Starbucks Strategic Management

EXECUTIVE SUMMARY

Starbucks continues to be the "coffeehouse of choice" for many domestic and international customers. Their upscale coffee outlets deliver brand uniqueness at locations scattered nationally and internationally. Starbucks has been able to differentiate themselves from all competitors by allowing its customers to smell coffee aroma all day long. The company has enjoyed success through international expansion as well as adapting to the different customers' needs. Beside this Starbucks continues to face stiff competition combined with worldwide economic conditions. Firms such as McDonald's and Dunkin Donuts desire to entice Starbucks customers away to cheaper cups of coffee. The company needs a clear strategy to offset the attacks of its competitors that are trying to attract its customers. With regard to threats recent trend shows consumers are reflecting a preference for organic and non-adulterated products. Starbucks can avail this opportunity by introducing organic coffee and disclosing the nutritional content to the consumers as well as by providing discounts on special occasions as to attract new customers to increase its sales. Starbuck's most advantageous opportunities lie in expansion in ever-growing markets like Brazil, India and China. Increasingly, positive public sentiment toward social responsibility can also increase the image of the company fostering consumer loyalty and increased sales. The detailed analysis of the internal and external factors recommends that Starbucks has room to improve, showing more interest in marketing by localized events and promotions. Leading the way in technological media, Starbucks should also use social networks like Twitter and Facebook as its advertisement channels.

TABLE OF CONTENTS

SUMMARY 4,5

MISSION & VISION STATEMENT 6

SWOT ANALYSIS 7,8

INTERNAL FACTOR EVALUATION 9

EXTERNAL FACTOR EVALUATION 10

COMPETITITVE PROFILE MATRIX 11

SPACE MATRIX 12,13

THE INTERNAL-EXTERNAL (IE) MATRIX 14

SWOT MATRIX 15,16

QSPM 17,18

FINANCIAL RATIOS...................................................................................... ANNEXURE A

SUMMARY

Starbucks was founded by Gordon Bowker, Jerry Baldwin and Zev Siegl in 1971 in Seattle, Washington. With the success of the first store in 1972, they opened a second store in University Village, Washington. It was in 1981 when Howard Schultz landed his first job with Starbucks to manage retail sales and marketing. In 1993, the company ventured into the East Coast market in Washington, D.C., and entered into venture with Barnes & Noble to sell its coffee at the bookseller's stores.

During 2000, Starbucks opened 200 new stores outside of the United States, out of which 150 were in Asia Pacific region, and opened its first store in Dubai and Hong Kong, and its 100th store in both Japan and United Kingdom. Recently the company opened a store in Zurich, Switzerland, as its first venture into continental Europe. The year 2002 was the worst when Starbucks faced a $3.9 million loss, despite a 15% increase in revenues and closed underperforming locations.

Despite of the loss, the company kept its morale high and opened its first store in Turkey and acquired 129 Seattle's Best Coffee coffeehouses as well as certain wholesale distribution rights. The economic recession of 2007 and intense pressure from competitors forced Starbucks to close 600 underperforming stores in United States in 2008 and plan to opens only 200 new stores in 2009.

Starbucks products can be accessed from everywhere. For Example, convenience stores, grocery stores, department stores, movie theatres, businesses, schools and even airports. Its retail outlets are seen as a place for socialization, relaxation and reflection. The company is pleased to provide complimentary wireless internet access to its customers to use their electronic gadgets. The company strives to offer the lowest possible price to its customers. Fortune rated Starbucks as one of the best top 10 places to work.

The Company has three operating segments: United States, International, and Global Consumer Products (CPG). The U.S operations represent 80% of total company-operated retail revenues, 55% of total speciality revenues and 76% of total net revenues for fiscal year 2008.For the second quarter of 2009, U.S total revenues were $1.8 billion, a decline of $131.5 million, or 6.8%, due to decreased revenues from company operated retail revenues. U.S comparable store sales declined 8%, due to 5% decline in the number of transactions and a 3% decrease in the average value per transaction. Speciality revenues declined 3.9% to $202.6 million, driven by softer foodservice revenues.

Starbuck's International operations represent the remaining 20% of company operated retail revenues and 21% of speciality revenues. Many of Starbucks' International operations are in early stages of development that require a more extensive support organization relative to the current levels of revenue and operating income in the United States. International total net revenues were $433.7 million 2009, down $59.7 million, or 12.1%, compared with the same period last year, primarily due to the impact of a stronger U.S. dollar relative to the British pound and Canadian dollar.

Starbucks Global Consumer Product Group segment represents 24% of total speciality revenues and 4% of total revenues for year 2008.CPG operations sell a selection of whole bean and ground coffees as well as a selection of premium Tazo teas through licensing arrangements in U.S and international markets. CPG total revenues decreased by 2% to $94.8 million for the second quarter of 2009, due to lower margin on sales of packaged coffee as a result of discounting, as well as lower volume to the trade.

Starbucks major competitors are Mcdonald's, Dunkin Donuts, Caribou Coffee and Peet's Coffee and Tea. Mcdonald's attacks Starbucks around the world with its $1.00 (and less) coffee. Dunkin Donuts and Krispy Kreme Doughnuts are becoming stronger in offering specialty coffee along with other complementary products. Caribou, smaller, is the smaller competitor to Starbucks in terms of product offerings; however the company reported

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