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Starbucks - Starbucks - Beyond The CupBeyond The CupINFSCI 2810 – M.I.S.INFSCI 2810 – M.I.S.Ken SochatsKen Sochats
Presented by:Presented by:Sangeeta Bokil * Arindam DuttaSangeeta Bokil * Arindam DuttaJessica Fondy * Shawn LewisJessica Fondy * Shawn Lewis
22
Strengths / WeaknessesStrengths / Weaknesses
StrengthsStrengths Name RecognitionName Recognition Market PenetrationMarket Penetration Perception of QualityPerception of Quality Consumer Respect for BrandConsumer Respect for Brand
WeaknessesWeaknesses Social / Environmental Criticism (Fair Trade)Social / Environmental Criticism (Fair Trade) ““Anti-Starbucks” SentimentAnti-Starbucks” Sentiment People who simply don’t like the coffeePeople who simply don’t like the coffee
33
Opportunities / ThreatsOpportunities / Threats
OpportunitiesOpportunities Branch out into new US MarketsBranch out into new US Markets Acquire socially / environmentally conscious Acquire socially / environmentally conscious
customerscustomers Increase public goodwill for companyIncrease public goodwill for company Make a positive impact in the worldMake a positive impact in the world
ThreatsThreats ““Anti-Starbucks” SentimentAnti-Starbucks” Sentiment Competition from other coffee shopsCompetition from other coffee shops
44
What Makes a What Makes a Good New Product?Good New Product?
Seven basic decision criteriaSeven basic decision criteria Revenue boostingRevenue boosting Cost viabilityCost viability Image boostingImage boosting Social outreachSocial outreach Market appropriatenessMarket appropriateness Capitalize on brand strength Capitalize on brand strength Market effectsMarket effects
55
Our ProposalOur Proposal
Starbucks T-shirts and Starbucks T-shirts and sweatshirtssweatshirts
““Beyond the Cup” Beyond the Cup” Corporate Social Corporate Social Responsibility Responsibility campaignscampaigns
Environment, LiteracyEnvironment, Literacy Targets Starbucks Targets Starbucks
customers and the customers and the socially responsiblesocially responsible
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Revenue / Cost ViabilityRevenue / Cost Viability
Start with only T-shirts in limited marketsStart with only T-shirts in limited markets Avoid sweatshop labor!Avoid sweatshop labor! ““Beyond the Cup” allows tie-in to existing Beyond the Cup” allows tie-in to existing
corporate strategies through a new corporate strategies through a new consumer avenueconsumer avenue
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Revenue / Cost ViabilityRevenue / Cost Viability
Socially Responsible Supplier –Socially Responsible Supplier –The Icon GuildThe Icon Guild
Bundles shirt and printing costsBundles shirt and printing costs
Shirt Shirt CostCost
1 Color1 Color Add’l Add’l ColorColor
11stst ScreenScreen
Add’l Add’l ScreensScreens
< $6< $6 $0.50$0.50 $0.25$0.25 freefree $10/$25$10/$25
88
Revenue / Cost ViabilityRevenue / Cost Viability
Separate Shirt / Printing CostsSeparate Shirt / Printing Costs ShirtsShirts
American Apparel, UnionwearAmerican Apparel, Unionwear Between $4.45 - $7.50 depending on size and quantityBetween $4.45 - $7.50 depending on size and quantity
PrintingPrinting The Icon Guild, Comtempl8 T-shirtsThe Icon Guild, Comtempl8 T-shirts $0.50 - $0.60 per shirt plus set up costs$0.50 - $0.60 per shirt plus set up costs
Artwork billed separately at $40/hour; superseded by Artwork billed separately at $40/hour; superseded by Starbucks’ existing Art DeptStarbucks’ existing Art Dept
Transportation between $0.28 - $0.70 per shirt; Transportation between $0.28 - $0.70 per shirt; superseded by Starbucks’ existing logistical capabilitiessuperseded by Starbucks’ existing logistical capabilities
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Revenue / Cost ViabilityRevenue / Cost Viability
Cost SummaryCost Summary $10 - $12 per shirt, $15 worst case$10 - $12 per shirt, $15 worst case
Expected price pointExpected price point $20 - $30$20 - $30
Leaves comfortable profit marginLeaves comfortable profit margin
1010
Image Boosting – Image Boosting – Social OutreachSocial Outreach
Already does a lot of work for social Already does a lot of work for social causescauses LiteracyLiteracy EnvironmentEnvironment
Need to better inform public of their Need to better inform public of their positive contributions to the environment positive contributions to the environment and communityand community
1111
Image Boosting – Image Boosting – Social OutreachSocial Outreach
Starbucks donations to charitable Starbucks donations to charitable organizations: $30.3 million in 2005organizations: $30.3 million in 2005
Starbucks also contributes to literacy, Starbucks also contributes to literacy, environmental, and coffee origin communitiesenvironmental, and coffee origin communities
Our products help publicize this knowledgeOur products help publicize this knowledge Re-educate coffee consumers about StarbucksRe-educate coffee consumers about Starbucks
1212
Image Boosting – Image Boosting – Social OutreachSocial Outreach
Caveat – Supporting Coffee Farmers and Caveat – Supporting Coffee Farmers and Fair Trade, but where?Fair Trade, but where?
Our product does not address this issueOur product does not address this issue ……but It highlight’s Starbucks’ but It highlight’s Starbucks’
commitment to responsible supplierscommitment to responsible suppliers Mitigates this line of criticism.Mitigates this line of criticism.
1313
Market AppropriatenessMarket Appropriateness
Is it time?Is it time? Disposable Personal Income (DPI)Disposable Personal Income (DPI)
1.7% DPI increase in last year and 4.5% growth projected 1.7% DPI increase in last year and 4.5% growth projected over next yearover next year
5.4% growth in the last 12 months5.4% growth in the last 12 months US Apparel sales marketUS Apparel sales market
$181 billion in 2005, 4% growth rate$181 billion in 2005, 4% growth rate Promising three-year outlookPromising three-year outlook
US Charitable DonationsUS Charitable Donations $260.3 billion in 2005, 2.7% growth rate$260.3 billion in 2005, 2.7% growth rate
Yes!Yes!
1414
Market AppropriatenessMarket Appropriateness
Customer ProfileCustomer Profile Men, women, and children of all agesMen, women, and children of all ages
Versatile product line – considered as:Versatile product line – considered as: FashionableFashionable SportswearSportswear Active wearActive wear Casual WearCasual Wear Work WearWork Wear Resort WearResort Wear
……all with a theme of social responsibilityall with a theme of social responsibility
1515
Brand StrengthBrand Strength
Customers and employees fiercely loyalCustomers and employees fiercely loyal Very strong brand presenceVery strong brand presence
Believed the brand was created from Believed the brand was created from Starbucks’ business strengthStarbucks’ business strength
Received Brandweek Customer Loyalty Gold Received Brandweek Customer Loyalty Gold Award in 2006 for Coffee and Doughnuts Award in 2006 for Coffee and Doughnuts categorycategory
Is and will be highly marketableIs and will be highly marketable
1616
Market EffectsMarket Effects
Relaxed lounging environment at Starbucks Relaxed lounging environment at Starbucks supports our productsupports our product
Capitalize on customer brand loyaltyCapitalize on customer brand loyalty Donate 10% of profits to charity to further Donate 10% of profits to charity to further
commitment to social responsibilitycommitment to social responsibility Customize available inventory to local Customize available inventory to local
demographic (literacy in areas with educational demographic (literacy in areas with educational deficiencies, environment in appropriate areas)deficiencies, environment in appropriate areas)
No need for large store displayNo need for large store display
1717
Marketing PlanMarketing Plan
Pre-DistributionPre-Distribution Short-Term: 3-month trial in California and Short-Term: 3-month trial in California and
New York (high traffic) areas)New York (high traffic) areas) Long-Term: national approachLong-Term: national approach Extend existing advertising to encompass Extend existing advertising to encompass
“Beyond the Cup” idea“Beyond the Cup” idea Wrap shirts with tags that emphasize Wrap shirts with tags that emphasize
donation to charity and social campaigndonation to charity and social campaign
1818
Marketing PlanMarketing Plan
Small shipments through local delivery Small shipments through local delivery services (UPS, FedEx, DHL)services (UPS, FedEx, DHL)
Large shipments through logistical chainLarge shipments through logistical chain Stock stores with limited inventoryStock stores with limited inventory Establish reorder pointsEstablish reorder points Tag as subset of existing inventory for Tag as subset of existing inventory for
asset trackingasset tracking
1919
Marketing PlanMarketing Plan
Develop promotional effortsDevelop promotional efforts CouponsCoupons Contest prizesContest prizes Gift-with-purchaseGift-with-purchase Seasonal salesSeasonal sales Press releasesPress releases
Analyze customer reactions in NY and Analyze customer reactions in NY and CACA
2020
Gauging SuccessGauging Success
Small initial run of 5000 shirtsSmall initial run of 5000 shirts Break Even Point Break Even Point
worst case, 4,167 shirts @ $15 / $20 worst case, 4,167 shirts @ $15 / $20 cost/price ratiocost/price ratio
best case, 1,852 shirts @ $10 / $30 best case, 1,852 shirts @ $10 / $30 cost/price ratiocost/price ratio
Profits become even steeper as per-shirt Profits become even steeper as per-shirt costs decrease with increased quantitiescosts decrease with increased quantities
2121
Gauging SuccessGauging Success
One-Year goalOne-Year goal $10 million in revenue$10 million in revenue
Five-Year goalFive-Year goal $40 million in revenue$40 million in revenue
2222
ExpansionExpansion
Move from T-Shirts to sweatshirts and Move from T-Shirts to sweatshirts and other apparel itemsother apparel items
Capitalize on existing celebrity “authentic Capitalize on existing celebrity “authentic personal endorsements” (i.e. not personal endorsements” (i.e. not compensated) for public exposurecompensated) for public exposure
Further the cause through existing Further the cause through existing partnershipspartnerships