Starbucks Competitive Assessment

BA 311 Presentation

Team 3 (Hamza Khan, Tuan Le, Kassy Sepich, Amalya Sharyan, Joel Thannickal)

February 7, 2008

Primary Competitive Issues

Sale Price Availability Customer Service Maintenance of a Positive Brand Image Various Styles and Flavors of Specialty Beverages Financial Employee Productivity International Markets Narrow Product Mix Volatile Coffee Markets

The “Hear” Music Label

Significant Trends in the Coffee Industry

• Coffee reigns above energy drinks and soft drinks as the preferred caffeine beverage

• American demographic groups show continual increase in coffee consumption

• Large corporate competitors are innovating creative ways to take a piece of the Starbucks pie

Starbucks’ Competitors

• Locally owned coffee carts and shops

• Northwest Based Chains

- Peet’s Coffee

- Stumptown

- Java Bean

- Tully’s

- Dutch Brothers

• Corporate Businesses

- Mc Donald’sMc Donald’s

- - Dunkin’ DonutsDunkin’ Donuts

- Krispy Kreme Donuts

Starbucks vs. The Little Man

Small businesses and coffee carts…- Connect with the community- Have diverse menus- Are good on the go- Create a reason to return

But Starbucks still controls the market because of…-Vast number of stores-Extra amenities small coffee retailers do not offer-Creative coffee blends-Strong marketing strategies

SWOT Analysis Chart

STRENGHTS:•Accessibility•Economies of scale•Financial growth•Positive brand image

WEAKNESSES:•Low financial employee productivity•Narrow product mix•Weak compliance function•Corporate image•High price points

OPPORTUNITIES:•Growth in new international markets•Expansion of new flavors and styles of coffee beverages•The “Hear Music” label

THREATS:•Intense competition•Unstable coffee markets•Controversies and criticism•Possible over-saturation of the market

Competitive Landscape

Product Form Competition

Product Category Competition

Core Benefit Competition

Budget Competition

Feared Competitors: McDonalds

1) Cost Advantage

2) Strong Cash Flow

3) Strong Brand

Feared Competitors: Dunkin’ Donuts

1. Cost Advantage

2. Complements the main Product.

The critics say it best…

“ If an MBA were a doctor and your company a patient, you’d be diagnosed with a most common syndrome of commercial success: maturity…. Memories grow fonder, knees sound noisier, and yeah, folks take you for granted.” - Ben Santaris and Laura Gunderson

The Oregonian

Words of Wisdom…

“I have said for 20 years that our success is not an entitlement and now it's proving to be a reality. Let's be smarter about how we are spending our time, money and resources. Let's get back to the core.”

- Starbucks CEO Howard Schultz

Schultz saves the day…

With the return of Howard Schultz as CEO, Starbucks will:

• Cut food items from the menu that interfere with the coffee aroma

• Close stores that are not meeting expectations

• Focus on International Expansion• Return to a customer experience mindset

They say this is what happens to Starbucks’ competitors….