STARBUKS WAC
Presenter:
Group 5
Introduction to Group
Ms. Sehrish Riaz S#: 12
Mr. Tahir Sami S#24:
Ms. Aneeqa Atique S#: 08
Mr. Wasif Ali S#:23
Mr. Ali YousafS#:25
STARBUKS -Overview
Company started: 1971 in Seattle, Washington
CEO: Howard Schultz (Founder of Starbucks coffeehouse)
Total Stores world wide: 5886
STARBUKS -Overview
Products: - BeveragespastriesWhole coffee beans (coffee-related retail items
Positioning: “third place”
Mission Statement (Original)
“Establish Starbucks as the premier purveyor of the finest
coffee in the world while maintaining our uncompromising
principles while we grow.”
Six components of Mission
Provide a great work environment and treat each other with respect and dignity.
Embrace diversity as an essential component in the way we do business.
Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee.
Develop enthusiastically satisfied customers all of the time
Contribute positively to our communities and our environment
Recognize that profitability is essential to our future success.
Mission Statement AnalysisNO COMPONENT YES/NO
1. Customers Yes
2. Products or services Yes
3. Markets Yes
4. Technology No
5. Concern for survival, profitability and
growth
Yes
6. Philosophy Yes
7. Self-Concept Yes
8. Concern for public image Yes
9. Concern for employees No
Proposed Mission Statement
Establish Starbucks as the foremost provider of the deluxe coffee in the world and also to be established as
the most employee appreciated company even as maintaining our uncompromising principles as we
grow mutually with hi-tech advances.
Objectives of Starbucks
Most recognized and respected brand in the world
Is to recognize that every dollar earned passes through employees’ hands
Market expansion
Operations to Achieve Objectives:
rapidly expending its retail operations
grow its sales and other operations
Continuously reducing its supply chain cost
PESTEL Analysis
Political Allowance for the Direct Dealing with the
growers Economic
Unwillingness to help improve the economic condition of the coffee growers themselves by Starbucks
250 Pre Harvest and 650 Post Harvest financing to the Coffee growers and farmers by the Starbucks in 2005 which more than 1.2 B Pounds
PESTEL Analysis (Cont.)
Social Supporting Relief Organization such as CARE Providing Direct Support to the farmer and
farm community around the world Contribute $43,000 in 2001 for construction
of the Health Clinic and School in Guatemala Providing the Varity if ways of improvement
of Coffee Processing facilities in a number of countries in the world
PESTEL Analysis (Cont.)
Technological shade Growth Mexico coffee’s” Online selling throw its website
Starbucks.com Ecological
Cultivated under the Company of shade Trees in Organic product
PORTER ANALYSIS
Threat Of new Entrants:(Four 4’s, Two 2’s, One 3s, One 1’s, one 5’s)
So the threat of new entrants is High
Intensity of Rivalry:(Three N/A’s, Three 2’s, One 3’s)The rivalry is very intense and Low to
Moderate
Bargaining Power of Buyer:(Four 4’s, One 1’s, Two2’s One 5’s) The bargaining power of the buyer is High
PORTER Analysis
Bargaining Power of Supplier:(Three 4’s, Three 2’s, One 5,s) So the Supplier power is HIGH
Threat of Substitutes:(One 2’s One 3,s) So the threat of substitute is Low to
Moderate
PORTER Analysis
INDUSTRY COMMENTS:
As there are three high forces and Two Low to Moderate force so the over all industry is very attractive and growth is expected to be there in the industry
Key External Factors Weight RateWeighted
ScoreComments/Justification
Opportunities
1 Direct relationships with coffee farmers 0.08
4
0.32 Coffee farmers
2 Providing ready access to consumer 0.05
3
0.15 Increase branches
3 Unroasted beans 0.05
4
0.20
For quality imporvement of Green Coffee
4 Market Expansion 0.06
2
0.12
Pacific, Northwest & California,
Boston ,Washington
5 International Expansion 0.08
3
0.24
more to Asia, Europe & Latin America
6 Joint ventures 0.06
4
0.24
for achieving the target of more then 500 branches till
2003
7 New product placement at existing coffee 0.03
2
0.06 at existing Cafes
8 Espresso Bar Concept 0.05
3
0.15 new concept
9 Providing Organic products 0.06
3
0.18
such as the Fair Trade ,Green coffee etc
10 Buying in long-term contracts 0.04
4
0.16 By less spending on cost
11 Coffee of the day 0.03
2
0.06
Fair Trade Coffee in North America
EFE
EFE
Threats
1 Anti Globalized movements 0.03
2
0.06 against globalization
2 Plummeting pressure of Coffee Prices 0.04
4
0.16 Prices of competitors
3 Labour & real estate prices 0.05
3
0.15 Employment and rent rates
4 Imports & Brokers 0.04
2
0.08 Sale to mass Market
5 Less profit from joint ventrues 0.06
4
0.24 For new entering into countries
6 Cash out from the business 0.05
2
0.10
7 Substitutes 0.07
4
0.28 Brewages and juices
8 Missuse of brand names 0.07
2
0.14 Copy or miss use of brand
Total: 1.00 3.09
Key Internal Factors Weight Rate Weighted Score
Strengths
1 Expension in retail operations 0.08 4 0.32
2 Product Development 0.06 3 0.18
3 New distribution channels 0.05 3 0.15
4 Employees stock ownership plans 0.07 4 0.28
5 Market development 0.05 4 0.20
6 Perceive premium product 0.06 4 0.24
7 Product Defferciation 0.04 3 0.12
8 Paceful atmosphare (Specially service with music) 0.06 4 0.24
9 Proper customer guidence by providing wide ray of coffee selection & opportunities. 0.04 3
0.12
10 Evaluation of companies business lines (Assembly of experienced professionals increasing growth) 0.08 4
0.32
11 Quality of service 0.05 3 0.15
12 Employees training benefits 0.03 3 0.09
Weaknesses
1 Lack of emplyee compensations and benefits 0.07 2 0.14
2 Critical parking place at busy streets of North America 0.07 2 0.14
3 Sales saturation 0.03 1 0.03
4 Less spending on advertising 0.04 1 0.04
5 Employees overworked/under paid 0.07 2 0.14
6 Decrease in sale of per store. 0.05 2 0.10
Total: 1.00 2.86
THE MATCHING STAGE- IE
4.0 Strong (3.0-4.0) 3.0 Average (2.0-2.99) 2.0 Weak (1.0-1.99) 1.0 4.0 Strong (3.0-4.0) 3.0 Average (2.0-2.99) 2.0 Weak (1.0-1.99) 1.0 4.0 Strong (3.0-4.0) 3.0 Average (2.0-2.99) 2.0 Weak (1.0-1.99) 1.0
GROWTH AND BUILT
Forward , backward, Horizontal integration
Product development
Market development
Market Penetration
SWOT Matrix SO Strategy S5, S7 & O8: S5:Market development S7:Product Differentiation O8:Espresso Bar Concept-Use espresso bar concept in market development which
will ultimately differentiate the product from other coffee provider.
S 11 , O 2 & O 9:S11:Quality of serviceO2:Providing ready access to consumerO9:Providing Organic products-We can create customer loyalty through adding benefit
to the product.
WO Strategy W6 O7 :W6: Decrease in sale of per store.O7:New product placement at existing
Can increase sale of per store by placing out some new product at existing coffee.
SWOT Matrix
ST Strategy S4 & T8:S4:Employees stock ownership plansT8:Missuse of brand names Can avoid the misuse of brand name
by employee stock ownership plan( employee loyalty)
SWOT Matrix
WT Strategy W4 & T1:W4:Less spending on advertisingT1:Anti Globalize movements
• Can reduce the threat of anti globalization movements by advertisement.
SWOT Matrix
Financial Analysis
Financial Analysis(Liquidty Ratio)
20012002
Net Working Capital 148.6310.00
Current Ratio 1.33 1.58
Quick Ratio .84 1.09
Financial Analysis(Activity Ratio)
20012002
Account Turnover 29.30 33.70 Collection Period 12.46 10.83Inventory Turnover 5.03
5.13Inventory Age 72.59 71.16Operating Cycle 85.04 81.99
Financial Analysis(Activity Ratio)
20012002
Total Asset T.over 1.43 1.43
F.Asset T.over 2.33 2.60
Financial Analysis(Leverage Ratio)
20012002
Debt Ratio 0.25 0.25
Debt Equity Ratio 0.34 0.33
L.Term Debt Ratio 0.004 0.004
Financial Analysis(Profitability Ratio)
20012002
G.P Ratio 57.99%58.59%
O.P Ratio 10.61%9.69%
N.P Ratio 6.84%6.54%
ROI 9.79%9.38%
ROE 13.12%12.46%
Financial Analysis(Market Value)
20012002
EPS $ .48$0.56
P.E Ratio 39.9536.56
B.V/Share 3.63 4.48
Value Chain of STARBUKS (Interlink Activities)
Value Chain (Inbound Logistics)
Starbuks bypass the much of the middle market +
Starbuks Developed expertise and relationship with coffee growers themselves +
Taking out cost of its supply chain +
Joint venture with sazaby that had expertise in both retail and estate. +
Value Chain (Inbound Logistics)
Starbuks is giving direct support to the coffee growers. +
Company had purchased Peet’s Coffee and Tea, a Berkeley, California, Coffee roaster and distributor, straining the company’s management and financial capabilities. -
Company can pursue the opportunity of leverage the brand by introducing new products and development of new distribution. (P+)
The New York “C” coffee prices remained at near record lows, decreasing sourcing costs and increasing gross operating margins. (P+)
Value Chain (Cont..)
Operations: Between 1995 and 1998 starbuks had averaged
$0.69 million per store. + Company was continuing expand international
operations at breakneck pace. + Outbound Logistics: Addition to its retail stores: + It sells through specialty sales groups Direct response business Supermarket Online selling at starbucks.com
Value Chain (Cont..)
Marketing and Sales: Company is still spending less than $20
million per year on advertising. P+ Products type offering: + Also sells bottled Frappuccino coffee
drinks & line of premium ice-cream through its joint venture partners. +
Also offers a line of innovative premium teas produced by its wholly owned subsidiary, Tazo Tea. +
Value Chain (Cont..)
$215 M profit on $3.29B sales in 2002 & expecting 25% growth in 2003. +
New stores cannibalizing existing stores. (-)
Profliferation of stores did created barriers for the competitors +
But this profiliferation led to downward trend in sales per stores. (-)
Before entering in any new country, there was complete research +
Value Chain (Cont..)
“Commitment to Origins” company program. +
All the three coffees under “commitment to Origins” program was 20-25% more expensive compared to Starbuks traditional blends. +
Starbuks introduced Fair trade coffee in North American stores and promoted it through various brochures and promotions. +
Company can offer “Coffee of the day” per week rather than per month. P+
Corner locations, the hallmark of early growth store provided high visibility. +
Value Chain (Cont..)
It expanded all facets of the industry as distributed through traditional supermarket distribution systems. +
It has three-legged stool for global development which are retail coffee and assorted specialty items, specialty sales and Frappuccino coffee drinks and specialty coffee ice creams sold through retailer globally. +
Value Chain (Cont..)
It can enhance its marketing under the leadership of Howard Schultz. +
R&D for new markets in which it has to enter. +
Value Chain (Cont..)
Services The perceived premium was both in the
products’ quality and in the method of its delivery. +
Starbuks believe and actively giving superior services by giving the sense of discovery and excitement and loyalty that bend the customer to starbuks. +
It had evolved into its own Americanized version of specialty coffee provider of coffee shop services. +
Value Chain (Cont..)
Special pastries and music provided an atmosphere of both warmth and comfort. +
Starbuks is providing ready access to consumer foot traffic such as commuting routes. +
Employees are trained to provide wide array of advice on coffee selection and appropriateness to potential customer. +
Internet Selling. +
Value Chain (Cont..)
Infrastructure Starbuks used two basic structures
for international expansion that were company owned and licensing agreements. +
The company owned nearly 5700 stores in 28 countries +
The company had 1312 stores in international market +
Value Chain (Cont..)
The total stores in number are 5886. +
“Interbrand” one of the most recognizable global brands. +
Stores are located in pivotal positions for consumer recognition and access. +
All stores were owned by the company in domestic market. +
Value Chain (Cont..)
Human resource management: Howard Schultz joined the company as
member of marketing team. + In decade of 1990s, starbuks expand its
talent pool on the most senior levels + Employees termed as partners. + Starbuks is focusing on employee
training. + Company provides health care benefits to the
employees working over 20 hours in a week. +
Value Chain (Cont..)
First time starbuks gave stock ownership to its employees. +
Starbuks gave training to all foreign managers to its Seattle offices for 13 day training. +
It can start employee benefits and motivation programs. P+
Stores managers and employees were over worked and unpaid. - / p+
Barista pay was more than low-end wages jobs +
Value Chain (Cont..)
Technology development Starbuks selectively introduced in starbuks stores
in North America and through online sales at starbuks.com +
Procurement Company had joint venture with Sazabay in Japan.
+ Starbuks provide bottled Frappuccino coffee drink
and align of premium ice cream through its joint venture partnership. +
Buying out the coffee connection change in the region of Boston. +
SPACE Matrix
Grapgh
Aggressive Strategies
The results and vector of the space matrix is showing that strategies will be aggressive, which are:
Backward, Forward and Horizontal integration
Market penetration Market Development Product Development Diversification (related or unrelated)
THE DECISION STAGE Outcome of techniques at matching stage
QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)
Market Development Product Development
Key External Factors Weight AS ATS AS ATSOpportunities
1Direct relationships with coffee farmers 0.08 - - - - 2Providing ready access to consumer 0.05 3 0.15 2 0.10 3Unroasted beans 0.05 - - - -
4Market Expension (Pacific, Northwest & California, Bostan ,Washington)
0.06 - - - -
5International Expension ( more to Asia, Europe & Latin America)
0.08 - - - -
6Joint ventures ( for achieving the target of more then 500 branches till 2003)
0.06 3 0.18 4 0.24
7New product placement at existing coffee 0.03 1 0.03 3 0.09 8Espresso Bar Concept 0.05 4 0.20 2 0.10 9Providing Organic products 0.06 1 0.06 4 0.24
10Buying in longterm contracts (By less spending on cost)
0.04 - - - -
11Coffee of the day (Fair Trade Coffee in North America)
0.03 2 0.06 3 0.09
12 - - Threats
1Anti Globalized movements 0.03 - - - - 2Plummeting pressure of Coffee Prices 0.04 - - - - 3Labor & real estate prices 0.05 - - - - 4Imports & Brokers ( Sale to mass Market) 0.04 2 0.08 3 0.12 5Less profit from joint ventrues 0.06 - - - - 6Cash out from the business 0.05 - - - - 7Substitutes 0.07 3 0.21 4 0.28 8Missuse of brand names 0.07 - - - - 9 - -
10 - - Total: 1.00
Key Internal Factors Weight AS ATS AS ATS
Strengths
1Expension in retail operations 0.08 - - - -
2Product Development 0.06 2 0.12 4 0.24
3New distribution channels 0.05 - - - -
4Employees stock ownership plans 0.07 - - - -
5Market development 0.05 4 0.20 2 0.10
6Perceive premium product 0.06 3 0.18 2 0.12
7Product Defferciation 0.04 2 0.08 4 0.16
8Paceful atmosphare (Specially service with music) 0.06 - - - -
9Proper customer guidence by providing wide ray of coffee selection & opportunities.
0.04 - - - -
10Evaluation of companies business lines (Assembly of experienced professionals increasing growth)
0.08 - - - -
11Quality of service 0.05 2 0.10 4 0.20
12Employees training benefits 0.03 - - - -
Weaknesses
1Lack of emplyee compensations and benefits 0.07 - - - -
2Critical parking place at busy streets of North America 0.07 - - - -
3Sales saturation 0.03 2 0.06 3 0.09
4Less spendings on advertising 0.04 2 0.08 3 0.12
5Employees overworked/under paid. 0.07 - - - -
6Decrease in sale of per store. 0.05 - - - -
Total: 1.00 1.79 2.29
Recommendations
Revamp Employee Reward System
Improve “Third Place” Environment
Focus Profitability Measures on More Than Just Staffing
Action Plan For Improvement Decrease employee turnover rate Improve site accessibility and
cleanliness Enhance Starbuck’s differentiated
atmosphere
Impacts
By focusing on the initial recruitment and hiring stage, and by rewarding employees based on merit current turnover rates will be reduced.
By focusing on site accessibility and cleanliness, the physical facility will not detract from atmosphere.
By improving Starbucks’ atmosphere, it will become a more attractive place to go.
Potential Risks
Customers may not react positively to the changes being made
Not enough available employees to meet re-aligned hiring needs
Claims of age discrimination and negative affect on sales in youth demographic
Costs associated with planned change
References
http://www.dailytimes.com.pk/default.asp?page=story_24-6-2003_pg5_3
brand Issue:: http://www.organicconsumers.org/starbucks/coffback.htm
www.starbuks.com