starbucks report
Posted by ~Ray @ 2008-08-04 13:11:10
5 Links: human sigma link-baiting neuroscience brand experience wine While I'm stuck on writing some other posts—the idea is there the execution some way off—it is time for another collection of links. • Using Human Sigma for measuring customer engagement - Mitch Owen reviews a new book on the market that suggests that evaluating our efforts at customer satisfaction happen on four levels: Confidence. Integrity. Pride. Passion. • How to glide to a writing career - Valleywag writes an insightful post (for once) about what matters when blogging. I like "AVOID: Blogger ego. If you do blog just write and forget about it. Don't reply to your comments with more than "Good point h8rboi thanks. Don't troll other bloggers for links or try to get onto Techmeme by posting about whatever's already there. ... populate in the real media don't care what your Technorati be is they'll just Google you to see what you write." That said. I have no intent to engage on a writing career.• Mind hacks: an converse with Jonah Lehrer on neuroscience - What I like: "Artists are constantly being forced to reverse-engineer the brain. By reverse-engineering the art - by trying to understand why exactly it resonates with us - we can learn about the mind."• Thirteen examples of successful brand experiences - could be filed under architecture. The British design council points us to 13 different "experience-castles" (my own term) where customers can be enchanted.• Calculating the carbon footprint of booze - What can I say? It's the new world! Some key-points: organic is not as efficient as we think; distance matters; packaging matters. • Bonus Link: Why does a salad cost more than a big mac. - A picture says more than a 1000 words. This is just as applicable to Europe btw. convey Wolsey for inventing the subsidy!Enjoy! More of this: check out the S+FnR bookmarks—updated 24/7 About this blog & the authorThe S+FnR blog takes a look at the world of food- retail- and music-venues and focusses on the following issues: Setting up a business in this area * innovative practices and content * the marketing of ideas values products services locations etc. * logistical considerations * mapping the value chain of the industry * sharing values through an organisation * attracting talent * motivating staff * integrating technology where possible * effective design * product and service choice * implementing social responsibility within and without the organisation * factors influencing location-choice * effective market-research * effective business planning * attracting finance at early and later stages * understanding taste * understanding experience * telling stories * more as this blog evolves. For info or feedback please send a mail to: foodandretailblog@gmail com Vincent van Wylick is the author of this weblog. You can find out more about him via his site linkedin his work on Tech IT Easy (a tech-blog) and his purely informal scrapblog. • ▼ 2007 (88) o ▼ November (24) Interrupting my blogging-schedule for 12 days !! Starbucks' wholly-owned growth vs. Subway's franch... Private Labels II - thoughts about trends and patt... Random interlude - Imax. Guinness pie The business of HoReCa - "Hotels. Restaurants. Caf... Private Labels - a first look Interlude: Kill the Argument Media-interlude: food sex and… Axe !? Amazon's Jeff Bezos on strategy & innovation (not... Meta-FNR II - meet Mr. Generalist Meta-FNR - Stuff I still need to do 5 Links: human sigma link-baiting neuroscience. ... Media-interlude: how to demolish a building Las Ve... Real Estate Strategy III - different types of cost... Interlude: Malcolm Gladwell on people SEPA (Single Euro Payments Area) coming soon! IKEA's growth part I - the Scandinavian years 5 links to think - on lacquer designing experiences... Real Estate II - thinking about competition Interlude: The "10,000-hours-to-be-an-expert" rule... Thinking about Real Estate - holistic approach & c... Bearish on the organic boom Media-interlude: digging Candy Dulfer's Sax perform: Technology-inspired Hiatus ► October (28) Lean Toyota principles in a Food / Retail environm... 5 links to think Month 2 on food and retail - what I've learned so... Lessons from eBay's "The Perfect Store" perform: Do what you do best Porter's 5 forces - how they bring home the bacon. 3 examples and... A quircky little marketing idea Interlude: Coffee can be a dangerous drug The Consumer Decision Process The eco trend II - measuring the cost of climate c... Ikea - strange alien values 5 links Is coffee is dead? Part 2. On restaurants - brand and geographic marketing On blogging (oh no not another one) The "Well Curve" - a better understanding of cust... A new theme and have a great weekend Top-franchises in Germany Career choices in knowledge-based companies Media-interlude: Songs named after cities - Amster... Is coffee a bad business to be in? China and its golden cow-business A few days in limbo The value of conversation - (a short*) part II Conversation and price elasticity Little update: some research material for caterers.. o ► September (21) o ► August (15) Latest Comments• Re: Interrupting my blogging-schedule for 12 days !! - vincentvw • Re: Interrupting my blogging-schedule for 12 days !! - Jeremy Fain • Re: Interlude: Malcolm Gladwell on people - vincentvw • Re: Interlude: Malcolm Gladwell on people - Matthias • Re: IKEA's growth part I - the Scandinavian years - vincentvw Hive-NewsFind more feeds on…My Food and Retail page: My Marketing and Art page: Review S+FnRFood & Drink Blogs on RateItAll Link-Love• About( com) Retail • Church of the customer blog • Copyblogger • Customers rock! • Elsevier Food (Dutch) • Jaffe Juice • Kottke( org) on restauranting • Marketing Tribune (Dutch) • Misset Horeca (Dutch) • NYT on dining and wine • Presentation Zen • Rebuilding Place in the Urban Space • sell design diva • Seth Godin's communicate • Small Business Branding • Tech IT Easy (sister-blog) • Web-buyers Guide Trivial Twittersfollow vincentvw at http://twitter com Blog Information Profile for vincentvanwylick Labels• About (11) • Amazon (2) • Apple (2) • Asia (4) • blogging (13) • books (5) • branding (25) • business angels (1) • business strategy (40) • career (6) • catering (17) • Coca-Cola (2) • coffee (6) • community (10) • culture (23) • customers (27) • design (21) • e-commerce (8) • ebay (2) • eco-trends (2) • entertainment (2) • entrepreneurship (32) • ethics (12) • Europe (14) • finance (7) • food (31) • Franchising (5) • geography (4) • Globalisation (18) • horeca (1) • human resources (22) • humour (6) • Ikea (3) • innovation (28) • interlude (17) • Jacques Brel (1) • La Place (1) • Legalese (1) • Leonidas (2) • Links (4) • logistics (9) • management (22) • marketing (31) • mcdonalds (3) • media (14) • music (12) • Nestle (2) • new business development (10) • news (4) • operation (13) • operations (11) • organic (2) • Politics (2) • private labels (2) • real estate (8) • Research (21) • restaurants (11) • retail (43) • self-development (11) • SEPA (1) • starbucks (7) • subsidies (1) • Subway (2) • supermarkets (9) • suppliers (14) • supply chain managment (6) • Tchibo (1) • technology (19) • tools (15) • trends (16) • Unilever (1) • USA (16) • venture capital (2) • vision (12) • Wine (1) Starbucks is whether you love the company or hate it something of a phenomenon. An almost ubiquitous presence today on the global high street it seems unfathomable that Starbucks is less than 35 years old having been formed in 1971 in Seattle. Indeed even more recently than that the company was almost unheard of in the UK. We were after all a nation of tea-drinkers weren’t we? Yet Starbucks has employed about 6,000 people in the UK since it opened eight years ago and operates 460 stores a total that it continues to change magnitude at a rate of around 50 stores a year. The affiliate has around 9,700 stores in 38 countries worldwide serving 34 million customers a week.• Starbucks Coffee Company(Public affiliate; 10,001 or more employees; SBUX; Retail industry)February 2007 — Present (11 months) Responsible for all human resources initiatives and activities covering more than 10,000 company operated and licensed stores and more than 100,000 people throughout the US. bring about a team of more than 350 human resources professionals. Catching the Starbucks FeverStarbucks History Starbucks opened operations in Seattle’s Pike Place Markets in 1971 with the future aim of providing coffee to a number of restaurants and surrounding bars. With the recruitment of Howard Schultz who led the marketing and retail efforts of Starbucks in 1982 the company took a change in direction through the views of Schultz who after visiting Italy tried to adapt the same principles in order to a strong bar culture. Schultz then utilized Starbucks ability to provide quality coffee beans and opened up a new store called Il Giornale which brewed coffee from these particular beans. By 1987. Il Giornale had decided to take over the assets of Starbucks and also advance changed its label to Starbucks Corporation. By the end of the year. Starbucks had increased the be of stores to 17 and furthered its location span by entering Chicago and Vancouver. In 1990 the company took further steps forward with expansion of the Seattle headquarters and an increase in resources with the opening of a new roasting plant. Relationships and other ventures also took off during the early nineties as the company looked to development organizations to further its progress. By 1995 the company really established its name with the opening of the 676th store as well as increasing the products in hold on with the addition of be discs a result of a previously popular experiment with ‘in-house’ music. In 1996 the affiliate kept on stretching its reach by entering into the market of Japan. Singapore and Hawaii. This was achieved through joint ventures including the one formed with Sazaby Inc. which pushed through the development of coffee houses in Japan. By the year 2000 things had progressed so far that 3,300 stores were already opened the company had ventured into countries ranging from England to Australia and a website was created to keep up operations with the latest technology (starbucks com). The current international situation for Starbucks seems to be an emerging part of their business and the reorganization of this is proved by their aim to become a leading global company through making a difference in peoples lives all around the world (http://www starbucks com). This goal is quite close to being achieved as proved the Starbucks current locations in international markets and the successfulness of these ventures. The current countries in which Starbucks are located in are: Australia. Bahrain. Canada. Hong Kong. Israel. Japan. Kuwait. Lebanon. Malaysia. New Zealand. Oman. Peoples Republic of China. Philippines. Qatar. Saudi Arabia. Singapore. South Korea. Switzerland. Taiwan. Thailand. Untied Arab Emirates. United Kingdom and the United States. (starbucks com) Overall the aim of becoming a worldwide global brand seems to be working in favor of the company and is helping it to attract the attention of many major companies who would desire to share a partnership (starbucks com). This is all positive news for the company because it provides a strong basis for future development of international markets which further strengthens the mission to become one of the leading specialty coffee retailers in the world. In addition to the fact that Starbucks has already successfully opened around 3,500 stores the ‘push’ to achieve their goal is proved more than ever by the aim to open at least 650 stores just in Europe by the year 2003. It’s these types of goals which prove the potential of this brand to become so popular and come up known that it would be as recognizable as major names such as McDonalds and Coca-Cola. Vision As stated on the website the company’s vision is to ‘establish Starbucks as the most recognized and respected brand in the world.’ This is a fitting vision because it is a broad comprehensive picture of what the company wants Starbucks to become. We ordain examine the vision using four components. First the vision is built on a foundation of the organizations core values. Starbucks only uses the finest coffee beans when brewing its variety of blends and therefore wants to be looked at with the respect of a company that uses and provides the best. Secondly the company desires a top of the mind recognition. Starbucks not only wants consumers to remember who it is but think about Starbucks first having a shining image. Third is a summary of what the organization does. Starbucks is lacking in this component because it fails to provide a statement announcing what exactly what business Starbucks is in. It assumes that as a recognized brand it does not need to specify what business the company is in. The mission statement in the next section provides a much better description of this component. Finally the vision states broad goals of what the company could be. Starbucks wants to be the most recognized and most respected brand in the world. The most recognized and the most respected are the two broad areas of this statement. Ideally the two mean number one or above all others but there is no numeric goal or timeline for this objective. The overall company operations are based around purchasing and roasting high-quality whole bean coffees and selling them along with fresh rich-brewed. Italian style espresso beverages a variety of pastries and confections coffee-related accessories and equipment. This is achieved through the huge number of company operated retail stores a specialty sales group supermarkets a direct response business and also on the World Wide Web at the Starbucks com website (starbucks com). The attainment of this goal is boosted by the rapid expansion of new retail stores in addition to the development of many new opportunities in terms of products and distribution channels. Mission The mission of Starbucks is to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow. None of this success would have been possible without a set of goals that the affiliate aimed to achieve and a set of principles which governed the decision making process. Starbucks has a clear set of guidelines which has to be followed and uses these as a direction tool for the future of the business. Traditionally the guidelines would more appropriately be connected to the vision however the company has set them with the mission statement. The six principles of Starbucks are stated as (starbucks com): • 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. Application of these principles can be used as a guideline for all employees from managers to workers to aim to achieve the company’s goals while maintaining a certain type of standard. This mission statement along with the set of guidelines provides a focus for employees as they make strategic decisions. It not only supports the employees but supports the customers as well making a note that they should satisfied all of the time. The mission shows alignment with the vision by stating how the company plans to reach the broad goals set by the vision statement. Another supporting sentence in the mission statement is that the company apply the highest standards of excellence to the purchasing roasting and fresh delivery of its coffee. This statement supports the idea that Starbucks uses the best available resources to give it a recognized and respected name. Timeline Overview We will take the company timeline and strategic decisions portion in two main sections. The first is when Starbucks was a Private Company from its inception in 1971 to it’s initial public offering in 1992. Then we ordain discuss some of the major actions of the publicly held company from 1992 to present. We believe that there since the beginning. Starbucks strategy has been one of growth. They have demonstrated all dimensions of a growth strategy: Internationalization in expanding into new countries and the global market. It has shown concentration in being creative and relying on it’s core competency of making high quality coffee and coffee equipment to develop new products and markets. Horizontal Integration has been evident in the many strategic acquisitions partnerships and joint ventures. Vertical Integration has been another key success calculate as Starbucks Corporation has integrated backwards in opening coffee roasting plants and forwards in controlling the distribution of it’s many products. This growth has taken it from a single store in Pikes Place Market in Seattle to a worldwide affiliate with sales of over $2.1 Billion and operations in almost thirty countries in just 21 short years (fortune com). Private Company 1971: Starbucks began when three friends-English teacher Jerry Baldwin history teacher Zev Siegel and writer Gordon Bowker—opened a store called Starbucks Coffee. Tea and Spice in the touristy Pikes Place merchandise in Seattle (Thompson). The three original partners each invested about $6,350 in the hold on and believed they build a client base in the Seattle area. This was a strategic decision because each they saw an opportunity in the fine coffee market as they saw another similar store have success in the San Francisco Bay area. (Thompson) The store sold coffee beans and high quality coffee making equipment. The owners prided themselves on their knowledge of coffee bean and of educating customers about the benefits of dark roasting coffee. (Thompson) 1972: after the success of the first store a second Starbucks was opened in Seattle (Thompson). September 1982: Howard Schultz current chairman of Starbucks was hired to manage retail sales and marketing (Business & Company. 2002). After meeting with the owners early in 1982. Schultz was taken in by Starbucks commitment to quality and of educating customers of the benefits of slow roasting dark coffee beans. By this time Starbucks had expanded to operating five stores and a small coffee bean toasting facility. (Business & Company. 2002) 1983: After visiting Milan and seeing that the vast quantity of coffee and expresso bars. Schutlz realizes that Starbucks should be selling expresso cappuccino and fresh brewed coffee as well as selling coffee beans and high quality coffee equipment (Thompson). He was met with resistance as the owners did not want Starbucks to sell beverages (Business & Company). April 1984: Schultz finally convinced the owners to open a sixth “test” store in Seattle area. (starbucks com) It was an Expresso Bar that was designed to change coffee expresso and capuccinno and the store had immediate success (Thompson). April 1986: Schultz left Starbucks to fulfill his idea of building expresso bars around the Seattle area and opens II Giornale. (Thompson) In a year and half two more II Giornale expresso bars would be opened all serving Starbucks coffee. (starbucks com) March 1987: II Giornale and Howard Schultz acquired Starbucks for $3.84 million. (Thompson) They acquired the Starbucks name roasting plant stores etc. The new label of the company would be Starbucks Corporation and Howard Schultz was the new CEO. Schultz has a strategic vision of Starbucks becoming a national company. His goal was to open 125 stores in the next five years. Schultz had already demonstrated his corporate vision and growth strategy with II Giornale now he was horizontally integrating in the Seattle market by acquiring Starbucks. This would be the first major acquisition in Starbucks history. Between 1987 through 1990 Starbucks entered new markets and continued to grow. Schultz announced a five-year growth plan to build 125 new stores. (Thompson) At the end of 1987 there were 17 Starbucks locations and by 1990 there were 84 (starbucks com) During this four year growth phase Starbucks entered the markets of Chicago. Vancouver and Portland. (starbucks com) In 1988 the company started a mail order catalog for it’s fine dark roasted coffee beans and high quality coffee equipment (Business & Company. 2002). 1991: Schultz makes Starbucks. “the first privately held affiliate to establish an employee stock option schedule that included part-timers.” (Business & Company. 2002). Schultz had a business strategy to retain high quality employees by making Starbucks a great place to work. He referred to every employee as a “partner” in the company (Thompson). 1991 – Starbucks Company entered next big merchandise. California. Management believed this would be a favorable market because of it’s “trendy” nature (Thompson). 1992 – Starbucks had opened 150 new stores between the five-year period of 1987-1992. 25 more than the original plan (Thompson). This was a tribute to the high sales and success that Starbucks was having throughout it’s markets. People were associating Starbucks with high quality coffee and it was becoming a very social atmospheres. Public Company June 1992 – Starbucks Company was very successful after its initial public offering on the NASDAQ exchange (Thompson). 1993 – during this year Starbucks opened in the Washington. D. C merchandise opened its second roasting lay and began it’s long-term relationship with Barnes & Noble. Inc to change coffee products at its bookstores (Business & Company. 2002) (starbucks com). 1994-1995 – these years represent more growth and partnerships including an acquisition of The Coffee Connection. Inc for $23 million (Business & Company. 2002). During these years Starbucks penetrated the approximately 15 more markets (cities) in the United States (starbucks com). It also formed a strategic alliance with PepsiCo the North American Coffee Partnership to manufacture and give coffee drinks. This strategic decision turned out very lucrative as Frappuccino® an iced coffee consume has had an incredible amount of success in grocery and convenience stores. Starbucks also opened two more major accounts; Sheraton Hotels and United Airlines (starbucks com) 1996 – Starbucks Coffee International a subsidiary of Starbucks Corporation formed a fit venture with SAZABY Inc. a Japanese corporation to bring Starbucks into lacquer in 1995 and in 1996 it opened it’s first international location in Tokyo. Japan. This marked the beginning of its International growth which would see locations in Singapore at the end of 1996; Taiwan. Thailand. New Zealand and Malaysia by 1998; China. Lebanon and South Korea by 1999; and Spain. Puerto Rico and San Juan by end of 2002 (Business Wire) (starbucks com) By 2002. Starbucks had locations in almost thirty countries (starbucks com). Also in 1996 Starbucks formed an alliance with Dreyers Ice Cream to introduce coffee ice cream products which according to starbucks com became the “number one brand of coffee ice cream in the United States.” By 1996 there were 1,015 Starbucks locations (starbucks com) 1998 – Starbuck acquired the Seattle Coffee Company located in the United Kingdom and comprised of 56 locations for over US$60 million (BBC News Online. 1998). This is the beginning of Starbuck’s president’s goal of opening 500 stores in Europe by 2003. (BBC News Online. 1998) 1999 – There were two major events during 1999. The first was the acquisition of Tazo® a tea company. (Business & Company. 2002) The second was a long-term contract with Albertson’s supermarkets (Albertson’s,1999). In this deal more than 100 Starbucks Coffee bars would be opened in Albertson’s grocery stores in the U. S. This was also a strategy by Starbucks to introduce Frappuccino®. Tazo® tea and other merchandise to new markets across the Midwest where Albertson’s is centralized (Albertson’s. 1999). 2000- During 2000 approximately 1,865 Starbucks locations were opened in the United States and abroad (starbucks com). In addition. Starbucks entered into a contract with Host Marriott International as this continued their growth into the hotel industry (starbucks com). 2001- This year represented another year of substantial location growth with over 1,400 new locations bringing the total amount to 4,709. In addition Starbucks Japan. Ltd. (“Starbucks Japan”) saw the opening of it’s 300th Japanese location after winning immense popularity in Japan and financial success after it’s Initial Public Offering on Nasdaq Japan September of 2001 (starbucks com) (Business Wire). 2002- This year Starbucks continues to break through into new markets in new countries. In March of 2002 Starbucks celebrated it’s first store opening in Spain and announced plans to open hundreds of new stores internationally (Puget. 2002). Starbucks Size Starbucks is a global corporation with 4,709 total locations in the United States and worldwide (starbucks com). With operations in almost thirty countries such as the United States. Australia. Germany. United Kingdom and Qatar to name a few they reported revenues of over $2.64 Billion in 2001 (Starbucks Corporation). The company reported total assets of $1.851 billion in 2001. Starbucks continues to change at a rapid pace with plans to open over 600 locations in Europe alone by 2003 (starbucks com). Starbucks has quickly become well established in the United States having locations in every major city. Starbucks employed over 59,000 people during 2001 with a employment growth rate of 24% (fortune com). Starbucks Scope Starbucks Corporation competes in the global arena. As previously mentioned in this case study it has operations in almost thirty countries most prominently in the United States. Starbucks has used high quality coffee as it’s core competency and is currently in many different markets. These include ice cream supermarket coffee beans restaurants coffee bars coffee brewing equipment coffee flavored drinks tea’s and also books and compact discs. Starbucks sells its product through many avenues including Starbucks Coffee locations mail-order catalogs and its website starbucks com. Starbucks Financial Performance During the fiscal year ending September. 2001 reported revenues were $2.649 Billion. This was over $500 million higher than the previous year. Reported gross profit increased over $100million from 2000 to $581 million. Starbucks reported 2001 Operating Income of $252.5million and Total Net Income $181.2 million both figures increasing substantially from the previous year (Starbucks Corporation). Starbucks Corporation has quite a few very strong financial ratios which we will now look at. The P/E ratio (profit/earnings) in 2001 was 49.08 which is far superior to the Industry average of 27.58 (Ratio. 2002). Starbucks EPS earnings per share of 81.79 is over five times higher than the industry average of 12.67 (Ratio. 2002). The quick ratio which relates total current liabilities to change marketable securities and receivables of 1.48 is a strong figure. Starbucks Corporation’s Current Ratio of 0.91 is stronger than the industry add up of 0.56. As the Current Ratio is the company’s current assets / current liabilities this indicates that Starbucks Corporation has the ability to satisfy it’s current liabilities with it’s current assets and with the ratio of 0.91 it is a signal of financial strength. Some other ratios open from Multex com include a Return on Assets of 11.31 a Return on Investment of 14.52 and a go on Equity of 14.86. Starbucks ROA and ROI are both stronger the industry average but the ROE is slightly weaker than the industry average of 17.80. Inventory Turnover ratio is 11.48 which indicates that Starbucks Corporations inventory is highly liquid and its operating cycles are very healthy (Ratio. 2002). This ratio is one more strong measure that Starbucks is a corporation that has exhibited strong financial performance. Starbucks Nonfinancial Performance Starbucks Corporation was voted by Fortune Magazine as one of the Top 100 Best Companies to Work For in 2002 ranked number 58 to be exact (fortune com). As of 12/1/2001 Starbucks Coffee has 51,914 employees in the United States and 7,627 employees outside of the U. S. (fortune com). Starbucks Corporation created 12,650 new jobs in 2001 from a pool of over 720,000 applicants with a 24% Job Growth evaluate (fortune com). 26% of it’s workforce is made up of minorities (non-Caucasion) and 60% of it is made up of women (fortune com). Starbucks Corporation chairman Howard Schultz believes that Starbucks should be a great place to work and should treat every one of their employees as partners. Some examples of his good faith have been employee stock options plans and health coverage that allow any employee part-time or full-time to benefit from. The plans have succeeded in having a low voluntary employee turnover rate in 2000 of 23% (fortune com). Product Usage Rate Usage Rate: The usage rate varies according to each type of product. In terms of coffee the add up usage rate for coffee drinkers is around three cups per day. It should be mentioned that every person has their own personal amount of coffee needed each day and so it is hard to base this fact as a general description but on average regular coffee drinkers would consume about two-three cups a day. In terms of the other food & beverage products it would be fair to base the usage rate on the number of coffees that are consumed during the day. Once again it is important to state that each person has their own personal amounts but usually those that purchase a consume of coffee would probably purchase a biscuit or chocolate. Other products such as coffee related equipment would only be purchased once in a while or when they were needed. Music would be purchased on a personal basis depending on if the consumers like the music available. Performance / Need Analysis Consumers especially those who are working have the need to go straight into the store and straight out as quickly as possible. This is a study objective because the quicker the service is the more satisfied customers will be. This is proved by the take-away nature of Starbucks and its catering facilities for the working class. In terms of actual coffee products consumers are in need of having high quality coffee variations made up from high quality coffee beans (http://www coffee com au/coffee_robusta htm). Consumers are appealed to by those companies who deal with the roasting and brewing of high quality coffees. Starbucks proves this point because it only purchases and roasts high quality whole coffee beans as well as adapting them into a number of different coffee variations. Consumers in addition to high quality coffee be to be able to taste many types of coffee variations. It is vitally important that those more popular coffee products are available to consumers while other variations are introduced on an occasional basis. Within in this it is necessary to make sure that the coffees are made of high quality beans and meet the requirements of consumers. These requirements include thick furnish cream at the top of Espressos strong flavor that is maintained and that the freshness of the beverage stays longer while undesirable flavors are minimized (http://www coffee com au/coffee_freshness htm). Basically the less these requirements are met the less appealing coffee will be to consumers. Starbucks meets these requirements through providing many variations of coffee in order to conform to as many people as possible. Examples include the walnut flavor of Colombia Narino Supremo the creamy sweet Café Verona and the smooth buttery Sulawesi (http://www starbucks com/shop/product asp). The fact that Starbucks is mainly associated with coffee some consumers who don’t drink coffee will be less attracted by the store. Many consumers who don’t consume coffee usually drink something similar like tea. With Starbucks the acquirement of the Portland (USA) based Tazo® Tea Company has allowed the product offerings to be expanded even further. Tazo® Tea provides a be of premium teas as well as herbal teas in addition to tea accessories and gift packs. This was a useful acquisition by Starbucks because it allowed them to better meet the requirements of even more consumers and therefore expanded the attractiveness of the store on a whole new aim. Through the selling of coffee-related products such as brewing equipment and accessories many consumers can enjoy high quality coffee at home rather than traveling out of their way. The equipment available includes Expresso machines stainless steel coffee filters and Starbucks cleaner and canisters. This is another example of how Starbucks is meeting the needs of current customers as well as increasing its attractiveness to potential customers. In addition to meeting those beverage needs of consumers sometimes there is the need to have an assortment of small foods that are quick to consume and easy to carry. This is sometimes the case when people are looking for a quick eat to have along with their drink. Starbucks has met this requirement through providing a be of chocolate variations like gift boxes and chocolate bars while also offering sweets such as after-coffee mints and lollipops. The benefits of this are further increased by the fact that sometimes these chocolates can complement a coffee and therefore when one is bought the other one also has a greater chance of being purchased. There are also less important needs that if required can sometimes bring about potential success. These needs are often apart of the whole experience and include things like music. Starbucks meets the need of consumers by another acquirement this time it’s the music company. Hear Music. The connection here is that customers can purchase music through Starbucks as a result of the agreement with Hear Music. Throughout the world many café’s have some type of music playing the background and this is a key identification feature that further expands the experience. Hear Music provides Starbucks with a number of songs that are played throughout the day and this is quite an attraction for customers as proved by their constant questioning of what song is playing (http://www starbucks com/hearmusic/product asp). Further. Hear Music provides Starbucks with a number of compilation albums as come up as favorites in order to make customers feel more at home. Strengths and Weaknesses Operations Starbucks specialty operations strive to create the Starbucks brand outside the Company-operated retail store environment though a number of channels. By establishing relationships with well-known third parties that share their values and commitment to quality. Starbucks is able to arrive customers where they work shop and travel. These relationships take various forms including grocery channel licensing agreements warehouse club accounts international retail store licensing agreements direct-to-consumer merchandise channels joint ventures and more. Although Starbucks does not usually outsource operational control of its retail stores in North America in situations where another company can provide improved access to desirable retail space the Company licenses its operations. Starbucks has a long-term licensing agreement with Kraft Foods. Inc to merchandise and distribute Starbucks whole bean and ground coffees in the grocery channel in the United States. Kraft manages all distribution marketing advertising and promotions for this particular product. The Company has two non-retail domestic 50-50 fit ventures. This includes one with PepsiCo. Inc who develops and distributes ready-to-drink coffee-based products. Also they have a joint venture with Dreyer’s Grand Ice Cream. Inc to develop and distribute Starbucks premium coffee ice creams. Starbucks also makes their coffee and coffee-related products available via mail order and online. For the most move. Starbucks is vertically integrated controlling its coffee sourcing roasting and distribution through its retail stores. Score: +2 Marketing and Sales One of the main strengths of Starbucks over the years has been their tireless effort to make their product an uplifting move of people’s daily lives. Starbucks’ strategy for expanding its specialty operations is to reach customers where they work travel shop and dine by establishing relationships with prominent third parties who share their values and commitment to quality. Starbucks has carried out their strategy by moving distribution into grocery stores convenience stores department stores movie theatres businesses airports schools and homes. Starbucks has shown to use less of traditional advertising; instead relying more on its image advertising such as movie and television placement in order to promote the success of the business. Score: +2 Customer Service One of Starbuck’s primary objectives is to provide a superior level of customer service. One of their guiding principles in their mission statement states. “Develop enthusiastically satisfied customers all of the time”. In building customer loyalty not only does Starbucks offer high levels of customer service but they also strive to educate customers about coffee quality. There is an information section in each store that provides customers a good resource for becoming more knowledgeable about the world of coffee. Starbucks also publishes and distributes a mail order compile and a catalog of business gifts that offer coffees certain food items and select coffee-making equipment and accessories. The company has several other initiatives to enhance the customers’ experience at Starbucks retail stores. For example the Company is currently in the process of implementing wireless Internet access in its stores. Starbucks does provide a “comment card” on their web place that allows customers to give constant feedback about their experiences or concerns they may have. This is used as a means of improving the business where necessary. Score: +2 Procurement Starbucks depends upon both its outside brokers and its direct contact with exporters for the supply of green coffee. Coffee sought by Starbucks tends to trade on a negotiated basis usually quite a bit higher in price compared to their competitors. Supply and determine can be affected by many factors in the producing countries such as weather political and economic conditions. To reduce the risks associated with the unpredictability of coffee price and supply. Starbucks enters into long-term fixed price contracts with its suppliers to ensure an adequate supply of quality green coffee over extended periods of time. Starbucks is confident with such relationships and believes the risks of non-delivery on such purchase commitments are remote. Starbucks believes how they choose partners is critical to their success and have listed a few criteria: • Shared values and corporate culture • Strong multi-unit retail/restaurant experience • Dedicated human resources • Commitment to customer service • Quality image • Creative ability local knowledge and brand-building skills • Strong financial resources During the past year Starbucks has been developing a new set of coffee sourcing guidelines. These sourcing guidelines are a flexible point system that rewards performance in sustainable categories with financial incentives. Ultimately those who qualify for 100 points will be granted preferred supplier status with the Company’s coffee buyers. Score: +1 Technological Development Starbucks is continuously searching for ways to better a customers’ experience. With the introduction of the Starbucks Card for example the Company has created the opportunity to improve customer service bring down lines and make a customer’s visit at Starbucks quicker and more convenient. Score: +1 Human Resource Management Starbucks realizes that one of their most valuable resources are their employees. The first guiding principle in their mission statement even addresses the Company’s belief towards employees: “Provide a great work environment and treat each other with respect and dignity”. Management understands that their employees play a study role in the growth of the company. All employees at Starbucks are referred to as “partners” no matter what job position they occupy. The Company’s cultural values gives employees a sense of meaning to their bring home the bacon even if it is just pouring a cup of coffee. Each partner (even part-time employees) is eligible to receive health care participate in the Bean Stock program and get a free pound of coffee each week. Under the Bean Stock program employees are offered stock below the fair market value several times a year. Starbucks’ employees also participate in a 401(k) profit sharing plan. Starbucks believes they are in the coffee business as well as the “people development” business. Each employee is required to complete an extensive training program that includes product expertise a commitment to customer service and well-developed interpersonal skills. Professional coffee bartenders for Starbucks complete up to 24 hours of training before entering their assigned store. This training gives them knowledge to answer any questions about coffee or the Company and the knowledge to arrange sample tastings and demonstrations with any of the equipment in the store. While the industry turnover rate is about 400 percent. Starbucks maintains a turnover rate of only 50 percent. Due to this low turnover. Starbucks has lowered their training time and costs. Additionally. Starbucks is proud to note that it was again rated as on of the best companies to work for by Fortune magazine. Score: +2 tighten Infrastructure Starbucks has proved to be a leader in identifying merchandise trends and positioning themselves accordingly. For example before the recent economic slowdown management noticed a decrease in merchandise. Rather than pull back from their expansion strategy. Starbucks launched a series of small adjustments to improve efficiency and continue with their plans. Starbucks strives to offer an environmentally safe product as it believes that the welfare of people plant and product are linked. Starbucks prides itself on being a “good citizen” locally and in the international scene. They make significant contributions to local charities that focus on children the environment the homeless and AIDS research/support. Stated in the Starbucks Environmental Mission Statement; “Starbucks is committed to a role of environmental leadership in all facets of our business. We fulfill this mission by a commitment to: • Understanding of environmental issues and sharing information with our partners • Developing innovative and flexible solutions to bring about change • Striving to buy sell and use environmentally friendly products • Recognizing that fiscal responsibility is essential to our environmental future • Instilling environmental responsibility as a corporate value • Measuring and monitoring our progress for each project • Encouraging all partners to share in our mission" Score: +3 Production-Operations Starbucks stores are typically clustered in high-traffic high-visibility location in each market. Stores vary in size with an average of approximately 1,500 square feet. Since the Company is able to vary the coat of its stores. Starbucks stores are located in a variety of settings including office buildings downtown and suburban retail centers airport terminals and kiosks located usually in building lobbies. Whatever location the Company chooses to be in its focus will be on attracting high pedestrian street traffic. The product mix in each hold on varies depending on the size and location of the store. Starbucks takes great care in picking the right location. Analyst Mitchell Speiser says that. “while chains like McDonalds and Wendy’s routinely shutter 50 to 100 restaurants a year. Starbucks has closed only a small number of outlets in its 30-year history”. Starbucks has focused on improving efficiency and increasing its gross profit margins. Milk for example is the second most expensive product after coffee beans. Where Starbucks once had 65 different milk suppliers in the U. S. they now have fewer than 25. Without a doubt this efficiency gain has saved them a lot of money. Score: +3 Marketing Starbucks is the leading specialty coffee retailer in the nation with over 5,000 locations in 22 international markets. Starbucks positions their products on a relatively simple plane. They focus on quality and experience rather than price. A comparison of specialty drinks with its competitors reveals very minor differences. Starbucks’ image is one of the key elements to their success. The company has realized that populate don’t only come for the coffee; they go for the atmosphere. People socialize read study or just apply the music while drinking their coffee. Knowing this. Coffee shops try to make their stores unique in some way or another that ordain create an appealing atmosphere. Starbucks has less of a distinct setting for their locations; instead they focus on having plenty of comfortable seating so that people feel welcome to stay longer than they might have planned. Starbucks also positions each hold on individually according to the specific location it is in. This flexibility has attributed to the great success of the Company in the past decade. Another important part of Starbucks’ positioning is that they are environmentally friendly. While other retailers position themselves in similar ways no one focuses to the extent that Starbucks has. Consumers seem to respond to environmentally friendly companies who seem to truly care about the future of the world. Advertising strategies used by Starbucks has also been a key success factor. Starbucks has found more success advertising on a local level rather than to the nation as a whole. The Company advertises a lot through print mediums as Starbucks’ target market tends to be educated people who do more reading than the average person. Score: +3 Research and Development Starbucks’s organizational culture is one of innovation and creativity. This is evident through the continuous developments of new and exciting products. Whether it’s the new 4-cup thermal coffeemaker recently introduced to the market or the Starbucks ‘DoubleShot’ Espresso beverage. Starbucks seems to be the market leader when it comes to new products and ideas. In November 2001 the Company introduced the ‘Starbucks Card’ which is a stored-value separate that can be loaded and re-loaded in denominations up to $500. The Starbucks Card is a wonderful convenience tool for customers that can serve as great gifts and reduces time spent at the cash register. This contributes to the overall enhancement of the customer’s experience. Starbucks is extremely pleased with the ongoing positive customer response to the Starbucks Card. It is through the introduction of new products and the development of new distribution channels that Starbucks focuses on their Company’s goal of becoming the most recognized and respected brand in the world. Starbucks is one of the fastest growing companies in the U. S.; from just 17 coffee shops in 1987 to over 5,000 today. Future plans include opening at least 1,200 new stores during 2002 and by 2005 to undergo over 10,000 stores worldwide. Score: +2 Financial and Accounting Financially. Starbucks has had solid earnings and return. Despite still following a ‘fast-growth’ strategy the Company has managed to continue healthy operations while generating enough public funds to finance store expansion. For the first quarter of fiscal 2002. Starbucks reported record revenues and earnings. These consolidated net revenues are an increase of 21 percent to $805 million from $667 million for the first quarter of fiscal 2001. Starbucks expects full-year revenues to grow approximately 20 percent in fiscal 2002. Starbucks ended last year with more than $300 million in cash and virtually no debt. Score: +2 Management Starbucks firmly believes that their employees are one of their important assets and that it’s through their high quality workforce that they are able to maintain a competitive advantage. They have successfully built a nation wide Retail Company by creating pride in the labor compel produced through an empowering corporate culture; exceptional employee benefits and employee stock ownership programs. Employees are empowered by management to make decisions without having to first report to management and are encouraged to think for themselves as an entity of the business. The culture towards employees can be described as ‘relaxed’ and supportive. Starbucks has avoided a hierarchical organization structure and has no formal organizational chart. It is evident that employees at Starbucks share common goals. An employee was quoted as saying; “We all have this common belief in the product we sell”. Score: +3 Information Systems-Information Technology Starbucks deploys Blue Martini’s order management system to its retailers and channel partners. The system provides Starbucks with the ability to centrally manage and deliver contract-based products and pricing in different languages for its global distribution. Score: +1 Summary of Scores Overall. Starbucks seems to be a strong well-established and well-rounded company. As the industry leader they undergo built a strong brand image that has helped them to gain a considerable greater overlap of the market in comparison to their competitors. Management has shown to have the ability to foresee market trends and changes in consumer behaviors. Management has also created a corporate culture that promotes high productivity levels by their competent employees. Financially. Starbucks is stable despite its rapid and continuous growth strategies. The Company has done well to establish reliable long-term relationships with suppliers. For the most part as individual scores indicate. Starbucks is fairly to very capable in most areas of its business. In areas where they do perhaps lack expertise skills or competencies they have formed strategic alliances with companies that can be more efficient and effective. Value Chain Activities +13 of a total +21Internal Audit +13 of a total +18Total +26 of a be +39Stock Prices Chart One: Starbucks vs. Industry This Chart compares Starbuck’s stock to the Special Eateries Industry average. As depicted by the graph. Starbuck’s has been a defining compel in the industry as the industry average follows the exact same pattern/line just slightly below Starbucks for the past five years. (Source: hoovers com)Chart Two: Starbucks vs. Competition This Chart Compares Starbucks with three study competitors in the market. NWCI – New World Coffee Inc. DDRX – Diedrich Coffee. Inc. GMRC – Green Manhattan Coffee Inc. Because of the diversity of Starbucks competition in the past three years the stocks do not seem to be a parallel population to each other. In specific. Green Manhattan stock peaked the highest of the four around one year ago. Starbucks Corporation have has been on a steady and consistent rise for the past five years and Diedrich Coffee. Inc. possibly because of the increased market share competition put on by Starbucks Corporation and Green Manhattan Inc has seen a steady drop in stock prices over the past two years. (Source: hoovers com)Chart Three: Starbucks vs. Dow Jones This graph charts Starbucks Corporation versus the Dow Jones Industrial Average over the past five years. We chose this average because we conclude it best represents the restaurant industry that Starbucks is a member. This is reflected by some of the similar upward and downward movements of both lines in the graph. Overall Starbucks Corporation stock has been consistently higher than the Dow Jones and has grown in price at a higher rate than the average. (Source: hoovers com)Opportunities and Threats Economic Forces Economic factors are an important aspects that concern the nature and direction of the economy in which a firm operates. Since the relative affluence of various market segments will affect the consumption patterns companies must take this into consideration when planning its strategy. In periods of normal determine variation the bespeak for coffee is price inelastic. However when coffee prices show big increases consumers tend to reduce their consumption commensurately. The Company’s net revenues increased from $1.3 billion in fiscal 1998 to $1.7 billion in fiscal 1999 due primarily to the Company’s store expansion program and comparable store sales increases. As part of its expansion strategy of clustering stores in existing markets. Starbucks has experienced a certain level of cannibalization of existing stores by new stores as store concentration has increased. However management believes such cannibalization has been justified by the incremental sales and go on new store investments. This cannibalization as well as increased competition and other factors may continue to put downward pressure on the Company’s comparable store sales growth in future periods. (starbucks com) Score -1 Sociological Forces As a result of Starbucks closely following their objectives the company has installed a list of principles that further outline the company’s willingness to make sure that its affect on the environment is as positive as possible. These principles are stated as (starbucks com): • Understanding of environmental issues and sharing information with our partners. • Developing innovative and flexible solutions to bring about dress. • Striving to buy sell and use environmentally friendly products. • Recognizing that fiscal responsibility is essential to our environmental future. • Instilling environmental responsibility as a corporate value. • Measuring and monitoring our progress for each project. • Encouraging all partners to share in our mission. The importance of these guidelines is further illustrated by the affiliate’s mission to show leadership towards environmental issues. This can only be seen as a positive for the visualise of the company and shows that they are willing to utilize their resources in order to more than conform to requirements. In addition to this. Starbucks doesn’t just rest on its laurels it demonstrates it through participating and organizing activities such as neighborhood clean-ups and walk-a-thons. Once again the company’s image is strengthened by its actions and shows that it is able to actively contribute with the right cerebrate behind its activities. Further examples of the company’s actions towards environmental friendliness include the recycling and reusing of resources in order to enhance the lives of people around the world (http://www starbucks com). Policies that also have been implemented are the buying policies which only allow the company to purchase from those other businesses (suppliers) who follow the same environmental strategy as Starbucks. This illustrates the integrity of the company as they can sometimes sacrifice opportunities if they don’t follow what the company stands for. In addition to waste reduction. Starbucks also aims to reduce energy usage and once again demonstrates this by doing energy audits and then using the results to change store design or procedures so that they save as much energy as possible. Lastly to integrate these policies to new employees. Starbucks has employed the services of a few partners which congregate together to create a ‘Green Team,’ which installs the environmental views into trainees as well as coming up with inventive ways of helping the environment. Score: +3 Demographic Factors Starbucks originated in the United States which is the sector we will be examining for demographics. According to the CIA World Factbook the population of the U. S as of July 2001 was estimated at 278,058,88 (CIA). Population facts are important to Starbucks because they can give Starbucks valuable statistics such as US population base per Starbucks store. People ages 15-64 make up the largest percentage of the population and therefore will have greater hold back of the market than any other sector (CIA). This implies that the most important target market for Starbucks are people within this age group. The two largest ethnic groups in the U. S are white 83.5% and black 12.4. The ethnic background is important to a affiliate because it influences tastes trends perceptions values and beliefs of an individual. Estimated GDP in 2000 was $9.963 trillion (CIA). GDP real growth rate was 5% (CIA). The growth rate of GDP suggests that the economy is growing and therefore there is opportunity for Starbucks to expand business. A very large per capita purchasing power parity of $36,200 suggests that Americans have the opportunity to buy specialty coffee drinks from an expensive quality-intensive organization such as Starbucks (CIA). An inflation rate in consumer prices in the year 2000 of 3.4% is a high inflation rate. This suggests that the economy could be heading towards recession. During a recession it could be expected that consumers would spend less on premium luxury items such as Starbucks’ coffee. Score +2 Legal / Political Forces Right now. Starbucks has two class action suits pending since 2001. The lawsuits entitled Carr vs. Starbucks and Sheilds vs. Starbucks are challenging the status of Starbucks California store managers and assistant managers as exempt employees under California wage and hour laws. Starbuck’s is denying all liabilities in these cases however; the company has agreed to the settlement in order to act care of all of the plaintiffs’ claims without having to get involved in any protracted litigation. Starbucks also only imports all their coffee beans so possible threats could include a dress in import laws. A change in the status quo as far as imports go could greatly affect numerous areas of production for the affiliate. For example if it costs more to import or the process is made more difficult the result could ultimately be a change in price which would affect the level of consumption for Starbucks coffees. (starbucks com): Score -2 Summary of Scores The Economic Force was scored as a -1 due to the fact that an increase in coffee prices does affect the level of consumption of the good. Economic factors such as price raises pose to be a threat however it is a minor threat considering that Starbucks has established its customer base. It is apparent that an increase in price might affect consumer behavior but it will not drastically dress consumer habits. The technological sector was scored as a +3. The reasoning behind that is that new technological changes that Starbucks is undergoing poses to help open the door for new products by improvements being made in marketing and manufacturing techniques. Also the changes will assist in improvements in existing products. The technological improvements advancements and innovations create a great broach of opportunity for the organization by staying ahead of what competition is doing. In the Sociological sector. Starbucks was given a +3. Justification for this score is that Starbucks has created an image of being environmentally friendly. This is a strong opportunity to build on the organization’s market share because the company can attract more consumers from its competition because of its strong reputation. Starbucks scored a +2 in the Demographic sector primarily because the U. S population is growing with an increasing GDP and large per-capita purchasing power. Starbucks must be weary of a high inflation rate as this could suggest recession. Porters Five Forces Current Competitive Force Porter’s first force that Porter describes is current rivalry among existing firms. In the specialty eateries industry. Starbucks’ current and direct U. S competitors are Diedrich Coffee. Seattle’s Best Coffee and Einstein/Noah Bagel Corporation (hoovers com). The competition however is not equally balanced. Diedrich Coffee operates 370 coffeehouses in 37 states and 11 countries (hoovers com). Seattle’s Best Coffee operates 160 coffee cafes and 20 Italian coffee cafes in 17 states and 8 countries (hoovers com). Einstein/Noah Bagel Corporation operates 460 bagel cafes in the U. S (hoovers com). Starbucks has 4,709 locations in over 20 countries (hoovers com). It is clear that Starbucks has few major competitors and the competition has nowhere Starbucks’ volume of operations. Starbucks is the leading retailer roaster and brand of specialty coffee in the world. Smaller competitors however pose potential threats to the company. For example the average Starbucks location draws on a population base of 200,000 (msn com). In San Francisco and Seattle. Starbucks draws on population bases between 17,000 and 19,000 (msn com). In cities where Starbucks does not draw on small population bases smaller competitors can attract some of Starbucks’ 200,000 person population base. A slowing industry market growth is another threat facing Starbucks. According to the market research firm Allegra compound market growth between 1997 and 2001 was 57% (hoovers com). From 2002 to December 2004 the market it estimated to grow 14%. (hoovers com). Competitors are selling similar products including specialty coffees as well as high quality foods. In this slowing market competition is high. Score: -2 Threat of Potential Entrants carry’s next force is the threat of Potential Entrants. Starbucks being the world leader in its industry has controlled access to distribution channels. Starbucks has exhibited this control over distribution channels by setting guidelines for their suppliers to follow. These guidelines will be discussed in more dilate in the discussion of the industry bargaining power of suppliers. Starbucks is Fortune’s number one most admired company in the food industry (fortune com). One of their key attributes to success is innovation where Fortune ranks Starbucks number one in the industry (fortune com). Starbucks is constantly innovating and showing strong product differentiation in their industry. The industry following Starbucks’ lead is becoming more differentiated. For example five months after Starbucks introduced a prepaid Starbucks debit card. Seattle’s Best launched its version of the marketing product (hoovers com). This industry differentiation is an opportunity for Starbucks and a threat to potential entrants. Statistics undergo shown the industry to be slowing down therefore making competition high and the threat of new entrants low. Some believe however that there is a different kind of potential entry threat. Ted R. Lingle executive director of the Specialty Coffee Association of America believes that national food servers like McDonalds and Denny’s could create strong coffee menus and become “the strongest competitor for Starbucks’ business.” (msn com). Score: -3 Bargaining Power of Buyers Porter’s next force is Bargaining Power of Buyers. Star
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