Starbuck's Strategy and Internal Initiatives to Return to Profitable Growth
Table of Contents
1. EXECUTIVE SUMMARY
Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, operating in more than 50 countries. Since its founding in 1987 as a modest nine-store operation in Seattle, Washington, Starbucks had become the world's premier roaster and retailer of specialty coffees, with 8,812 company owned stores and 7,852 licensed stores and annual sales of about $10 million. During the recession in 2008 and 2009, sales at company owned Starbucks stores open 13 months or longer declined an average from 3% to 5%.
Starbucks purchases and roasts high-quality whole bean coffees and sells them, along with handcrafted coffee and tea beverages and a variety of fresh food items, through company-operated retail stores. Starbucks also sell coffee and tea products and license the trademarks through other channels such as licensed retail stores, and through certain of their licensees and equity investees, they produce and sell a variety of ready-to-drink beverages. All channels outside the company-operated retail stores are collectively known as specialty operations. In addition to their flagship Starbucks brand, their portfolio includes brands such as Tazo Tea, Seattle’s Best Coffee, and Starbucks VIA Ready Brew.
Starbucks has three reportable operating segments such as United States, International, and Global Consumer Products Group (CPG). The US and International segments both include Company-operated retail stores and certain components of specialty operations. The CPG segment includes packaged coffee and tea, and other branded products sold worldwide through channels such as grocery stores, warehouse clubs and convenience stores, and US foodservice accounts. CPG operates a significant portion of its business through licensing arrangements and joint ventures with large consumer products business partners. 2. External Analysis
2.1. Starbucks Using Porter’s Five Forces:
2.1.1. The Threat of Substitutes in Coffee Industry - Medium
There are other beverages that can be substitutes from Starbucks coffee and tea including soda, fruit juice, smoothies, water, beer and other alcoholic drinks. Starbucks offer people a place to hang out, chat, and relax, but other tea houses, fast food places, side‐walk cafes, and bars and pubs also offer the same environment. 2.1.2. The Threat of New Entry - Low
The entry barrier for the coffee industry is relatively low, even for premium coffee like Starbucks. Any large and well‐funded company where capital is not a problem could be potential entrants. There are some of current and ongoing threats of new entrants include fast food chains such as McDonalds, Burger King and Dunkin Donuts. 2.1.3. Rivalry among Competing in Coffee Industry - Medium
Other coffee chains such as: Coffee Bean & Tea Leaf, Caribou Coffee, and Dunn Bros Coffee. Those are smaller privately owned coffee houses, and other secondary coffee providers include McDonalds, Burger King, and Dunkin Donuts. 2.1. 4. The Bargaining Power of Suppliers ‐ Low
Not much bargaining power for coffee bean suppliers due to the importance of Starbucks’ business to any individual supplier, and the fact that Starbucks probably accounts for a large percentage of any individual supplier’s sales.. This gives Starbucks the ability to dictate the price of coffee bean sales. Similarly, suppliers of paper and plastic products, such as cups, napkins, lids, etc, have very little bargaining power due to the large amount of alternative sources Starbucks could draw from. In addition, Starbucks has formed contracts with such suppliers, giving them effectively no bargaining power. 2.1.5. The Bargaining Power of Buyers - Medium
In the past, buyers did not really have bargaining power when it came to premium coffee such as Starbucks. The sheer scale of Starbucks’ business reduces the bargaining...
References: Thompson, Arthur A., Margaret A. Peteraf, John E. Gamble, and Dr. A.J. (Lonnie) Strickland. Cases for Crafting & Executing Strategy Vol. 1. New York: McGraw Hil, 2012. Print.
Thompson, Arthur A.. Crafting and executing strategy: concepts and readings.. 18th ed. New York: McGraw-Hill/Irwin, 2012. Print.
Starbucks 2009 annual report. (2009, November 20). Retrieved from http://media.corporate-ir.net/media_files/irol/99/99518/SBUX_AR.pdf
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