starbuks (wac) business strategy analysis.ppts

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


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. +


$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 +


“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. +


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. +


It can enhance its marketing under the leadership of Howard Schultz. +

R&D for new markets in which it has to enter. +


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. +


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. +


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 +


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. +


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. +


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 +


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

http://www.organicconsumers.org/starbucks/coffback.htm

http://www.organicconsumers.org/starbucks/coffback.htm

starbuks (wac) business strategy analysis.ppts

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