60914885 Starbucks Final

8/3/2019 60914885 Starbucks Final

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Starbucks strategy in thespecialty coffee industry.

Mohammad Robiul Alim 300649435

Raja Pravu

Ashraful Kabir 300642403


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Presentation Outline

Introduction to Starbucks

Industry Overview

Company Overview Strategic Analysis


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About Starbucks

Overview

Timeline

Corporate Values andBusiness Principles

Mission Statements

Corporate SocialResponsibility


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Established in 1971 at Seattle, Washington

Famous for its quality fresh-roasted coffee beansand stylish atmosphere. Over 9,000 stores worldwide Product lines include :

beverages (coffee, Tazo tea, soda, juices)

pastries whole coffee beans coffee-related hardware and equipment merchandise (mug, CDs)

Overview


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1971 Starbucks Coffee, Tea, and Spice store (coffee bean roasting)opened in Seattles Pike Place Market.

1982 Howard Schultz joined Starbucks.

1986 Howard Schultz established Il Giornale Coffee Company.

1987 Il Giornale acquired Starbucks and changed the name intoStarbucks Corporation.

1992 Starbucks decertified the union and made IPO.

1995Starbucks Coffee International opens in Japan Starbucks implemented ESOP.

Timeline


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Timeline

1996Starbucks began selling bottled Frappuccino.

1999 Starbucks acquired Tazo Tea.

2000 Acquired Hear Music, a San Francisco-based company

2003Starbucks acquired Seattles Best Coffee

2005 Introduced Starbucks Coffee Liqueur; Acquires Ethos Wate


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Corporate Values and

Business Principles

Building a Company with Soul

Opposing Franchising because of Quality Controland Culture

Only selling coffee beans without artificial flavors.

Satisfy customers by all means.

Employees contribution and involvement in making

Starbucks a better company
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About Starbucks

Mission Statements

Company Mission Statement:

Establish Starbucks as the premier

purveyor of the finest coffee in theworld while maintaining our

uncompromising principles while we

grow.

Environmental Mission Statement: Starbucks is committed to a role of

environmental leadership in all facets

of our business.


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Mission Statement

Six guiding principles:

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.


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Starbucks focuses its efforts on improving social and economic

conditions for coffee farmers; minimizing environmental impact;

making a positive contribution in the communities where they dobusiness; and providing a great work environment for their partners

(employees).

Establish the Starbucks Foundation in 1997

A major contributor of CARE, worldwide relief and development

organization (Health, Education, and Humanitarian aid)

Provides financial support to community literacy organizations

Participate in local charitable projects.

2004 EnviroStars Recognized Leader Award for its community

service and environmental activities


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Starbucks Strategy

Rapid store expansion strategy Domestic store expansion

International store expansion Employee Training and Recognition Real Estate, Store Design, Planning, and Construction Store ambience

Product Line

Coffee purchasing strategy


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Starbucks Strategy

Rapid store expansion strategy

Domestic store expansion A three-year expansion strategy

Starbucks everywhere approach

International store expansion

Company-owned and company-operated stores or licensing Created a new subsidiary, Starbucks Coffee International

Expanded its consumer products channel in South Pacific region


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Starbucks Strategy

Employee Training and Recognition

Systems to recruit, hire and train baristas and store managers

screening

training programs

awards for partners

Real Estate, Store Design, Planning, and Construction

A broad range of store formats (the right image and character) A stores of the future project team

High-traffic, high-visibility store locations

Control of average store opening costs

Wi-Fi availability at stores


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Starbucks Strategy

Store ambience

The concept of everything matters

Assessment of standards


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Starbucks Strategy

Product Line

Wide range of products choices

Special product promotion

Selling music CDs

Joint ventures

Pepsi CoDreyers Grand Ice Cream

Jim Beam BrandsAcquisitions

Hear Music Ethos Water

Starbucks Cards

Partnership with Bank One


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Starbucks Strategy


Building relationship with growers and exporters, checking on

agricultural conditions and crop yields, and searching out varieties

and sources that would meet Starbucks standards.

Using fixed-price purchase commitment and purchasing coffee future

contracts

Contributing to the sustainability of coffee growers and helpingenvironment conservation

Purchasing and marketing Fair Trade Certified coffee

Promoting coffee cultivation methods that protected biodiversity and

maintained a healthy environment


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Industry and CompetitiveAnalysis

Coffee Industry

C

Corporate Values andBusiness Principles

Mission Statements



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Industry and Competitive Analysis

Coffee industry

Coffee drinking trend Coffee beans production

Competitor analysis

Future goals Current strategy Assumptions Capabilities

Generic competitive strategy

PEST analysis

Site 7S analysis


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Coffee industry

Coffee drinking trend Coffee is the second most consumed drink after water.

Americans substitute specialty coffee for alcohol.

Coffee shops are a great place to meet people.

Coffee is an affordable luxury.

Consumers are more knowledgeable about coffee.

Coffee beans production In 1994, coffee was the second most traded commodity after

Oil.

There are two types of Coffee, namely basic andspecialty.


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Competitor analysis

2 Types of Competitor:

Coffee shops and restaurants Nationwide coffee manufacturers (rival brands

of specialty coffee)


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Competitor analysis

Future goals To grow bigger To better position themselves as an alternative to Starbucks

Current strategy

Merger of local and regional chains of coffee shops etc.

Assumptions Competitors assumptions about themselves

Competitors assumptions about the industry and other companies in it


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Competitor analysis

Capabilities (areas of competitors strengths and

weaknesses) Product Dealer/distribution Operations R & D Financial strength Organization & managerial ability Personnel turnover


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Generic Competitive Strategy


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Focused differentiation

Serve niche buyers better than rivals

Buyers have distinctive preferences, special requirements, or unique

needs

Have unique capabilities to serve needs of target buyer segment

Big enough to be profitable and offers good growth potential

Costly or difficult for multi-segment competitorsto meet specialized needs of niche members

Starbucks has resources and capabilities

to effectively serve an attractive niche

Few other rivals are specializing in same niche


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PEST Analysis

Political Influences

Relationships between U.S. and countries producing coffeebeans

Environmental regulations Industry-specific regulations

Economic Influences

Demand for food and beverages

Customers buying power Exchange rate & taxation


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PEST Analysis

Social Influences

Trend

Consumer preferences

Changes in lifestyle and occupation Education

Technological Influences

advances in manufacture biotech and agricultural development

IT developments


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Site 7S Model

Strategy

Rapid store expansion strategy

Product Line



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Site 7S Model

Structure

There are one store

manager, one assistant

manager, some shift

supervisors and 16

partners/baristas

Baristas Baristas Baristas

Shift Supervisors

Assistant Manager

Store Manager


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Site 7S Analysis

StaffingEmployee benefits package includes base salary, health carebenefits, stock option plan, and

Health care benefits include preventive care, crisis counseling,dental care, eye care, mental health, chemical dependency, and

medical costs for terminal illness up for 29 months.

Employees trainings that include basic 24 hour-training, Star

Skills, Coffee Master Program, Servant Leadership Workshop,

Career Power and Career Power for Coaches Workshop.

Awards for partners, which range from frequent awards to high-

level cash awards.


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Site 7S Analysis

Systems

Centralized control over individual stores by

headquarters Total Quality Management (i.e. Just-In-Time)

Information system to support business operations.


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Site 7S Analysis

Skills

coffee making customer service

sales techniques


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Site 7S Model

Style

Increase motivation through reviews and raises.

Employees are allowed to make decisions and participate in


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Site 7S Model

Shared Values

Fun working environment

Treat each other with respect and care Diversity is encouraged.

Maintain highest quality standards for products

Satisfy customers and compensate the unsatisfied

ones. CSR.

Respect employees by calling them partner.

The importance of profitability for future success

Does Starbucks strategy seem to be


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Does Starbuck s strategy seem to be

well- matched to industry andcompetitive conditions?

The first of these factors was their abilityto design a strategic approach to growththat quickly demonstrated the feasibilityof their business model and took

advantage of some key demographicgroups.


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Does Starbucks strategy seem to be well-matched to industry and competitive

conditions? Cont

Ability to attract the highest-qualityemployees through the implementation of asuperior healthcare plan while reducing

costs and giving equity ownership to allemployees.

Does Starbucks strategy seem to be well


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The strategic alliance they had withconservation international allowed themto create a sustainable supply chain of

high quality coffee.


conditions? Cont


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A community environment in which casualsocial interactions could take place.


conditions? Cont

D St b k t t t b ll


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conditions?

Ability to adapt to the changing dynamicsof their consumer demographics.

Does the strategy seem to be keyed to a cost advantages


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Does the strategy seem to be keyed to a cost advantages,

differentiating features serving the unique needs of a nicheor developing resource strengths and competitivecapabilities rivals cant imitate or trump?

The specialty coffee industry does not put a high premiumon economies of scale. Although, companies with nationaldistribution in the coffee industry at large experienced some

discounts through bulk purchases and superiorinfrastructures, their advantages were small.

Many cost advantages can be independent of scale and may

be gained by establishing one's position in an industry early.These can be referred to as first mover advantage. Some ofthese advantages come from proprietary product technology,favourable access to raw materials, favourable locations anda learning experience curve.

Does the strategy seem to be keyed to a cost advantages


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Does the strategy seem to be keyed to a cost advantages,

differentiating features serving the unique needs of a nicheor developing resource strengths and competitivecapabilities rivals cant imitate or trump?

There is also numerous cost disadvantages imposed on newentrants that are independent of the economies of scaleconsiderations. As the industry matures, the ability to access

distribution channels and select from the highest qualitycoffee beans has becoming increasingly difficult.

The strategy of differentiation is particularly attractive

because it offers insulation from the price competitioninherent in a cost leadership strategy. The goal should shiftaway from differentiating physical attributes and towardsdifferentiating the organizations systems and bureaucraticset up as well as their image within the industry.


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What is there about Starbucks strategy that canlead to sustainable competitive advantage?

Many efforts are being made at Starbucks to enhance theirimage as being environmentally friendly, as is true for allmodern corporations, they still have much room to improve,

thus, further differentiating themselves.

To encourage customers to use porcelain cups, Starbucks could offer in-house drinkers who choose to use the porcelain cups a discount. Otherexamples of ways in which Starbucks could enhance both its actual

green bona fides and its image as an environmentally friendly companywould include: selling to go mugs and re-usable sleeves at affordableprices; implementing recycling bins; seeking to compost or otherwiserecycle food waste; and encouraging customers, using financialincentives, to recharge plastic Starbucks cards as opposed to purchasinga new one.


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Thank You

All

60914885 Starbucks Final

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