Starbucks Strategy

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Is the Best Time Yet to Come?

Transcript of Starbucks Strategy

  • Starbucks Global Quest in 2006: Is the Best Yet to Come?Danny Nugroho RP 13967/PS/MM/06Retnowulan 19421/PS/MM/06

  • Presentation OutlineIntroduction to StarbucksIndustry OverviewCompany OverviewSite AnalysisRecommendations for ImprovementFocused Recommendation for ImprovementFinal Action PlanImpact AnalysisWrap Up

  • Presentation OutlineAbout StarbucksOverviewTimelineCorporate Values and Business PrinciplesMission StatementsCorporate Social Responsibility

    Starbucks StrategyStore expansion strategyProduct lineCoffee purchasing strategyIndustry and Competitive AnalysisCoffee industryCompetitor analysisGeneric competitive strategyPEST analysisSite 7-S analysis

    ConclusionRecommendation

  • Presentation OutlineAbout Starbucks

    Starbucks StrategyIndustry and Competitive AnalysisConclusionRecommendation

  • About Starbucks Overview

    Timeline

    Corporate Values and Business Principles

    Mission Statements

    Corporate Social Responsibility

  • Established in 1971 at Seattle, Washington Famous for its quality fresh-roasted coffee beans and 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

  • 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 into Starbucks Corporation.

    1992 Starbucks decertified the union and made IPO.

    1995 Starbucks Coffee International opens in Japan Starbucks implemented ESOP.

    Timeline

  • Timeline1996 Starbucks began selling bottled Frappuccino.

    1999 Starbucks acquired Tazo Tea.

    2000 Acquired Hear Music, a San Francisco-based company 2003 Starbucks acquired Seattles Best Coffee

    2005 Introduced Starbucks Coffee Liqueur; Acquires Ethos Wate

  • Corporate Values and Business PrinciplesBuilding a Company with Soul

    Opposing Franchising because of Quality Control and Culture

    Only selling coffee beans without artificial flavors.

    Satisfy customers by all means.

    Employees contribution and involvement in making Starbucks a better company

  • About StarbucksMission StatementsCompany Mission Statement:Establish Starbucks as the premier purveyor of the finest coffee in the world 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.

  • Mission StatementSix 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.

  • Corporate Social ResponsibilityStarbucks focuses its efforts on improving social and economic conditions for coffee farmers; minimizing environmental impact; making a positive contribution in the communities where they do business; and providing a great work environment for their partners (employees).Establish the Starbucks Foundation in 1997A major contributor of CARE, worldwide relief and development organization (Health, Education, and Humanitarian aid)Provides financial support to community literacy organizationsParticipate in local charitable projects.2004 EnviroStars Recognized Leader Award for its community service and environmental activities

  • Starbucks StrategyRapid store expansion strategyDomestic store expansionInternational store expansionEmployee Training and RecognitionReal Estate, Store Design, Planning, and ConstructionStore ambience

    Product Line

    Coffee purchasing strategy

  • Starbucks StrategyRapid 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

  • Starbucks StrategyEmployee 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

  • Starbucks StrategyStore ambience The concept of everything matters Assessment of standards

  • Starbucks StrategyProduct Line

    Wide range of products choicesSpecial product promotionSelling music CDs Joint venturesPepsiCoDreyers Grand Ice Cream Jim Beam BrandsAcquisitions Hear Music Ethos WaterStarbucks CardsPartnership with Bank One

  • Starbucks StrategyCoffee purchasing 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 contractsContributing to the sustainability of coffee growers and helping environment conservationPurchasing and marketing Fair Trade Certified coffeePromoting coffee cultivation methods that protected biodiversity and maintained a healthy environment

  • Industry and Competitive Analysis Coffee Industry

    C

    Corporate Values and Business Principles

    Mission Statements

    Corporate Social Responsibility

  • Industry and Competitive AnalysisCoffee industry

    Coffee drinking trendCoffee beans production

    Competitor analysis

    Future goalsCurrent strategyAssumptionsCapabilities

    Generic competitive strategy

    PEST analysisSite 7S analysis

  • Industry and Competitive AnalysisCoffee 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 and specialty.

  • Industry and Competitive AnalysisCompetitor analysis

    2 Types of Competitor:

    Coffee shops and restaurantsNationwide coffee manufacturers (rival brands of specialty coffee)

  • Industry and Competitive AnalysisCompetitor analysis

    Future goalsTo grow biggerTo better position themselves as an alternative to Starbucks

    Current strategyMerger of local and regional chains of coffee shops etc.

    Assumptions Competitors assumptions about themselves Competitors assumptions about the industry and other companies in it

  • Industry and Competitive AnalysisCompetitor analysis

    Capabilities (areas of competitors strengths and weaknesses) Product Dealer/distribution Operations R & D Financial strength Organization & managerial ability Personnel turnover

  • Industry and Competitive AnalysisGeneric Competitive Strategy

  • Industry and Competitive AnalysisFocused differentiation

    Serve niche buyers better than rivalsBuyers have distinctive preferences, special requirements, or unique needsHave unique capabilities to serve needs of target buyer segmentBig enough to be profitable and offers good growth potentialCostly or difficult for multi-segment competitors to meet specialized needs of niche membersStarbucks has resources and capabilities to effectively serve an attractive nicheFew other rivals are specializing in same niche

  • PEST AnalysisPolitical Influences Relationships between U.S. and countries producing coffee beans Environmental regulations Industry-specific regulations

    Economic Influences Demand for food and beverages Customers buying power Exchange rate & taxation

  • PEST AnalysisSocial Influences Trend Consumer preferences Changes in lifestyle and occupation Education

    Technological Influences advances in manufacture biotech and agricultural development IT developments

  • Site 7S ModelStrategy

    Rapid store expansion strategy

    Product Line

    Coffee purchasing strategy

  • Site 7S ModelStructure

    There are one store manager, one assistant manager, some shift supervisors and 16 partners/baristas

  • Site 7S AnalysisStaffingEmployee benefits package includes base salary, health care benefits, 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.

  • Site 7S AnalysisSystems Centralized control over individual stores by headquarters Total Quality Management (i.e. Just-In-Time) Information system to support business operations.