Week 5 starbucks ppt draft
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Starbucks: Now and beyond Presented by “Team 5”: Denisa Dobrin, Colby Foster-Baker, Jen Allison, Geoffrey MacLennan, Renee Volk NECB (2012), MBA 525, Managerial Economics Prof.: Dr. Ned Gandevani MBA525 Team 5 Presentation 1
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Transcript of Week 5 starbucks ppt draft
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Starbucks:Now and beyond
Presented by “Team 5”:
Denisa Dobrin, Colby Foster-Baker, Jen Allison, Geoffrey MacLennan, Renee Volk
NECB (2012), MBA 525, Managerial Economics
Prof.: Dr. Ned Gandevani 1
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Agenda• Company Profile• Market Demand (Colby)• Pricing Strategy (Colby)• Market Size (Jen)• Production Scale / Scale of operation (Jen)• Market Structure (Geoff)• Conclusions, Recommendations, Q&A (Renee)
Starbucks mission statement: “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” (Starbucks.com
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Company Profile
• First store in Seattle, 1971• Currently 18,000+ stores in 60 countries• Employs approximately 149,000 people• Revenue:• 2011 at $11.7 billion• 2012 at $13.3 billion
• Operating Income: • 2011 at $1.7 billion• 2012 at $2.0 billion
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Market Demand• Historical Demand• $13.3 billion in revenue in 2012 (14% increase from 2011)• 7% increase in global sales
• Will market demand for Starbucks be robust in the next 12 months?• International demand should increase• 15% sales growth in China/Asia Pacific during 2012 fiscal year• 154 new stores opened in China/Asia Pacific region in 2012• Plans to open additional 600 stores in China/Asia Pacific
• Domestic demand remains strong• Moved up to 3rd largest American restaurant chain in 2011• New offerings to expand retail chain demand 4
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Market Demand (cont.)
• Will market demand for Starbucks be robust in the next 12 months?
• Branching into new markets• Teavana Holdings, Inc. – specialty tea products• Verismo™ - single-serve home brewing system• Evolution Fresh™ - high-end specialty juice retailer
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Pricing Strategy• What is Starbucks pricing strategy?• Broke “Skim Pricing” mold by sustaining premium prices• Competitor’s prices have risen to compete
• Factors affecting Pricing• Competition• McDonald’s offering “premium” coffee at low $1 prices • Controls largest market share
• Consumer Attitudes• Established as quality and innovation leader• High level of brand trust
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Pricing Strategy (cont.)
• Economic Conditions: Global Financial Crisis• Standard drink prices lowered by $0.05 to $0.15• Specialty drink prices raised by up to $0.30• Overall, sustained premium pricing levels
• Does Starbucks pricing strategy make sense?• Re-branded the “cup of Joe” and established market for high-end
coffee houses• Customer’s very willing to pay for perceived high quality
beverages and exceptional service• Premium pricing strategy is more profitable as economic
efficiency efforts are underway7
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Current Scale of Operation
Just how big is Starbucks?• 17,00 stores in 55 countries• 60 million customers world wide• 160,000 employees Processing and Distribution• Roasting plants• Co-manufacturers• Tea• Distribution Centers
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Current Scale of Operation (cont.)
Market Share •In 2010 Starbucks had 33% of the coffee store market
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Local & Regional Specialty Coffee
Shops47%
Starbucks33%
McDonalds7%
Convenience Stores & Gas Sta-
tions13%
Market Share (USA)
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Current Scale of Operation (cont.)
• 2011 fastest competitor is Dunkin Donuts• Expansions• China• Products
• Structure recommendations
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Cost Structure
Sticking it out in tough times• 2008 Economic Crisis
• Sales ↓• Expenses ↑
• Outsourcing agreements• 70% tied into agreements• Globalized process and improved efficiency at lower costs
• Cost cutting measures• Store closings domestically and internationally
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Shut Down Effect
Could the Shut Down Rule apply to Starbucks?
• Cost of product vs. Sales• Food sales doubled• Introduction of new products
• Teavana• La Boulange
Short run vs. Long run
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Market Structure
• Starbucks operates within a Monopolistic Competition structure
• What is a Monopolistic Competition Structure?• No major barriers to entry into market• There are many competitors• Each competitors product is differentiated• Each firm able to make independent decisions on price and
output
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Market Structure (cont.)
• Coffee Industry• No Major Barriers to entry• McDonald’s and Wendy’s upgraded coffee offerings• Independent coffee shops
• Differentiated Competitors• Fast Food Chain Restaurants (McDonald’s, Wendy’s)• Coffee - Donut Chains (Dunkin’ Donuts, Honey Dew)• Premium Coffee Chains (Peet’s, San Francisco Coffee House)• Independent Coffee Houses
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Market Structure (cont.)
• Starbucks within a Monopolistic Competition
• Starbucks Differentiation From Their Competition• Considers themselves a premium coffee provider• Offers premium product and experience• Customer loyalty programs• At Home Products
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Fiscal Cliff
• How will the Fiscal Cliff Impact Starbucks
• Strong 4th Quarter leading into Fiscal Cliff• Brand Resilience within the United States• Strong Growth Projections in Asian Market• Strong Corporate Leadership• Starbucks Takes Responsible Approach
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Government Regulations
• What impact does government regulations have on Starbucks?
• Starbucks is committed to full compliance with laws, rules, and regulations in all countries
• U.S. Food and Drug Administration cracked down on alcohol-caffeine drinks
• No immediate additional regulation seen on caffeine drinks under 80 milligrams
• Government concerns centered on marketing of caffeine product to children
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Recommendations• Grow presence in key Asian markets• Starbucks has been expanding its presence in Asia particularly in
China and India• China’s and India’s economy are growing quickly• In China, the Gross domestic product growth of 10.3% in fiscal
year 2010 and 9.2% in fiscal year 2009 (Starbucks Corporation SWOT Analysis, 2012)
• More than 160 cities in China have a population greater than one million (Starbucks Corporation SWOT Analysis, 2012).
• Middle class population in China is expected to double by 2025 and in increase in India
• The Market within India is primarily tea drinkers but the coffee consumption is rising • Starbucks can capitalize on this market
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Conclusion• Demand for Starbucks is going to increase over the next 12
months• In 2012 alone, • Starbucks has expanded into three new markets Specialty
juices, Teas, and At home brewing options for customer• Revenue increase 14 % 2011 to 2012
Current pricing strategy is simple yet effective • Built a brand and atmosphere customers are willing to pay for
and keep coming back for. • They are innovation, produce quality products, and are well
respected• Starbucks has a strong presences in the market and is known
for their premium products 19
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“Team 5” would like to say:
THANK YOU!
Got any
QUESTIONS?20
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References• Certner, J. (2012). Starbucks: For infusing a steady stream of new ideas to
revive its business. Fast Company, (163), 112-149. • 6 Tips to De-Commoditization. (2012). Foundry Management & Technology,
Vol. 140 Issue 5, p31-32. Retrieved from: http://web.ebscohost.com/ehost/detail?sid=f606cfa5-eef1-4883-af2b-ab9794bc7cab%40sessionmgr115&vid=5&hid=111&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=buh&AN=77242931
• ABC News. (2012, April 30). Starbucks Seeks Success in Tea Leaves. Retrieved from: http://abcnews.go.com/Business/story?id=88266&page=1#.ULFEgmeDqKJ
• Abilla, P. (2010). Part 2: Starbucks, why lean, why now? Schmula, Retrieved from http://www.shmula.com/starbucks-why-lean-why-now/5639/
• Cooke, J.A. (2010). From bean to cup: how Starbucks transformed its supply chain. Supply Chain Quarterly. Retrieved from: http://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/
• Farrell, D., Remes, J., Agrawal, V., et al. (2003). New horizons: Multinational company investment in developing economies, McKinsey Global Institute. Retrieved from: http://www.mckinsey.com/insights/mgi/research/productivity_competitiveness_and_growth/new_horizons_for_multinational_company_investment
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References (continued)• Fontevecchia, A. (2012, January). Time to buy Starbucks? K-cup, same-
stores sales surging. Forbes, 28-28. Retrieved from: http://necbproxy.egloballibrary.com/login?url=http://web.ebscohost.com/ehost/detail?vid=3&hid=112&sid=c30de638-4135-4e0a-bbf4-fe418be33dc0%40sessionmgr104&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=buh&AN=70566309
• Harrington, D. (2011, June 5). Starbucks coffee 2011-2012 – Starbucks locations expand, Starbucks Revolution, New Starbucks logo. Espresso & Coffee Guide. Retrieved from: http://www.espressocoffeeguide.com/2011/06/starbucks-coffee-2011-2012-starbuck-locations-expand-starbux-revolution-new-starbucks-logo/
• Hsu, T. (2012, June 15). Starbucks to upgrade food by buying artisan bakery chain. Los Angeles Times. Retrieved from: http://articles.latimes.com/2012/jun/05/business/la-fi-starbucks-bakery-20120605
• James, D. (2007, July 30). Investigating the trend of skim pricing. Helium, Retrieved from http://www.helium.com/items/493518-investigating-the-trend-of-skim-pricing
• Jargon, J. (2010). Slow down, Starbucks tells baristas. Wall Street Journal, Retrieved from http://www.theaustralian.com.au/archive/business-old/slow-down-starbucks-tells-baristas/story-e6frg90x-1225938127889
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References (continued)• Lehnat, S., Gore, D, Corn, M., Love, B., & Boggs, K. (2010). Starbucks coffee:
2011-2013 advertising & marketing plan. Retrieved from: http://samlehnert.com/wp-content/uploads/2012/02/starbucks.pdf
• Marketwatch.com. (2012). Annual financials for Teavana Holdings, Inc. Retrieved from: http://www.marketwatch.com/investing/stock/tea/financials
• McKinsey Quarterly. (2011). Starbucks’ quest for healthy growth: An interview with Howard Schultz. McKinsey Quarterly, 2, 34-43. Retrieved from: http://necbproxy.egloballibrary.com/login?url=http://web.ebscohost.com/ehost/detail?sid=81aff90f-a58e-4db9-bf60-0878c8c2a3c5%40sessionmgr115&vid=22&hid=104&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=buh&AN=60260234
• McWhinnie, E. (2012, January 4). Competition in the coffee industry is heating up. Wall St. Cheat Sheet. Retrieved from: http://wallstcheatsheet.com/trading-markets/competition-in-the-coffee-industry-is-heating-up.html/
• Microeconomics - Competing as Starbucks. (n.d). Microeconomics - Just another Edublogs.org site. Retrieved from: http://microeconomicsalberta.edublogs.org/competing-as-starbucks/
• Miller, C.C. (2010, March 24). Starbucks still sees growth, as well as dividends. Deal BookNew York Times. Retrieved from: http://dealbook.nytimes.com/2010/03/24/starbucks-still-sees-growth-as-well-as-dividends/
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References (continued)• Mohammed, R. (2009, August 24). Starbucks’ new pricing strategy: The
beginning of the end?. Pricing for Profit, Retrieved from: http://www.pricingforprofit.com/pricing-strategy-blog/starbucks-new-pricing-strategy-beginning.htm
• Morrison, M. (2011). Bang for its Starbucks: Hits No. 3 despite limited spend. Advertising Age, 82(18), 1-100. Retrieved from: http://web.ebscohost.com/ehost/detail?sid=143615dc-c327-4e02-af1b-1764da507bd2%40sessionmgr15&vid=4&hid=119&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=buh&AN=60405463
• O'Farrell, R. "Starbucks Pricing Strategy", Demand Media retrieved from: http://smallbusiness.chron.com/starbucks-pricing-strategy-10544.html
• Our Heritage | Starbucks Coffee Company. (n.d.). Starbucks Coffee Company. Retrieved November 12, 2012, from http://www.starbucks.com/about-us/our-heritage
• Parikh, R. (2012). America’s energy dependency: will government regulation of caffeine bring the caffeine companies to a crash? William & Mary Business Law Review. (3)2. 644-666. Retrieved from: http://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=1043&context=wmblr
• Patton, L. (2012, Nov. 14). Starbucks with Teavana moves Schultz beyond coffee roots. Retrieved from: http://www.bloomberg.com/news/2012-11-14/starbucks-to-buy-teavana-for-620-million-to-add-tea.html
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References (continued)• Saporito, B. (2012, June 25). Starbucks’ big mug. Time. (179)25. 51-54. Retrieved
from: http://web.ebscohost.com/ehost/detail?sid=81aff90f-a58e-4db9-bf60-0878c8c2a3c5%40sessionmgr115&vid=27&hid=10&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=buh&AN=76906112
• Shook, J. (2009, August 07). [Web blog message]. Retrieved from: http://www.lean.org/shook/DisplayObject.cfm?o=1085
• Starbucks Corporation SWOT Analysis. (2012). Starbucks Corporation SWOT Analysis, 1-11.
• Starbucks Corporation. (2012, November 01). Starbucks reports record fourth quarter and fiscal 2012 results [Press Release]. Retrieved from http://news.starbucks.com/article_display.cfm?article_id=713
• Starbucks. (2011). Our Starbucks Mission. 1-32. Retrieved from: http://globalassets.starbucks.com/assets/eecd184d6d2141d58966319744393d1f.pdf
• Starbucks. (n.d). | Microeconomics discussionpuneetaujla. Retrieved from http://puneetaujla.wordpress.com/starbucks/
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References (continued)• Starbucks: new pricing strategy aims to preserve both quality
and quantity. (2009). MarketWatch: Global Round-up, 8(10), 40. Retrieved from http://web.ebscohost.com/ehost/detail?vid=3&hid=13&sid=f606cfa5-eef1-4883-af2b-ab9794bc7cab%40sessionmgr115&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=buh&AN=44705820
• Teavana Holdings. (2012, Sept. 4). Teavana Holdings, Inc.announces second quarter fiscal 2012 financial results. Retrieved from: http://ir.teavana.com/phoenix.zhtml?c=246215&p=irol-newsArticle&ID=1731304&highlight
• Wang, H. (2012, August 10). Five things that starbucks did to get china right. Forbes, Retrieved from: http://www.forbes.com/sites/helenwang/2012/08/10/five-things-starbucks-did-to-get-china-right/
• Yousef, H. (2010, January 20). Starbucks posts grande earnings. CNNMoney.com. Retrieved from: http://money.cnn.com/2010/01/20/news/companies/Starbucks_earnings/index.htm
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