Starbuck Global Strategy and Executive Summary Final

STUDY CASE

Encadré par : PHD Rachid Wahabi

BAHBAH Karim 2388MOHCINE Yasmine 2355

ESSAT Ayoub 2380

RHANDOURRim 2438

ZINEDDINERachid A1250

SUMMARYI. Starbucks’ vision, objectives and mission

II. External analysis1. PESTEL analysis2. Strategic business3. Competitive analysis (M. PORTER)4. Key Success Factors5. Opportunities & Threats

III. Internal analysis 1. Starbucks core competencies2. VRIO analysis (Barney’s VRIN)3. Starbucks Value-Chain Analysis4. Competitive Analysis: Direct Competitors5. Strengths & Weaknesses

IV. TOWS analysisV. Starbucks’ BCG MatrixVI. Financial analysisVII. Starbucks’ SPACE MatrixVIII. Executive summary

STARBUCKS

vision, objectives and mission

VISION STATEMENT

• Starbucks vision statement is :

“To establish Starbucks as the most recognized and respected brand in

the world and become a national company with values and guiding principles that

employee could be proud of ”

OBJECTIVES OF STARBUCKS

• To Grow by making employees feel valued :

Starbucks approach the employee with good compensation and comprehensive benefits package. The company beliefs that sharing the company’s success with the people who made happen will help them think and acts like an owner of the company.

• To Recognize that every dollar earned passes through employees’ hands :

Starbucks will always appreciate the employee as the revenue which isincreasing every year is by the efficient and hardworking employees. This drastic increase in profit is not recognized without the support of the employees whoattracts the customers to a long term relationships with the coffeehouse.

• Use the pays, benefits and opportunities for personal development to help gain employee loyalty and become difficult to imitate.

MISSION STATEMENT

• Starbucks Mission Statement is :

“Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising

principles while we grow.”The six principles are:– 1. Provide a great work environment and treat each other with

respect and dignity.– 2.Embrace diversity as an essential component in the way we do

business.– 3.Apply the highest standards of excellence to the purchasing

roasting and fresh delivery of our coffee.– 4. Develop enthusiastically satisfied customers all of the time– 5.Contribute positively to our communities and our environment– 6.Recognize that profitability is essential to our future success.

• The vision statement clearly describes the dream or the future of the company that is to be the worlds most well known coffeehouse and also to be the most appreciated and positively graded brand by all levels of people around the world.

• The company also focuses its vision to employee satisfaction; so that the employees will be happy.

STARBUCKS

EXTERNAL ANALYSIS

PESTEL ANALYSIS

Political

Economical

Social

Technological

Ecological

Legal

PESTEL : Political

• Relation between the U.S. government and the states coffee producers

• Regulations imposed by different states where Starbucks gets its supplies and implements

• Quotas, taxes and other factors related to destination states

PESTEL : Economical

• The evolution of coffee prices, milk and other raw materials for the brand.

• Purchasing power varies depending on the destination country.

• Unemployment rate.

PESTEL : Social

• Brand popularity, a symbol of prestige

• A controversial symbol, therefore target of anti-globalization

• Starbucks plays heavily on the development of its retail outlets

• Evolution of the image of coffee as a beverage to consumers (terms of health, image conveyed, effects of caffeine ...)

PESTEL : Technological

• Technological advances may allow better performance for the production

• Better communication with suppliers; transport optimization

• Ensure better service

PESTEL : Ecological

• Recycling: in stores and customer awareness. Goblet recyclable

• Reducing energy use by 25% in 2010.

• Use renewable energy to 50% of global consumption.

• Control the water consumption to 25% reduction by 2015.

PESTEL : Legal

• Labor code relating to different countries: minimum working age and type of contracts

• Health Code following international and local standards

• Consumer Protection associations

STARBUCKS STRATEGIC BUSINESS

• Although the firm is growing rapidly, its fundamental business is still coffee. At the same time, the firm is cautiously branching out into music and ice cream and other food products, and is experimenting with restaurants with more comprehensive menu selections .

• This approach is allowing starbucks to remain focused on his coffee business but to explore nuw business oprtunities at the same time.

• Clearly, starbucks revised some of its business strategies in an attempt to both protect its core business while also expanding into new ones.

• In Starbucks Coffee case; there is only one strategic activity field ; Coffee .

• To ensure a constant supply STARBUCKS makes sure setting up alliances with South American suppliers.

• Demand varies according to the buying power and the acceptance of the products by the consumer with respect to the intercultural constraints that can lead to geographic diversification.

PORTER FIVE FORCES

Intensity of competitive

rivalry

Threat of new entrants

Bargaining power of

customers

Threat of substitute

products or services

Bargaining power of suppliers

INTENSITY OF COMPETITIVE RIVALRY

• The rivalry between existing competitors is high.

• Starbucks works with major competitors such as Costa, McDonald's, Dunkin Donuts and Caribou Coffee and thousands of other "small" cafes.

Threat of substitution

• Substitution of products and services including tea, juices, energy drinks, soft drinks or water.

• On the other hand, pub and bars are increasingly frequented by potential clients considered as meeting places and relaxation.

Bargaining power of suppliers

• The demand for coffee is increasing globally, however, the production of coffee beans occurs only in certain geographical areas.

• In addition, issues related to African coffee producers unfairly treated by multinational corporations are resolved through the efforts of various non-governmental organizations, which contributes to the growing bargaining power of suppliers.

Bargaining power of customers

• The bargaining power of customer starbucks revolves around:

Minimum switching cost

Abundant supply

STARBUCKS LOGO EVOLUTION

The logo has been significantly streamlined over the years.

The year 2011 marks an important shift in the image of the company. Now internationally recognized, Starbucks takes the bet to abandon the text "Starbucks Coffee" from its logo, this modernization is riding the wave of minimalism reflects the diversification of Starbucks But more importantly, it shows that the Starbucks siren is now well in the minds of consumers and it is recognized by all.

Threat of new entrants

• The threat of new entrants in the industry is low because the market is very saturated and more substantial amount of financial resources related to buildings and properties that are needed to enter industry.

The key success factors

• Starbucks success today can be attributed to five main factors. The first of these factors is their ability to develop a strategic approach to growth that has quickly demonstrated the feasibility of their business model by taking advantage of some key demographic groups.

• The second is the ability to attract the best employees through the implementation of a plan for health care quality while reducing costs and providing an equal share of the company to all employees.

• The third strategic alliance with Conservation International that they had allowed them to create a sustainable supply chain of high quality coffee.

• The above three factors have enabled them to promote the emancipation of the fourth factor of their success, a community environment in which social interactions may occur occasionally.

• the fifth factor of their success is the ability to adapt to the changing dynamics of consumer demographic characteristics.

All these factors have helped Starbucks to remain at the forefront of the specialty coffee industry.

Opportunities Treats

O1Globalization makes it easy to enter international market.02People are looking for cheap internet connexions.03Express foods are getting famous to reduce time spent.04Demand for non-chemical and healthy products.

T1Increase in the inflation rates creates a demand of lower priced products.T2Many companies are pricing their products chapet to impress customers.T3 Increase in hypermarkets and national supermarkets.

STARBUCKS

INTERNAL ANALYSIS

Starbucks core competencies

• Starbucks core competencies are its unwavering focus on quality, outstanding customer service, continuous product advancement, care for its employees, and its drive to be "everywhere."

• Over the years Starbucks has gone from offering fresh brewed coffee to a whole range(gamme ) of offspring products such as Lattes, Frappucinos, and Chais. The company began to diversify and create joint ventures with Dreyer's (Starbucks Ice Cream), PepsiCo (bottled Frappucino drinks), Kraft Foods Inc., (access to thousands of distribution channels and vendors for beverage products), and HP (in-store CD burning) all of which bear the Starbucks core of high quality.

• Starbucks' unwavering support to its employees was clearly displayed when it was the first company to offer stock options to part-time employees.

• Starbucks has one of the lowest employee turnover rates in the industry with 60% turnover for Starbucks and 140% for the industry average.

• The Starbucks philosophy encompasses the belief that a Starbucks coffee house should be on every city block and within reach of each other. This strategy, considered by some to be store cannibalism, has worked very well for Starbucks and allowed the company to grow and penetrate a wide variety of markets and locations.

VRIO Analysis

• In order to lead to a sustainable competitive advantage a resource or capability should be Valuable, Rare, Inimitable (including non-substitutable), and Organized. This VRIO framework is the foundation for internal analysis.

• Valuable : A resource is valuable if it helps the organization meet an external threat or exploit an opportunity. While it may not help the firm outperform its competitors, it can still be labeled a strength. One good way to think about valuable resources is to ask how they help the company.

• Common competitive foundations (a.k.a. the generic building blocks) for firms are efficiency, quality, customer responsiveness, and innovation. If a resource helps bring about any one of these four things then it is valuable.

• Rare : A resource is rare simply if it is not widely possessed by other competitors. Of the criteria this is probably the easiest to judge.

• Inimitable. A resource is inimitable and nonsubstitutable if it is difficult for another firm to acquire it or a substitute something else in its place. This is probably the toughest criteria to examine because given enough time and money almost ANY resource can be imitated.

• Therefore, one way to think about this is to compare how long you think it will take for competitors to imitate or substitute something else for that resource and compare it to the useful life of the product.

• Another way to help determine if a resource is inimitable is why/how it came about. Inimitable resources are often a result of historical, ambiguous, or socially complex causes.

• Organized : A resource is organized if the firm is able to actually use it.

Many scholars refer to core competencies.3 A core competency is simply a resource that is VRIO.

• While VRIO resources are the best, they are quite rare and it is not uncommon for successful firms to simply be combinations of a large number of VR_O or even V_ _ O resources and capabilities. Recall that even a V _ _ O resource can be considered a strength under a traditional SWOT analysis.

REMEMBER

VRIO analysis is done on each individual resource not on the firm

as a whole.

VRIO of Starbucks :VRIO

frameworkvaluable rare Difficult to

imitate exploited S or W Competitive

implications

Firm infrastructures

(finances)

yes no no yes S Temporary advantage

Human resources

management

yes yes yes yes S Sustainable advantage

procurement yes y/n y/n yes S Temporary advantage

marketing yes yes yes yes S Sustainable advantage

Sales/retails location

(customer relations)

yes no yes yes S Sustainable advantage

• This VRIO analysis demonstrated that Starbucks has core competencies in the areas of human resource management, marketing, and in operating its retail locations.

• These competencies are discussed in further detail below :

• Human Resource Management : Starbucks has created an environment and an organization around its employees, one of its most important assets and sources of sustainable advantage. The empowering corporate culture, have aided in crafting an exceptional workforce that takes pride in its work and is treated with dignity. This culture is apparent in all levels of the organization from the baristas and managers, all the way to the executives.

• Marketing : Starbucks has created a brand that exudes an understanding of people’s values, lifestyles, and needs. The company’s attention to the experiential factor has been pivotal to its success. Instead of big bucks, they resort to old-fashioned charm and appeal. For instance in New York, Starbucks is handing out subway passes and in Boston and San Francisco, it is giving away free cab rides as a way of passing out good cheer for the holidays. “If you make an emotional connection with them, you’ve captured their heart. That’s what creates brand loyalty”, said Brad Stevens, Starbucks’ top marketing executive. Such creative marketing has served and will continue to serve as a source of sustained advantage for them.

• Sales/Retail Locations: Service is the distinguishing factor that sets Starbucks apart from its competitors. With approximately 85% of Starbucks’ business revenue coming from its retail storefronts, it is crucial that it makes service a cornerstone of its brand. Starbucks’ penchant for consistency, customer service, and casual yet pleasing experience has made its locations one of the most sought after meeting spot for people of all ages. These tie back to the hiring practices of Starbucks that ensures that it searches for people who "get" what a great customer experience is all about.

Starbucks Value-Chain Analysis

Value chain analysis allows the firms to understand the parts of its operations that

create value and those that do not.

Understanding these issues is important because the firm earns above-average returns only when the value it creates is greater than

the costs incurred to create the value.

• As it is seen from the figure above in value-chain analysis the business activities are divided into two categories: primary activities and support activities. The primary activities directly deal with the creation of products or services, whereas, support activities can be used to obtain or increase competitive edge in the marketplace.

PRIMARY ACTIVITIES

• Inbound logistics : Starbucks inbound logistics involve company agents choosing coffee beans producers mainly in African continent, communication the standards related to the quality of coffee beans, establishing strategic relationships with suppliers and organizing the supply-chain management.

• Operations : Starbucks operations are conducted in more than 50 countries in two ways: direct operation of the stores by the company and licensing. Currently there are 8870 company-operated stores globally, whereas 8139 stores operate on the basis of license (Starbucks Company Profile, online, 2011).

• Outbound logistics : The outbound logistics for Starbucks has traditionally involved selling its products through its stores without any intermediates. However, starting from recent a range of Starbucks products such as 3-in-1 coffees in sachets are being sold through a set of leading supermarkets.

• Marketing and Sales : Starbucks does not heavily invest in marketing relying instead on the word-of-mouth achieved through the high quality of products and high level of customer services. However, occasional marketing activities initiated by the company involve sampling of new products that are usually conducted within areas nearby the stores.

• Service : Providing superior level of customer services is one of the Starbucks’ main objectives and it is driven from the mission statement of the company. Accordingly, the company staffs are encouraged to go to great lengths in order to ensure the high level of customer satisfaction.

SUPPORT ACTIVITIES• Infrastructure : Starbucks infrastructure includes a range

of general support activities such as “management, planning, finance, accounting, legal support and government relations that are required to support the work of the entire value-chain” (Hitt et al, 2009, p.87).

• Human Resource Management : The workforce is duly perceived to be the most valuable resource by Starbucks. Accordingly, a wide range of training and development programs are available for them and they are motivated by both, tangible and intangible incentives. Specifically, in UK Starbucks staff is entitled to free drinks during the shift.

• Technology development : Starbucks relies on technology for cost-saving purposes, as well as, ensuring the consistency of the quality of products and offering a high level of customer experience in general. For instance, with the introduction of computerised coffee roasters the consistent taste of Starbucks coffee was ensured and this has contributed to the level of customer retention for the company.

• Procurement : This involves purchasing items that are needed for the production of final products or offering services. For Starbucks it would be coffee beans and raw food items, as well as fixed assets such as buildings, machinery etc.

COMPETITIVE ANALYSIS

14,000 specialty coffee outlets in the U.S. Number of ambitious rivals to increase their

expansion plans No other specialty coffee rival had more than

250 stores, but there were at least 20 small local and regional chains that aspired to compete against Starbucks

COMPETITIVE ANALYSIS: DIRECT COMPETITORS

Top 3 Competitors:o Diedrich Coffee Inc.o Caribou Coffee Inc.o Dunkin’ Brands Inc.

Other competitors:o Local Cafeso Fast food and convenience stores

STAGE IN PRODUCT LIFE CYCLE

• Mature Stage (Competition appears with similar products in specialty coffee thus, Starbucks has to defend market share while maximizing profit)

– Product: Starbucks differentiates their product from that of competitors through quality of its products and environment.

– Price: should be lower because of new competition but maintains the same because of strong brand identity.

– Distribution: becomes more intensive and incentives may be offered to encourage preference over competing products such as the Starbucks Card which is convent and gives rewards.

– Promotion: emphasizes product differentiation.

PIONEER ADVANTAGES

• Starbucks was the first specialty coffee retailer in America. By being there first, Starbucks could set the standard for customer expectations. Later entrants, would have to simultaneously chase the market leader and work their way up. Starbucks being the pioneer could lock in customers who would then have a difficult time switching to another provider at a later time.

• Howard Schultz says, “Starbucks brand sends a message of consistency. If you want a quick coffee break you don’t want to take a chance on something else. With Starbucks, you know what you’re going to get. There’s no risk.”

INTENSITY OF COMPETITION

• The toughest competition would be local cafes. These cafes have a customer base that is dedicated and take pride in their product.

• Fast food and convinces stores that hold the benefits of convince of drive , cheaper pricing and time efficiency.

• Copy cats, such as other specialty coffee retailers.

COMPETITOR’S ADVANTAGES AND DISADVANTAGES

• Advantages:• Starbucks success inspired copy cats: for example

Starbucks has mastered real estate so rivals are picking similar spots like Starbucks populated with well-educated, well-paid and well-traveled consumers sophisticated enough to appreciate a pricey cup of coffee as well as mimicking their specialty drinks.

• Starbucks crams stores close to one another cannibalizes its owns sales

• Starbucks business can suffer if the chain expands so rapidly that its service or quality of its products slips

• Standardized high prices

COMPETITOR’S ADVANTAGES AND DISADVANTAGES

• Disadvantages:

• Building stores across the street from one another to intercept consumers on their way to work or home or anywhere in between and to build brand awareness. Starbucks used their storefronts as billboards giving them more street exposure, allowing them to pool advertising dollars and drive traffic into their stores. It successfully worked.

• Starbucks has strong brand identity and word of mouth that its extremely difficult for rivals to compete.

• Starbucks stays innovative by introducing new beverages, and technologies that will attract more customers of various ages during different times of the day.

• Still growing and opening it doors internationally

strengths Weackeness

S1Huge market expansion to china, Brazil, India and RassuiaS2 Provide a great work environmentS3Apply the highest standars of excellence in servicesS4Starbucks has monopolistic advantages over its competitorsS5Purchased Ethos healthy water for 8 million and also does not use chemical flavor for coffeeS6Launching the sales of Frappuccino in Japan and Taiwan

W1Price of coffee is high at StarbucksW2Less marketing and advertising its product W3Starbucks products are not available at supermarket

STARBUCKS

TOWS Analysis

ST strategies WT strategies

S2,S3,S4,T1,T2

Starbucks needs to change its market strategy by reducing the price to compete with competitors

W1,W2,T1;T2

Create new complementary products which contain good quality and lower price to attract more customers

W3,T3

Starbucks needs to analyze the way to reduce the risks of selling its coffee products at supermarkets as customers are demanding it

SO strategies WO strategies

S1,S3,O1,O2,03Do advertisements about the free internet connections and the excellent service they provide

S5,04Starbucks shall increase the healthy products into market as the demand for it is high

W1,W2,O1;O3Reduce the price and advertise the products all over the places

W1;W3;O3Do R&D to sell products at supermarkets without reducing the quality with cheap price

BCG MATRIX

STARBUCKS

Analyse Financière

DONNÉES BOURSIÈRES

• Nombre de titres : 749.300.000 • Capitalisation boursière : 44276 M$• Cours de l’action: 59.09$• Indice principal : Nasdaq 100• Autres Indices : SP100, Stoxx Americas 100• Place de cotation : NASDAQ

DONNÉES ANNUELLES DU COMPTE DE RÉSULTAT

Eléments SBUX DNKN MCD NSRGY Secteur

Cap. boursière : 44,28Mds 4,20Mds 103,88Mds 230,88Mds 5,38Mds

Employés : 160 000 1 104 440 000 339 000 893

Croiss. Trim. du CA 0,11 -0,04 0,02 0,13 0,21

Chiffre d’affaires annuel 13,66Mds 658,18M 27,57Mds 98,92Mds 2,13Mds

Marge brute (ttm) : 0,57 0,79 0,39 0,48 0,24

EBITDA (ttm) : 2,46Mds 304,86M 9,85Mds 18,55Mds 374,11M

Marge d’exploitation (ttm): 0,14 0,38 0,3 0,16 0,03

Bénéfice net (ttm) : 1,43Mds 108,18M 5,46Mds 11,37Mds N/D

BPA (ttm): 1,86 0,93 5,36 3,56 0,76

PER (ttm) : 31,79 42,63 19,33 20,35 31,28

PEG (attendu 5 ans) 1,47 1,68 1,9 3,91 1,47

STARBUCKS

SPACE Matrix

STARBUCKS

Executive summary

STARBUCKS: CURRENT SITUATION

• The current international situation for Starbucks seems to be an emerging part of their business and the reorganization of this is proved by their aim to become a leading global company through making a difference in people’s lives all around the world.

• The countries in which Starbucks are located in are: Australia, Bahrain, Canada, Hong Kong, Israel, Japan, Kuwait, Lebanon, Malaysia, New Zealand, Oman, Peoples Republic of China, Philippines, Qatar, Saudi Arabia, Singapore, South Korea, Switzerland, Taiwan, Thailand, United Arab Emirates, United Kingdom, and the United States.

While Starbucks wants to sell the finest coffee in the world, they are really selling an authentic experience and the only

reason customers believe it is an authentic experience is because of the rituals they have learned – and that Starbucks

has taught to them – on how to drink coffee.

STARBUCKS: GLOBAL STRATEGY

• Three potentially successful generic strategies: overall cost leadership, differentiation and focus.

– Overall cost leadership implies the pursuit of cost reductions in all areas of a firm through tightly controlling.

– The generic strategy of differentiation involves the creation of something that is perceived by the industry as being unique.

– The last generic strategy mentioned is focus, which targets a particular group, geographic market, or segment of a given product line.

Starbucks initially used an aggressive generic strategy of focus to take advantage of this small portion of

the overall coffee market and eventually transitioned into a strategy of differentiation.

ADVANTAGEOUS ENVIRONMENT CHANGES

• The company has gone to great lengths to take advantage of the advantageous environment changes. For example, they offer free wireless internet access to some customers at the majority of its US stores. Additionally, Starbucks will give two hours of free internet access per day to people who have a Starbucks’ card.

• Starbucks has also enabled customers to access an iTunes play list in stores, which shows the music playing in real time and gives them the opportunity to purchase music digitally.

2012 FINANCIAL RESULTS

Record revenues of $13.3 billion

38% total shareholder return in 2012following a 32% return in 2011

Record earnings per share of $1.79

14% revenue growth in 2012

18% earnings per share growth

Record cash flow of $1.8 billion

Record returns on invested capital of 22.4%

over $1.1 billion returned to shareholders through dividends

AWARDS AND HONORS

• The firm was named by as one of the top 100 companies to work for in 2013, listing reasons that employees of the company were offered stock rewards for working 20 hours/week, and that "There is potential for anyone to move up the ladder."

FORTUNE MAGAZINE