Starbucks

Starbucks

Crystal HillStephen

LechtenbergAnand McGeeAllison PurtellJason Torres

Industry Overview Highest imported product in world,

second to oil

U.S. Coffee Industry 20,000 stores, $11 Billion profit

Top 50 companies, 70% of profit

Secure prime locations, drive store traffic, deliver high quality products

Business and Economic Factors Business Characteristics

Expansion, franchising and licensing, store traffic

Economic Characteristics Coffee beans, futures contracts

Forces for Driving Change Environmental concerns

Sustainable coffee Organic coffee, fair trade, and shade grown

coffee

Customer’s desire for information

“Green” coffee

Competitive Forces Threat of New Entrants

Low startup costs, strong first mover advantage Rivalry Among Existing Firms

Highly concentrated, highly competitive Threat of Substitute Products

Low customer switching costs, differentiation Bargaining Power of Customers

Millions of coffee consumers worldwide, little power Bargaining Power of Suppliers

Firms hold power, suppliers compete against eachother

Competitive Positions Starbucks

First mover advantage (Blue Ocean) Differentiation

McDonalds McCafe division

Dunkin Donuts Starbucks biggest competitor

Nestle

Competitive Moves Innovation

Contribute more capital to R&D Expansion

Starbucks, 700 new stores in 2009 McDonalds, 1,000 new stores in 2009 Dunkin Donuts, 100 stores in Taiwan by 2017

Product Differentiation

Key Success Factors Starbucks:

Continue disciplined expansion Product differentiation

McDonald’s: Most products for your dollar

Nestle: Unmatched product and brand portfolio

Dunkin’ Donuts: Innovation

Attractiveness of Coffee Industry

Coffee beans are 2nd largest export Large companies make up 70% of industry

Must secure prime locations, manage and increase store traffic, and sell high quality products

Companies must expand in order to succeed Competition on price Relationships with coffee producers is key Overall attractive industry

Starbucks saw $1,000,000 profit per store in 2008 Typical coffee shop saw $500,000 profit per store

Marketing Efforts Recognition in Hollywood Loyal customers Rewards programs

My Starbucks Rewards card Facebook Competition

Financial outcomes Consolidated Company revenue

$2.5 Billion in 2008 $2.4 Billion in 2009

Due to strengthening U.S. dollar And fewer stores being opened in ’09 High costs in closing 800 stores

Current stock price of $21.59 Forecasted to increase in December

Pricing First price reduction in August 2009

Due to 6% decrease in sales On standard drinks by 5-15 cents

To attract non-loyal customers Specialty drinks increased

Was last raised in 2007 by 5 cents Loyal customers won’t leave

Trying to cut down costs by being more efficient in stores

Strengths Operational Techniques

Extending their market to other business channels

Joint ventures

Marketing and sales strategies Focus on quality and experience vs.

price

Strengths Customer service

“Develop enthusiastically satisfied customers all of the time.”

Wireless internet Comment cards

Management techniques Empowerment of employees Every employee a “partner”

Core Competencies Vertically Integrated

Placement “…to become the most recognized and

respected brand in the world”

Weaknesses Lack of current new product development

Slow to diversify into new markets

Pricing strategies

Current marketing strategies not meeting marketing objectives Younger, less educated customers with lower

economic status

Weaknesses Market saturation has gotten in the way

of products and services not meeting marketing characteristics

Low customer satisfaction Speed of service Inconsistency

Opportunities Co-branding

International expansion India and Pacific

“Going green” practices

Threats Rising costs of coffee or dairy products

Copycat brands/Competition McDonalds and Dunkin Donuts

Declining coffee market New beverage or pastime could evolve

Eliminate-Reduce-Raise-Create

Eliminate

Underperforming stores

Raise

Education of coffee with employees

Reduce

Amount of time employees spend making individual drinks

Calories in specialty drinks

Create

More loyalty rewards

A better “everyday brew”

Competitive Strength By keeping Focus on quality coffee and

excellent customer service Easier to acquire quality suppliers Harder for competition to keep up

Valuable Assets and Resources Quality coffee Diversified menu, reaching across 3 tiers

of customers Technology Employees

Starbucks’ Issues/Solutions

Problem: Overexpansion

Solutions: Transformation Agenda1) Improving U.S. state2) Re-igniting emotional attachment3) Build for the long term4) Expand around globe outside U.S.