Starbucks Retail Chain Analysis

PRESENTED BY : DEEPAK VARGHESE

M-14-02

DIXON DOMINIC M-14-04ISHAN PARASHAR M-14-06SOHAM DAS M-14-16

Introduction Industry - Coffee Shop Founded - March 30, 1971 (Seattle,

Washington) Key People - Howard Schultz (Chairman & CEO) Kevin Johnson (President & COO) Inspired to sell high quality beans & equipment inspired from Alfred Peet’s style Roasted coffee beans bought from Peet’s After a year started buying from growers Later bought Peet’s

Timeline in Brief1971 - Starbucks Coffee, Tea and Spice

store (coffee bean roasting) opened in Seattle Pike Place Market

1982 - Howard Schultz joined Starbucks

1986 - Howard Schultz established Il Giornale Coffee Company

1987 - Il Gionarle acquired Starbucks and changed name to Starbucks Corporation

1992 - IPO with 140 outlets (12% = $25mill.)

1995 - Starbucks Coffee International opens in Japan

- It implements ESOP

• 1996 - Started selling bottled Frappuchino

• 1999 - Acquired Tazo Tea

• 2000 - Acquired Hear Music, a San Fransisco based company

• 2003 - Acquired Seattle’s Best Coffee

• 2005 - Introduced Starbucks Coffee Liqueur; Acquired Ethos Wate

Why Globalize?Saturated home marketReaching brand maturity stage in USA

Salient Features International joint venturesLicensingAcquisitionsMaintaining its image throughout Operating at loss in few areas Imbibing local culture

With 20% of world’s coffee consumed in North America, Starbucks had to aggressively sell its offerings in

countries that already have dedicated tea or coffee drinkers.

JapanStarbucks Coffee Japan was established in October

1995, as a JV between Sazaby Inc. and Starbucks Coffee International.

Since opening its first store in Ginza district, Tokyo has expanded to more than 900 stores.

Company Name:- Starbucks Coffee Japan Ltd.Critics warned that Japanese would never buy

takeout coffee in paper cups or accept the interior non smoking policy.

Starbucks proved them wrong with nearly 30% of its customers drinking takeout coffee in those throw away cups.

UK• Starbucks fuelled its initial expansion into UK

with an acquisition of the then 56 outlet, UK based, Seattle Coffee Company, 1998.

• Rebranded all stores to Starbucks

• Used its capital and influence to obtain prime locations across the country.

• 675 stores : 2nd biggest overseas market.

FranceStarted in 1994 but could open only 30

outlets in 10 years.

Huge cultural diversity considering its historic café culture and French tend to hold to their traditions

Target audience = America & Asian tourists + young rich kids wanting to mingle with these tourists

Has been incurring losses inspite of tweaking the menu to local tastes and success in UK

Brand building in areas of high tourist traffic

South Korea• Started in 1999

• Starbucks Korea Co. Ltd. As a JV with Shinsegae Department Store Co. Ltd. and Starbucks Coffee International

• Faced opposition from locals; changed lettering of the store and in-store redecorating

• A Starbucks store in Seoul showcases traditional Korean culture, with much of its interior constructed with material reclaimed from old buildings.

• Succeeded where Wal-Mart failed; largest in the world five story Starbucks

Middle East• Entered in 1999, Kuwait.

• Licensing agreement with trading partner and licensee M.H. Alshaya Co. WLL, a private Kuwait family business.

• The family operates over 280 Starbucks stores in Middle East Region including Kuwait, KSA, UAE, Egypt, Lebanon, Jordan, Qatar, Bahrain and Oman.

• Currently 600+ stores.

China• Entered in 1999

• China was a tea preferring country and had a rich culture around it.

• Targeted the new middle classes with the idea of “meet with friends while drinking our favorite beverage”.

• Didn’t advertise but focused on getting high visibility and high traffic localities.

• Introduced beverages using popular local ingredients such as green tea.

India• Attempted to form alliance with Future Group; rejected by

FIPB.

• Was in talks with Jubilant Group for an alliance; didn’t materialize.

• Entered in 2012 by forming a JV with Tata Global Beverages.

• Indian consumers sit for hours in the outlets with their coffee unlike their foreign counterparts which demand plush outlets rather than kiosks and small outlets serving coffee on the go.

• Opened its 75th store on July, 2015.

Cultural Diversity• At Starbucks diversity is defined by an

equation –

DIVERSITY = INCLUSION + EQUITY + ACCESSIBILITY

• “We remain highly respectful of the culture and traditions of the countries in which we do business. We recognize that our success is not an entitlement, and we must continue to earn the trust and respect of customers everyday.”

Howard Schultz

Generic Value Chain

Generic Value ChainPrimary Activities• Inbound logistics - Sourcing coffee from diverse

coffee beans producers with whom they have great relationships and built up efficient supply chain management system. • Operations - They have operation in 60

countries with their stores being modeled on company operated stores and licensed stores. • Outbound logistics - Most of its product mix are

sold in-store and some through large box retailers. Payment around source through point of sale, prepaid Starbucks Cards and mobile payments.

Generic Value Chain• Marketing and Sales - Traditionally, investment

in marketing activities have not been significant and relied mainly on the growing reputation of premium quality product mix and superior customer services to give the ‘Starbucks Experience’ to drive customers to their stores and products. • Service - Starbucks has a reputation for

providing supreme level of customer services to their consumers.

SUPPORT ACTIVITIES• Firm Infrastructure- They have well designed,

aesthetically pleasing stores. They have efficient level of finance, accounting and legal departments to support the firm’s infrastructure.

Generic Value Chain

• Human Resource Management:- Great benefits, employee empowerment and amazing corporate culture makes Starbucks drive efficient management of human capital.

• Technology development:- Investments in innovative technologies like the well - liked mobile app.

• Procurement:- Starbucks procures its products from a diverse group of supplier and has fixed contracts with some of the suppliers.

OPERATING RESULTS

AMERICA – SEGMENT RESULTS

EMEA – SEGMENT RESULTS

CHINA / ASIA PACIFIC – SEGMENT RESULTS

2013 2012 2011 2010 20090

1020304050607080

Gross margin

Gross margin

2013 2012 2011 2010 20090

200

400

600

800

1000

1200

1400

1600

Net Income

Net Income

2013 2012 2011 2010 20090

0.05

0.1

0.15

0.2

0.25

0.3

0.35

D/E Ratio

D/E Ratio

2013 2012 2011 2010 20090

5

10

15

20

25

30

35

ROE

ROE

STARBUCKS VS PEERS

References• Starbucks’ Global Quest in 2006: Is it the best yet to come?

by Danny Nugroho RP and Retnowulan• Starbucks International Marketing Strategy by Shahzad Khan• Modes of International Business by Brijesh Dholakia• Strategic Planning of Starbucks(Past Decissions, Current

Situation and Future Options) by Namrataben Govindbhai Panchasara

• https://en.wikipedia.org/• http://articles.economictimes.indiatimes.com/• http://marketresearch.about.com/• http://www.forbes.com/• http://www.bloomberg.com/• https://news.starbucks.com/views/• http://www.business-standard.com/