Starbucks Competition and Strategy Analysis

Starbucks argument and Strategy AnalysisExecutive SummaryAs umber bean drinkers of all ages and sizes increase around the world, Starbucks amongst fierce rivals continues to experience best cau stage seth gross sales. Their upscale java tree outlets that deliver sweet to the eye dcor and set uniqueness at locations scattered nationally and internationally, their distinct aromas and scents, Starbucks has been suit adequate to(p) to differentiate themselves from all competitors. The aforementi whizzd characteristics that is Starbucks, has enabled the hot chocolate retailer to increase profitability, turn out globosely, and attract impertinently customers.With an estimated 17,000 outlets in approximately 55 countries, Starbucks boasts as the largest coffee outlet chain in the world. In North America alone, Starbucks employs nigh 11,000 full-time and 60,000 part-time employees. Additionally, the chain employs over 7,000 outside its joined States borders. by bunkr of with(predicate) providing top tint coffee beans and distinctive varieties (aforementioned), Starbucks has led the way in revolutionizing the trade attention. The chain not specializes in serving coffee, but overly teas, juices, historicries of all kinds and now counterbalance coffee-flavored ice cream brands that deliver pleasing to the taste and thirst of many loyal, and soon-to-be new customers.Since 1994, Starbucks has enjoyed measurable success through with(predicate) clever mergers and or acquisitions. A some successful ventures include Seattles surpass coffee chain now offers a small line of its indemnity brands on commercial Delta airlines flights and thanks to the ever-increasing Wi-Fi commercialize, Starbucks continues to connect with customers. In 2010, after coarse market surveying, Starbucks introduced three new ice cream coffee-free flavor brands.Starbucks continues to appear stiff competition and only through strategic planning hinged upon conclusion new and creative ways to be innovative will the crocked continue to diversify its financial portfolio while enabling its ability to offer liabilities.IntroductionHeadquartered in Seattle, Washington, Starbucks is an international Corporation (www.Starbucks.com) whose stocks ar traded on the big board under the SBUX ticker symbol. Starbucks is the largest coffee outlet in the world, with close to seventeen k shops in approximately fifty countries or provinces, eleven thousand in America alone, over one thousand in Canada, eighter hundred in Japan and seven hundred Coffee Shops in the linked Kingdom. Starbucks in 2003 was listed as a Fortune 500 firm, be 465. By the end of 2010, they were puted 241.BackgroundHoward Schultz gained control of Starbucks in 1987. Starbucks was founded by three colleagues in 1971 in Seattle who were inspired by a mutual acquaintance Alfred Peet, an established businessman. By 1980 the alliance had grown to four locally owned stores that turned a rea sonable profit every course of study. It was in 1981 when Howard Schultz, and so Vice President of U.S operations for Swedish Kitchen and Coffeemaker equipment decided to lambaste Starbucks out of curiosity as to how and why the Starbucks was so successful with selling his companys mathematical products. Managerially, Schultz was impressed with the company. After more persistence, Schultz landed his first job with Starbucks as head of marketing and research.Overf pocket-sizeding with ideas for the company, Howard Schultzs biggest inspiration and peck for Starbucks future came in 1983 while on a business trip to Italy and the idea of Espresso interdict came fell upon him. After failing to convince Baldwin for the elaboration of business, he ab initio left Starbucks in 1985 and started the Il Giornale coffee bar chain in 1985 and the coffeehouse was very successful. In 1987 after buying out the former owners Jerry Baldwin and Gordon Bowker, Schultz began to quickly begin to realize his full imagine for Starbucks and quickly grow business operations in Vancouver, British Columbia, and Chicago, Illinois, of the same year. By 1992, Starbucks then a recognized universally traded company on the stock market had expanded nationally to 165 shops. In 2009, Starbucks succeeded by possibility active nine hundred enlargeitional shops outside the Continental United States. bang Statement(Actual per www.starbucks.com, accessed on 20 February 20, 2011)Establish Starbucks as the premier electric distributor of the best coffee on the pla crystalize without compromising principles on quality of offshoot.Our CoffeeIt has always been, and will always be, just aboutwhat quality. Were passionate most ethically sourcing the finest coffee beans, roasting them with great care, and improving the lives of batch who grow them. We care deeply about all of this our work is never done.(2, 7)Our PartnersWere called partners, because its not just a job, its our passion. To charterher, we embrace diversity to create a purport where individually of us fundament be ourselves. We always treat each other with respect and dignity. And we hold each other to that standard, ensuring the latest applied science is implemented for producing superior products to our loyal customers. (4, 8, 9)Our CustomersWhen we are fully engaged, we connect with, antic with, and uplift the lives of our customers-even if just for a few moments. Sure, it starts with the promise of a short made beverage, but our work goes far beyond that. Its really about human connection. (1)Our StoresWhen our customers feel this sense of belonging, our stores become a haven, a flaw from the worries outside, a place where you can meet with friends. Its about enjoyment at the speed of life-sometimes slow and savored, sometimes faster. Always full of humanity. (6)Our Neighborhood each store is part of a community, and we take our responsibility to be right-hand(a) neighbors seriously. We wan t to be invited in wherever we do business. We can be a force for positive action-bringing together our partners, customers, and the community to contribute every day. Now we see that our responsibility-and our potential for good-is even larger. The world is looking to Starbucks to set the new standard, yet again. We will lead. (3)Our ShareholdersWe know that as we deliver in each of these areas, we enjoy the kind of success that rewards our allocateholders. We are fully responsible to get each of these elements right so that Starbucks-and everyone it touches-can endure and thrive. (5)CustomerProducts or servicesMarketsTechnologyConcern for survival, profitability, harvestPhilosophySelf-conceptConcern for public imageConcern for employeesMission Statement AnalyzedI cerebrate this to be a fairly good, and accurate statement although per my rating ( standd on research), the mission statement lacks two (2) important components Technology and Concern for employees. The company must evaluate whether it is technologically advanced and even though the companys vision is of concern to its employees, it still should be added to its mission statement.Vision Statement(Actual per www.starbucks.com, accessed on 20 February 20, 2011)To establish Starbucks as the most recognized and respected brand in the world and become a national company with determine and guiding principles that employee could be proud of. The vision statement leadly describes the dream or the future of the company that is to be the worlds most comfortably know coffeehouse and also to be the most appreciated and positively grade brand by all takes of people around the world. Finally, the company focuses fury in the value of employees and their loyalty, and strives to create a happy work environment.The prospect for entry of new competitors reads a balance between different firms competing in a market and subsequently, they can be looked upon as a flagellum to already established firms. One of Starbucks staunchest competitors is McDonalds McCafe which is really catching on globally. Competition is real collectable(p) to entry level start up be which can be extremely low and or offered at a bargain cost to gain a competitive edge. This probably can explain why Starbucks has recently decided to partner with Burger King which I personally consider a very positive move.Starbucks Competitive pen hyaloplasm (CPM) is illustrated below and compares the coffee firms internal and external factors, based upon strengths (superior or 4.0), against weaknesses (1.0), against its current, and projected market competition. Used effectively, it will give controlment clear idea about the firms strengths and weaknesses and aid in plotting a way forrad that is healthy and most importantly, profitable. Anything in between can be rated from fair, to sightly to above amount to superior. From the illustration below, Starbucks fares a little above average when compared to Dunkin Donu ts, yet well below McDonalds.Competitive Profile Matrix (CPM)In the External Factor military rating or EFE, only external factors, that is, opportunities, and threats, are evaluated. From the illustration below, the following info can be drawn foodie coffee consumption tied in to drinkers educational levels. The higher(prenominal) the level of education the more(prenominal) foodie coffee on average was consumed, by as much as seventy-one portion. Trends showed sixteen portion of U.S. giving population consumed differentiation coffee on a insouciant stern sixty-three percent only occasionally. The growth in popularity of specialty coffees has increased, as only thirteen percent and fifty-nine percent of people account daily and occasional consumption, respectively, in 2002. Also, trends over the past ten-years showed consumers requesting more native coffees which influenced retailers on the growing environment of coffee beans. Consumers are go more health assured and are looking for sweats and snacks that are low in carbohydrates / profit and calories.International market has a stronger economy and accordingly, consumers would be able to pay premium price for specialty or gourmet coffee.With regards to threats, the 2007-2009 economic recession adversely affected the specialty coffee industry. youthfully, trends show consumer concern with nutritional value. Volatility in the stocks and coffee price could clash the purchasing power for the buyers. Smaller competitors are expanding their markets as well as their product line oblations.In conclusion, competitors such as McDonalds and Dunkin Donuts are bonny stronger in offering specialty coffee along with other encomiastic products. This may explain why SBUX has recently announced a fusion with Burger King who has long lagged behind McDonalds, especially in the breakfast compass to start offering Seattles Best coffee products (a subsidiary of Starbucks), in efforts to however close the gap bet ween itself from its the conglomerate that is McDonalds Corporation.External Factor Evaluation (EFE) MatrixGourmet coffee consumption rose with the drinkers educational level. Those who immaculate college bought forty-nine percent more gourmet coffee on average, and those with some postgraduate education bought seventy-one percent more 16 percent of the U.S. adult population consumed specialty coffee on a daily basis, whereas sixty-three percent indulged occasionallyThe growth in popularity of specialty coffees has increased, as only thirteen percent and fifty-nine percent of people account daily and occasional consumption, respectively, in 2002Another trend that has surfaced in the past decade has been consumer requests for organic coffees, and more emphasis was placed by retailers on the growing environment of the beansConsumers are becoming more health assured and are looking for sweats and snacks that are low in carbs / sugar and calorieInternational market has a stronger eco nomy and accordingly, consumers would be able to pay premium price for specialty or gourmet coffeeThreatsThe 2007-2009 economic recession adversely affected the specialty coffee industryRecent trends shows consumers are concerned about the nutritional value of coffee products and are demanding nutritional info be posted on the products even in retail outlets.Volatility in the stocks and coffee price could relate the purchasing power for the buyersSmaller competitors are expanding their markets as well as their product line offeringsCompetitors such as McDonalds and Dunkin Donuts are becoming stronger in offering specialty coffee along with other completing products home(a) Factor Evaluation (IFE) MatrixInternal Factor Evaluation (IFE) Matrix is a summary step in conducting an internal strategic-management audit employ to evaluate the strengths and weaknesses of a business, and provide a foundation for observeing and evaluating relationships founded upon those areas.Looking at ke y Internal Factors, Starbucks most advantageous opportunities lie in expansion in ever-growing Markets like Brazil, Russia, India and China or the BRICs as they are ordinarily referred. Of note, Starbucks doesnt appear to show any interest in marketing its products through advertisings as much as focusing on the quality of its coffee and that power alone to retain, and attract new customers.Key Internal FactorsStrengthsStarbucks expects to add approximately 20 clams new stores to its global store base in financial 2009 by closing approximately 425 company-operated stores in the United States and adding of approximately 60 company-operated stores internationallyThe company plans to open approximately 65 net new licensed stores in the United States and approximately 320 net new licensed stores internationallyCapital expenditures for fiscal 2009 are pass judgment to remain unchanged, at approximately $600 million.Licensing revenues increased primarily due to higher product sales an d royalty revenues as a result of opening 438 new licensed retail stores in the last 12 calendar monthStrong marketing and promotional campaign such as product placement in major TV seriesStarbucks also provides electrical outlets and, in some stores, wireless access, for customers who might need to use their MP3 players or laptop computersStarbucks products can be found in convenience stores, marketplace stores, department stores, movie theaters, businesses, schools, and even airportsStarbucks is rated by Fortune as one of the best top 10 places to workStarbucks also encourages the use of its mesh site where customers are able to register their Starbucks cards, receive nutritional study about Starbucks products, shop online, search for careers, and much moreWeaknesses47 percent drop in earnings in one year (2008)For the 26 weeks ending promenade 2009, Starbucks revenues rock-bottom 7 percent to $4.95 billion and net income hangd 72 percent to $89.3 millionMoodys Investors Ser vice recently rasegraded Starbucks quotation ratingsThe U.S. company operated retail business continued deteriorating trendsFor the second quarter of fiscal 2009, U.S. total net revenues were $1.8 billion, a decline of $131.5 million, or 6.8 percent, due to decreased revenues from company operated retail storesMany of Starbucks International operations are in early stages of development that require a more extensive strengthener organization relative to the current levels of revenue and operating income in the United StatesInternational total net revenues were $433.7 million for the 13 weeks ended March 29, 2009, down $59.7 million, or 12.1 percent, compared with the same period last year, primarily due to the impact of a stronger U.S. dollar relative to the British pound and Canadian dollarGlobal Consumer Products Group (CPG) total net revenues decreased by 2 percent to $94.8 million for the second quarter of fiscal 2009, due primarily to demean margin on sales of packaged coff ee as a result of discounting, as well as lower volume to the tradeThe Strength-Weaknesses-Opportunities and Threats (SWOT) analysis is an effective to that when used properly, gathers, analyzes, and evaluates information which helps firms identify strategic advantages/disadvantages.SWOT StrategiesOpportunitiesGourmet coffee consumption rose with the drinkers educational level. Those who finished college bought 49 percent more gourmet coffee on average, and those with some postgraduate education bought 71 percent moreSixteen percent of the U.S. adult population consumed specialty coffee on a daily basis, whereas 63 percent indulged occasionallyThe growth in popularity of specialty coffees has increased, as only 13 percent and 59 percent of people reported daily and occasional consumption, respectively, in 2002Another trend that has surfaced in the past decade has been consumer requests for organic coffees, and more emphasis was placed by retailers on the growing environment of the b eansConsumers are becoming more health conscious and are looking for sweats and snacks that are low in carbohydrates / sugar and calorieInternational market has a stronger economy and accordingly, consumers would be able to pay premium price for specialty or gourmet coffeeImplement product development by introducing organic coffee and disclosing the nutritional content to the consumers (S1, S2, S3, S5, S6, S7, O1, O2, O3)Continue opening more retail stores foreign where coffee is in demand and market has not been saturated by competitors (S1, S2, S3, S4, S9, O6)Develop new products with better nutritional value (S6, S8, O1, O2, O4, O5)Develop a marketing strategy such as Starbucks Combo by offering combination of gourmet coffee and cookie / cake or 2 for 1 on Tuesdays and Wednesdays when the patrons can purchase coffee on Tuesday and get free refill on Wednesday (W1, W2, W3, O1, O2, O3)Establish joint venture with hotels, airlines, and retailers for having mini-Starbucks locations or for serving premium Starbucks coffee in the hotel rooms or during the flights (W1, W2, W3, W4, W5, O1, O2, O3, O6)ThreatsThe 2007-2009 global recession negatively affected the specialty coffee industryRecent trends have shown that some of the consuming public is concerned about the nutritional value of such products as those offered by the specialty coffee field and have even challenged the correctness of the labeling and calorie information posted on the products available at retail outlets.Volatility in the stocks and coffee price could impact the purchasing power for the buyersSmaller competitors are expanding their markets as well as their product line offeringsCompetitors such as McDonalds and Dunkin Donuts are becoming stronger in offering specialty coffee along with other complementary productsImplement market penetration strategy by promoting additional licensing retail deals. This minimizes the risks and capital expenditures for Starbucks (S2, S3, S4, S5, T1, T4, T5)Low er prices of popular drinks by $0.50 and promote the price decrease through aggressive advertising (S6, S7, S8, T1, T4)Penetrate market by charitable to a wider variety of consumers (W6, T4, T5)Cutback on some of operating expenses such exhausting to improve purchasing power and getting better prices from the suppliers and vendors (W4, T4, T5)Create promotional Strategies Such As Starbucks Combo Or Reduce The Price By $0.50 Per Drink On Popular DrinksDevelop New Products With Better nutritionary ValueExpand Internationally By Opening Additional hundred+ License Retailers Through Joint VenturesPortfolio Analysis Starbucks BCG Matrix(The Worlds Most groundbreaking Companies Their creativity goes beyond products to rewiring themselves. Business Week and the capital of Massachusetts Consulting Group rank the best. Accessed and referenced on 20 February 20, 2011 at http//www.businessweek.com/magazine/content/06_17/b3981401.htm)The Boston Consulting Group (BCG) matrix is enhancing a multidivisional firms efforts to formulate strategies. The BCG allows a multi-focused firm to manage its portfolio by examining relative market share position and the industry growth rate each division relative to all other divisions in the organization. The Starbucks BCG matrix below shows four (4) divisions which include Question Marks, Stars, Cash Cows, and Dogs.quarter-circle I shows low relatives market position, high growth industry. Cash require versus cash generation are high and low. Quadrant II or Star Division identifies best long-run opportunities for growth and profitability. Quadrant trey or Cash Cows with high relative market share position but compete in a low growth industry and finally, Quadrant IV or Dogs identifies relatively low market share position and compete in a snail or no market growth industry.Starbucks Income Statements shows steady increases between 2003 and 2005. The revenues on the year 2003 were $4,075,000, while $2,191,000 in year 2004, $6,369,00 0 in year 2005. Also, the firms growth sales rate for 2004 and 2005 was 56.3%. In conclusion, Starbucks were identified in Star division which means its long-run opportunities for the growth and profitability is overall good.RecommendationsStarbucks coffees price are much more expensive than other market competitor products because Starbucks purchases the highest quality coffee beans which means and price-war advantage for its competitors in these challenged economic times.Develop series of new coffee, tea and fruit drinks with better nutritional values for health conscious customers. Initially, enter selected market with predatory pricing strategy and then move to larger market.Starbucks is showing signs of change and that the change has started to work. For the first time in eight quarters, the company posted positive earnings. In fact, all US company operated stores reported positive growth in their sales.For the last few years, the company over-expanded by opening overly many s tores and some too close to each others. Now, they have done an impressive job restructuring itself and travel back to being profitable by closing some stores and slimming down its workforce over the past few years. They further eliminated excessive liquidate in their operations and have been trying to be leaner in their day to day business processes.Leading the way in technological media, Starbucks innovative nature has enabled capitalization on the social networks like chirrup and Facebook. Additionally, Starbucks even has an iPhone application (accessed at Why Starbucks Has Room to Improve. http//www.minyanville.com/businessmarkets/articles/starbucks-growth-upgrade-profit-price-hikes/1/22/2010/id/26485 20 Feb. 2011.).