STARBUCKs: STARBUCKs SHUBHADIP BISWAS PGDM10-12 IILM-GSM HISTORY: HISTORY Jerry Baldwin, Zev Siegl , and Gordon Bowker - founders of STARBUCKS- 1971 It used 2 be a retailer. Howard Schultz started his career as a salesman in swedish kitchenware. 1982 —he began his journey with STARBUCK. 1983 -on a business trip to Milan—he saw an espresso bar with different concept. HISTORY:
HISTORY He loved it - It was a warm community experience. He proposed the idea - Board of Directors rejected it. He left
& opened his own coffee bar company - II GIORNALLE 1987 —Howard bought Starbucks. From that time to now on Starbucks is most popular coffee brand worldwide—for its famous fresh brewed coffee.
COFFEE INDUSTRY ANALYSIS: COFFEE INDUSTRY ANALYSIS BASIC COFFEE SPECIALTY COFFEE- --Higher quality coffee growing in 7% annual growth rate COFFEE INDUSTRY ANALYSIS: COFFEE INDUSTRY ANALYSIS Coffee shops make up the fastest growing part of the restaurant business, checking in with a 7% annual growth rate! World coffee production is estimated at 110 - 120 million bags per year. 14 billion espresso coffees are consumed each year in Italy, reaching over 200,000 coffee bars , and still growing. Americans consume 400 million cups of coffee per day, or equivalent to 146,000,000,000 (146 billion) cups of coffee per year; making the USA the leading consumer of coffee in the world . COFFEE INDUSTRY ANALYSIS: COFFEE INDUSTRY ANALYSIS The National Coffee Association estimates that the US coffee market will reach $29 billion in 2011 Starbucks already has a presence in China, but the Indian market remains largely untapped. Recently, Starbucks entered into a partnership with Tata coffee ,the nation's biggest coffee producer to help tap the country where coffee consumption has increased by 89% in the past 13 years. Currently only 22% of urban youth go to cafes, and according to cafe coffee day executives, the Indian market has the potential to house up to 5,400 cafes. Currently less than one-third of those cafes exist . . CURRENT SCENARIO: CURRENT SCENARIO Starbucks is the largest coffeehouse company in the world, with 17,009 stores in 50 countries, including over 11,000 in the United States, over 1000 in Canada, and over 700 in the UK. Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, coffee beans, salads, hot and cold sandwiches and panini , pastries, snacks, and items such as mugs and tumblers. SBUX.O $36.72 -0.14-0.38% CURRENT SCENARIO: CURRENT SCENARIO Through the Starbucks entertainment division and hear music brand, the company also markets books, music and film. Starbucks posted earnings of 399.3 million or $0.37 EPS, up 86% compared to $199.4 million from same quarter last year. This figure beat analyst estimates of $0.32 EPS. Sales also rose 17% to 2.8 billion as comparable store sales added 8% in domestic markets. REVENUE GROWTH OF STARBUCK: REVENUE GROWTH OF STARBUCK PESTEL ANALYSIS: PESTEL ANALYSIS POLITICAL - High tariff affects Starbucks production. Ability to sourcing best coffee beans . ECONOMICA L- Higher exchange rate -> Most of suppliers of Starbucks are external -> result=Incurring higher cost -> Coffee making is being expensive Way-out: extra cost to consumer?? Or making less profit?? PESTEL ANALYSIS: PESTEL ANALYSIS Income distribution of consumer : After the economic crisis, 2007 unemployment figures rose. People who were able to consume Starbucks’ expensive specialty coffee now saw it as a luxury in some location. Result - > sudden drop in sales volume, 2009 PESTEL ANALYSIS: PESTEL ANALYSIS SOCIAL ISSUE- Changing taste —USA is consuming more specialty coffee—import of 1.3 billion in 2010 India ,China-people prefer tea. So difficulty in implementation of strategy- Americanization in developing countries. Health consciousness- Need to introduce new healthy alternatives. North Americans are replacing alcohol with coffee Coffee bars— a place for meeting , a place of recreation PESTEL ANALYSIS: PESTEL ANALYSIS TECHONOLOGY— Starbucks for promoting band globally—using social networking sites. Implemented new phone payment system. Starbucks card —online payment—it also helps to increase customer loyalty. PESTEL ANALYSIS: PESTEL ANALYSIS ENVIRONMENTAL- Coffee harvest is dependent on weather conditions. Health of coffee trees. Harvesting practices. Disease and infection caused by insects. OPPORTUNITIES AND THREAT--: OPPORTUNITIES AND THREAT-- OPPORTUNITIES: Move into new market Growth in coffee market THREATS: Competition with Mcdonald , Caribou Coffee and Peet's coffee in the broader market for specialty coffee. They are selling good coffee for better value. Previously-second cup---growth of second cup was a headache. INTERNAL ANALYSIS STRENGTH: INTERNAL ANALYSIS STRENGTH Brand image Strategy to capture key locations and opening stores Roasting technology Valued and motivated partners - employees INTERNAL ANALYSIS WEAKNESS: INTERNAL ANALYSIS WEAKNESS Aggressive expansion without proper infrastructure: Is Starbucks there?? Ans : No Result : Put a Starbucks there. Question arises -> Quality vs Volume Starbucks has not focused on its product differentiation objectives Problem in distribution channel: Starbucks has charged that Kraft's alleged neglect and mismanagement of the business -- which brings in about $500 million in annual sales. The world's biggest coffee chain wants to end the partnership on march 1 and replace Kraft with privately held Acosta Inc. largest publicly traded food service competitors-----fy 2009: largest publicly traded food service competitors----- fy 2009 company revenues Net income Net margin restaurants franchised mcdonald $22745 $4551 20% 32478 81% Yum brands $10836 $1083 10% 37000 starbucks $9775 $391 4% 16635 0% Darden restaurant $7218 $372 5.2% 1773 Brinker international $3621 $79 2.2% 1689 40% Wendy international $3581 $4 0.1% 6451 80% Burger king holdings $2537 $200 7.9% 11925 88% Jack in the box $2471 $131 5.3% 2212 46% Cke restaurants $1419 $48 3.4% 3141 71% COMPETENCIES OF STARBUCKS-: COMPETENCIES OF STARBUCKS- Roasting technology Valve technology Value and motivated partners Real estate approach Brand image Quality Efficient supply chain management system CORE COMPETENCIES: CORE COMPETENCIES Roasting technology Brand image Marketing strategy: Marketing strategy The global economy continues its recovery, Starbucks is planning to open an average of more than one store each day. ACQUISITION : April 2003, Starbucks completed the purchase of Seattle's best coffee and Torrefazione Italia from AFC Enterprises 1998-Tazo tea company ; 1999-Hear music; 2008-Clover Marketing strategy: Marketing strategy PARTNERSHIP - United Airlines Nordstorm Barnes and Noble book store Pepsico Pricecostco Red Hook Breweries Dreyer’s Ice Cream Aramark Apple Tata Coffee Acosta Inc STARBUCK STRATEGY: STARBUCK STRATEGY Conclusion From SWOT ANALYSIS: Conclusion From SWOT ANALYSIS Starbucks aggressive growth strategy has made it difficult to deliver consistently high quality products and superior customer service worldwide. Starbucks needs to refocus on the product differentiation strategy rather than expanding. Market penetration will not be a problem if Starbucks creates proper infrastructure globally.