Starbucks 2008

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Presentation Transcript

Slide3: 

A new niche premium business concept

Mission Statement: 

Mission Statement “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow” Environmental Mission Statement “Starbucks is committed to a role of environmental leadership in all facets of our business”

Value Statements: 

Value Statements 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.”

Slide6: 

Starbucks’ success comes from their focus to maintain founding principals as they grow, their aggressive distribution, and their commitment to provide environmental leadership. Howard Schultz has always put people before products, which is the bottom line in their principals. Schultz wants to promote the “Starbucks experience,” meaning each customer gets more than the finest cup of coffee; they get great people, comfortable meeting place, and first-rate music. “Understood that one amazing cup of coffee could make someone’s day, served in a place where people feel welcome, could elevate someone’s day. Maybe even change their life.”

Slide7: 

How real is competition

Competition: 

Competition McDonald’s & Dunkin’ Donuts In-and-out service Convenience Global In-and-out service Price Extended drink menu Global

Competition: 

Competition Peet’s & Tully’s Quality, specialty coffee Global Seattle based Located near Starbucks US based 130 outlets Coffee experience Specialty coffee Multi-channel distribution like Starbucks US based 70 stores

Competition: 

Competition Tim Horton’s & Caribou Comfortable atmosphere Anti-Starbucks Quality coffee process US based 484 outlets Coffee experience Specialty coffee Multi-channel distribution like Starbucks Canada based 2733 outlets of which 345 in US

Coffee clash: McDonald's takes on Starbucks Fast food chain gears up for battle, but franchise owners offer resistance : 

Coffee clash: McDonald's takes on Starbucks Fast food chain gears up for battle, but franchise owners offer resistance Store owners are balking at the plan’s estimated $100,000 price tag to cover renovations and initial new equipment. And many are concerned that little customer interest in McMochas means it will could take years to recoup their investment, even on the famously high-margin coffee drinks Since it launched its so-called premium coffee about 18 months ago, followed by limited tests of sweet tea and iced coffee, McDonald's has added specialty coffee drinks to about 800 U.S. stores

Slide12: 

Specialty Coffee Drinks Market Quality and freshness Gourmet espresso coffee and specialty drinks are very popular New experimental ways to make drinks popular; New Flavors Connections made with others over coffee in person Coffee most popular at breakfast (most popular meal) and snack time

Starbucks strengths and weaknesses: 

Starbucks strengths and weaknesses Strengths Financial Benefits of Global Brand Successful Beverage Innovator Consistent Strength of Main Product Line Weaknesses US Market Reliance Rapid Growth Consequences Reliance on Beverage Innovation http://www.starbucks.co.jp/rtd/images/discoveries_img/seattle_latte.jpg

Starbucks opportunities and threats: 

Starbucks opportunities and threats Opportunities International Operations Growing Specialty Coffee Market Starbucks Visa Card Convenient Locations Threats Market Dependence & Supply Risk Saturated US Markets Competition Rising Diary Costs http://www.cardweb.com/images/s/starbucks/duettocards_flash.jpg

Slide27: 

Good IT infrastructure

Competition “brewing”: 

Competition “brewing” Mac cafe shops in 14000 locations with baristas in the outlets The new drinks are priced from $1.99 to $3.29 and come in vanilla, caramel and mocha flavors. At those prices, they undersell Starbucks by almost a dollar per cup, and that is very significant. .

Competition “brewing”: 

Competition “brewing” Nero was named as the best of the major coffee chains Starbucks is peddling the worst coffee at the highest prices according to a survey of the big three coffee houses on Britain's high streets Caffe Nero came top of the survey with the cheapest coffee and the highest score for taste. The independent UK chain proved cheaper than Starbucks and Costa for a cappuccino and a pastry. Despite its lower prices, Nero also used twice as much coffee as standard in its regular and large drinks. Costa and Starbucks used a single shot of espresso and more water as opposed to the double shot in Nero coffees.

Competition “brewing”: 

“Testing is a way of life for us, as we are constantly looking for new ways to connect with the customer and provide the best Starbucks experience,” the company said. The coffee company has been looking for new solution to its faltering growth this year. Howard Schultz, its chairman, who recently returned as chief executive after the company dismissed Jim Donald, its Chief Executive, acknowledged that the struggling US economy seemed to have contributed to the decline. The company also suffered as its raw material costs soared, with milk prices increasing sharply. Competition “brewing”

The Price war: 

The Price war Starbucks Medium cappuccino £2.29; single espresso £1.40 Costa coffee Medium cappuccino £2.27; single espresso £1.33 Caffe Nero Medium cappuccino £1.80; single espresso £1.25

A knee jerk reaction: 

A knee jerk reaction Faced with fast-food restaurants such as McDonald’s and Dunkin’ Donuts muscling into the coffee market by selling cups of premium roast for a little over a dollar, Starbucks, the world’s largest coffee chain, has also introduced a $1 cup of coffee in its battle against an ever-growing band of imitators and cheaper competitors So far, the $1 cup of filter coffee is available only in a small number of branches in Seattle and the concept was in a testing phase. For $1, the customer gets an 8oz cup of drip coffee which can be refilled as often as he likes (per visit)

2008 Strategy change to increase business: 

2008 Strategy change to increase business The early adopters who valued the club-like atmosphere of relaxing over a quality cup of coffee found themselves in a minority. To grow, Starbucks increasingly appealed to grab and go customers for whom service meant speed of order delivery rather than recognition by and conversation with a barista. Starbucks introduced new store formats like “Express” to try to cater to this second segment without undermining the first. But many Starbucks veterans have now switched to Peets, Caribou and other more exclusive brands.

Loosing their distinctive competency: 

Loosing their distinctive competency Starbucks introduced many new products to broaden its appeal. These new products undercut the integrity of the Starbucks brand for coffee purists. They also challenged the baristas who had to wrestle with an ever-more-complicated menu of drinks. With over half of customers customizing their drinks, baristas hired for their social skills and passion for coffee, no longer had time to dialogue with customers. The brand experience declined as waiting times increased. Moreover, the price premium for a Starbucks coffee seemed less justifiable for grab and go customers as McDonald's and Dunkin Donuts improved their coffee offerings at much lower prices.

Cannibalization due to too many outlets clusters: 

Cannibalization due to too many outlets clusters opening new stores and launching a blizzard of new products create only superficial growth. Such strategies take top management's eye off of improving same store sales year-on-year. This is the heavy lifting of retailing, where a local store manager has to earn brand loyalty and increase purchase frequency in his neighborhood one customer at a time. That store manager's efforts are undercut when additional stores are opened nearby. Eventually, the point of saturation is reached and cannibalization of existing store sales undermines not just brand health but also manager morale.

What went wrong: 

What went wrong None of this need have happened if Starbucks had stayed private and grown at a more controlled pace. To continue to be a premium-priced brand while trading as a public company is very challenging especially if need to sustain its exclusivity and premium price. When you see too many of starbucks around, the premium and luxury is compromised. The product once thought of as an exclusive product is now a generic product which loses its premium and therefore, those customers who want exclusivity substitute out.

Is Starbucks suffering from Marketing Cornucopia? : 

Is Starbucks suffering from Marketing Cornucopia? Starbucks is redefining themselves too broadly meaning “Much more than a coffee store – ‘we are an alternative distribution’” thus falling into the trap of trying to do all things to all people and, this results in consumers no longer being able to relate to what made the company remarkable in the first place Strategically Starbucks should stick with defining themselves as a “Third Place” “Coffee experience” provider

What went wrong: 

What went wrong There was a steady brand diminution in the following activities of Starbucks: conversion of hand-extracted espresso machines to automatic removing control from the barista and sacrificing quality for speed. Conversion of stores from 3rd places into retail spaces, Pre-bagging beans for efficiency but losing the smells and theater of a real coffee shop, Brand extensions galore -- are they a coffee house or just another shop

Has the space vanished: 

Has the space vanished Starbucks thus became an over-priced alternative that was too slow and lacked any differentiating service quality to justify the price difference between them and competitors. Coffee is transcending the big business level and going back to the streets as a grassroots independent movement Starbucks needs to reinvent. Current economic turmoil worldwide will make it difficult. Has Icarus paradox hit Schultz!

Star bucks up !!!!!! : 

Star bucks up !!!!!! Closes 600 US coffee shops and eliminate as many as 12,000 jobs – the most in its history – amounting to 7% of its workforce worldwide In early 2008 nearly every one of the 7,100 Starbucks locations in the U.S. was closed from 5:30-9 p.m. local time as baristas learn more about making espresso drinks through training programmes. The training will involve more than 135,000 baristas in the U.S. The training event is "designed to energize partners and transform the customer experience ... to provide a renewed focus on espresso standards that will help ensure the exceptional quality of every beverage"

Slide47: 

By making foundational changes for the long term: A proprietary and revolutionary in-store Clover(R) brewing system that delivers the best cup of brewed coffee available anywhere will be available in Starbucks only. A complete reinvention of brewed coffee in-store, that will be brought to life by baristas across the U.S. They wil restart scooping and grinding a new unique coffee blend and connecting customers to the early days of Starbucks. Starbucks plans for re-igniting the emotional attachment with customers

Slide48: 

The introduction of a new state-of-the-art espresso system that provides the perfect shot every time and helps facilitate the critical connection between barista and customer; The first phase of a Starbucks Card Rewards program, rewarding registered cardholders and providing unique new benefits when using their cards in Starbucks stores; The launch of MyStarbucksIdea.com, Starbucks first online community, that takes the Starbucks Experience outside the store and enables customers to play a role in shaping the company's future Starbucks plans for re-igniting the emotional attachment with customers

Slide49: 

An expanded relationship with “Conservation International” that enhances Starbucks 37-year commitment to ethically sourcing the world's finest coffees and thus reaffirming Starbucks leadership position in sustainable sourcing and climate preservation. Starbucks plans for re-igniting the emotional attachment with customers

Slide50: 

Starbucks has entered into an agreement to acquire The Coffee Equipment Company, whereby Starbucks will become the exclusive provider of the revolutionary Clover(R) brewing system. With its proprietary brewing process, the Clover(R) machine has quickly become regarded as the gold standard in innovation in brewing equipment. Clover's unique brewing utilizes a special vacuum technology that brings out the complex, rich and distinctive flavors. The Clover(R) brewing system also adds to the theater and drama of the coffee experience through its highly visual brewing method Creating an USP by acquiring Coffee Equipment Company

Slide51: 

All Starbucks company-operated stores in the U.S. will further elevate the customer experience when they begin to scoop and grind the beans they use for brewed coffee. Starbucks locations outside the U.S., also will follow suit in the coming months. "We are returning to the very best elements of our heritage and bringing back the simple romance and excitement of coffee," said Schultz. "Since 1971, we have sourced, roasted and sold the world's finest coffees. By highlighting that history through Pike Place Roast, and bringing back the sounds and aromas of the coffeehouse, we are raising the bar on what it means to serve the perfect cup of coffee." Going down the memory lane and reinventing

Slide52: 

Over the last several months, Starbucks stores around the world have taken great strides to ensure that every customer receives a drink that exceeds their expectations, every time. From an unprecedented education and training initiative focused on espresso excellence, to the upgrading of Starbucks Verisimo(R) espresso machines in U.S. and Canada stores to ensure the highest-quality espresso with each shot, every partner at Starbucks has demonstrated a relentless commitment to quality. The reinventing process

Slide53: 

As part of those continuing efforts, Starbucks unveiled the Mastrena(TM), the next generation of world-class espresso machines exclusive to Starbucks stores. The Mastrena(TM) represents more than five years of development and collaboration between Starbucks and Thermoplan AG, one of the world's leading espresso machine manufacturers. Introduction of Complimentary Tall beverage of choice (including Frappuccino(R) blended beverages) with the purchase of one pound of whole bean coffee (on the same visit) and Free refills on brewed coffee (on the same visit). Two hours daily of free, in-store Wi-Fi, starting this spring in company-operated stores in the U.S. (per registered cardholder). The reinventing process

Finally Starbucks is back to the basics: 

Finally Starbucks is back to the basics Best Baristas Best coffee Best environment Campaign to retain customers Campaign to sell the coffee experience Campaign to attract new customers to the third place

The “never say die” attitude: 

The “never say die” attitude "There have been times in our history where others questioned whether we had reached our limit -- yet time and time again, we have responded by reaching even greater heights," Schultz said. We hope we've given everyone a reason to believe -- not only in the endurance of the Starbucks legacy, but also in our ability to continually raise the bar for what it means to be “The world's leading roaster and retailer of specialty coffee."