Starbucks - Strategy Management Final Report

Strategy Management Final Report

From STARBUCKS COFFEE

to STARBUCKS

1. Overview

The Starbucks Story

It began in 1971. Back then they were a roaster and retailer of whole bean and ground coffee, tea and spices with a single store in Seattle's Pike Place Market.

Today, it was privileged to connect with millions of customers every day with exceptional products and more than 17,000 retail stores in over 50 countries.

Total stores: 17,018* (July 3, 2011)

Argentina, Aruba, Australia, Austria, Bahamas, Bahrain, Belgium, Brazil, Bulgaria, Canada, Chile, China, Cyprus, Czech Republic, Denmark, Egypt, El Salvador, England, France, Germany, Greece, Guatemala, Hong Kong/Macau, Hungary, Indonesia, Ireland, Japan, Jordan, Kuwait, Lebanon, Malaysia, Mexico, New Zealand, Netherlands, Northern Ireland, Oman, Peru, Philippines, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Scotland, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Arab Emirates, United States and Wales.

Product

Coffee

: More than 30 blends and single-origin premium arabica coffees.

Handcrafted Beverages

: Fresh-brewed coffee, hot and iced espresso beverages, coffee and non-coffee blended beverages, Vivanno™ smoothies and Tazo® teas.

Merchandise

: Coffee- and tea-brewing equipment, mugs and accessories, packaged goods, music, books and gift items.

Fresh Food

: Baked pastries, sandwiches, salads, oatmeal, yogurt parfaits and fruit cups.

Consumer Products

: Offered in Canada, China, Denmark, Finland, Germany, Ireland, Japan,

Korea, Mexico, Norway, UK and U.S. Products include:

- Coffee and Tea

- Ready-to-Drink (RTD

- Starbucks® Ice Cream: Super-premium coffee and coffee-free flavors.

Brand Portfolio

Starbucks Coffee, Seattle's Best Coffee, Tazo Tea and Torrefazione Italia Coffee.

2. Changes in Strategies

Will Starbucks succeed?

 It is important to build on the strength and exploit opportunities

 Find ways to reduce losses from weakness and threat

 Selling beer and wine does not necessarily reflect on the image of Starbucks

 More over, Being a new comer in the Juice businesses, Starbucks is expecting a tough competition from existing brands

3. External Analysis

Industry growth and size

The coffee industry has a structure or characteristics that are difficult to define or to set a boundary from which it can be differentiated with other industries (Larson 2008). We will define the coffee industry as the retail-based, where the coffee beans are sold in retails stores.

The general coffee industry is well developed and very competitive. The coffee industry includes 20,000 stores with combined revenue of $11 billion. Approximately 20 million people work in the coffee industry worldwide. The coffee industry is very concentrated at the top and fragmented at the bottom with the top 50 companies taking up to 70% of the sales.

As coffee industry face crisis because of market growth in mature and it is easily impacted by economic condition. Hundreds of Starbucks across America, which is the nation's largest coffee chain, closed nearly 600 stores that were not profitable around 2008.

As national economic growth grinds to halt, worried consumers have saved their pennies,

and visited Starbucks less frequently. Also people forecast a gloomy future of world economy.

Five Forces Model

그림 3 Five Forces Model -Industry Analysis

 Threat of Rivalry

Intensity for competition

When it comes to coffee chains, Starbucks is the better name in the business.

Starbucks faces competition against other small coffeehouse chains across Seattle In 1987 when the company was bought and formed by Michael Schultz.

Starbucks lead the way with over 16,680 stores worldwide; and Caribou Coffee a distant second, with nearly 500 corporate owned stores and over 100 franchised outlets. Also there are numerous competitors in the same industry.

Both domestic as Tully's Coffee, Gloria Jean's, Caribou Coffee and international competitors such as Dunkin Donuts and McDonald's, always require Starbucks to evolve, differentiate and grow.

A coffee store operator will face competition not only from other coffee shops but also gas stations, quick service and fast food restaurants, convenience stores, donut shops and gourmet food stores.

This results in higher degrees of rivalry and lowering profitability. Also other competitors such as Dunkin and McCafe providing coffee at low price threaten Starbucks to decrease its price.

1) Caribou and Peet's Coffee and Tea

Caribou is the 2nd largest coffeehouse based upon locations with 410 company-operated locations in six states15 while Peet's has 193 locations in six states.16

2) McCafe and Dunkin Donuts

3) Jamba Juice

http://www.slideshare.net/MShahab/starbucks-case-study-2776465