The Relationship Between Strategic and Financial Planning

Introduction:

It is important to understand the relationship between strategic and financial planning when preparing for the future of a company and forecasting the success. Starbucks has developed two strategic initiatives for 2013 to help grow the company and increases success. Starbucks decided to try to expand the drive thru chains and develop a home brewing system. In developing this strategic plan, Starbucks needed to take into account the increase in employees, increasing capital, and increased expenses when developing the 2013 financial plan. When developing the 2013 financial plan, it is most important to understand how these two initiatives will affect sales within the company. To understand better how these initiatives will affect Starbucks financial planning, it is important to get an understanding of the development of these initiatives.

A strategic planning initiative discussed in Starbucks annual report

Starbucks has two strategic planning initiatives for 2013 that will help them grow and become an even better business. Developing a home brewing machine and expanding their drive-through expansion chains are two strategic plans that Starbucks wants to implement. These two strategic plans were discussed in Starbucks 2013 annual report. Starbucks want to develop a home brewing machine because many customers have a financial hardship in this economy, and so they are deciding to drink their coffee at home. So this will be the solution for those coffee drinkers who still need their morning "fix," and still enjoy the same Starbucks coffee flavor. The second strategic planning initiative is expanding on Starbucks drive-through stores. Starbucks plans on adding about 900 more drive-through coffee shops in the United States over the next five years. The reason for this is that drive-through stores historically have better margins which result in higher profits and more cash flow. Ultimately, drive-through stores and home brewing systems offer more convenience for customers, which allow Starbucks to compete with burger food chains and donut food chains (Novinson, 2013). Starbucks' brand serves as its main competitor and these two growth strategies will provide a very good brand extension without distracting the coffee shop for what they are known for, which is their quality product, and customer service.

How the initiative affects Starbucks financial planning? How will the initiative affect costs?

The plan to open 900 drive-thru coffee shops and home brewing machines will affect Starbucks' financial planning. The costs associated with launching these new initiatives go hand-in-hand with the financial plan. Starbucks' will have to determine if they will purchase existing buildings and remodel them for their needs or build new buildings. Additional employees will be needed to operate each store. Launching 900 new stores will increase the costs to purchase the goods needed for each store to operate. Coffee, flavored syrups, cups, plates, silverware, and the food sold will require additional inventory to be purchased. The additional costs for the store and brewing machines inventory could require additional employees to maintain the increased workload in the warehouses. These costs will affect the financial plan because each factor must be taken into consideration when creating the budget and setting profit goals.

Home Brewing Coffee Machines - Risks

Right now, the name every household knows for single cup home brewing is Keurig. They first entered the market 15 years ago and have built an empire around that one concept. Although Starbucks has a very prominent name in coffee, entering into the at-home brewing sector will still be a challenge. Currently, Keurig's stock price is trading higher than Starbucks:

* Keurig Stock Price (GMCR) - $84.29 / share (Google Finance, 2013)

* Starbucks Stock Price (SBUX) - $75.57 / share (Google Finance, 2013)

Stock price alone shows a strong favor in the competition because