Business Analysis : Starbucks 's Coffee

As the world’s number one specialty coffee retailer, Starbucks sells coffee drinks, food items, coffee beans, and coffee-related accessories and equipment. In addition, Starbucks sells whole-bean coffees through a specialty sales group and grocery stores. Starbucks has grown beyond coffee into related businesses such as coffee-flavoured ice cream and ready-to-drink coffee beverages. The purpose of this paper is to analyze Starbucks business strategy, customer value proposition, company’s operations and the risks to financial results and reporting in the short term.

Starbucks Corporation, generally known, as Starbucks Coffee is the leading retailer and a brand of world’s forte coffee in the world, with more than 15,000 retail locations in North America, Latin America, Europe, the Middle East and the Pacific Rim, wherever in this world where premium quality coffee is in demand. Starbucks is the largest coffeehouse company in the world ahead of UK rival Costa Coffee, with 20737 stores in 63 countries and territories, including 11910 in the United States, 1496 in China, 1442 in Canada, 1052 in Japan and 772 in the United Kingdom. The first Starbucks was open in 1970. The name was inspired from Herman Melville’s Moby Dick, a definitive American novel regarding the 19th century whaling industry. The nautical name matches seamlessly for a store that imports the world’s finest coffees to the cold thirsty people of Seattle. In May 1998, Starbucks have finally successfully entered the European market through its acquirement of 65 Coffee Company stores initially originated from Seattle in the UK. Both companies shared a common culture, focusing on a great commitment to customized coffee, similar company values and a mutual respect.

starbucks Corp., an international coffee and coffeehouse chain based in Seattle, Washington, has expanded rapidly since its opening in 1971. These outrageous success was due to its well-developed strategy vision which lay out the company's strategic course in developing and strengthening its business. Starbucks is a global corporation that sells authentic coffee in 30 countries, reporting revenues of nearly $5.1 billion in 2006. The main goal of Starbucks is to embrace diversity by applying the highest standards of excellence. Starbucks strives to perfect the relationship with the working class by making the service as fast as possible because they believe that every customer has their own personal rate. One

Starbucks is no doubt a phenomenon in the United States, but the brand wants to expand globally. Opening chains in various global locations such as Japan, Vienna, England; Starbucks wants to reach out to the coffee loving fans everywhere. Nevertheless opening chains globally is not that simple. There are many uncontrollable factors Starbucks need to focus on to make sure they are making profit as well has abiding by the country’s laws and regulations. Going global takes a lot of market research to make sure that the brand will be successful even with uncontrollable factors. Controllable factors can be tailored to fit the needs of each country. Starbucks has to find the happy medium so they don’t lose their identity overseas.

Starbuck Coffee was founded in 1971 by three friends who had a vision to open a coffee house that convenient, accessible, and friendly. Turning this dream into reality, they opened the first Starbuck Coffee house in Pike Place, Seattle, Washington. In 1990, Starbucks gave voice to their mission which was to, “provide a great work environment and treat each other with respect and dignity.” Even though the mission statement has changed a bit, it did not stray away from its essence which is to exist for its customer no matter who they are and nurture their soul. Starbucks consistently ranks as one of the best company to work for and the best place to work if you belong to the LGBT community. Starbucks strives for gender, race, and sexual equality which can be seen through their promotional campaigns and their frontline employees.

Accounting helps to measure an organizations activities, process data into reports, and translate the results to decision makers. Financial statements and reports help to present the company to the public in financial terms. The information on these data statements can used to evaluate the company through vertical and horizontal analysis. Vertical analysis is the proportional analysis of a financial statement. Normally, vertical analysis is done with a financial statement over a period of time. When using vertical analysis, a line item on a financial statement is listed as a percentage of another item (Harrison, 2015). A horizontal analysis is the comparison of information or ratios over a series of reporting periods. Horizontal analysis helps investors and analysts to control how a company has grown over time. Analysts and investors could use horizontal analysis to compare a company's growth rates in relation to its competitors and industry.

The company that I am writing about is Starbucks, the international coffee shop chain. The company's financial statements for this analysis are from the FY2011 Annual Report and 10-K. The company has 10787 stores in the United States, of which 38% are franchised and the remainder are company-owned. The franchise model is more common when the company operates internationally. There are 6216 Starbucks stores internationally and of these 63% are franchises, with just 37% company-owned. The franchise model for international expansion has been utilized to help Starbucks expand quickly in foreign countries and to mitigate foreign political risk and to ensure that the product/service offering is tailored to local tastes (Thompson, 2012). The company is now in the process of buying back some overseas franchise stores in order to retain more profits for itself (Franchise Press, 2011). This paper will take a look at the company's most recent annual report to analyze the financial statements.

1.Analyze the business-level strategies for the corporation you chose to determine the business-level strategy you think is most important to the long-term success of the firm and whether or not you judge this to be a good choice. Justify your opinion.

High pricing from the competitors create a pricing war by driving down the profit margins when increasing the market share.

Analyzing Starbucks’ identity starts with its mission statement, “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time”. Based on their mission statement,

Financial viability, or being able to generate sufficient income to meet operating payments, debt commitments and, where applicable, to allow growth while maintaining service levels, is essential for Starbucks’ continual growth (Falconer, 2009). Generating cash flow, building strong relationships with shareholders and stakeholders, and accurately estimating expenses and sales are all vitally important for financial viability. In recent years, Starbucks has generated top market revenues resulting in sufficient cash flow (Hill, 2015).

Starbucks first opened its doors in Seattle’s Pike Place Market with the name being coined from that of Moby Dick’s first mate (Schultz & Yang 1999). It has spread its shops across North America, all over Europe, the Middle East, Latin America as well as the Pacific Rim with an estimated 35 million customer weekly (Michelli, 2008). With tremendous growth from a small time coffee shop, the company has matured to an international icon that today it is one of the world’s leading retailer, roaster and brand specialty coffee (Story, 1971). The company offers whole bean coffees, espresso beverages, and confectionery and bakery items.

The same goes for its marketing strategy. This culture consists of two key points. The first is our image. When you walk into a Starbucks, a friendly face greets you. The color scheme is very earthy and warm. The same thing can be said about the smells. We want to make it a comfortable place for you to relax. It could even be where you and your wife met, or where you heard your favorite band for the first time. The second is, you are our culture. We want to make sure that you come first. This is why our baristas do their best to remember your regular drinks. And since our culture is you, we know just how to reach you. Weather this be via a mobile phone app, our website, or in-store, we are there for you.

The purpose of this report is to be able to identify and discuss two of the most recent innovative activities of the world’s biggest and well-recognised retail coffee company, Starbucks Corporation. Starbucks has introduced numerous innovations over its long history. From its signature terms (like barista, venti, chai, Frappuccino®) (Michelli 2007), the drive-thru café concept, the Starbucks Card, the digital app ‘shake to pay’ to the corporate culture that overall makes the Starbucks Experience are some of the reasons why Starbucks has maintained its dominance in the coffee industry. This report will look in to its activities involving innovation and map each of them in the 4P framework of innovation space. Furthermore, the innovation identified will be analysed to understand its strengths and weaknesses in order to come up with new strategies for innovation.

In recent occurrence for Starbucks, the company business has gained exceptional growth. Howard Schultz who is the chairman and CEO of Starbucks stated that “Starbucks Q3 fiscal 2015 stands as among the strongest and most remarkable quarters in our over 23 years as a public company.” (Starbucks Corporation 2015, 1) Starbucks “net revenue $4.9 billion in Q3 FY15, which is an increase of 18% over Q3 FY14.” (Starbucks Corporation 2015, 1) Part of the increase revenue for the company was due to global expansion in the China/Asia Pacific area. Within a year time frame, Japan opened “1,592 new stores.” The impact sales from Japan help “increase the company income about 22% to $938.6 million in Q3 FY15.” (Starbucks Corporation 2015, 1) Safe to