Economic Analysis of Starbucks Corporation It’s hard to drive the street these days and not see a Starbuck’s coffee house sitting on a corner with cars lined up in the drive-thru or consumers gathering in their café to socialize. This has been the scene since the first Starbucks was opened in 1971. Since then, Howard Schultz, chairman and CEO, has embarked on a vision to bring Italian coffeehouse traditions back to the United States. Starbucks mission statement is simple, “to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time” (Starbucks, 2017, para. 7). Starbucks has built a global empire with a reported 22,519 stores spanning over 66 countries. The company’s diversity and purchase power of …show more content…
Anyone can enter the coffee industry by just selling coffee, anytime, anywhere. Thus, entry into the coffee industry has low barriers causing a downward sloping demand curve. However, it is Starbucks branding image that has differentiated themselves from other café competitors with their aesthetic appeal and concepts of its stores. Stores are visually appealing and have a ‘cool’ factor about them. Additionally, they provide free wife, great music and great customer service, which draws a warm environment or community to engage in the “Starbucks Experience” (Geereddy, 2015).
Product
The relationship between the quantity of a good buyer’s demand and its priced is defined as the law of demand (Dolan, 2013). Coffee beans being a primary input in the value chain, had had volatile prices determining market costs and profitability margins in recent years. The global price of coffee has drastically risen due to the growing demand in other countries and the resulting in a supply shortage. However, the price of coffee beans is projected to decrease, which will translate into a decrease in market costs and an increase in profitability (Geereddy, 2015). After the coffee crisis of 2004, Starbucks established a Farmers Support Center, where farmers in key regions of are provided resources and expertise to help lower the cost of production, reduce pesticides, improve quality and increase the yield of premium
Financial statements provide users with information for evaluating an entity’s performance and financial status and thus help them to make informed decisions in their dealings with the entity. To assess these aspects, the users have various tools that they can employ. For instance, ratio analysis helps the users to detect any significant changes in an entity’s operating performance within a given period and thus indicate the risks and opportunities of the entity being reviewed (Helfert, 2001). Further, calculating ratios of companies in the same industry can help to highlight the companies that are performing below the industry average and thus help investors to choose the best company to choose from among alternatives. Apart from investors, ratio analysis can also help creditors evaluate a company’s liquidity and thus assess its ability to pay its debts on time (Helfert, 2001). Other ratios such as efficiency ratios can help managers to determine optimal uses of the entity’s assets and thus work towards enhancing efficiency. Apart from ratio analysis, horizontal analysis can also be used to reveal the trends of individual items in an entity’s income statement and balance sheet and thus help to unearth the items that may have affected the entity’s performance during a specific period. The horizontal analysis and ratio analysis of the financial statements of Starbucks Corporation that is the subject of this paper indicate that
KEVIN R. JOHNSON, 48, has served as the Chief Executive Officer of Juniper Networks, Inc., a leading provider of high-performance networking products and services, since September 2008.
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 celebrates 40 years with 17,000 stores in more than 50 countries (Goals & Progress, 2010). Starbucks thrive on their values as a company to improve the lives of people who grow their coffee, neighborhoods where the company does business, and they care for the environment (Goals & Progress, 2010). Starbucks strives to incorporate good business practices and ethics across the globe not only for the enhancement of the company but also for the enhancement of the stakeholders and the communities the company impacts. Starbuck’s mission statement is “to inspire and nurture the human spirit. As said by Howard Schultz, Chairman, President and Chief Executive Officer, in the 2010
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
This study gives a brief review of the U.S. and international coffee shop industry. The coffee industry includes 20,000 stores with combined revenue of $11 billion. Approximately 20
Starbucks is undoubtedly an international brand. The history of coffee traces back to Ethiopia, Africa, India, Arabia, and Europe, and has been traded abroad since the 11th century. Understanding the demand and widespread market for coffee, Starbucks has triumphantly capitalized both the domestic market, and the varied international markets as well. Possessing about 6,500 retail sites worldwide, Starbucks’ net is spread across thirty countries and has been found as one of the most recognized brands all over the globe in equality to McDonalds and Toyota. This organization’s ability to build an international brand has been unprecedented- particularly since it represents a specialty
The price has been rising, not simply due to the price of coffee itself, but because of the supply chain and the current economic situation around the world. Last year Starbucks had to raise prices globally, but especially in the United States and China, due to rising prices for coffee and other ingredients, but this year they are taking the hit from the rising coffee prices for the consumers (Baertlein, 2011). Although the prices of coffee had to be raised globally due to the high demand of the product and the cost of producing it, there is still a strong outlook for the coffee industry because of the large consumer base of the industry. The coffee industry is expected to continue growing through at least the year 2015 and even longer in other emerging markets around the world (Lingle, 2007). Even if the market in the United States begins to decline, there are other emerging markets for the specialty coffee industry. Due to Brazil’s rising economy, it is set to be the biggest coffee drinking country in the world with recent coffee consumer growth of 39% from 2000 to 2009 (Murphy, 2011). With Brazil’s upper and middle classes expanding, it has more money to spend on specialty coffee and other superfluous items. Brazil could be
Howard Schultz is not the only Howard to have a significant influence on Starbuck’s success. Howard Behar, the former president of Starbucks North America and Starbucks International always stressed the importance of people over profits. Behar worked at Starbucks from 1989- 2007, coaching hundreds of leaders to help the company grown into the coffee power-house it is today (Behar, 2014). Behar’s leadership approach at Starbucks was extremely people-centered, and the company held onto that philosophy after he retired. One of Behar’s famous quotes, “We’re in the people business serving coffee, not the coffee business serving people,” shows his true feelings and passion for the customer (Stallard, 2011). Behar is still loved and respected at Starbucks for his heart and passion as well as his work ethic, open-mindedness, and judgment about the world of business (Stallard, 2011). Howard Behar may not be in the coffee business anymore, but he passed on many of his beliefs and passions to Howard Schultz, current CEO of Starbucks,
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.
In general the coffeehouse industry in the United States was experiencing an increase in coffee consumption per capita due to the “Starbucks effect”. At this time Starbucks was operating approximately 20,000 stores in the United States and was living a fast expansion strategy worldwide.
Nothing like the fresh scent of brewed coffee in the morning – “Starbucks” a well-known coffee house that is still growing and expanding their operations today is considered the number one specialty coffee retailer around the world and abroad. Therefore, the supply and demand for coffee is on the incline and is regarded as one of the most rapid growing organizations in the world. According to the National Coffee Association, adults between the ages of 18 and 39 are more likely to purchase coffee out-of-home, then older consumers (2016). Even coffee statistics conducted in 2016 indicates “50% of the population, equivalent to 150 million Americans, drink espresso, cappuccino, latte, iced/cold coffee” (E-Imports, 2016). Other statistics numbers show that an estimated of total Americans consuming coffee would be up by 1.5% and specialty coffee up from 20% in this year alone. Even the global consumption will increase by 12% over the next years. Therefore, a key question is how will the “law of demand” predict how the consumers will behave (Lorenzetti, 2016)? Namely, will the higher demand for coffee beans impact what the consumer at Starbucks will pay for a cup of coffee? Therefore, companies such as Starbucks should analyze and understand the microeconomic model to get a clear picture of the price elasticity, cost to produce, and the overall market to make the most effective business decisions and recommendations that will have an
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.
“To inspire and nurture the human spirit- one person, one cup, and one neighborhood at a time.” Starbucks is one of the largest chain restaurants in the United States. With over 17,000 stores located in 55 countries, and approximately 3 new stores being opened each day, Starbucks is the 3rd largest restaurant chain in the United States. When founded in 1971, the founders wanted to focus on the customer, the experience, and the product. Starbuck’s founding partners wanted to create a coffee shop that was a home away from home. They wanted Starbucks to be another stop in between work and home. For many individuals, Starbucks is just that and here is why.
This case assignment discusses the history of Starbuck’s accomplishments as they entered the American coffee culture heritage. In 1983, The chairman and CEO Howard Schultz traveled to Italy and had a dream to carry the Italy coffeehouse ritual back to the United States. Schultz was focused on creating an environment meeting company that makes good coffee but also be a social experiment. Starbucks today opened more than 19,000 stores functioning in 62 countries. Starbucks has numerous rewards that globalization has offered and they have significantly benefited from it, while in the coffee industry. Starbucks has a wide-range in marketing strategies to benefit the customers. During the different obstacles that Starbucks has encountered, they must stay reliable in quality and uphold to adjust to different customer values.