Financial Analysis of Starbucks Essay

Given the values of all the other variables that affect demand, a higher price tends to reduce the quantity people demand, and a lower price tends to increase it. Of course, price alone does not determine the quantity of a good or service that people consume. Coffee consumption, for example, will be affected by such variables and income and preferences, as we will see later.

Starbucks Coffee originated in 1971 as a coffee and tea café opening in a small neighborhood of Seattle, Washington (Starbucks Corporation, 2010). Starbucks continued its service for Seattle residents for a decade when the new director of retail operations and marketing, Howard Shultz, decided to make some beneficial changes to the company. After two years of employment Howard Shultz decided to expand Starbucks outside of the Seattle area. In 1987 Starbucks was entering in the coffee market and the few numbers of Starbucks were now becoming a corporation (Starbucks Corporation, 2010). Fast forwarding to current times, Starbucks is

* Government Stability: the stability of the government, not only in the US but in all of the countries which the company imports from, is an important factor in Starbucks’ performance. The recent US Election may have an impact on Starbucks if the elected administration enforces new taxation and legislation.

Each country has own economical rules, and Starbucks has own principles to analyze these factors. In order effectively run businesses around global, the company analyzes the competitive force very importantly. For example, in Italy Starbucks encountered with very strong competition since European countries have already predefined coffee culture and competitors like Nestle, McDonalds etc. that were hard to defeat. One of the important elements in the case of Starbucks is the cultural and political force, since they should take into account to avoid further issues. For instance, Schultz (CEO of Starbucks) flew several times to Israel for the discussion on the favor of Palestine, which considered being very positive factor during expansion in Middle East.

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.

Economic conditions in the US and certain international markets could adversely affect Starbucks’ business and

Starbucks Corporation the leading coffeehouse in the world. It was founded in 1971 by Jerry Baldwin, Zev Siegel, and Gordon Bowker in Seattle, Washington. Howard Schultz was the key person who turned the company a huge success around the globe. Since the beginning Starbucks has been facing many tough challenges and yet it is still remains as the best coffee House in the world. The mission of Starbucks is to inspire and nurture the human spirit- one person, one cup, and one neighborhood at a time. Their main competitors are include Dunkin Donuts, Biggby Coffee, Caribou Coffee, McDonald 's, Panera Bread, and Einstein Bagels, ,Secret Recipe, Old Town White Coffee and Coffee Bean. The political stability shows what

Starbucks is known for their Frappuccino’s; unfortunately they are on a downward spiral in sales due to competitors such as McDonalds. In 2008 Starbucks admits to its losses due to their competitors. “Company executives now freely admit that such thinking is largely to blame for the woes that led to Tuesday’s announcement that Starbucks will close 600 U.S. stores and eliminate thousands of jobs. The coffee giant’s missteps have come at a spectacularly bad time, hitting as the economic slump deepens and consumers are seeing their discretionary spending eaten up by rising gas prices and grocery bills (Linn).”

In this assignment, a savvy financial analyst researching companies in which to invest a U.S. publically-traded company that would be a good investment was chosen. After a lengthy search, a company that my family is unduly familiar with, Starbucks, was chosen and in the following pages a financial analysis will be described.

Starbucks along with the rest of the world was hit hard with the worldwide recession beginning in 2008. They were forced to change the way in which they operated. Starbucks is a rapidly expanding company and it is imperative through the leadership of Howard Schultz that they continue to evolve.

Since January 2008, Starbucks has taken steps to address the deterioration in the US retail environment revitalize its global support structure. These steps have been designed to structure the company’s business for long-term profitable growth. Because of the continued weak economy and decreased customer traffic, as well as the cost associated with the store closures and other actions in its transformation strategy, the company’s fiscal 2008 results were impacted negatively in the following ways:

Starbucks is a american coffee company or coffeehouse chain and was founded in Seattle Washington in 1971 by English teacher Jerry Baldwin, history teacher Zev Siegl, and writer Gordon Bowker("Starbucks." Wikipedia. Wikimedia Foundation, 21 June 2017. Web. 23 June 2017). The company became so popular they now how stores all over the world.

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.

The greatest threat of them all at this particular moment for Starbucks, or any other company for that matter, is the global economy crisis. In particular the source of the crisis, this lays in its home country the U.S. So if more than ¾ of the companies growth is depended on the U.S. then the

Factors in the global environment provide both opportunities and strengths for Starbucks. Opportunities such as increased revenues, further expansions, and achieving their goal of becoming the most respected brand worldwide. Starbucks also faced threats. These threats include dealing with growing antiglobalization overseas and their huge risk of less return on each overseas store, this deriving from overseas operations being run by local partners instead of Starbucks