Starbucks

Topic: An examination into the rise and fall of Starbucks Coffee Company and its relationship to certain microeconomic principles.

Within the coffee industry Starbucks Corporations has grown from a small shop to a leading coffee distributor, proving to have financial strength and determination to continue growth. With the weakening economy the continued success of Starbucks

(3a): What trade-offs has Starbucks made? What different activity choices has it made from its rivals?

Founded in 1985, Starbucks is one of the largest coffeehouse companies in the world with over 16,000 stores in 50 countries. This report evaluates major internal and external factors affecting Starbucks using various analytical techniques. Based on the Starbucks brand in UK, it identifies suitable marketing strategies for Starbucks to expand its business in the UK market within the next two years. In line with the chosen marketing strategies, recommendations for the marketing mix are discussed.

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

For Starbucks corporations, this presents an opportunity to grow in the domestic market when currently there are 50% of Americans that drink coffee as well. This percentage also correlates to a 225.2 billion dollar impact in the U.S. Along with growth in coffee shops; the coffee industry had managed to be 1.6% of total gross domestic product in the United States. This opportunity received a weight of .10 in this External Factor Evaluation. This second rating was given a 2 for average.

Starbucks financial statements were analyzed for the fiscal year ended September 27, 2015. Like all public companies, annual and quarterly financial statements are required to allow regulators and other interested parties to analyze the financial status and management decision making of the company. This analysis focuses on the results of Starbucks most recent published annual report containing their balance sheets, statement of earnings and cash flows. These statements will be analyzed against the results of one of its competitors, Dunkin Donuts, to investigate how the two companies compare to each other. It was noted that Starbucks and Dunkin Donuts do not have corresponding fiscal year ends. The data therefore is not directly comparable since the reports do not reflect the same time period of data but should provide additional insight. The paper will attempt to provide a brief analysis of Starbucks operations in terms of its liquidity, leverage, activity, profitability and growth ratios used by analysts in the industry.

2) Garthwiate, Craig; Busse, Meghan; Brown, Jennifer; Merkley, Greg “Starbucks: A Story of Growth” Harvard Business Publishing, July 2012.

Starbucks is striving to build a better company by expanding our focus in three areas that can have a significant impact. These areas include working with farmers to develop a future, bringing green retail to a global scale, and building opportunities for the younger generation.

For the purposes of this essay, due to the dominance of Costa and Starbucks and their ever-increasing share of the market, in terms of both value and volume, the coffee-shop market in the UK is assumed to be a duopoly. There is, however, a fairly significant number of smaller chains and independent operators within the market, (Keynote, 2012). However, a Hotelling model or a product differentiation model where the competition within groups (independents) is more important than the competition between the groups, can justify this simplification. (Zaouras, 2012).

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.

This can be considered as a most significant change in the social system of UK and other countries of the world and will have impact on the performance of Starbucks.

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.

Following its success in the United States, Starbucks ventured overseas and quickly became a globalization icon. With its rapid globalization strategy, Starbucks expanded from about 5000 stores to an estimated 15,000 stores in 2000 (Groth, 2011). By mid-2000s, Starbucks’ supply chain faced many issues, resulting with challenges of having to fulfill expansion strategies yet minimizing escalating operation expenses. By 2008, Starbucks’ stocks fell by 42% (Schultz, 2011). The rapid expansion took a toll on the sales growth and stretched the limits of the existing supply chain, which then rippled down to erode the customer-valued ‘Starbucks experience’ (Gibbons, 2011).

With its Thailand expansion, the company entered the market with a licensing agreement with ‘coffee partners’ a local Thai company. It set its target to open more than twenty odd Starbucks outlets within a span of five years. But the company failed in its attempt as they found constraints in raising enough funds for the expansion. Starbucks then took over coffee partners in 2000. The licensing agreement did not work for the coffee company as they found restrictions in their expansion and growth. They turned the licensing to other mode of operations. By 2007, they managed to expand up to one hundred and three outlets in the region, just in 7 years time they had 5 times their target of Starbucks outlets. Similar to the Thailand market, the Starbucks expanded in Britain. It went ahead and bought the Seattle coffee company in 1998 which was originally a Britain based coffee shop operating similar to that of the American Starbucks. They followed a format similar to that of the American one. They had 60 retails outlets and Starbucks with the same format acquired the outlets from this widely known company and employed its expertise in the field to provide the customers with its range of products and services to the one similar to north America. But Starbucks did not have to struggle in Britain, as the culture in both America and Britain were similar and its was easy for the company to follow the same format and also the original company, Seattle coffee had expanded across Britain,