Starbucks : The Coffee Industry

Decent Essays

After many years in the coffee industry, Starbucks is well on their way to achieving their vision, “a place that offers interesting coffee-related drinks in a theatrical atmosphere, pivoted around the espresso machine and become most recognized and respected brand of coffee in the world.” However, in order to maintain their position as the leader in the specialty coffee industry several obstacles have been identified. This report identifies three major issues in relation to financing, sales, and expenses and provides the most optimal strategy to surmount each issue.
Starbucks has recognized that there is much room to grow in the specialty coffee segment, and plans to uses the same strategy of issuing common shares to finance its growth. This can be a very successful form of financing as it allows ownership to remain with the organization. However, the issue that arises is that financial projections must be upheld in order to maintain Starbucks strong financial position and investor confidence. In order for Starbucks to continue its plans for expansion, heavy equity and debt financing will be needed to meet the expected projections and will be imperative in order to secure such financing for the upcoming year 1997 where the anticipated increase in weighted average shares outstanding is 7,769 shares or 10% respectively. This figure is supported with an approximate 44% increase in the value of common stock from 1996 to the anticipated value in 1997.

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