Starbucks Maintaining Growth

In: Social Issues

Submitted By mklao
Words 1810
Pages 8
Description and "Diagnosis" of the Organizational Problem Since its creation in 1971, Starbucks had managed to consistently expand to and increase profit, yet in 2008 Starbucks began to report declines in profit and by 2009 net income had dropped 77% (Starbucks, Awaiting Recovery…). Furthermore, the quality of the once admired coffee began to decline as customers noted a charred flavor and while some even ranked the supposedly lower-end McCafes above Starbucks (Consumer Reports). Although, “some industry forecasters foresaw Starbucks’ disappointing performance as an early indicator of a weakening economy”, Starbucks’ own internal research indicated that that this was not the case. Rather than simply reflecting the downturn in the economy, this shrinkage was the result of the changes being made within Starbucks and the increasing competition outside of Starbucks. As the first of its kind, Starbucks initially experienced very little competition, but through the decade of the 00s both McDonald’s and Dunkin Donuts began to gain access and success in the market. In 2001, McDonald’s reinvigorated “McCafe”, and began offering espresso drinks in addition to teas and pastries (Starbucks: Maintaining a Clear Position). McDonald’s also emulated Starbucks by declaring in 2008 that they would, “begin installing coffee bars with ‘baristas’ throughout its US stores over the next two years” (Starbucks: Maintaining…). With prices between $1.99 and $3.29 as opposed to Starbucks’ $2.65 to $4.15, McDonald’s also held a clear advantage in the lower budget market. Although Dunkin Donuts had historically been focused on donuts, in the 2000s Dunkin Donuts also came to compete with Starbucks as it “pursued an aggressive growth strategy that shifted its positioning to coffee” (Starbucks: Maintaining…). Dunkin Donuts also “began offering free Wi-Fi and piped-in music. These…...

Similar Documents

Starbucks- Growth vs Dividends

...Strategy case study: Starbucks-sacrificing dividends for growth Starbucks has grown a lot since it's opening in Seattle in 1985. It went from 17 stores, to over 15.000 stores all around the world in 2010. But they are changing their strategy, and purpose. They started closing down shops, and refocused on the Starbucks experience, which would increase customer's willingness to pay and also increase profitability. They even payed their first dividend 2010. That ment a huge change of purpose. But is growth bad ? It has it's benefits and dangers. Warren Buffet states, that ‘Growth benefits investors only when the business in point can invest at incremental returns that are enticing – in other words, only when each dollar used to finance the growth creates over a dollar of long term market value.’ We can say that it worked for Starbucks in the beginning, when growth also meant growth of the share price, and even though no dividends were paid, the company was still profitable over the years, but with the emerging of new competition (ex. McDonalds coffee shops,…), and the loss of some of the Starbucks Experience, in 2008 the company didn’t see any share price growth, and still hasn’t paid out any dividends. From this, we can see focusing strongly on growth is not always a good idea, and while it can bring the company market share in the beginning and can even prove the be more profitable in the long term, it should not be the only purpose of the company. And when Starbucks......

Words: 517 - Pages: 3

Managing High Growth Brand-Starbucks

... Subject: STARBUCKS CORPORATION: Managing high growth brand. Dear Sir, We are grateful to you for giving us the chance to work on this case study. We would also like to express gratitude to you for your gracious cooperation and valuable guidance for preparing the report. Sincerely, Khan Samara Salsabeel (07-09162-2) Sadia Rezwana (07-09013-2) Kazi Masum (08-09933-1) Mohammad Abdul Kader (08-11783-2) In 1971, Seattle entrepreneurs Jerry Baldwin, Gordon Bowker and Zev Siegl first opened Starbucks in Pike Place Market. At that time, Country’s major coffee brands were engaged in price war, therefore they were forced to use cheaper beans in their blends to reduce costs. As a result there was a decline in coffee consumption. To harness the potential of the gourmet coffee trend in the Seattle area, the founders of Starbucks experimented with the new concept of a store dedicated to selling only the finest coffee beans and coffee brewing machines. This emphasis on quality whole-bean coffee retail was fairly unique. Starbucks placed quality as its top priority. The Starbucks management dedicated a great deal of their time and financial resources to establishing strong relationships with coffee growers from around the world. In 1982, Howard Schultz, current CEO of Starbucks recognized that the conservative business plans of early Starbucks management......

Words: 3244 - Pages: 13

Starbucks

...header: COFFEE 1 STARBUCKS COFFEE: SWOT ANALYSIS VANESSA HARRISON-HARVEY Starbucks is the leading retailer and roaster for brand specialty coffee in the world. Starbucks is a global organization with more than 18,000 retails in sixty-two countries in the entire United States. Starbucks mission is to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time. The principle Starbucks represents every day is their coffee, their partners, customers, stores, neighborhood and their shareholders. Starbucks believes that conducting business ethically and striving to do the right thing is vital to the success of the company. Their business ethics and compliance programs supports Starbucks mission and helps to protect their culture and reputation by providing resources that help partners make ethical decisions at work. A SWOT analysis of the company is listed; Strengths: Starbucks strengths consist of having outlets positioned in high street locations, and malls within other business areas like office buildings. They maintain a high quality of service, are one of the strongest franchises in the world with more than 6500 license shops in the world. They are known for their phenomenal selection of flavor variations, maintaining a limited number of strong competitors, a high market growth, and above all always treating employees as partners and not just employees. Weaknesses: The fact that Starbucks has enormous strengths,......

Words: 532 - Pages: 3

Starbucks

...challenges facing Starbucks in 2010 Motives of Starbucks’ internationalization Exploring internationalization motives of Starbucks represented by a number of factors, including proactive and reactive factors, provides a better understanding of the reasons for the company’s decision to expand to foreign markets. Proactive motives are related to the firm’s motivation to take advantage of new market opportunities. While reactive motives represent that the firm responds to environmental changes and pressures in its domestic market or in foreign markets and adjusts the activities over time. (Hollensen 2011; Czinkota et al. 2009) Seeking growth and exploring new market opportunities are major proactive motives of Starbucks’ internationalization. Moreover, decision-makers are likely to explore first those overseas market opportunities perceived as having some similarity with the opportunities in their home market. At a later stage of internationalization Starbucks strived to make use of economies of scale which enabled the company to rise more rapidly on the learning curve and reduce production costs. (ibid) Major reactive motive for initial stage of Starbucks’ internationalization is represented by physical and psychological closeness to Canada that was the first foreign market for the company. Another reactive motive of Starbucks’ international expansion is saturation of the domestic market. The case study mentions that Starbucks expanded to......

Words: 7138 - Pages: 29

Starbucks

...The Future of Starbucks      An Analysis by Team Macchiato:  Zack Higbee  Chen Yee Liaw  Calvin Ting  Kevin Tjho  Michelle Ton    1 Executive Summary  Starbucks Corporation has arguably been the most successful coffee chain in the past few decades,  using their aggressive expansion strategies to push out much of its competition.  Through its  expansion, Starbucks has focused on creating a dense network of stores all around America, while  also opening up new locations all around the world.  By leading the retail coffee market, Starbucks  is able to sell its coffee for a premium price and increase their profitability.  Its success can be seen  in the gradual rise of its stock prices from 1992 – 2007, reaching almost 6000% of their initial  public offering 1 .  Yet, in the recent year, the market has shown Starbucks to be in constant decline, as their stock  has dropped about $15/share, a value they have been above since 2004.  Also, looking at  Starbucks’ SEC filings, we can see that its comparable store sales have decreased significantly in US  markets since 2004.  This has prompted Team Macchiato to evaluate Starbucks’ current strategies  in addition to the retail coffee market as a whole.  To evaluate the problem, one of the biggest  questions to consider is to what extent is the “designer coffee” market just a fad.  In other words,  will the allure of gourmet Starbucks coffee be maintained or will more appealing options threaten ......

Words: 6815 - Pages: 28

Starbucks

...I’m sure that when thinking of Starbucks, many automatically think of strong coffee; Starbucks is more than just coffee. This company offers an appealing atmosphere and friendly helpful staff to assist customers with various services. Not only does Starbucks offer exceptional customer service they also pride themselves in offering an excellent working environment and benefits to their employees. Starbucks’ mission statement states: “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow. The following six guiding principles will help us measure the appropriateness of our decisions: - Provide a great work environment and treat each other with respect and dignity. - Embrace diversity as an essential component in the way we do business. - Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. - Develop enthusiastically satisfied customers all of the time. - Contribute positively to our communities and our environment. - Recognize that profitability is essential to our future success.” In order to maintain this mission many steps are taken to enhance each store within the vast company.” (Starbuck Corporation, Fiscal 2011 Annual report) Starbuck’s main competition is McDonald’s McCafe and then Dunkin Donuts Coffee. McDonald’s McCafe is marketing its low price strategy, while Dunkin Donuts, is offering that it simply has a better coffee......

Words: 1262 - Pages: 6

Starbucks

...FIN 534 FINANCIAL MANAGEMENT Financial Analysis (Starbucks) Lisa Massey Strayer University Due Date: September 14, 2013 Starbucks is a strong competitor in the service sector and a leader in the gourmet coffee industry. With a continued growth rate in store openings and maintaining successful profitability of its operations, Starbucks has demonstrated its ability to sustain a reliable and steady growth. Starbucks’ ability to contend with the vulnerability to current financial threats such as economic recession, higher interest rates, and global competition, is constantly proven by its incomparable brand image, its continual product innovations, and its exceptional customer service. This also proves to be its strongest investment strategy. One strategic way to evaluate the vulnerability of Starbucks to current financial threats is to execute a SWOT Analysis. A SWOT analysis is a situation analysis in which the strengths and weaknesses of an organization, and external opportunities and threats it faces are examined to chart a strategy (Business Dictionary, 2012). SWOT is the acronym for strengths, weaknesses, opportunities, and threats. The purpose of the SWOT analysis is to assess what an organization can and cannot do in addition to evaluating the potential opportunities and any financial and economical threats it may face. Over the years, Starbucks have developed much successful strengths. Here are a few of the most......

Words: 1556 - Pages: 7

Starbucks

...Individual AssignmentDate: 6/7/2014 | Strategic analysis: Starbucks in 2012: Evolving into a Dynamic Global Organization Strategic analysis: Starbucks in 2012: Evolving into a Dynamic Global Organization Table of Contents Executive Summary 2 Company Profile: 2 Highlights 3 Objectives 4 Mission Statement and Guiding Principles: 4 Case Analysis: 5 External Environment of the Retail Market for Coffee & Snacks: 5 Industry Overview and Analysis 5 Industry Life Cycle and Market Share Concentration: 5 Industry Demand Determinants and Profitability Drivers: 5 Porters Five Forces Analysis of the Retail Coffee and Snacks Industry 6 Internal Analysis of Starbucks Corporation 8 Starbucks Core Competence 8 Competitive Advantage in a Mature Industry 8 Financial Analysis 10 Starbucks SWOT Analysis: 12 Porter 5-forve Analysis: 15 Starbuck Strategy Analysis 16 Recommendation 20 Conclusion 21 Preference: 21 Executive Summary Starbucks Corporation, an American company founded in 1971 in Seattle, WA, is a premier roaster, marketer and retailer of specialty coffee around world. Their key goal was to sell whole coffee beans. Soon after, Starbucks began experiencing huge growth, opening five stores all of which had roasting facilities, sold coffee beans and room for local restaurants. In 1987, Howard Schultz bought Starbucks from its original owners for $4 million after expanding Starbucks by opening three coffee bars. These coffee bars were based......

Words: 9521 - Pages: 39

Starbucks

...Lakisha Spurlock Week One Individual Assignment Organizational Behavior and Communication Paper Starbucks Patrick Thornton August 16, 2010 Starbucks is the largest retailer of specialty coffee in the world (Starbucks, 2010). Starbucks has more than 15,000 stores in 50 countries. Starbucks became the leading specialty coffee retailer by making its workforce a sustainable competitive advantage (Rothman, 1993). Their culture, brand and product excellence continues to win accolades (Michelli, 2007). Howard Schultz, the company’s Chief Executive Officer, explains how his philosophy of extensive benefits for both full and part-time workers has contributed to growth. In 2007, 2008 and 2009, Fortune recognized Starbucks as one of America’s best companies to work for (Fortune, 2010). Although 85% of Starbucks’ partners (employees) are part-time, they are still eligible for full benefits if they work 240 hours a quarter. Starbucks’ old mission statement was to establish themselves as the premier purveyor of the finest coffees in the world while maintaining their uncompromising principles as they grow (Michelli, 2007). Starbucks’ (2010) current mission statement is to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time. Starbucks has six principles of how they live their mission every day: (1) source the finest coffee beans, roasting them with great care, and improving the lives of people who grow them; (2)......

Words: 836 - Pages: 4

Starbucks

...1.0 INTRODUCTION Name : Starbucks Corporation (NASDAQ: SBUX) Headquarters : Seattle, Washington, U.S. Employees : 176,000 in 2008 Revenue for 2008 : US$10.383 billion CEO : Howard Schultz (Founder of Starbucks coffeehouse) Starbucks Corporation is an international coffeehouse chain based in Seattle, Washington, United States. Starbucks is the largest coffeehouse company in the world, with 16,120 stores in 49 countries, including around 11,000 in the United States, followed by nearly 1,000 in Canada and more than 800 in Japan. Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, snacks, and items such as mugs and coffee beans. Through the Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film. Many of the company's products are seasonal or specific to the locality of the store. Starbucks-brand ice cream and coffee are also offered at grocery stores. Starbucks’ Italian style coffee, espresso beverages, teas, pastries and confections had made Starbucks one of the greatest retailing stories of recent history and world’s biggest specialty coffee chain. In 2003, Starbucks made the fortune 500. 1.1 BACKGROUND OF THE COMPANY 1.1.1 Era before Howard Schultz In 1971, three academics, English Teacher Jerry Baldwin, History Teacher Zel Siegel and writer Gordon Bowker opened Starbucks Coffee, Tea and Spice in Touristy Pikes Place Market in Seattle. The three were......

Words: 7365 - Pages: 30

Starbucks

...consulting firm, NG Inc, was asked to research Starbucks and compile a strategic analysis and balanced scorecard for their career objectives. Starbucks was founded in 1971 in Seattle and continues to be the lead marketer of fine coffee at the retail level. It currently has retail stores in all 50 states, as well as 36 countries outside the U.S. Its products and services include: over 30 blends of coffee, hand crafted beverages, merchandise, fresh food, global consumer products, Starbucks cards (rechargeable gift cards), and its brand portfolio (subsidiaries such as the Tazo Tea Company and Ethos Water). After preparing a balanced scorecard for their 2004 strategies, we compared the actual 2005 data to their goals to measure how successful they were in achieving these goals. In order to prepare a strategic analysis and balanced scorecard, we conducted extensive research on the company. We analyzed their mission statement and additional goals stated in press releases, articles, etc. and compared it to their financial results and actual data for 2004 and 2005. Starbucks’ main goal is to increase revenue, which increased by $1,075,000,000 in 2005. R&D expenditure increased by $2,200,000, which lead to more efficient equipment and innovative products. 328 new retail stores and 400 new drive-thru stores were opened, which increased convenience and frequency of visits for existing customers, as well as increased new customers. Starbucks also added 11,200......

Words: 1197 - Pages: 5

Starbucks

...Starbucks is considers the one of the most famous coffee store brand in the world, based on the case we can find that it is on the leading position of coffee market, it has a significant sales growth compare other brand in the market. But in recent year it seems start to facing more challenges from different aspect and these challenges had became a resistance of its business expansion. 1. Financial Analysis Income statement: Based on the case we can find that there is a huge net income increase from 1994 to 1999. It is more than 10 times different within 6 years. On the other hand, the retail and specialty sales has sharply growth in these years. Net Earning |Year |1994 |1995 |1996 |1997E |1998E |1999E | |Net Earnings (US$ Thousands) |10206 |26102 |42128 |57700 |84900 |113000 | [pic] Total Sales | |1997E |1998E |1999E |2000E | |Year | | | | | |Total Sales (US$ Millions) |9 |30 |73 |150 | [pic] Balance Sheet: a. Working Capital = Total Current Assets – Total Current Liabilities | | | | | | ...

Words: 2418 - Pages: 10

Can Starbucks Meet Its Projected Ultimate Growth?

...Final Project: Company Analysis Company: Starbucks Corporation Critical Thinking Question: Can Starbucks meet its projected ultimate growth? Bruce Harris BMGT 327-01 Organizational Theory and Behavior Dr. Susan Eisner Winter 2005 Semester Tuesday January 25, 2005 To: Professor S. Eisner From: Bruce Harris Date: Tuesday, January 25, 2005 Re: Final Project (Option 2) – Company Analysis – Starbucks Corp. Introduction: Starbucks Corp. has had a substantial impact on the way Americans socialize, relax, reward themselves, and meet to conduct business. This effect and the efficiency with which it was accomplished reflect the high performance of the company. With annual revenue growth consistently topping 20%, it is quite clear that the company is doing something right. This memo will examine 3 concepts that have impacted the company’s high performance. It will then evaluate and discuss a critical question about the future performance of Starbucks. Relationship of topic to this course – 3 course terms relevant to company’s performance: 1. Employee involvement is characterized by decision-making power delegated to employees at all levels within a company. A high level of employee involvement is termed “empowerment,” and is present when employees are given the latitude to make decisions that affect them and their work. Studies have found that empowerment has a substantial positive impact on productivity and worker satisfaction. 2. Social Responsibility refers to the......

Words: 2803 - Pages: 12

Starbucks

...A Coffee Story: Starbucks When customers are deciding where they want to buy their hot coffee, many different product attributes will be factored when making their decision. Product attributes may include different price points depending on the size of the hot coffee, and the quality of the coffee. The functionality of the hot coffee store with having a fast service is one attribute customers seek because many customers are buying on their way to work. Customers are looking for a combination of attributes to create a great value for the price. A recent study suggests that consumers purchasing decisions are made based on the perception of product value rather than price. “There is a price-value formula consumers use to calculate brand differences and to decide which brands to buy. Shopper consciousness has shifted from just trying to ferret out deals to looking for brands that provide value”. (Agriculture and Agri-foods Canada, 2010) The study also suggests that with created value, consumers will likely remain loyal to those hot coffee stores. For many hot coffee drinkers it is the quality of the hot coffee that they are looking for when making a purchasing decision. Customers are looking to the hot coffee chain that has their favorite blends or flavors to choose from. Innovations in the hot coffee market have created new customers to the market who wouldn’t normally consider coffee as their beverage of choice. “Products such as iced coffees have captured the......

Words: 2362 - Pages: 10

Starbucks

...Starbucks a Strategic Analysis Past Decisions and Future Options 4/17/2008 Brown University Economics Department Ryan C. Larson 08’ 1 Contents Introduction ......................................................................................................................... 4 Michael Porter’s 5 Forces Analysis (Past) .......................................................................... 7 Industry Rivalry ............................................................................................................................ 8 Potential for new entrants ........................................................................................................ 10 Substitute Products ................................................................................................................... 12 Bargaining Power of Buyers ...................................................................................................... 13 Bargaining Power of Suppliers................................................................................................... 14 Summary: The Five Market Forces in Specialty Coffee in 1987 ..................................... 15 Specialty Coffee Industry Attractiveness.......................................................................... 16 Starbucks’ Original Generic Strategy ............................................................................... 19 Starbucks’ Success Factors .........................................

Words: 22564 - Pages: 91