Starbucks Competition and Strategy Analysis

Starbucks Competition and Strategy AnalysisExecutive SummaryAs java drinkers of all ages and sizes add-on around the world, Starbucks amongst fierce rivals continues to experience unsurpassed harvesting sales. Their upscale coffee tree outlets that deliver pleasing to the eye dcor and grease uniqueness at locations disjointed nationally and internationally, their distinct aromas and scents, Starbucks has been satisfactory to differentiate themselves from all competitors. The aforementi unmatchedd characteristics that is Starbucks, has enabled the coffee seller to increase profitability, expand globally, and attract mod customers.With an estimated 17,000 outlets in around 55 countries, Starbucks boasts as the largest coffee outlet chain in the world. In North America alone, Starbucks employs nearly 11,000 full-time and 60,000 part-time employees. Additionally, the chain employs over 7,000 outside its unite States borders. Through providing top quality coffee beans and distin ctive varieties (aforementioned), Starbucks has led the way in revolutionizing the commercialise industry. The chain non specializes in serving coffee, but overly teas, juices, pastries of all pleasings and now eve coffee-flavored ice cream brands that deliver pleasing to the taste and thirst of m close to(prenominal) loyal, and soon-to-be new customers.Since 1994, Starbucks has enjoyed measurable success through apt(p) mergers and or acquisitions. A few successful ventures include Seattles Best coffee chain now offers a small line of its premium brands on commercial-grade Delta airlines flights and thanks to the ever-increasing Wi-Fi market, Starbucks continues to connect with customers. In 2010, after extensive market surveying, Starbucks introduced three new ice cream coffee-free flavor brands.Starbucks continues to face stiff competition and close offely through strategic planning hinged upon finding new and creative ways to be innovative will the firm continue to dive rsify its financial portfolio turn enabling its ability to cover liabilities.IntroductionHeadquartered in Seattle, Washington, Starbucks is an international Corporation (www.Starbucks.com) whose stocks are traded on the NYSE under the SBUX ticker symbol. Starbucks is the largest coffee outlet in the world, with close to seventeen thousand shops in virtually fifty countries or provinces, eleven thousand in America alone, over one thousand in Canada, eight hundred in Japan and seven hundred Coffee Shops in the United kingdom. Starbucks in 2003 was listed as a Fortune 500 firm, stratified 465. By the end of 2010, they were ranked 241.BackgroundHoward Schultz gained control of Starbucks in 1987. Starbucks was founded by three colleagues in 1971 in Seattle who were inspired by a mutual conversancy Alfred Peet, an established channelman. By 1980 the company had grown to four locally owned stores that turned a reasonable profit every year. It was in 1981 when Howard Schultz, then fr ailness President of U.S operations for Swedish Kitchen and Coffeemaker equipment decided to visit Starbucks out of curiosity as to how and why the Starbucks was so successful with selling his companys products. Managerially, Schultz was impressed with the company. After practically persistence, Schultz landed his firstly job with Starbucks as head of marketing and research.Overflowing with ideas for the company, Howard Schultzs biggest inspiration and vision for Starbucks future came in 1983 while on a business trip to Italy and the idea of Espresso Bars came fell upon him. After failing to convince Baldwin for the expansion of business, he initially left Starbucks in 1985 and started the Il Giornale coffee bar chain in 1985 and the coffeehouse was very successful. In 1987 after buying out the former owners Jerry Baldwin and Gordon Bowker, Schultz began to cursorily begin to realize his full dream for Starbucks and quickly expanded business operations in Vancouver, British Columb ia, and Chicago, Illinois, of the same year. By 1992, Starbucks then a recognized publicly traded company on the stock market had expanded nationally to 165 shops. In 2009, Starbucks succeeded by opening rough nine hundred additional shops outside the Continental United States.Mission education(Actual per www.starbucks.com, accessed on 20 February 20, 2011)Establish Starbucks as the premier distributor of the best coffee on the planet without compromising principles on quality of ontogeny.Our CoffeeIt has ever uttermost(a)ingly been, and will always be, about quality. Were passionate about ethically sourcing the finest coffee beans, roasting them with great care, and improving the lives of commonwealth who grow them. We care deeply about all of this our work is never done.(2, 7)Our PartnersWere called partners, because its not just a job, its our passion. To find outher, we embrace diversity to create a place where each of us can be ourselves. We always treat each other(a) wit h respect and dignity. And we hold each other to that standard, ensuring the latest technology is implemented for producing superior products to our loyal customers. (4, 8, 9)Our CustomersWhen we are fully engaged, we connect with, laugh with, and uplift the lives of our customers-even if just for a few moments. Sure, it starts with the promise of a perfectly made beverage, but our work goes far beyond that. Its rightfully about human connection. (1)Our StoresWhen our customers feel this sense of belonging, our stores become a haven, a break from the worries outside, a place where you can meet with friends. Its about enjoyment at the speed of life-sometimes slow and savored, sometimes faster. Always full of humanity. (6)Our NeighborhoodEvery store is part of a community, and we take our responsibility to be good neighbors seriously. We pauperism to be invited in wherever we do business. We can be a force for positive action-bringing together our partners, customers, and the commu nity to contribute every day. Now we perk up that our responsibility-and our potential for good-is even larger. The world is looking to Starbucks to set the new standard, yet again. We will lead. (3)Our ShareholdersWe know that as we deliver in each of these areas, we enjoy the kind of success that rewards our shareholders. We are fully accountable to get each of these elements right so that Starbucks-and everyone it touches-can endure and thrive. (5)CustomerProducts or servicesMarketsTechnologyConcern for survival, profitability, growingPhilosophySelf-conceptConcern for public imageConcern for employeesMission Statement AnalyzedI consider this to be a fairly good, and accurate parameter although per my rating (based on research), the mission statement lacks two (2) important components Technology and Concern for employees. The company must evaluate whether it is technologically advanced and even though the companys vision is of concern to its employees, it still should be added to its mission statement.Vision Statement(Actual per www.starbucks.com, accessed on 20 February 20, 2011)To establish Starbucks as the most recognized and respected brand in the world and become a national company with values and guiding principles that employee could be proud of. The vision statement clearly describes the dream or the future of the company that is to be the worlds most thoroughly known coffeehouse and also to be the most appreciated and positively graded brand by all levels of people around the world. Finally, the company focuses emphasis in the value of employees and their loyalty, and strives to create a happy work environment.The opportunity for entry of new competitors shows a balance between different firms competing in a market and subsequently, they can be looked upon as a threat to already established firms. One of Starbucks staunchest competitors is McDonalds McCafe which is in truth catching on globally. Competition is real due to entry level start up c osts which can be extremely low and or offered at a bargain outlay to gain a competitive edge. This probably can explain why Starbucks has late decided to partner with Burger King which I personally consider a very positive move.Starbucks Competitive Profile Matrix (CPM) is illustrated below and compares the coffee firms internal and external factors, based upon strengths (superior or 4.0), against weaknesses (1.0), against its current, and projected market competition. Used effectively, it will give management clear idea about the firms strengths and weaknesses and aid in plotting a way forward that is anicteric and most importantly, profitable. Anything in between can be rated from fair, to average to above average to superior. From the illustration below, Starbucks fares a little above average when compared to Dunkin Donuts, yet well below McDonalds.Competitive Profile Matrix (CPM)In the External Factor Evaluation or EFE, just now external factors, that is, opportunities, and threats, are evaluated. From the illustration below, the following info can be drawnGourmet coffee consumption tied in to drinkers educational levels. The high the level of education the more gourmet coffee on average was consumed, by as much as seventy-one pct. Trends showed sixteen percent of U.S. adult population consumed medium coffee on a daily basis sixty-three percent only occasionally. The growth in popularity of specialty coffees has increased, as only thirteen percent and fifty-nine percent of people describe daily and occasional consumption, respectively, in 2002. Also, trends over the past ten-years showed consumers requesting more natural coffees which influenced retailers on the ontogenesis environment of coffee beans. Consumers are becoming more health conscious and are looking for eliminate and snacks that are low in carbohydrates / sugar and calories. planetary market has a stronger economy and accordingly, consumers would be able to pay premium price for s pecialty or gourmet coffee.With regards to threats, the 2007-2009 economic inlet adversely affected the specialty coffee industry. Recently, trends show consumer concern with nutritionary value. Volatility in the stocks and coffee price could impact the purchasing power for the buyers. Smaller competitors are expanding their markets as well as their product line offerings.In conclusion, competitors such(prenominal) as McDonalds and Dunkin Donuts are becoming stronger in offering specialty coffee along with other complimentary products. This may explain why SBUX has lately announced a partnership with Burger King who has long lagged behind McDonalds, especially in the breakfast arena to start offering Seattles Best coffee products (a ancillary of Starbucks), in efforts to further close the gap between itself from its the conglomerate that is McDonalds Corporation.External Factor Evaluation (EFE) MatrixGourmet coffee consumption rose with the drinkers educational level. Those who finished college bought forty-nine percent more gourmet coffee on average, and those with some postgraduate education bought seventy-one percent moreSixteen percent of the U.S. adult population consumed specialty coffee on a daily basis, whereas sixty-three percent indulged occasionallyThe growth in popularity of specialty coffees has increased, as only thirteen percent and fifty-nine percent of people reported daily and occasional consumption, respectively, in 2002Another trend that has surfaced in the past decade has been consumer requests for organic coffees, and more emphasis was placed by retailers on the growing environment of the beansConsumers are becoming more health conscious and are looking for sweats and snacks that are low in carbs / sugar and calorieInternational market has a stronger economy and accordingly, consumers would be able to pay premium price for specialty or gourmet coffeeThreatsThe 2007-2009 economic recession adversely affected the specialty coffee indust ryRecent trends shows consumers are concerned about the nutritionary value of coffee products and are demanding nutritionary info be posted on the products even in retail outlets.Volatility in the stocks and coffee price could impact the purchasing power for the buyersSmaller competitors are expanding their markets as well as their product line offeringsCompetitors such as McDonalds and Dunkin Donuts are becoming stronger in offering specialty coffee along with other complementary products inseparable Factor Evaluation (IFE) MatrixInternal Factor Evaluation (IFE) Matrix is a summary step in conducting an internal strategic-management audit utilise to evaluate the strengths and weaknesses of a business, and provide a foundation for identifying and evaluating relationships founded upon those areas.Looking at key Internal Factors, Starbucks most advantageous opportunities lie in expansion in ever-growing Markets like Brazil, Russia, India and China or the BRICs as they are commonly referred. Of note, Starbucks doesnt appear to show any interest in marketing its products through advertisings as much as focusing on the quality of its coffee and that power alone to retain, and attract new customers.Key Internal FactorsStrengthsStarbucks expects to add approximately 20 net new stores to its global store base in fiscal 2009 by closing approximately 425 company-operated stores in the United States and adding of approximately 60 company-operated stores internationallyThe company plans to open approximately 65 net new licensed stores in the United States and approximately 320 net new licensed stores internationallyCapital expenditures for fiscal 2009 are expected to remain unchanged, at approximately $600 million.Licensing revenues increased primarily due to higher product sales and royalty revenues as a result of opening 438 new licensed retail stores in the last 12 month untouchable marketing and promotional campaign such as product placement in major TV seriesStarb ucks also provides electrical outlets and, in some stores, wireless access, for customers who might need to use their MP3 players or laptop computersStarbucks products can be found in convenience stores, grocery stores, department stores, movie theaters, businesses, schools, and even airportsStarbucks is rated by Fortune as one of the best top 10 places to workStarbucks also encourages the use of its Web site where customers are able to cross-file their Starbucks cards, receive nutritional information about Starbucks products, shop online, search for careers, and much moreWeaknesses47 percent drop in earnings in one year (2008)For the 26 weeks ending March 2009, Starbucks revenues rock-bottom 7 percent to $4.95 billion and net income decreased 72 percent to $89.3 millionMoodys Investors Service recently downgraded Starbucks credit ratingsThe U.S. company operated retail business continued deteriorating trendsFor the second quarter of fiscal 2009, U.S. total net revenues were $1.8 billion, a decline of $131.5 million, or 6.8 percent, due to decreased revenues from company operated retail storesMany of Starbucks International operations are in early stages of information that require a more extensive support administration sexual congress to the current levels of revenue and operating income in the United StatesInternational total net revenues were $433.7 million for the 13 weeks ended March 29, 2009, down $59.7 million, or 12.1 percent, compared with the same period last year, primarily due to the impact of a stronger U.S. dollar relative to the British pound and Canadian dollarGlobal Consumer Products theme (CPG) total net revenues decreased by 2 percent to $94.8 million for the second quarter of fiscal 2009, due primarily to lower margin on sales of packaged coffee as a result of discounting, as well as lower volume to the tradeThe Strength-Weaknesses-Opportunities and Threats (SWOT) analysis is an effective to that when used properly, gathers, analyzes , and evaluates information which helps firms identify strategic advantages/disadvantages.SWOT StrategiesOpportunitiesGourmet coffee consumption rose with the drinkers educational level. Those who finished college bought 49 percent more gourmet coffee on average, and those with some postgraduate education bought 71 percent moreSixteen percent of the U.S. adult population consumed specialty coffee on a daily basis, whereas 63 percent indulged occasionallyThe growth in popularity of specialty coffees has increased, as only 13 percent and 59 percent of people reported daily and occasional consumption, respectively, in 2002Another trend that has surfaced in the past decade has been consumer requests for organic coffees, and more emphasis was placed by retailers on the growing environment of the beansConsumers are becoming more health conscious and are looking for sweats and snacks that are low in carbohydrates / sugar and calorieInternational market has a stronger economy and accordingl y, consumers would be able to pay premium price for specialty or gourmet coffeeImplement product development by introducing organic coffee and disclosing the nutritional content to the consumers (S1, S2, S3, S5, S6, S7, O1, O2, O3)Continue opening more retail stores overseas where coffee is in demand and market has not been saturated by competitors (S1, S2, S3, S4, S9, O6)Develop new products with better nutritional value (S6, S8, O1, O2, O4, O5)Develop a marketing strategy such as Starbucks Combo by offering combination of gourmet coffee and cookie / cake or 2 for 1 on Tuesdays and Wednesdays when the patrons can purchase coffee on Tuesday and get free refill on Wednesday (W1, W2, W3, O1, O2, O3)Establish joint venture with hotels, airlines, and retailers for having mini-Starbucks locations or for serving premium Starbucks coffee in the hotel rooms or during the flights (W1, W2, W3, W4, W5, O1, O2, O3, O6)ThreatsThe 2007-2009 global recession negatively affected the specialty coffe e industryRecent trends have shown that some of the consuming public is concerned about the nutritional value of such products as those offered by the specialty coffee sector and have even challenged the correctness of the labeling and calorie information posted on the products available at retail outlets.Volatility in the stocks and coffee price could impact the purchasing power for the buyersSmaller competitors are expanding their markets as well as their product line offeringsCompetitors such as McDonalds and Dunkin Donuts are becoming stronger in offering specialty coffee along with other complementary productsImplement market penetration strategy by promoting additional licensing retail deals. This minimizes the risks and capital expenditures for Starbucks (S2, S3, S4, S5, T1, T4, T5)Lower prices of popular drinks by $0.50 and promote the price decrease through aggressive advertising (S6, S7, S8, T1, T4)Penetrate market by appealing to a wider variety of consumers (W6, T4, T5)C utback on some of operating expenses such trying to improve purchasing power and getting better prices from the suppliers and vendors (W4, T4, T5)Create promotional Strategies Such As Starbucks Combo Or Reduce The Price By $0.50 Per Drink On Popular DrinksDevelop New Products With Better Nutritional valueExpand Internationally By Opening Additional 100+ License Retailers Through Joint VenturesPortfolio Analysis Starbucks BCG Matrix(The Worlds Most Innovative Companies Their creativity goes beyond products to rewiring themselves. Business Week and the Boston Consulting Group rank the best. Accessed and referenced on 20 February 20, 2011 at http//www.businessweek.com/magazine/content/06_17/b3981401.htm)The Boston Consulting Group (BCG) matrix is enhancing a multidivisional firms efforts to formulate strategies. The BCG allows a multi-focused firm to manage its portfolio by examining relative market share position and the industry growth rate each division relative to all other divisi ons in the organization. The Starbucks BCG matrix below shows four (4) divisions which include Question Marks, Stars, Cash Cows, and Dogs.quarter-circle I shows low relatives market position, high growth industry. Cash needs versus cash generation are high and low. Quadrant II or Star Division identifies best long-run opportunities for growth and profitability. Quadrant III or Cash Cows with high relative market share position but compete in a low growth industry and finally, Quadrant IV or Dogs identifies relatively low market share position and compete in a snail or no market growth industry.Starbucks Income Statements shows steady increases between 2003 and 2005. The revenues on the year 2003 were $4,075,000, while $2,191,000 in year 2004, $6,369,000 in year 2005. Also, the firms growth sales rate for 2004 and 2005 was 56.3%. In conclusion, Starbucks were identified in Star division which means its long-run opportunities for the growth and profitability is overall good.Recommenda tionsStarbucks coffees price are much more expensive than other market competitor products because Starbucks purchases the highest quality coffee beans which means and price-war advantage for its competitors in these challenged economic times.Develop series of new coffee, tea and fruit drinks with better nutritional values for health conscious customers. Initially, enter selected market with predatory pricing strategy and then move to larger market.Starbucks is showing signs of change and that the change has started to work. For the first time in eight quarters, the company posted positive earnings. In fact, all US company operated stores reported positive growth in their sales.For the last few years, the company over-expanded by opening too many stores and some too close to each others. Now, they have done an impressive job restructuring itself and move back to being profitable by closing some stores and slimming down its workforce over the past few years. They further eliminated excessive waste in their operations and have been trying to be leaner in their day to day business processes.Leading the way in technological media, Starbucks innovative personality has enabled capitalization on the social networks like Twitter and Facebook. Additionally, Starbucks even has an iPhone application (accessed at Why Starbucks Has Room to Improve. http//www.minyanville.com/businessmarkets/articles/starbucks-growth-upgrade-profit-price-hikes/1/22/2010/id/26485 20 Feb. 2011.).