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We’re not in the coffee business serving people…

We’re in the people business serving coffee.

-Howard Behar, Director of Retail Operations

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•Founded by Jerry Baldwin, Zev Siegel, and Gordon Bowker in 1971 in Seattle’s Pike Place Market.

•Purchased by Howard Schultz in March of 1987 and turned in into what we see today.

•Schultz wanted to create a business that does the right things for the right reasons and is financially successful.

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“Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.”

Mission Statement

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To support their mission statement the following six guiding principles help guide the appropriateness of 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.

Guiding Principles

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• Growth– Number of stores– Increase Net Revenue

• Preserve the Starbucks Experience• Be a Leader in Corporate & Social

Responsibility

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• Balanced Scorecard Analysis based on Starbucks Growth initiative– A strategic “dashboard” executive management tool

• Where is Starbucks today? Where are they going?• How will maintaining a Balanced Scorecard help in

achieving growth objectives?

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10,000 new stores

in four years

Learning & Growth– Quality employees– Create the “Third Place”

Financial– Net revenue– Same store sales– Earnings per share

Customers– Increase core group– Support shade growth– Sustainability index– CSR

Operations– New store growth– Productivity– Source coffee beans

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Financial

Customer

Operations

Learning Quality EmployeesStarbucks Experience

Source coffee beansNew store growthProductivity

Quality Products SustainabilityCSR

EPSSame store sales Net revenue

Causality TreeCausality Tree

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• Attract & Retain Quality Employees– Measure (1): Time to Fill– Target (1): Less than 40 days– Leading Indicator------------------------------------------------------------------------------------------– Measure (2): Percentage Voluntary Turnover– Target (2): Less than 20%– Lagging Indicator------------------------------------------------------------------------------------------– Measure (3): Percentage of Positions filled Internally– Target (3): Greater than 50% for Supervisors and 80% for Unit

Managers– Lagging Indicator

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• Maintain High Level of Employee Satisfaction– Measure (1): Employee Satisfaction Survey– Target (1): Greater than 70% Very Satisfied; 90% Satisfied– Leading Indicator

------------------------------------------------------------------------------------------– Measure (2): Percent Shrinkage– Target (2): Less than 2%– Lagging Indicator------------------------------------------------------------------------------------------– Measure (3): Employee Total Compensation– Target (3): 30% above industry average– Leading Indicator

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• Create the 3rd Place– Measure (1): Employee Retention of Training – Target (1): 90% of Benchmark– Leading Indicator

------------------------------------------------------------------------– Measure (2): Culture Compatibility Test– Target (2): Score 80 +– Leading Indicator

------------------------------------------------------------------------– Measure (3): Secret Shopper Evaluation– Target (3): Score of 95.45% (2 σ)– Leading Indicator

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• Support New Unit Growth– Measure: Sites under consideration vs. Benchmark– Target: 1 : 1– Leading Indicator

• Productivity– Measure: Net Revenue per Labor Hour per Employee– Target: Greater than $46.85 – Lagging Indicator

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• Increase the number of units– Measure: Actual vs. Target– Target: 1 : 1– Lagging Indicator

• Source top quality coffee beans– Measure (1): Contracts vs. Forecasted Demand– Target (1): 105%– Leading Indicator

--------------------------------------------------------------------------– Measure (2): Purchased vs. Demanded– Target (2): 100%– Lagging Indicator

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• Support shade-grown coffee– Measure: % coffee sourced from shade-grown farms– Target: 25%– Leading Indicator

• Grow top customers (18+ visits/month)– Measure: # of visits per month– Target: 5% annual growth– Leading Indicator

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• Drive Sustainability – Measure (1): % benchmark to index– Target (1): Sustainability index– Leading Indicator

------------------------------------------------------------------------------------------

– Measure (2): # recycled paper products– Target (2): 25%– Lagging Indicator

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• Corporate and Social Responsibility– Measure (1): % Fair Trade Coffee– Target (1): Maintain or increase % year-to-year– Lagging Indicator

------------------------------------------------------------------------------------------

– Measure (2): % Organic Coffee– Target (2): Maintain or increase % year-to-year– Lagging Indicator

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• Net Revenue Increase– Measure: Percent increase year-to-year– Target: 20% – Lagging Indicator

• Same Store Sales Growth– Measure: Increase over previous period– Target: 3-7%– Lagging Indicator

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• Increase Firm Value– Measure: Earnings per share– Target: Increase 3.4% to $0.89 per share– Lagging Indicator

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Consumers

Value Chain Partners

Employees

Investors

Publics

Convenience

Beans

Drive Value / EPS

Starbucks Experience

Tax Base / CSR

Quality products

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Financial performance

Growth The 3rd Place

↑ Rev/Unit ↑ EPS↑ Net Rev

↓Time to fill

↓Vol. Turnover

↑ Promotions

↑ EE Satisfaction

↓Shrinkage

↑ Compensation

Employees

Retention of trainingCompatibilitySecret Shopper

% Sites Considered.

% Sites Constructed.

Net RevLbr Hr.

CSR

%Contract TQB

%Purchased TQB

%Shade Grown

# VPM

↑ Recycling

↑ Sus. %

%Fair Trade

%Organic

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10,000 new stores

in four years

Learning & Growth– Quality employees– Create the “Third Place”

Financial– Net revenue– Same store sales– Earnings per share

Customers– Increase core group– Support shade growth– Sustainability index– CSR

Operations– New store growth– Productivity– Source coffee beans

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Reasons for Unsatisfied Customers

• Focus on global expansion

– Starbucks went public in 1992 - raised $25 million

– Worldwide - Opening 3 stores daily on average

– Optimistic growth plan - Own 10,000 stores USA

• Focus on product Innovation

– One half day VS. 16 days working 8 hr shifts

– Clientele is changing with menu

– Increase of customization

– “Just Say Yes

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Since the beginning…

• One store: whole coffee beans• Transitioned to selling coffee drinks• NOW:

– Went public in 1992, opened 140 stores– 5000+ stores, 20 million customers– Extensive drink menu– Starbucks outside the coffee shop

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Competition• Big Coffee Stores:

– Gloria Jeans– Caribou Coffee – Dunkin’ Donuts

• Small, Independent Shops– More intimate/personalized– More potential product mix

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Demand• 109 million daily coffee drinkers• 52 million on-occasion coffee drinkers• 1/3 coffee consumption outside the home

• $21.5 billion total coffee market– Starbucks share – 42%

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Consumers and the Ideal Customer

• Changing clientele – new demographics– Younger, less well-educated, lower incomes

• Highly satisfied customers = most profitable customers

• Key factors for customer satisfaction– Clean stores and friendly/attentive staff

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solutions

• Starbucks’ Proposal: Invest 40 million annually in the company’s 4,500 stores, which would allow 20 additional labor hours a week/per store.

• Our Proposal: Do invest the 40 million annually, but do not use every store. Research those stores with higher volumes and invest in those.

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Solutions cont….

• Add “bar-back” type employee

• Offer discounts and incentive offers

• Better rotation schedule to help prevent sluggish employees

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Evaluating the Solutions

• We will continue evaluating the effectiveness of our plan by having monthly check-ups to determine customer satisfaction

• Keep checking sales with respect to customer satisfaction to make sure both stay positive

• Continue the Mystery Shopper Program

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Post-situation• July 1st ,2008 – decision to close 600 stores

nationwide, expected to close within the next year

• Starbucks Value Card

• Iced Brewed Coffee Card

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Thank you