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Executive SummaryOur 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, globalconsumer 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, whichincreased convenience and frequency of visits for existing customers, as well as increased new

customers. Starbucks also added 11,200 distribution channels, which lead to more efficiency and

maximization of accessibility to its products. With competitive compensation and benefits,

employee turnover remained low and extensive in-house training for employees resulted in high

employee loyalty and skill.

Strategic AnalysisStarbucks Corporations main and overall goal, as is the nature of any company, is to increase

profits. In order to accomplish this, Starbucks focuses on a variety of strategies that allow the

company to maintain a competitive edge and constantly reinvent its approaches.The cornerstone of Starbucks success is the opening of new stores. Starbucks wants to

enhance its brand name and equity, and accomplishes this by attracting new customers to

opening stores in their communities. New store locations can also maximize convenience,

therefore increasing the frequency of visits by existing customers. In addition, many of these new

stores are being development with drive-thrus. With this, Starbucks is targeting a particular

segment of its customer base that is comprised of professionals and on-the-go parents. To

measure the effectiveness of these strategies, Starbucks is continuously comparing data between

newly opened stores and existing stores, trying to increase the profitability of both units while

maintaining a steady growth rate.Another strong point of Starbucks strategy is the value placed on customer satisfaction. By

extensively training employees for twenty hours before full employment, Starbucks hopes to

maximize employee responsibility and attentiveness, resulting in a decrease in wait time.

Furthermore, by closely tracking consumer needs and wants, Starbucks is able to introduce more

popular products with a decrease in time between new product introductions. By decreasing wait

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time and increasing choices for customers, Starbucks hopes to increase loyalty among current

customers and hopefully attract new customers.

Starbucks also places great value on its employees which is the reason why Starbucks is

consistently known as one of the top companies to work for. Starbucks has great compensation

and competitive benefits packages for its employees. Even part-time workers get some type of

benefit package (ex: insurance). Starbucks treats its employees well because they believe thatthe work environment should be family-oriented and that a happy employee makes a happy

customer.In addition, the company is placing emphasis on substantially expanding its infrastructure by

investing in corporate and regional support facilities and personnel, as we well as establishing

more efficient distribution networks (Starbucks). Such investments are believed to be necessary

to maintain the current level of growth planned for international expansion, which brings us to

our next major point.Starbucks believes that one of the key factors in sustaining long-term development is its

introduction to new countries and cultures. Compared to the year before, Starbucks has

significantly increased its pace in opening up international retail stores, reaching a little above

3,000 stores in foreign countries. This is obviously an intelligent move, as it already dominatesthe US market, which constitutes only 300 million people, and makes up the bulk of its earnings,

whereas the rest of the world inhabits more than 6.5 billion people, of which, many use caffeine,

just not from Starbucks. The focus on foreign development, however, can come at great

difficulty as foreign cultures and governments will require more research, understanding,

marketing and political relationships. Another concern can be the lack of regulation and

governmental control regarding patents and trademarks, where other companies can mimic

Starbucks brand and logo, stealing their ideas and methods to use as their own, which is already

a concern in China.Furthermore, Starbucks is continually expanding their distribution outlets. In 2004, they had

20,000 outlets that sold their specialty products, including Wal-Mart, Target, a variety of other

grocery stores, and pharmacies. In 2005, the number of stores involved in the Starbucks

distribution channel increased to 31,000, exhibiting almost a 50% improvement and drastically

expanding their ability to reach customers.Overall, the Starbucks Corporation is adept and knowledgeable when it comes to designing

approaches to further their profits and market share while maintaining a close relationship with

customers and their needs. Every aspect of their strategy has been carefully considered and

thoroughly planned out, and the immediate future only seems to hold great success for the

company and its associates.

Analysis resultsStrategy 2004 2005 Difference Explanation

Net Revenue $5,294,247 $6,369,300 +$1,075,000 The combination of new retail stores, higherrevenues from existing stores, and theintroduction of new products resulted inincreased revenue.

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R&DExpenditure

$8,300 $10,500 +$2,200 Recent development efforts have resulted innew brewing and espresso-makingequipment, successful flavor line extensions(product development), and new items formorning pastry and lunch menus.

Number ofDrive-ThruStores

700 1100 +400 To accommodate the early morning trafficdriven by time-conscious individuals,Starbucks began including drive-thru storesas a means of attracting this customersegment.

New StoresOpened

1,344 1,672 +328 Starbucks is domestically and internationallyexpanding their enterprises to a variety ofmarkets, some of which, are currentlyuntapped. This enables the company todevelop in new communities and increasecustomer service in extremely high traffic

areas.

EmployeeTurnover

Great compensation and benefits packageslowered employee turnover. Furthermore,profit sharing plans add to employee loyaltyand productivity. This helps to avoidadditional training costs. (Data could not befound)

DistributionChannels

20,000 31,200 +11,200 Increasing the number of stores involved inthe Starbucks distribution channel allows thecompany to maximize accessibility to its

products.EmployeeTrainingHours

Starbucks requires employees to undergo 20hours of in-store and online training.

(Amounts in Thousands, Store Numbers Are Actual)

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SWOT Analysis:Strengths

Well-known brand identity and imageMajority market shareRecognized for Quality and Service

Low Employee TurnoverEmployee Satisfaction due to competitivecompensation and benefit packagesGlobal presenceFocus On Customer SatisfactionHigh Visibility LocationsInnovative extensive R&D forEquipment/TechnologyConvenientDrive-Thru StoresComfortable Ambiance

Internet Access (Wireless)Non-smoking Areas

WeaknessesOver-saturation of the marketExpensive ProductsLack of diverse music selections

Reliance on beverage innovationFinancial Problems in some international storesGovernment regulations and relationsSeasonal fluctuations in salesOver-Reliance On Domestic StoresNegative corporate image in Ecuador due torelations with coffee growersLack of expansionLack of customer acceptance of new products inexisting and new marketsNon-smoking Areas

OpportunitiesNew Market Opportunities InternationallyFranchise OpportunitiesHealth drinksOrganic drinksEnergy drinksProduct Delivery To Home or Office (Catering)Boba (Tapioca drinks)Specialize more in international markets with

local flavorsMore bottled drinks such as bottledFrappuccinos sold in supermarketsMore selection for kids drinksOffer mini-meals with drinks at a set price, suchas coffee with a pastry or sandwichMarket extension for Starbucks merchandise,such as aprons, hats, etc.

ThreatsAnti-Starbucks GroupsCompetition from restaurants, doughnut shops,and other specialty coffee shopsCompetition from supermarket sales concerningwhole bean coffeesSeasonal coffee pricesImitations of Starbucks image and logo inChina could potentially confuse market and

lessen opportunities in foreign countriesMedical research concerning the effects ofcaffeineHealth conscious groups

Recommendations

Organic Foods and Health Drinks

Starbucks should provide organic foods and health drinks. Modern people are more health

conscious, particularly as new trends begin to focus on health-conscious marketability. Starbucks

can improve their image by paying more attention to their customers concerns. For example,

using more organic ingredients or diversifying their menu would provide fresh healthy coffee

substitutes, thus potentially attracting new customers as well as increasing the frequency of visits

from current customers who may not need caffeine during that particular time in the day.

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CateringStarbucks can expand their service to office or home delivery when the purchase size reaches a

reasonable minimum. Because the drive-thru retail store is increasingly being marketed towards

professionals on the go, Starbucks could attract potential clients, such as large firms or

companies, by delivering coffee directly to their business location. This would also allow for the

possibility of long-term contracts.Increase International Locations

Starbucks should continue to open new locations worldwide. Starbucks is extremely dependent

on its domestic success, and yet has a variety of countries it has not explored opportunities in.

However, it is recommended that Starbucks tread lightly and with caution, insuring proper social

and cultural analysis before plunging into a country. This is apparent in the fact that Starbucks

was forced to close three retail stores in Singapore last year.

Community OutreachStarbucks could refresh their corporate image by showing more concern for the communities

they are located in. Although a huge portion of the population is well aware of the fact that

Starbucks is successful in its endeavors, an extremely small percentage is knowledgeable or

exposed to its community or charity outreach programs. By increasing awareness of its sociallyresponsible characteristics, Starbucks might lull or appease antagonistic groups, thus enhancing

their public image and brand equity.Product Extension and Specialization

Lastly, Starbucks could try to extend its menu selection to include drinks related to particular

cultures. For example, the Chinese culture focuses more on tea than coffee, and although

Starbucks has a selection of different types of tea, it could further entice this consumer segment

by introducing boba, a drink that incorporates little balls of jelly called tapioca. It could present

similar drinks that are popular in other cultures as well. Another example is in Japan, Starbucks

introduced a Matcha (green tea) latte and Frappuccino. This caters more to local tastes and

preferences, which increases customer satisfaction. Starbucks should research local cultures

more so that it can adapt its menu to meet the needs of its international customers.Increase Bottled Drinks

Starbucks currently sells bottled Frappuccinos in supermarkets and specialty stores, which

remain extremely popular among consumers. Starbucks should increase its product line of

bottled drinks to include other favorites, such as the Iced Chai Tea Latte or even seasonal drinks,

such as the Gingerbread Latte. This would increase sales and customer awareness of the products

it sells in its retail stores.Increase Selection forChildrens Drinks

Since Starbucks aims to be a family environment and cater the needs of all family members,

it should increase its menu items for children. It currently offers hot chocolate and apple cider for

children, but it could offer a wider range of products, such as milk shakes or juice, as well asmore bakery items that satisfy childrens taste preferences. This would entice parents to bring

their children in, especially working parents who want to go to Starbucks but feel that that they

cant take their children with them because they will be to antsy, which would generate more

sales.Offer Set Mini-meals

Offering value meals similar to fast food restaurants would increase sales because it increases

the average sale per customer. Working men and women come into Starbucks for something

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quick and convenient, they dont always have time to calculate how much separate menu items

will cost or they dont really think about getting a snack, so if you market mini-meals that

include a latte and a pastry or sandwich together at a set price, it encourages them to purchase

additional items. This also increases awareness of Starbucks additional menu items, such as the

fresh food and pastries.Market Extension of Starbucks Merchandise

Increasing the Starbucks merchandise line to include more branded items, such as baseball

hats, canvas tote bags, umbrellas, aprons (and other kitchen accessories), not only increases sales

but helps Starbucks achieve its ultimate goal of becoming the most recognizable brand in the

world. More people will be wearing the Starbucks logo to show their loyalty and support of the

brand, which increases awareness and helps establish Starbucks as a mega-brand.