STARBUCKS Sherin

varghese

• Starbucks Corporation is an American global coffee company and coffeehouse chain based in Seattle, Washington.

• Starbucks is the largest coffeehouse company in the world, with 20,891 stores in 62 countries, including 13,279 in the United States, 1,324 in Canada, 989 in Japan, 851 in the People's Republic of China, 806 in the United Kingdom, 556 in South Korea, 377 in Mexico, 291 in Taiwan, 206 in the Philippines, 179 in Turkey, 171 in Thailand, and 167 in Germany.

INTRODUCTION

• Starbucks locations serve hot and cold beverages, whole-bean coffee, microground instant coffee, full-leaf teas, pastries, and snacks. Most stores also sell packaged food items, hot and cold sandwiches, and items such as mugs and tumblers.

• Starbucks Evenings locations also offer a variety of beers, wines, and appetizers after 4pm. 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.

• From Starbucks' founding in 1971 as a Seattle coffee bean roaster and retailer, the company has expanded rapidly. Since 1987, Starbucks has opened on average two new stores every day.

• Starbucks had been profitable as a local company in Seattle in the early 1980s but lost money on its late 1980s expansion into the Midwest and British Columbia. Its fortunes did not reverse until 1990 when it registered a small profit. By the time it expanded into California in 1991 it had become trendy.

• The first store outside the United States or Canada opened in the mid-1990s, and overseas stores now constitute almost one third of Starbucks' stores. The company planned to open a net of 900 new stores outside of the United States in 2009, but has announced 300 store closures in the United States since 2008.

The Starbucks Center, Seattle. The company HQ, in the old Sears, Roebuck and Co. catalog distribution center building

CURRENT SCENARIO• Starbucks is the largest coffeehouse company

in the world, with 17,009 stores in 50 countries, including over 11,000 in the United States, over 1000 in Canada, and over 700 in the UK.

• Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, coffee beans, salads, hot and cold sandwiches and panini , pastries, snacks, and items such as mugs and tumblers.

• Through the Starbucks entertainment division and hear music brand, the company also markets books, music and film. Starbucks posted earnings of 399.3 million or $0.37 EPS, up 86% compared to $199.4 million from same quarter last year.

• This figure beat analyst estimates of $0.32 EPS. Sales also rose 17% to 2.8 billion as comparable store sales added 8% in domestic markets.

REVENUE GROWTH OF STARBUCKS• High tariff affects Starbucks production. Ability to

sourcing best coffee beans . ECONOMICAL- Higher exchange rate -> Most of suppliers of Starbucks are external -> result=Incurring higher cost -> Coffee making is being expensive Way-out: extra cost to consumer?? Or making less profit??

• Income distribution of consumer : After the economic crisis, 2007 unemployment figures rose. People who were able to consume Starbucks’ expensive specialty coffee now saw it as a luxury in some location. Result - > sudden drop in sales volume, 2009.

• Changing taste —USA is consuming more specialty coffee—import of 1.3 billion in 2010 India ,China-people prefer tea. So difficulty in implementation of strategy- Americanization in developing countries. Health consciousness- Need to introduce new healthy alternatives. North Americans are replacing alcohol with coffee Coffee bars— a place for meeting , a place of recreation.

• Starbucks for promoting band globally—using social networking sites. Implemented new phone payment system. Starbucks card —online payment—it also helps to increase customer loyalty.

SWOT ANALYSIS• Strenghts : Brand image Strategy to capture key locations and

opening stores Roasting technology Valued and motivated partners – employees.

• Weakness : Aggressive expansion without proper infrastructure: Is Starbucks there?? Ans : No Result : Put a Starbucks there. Question arises -> Quality vs Volume Starbucks has not focused on its product differentiation objectives Problem in distribution channel: Starbucks has charged that Kraft's alleged neglect and mismanagement of the business -- which brings in about $500 million in annual sales. The world's biggest coffee chain wants to end the partnership on march 1 and replace Kraft with privately held Acosta Inc.

• Opportunities :

• Expansion into retail operations • Technological advances • New distribution channels (delivery) • New products • Distribution agreements • Brand extension • Emerging international markets • Continued domestic expansion/domination • of segment. • Large market; appeals to adults, teens, and

has kid friendly products as well.

• Threats :

• Increased competition from coffee shops and others (restaurants, street carts, supermarkets)

• US market saturation • Coffee price volatility in developing countries • Negative publicity from poorly treated farmers in

supplying countries • Consumer trends toward more healthy ways and away

from caffeine • Fragile state of worldwide production of specialty coffees • Alienation of younger, domestic market segments • Corporate behemoth image • Cultural and Political issues in foreign • countries .

COMPETENCIES OF STARBUCKS

• Roasting technology• Valve technology• Value and motivated partners• Real estate approach• Brand image• Quality Efficient supply chain

management system.

Marketing strategy

• Marketing strategy The global economy continues its recovery, Starbucks is planning to open an average of more than one store each day. ACQUISITION : April 2003, Starbucks completed the purchase of Seattle's best coffee and Torrefazione Italia from AFC Enterprises 1998-Tazo tea company ; 1999-Hear music; 2008-Clover.

• United Airlines Nordstorm Barnes and Noble book store Pepsico Pricecostco Red Hook Breweries Dreyer’s Ice Cream Aramark Apple Tata Coffee Acosta Inc.

CONCLUSION

• Starbucks aggressive growth strategy has made it difficult to deliver consistently high quality products and superior customer service worldwide. Starbucks needs to refocus on the product differentiation strategy rather than expanding. Market penetration will not be a problem if Starbucks creates proper infrastructure globally.