Starbucks
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Transcript of Starbucks
Starbucks
Crystal HillStephen
LechtenbergAnand McGeeAllison PurtellJason Torres
Industry Overview Highest imported product in world,
second to oil
U.S. Coffee Industry 20,000 stores, $11 Billion profit
Top 50 companies, 70% of profit
Secure prime locations, drive store traffic, deliver high quality products
Business and Economic Factors Business Characteristics
Expansion, franchising and licensing, store traffic
Economic Characteristics Coffee beans, futures contracts
Forces for Driving Change Environmental concerns
Sustainable coffee Organic coffee, fair trade, and shade grown
coffee
Customer’s desire for information
“Green” coffee
Competitive Forces Threat of New Entrants
Low startup costs, strong first mover advantage Rivalry Among Existing Firms
Highly concentrated, highly competitive Threat of Substitute Products
Low customer switching costs, differentiation Bargaining Power of Customers
Millions of coffee consumers worldwide, little power Bargaining Power of Suppliers
Firms hold power, suppliers compete against eachother
Competitive Positions Starbucks
First mover advantage (Blue Ocean) Differentiation
McDonalds McCafe division
Dunkin Donuts Starbucks biggest competitor
Nestle
Competitive Moves Innovation
Contribute more capital to R&D Expansion
Starbucks, 700 new stores in 2009 McDonalds, 1,000 new stores in 2009 Dunkin Donuts, 100 stores in Taiwan by 2017
Product Differentiation
Key Success Factors Starbucks:
Continue disciplined expansion Product differentiation
McDonald’s: Most products for your dollar
Nestle: Unmatched product and brand portfolio
Dunkin’ Donuts: Innovation
Attractiveness of Coffee Industry
Coffee beans are 2nd largest export Large companies make up 70% of industry
Must secure prime locations, manage and increase store traffic, and sell high quality products
Companies must expand in order to succeed Competition on price Relationships with coffee producers is key Overall attractive industry
Starbucks saw $1,000,000 profit per store in 2008 Typical coffee shop saw $500,000 profit per store
Marketing Efforts Recognition in Hollywood Loyal customers Rewards programs
My Starbucks Rewards card Facebook Competition
Financial outcomes Consolidated Company revenue
$2.5 Billion in 2008 $2.4 Billion in 2009
Due to strengthening U.S. dollar And fewer stores being opened in ’09 High costs in closing 800 stores
Current stock price of $21.59 Forecasted to increase in December
Pricing First price reduction in August 2009
Due to 6% decrease in sales On standard drinks by 5-15 cents
To attract non-loyal customers Specialty drinks increased
Was last raised in 2007 by 5 cents Loyal customers won’t leave
Trying to cut down costs by being more efficient in stores
Strengths Operational Techniques
Extending their market to other business channels
Joint ventures
Marketing and sales strategies Focus on quality and experience vs.
price
Strengths Customer service
“Develop enthusiastically satisfied customers all of the time.”
Wireless internet Comment cards
Management techniques Empowerment of employees Every employee a “partner”
Core Competencies Vertically Integrated
Placement “…to become the most recognized and
respected brand in the world”
Weaknesses Lack of current new product development
Slow to diversify into new markets
Pricing strategies
Current marketing strategies not meeting marketing objectives Younger, less educated customers with lower
economic status
Weaknesses Market saturation has gotten in the way
of products and services not meeting marketing characteristics
Low customer satisfaction Speed of service Inconsistency
Opportunities Co-branding
International expansion India and Pacific
“Going green” practices
Threats Rising costs of coffee or dairy products
Copycat brands/Competition McDonalds and Dunkin Donuts
Declining coffee market New beverage or pastime could evolve
Eliminate-Reduce-Raise-Create
Eliminate
Underperforming stores
Raise
Education of coffee with employees
Reduce
Amount of time employees spend making individual drinks
Calories in specialty drinks
Create
More loyalty rewards
A better “everyday brew”
Competitive Strength By keeping Focus on quality coffee and
excellent customer service Easier to acquire quality suppliers Harder for competition to keep up
Valuable Assets and Resources Quality coffee Diversified menu, reaching across 3 tiers
of customers Technology Employees
Starbucks’ Issues/Solutions
Problem: Overexpansion
Solutions: Transformation Agenda1) Improving U.S. state2) Re-igniting emotional attachment3) Build for the long term4) Expand around globe outside U.S.