STARBUCKS STRATEGY

INTRODUCTION

• Starbucks Corporation is an international coffeehouse chain based in Seattle, Washington, United States.

• CEO: Howard Schultz (Founder of Starbucks coffeehouse)

• Starbucks is the largest coffeehouse company in the world, with 16,120 stores in 49 countries, including around 11,000 in the United States, followed by nearly 1,000 in Canada and more than 800 in Japan.

• Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, snacks, and items such as mugs and coffee beans. 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. Starbucks’ Italian style coffee, espresso beverages, teas, pastries and confections had made Starbucks one of the greatest retailing stories of recent history and world’s biggest specialty coffee chain.

• In 2003, Starbucks made the fortune 500.

COFFEE INDUSTRY

• Coffee is an important commodity and a popular beverage.

• Over 2.25 billion cups of coffee are consumed in the world every day.

• Over 90% of coffee production takes place in developing countries, while consumption happens mainly in the industrialized economies.

• Worldwide, 25 million small producers rely on coffee for a living.

• Coffee is also bought and sold as a commodity on the New York Board of Trade.

• The world's largest transfer point for coffee is the port of Hamburg, Germany.

Porter’s five forces

Bargaining power of supplier: (high)

1.Farmers have less land to produce(3/4 coffee farms in world are less than 3 acres.

2.Farmers don’t have desire, the volume, the expertise, connections to export themselves, because most of the countries regulated coffee sales . they are having a long negotiation with exporters about price.

3.Very few exporters are there to export

Industry rivalry: (Low) 1.Low barriers to enter into retail specialty coffee market . 2.Less regulations. 3.High profit margins. 4.Huge competition

Threat of substitutes: (high) 1.Speciality coffee is facing tough challenges from substitutes like basic coffee , tea, juice, soft drinks, alcohol

Bargaining power of consumer: (high) 1.Due to presence of large specialty coffee makers, consumers have high bargaining power.(3485 competitors are present in specialty coffee market) 2.Adoptation of healthier life style and replacing of alcohol with coffee . 3.Low switching cost.

Threat of new entrants : (high) 1.Facing high competition from flavored coffee makers. 2.A Few players with multiple outlets becoming tough competition to star bucks , around 5500 coffee bars, cafés are there in USA and Canada by 1999.

BCG

INDUSTRY GROWTH RATE

RELATIVE MARKET SHARE

INTERNATIONAL LOCATIONS

HIGH

LOW

LOW HIGH

VIA INSTANT COFFEE

SEATTLE’S BEST

PRE-BOTTLE FRAPPACINO’S

COFFEE’S

LATTE’S

FRAPPUCCINO'S

• It shows the cash cows as the regular Starbucks line of Coffee’s, Latte’s and Frappuccino's found at nearly every location. These are stable products that account for the bulk of sales.

• A potential star is the International locations, which hold less financial risk and open doors for innovation and stability.

• Question marks are the recently added VIA instant coffee to be expanding to grocery stores and convenient stores. Another question mark is the oft forgotten sub-brand Seattle’s Best. The company will be revamping this brand and it’s future is unknown.

• Current products like this such as the dog, pre-bottle Frappuccino's account for a tiny fraction of sales.

SUPPLY CHAIN MANAGEMENT

SOURCING

Sourced approximately 50% of its beans from

Latin America

SAMPLING

Extracts 3 different samples from every

shipment of 250 bags

1. Offer sample sent by exporter

2. Before the shipment

3. At coffee roasting plant

ROASTING & BLENDING

Computerized roasters roast the coffee beans

under appropriate temperature and time

Air cooling

PACKAGING

Vacuum -sealing