Case Study: Starbuck’s Past Present & Future

PRESENTED BY:NAHID HOSSENID: UGO1-37-14-083

Prepared for: Fabiha EnamAssistant professor State University of Bangladesh

Introduction of Starbucks

Company started in 1971 in Seattle, Washington

Grew from 55 stores in 1989 to over 15,000 stores today

Products sold include:- beverages - pastries- whole coffee beans- coffee related retail items

Mission Statement

To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.

Starbuck’s Competitive Analysis

Market Structure Monopolistic Competition

Competitive Activity Many companies are in the market and competition is

fierce Competitors use location, product mix, and store

atmosphere differentiation to establish market niche Industry Costs and Capital Structure

Low to moderate costs for each location Major start-up expenditures are property and equipment Major operating costs are labor and cost of sales

PEST Analysis for Starbuck’s

Political Influences State & Local government controls

Economic Influences Changes in disposable income could influence purchase levels

Social Influences Consumer preferences could shift from coffee to other beverages

Technological Influences Use of technology can improve operational efficiencies

CSR strategy for Starbucks Major contributor to CARE since

’91’ Financial support to community

literacy organizations Green Store Task Force

10 cent discount to customers bringing their own mugs

Coffee grounds given as soil amendments

Products Products Diversification Diversification StrategiesStrategies

Coffee Beans & coffee equipment Fresh brewed coffee, espresso & cappuccino Lattes Wi-Fi Music CDs Food Items

Financial AnalysisSolvency

• Not extremely liquid but capability in Financing short-term debt will not be a problem

Profitability

• Profitable •Below industry standards•Declining in 2008 due to higher operating costs

Financial Leverage

•Initially the company was financed majorly by equity capital later over the years it accepted debt majorly long term

•Has ability to cover debt obligations

LIQUIDITY RATIOS

YEAR 2008 2007 2006 2005 2004

CURRENT

ASSESTS1,748.

01,696.4

91,529.7

91,209.3

3 1,350.9

CURRENT

LIABILITY

2,189.7

2,155.57

1,935.62 1,227.0 746.26

CURRENT RATIO

0 .8 0.79  0.79 0.99 1.81

LEVERAGEYEAR 2008 2007 2006 2005 2004DEBTS 3181.7 3,059.7

62,200.4

41,423.4

3 916.33

EQUITY CAPITAL

2490.9 2,284.12

2,228.51

2,090.26

2,470.21

DEBT –EQUITYRATIO

1.28 1.34 0.99 0.68 0.37

Net Profit Margin (%)YEAR 2008 2007 2006 2005 2004 2003 2002 2001 2000

% 3 7.1 7.5 7.8 7.3 6.5 6.4 6.8 4.3

RETURN ON EQUITY

YEAR

2008

2007

2006

2005

2004

2003

2002

2001 2000

% 12.7 29.4 26.1 23.7 15.7 12.8 12.3 13.1 8.2

RETURN ON ASSESTSYEAR

2008

2007

2006

2005

2004

2003

2002

2001

2000

% 5.6 12.6 13.1 14.1 11.5 9.6 9.5 9.8 6.3

GROWTH RATES %

STARBUCKS INDUSTRY S&P 500Sales (5-Year Annual Avg.) 20.57 18.96 12.90

Net Income (5-Year Annual Avg.)

3.52 9.23 15.13

Dividends (5-Year Annual Avg.)

NA NA 11.79

Company Industry S&P 5005Yr Gross Margin (5-Year Avg.)

23.0 29.6 39.4

5Yr Net Profit Margin (5-Year Avg.)

6.3 8.9 11.5

Profit Margins %

STRATEGIES FOR NEXT FISCAL

Better operational excellence at the store level More meaningful innovation to continue to differentiate the store experienceIncreased efficiencies and effectiveness in the general and administrative infrastructure, to become more capable of navigating through the fluctuations in the external environment.

Product Differentiation Products: Coffee, beans, pastries,

equipment, mugs, containers, accessories, music CDs

“Everything matters” store ambience Retention of coffee aroma City specific mugs and t-shirts Season special coffees, rare exotic

coffees, handcrafted beverages etc Custom drinks and customer attention

Customer Customer Willingness to PayWillingness to Pay

Starbucks charged coffee at slightly higher rates

Location Ambience

(Everything matters), seating, comfort and convenience

COFFEE centered theme

Wi-Fi … more value, more time, more business

New Products and Places Music CDs The Starbucks card The Duet to Visa card Wi-Fi internet Starbucks coffee in supermarkets (in

Flavor lock packaging) Airports, Universities, airlines, equipment

in hotel rooms, business offices Mail order sales Amazon.com and other websites

Causes of the Problem

High Prices – Low Quality Starbucks has always tried to maintain it’s price-

point , with only a minimal improvement in product quality.

Negative Image Starbucks has a large number of negatives in my

mind these days. We also find out the customer of Starbucks has dissatisfaction on the size of cup what they are serving for their beverage.

Poor Quality Control Starbucks core coffee quality has also suffered,

in a number of obvious ways.

Potential solution for the problems

Solution for the High Price and Low Quality In this condition if the Starbucks want to keep their

Brand image good they have to maintain product price on the basis of the product quality.

Solution for the Negative Image The Starbucks should do an analysis on their loyal

customer and the potential customers about their beverage CUP size.

Solution for Poor Quality Control Starbucks is a very renound in coffee Brand, so if the

Starbuck do not maintain their products taste for every time, that is not reputable for a giant coffee Brad like Starbuck.

Thank You….!!!

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