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SUMMARY
I. Starbucks vision, objectives and mission
II.
External analysis
1. 2. 3. 4. 5. PESTEL analysis Strategic business Competitive analysis (M. PORTER) Key Success Factors Opportunities & Threats
III.
Internal analysis
1. 2. 3. 4. 5. Starbucks core competencies VRIO analysis (Barneys VRIN) Starbucks Value-Chain Analysis Competitive Analysis: Direct Competitors Strengths & Weaknesses
TOWS analysis Starbucks BCG Matrix Financial analysis Starbucks SPACE Matrix Executive summary
STARBUCKS
vision, objectives and mission
VISION STATEMENT
Starbucks vision statement is : To establish Starbucks as the most recognized and respected brand in the world and become a national company wi th values and guiding principles that employee could be proud of
OBJECTIVES OF STARBUCKS
To Grow by making employees feel valued :
Starbucks approach the employee with good compensation and comprehensive benefits package. The company beliefs that sharing the companys success with the people who made happen will help them think and acts like an owner of the company.
To Recognize that every dollar earned passes through employees hands : Starbucks will always appreciate the employe e as the revenue which isincreasing every year is by the efficient and hardworking employees. This drastic increase in profit is not recognized without the support of the employees whoattracts the customers to a long term relationships with the coffeehouse. Use the pays, benefits and opportunities for personal development to help gain employee loyalty and become difficult to imitate.
MISSION STATEMENT
Starbucks Mission Statement is : Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.The six principles are:
1. Provide a great work environment and treat each other with respect and dignity. 2.Embrace diversity as an essential component in the way we do business. 3.Apply the highest standards of excellence to the purchasing roasting and fresh delivery of our coffee. 4. Develop enthusiastically satisfied customers all of the time 5.Contribute positively to our communities and our environment 6.Recognize that profitability is essential to our future success.
The vision statement clearly describes the dream or the future of the company that is to be the worlds most well known coffeehouse and also to be the most appreciated and positively graded brand by all levels of people around the world. The company also focuses its vision to employee satisfaction; so that the employees will be happy.
STARBUCKS
EXTERNAL ANALYSIS
PESTEL ANALYSIS
Political
Legal
Economical
Ecological
Social
Technological
PESTEL : Political
Relation between the U.S. government and the states coffee producers Regulations imposed by different states where Starbucks gets its supplies and implements
PESTEL : Economical
The evolution of coffee prices, milk and other raw materials for the brand. Purchasing power varies depending on the destination country.
Unemployment rate.
PESTEL : Social
Brand popularity, a symbol of prestige A controversial symbol, therefore target of antiglobalization
Starbucks plays heavily on the development of its retail outlets Evolution of the image of coffee as a beverage to consumers (terms of health, image conveyed, effects of caffeine ...)
PESTEL : Technological
Technological advances may allow better performance for the production Better communication with suppliers; transport optimization
PESTEL : Ecological
Recycling: in stores and customer awareness. Goblet recyclable Reducing energy use by 25% in 2010. Use renewable energy to 50% of global consumption. Control the water consumption to 25% reduction by 2015.
PESTEL : Legal
Labor code relating to different countries: minimum working age and type of contracts Health Code following international and local standards Consumer Protection associations
In Starbucks Coffee case; there is only one strategic activity field ; Coffee .
To ensure a constant supply STARBUCKS makes sure setting up alliances with South American suppliers.
Demand varies according to the buying power and the acceptance of the products by the consumer with respect to the intercultural constraints that can lead to geographic diversification.
INTENSITY OF COMPETITIVE RIVALRY The rivalry between existing competitors is high. Starbucks works with major competitors such as Costa, McDonald's, Dunkin Donuts and Caribou Coffee and thousands of other "small" cafes.
Threat of substitution
Substitution of products and services including tea, juices, energy drinks, soft drinks or water. On the other hand, pub and bars are increasingly frequented by potential clients considered as meeting places and relaxation.
The second is the ability to attract the best employees through the implementation of a plan for health care quality while reducing costs and providing an equal share of the company to all employees. The third strategic alliance with Conservation International that they had allowed them to create a sustainable supply chain of high quality coffee.
The above three factors have enabled them to promote the emancipation of the fourth factor of their success, a community environment in which social interactions may occur occasionally.
the fifth factor of their success is the ability to adapt to the changing dynamics of consumer demographic characteristics. All these factors have helped Starbucks to remain at the forefront of the specialty coffee industry.
Opportunities
Treats
O1 Globalization makes it easy to enter international market. 02 People are looking for cheap internet connexions. 03 Express foods are getting famous to reduce time spent. 04 Demand for non-chemical and healthy products.
T1 Increase in the inflation rates creates a demand of lower priced products. T2 Many companies are pricing their products chapet to impress customers. T3 Increase in hypermarkets and national supermarkets.
STARBUCKS
INTERNAL ANALYSIS
Starbucks' unwavering support to its employees was clearly displayed when it was the first company to offer stock options to part-time employees. Starbucks has one of the lowest employee turnover rates in the industry with 60% turnover for Starbucks and 140% for the industry average.
The Starbucks philosophy encompasses the belief that a Starbucks coffee house should be on every city block and within reach of each other. This strategy, considered by some to be store cannibalism, has worked very well for Starbucks and allowed the company to grow and penetrate a wide variety of markets and locations.
VRIO Analysis
In order to lead to a sustainable competitive advantage a resource or capability should be Valuable, Rare, Inimitable (including non-substitutable), and Organized. This VRIO framework is the foundation for internal analysis. Valuable : A resource is valuable if it helps the organization meet an external threat or exploit an opportunity. While it may not help the firm outperform its competitors, it can still be labeled a strength. One good way to think about valuable resources is to ask how they help the company.
Common competitive foundations (a.k.a. the generic building blocks) for firms are efficiency, quality, customer responsiveness, and innovation. If a resource helps bring about any one of these four things then it is valuable.
Rare : A resource is rare simply if it is not widely possessed by other competitors. Of the criteria this is probably the easiest to judge. Inimitable. A resource is inimitable and nonsubstitutable if it is difficult for another firm to acquire it or a substitute something else in its place. This is probably the toughest criteria to examine because given enough time and money almost ANY resource can be imitated.
Therefore, one way to think about this is to compare how long you think it will take for competitors to imitate or substitute something else for that resource and compare it to the useful life of the product. Another way to help determine if a resource is inimitable is why/how it came about. Inimitable resources are often a result of historical, ambiguous, or socially complex causes.
Organized : A resource is organized if the firm is able to actually use it. Many scholars refer to core competencies.3 A core competency is simply a resource that is VRIO. While VRIO resources are the best, they are quite rare and it is not uncommon for successful firms to simply be combinations of a large number of VR_O or even V_ _ O resources and capabilities. Recall that even a V _ _ O resource can be considered a strength under a traditional SWOT analysis.
REMEMBER
VRIO analysis is done on each individual resource not on the firm as a whole.
VRIO of Starbucks :
VRIO framework valuable rare Difficult to imitate exploited S or W Competitive implications Firm infrastructures (finances) Human resources management procurement marketing yes no no yes S Temporary advantage
yes
yes
yes
yes
Sustainable advantage
yes yes
y/n yes
y/n yes
yes yes
S S
yes
no
yes
yes
This VRIO analysis demonstrated that Starbucks has core competencies in the areas of human resource management, marketing, and in operating its retail locations. These competencies are discussed in further detail below :
Human Resource Management : Starbucks has created an environment and an organization around its employees, one of its most important assets and sources of sustainable advantage. The empowering corporate culture, have aided in crafting an exceptional workforce that takes pride in its work and is treated with dignity. This culture is apparent in all levels of the organization from the baristas and managers, all the way to the executives.
Marketing : Starbucks has created a brand that exudes an understanding of peoples values, lifestyles, and needs. The companys attention to the experiential factor has been pivotal to its success. Instead of big bucks, they resort to old-fashioned charm and appeal. For instance in New York, Starbucks is handing out subway passes and in Boston and San Francisco, it is giving away free cab rides as a way of passing out good cheer for the holidays. If you make an emotional connection with them, youve captured their heart. Thats what creates brand loyalty, said Brad Stevens, Starbucks top marketing executive. Such creative marketing has served and will continue to serve as a source of sustained advantage for them. Sales/Retail Locations: Service is the distinguishing factor that sets Starbucks apart from its competitors. With approximately 85% of Starbucks business revenue coming from its retail storefronts, it is crucial that it makes service a cornerstone of its brand. Starbucks penchant for consistency, customer service, and casual yet pleasing experience has made its locations one of the most sought after meeting spot for people of all ages. These tie back to the hiring practices of Starbucks that ensures that it searches for people who "get" what a great customer experience is all about.
As it is seen from the figure above in value-chain analysis the business activities are divided into two categories: primary activities and support activities. The primary activities directly deal with the creation of products or services, whereas, support activities can be used to obtain or increase competitive edge in the marketplace.
PRIMARY ACTIVITIES
Inbound logistics : Starbucks inbound logistics involve company agents choosing coffee beans producers mainly in African continent, communication the standards related to the quality of coffee beans, establishing strategic relationships with suppliers and organizing the supply-chain management. Operations : Starbucks operations are conducted in more than 50 countries in two ways: direct operation of the stores by the company and licensing. Currently there are 8870 companyoperated stores globally, whereas 8139 stores operate on the basis of license (Starbucks Company Profile, online, 2011).
Outbound logistics : The outbound logistics for Starbucks has traditionally involved selling its products through its stores without any intermediates. However, starting from recent a range of Starbucks products such as 3-in-1 coffees in sachets are being sold through a set of leading supermarkets. Marketing and Sales : Starbucks does not heavily invest in marketing relying instead on the word-of-mouth achieved through the high quality of products and high level of customer services. However, occasional marketing activities initiated by the company involve sampling of new products that are usually conducted within areas nearby the stores.
Service : Providing superior level of customer services is one of the Starbucks main objectives and it is driven from the mission statement of the company. Accordingly, the company staffs are encouraged to go to great lengths in order to ensure the high level of customer satisfaction.
SUPPORT ACTIVITIES
Infrastructure : Starbucks infrastructure includes a range of general support activities such as management, planning, finance, accounting, legal support and government relations that are required to support the work of the entire value-chain (Hitt et al, 2009, p.87). Human Resource Management : The workforce is duly perceived to be the most valuable resource by Starbucks. Accordingly, a wide range of training and development programs are available for them and they are motivated by both, tangible and intangible incentives. Specifically, in UK Starbucks staff is entitled to free drinks during the shift.
Technology development : Starbucks relies on technology for cost-saving purposes, as well as, ensuring the consistency of the quality of products and offering a high level of customer experience in general. For instance, with the introduction of computerised coffee roasters the consistent taste of Starbucks coffee was ensured and this has contributed to the level of customer retention for the company.
Procurement : This involves purchasing items that are needed for the production of final products or offering services. For Starbucks it would be coffee beans and raw food items, as well as fixed assets such as buildings, machinery etc.
COMPETITIVE ANALYSIS
14,000 specialty coffee outlets in the U.S. Number of ambitious rivals to increase their expansion plans No other specialty coffee rival had more than 250 stores, but there were at least 20 small local and regional chains that aspired to compete against Starbucks
Other competitors:
o Local Cafes o Fast food and convenience stores
PIONEER ADVANTAGES
Starbucks was the first specialty coffee retailer in America. By being there first, Starbucks could set the standard for customer expectations. Later entrants, would have to simultaneously chase the market leader and work their way up. Starbucks being the pioneer could lock in customers who would then have a difficult time switching to another provider at a later time. Howard Schultz says, Starbucks brand sends a message of consistency. If you want a quick coffee break you dont want to take a chance on something else. With Starbucks, you know what youre going to get. Theres no risk.
INTENSITY OF COMPETITION
The toughest competition would be local cafes. These cafes have a customer base that is dedicated and take pride in their product. Fast food and convinces stores that hold the benefits of convince of drive , cheaper pricing and time efficiency. Copy cats, such as other specialty coffee retailers.
strengths
Weackeness
S1 Huge market expansion to china, Brazil, India and Rassuia S2 Provide a great work environment S3 Apply the highest standars of excellence in services S4 Starbucks has monopolistic advantages over its competitors S5 Purchased Ethos healthy water for 8 million and also does not use chemical flavor for coffee S6 Launching the sales of Frappuccino in Japan and Taiwan
W1 Price of coffee is high at Starbucks W2 Less marketing and advertising its product W3 Starbucks products are not available at supermarket
STARBUCKS
TOWS Analysis
WT strategies
Starbucks needs to change its market strategy by reducing the price to compete with competitors
Create new complementary products which contain good quality and lower price to attract more customers
W3,T3 Starbucks needs to analyze the way to reduce the risks of selling its coffee products at supermarkets as customers are demanding it
SO strategies
WO strategies
S1,S3,O1,O2,03 Do advertisements about the free internet connections and the excellent service they provide S5,04 Starbucks shall increase the healthy products into market as the demand for it is high
W1,W2,O1;O3 Reduce the price and advertise the products all over the places W1;W3;O3 Do R&D to sell products at supermarkets without reducing the quality with cheap price
BCG MATRIX
STARBUCKS
Analyse Financire
DONNES BOURSIRES
Nombre de titres : 749.300.000 Capitalisation boursire : 44276 M$ Cours de laction: 59.09$ Indice principal : Nasdaq 100 Autres Indices : SP100, Stoxx Americas 100 Place de cotation : NASDAQ
Elments
SBUX
44,28Mds
DNKN
4,20Mds
MCD
103,88Mds
NSRGY
230,88Mds
Secteur
5,38Mds
Cap. boursire :
Employs :
160 000
1 104
440 000
339 000
893
Croiss. Trim. du CA
0,11
-0,04
0,02
0,13
0,21
13,66Mds
658,18M
27,57Mds
98,92Mds
2,13Mds
0,57
0,79
0,39
0,48
0,24
EBITDA (ttm) :
Marge dexploitation (ttm):
2,46Mds
304,86M
9,85Mds
18,55Mds
374,11M
0,14
0,38
0,3
0,16
0,03
1,43Mds
108,18M
5,46Mds
11,37Mds
N/D
BPA (ttm):
1,86
0,93
5,36
3,56
0,76
PER (ttm) :
31,79
42,63
19,33
20,35
31,28
1,47
1,68
1,9
3,91
1,47
STARBUCKS
SPACE Matrix
STARBUCKS
Executive summary
While Starbucks wants to sell the finest coffee in the world, they are really selling an authentic experience and the only reason customers believe it is an authentic experience is because of the rituals they have learned and that Starbucks has taught to them on how to drink coffee.
Starbucks initially used an aggressive generic strategy of focus to take advantage of this small portion of the overall coffee market and eventually transitioned into a strategy of differentiation.
Starbucks has also enabled customers to access an iTunes play list in stores, which shows the music playing in real time and gives them the opportunity to purchase music digitally.
18% earnings per share growth Record cash flow of $1.8 billion