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STRATEGIC MANAGEMENT(CSEB3101)

1st CASE STUDY PRESENTATION PROJECT

Prepared for Dr.Tey Lian Seng & Dr. Lee Su Teng


Prepared by: Group 4 (Tutorial: Thursday, 1-2 pm)
1. Firmansyah Shidiq Wardhana (CEB110723)
2. Fazarul Iqbal Bin Mustafa (CEA110026)
3. Muhammad Syazrrine Bin Mohammad Idris (CEA100067)

Faculty of Business & Accountancy, University of Malaya

Strategic Management Analysis of Starbucks.co

Initially Started

In 1971, three academics, English Teacher Jerry Baldwin, History Teacher Zel Siegel and
writer Gordon Bowker opened Starbucks Coffee, Tea and Spice in Touristy Pikes Place
Market in Seattle.

The three were inspired by entrepreneur Alfred Peet to sell high-quality coffee beans and
equipment. The store did not offer fresh brewed coffee by the cup, but tasting samples
were sometimes available.

The store was an immediate success, with sales exceeding expectations, partly because
of interest stirred by the favorable article in Seattle Times.

By the year 1980s the company had four Starbucks Stores in Seattle area and had been
profitable every year.

Then..

Entrepreneur Howard Schultz joined the company in


1982

the vice president of U.S operations for Swedish


Maker of stylish kitchen equipment and coffeemakers

Director of Retail Operations and Marketing

Idea of selling beverages after comes back from


Milan, Italy.

Then

April, 1984 first store to sell beverages was opened

Served 400 customers- over the 250 customer average at


their best.

After Howard Schultz failed to convince Baldwin for


expansion of business, he left Starbucks in 1985 and
started the Il Giornale coffee bar and the coffeehouse
was very successful.

In 1987, II Giornale acquires Starbucks

Howard Schultz becomes Starbucks President and CEO

Now

Worlds premier roaster and retailer specialty coffee.

Largest coffeehouse company in the world with 8,812


company-owned stores and 10,852 licensed stores in more
than 50 countries. (Total: 19.000 ++ stores)

Annual sales of about $ 10 billion ++

Sell: beverages, pastries, whole bean coffee, ground coffee,


and coffee-related products, confections, drinks, nutrition
foods.

Vision Statement of Starbucks

To be the most recognized and respected brand in the world


and become a national company with values and guiding
principles that employee could be proud of

The vision statement definitely describes the trance or the future of the
company that is to be the global most renowned coffeehouse and also to be
the most esteemed and completely sorted brand by the people around the
world.
The company also focuses its vision to employee satisfactions, so that the
employees will be delighted to perform their duty in Starbucks outlet

Mission Statement of Starbucks

Starbucks Mission Statement is;

to establish Starbucks as the premier purveyor of the


finest coffee in the world while maintaining our
uncompromising principles while we grow.

The six uncompromising principles are:

1.

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.

QUESTION A
What are the firm most important
external opportunities and threats ?

Main Opportunities
1.

Extension of global supplier networks through


collaborated Supply Chain Management

2.

The expansion and emerging economies as


increasing number of middle class society who
have high purchasing power parity

3.

The expansion of retail food outlet operations as


a third home for the Generation Y to spend their
time outside of their office and their home

4.

Attracted by a broader range of customers from


pop culture based society who are related with
music, entertainment, consumerism & IT.

Main Opportunities (continued)


5.

Globalization
and
internationalization
enforcement makes populous companies are easy
to enter international market

6.

Trend of People who are looking for convenient


place and also to have speedy internet
connections anytime & anywhere.

7.

Instant and prepared food trends are getting


famous to reduce time to be spent for customers.

8.

High Demand for non-chemical and healthy


products.

Threats for Starbucks


1.

Increased competition from local cafes and specialization


of other coffeehouse chains.

2.

Saturated markets in the developed economies.


(ownership issue of the coffee bean farmers)

3.

Supply disruptions from coffee bean plantation.

4.

Sentimental issue to the bad effect of coffee from


society.

5.

Increase in the inflation rates creates a demand in lower


priced products.

6.

Many companies are pricing their products cheaper to


impress customers.

7.

Increase in hypermarkets and economical supermarkets


who also provides the cafes and food stalls.

EFE MATRIX
Key External Factors

Weight

Rating

Weighted Score

1. Expansion of Supplier networks through Global Supply Chain

0.10

0.3

2. Emerging economies as increasing number of middle class society

0.05

0.2

3. Expansion of retail food outlet functional operations as a third home

0.05

0.1

4. Attracted by a broader range of customers

0.05

0.15

5. Globalization and internationalization enforcement

0.10

0.4

6. Trend of People who are looking for convenient hangout place

0.10

0.4

7. Instant and prepared food trends

0.10

0.3

8. High Demand for non-chemical and healthy products.

0.05

0.1

1. Sentimental issue to the bad effect of coffee from society.

0.05

1`

0.05

2. Supply disruptions

0.05

0.15

3. Saturated markets in the develop economies

0.05

0.1

4. Increased competition from local cafes and specialization of other coffehouse


chain

0.05

0.20

5. Increase in the inflation rates creates a demand in lower priced products.

0.05

0.1

6. Many companies are pricing their products cheaper to impress customers.

0.05

0.15

7. Increase in hypermarkets and economical supermarkets who also provides


the cafes and food stalls.

0.10

0.30

OPPORTUNITIES

THREATS

1.00

3.00

QUESTION B
-Forces Model,
discuss the attractiveness of the industry
in which the company competes.

Porters Five Forces


Bargaining Power of
Buyers

Potential Threats of New


Entrants

Competitive Rivalry

Potentials Threats of
Substitutes Product

Bargaining Power of
Suppliers

Threats of New
Entrants/Competitors
Starbucks
Competitors
There is a great deal of risk of entry by
potential competitors due to the low start
up costs. Such as Old Town, Caribou Coffee
McDonalds is able to add specialty
coffee to their existing services to
tap into the specialty coffee market
HIGH DEGREE
of Threats of New Competitors in
term of coffee shops line or
beverages/foods outlet

Threats of Substitutes
Product
Coffee & Food
Provision

The Substitute Products Could


be Beverages, Chocolates
Drink, Ice Blended, Etc
. There are similar offer of products
and services such as offered by
McDonald, Dunkin Donuts, ODrink
HIGH DEGREE
of available substitutes in the market

Medium to High Bargaining Power of Buyers

In the past, buyers did not really have bargaining power when it
came to premium coffee such as Starbucks. The sheer scale of
Starbucks business reduces the bargaining power of any single
group of buyers.

During some years ago, even though the price goes up, the buyers
who like only Starbucks would still come.

Nowadays, With newer entrants and competitors such as Mc


Donalds who claim to offer premium roast coffee of reasonable
quality for lower price, buyers now have slightly more bargaining
power than theyve had in the past

Low Bargaining Power of Suppliers

There is very low bargaining power for coffee bean suppliers due to the
importance of Starbucks business to any individual supplier, and the fact
that Starbucks accounts for a large percentage of any individual suppliers
sales. Indeed, Starbucks also got some exclusive coffee providers.

This gives Starbucks the ability to dictate the price of coffee bean sales.
Starbucks got different suppliers; actually 70% of them come from fair
trade and 30% from normal trade. Moreover, Starbucks got its own
distribution network, which impede any competitors to get the same final
products and put opacity on the different production costs.

Starbucks is a global coffee chain and we can imagine that many suppliers
are eager to work with them.

High Level of Competitive Rivalry

In this sector, we can observe there is a huge competition that try to


compete with Starbucks, why?

Because of the number of substitution products and the effectiveness of


the entry barriers.

How, well try to define those main competitors:

Any other coffee chain. Examples include The Coffee Bean & Tea Leaf,
Gloria (US) / Caf Negro (EU)

Smaller privately owned coffee houses or tea houses (laduree UE)

Secondary coffee providers: Including McDonalds, burger king, offices


cafeterias

Coffee machine makers: at home, in the offices and personal places.

QUESTION C.

what are their strategies?

3 Major
Competitors of Starbucks
Major
Competitors
Dunkin'

Donuts

McDonalds
Caribou

Coffee

27

Capital Investments

Launched McCafe by
McDonald
Adding new item in
breakfast menu
Nontraditional media

Uses its donut


Low and
affordable price
TV campaigns

Store Locator
Starbucks

Dunkin Donuts

Has 12,500 coffee shops in the


United States

Has approximately 17,000


stores over the world

Has 6,700 coffee shops in


the United States

Has around 10,000 stores


around the world

McDonalds McCaf

Caribou Coffee

Has over 31,000


restaurants World Wide.

Has 415 coffee shops in 16


States in the United States

29

Starbucks VS Dunkin Donuts

prominent competitor of
Starbucks

The brand positioning and advertising are strong in peoples mind.

Strong impression in their products.

Focus on coffee as well as focus on donuts.

New items have been created to be flavorful, well-priced and popular.

Hot espresso platform.

Smoothies.

Iced and hot coffee in numerous flavors.

Lots of Donuts.

Strategic partnerships have helped establish the brand in markets


without overwhelming stores leveraging.

Customer experience is main focused of Dunkin Donuts.

Dunkin Donuts beverages (hot chocolate, vanilla, iced, latte) are


getting more diverse play in social media mentions.

Dunkin Donuts Strategy

The taste-test advertisement directed towards Starbucks,


actually naming the brand in the commercial, surveying
coffee drinkers. More hardworking Americans preferred the
taste of Dunkin Donuts over Starbucks.

Strong Public Relations and Innovation of People- Based IMC.

Within a week of the ads launch about 50,000 people


visited dunkinbeatsstarbucks.com

It is a site that communicates the hard-hitting


competitive message with clarity and humor. Entering
this site you can: Learn the Truth (presenting Dunkins
coffee story) or Spread the Truth (sending an e-card to
your friends who drink Starbucks)

Weekly traffic to DunkinDonuts.com jumped 61%

The Product Development of Dunkin Donuts is also


considered as rapid and expansive such as provisioning more
selection of coffees, donuts, beverages, breads, and also
other products.

33

In March 2009, the company


unveiled an alternative slogan,
You Kin Do It!, and launched a
$100+ million ad campaign to
promote it.

Starbucks vs. Dunkin Donuts

Strong in Influencing Campaign.


The campaign slated to run
through 2009, includes radio,
print and outdoor advertising, in
addition to in-store point of
purchase, special events, and
sports marketing.

Leveraging
through
Online
marketing
and
rewards
for
customers,
often
leveraging
through celebrity or athletes
endorsers such as the Boston Red
Sox and the other New England
icons.

34

Starbucks VS Mc Donald

Starbucks vs. McDonalds

McDonalds Business Strategy

McDonalds has offered breakfast for years, and over the last couple years has
been heavily marketing its McCaf as their main attractive products of roasted
coffee for their customers.

In addition, McDonalds also use market penetration strategy by making the


price of McCafe to be affordable by most of customers even tough they provide
roasted and good coffee.

Lines of coffee drinks all while continually rolling out new drinks of both the
coffee and non-coffee variety, such as smoothies and frappes, McDonalds version
of the Starbucks frappuccinos.

Starbucks created their frappuccino for the summer season while McDonalds
introduced their frozen strawberry lemonade, a non-coffee beverage under
McCaf.

37

McDonalds Strategy

Like Dunkin Donuts, McDonalds took an aggressive stab at Starbucks


during TV ads as well. The two television ads were titled
Intellectuals and Hipsters.

Along with a TV ad McDonalds set up a website unsnobbycoffee.com


to promote its Washington States McCaf Outlets.

To email their friends about how they feel about high priced
coffee

In additional to the usual media, McDonalds makes significant use of


billboards and signage, sponsors sporting events ranging from Little
League to the Olympic Games.

Strong Global Sustainability Commitment to the Community.

38

Starbucks VS Caribou Coffee

Starbucks vs. Caribou Coffee

Caribou Coffee Strategy

Caribou Coffee has been able to achieve a competitive advantage by


satisfying customers through its efforts focusing on human and social capital,
but it be compromised given recent events.

Focusing on product differentiation in order to grab the attraction of


customers especially by also focusing on their nutritious products and drinks
which are distinguishable with others.

Caribou Coffees dedication to creating a unique experience for customers by


combining high quality products, a distinctive coffeehouse environment, and
excellent customer service, differentiates their place in the coffeehouse
industry

QUESTION D.

internal STRENGTHS & WEAKNESSES?

Strengths and
weaknesses

-Brand equity
-Strong Brand Image
-Great Work Environment
-Rapid Expansion
-Excellence Services

Customer satisfaction is
top priority

Stable, Well Established &


Excellent management &
High Quality products

Strengths of Starbucks

Stable and Well-Established Corporate Organization

Leading retailer and roaster for brand specialty coffee in the world.
Starbucks' profit margins were hit hard by the Great Recession, but the
company recovered quickly, posting a 12.7% increase in year 2012.

High Quality Product

Known for providing superior products and services. It is a global coffee


brand built upon a reputation for fine products and services. Consistent
high quality of service. Starbucks also has a highly developed brand, logo,
copyrights, trademarks and website.

Strengths of Starbucks (continued)

Rapid Expansion

Starbucks brand name is famous for its intense customer loyalty. In terms to satisfy
the customer Starbucks plans to open 1,200 net new stores in fiscal year 2013, many
in the United States and China and also worldwide. Huge market expansion to
emerging economic country such as China, Brazil, India and Russia

Market dominance and strong brand image

The company's aggressive make the Starbucks store conquer in every large city in the
world.
"Starbucks on every corner" strategy has allowed Starbucks to dominate local
markets. Starbucks is the world's largest coffee chain, with approximately 20,000
stores in 60 countries, 12,937 of which are located in the United States.

Strengths of Starbucks

Provide a great work environment which can maximize


loyalty of employees and minimize employees turnover
Apply the highest standards of excellence in services through
its customer service management, human relations, servicescape, store atmospherics and store design component.
Healthy and Eco-Friendly Focus: Purchased Ethos healthy
water for 8 million and also does not use chemical flavor for
coffee.

Expensive
Vulnerability of Innovation & Development

Too Dependent with Main Competitive


Advantage

Starbucks is having difficulty penetrating Europe's "cafe culture",

Weaknesses of Starbucks

High Price of Products


Because of the quality ingredients used itself is quite expensive. Starbucks
dont want to change the original recipe or modified ingredients.

Starbucks is having difficulty penetrating Europe's "cafe culture",

so much so that the company is considering scaling back its European presence.
Different regional tastes have also been a concern - most notably in France,
where Starbucks Expresso is considered "too charred" for French palates. Even if
European traffic picks up, customers could switch to lower priced menu options.
Starbucks may face (self-cannibalization) because of Higher real estate and
labour costs in Europe are also compressing margins.

Weaknesses of Starbucks (continued)

Vulnerability of Rapid Innovation.

Starbucks has a reputation for new product development and creativity. However,
they remain vulnerable to the possibility that their innovation may falter over time.

Too Dependent with Main Competitive Advantage

The organization is dependant on a main competitive advantage, the retail of


coffee. This could make them slow to diversify into other sectors should the need
arise.

High Operating Cost

Although Starbucks provides excellent customer service due to their loyal and
dedicated employees, they do this at a cost. They pay their employees
more
than restaurants and retailers. Furthermore, they offer benefits to
full-time and
part-time employees. This results in high costs for the
company.

IFE MATRIX
Key External Factors

Weight

Rating

Weighted Score

1. Stable and Well-Established Corporate Organization

0.10

0.3

2. High Quality and Premium Products

0.10

0.4

3. Rapid Expansion and Internationalization of Starbucks Store

0.05

0.2

4. Market Dominance and Strong Brand Image

0.10

0.3

5. Provide a great work environment which can maximize loyalty of employees

0.10

0.4

6. Apply the highest standards of excellence in services through its customer


service management, human relations, and store design component

0.10

0.4

7. Brand and well known for its eco friendly, stringent and healthy products

0.05

0.2

1. High Price of Products

0.10

1`

0.1

2. Starbucks is having difficulty penetrating Europe's "cafe culture",

0.10

0.2

3. Vulnerability of Starbuck Rapid Development and Innovation.

0.05

0.1

4. Too Dependent with Main Competitive Advantage

0.05

0.1

5. High Operational Cost

0.10

0.2

STRENGTHS

WEAKNESSES

1.00

2.90

QUESTION E.
financial condition?

Gross Margin
It measures how much higher they are able to price products above the costs to produce
those products

Return on Assets
It shows what percentage of every dollar invested in the business was returned as profit.

Current Ratio
The current ratio measures current assets against current liabilities to see if the company has
enough assets that can be converted into cash within a year to pay its debts that are due over
the next year
Quick Ratio
The quick ratio is the same as the current ratio only with inventories removed from
current assets

Debt Ratio
It measures the amount of the company's assets that are provided through debt rather than
equity
Time Interest Earned
Times interest earned shows how easily the company will be able to pay its
interest charges for the year

Asset Turnover
Asset turnover measures the efficiency of all assets of the company
Inventory Turnover
Inventory turnover measures how many times inventory is sold or used in a year. It
reveals how efficiently a company uses its inventory.

All of these things indicate that Starbucks has experienced better compounded annual
growth rates than Dunkin' Donuts. However, Dunkin' Donuts did experience an increase
in both sales and profits, although their increase in costs was much higher in
comparison.

Starbucks Revue and Free Cash Flow

Operating Income for Starbucks

Payout Policy- Dividend Payout Method of


Fundraising in Corporate Finance Method in
NASDAQ

Starbucks Using Both Equity and Debt Financing


to fundraise its operational venture

QUESTION F.

What

are the firms existing


strategies and objectives?

6 Main Principles of Starbucks

Provide a great work environment and treat each other with respect and
dignity.

Embrace diversity as an essential component in the way we do business.

Apply the highest standards of excellence to the purchasing, roasting and


fresh delivery of their coffee.

Develop enthusiastically satisfied customers all of the time

Contribute positively to our communities and our environment

Recognize that profitability is essential to our future success.

Objectives (Customer + Corporate Side)

to maintain Starbucks standing as one of the most recognized and


respected brands in the world.

to be the leading retailer and brand of coffee in each of our target


markets by selling the finest quality coffee and related products, and
by providing each customer a unique Starbucks Experience

To build and maintain a great, enduring company that strikes a


balance between profitability and a social conscience based on three
(3) major framework of ethical sourcing, environmental stewardship
and community involvement

Objectives (Employees Side)

To Grow by making employees feel valued

Starbucks approach the employee with good compensation and comprehensive


benefits package.

To Recognize that every dollar earned passes through employees hands

Starbucks will always appreciate the employee as the revenue which is increasing
every year is by the efficient and hardworking employees.

Use the pays, benefits and opportunities for personal development to help gain
employee loyalty and become difficult to imitate.

Paying scale and fringe benefit package allowed it to attract motivated people with
above average skills and good work habits and also to make the employee to be loyal
with Starbucks.

10 Existing Strategies of Starbucks


1.

Product Strategy: Offer related diversified and high-quality products

2.

Store / Retail Outlet Strategy: Provide a relaxing social atmosphere and third home experience

3.

Manufacturing Strategy: Choose the only premium coffee bean with their loyal suppliers by using
Backward Integration Strategy

4.

Pricing Strategy: Maximize market penetration and rewards system

5.

Service Strategy: Provide excellent services through customer service

6.

Information System & Operation Strategy: Use the Integrated Enterprise Resource Planning

7.

Marketing Communication Strategy: Through social media, community brand, TV-Ads, PR & Advertising

8.

HR Corporate Strategy: Encourages a great working environment for employees

9.

Ethical and CSR Strategy: Strengthening their ethical sources, environmental and community involvement

10.

International Business Strategy: expand global retail business to increase market share in a manner

1. Related Diversification Product Strategy

Becoming innovative
diversification

and

creative

with

their

products

Coffee: More than 30 blends and single-origin premium coffees.

Handcrafted Beverages: Fresh-brewed coffee, hot and iced


espresso beverages, Frappuccino coffee and non-coffee blended
beverages, Starbucks Refreshers, smoothies and teas.

Merchandise: Coffee- and tea-brewing equipment, Verismo


System by Starbucks, mugs and accessories, packaged goods,
music, books and gifts.

Fresh Food: Baked pastries, sandwiches, salads, salad and grain


bowls, oatmeal, yogurt parfaits and fruit cups.

2. Store/ Retail Strategy: Third Place

Focused on creating the third place experience for everyone to go to


between home and work. It is a must that customers feel the uniqueness of
enjoying their Starbucks coffee experience.

Creating unique and relaxing experience and atmosphere for people has
been very important for the company as they have realized that this is one of
the strongest concepts attached to the company.

The coffee giant achieved these using creature comforts, such as comfortable
furniture and relaxing music.

3. Manufacture Strategy

By having the backward integration


theory which tries to cooperate and
engage their suppliers in order to
prepare good and sustainable coffee
bean in SUPPLY CHAIN SYSTEM

Robust Design Manufacturing

Just In Time Supply Chain and


Manufacture Model

4. Pricing Strategy

Premium Pricing Strategy

Based on penetrating market


pricing which tries to enhance
the market segments in middle
class society based on the
emerging economics.

Rewards Based System Strategy

5. Service Strategy

Provide excellent services


through customer service
Giving the premium services for
their customers
Make the customers to have
Starbucks Experience by
making them become loyal and
repetitively buy their products
Customer Handling by giving
customer-based service

6. IS & Operation Strategy

Use the Integrated


Resource Planning

Utilization of Information System


Management (MIS) in order to make
the flow of operations, logistics
and
customer
relationship
management become well managed
and well recorded/documented

Advance
System

Business

Enterprise

Information

7. Marketing
Communication Strategy

The Starbucks marketing strategy


has even expanded to create a
community around their brand.
On their website, individuals are
encouraged
to
express
their
experiences with Starbucks history,
and the company strives to
personally join in the contest. 7
Starbucks marketing strategy has
always focused on word-of-mouth
advertising & social media strategy

8. HR Corporate Strategy

Growing by making employees


feel valued
Starbucks
approach
the
employee
with
good
compensation
and
comprehensive
benefits
package.
In some extent, a lot of cost
are incurred because they want
to
make
great
work
environment for employees.

9. Ethics & CSR Strategy

The Idea Starbucks Contest about


How Customers can contribute
their idea improve the products,
stores, service and operations

The Green Starbucks Community

The Starbucks Earth Hour and


Organic Food Society

Starbucks for Poors (SoP)

10. International Business Strategy

Internationalization of Starbucks by having


more than 19,000 stores all over the world

The company's aggressive make the


Starbucks store conquer in every large city in
the world.

"Starbucks on every corner" strategy has


allowed Starbucks to dominate local
markets. (Glocalization)

QUESTION G.
What objectives and strategies do you recommend
for this firm? Explain your reasoning. How does
what you recommend compare to what the firm
plans?

RECOMMENDED OBJECTIVES FOR


STARBUCKS
1. To dominate or
monopolize the specialty
coffee industry in global
scale by enhancing their
capacity

2. to focus on relevant
information and profitable
growth opportunities
through the offering a new
product and platform

3. to achieve a sustainable
growth in established
international market. While
at the same time investing
in emerging market.

4. to approach the global


based employees with
excellent working
ambiances, good
compensation and
comprehensive benefits
package

5. To be the most ethical


company, socio friendly &
eco-friendly coffee based
corporation who is strict
with ethical sources, &
environment and
community engagement

6. to be customer centric
based company who utilize
the marketing and IT
channels as a media to be
closed and interactive with
the customers.

6 MAIN STRATEGIES RECOMMENDATIONS


FOR STARBUCKS

2. Strategy to
Enhance
Operation
Management of
Starbucks

1. Strategy to
maintain product
innovation and
development

3. Strategy to
renew the
Starbucks
Brand name

4. Strategy to
build and retain
customer
loyalty

5. Strategy
towards cost
efficiency

6. Strategy
towards further
sustainable
growth

1. Why must be
Strategies to maintain product innovation and development ?
It is because some major reasons as follows:
Attracting more customers to come and enjoy foods/drinks in
Starbucks
Increasing the sales and market share of Starbucks
Survival & offensive mode to the rapid development of
entrants/competitors who also work in the same industry
Making customers to have diverse selections and experiences of food
tastes and appeals in Starbucks
Making it as the sustainable competitive advantage of Starbucks

2. Why must be
Strategies to Enhance Operation Management of Starbucks ?
It is because some major reasons as follows:
improving its store operations management, layout and inventory
Increasing operational effectiveness in global-localized context
improving its customer service through operational development
Increasing their sales through efficiency management
Increase Starbucks productivity and capacity
strengthening the global supply chain management in emerging
markets
Maintaining their total quality management & quality control

3. Why must be
Strategies to renew the Starbucks Brand name?
It is because some major reasons as follows:
Starbucks is no longer the sole dominant player.
to convince people that Starbucks coffee is superior to other coffees
and beverages. This is vital because if the general perception is that
McDonalds coffee is comparable to Starbucks coffee
These competing firms are a threat to Starbucks as they strive to
provide premium coffee comparable to Starbucks but at a lower
price. (McCafe)
Renewal of SB Brand name will play a huge part in making
Starbucks Coffee Company a success.

4. Why must be
Strategies to build and retain customer loyalty ?
It is because some major reasons as follows:
to make sure that customer satisfied with their services
to ensure to get customer feedback to improve marketing
strategies
to build a good relationship to customer will lead to customer
loyalty that can give a good benefit towards the company.
to attract new customers from other segments and target market
to inform easily customer in order to Introduce new product
to increase the sales of Starbucks Products

5. Why must be
Strategies towards cost efficiency ?
It is because some major reasons as follows:
Currently Starbucks has high operational cost regarding their
human capital cost, resources cost and expansionary cost
Cost efficiency will let them to increase the sales and productivity.
To face competition from nationwide coffee manufactures.
High debt leveraging in their corporate finance fundraising method
as mentioned by NASDAQ (2012)
Cost efficiency will stimulate Starbucks to rethink about their
holistic management.

6. Why must be
Strategies towards further sustainable growth?
It is because some major reasons as follows:
As a premium product, Starbucks meets forgery and imitation
troubles. The brand is actually counterfeiting in some countries.
Starbucks should worry more and more about those facts
The issue of organizational and corporate governance constraints as
Starbuck is known as the multinational company (MNC) which has
more than 19,000 branches all over the worlds
The reason of ethical, safe, stringent, hygienic, organic and
environmental concern for several products
The shift of consumption and purchasing behavior of society.

1. Implementation Plan of Strategy to maintain


product innovation and development
IMPLEMENTATION
Product differentiation
(instead of price war it is
better to invest in extensive
R&D effort to develop new
flavor, blends, or even roast
fusions.
Create a product to target
and penetrate new markets
Creating instant coffee mix
and tea bag style products

PROBLEMS
High Cost Incurred for
Research and Development
Perceived Value from
Customer can be tarnished
New Products May Fall and do
not comply with the
customers expectation.

SOLUTION
Starbucks needs to ensure
that the coffee offered is of
the highest quality.
Starbucks has to make sure
that they will differentiate
their products in line with
cost efficiency objective
fulfillment
Starbucks can use the
substitutable ingredients in
order to develop and create
the development and
differentiation of products
86

2. Strategies to Enhance Operation Management


of Starbucks
IMPLEMENTATION
Integrating the OM through
Integrated Operational
Restaurant System
Management with IT ERP.
Improving the supply chain by
hiring experts in term of
efficiency, inventory &
capacity management
Addition and improvement of
store equipment and facilities
For example, increase the
number of lounge area seating
and also improving the
internet facility

PROBLEMS
Incurring a cost to improve
operation management of the
Starbucks
The operational management
model is subjective and can
be based on Resources Based
View/ Industrial Based View
Decrease in a number of
seating if they want to
improve the equipment and
store stuffs to improve the
store atmosphere

SOLUTION
By using the appropriate
budgeting techniques in order
to select based on the
importance and rating of
improvement objectives
The improvement of operation
management enhancement
can be done in sequential or
progressive basis in order to
save up the budgets
Architectural and Interior
Designing must be considered
very well before coming to
the decision making to the
store design
improvement. `
87

3. Strategies to renew the Starbucks Brand name


IMPLEMENTATION
Aggressive Perceptive
Advertising and promotion
The Advertising through brand
Ambassador or Celebrity
Endorsers
Making joint partnership with
other company or NGO to
increase their ethical
popularity
Shaping Brand Reputation by
strengthening the 3 main
framework of ethical sources,
eco stewardship & community
engagement
Brand Quality control &
Auditing

PROBLEMS
The perception of publics
about aggressive marketing
advertisement could be
negative
The publics may assume that
Starbucks is trying to compete
with other potential
companies by having
aggressive efforts temptation
of marketing communication
in some extent

SOLUTION
Make sure that Starbucks is
still on the track based on its
vision and mission as well as
its objectives
Ensure that Starbucks when
they are doing the marketing
efforts. They are still in side
and in line with their current
and newly attracted
customers in order to retain
their confidence & loyalty.
Make sure the Starbucks brand
renewal does not seem to
make customers become
confused
with their tactics.
88

4. Strategy to build and retain customer loyalty


IMPLEMENTATION
Privilege Cards
Reward Program
Drive Through Project
Starbucks Community
Interactive Brand Online
Community
Creating a store atmosphere
that fits the local settings
Training baristas to be more
customer friendly

PROBLEMS
Costly marketing cost
Marketing Project
Sustainability is questionable
Increased cost to train
baristas
Improving layout store takes
time and incur cost.

SOLUTION
Try to be selective and
effective in utilizing and
managing the marketing
channels
The Balance Community
Scorecard must be created to
engage the community with
Starbucks
Public Relation must be very
creative and continuous to
update & interact with
customers
Store Improvement can be
done in green way in order to
have cutting
cost
89

5.Strategies towards cost efficiency


IMPLEMENTATION
Effective store expansion
decisions
Focus on the coffee
Add as many but selective
new store locations
internationally
Reduce the number of new
stores opened in the US

PROBLEMS
Risk that local markets react
negatively to Starbucks
(Example: the Halal dilemma)
Focus on the coffee will led
the company to face the
inconsistency in term of their
diversification project

SOLUTION
Get the response and
feedback from the society
Look at the industry project
benefits (CVB instrument-Cost
Volume Benefit Analysis about
how to juggle with
diversification projects and
coffee focus.
More efficient to create stores
(by using recycleable and eco
friendly materials)

90

6.Strategies towards further Sustainable Growth


IMPLEMENTATION
Educate the public about the
health benefits of coffee and
its other products.
Organizational modifications
Beware of the forgery
Entering the Corporate
industry
The company should be
organize around geographical
markets
the Starbucks should be
reorganized into a
departmental organization
(into divisions)

PROBLEMS
It is already known
that some of
starbucks products
are containing the
synthetic & artificial
ingredient.
Geo culture
constraints
Forgery is usual
Corporate Culture and
governance take time
to be improved and
restructured

SOLUTION
make sure that Starbucks has
the legal and ethical team
who study intensively about
the forgery and counterfeiting
about their intellectual
property
Ensure that the R&D
department is working so hard
in order to prevent the issue
of artificial ingredients and
also try to proof with
reasonable evidence
Sequential improvement in
term of corporate governance
management
91

CONCLUSION

CONCLUSION

Starbucks success is achieved through a few factors which are internally and externally
improved.

These factors not only have increased the sales but also the reputation among the coffee
and beverages/food lovers.

Starbucks encounters aggressive competition in all areas of its business activity. The
market for each of their business segments are characterized by vigorous competition
among major corporations with long established positions and a large number of new and
rapidly growing firms.

Starbucks have a good financial capacity with good strategies; it can overcome all the
competitors to shine high as the first class coffee purveyor

Starbucks needs to remain themselves to be ethical company which bring 3 major


value of ethical sources, eco stewardship & community engagement.

References

David, Fred R. (2013), Strategic Management: Concepts and Cases, 14th Edition, New
Jersey: Prentice-Hall International

Gallaugher, J., & Ransbotham, S. (2010). Social Media and Customer Dialog
Management at Starbucks. MIS Quarterly Executive, 9(4).

SBUX Financial Ratios. (2013, 3 27). Retrieved from BusinessWeek.com:


http://investing.businessweek.com/research/stocks/financials/ratios.asp?ticker=SBUX

Smith, M. D. (1996). The empire filters back: consumption, production, and the politics
of Starbucks Coffee. Urban Geography, 17(6), 502-525.

Spencer, K. (2012, Oct 26). Starbucks: Strengths, Weaknesses, Opportunities, Threats.


Retrieved
from
fool.com:
http://beta.fool.com/fatalx/2012/10/26/starbucksstrengths-weaknesses-opportunities-threa/15281/

Starbucks Corporation - Financial and Strategic Analysis Review. (2012, Dec 28).
Retrieved from GlobalData.

Starbucks
Marketing
Strategy.
(n.d.).
Retrieved
from
http://www.voteforus.com/starbucksmarketingstrategy.html

Thompson, Craig J., and Zeynep Arsel. (2004): "The Starbucks brandscape and
consumers(anticorporate) experiences of glocalization." Journal of Consumer Research
31.3 631-642.

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