Management.

Submitted to:

Prof. _____________________

Submitted by: Apostol, Randy C. jr Guce, Jonah Alyssa Marice F. Guevarra, Abbygail B. Reyes, Jackie lou S. H08202

Date started: June 25, 2010

Date finished: July 2, 2010

Organization studied: Starbucks Coffee Rationality: we chose this company because we’re curious on how the people still choose Starbucks even though the price is not that reasonable, is it because the coffee taste really good or it’s just the popularity of the coffee shop. Organization’s Vision-Mission/Role: Our mission is to inspire and nurture the human spirit- one person, one cup, and one neighborhood at a time. Analysis where the organization is in right now: Brief Starbucks story: We began in 1971. Back then we were a roaster and retailer of whole bean and ground coffee, tea and spices with a single store in Seattle’s Pike Place Market. Starbucks is named after the first mate in Herman Melville’s Moby Dick. Our logo is also inspired by the sea – featuring a twin-tailed siren from Greek mythology.

Being a Responsible Company We are committed to doing business responsibly and conducting ourselves in ways that earn the trust and respect of our customers, partners and neighbors. We call this Starbucks™ Shared Planet™ – our commitment to doing business responsibly. Within this, we have identified three areas of focus: ethical sourcing, environmental stewardship and community involvement. Starbucks competes in the Service Sector, Specialty Eateries Industry and is the dominant player in the Gourmet Coffee segment. Starbucks has committed itself to a philosophy of Corporate Social Responsibility. This philosophy has led the company to develop ethical and environmental guidelines for the sourcing of its coffee beans.

Economic factors: During 2008 and 2009, Starbucks closed over 900 stores in the United States and quite a few overseas. Starbucks expects to generate free cash flow of around $1 billion for the fiscal year ending in September. The price to earnings ratio of Starbucks is 26.79, a high P/E suggest that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. the return on investment of Starbucks is better that the industry rate of 3.7. The return on equity is also is great when compared to the industry rate of 7.65.

CLIENTS: The Starbucks welcomes millions of customers every day, in more than 16,000 locations in over 50 countries. The company doesn’t need any advertisements anymore because a lot of people really enjoy the coffee. Their costumers belongs to the upper middle class to high class people because even though the price of their coffee is expensive, they still afford to buy it. Way of operations: SB coffee considers their employees as their partners, offering the finest coffees in the world, grown, prepared and served by their finest people. Their employees were trained very well. They were committed to coffee knowledge, product expertise and customer service.

Profitability These ratios measure how efficiently the company uses its resources. Higher profitability could be attributed to greater efficiency. The gross profit margin, Indicates how efficiently a company manages its largest assets and biggest costs. From a gross profit standpoint, we like what is going on at Starbucks because from a 19.19% in 2008 it was able to recover to 20.71% for 2009. Liquidity Ratios Liquidity ratios indicate how well positioned a firm is to meet any future short-term obligations. Liquid assets include cash, marketable securities, and accounts receivables, among others. The current ratio of Starbucks for 2009 is 1.29, under the rule of thumb the current ratio should be 2.0. In 2008, the current ratio was 0.8 so Starbucks became more liquid in 2009. The quick ratio of Starbucks also improved from .3 to .59 in 2009, this is a good sign for the company. The quick ratio measures the

company’s ability to pay off short-term creditors without relying on the sale of inventories. The working capital increased from -441.7 to 454.8 in 2009. Return on Investment The following two ratios show what kind of return the company is getting on its investments. They are two crucial measures of how the company is performing. We like what we see here for Starbucks. The return on assets of Starbucks increased from 5.56% in 2008 to 7.01% in 2009. This means that Starbucks is starting to recover from an economic downturn in 2008.

Starbucks’ competitor: Figaro coffee is a Filipino chain of coffee shops. It is a designed as Europeanstyle cafés catering to the discerning, upscale coffee lovers, offering coffees, roasted and brewed according to the traditions and high standards of French and Italian cafes. Figaro offers a selection of specialty coffees from around the world as well as a variety of coffee and tea paraphernalia.

SWOT ANALYSIS: Strength •

Starbucks Corporation is a very profitable organization, earning in excess of $600 million in 2004. The company generated revenue of more that $5000 million in the same year.

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Starbucks has long-term growth prospects based on the company’s dominant leadership position, powerful brand, strong consumer acceptance, experienced management team and global expansion opportunities.

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Product diversification, Company operated retail stores, International stores (no franchise)

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Good relationships with suppliers, Industry market leader, Globalized, Customer base loyalty

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Product is the last socially accepted addiction, widespread and consistent, Strong Board, Strong financial foundation.

Weakness

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

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The organization has a strong presence in the United States of America with more than three quarters of their cafes located in the home market. It is often argued that they need to look for a portfolio of countries, in order to spread business risk.

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The organization is dependent on a main competitive advantage, the retail of coffee. This could make them slow to diversify into other sectors should the need arise.

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Ever increasing number of competitors in a growing market, Self cannibalization Cross functional management, Product pricing (expensive), Lack if internal focus (too much focus on expansion).

Opportunities •

New products and services that can be retailed in their cafes, such as Fair Trade products.

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The company has the opportunity to expand its global operations. New markets for coffee such as India and the Pacific Rim nations are beginning to emerge.

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Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential. Expansion into retail operations, Technological advances.

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New distribution channels (delivery), new products, Distribution agreements, Brand extension, emerging international markets, continued domestic expansion/domination of segment.

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Starbucks are exposed to rises in the cost of coffee and dairy products.

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Since its conception in the Pike Place Market, Seattle in 1971, Starbucks’ success has lead to the market entry of many competitors and copy cat brands the pose potential threats.

Threats

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Competition (restaurants, street carts, supermarkets, other coffee shops, other caffeine based products)

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Fragile state of worldwide production of specialty coffees, Alienation of younger, Domestic market segments, Corporate behemoth image

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Low barriers to entry, competition fierce. As SBUX expands internationally, it faces the challenge to build brand awareness in new markets.

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Cultural and Political issues in foreign countries

Organization’s new goals, mission, objectives etc… (Based on the group’s business analysis): The company will surely continue providing the best product. We will not destroy the customers’ expectation about the product. We’ll give the best coffee you’ll never forget your whole life.

Primary set of actions to be taken: 1. Maintain the good quality of the product 2. Maintain the consistency of the price 3. Enhance the flavors of the old products so that the customers will continue to purchase and be able to produce new palatable products that will satisfy the needs of the customers. 4. We will make sure that our company has a big difference to other companies in terms of taste of the coffee and with our other products. 5. If we open new branches to the other places, we’ll make sure that the place is appropriate for our coffee shop.