Starbucks case solution Fred R. David

2.1

Vision Statement

;Starbucks vision statement is To establish Starbucks as 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 :Conclusion 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 satisfactions, so that the employees will be happy 2.2

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.

Analyzing the Mission Statement Component Starbucks mission statement is needed to be analyzed to see the total number of mission .component it has

YES/NO

COMPONENT

NO

Yes

Customers

.1

Yes

Products or services

.2

Yes

Markets

.3

No

Technology

.4

Yes

Concern for survival, profitability and growth

.5

Yes

Philosophy

.6

Yes

Self-Concept

.7

Yes

Concern for public image

.8

No

Concern for employees

.9

This is a good mission statement. This mission statement lacks of 2 components: Technology and Concern for employees. The company must evaluate whether it is technologically advanced and even though the company’s vision is concern to employee, it still have to add it in mission statement.

2.2.1

Proposed Mission Statement

Establish Starbucks as the premier purveyor1 of the finest coffee in the world and also to be established as the most employee valued company while maintaining our uncompromising .principles as we grow together with technological advances :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. :Porters five Forces

1

Porter’s Five Forces Table Porters

Details

Industry

five

profitability

Forces Rivalry Among Competing Firm

There is intense competition in the coffee market amongst established coffee shops that are fighting to get customers. There are local coffee shops offering specials to lure potential HIGH

customers in. Restaurants are opening earlier LOW and closing later to accommodate customers on the go. With the 85% North American customers taking their coffee to go, convenience is a major factor

Potential of new competitors

There is a great deal of risk of entry by potential competitors due to the low start up costs. McDonalds is able to add specialty coffee to HIGH

their existing services to tap into the specialty coffee market. There is potential of $125,000 per year in revenue to be made by each store if they are able to successfully enter the specialty .coffee market

LOW

Potential

development

of

substitute products

Water is a substitute which is healthy for us and HIGH

it is free. The option to buy bottled water is also LOW inexpensive compared to coffee. With the focus .on healthier living, water is the ultimate choice

There

Bargaining power of suppliers

is

more

bargaining

power

for

suppliers of technological innovations such as automated coffee machines, latte and HIGH

espresso machines, etc because there are

LOW

not as many suppliers for such equipment as there are for coffee beans Bargaining power of consumers

Customers did not really have bargaining power HIGH

when it came to premium coffee such as LOW Starbucks. The sheer scale of Starbucks’ business reduces the bargaining power of any single group of buyers.

Competitive Profile Matrix Gloria Jean’s coffee

Caribou coffee

Starbucks

WT SCORE

RATING

WT SCORE

RATING

WT SCORE

RATING

WEIGHT (WT)

0.30

3

0.40

4

0.40

4

0.10

0.40 0.15

0.24 0.10

0.20

0.30 0.20 0.34

2.23

2 3 3

2 2 2 2 2

0.60 0.15

0.16 0.15

0.20 0.30 0.20 0.34

2.50

3 3 2 3

2 2 2 2

0.80 0.10

0.24 0.15

0.30

0.60 0.40 0.51

3.50

4

2 3 3 3 4 4

3

0.20

0.05 0.08

0.05 0.10

0.15

0.10 0.17

1.00

CRITICAL SUCCESS FACTOR Advertising Product Quality Price Competitiveness Management Financial position Customer loyalty Global expansion Employee benefits Customer Service

TOTAL

Starbucks shown highest score and the second highest were Caribou Coffee and Gloria Jean’s coffee shows the lowest Score. The competitive profile matrix (CPM) weighs product quality. The product quality (0.20) and is the most important item on the list of critical success factors. Starbucks score on this factor as the highest in comparison to their two chief competitors, Caribou and Gloria and reflecting a distinctive competitive advantage in the market. Customer service 0.17, Employee benefits 0.10 and global expansion 0.15 replicates a high level of importance on the CPM. The advertising weight, 0.10, on CPM does not reflect a high level in ranking the critical success factors, but does release valuable information in comparison to their competitors on the CPM. Starbucks rates and scores the .lowest on the price competitiveness factor

3.1.4

External Factor Evaluation Matrix (EFE)

Key External Factors Weighted

Ratin

Weigh

Score

g

t

0.60

4

0.15

Opportunities

Globalization makes it easy to enter international market

0.30

3

0.10

.People are looking for cheap internet connections

0.20

2

0.10

Express foods are getting famous to reduce time to be .spent

0.30

3

0.10

.Demand for non-chemical and healthy products

Threats 0.45

3

0.15

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

0.60

3

0.20

Many companies are pricing their products cheaper to .impress customers

0.20

2

0.10

Increase in hypermarkets and economical supermarkets

2.55

1.00

Internal Factor Evaluation Matrix

Weighted Score

Rating

Weight

Key Internal Factors Strengths

0.84

4

0.21

1. Huge market expansion to China, Brazil, India and Russia

0.40

4

0.10

2. Provide a great work environment

0.30

3

0.10

3. Apply the highest standards of excellence in services.

0.30

3

0.10

4. Starbucks

has

monopolistic

advantages over its competitors.

0.48

4

0.12

5. Purchased Ethos healthy water for 8 million and also does not use chemical flavor for coffee.

0.24

3

0.08

6. Launching the sales of Frappuccino in Japan and Taiwan.

Weaknesses 0.20

2

0.10

1. Price of coffee is high at Starbucks

0.14

2

0.07

2.

less marketing and advertising its product

0.24

2

0.12

3. Starbucks

products

are

not

available at supermarket

3.14

1.00

TOTAL

SWOT ANALYSIS: WEAKNESSES

STRENGTHS

Huge market expansion to China, Brazil, India and Russia

less marketing and advertising its product

.Apply the highest standards of excellence in services

Starbucks products are not available at supermarket .Starbucks has monopolistic advantages over its competitors

Purchased Ethos healthy water for 8 million and also does not use chemical flavor

Launching the sales of Frappuccino in Japan and Taiwan

WO Strategies

SO Strategies

W1,W2,O1,O3

S1,S3,O1,O2,O3

.O1

Reduce the price and Advertise the

Do advertisements about the FREE

Globalization makes it easy to enter

.products all over the places

internet connections and the excellent .service they provide

OPPORTUNITIES

international market

.O2

W1,W3,O3 S5,O4 Do R&D to sell products at supermarkets without reducing the

Starbucks shall increase the healthy

quality with cheap price

products into market as the demand .for it is high

People are looking for cheap internet connections

.O3 Express foods are getting famous to reduce time to be spent

.O4 Demand for non-chemical and healthy products

THREATS

.T1 Increase in the inflation rates creates a demand in lower

ST Strategies S2,S3,S4,T1,T2 Starbucks needs to change its market strategy by reducing the .price to compete with the competitors

WT Strategies W1,W2,T1,T2

.priced products .T2 Many companies are pricing their products cheaper to .impress customers

.T3 Increase in hypermarkets and economical supermarkets

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 for it

3.2.4

Space Matrix

FINANCIAL STRENGTHS

RATING

A Starbucks asset is financed through equity and is safe if creditors

5

start to demand repayment of debt. Long term debt-to-equity ratio is only 0.0017.

Starbucks Return on Asset ratio shows that in year 2005, the

4

efficiency of using assets to generate earning has increased from 12% to 14%.

Starbucks net income increased to $494.5 million in the year 2005

4

compared with $388.9 million in 2004. There is an increase of 21.3% in the income of Starbucks.

13

INDUSTRY STRENGTHS RATING

4

Starbucks Coffee Liqueur was the top selling new spirit product, grossed sales over $8million annually. Starbucks agreed to serve Starbucks Coffee in all United flights.

3

“Starbucks Everywhere” approach has increased foot traffic for all the

5

stores in area. This makes customers easy to fine Starbucks all the places in town.

12 worst =1+

best = 6+

ENVIRONMENTAL STABILITY RATING

4-

Starbucks products prices are high compared with competing coffee houses. They price their products several dollars below then Starbucks price. Demand for Starbucks products to be supplied in supermarkets

2-

3-

increase. But, doing that will put Starbucks business in risk as customers don’t know the way to brew the coffee. Increase in world coffee bean price in 2001, forced Starbucks to increase its beverages and coffee sold at retail.

9-

COMPETITIVE ADVANTAGES RATING 11-

Starbucks coffee and beverages are high in quality brewed by well trained employees. Starbucks teamed up with T-mobile WI-Fi service to provide internet access to all over Starbucks Coffeehouse

2-

2-

6-

There are 16,120 Starbucks coffeehouses worldwide and plan to open another 1800 stores. Starbucks is a customer oriented Coffeehouse.