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starbucks: case study

Order Description
1.Current Situation…….
2. Issue……..
3. Mission……………………… 4.Objectives…………….
PEST Analysis: Political………………… 5.Economic…………………… 6.Social…………………… 7.Technology…………………
External Analysis– Porter’s Five Forces:
8.Barriers to entry…………………………
9. The Bargaining Power of Suppliers…………… 10.The Bargaining Power of Buyers……………… 11.Competitive Rivalry………………
12.The Threat of Substitution……………… 13.Opportunities……………… 14.Threats…………………
15.Overall evaluation of the external 16.environment……
Internal Analysis:
17. Organizational strategy………………
18. Value chain analysis………………… 19.Strengths…………………… 20.Weaknesses………………
21.Market share……………………………… 22.Overall evaluation of the internal environment…………….
23. Key Success Factors……………… 24.Alternatives (Strategic Choice of Business Strategies and Corporate Strategies)
25. Criteria Matrix to Evaluate Alternatives …………………………….. 26.Recommendation………
27.Action Plan………
28.Contingency Plan ………………………
V2/18/2015 Euromonitor International Related
Analysis 1/3
Starbucks Corp in Consumer Foodservice (USA)
Local Company Profile | 12 Nov 2014
After essentially inventing the channel, Starbucks has become the leading specialist coffee shop
brand in the US with a value share of 60% in 2013. The company closed hundreds of locations during
the recession but reversed tactics in 2011, returning to outlet expansion and launching a number of new
initiatives intended to drive traffic throughout offpeak
dayparts (including lunchtime and late afternoons)
and boost average sales.
The brand continued pursuing expansion in 2013, adding up to 315 new locations in the US
throughout the year. Starbucks also purchased Evolution Fresh in 2011, a fresh juice brand that it plans
to leverage into a national footprint of juice/smoothie bars. Starbucks opened its first Evolution Fresh
outlet in California in March 2012. The company also purchased Teavana tea shops and La Boulange
Bakery in 2012, further upgrading its noncoffee
restaurant components.
Summary 1 Starbucks Corp: Key Facts
Full name of company: Starbucks Corp
Address: 2401 Utah Avenue South, Seattle, WA 98134, USA
Tel: +1 (206) 447 1575
Fax: +1 (206) 447 0828
Activities: Specialist coffee shops, juice/smoothie bars
Source: Euromonitor International from company reports, company research, trade press, trade sources
Summary 2 Starbucks Corp: Operational Indicators
2011 2012 2013
Net sales US$11,700.4 million US$13,299.5 million US$14,892.2 million
Net profit/(loss) US$1,728.5 million US$1,997.4 million (US$325.4 million)
Number of employees 149,000 160,000 200,000
Source: Euromonitor International from company reports, company research, trade press, trade sources
Starbucks Corp is a publiclyheld
company based in Seattle, Washington, US. The company operates
a large chain of specialist coffee shops and is the dominant player. It also operates a smaller chain of
specialist coffee shops under its Seattle’s Best Coffee, which it also sells wholesale to other foodservice
concepts (including Subway and Burger King) to be sold in fast food outlets. In the US, Starbucks has
become synonymous with the idea of specialist coffee shops, and the company has a growing
international presence as well.
More recently, Starbucks Corp also entered juice/smoothie bars with its Evolution Fresh brand. The
brand had only one outlet in operation due to being opened in March 2012, but the company has
expressed plans to build a national footprint over the longterm.
The company continued its ambitious
expansion plan by purchasing both Teavana branded tea shops and La Boulange Bakery. For the
former, the company plans on expanding these shops throughout the nation. In terms of La Boulange,
Starbucks will use its baked goods to replace its current offerings starting in 2013.
In 2010, the company embarked on a mission to renew its focus on the customer experience, seeking
to pay special attention to service, beverage quality and store appearance. Starbucks sought to
redefine its place as a coffee specialist, with an improved focus on bringing highquality
coffee to the
US. It continues to promote its stores as a “third place” a
location between home and work (or school),
2/18/2015 Euromonitor International Related
Analysis 2/3
where consumers can relax or spend time with friends. While US consumer foodservice has witnessed
an expanding number of outlets with drivethrough
locations, Starbucks’s emphasis on being a “third
place” remains an integral part of its efforts to expand its penetration. Starbucks outlets in the US
typically feature soft, muted tones and a variety of seating options, from communal tables to loungestyle
couches and chairs. Outlets also offer free WiFi
to those with laptop computers or other internetenabled
Starbucks expanded upon this premium experience through a new experiment in 2012 in which the
company began to serve select beers and wines alongside its own interpretations of classic appetisers
after 16.00hrs in certain locations. Titled Starbucks Evenings, the programme is not only an expansion
into a daypart that has been weak for the company, but is a continued commitment to the “third place”
theme, attracting singles looking to read or work with a glass of wine, or groups of people looking to
share a few appetisers and drinks in a smart and familiar space.
As of mid2014,
12 million Starbucks customers in North America had downloaded the Starbucks
mobile ordering app, accounting for 15% of total transactions. Starbucks likely believes that mobile
ordering is the payment platform of the future, and it is anxious to be ahead of the curve.
Almost half of domestic Starbucks outlets have drivethroughs,
and more than half of the new stores
planned to open in 2014 will have drivethroughs.
In late 2012, Starbucksowned
chain Seattle’s Best
Coffee tested a new drivethrough
only format, and then opened several drivethrough
only units in
2013. The 600 sq ft units, originally tested in Seattle, are claimed to leave a smaller ecological footprint
while still offering the same quality coffee and food as eatin
units, in addition to being highly profitable
with low overheads. McDonald’s has reported in the past that more than half of its US value is derived
from drivethroughs,
indicating the potential benefits this service can provide.
In addition to participating in consumer foodservice, Starbucks Corp sells branded products through
various retail channels, including within its own network of stores and in grocery stores and massmarket
retailers. The company added many products to its consumer packaged goods line over the
review period, including branded KCup
products for use in singlebrew
coffee machines, Via instant
coffee and, most recently, Evolution Fresh juice blends. The company has also expressed plans to
make further forays into greater health and wellness, though it had yet to release specifics as to which
brands or products at the end of the review period.
Starbucks roasts its own coffee, which is ground, brewed and served at its outlets. Both companyowned
and franchised locations use Starbucks as the sole provider of coffee for their beverages.
Starbucks Corp, in turn, sources its coffee from a variety of growers around the world. It is known for its
role as the largest buyer of fair trade coffee in the world.
The company also roasts coffee for its Starbucks brand, which is then sold as a consumer packaged
product at retail locations throughout the country. In addition, the company roasts coffee for its Seattle’s
Best Coffee brand, which is available at retail locations as well. Evolution Fresh products are available
mainly in independent retail outlets, although they can be found in larger chains such as 7Eleven
various large, regional grocery brands.
Starbucks’s share in specialist coffee shops declined throughout much of the review period, as the
brand suffered growing competition from lowerpriced
players. When the recession hit, many
consumers dropped their daily Starbucks habit, opting instead to brew coffee at home or purchase from
other outlets, including local independents and fast food chains. Its own retail business, while helpful for
the company, has also helped cannibalise its foodservice share, as consumers can now just brew their
favourite Starbucks roast in their own home.
Furthermore, many fast food players realised specialist coffee shops were stealing their breakfast
traffic and began improving their coffee offerings to entice customers back. McDonald’s McCafé
programme has been incredibly successful selling espressobased
beverages at lower prices than
Starbucks, and the brand was quickly followed by other fast food players such as Dunkin’ Donuts and
Burger King. While Starbucks does benefit from this trend through partnerships with various fast food
2/18/2015 Euromonitor International Related
Analysis 3/3
brands that sell Seattle’s Best Coffee, these are typically licensed deals and therefore result in relatively
small revenue streams.
To counter this rising competition, Starbucks used a number of strategies, including adopting an even
more premium positioning with new coffee roasts and highend
brewing techniques. Starbucks now
offers pourover
coffee in some locations during certain hours, capitalising on a gourmet trend that has
become popular among independent coffee shops. The technique is timeconsuming
and involves
by baristas, adding an air of personalisation and indulgence to the consumer experience.
Starbucks also implemented a number of initiatives designed to drive traffic throughout the day rather
than just during peak breakfast hours. The brand launched Bistro Box lunches in July 2011, lowcalorie
meals made with fresh, healthy ingredients. It also launched a line of miniature desserts made to be
paired with beverages and encourage higher average checks. The line includes miniature brownies,
pies, cupcakes and bites of frosted cake served on a stick, each of which is less than 200 calories and
sold for around US$2. The line has been very successful, appealing to both those consumers looking to
watch their calories and those looking to add an indulgent treat to their morning coffee or afternoon
snack. Finally, the brand experimented with “Happy Hour” promotions, designating a few hours during
the afternoon in which consumers could purchase blended frappuccino drinks at half price. The
Starbucks Evenings rollout
was the next step in this daypart expansion, and proved successful enough
after experimentation to be implemented nationwide at the very end of 2012.
While Starbucks maintains a sizeable lead over its chained competitors, it still faces significant
competition from independent coffee shops and local chains which maintained a 36% share of sales in
2013. There is a thriving culture among independent specialist coffee shops in the US, especially in
larger metropolitan areas, and many consumers are very loyal to their local brands. Starbucks
attempted to tap into this demand in recent years with the opening of a handful of new store concepts
designed to fit within the specific neighbourhoods in which they were located. While the new outlets
generated considerable media buzz, the venture was largely unsuccessful and the outlets have since
been converted to standard Starbucks locations.
The company remains highly dependent upon beverage sales for the majority of its revenues. In the
company’s fiscal year of 2013, 75% of retail sales at companyoperated
stores stemmed from beverage
purchases. This figure was unchanged from the previous year, though Starbucks continues to highlight
new food offerings and encourage higher attachment rates of food and beverage items with the goal of
increasing food share. The nationwide expansion of Starbucks Evenings introduces a larger variety of
food options which could shift this share in the future; however this coincides with the introduction of
more expensive wines and beers, which could maintain the balance or even shift it further in favour of
Convenient sodamaking
technology has emerged in recent years, as exemplified by the popularity of
the carbonated beverage maker Sodastream, and it has become a powerful tool for restaurateurs. In
June 2014, Starbucks launched a line of handcrafted sodas, which are, again, designed to complement
the food menu. Flavours include Spiced Root Beer, Golden Ginger Ale and Lemon Ale, giving familiar
flavours but with an added spice or kick.
Summary 3 Starbucks Corp: Competitive Position 2013
Product type Foodservice value share Rank
Specialist coffee shops 59.9% 1
Source: Euromonitor International from company reports, company research, trade press, trade sources, trade interviews



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