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Starbucks Coffee

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Kelley Barrow

on 4 November 2015

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Transcript of Starbucks Coffee

SWOT Analysis
The man that brought Starbucks to the world
Where it all Began
1971 in Seattle, Washington, a single coffee shop was born unaware of the future lying ahead.

In 1982, Howard Schultz came into the picture when he joined Starbucks as the Director of Retail Operations & Marketing.
1984, Schultz took a trip to Italy where he was captivated by the espresso bars. Schultz came to the conclusion that they should be selling drinks rather than just beans and machines. He pitched this idea to the founders and was rejected.
Schultz left the company in 1985 and in 1986 he formed his own coffee shop called II Giornale, which was very successful
In 1987, the three founders sold Starbucks to Schultz. He combined the coffee shops that he already had and this started the expansion
Starbucks was founded by three former students from the University of San Francisco, Zev Siegl, Jerry Baldwin, and Gordon Bowker.

Inspired by Alfred Peet (of Peet's Coffee), which taught them his style of roasting coffee beans

Originally, Starbucks was to be named "Pequod". This was the name of the ship in the novel "Moby Dick".
However, this name was rejected and the chief mate's name was chosen instead, "Starbucks"
In the beginning Starbucks sold coffee beans and coffee making equipment rather than drinks
By 1989, Starbucks expanded to Canada and had 46 stores in the Mid and Northwest parts of the United States

1992, Starbucks went public and had grown to 140 stores, with an annual revenue of $73.5 million in the United States alone.
Once Starbucks went public their market value had risen to $271 million and earnings per share had increased 70% from the year previously.
On average Starbucks has added 2 stores daily since 1987. As of 30 October 2015, Starbucks now has 23,043 shops throughout 68 countries.
Strong financial performance
Product recalls
Controversies with Kraft
Prices are higher than competitors
Needs to diversify its product range in the breakfast area to compete with competitors
Closure of many stores Worldwide
Employee issues "Clopening"
Growing presence in key Asian markets
Entry into the health and wellness
Expand its store to take on food and beverage retailers
Offer more discounts to the Baby boomers generation
Coffee trucks vs. new establishments
Be aggressive in marketing Teavana in Europe, China and India
Competition within specialty coffee drinks
Compliance costs associated with government regulations
McDonalds serving breakfast all day
Other coffee shops establishing the same atmosphere as Starbucks with lower coffee prices
Trademark and copyright infringements
Comparison of Starbucks and Dunkin Donuts. Dunkin is primarily on the east coast, while Starbucks is shown in the green.

Dunkin Donuts slowly moving west
Ethical Sourcing
Strategic Alternatives
Research companies that they receive merchandise from
Offer more food options
Offer more discounts
Switch software program to schedule employees
More aggressive marketing Teavania tea
Use coffee trucks instead of opening a new shop
Singapore - Limited edition ceramic mugs were recalled, due to the existence of lead
Swollen juice bottles
Coffee presses were recalled due to lacerations and burns. Carafe was made of glass and could fall out of the metal frame and shatter
More Food Options
Compete with McDonalds
Increase profit
Only 19% of Starbucks stores serve food
However, Starbucks would have to retrofit thousands of stores to support food items
To gain more customers
Baby boomers retiring; reduced income
2015 - 5% increase of retirees in the United States alone
College students
Use gift cards and mugs at licensed stores
High visibility locations to attract customers
Customer based loyalty
Strong customer connect through value-added services

As of 30 October 2015 stock has grown 304% in the past 5 years
Total revenue for 2015 was 19.2 billion, up 16.5% from last year. Net income rose 33.4 % to 2.8 billion
Strong Management
Strong Distribution channel
Software schedules employees based on sales
Employees are schedule to close and then open the next morning
Employees are not happy
Need to research or develop a new program and implement it
Teavana Tea
Since Europe, China and India drink more tea than coffee
China and India are a major market for Starbucks
China and India's population is over 1 billion
Europe has 10% of Starbucks coffee shops
Southeast Asia has 21.6%
India opened it's first Starbucks in 2012

2000 - Schultz left Starbucks and was replaced by CEO Jim Donald

During the depths of the recession, Starbucks nearly drowned
Tight-fisted consumers abandoned it
Starbucks' sales and share price sank so low that insiders worried Starbucks might become a takeover target
After eight years, Schultz returned as chief executive in January 2008
Shut 900 shops, mostly in the United States, drastically cut costs and put the company back on course

Comparison of Competitors
Store Closures
Starbucks closed 319 company & licensed stores
163 were in the United States
Saturated in big cities
Failed in Australia and closed their stores
Closed store in the Forbidden City, China
Starbucks Coffee Truck vs. Coffee Shop
Average cost to open a shop
$380,000 to $450,000 (Domestic)
Cost of a Coffee Truck (fully equipped)
$120,000 new
$60-70,000 used
2014 tested at College Campus
Would eliminate overhead costs
Is not a permanent fixture
Good for tourist attractions
A once loyal customer to Starbucks switched to McDonalds, for 3 reasons:

1. It's Cheaper
2. It's significantly faster and more convenient
3. Has a better food menu

Brewed coffee as samples
First location outside North America was in Tokyo
Full transcript