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Kelsey Estrada

on 3 June 2014

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Transcript of Starbucks

Elissah Batistelli
Kelsey Estrada
Mitch Foley
Denise Quintanilla
Market Analysis
Restaurant industry:
Customers can order food to eat there or to take on the go
Hospitality industry
Associated with food service industry which is composed of countless locations and employees throughout the world

Five Competitive Forces
Power of Buyers
Status: High
No switching costs in switching businesses
Customers can use Yelp
According to Seattle’s Office of Economic Development:
There are 1,109 restaurant, bars, and cafes and 694 independent coffee shops
10 times more coffee stores

Rivalry Among Existing Competitors
Status: Very high
Restaurants are opening earlier and closing later to accommodate those on the go
Competitors include:
Peet’s Coffee
Tully’s Coffee
Caffé Vita
Panera Bread
Purple Café
Any small or local restaurants that serve coffee, wine, and food

Threat of
New Entrants
Status: Moderate
Market is highly saturated
Financial resources requirements

Bargaining Power
of Suppliers
Status: Low
The main inputs are coffee beans and premium Arabica coffee, grown in select regions
Standard inputs = low cost of switching to substitute suppliers
Forward vertical integration
Due to its size and scope, Starbucks are highly important to a part of the suppliers business

Threat of
Status: Moderate
Seattle population = Coffee enthusiasts
Substitutes include:
Store bought coffee packs
Energy drinks
Other morning beverages like apple juice, orange juice

Critical Success Factors
Apps: Facebook, Instagram, Twitter
Cup design contest and giveaways
More traditional advertising such as bus ads, billboards, airport posters

Product Quality
Scores high in this factor in comparison with competitors
Top alcoholic brands will be added to menu
Partnered with La Boulange whose products are also high quality

Customer Service
If you don’t like the drink, Starbucks will remake it for you at no additional cost

Customer Loyalty
“My Starbucks Card”

Downtown demographics
High employment percentages therefore buyers tend to be less concerned with the price of the product
Downtown Seattle ranks 21st among the 231 major employment markets in the U.S. for job density
Nearly two thirds of population are between ages 25 and 54

"Tasting Series"
Sold in specialty coffee shops as well as grocery stores
Larger selection of tea
Few physical locations
Only breakfast, brunch, lunch food
Coffee pounds are more expensive

Currently expanding
“Instagram Contest” campaign
Roasting methods are not proprietary
Volatile coffee bean prices may adversely affect and increase cost of goods sold for Peet’s Coffee
Highly depends on single product

High credibility
Extensive menu
Already known for its coffee
One location
Fairly new to restaurant industry

Events and wine tastings
Happy hour
Seattle Art Museum and Pike Place Market
New restaurant openings nearby
No advertising
Dining atmosphere
Successful in 5 submarkets
Leader in specialty bread segment
Offers online ordering
Lacks powerful brand image
Not known for gourmet coffee
Prices are not competitive especially with thin menu

Mostly placed in urban neighborhoods
Catering business
Adapt menu to current food trends
Other restaurants may provide better and lower prices with a better menu
Imitation of setting and menu items
Constant potential competition with other food chains
Tully's Coffee
Caffé Vita
Purple Café
Einstein Bagels
Top Pot Doughnuts
"Pairs vintage aesthetic with a gourmet spin on the traditional coffee and doughnuts pairing"
Any small and local restaurants/cafés that sell coffee, wine, and food
Company Analysis
Company Background
1971 Starbucks opens first store in Seattle’s Pike Place Market
1982 Howard Schultz joins Starbucks as director of retail operations and marketing
1985 Howard found Il Giornale, offering brewed coffee and espresso beverages made from Starbucks® coffee beans
1987 Il Giornale acquires Starbucks assets with the backing of local investors, changing name to Starbucks Corporation
1991 Becomes first privately owned U.S Company to offer a stock option program that includes part time employees
1995 Begins serving Frappuccino® blended beverages
1996 Begins selling bottled Frappuccino® coffee drink through North American Coffee Partnership
1998 Extends the Starbucks brand into grocery channels across the U.S. Launches Starbucks.com
1999 Acquires Tazo Tea
2002 Establishes Starbucks Coffee Trading Company (SCTC) in Lausanne, Switzerland
2008 Chairman Howard Schultz returns as chief executive officer
2009 Launches Starbucks VIA™ Ready Brew Coffee
2012 Introduces Starbucks® Blonde Roast
2013 Strengthens ethical sourcing efforts with new coffee farming research and development center in Costa Rica
Products and Services
Assortment of gourmet coffee
Iced coffee
Blended coffee drinks
Variety of hot & cold teas
Starting to expand in the tea market
Assortment of small snack items
Bottled water
Yogurt and other small packaged goods
Starbucks experience
“Third place”- a place to go to socialize or relax between home and work
In the people business and happen to sell coffee
Free Wifi in all stores
Ages 25-40 primary
High paying jobs
Ages 41-70 secondary
Still working or retired
Have money saved
Ages 21-24 tertiary
Hospital workers
Median household income
Capitol Hill: $74,989
Seattle: $61,037
12% live below poverty line
Average age
Men: 37.3
Female: 35.3
Ethnicity of population
White: 69.5%
Asian: 13.8%
Black or African American: 7.9%
Hispanic or Latino ethnicity: 6.6%

Financial Standing
25.54% return on investment and 29.16% return on equity
Higher than any of its competitors
Number 1 brand in coffee house segment
Very recognizable brand
Valued at $4 billion
“Starbucks experience"
Offer an experience to customers that is found nowhere else
Largest coffee house chain in the world
Operates around 20,000 stores in 60 countries around the world
Employee management
Offers employees benefits to full and part time employees
Pay is much higher than competitors
Target Market
Coffee bean prices
Profitability and price of coffee depend on the price of coffee beans
Commodity and cannot be controlled by Starbucks
Cannot predict the price of coffee beans due to factors such as weather, and hedge funds
Price of products
Starbucks coffee is more expensive than many of its competitors
Can affect expanding into developing economies
Negative publicity
Known for taking away business from mom and pop coffee shops
Received publicity about the treatment of suppliers in the past
Expand supplier network
Depends on coffee beans from suppliers located in South America, Arabia, and Africa
Lessen the dependence on harvests in Africa or South America, save on shipping costs, and ensure enough beans for the expanding markets.
Expansion into emerging economies
China and India are growing economies that Starbucks operates only a few stores in
Increased product offerings
Food items
Beer, wine, and other spirits
Teas, juices, other drinks besides coffee
Expansion of retail operations
Sell more products through retailers such as grocery stores, 7 11 and other convenient stores

Rising prices of supplies
This includes coffee beans and dairy products
Cannot control or estimate the price of coffee beans
Over saturation
Threat of over saturation in developed economies
Increased competition
Increased competition from smaller coffee shops because they can offer customers a lower price
Bigger coffee houses specialize in certain areas to not compete directly with Starbucks

Marketing Objectives
To increase sales by 8% in the 12 month period of November 2015 to November 2016 within the Capitol Hill location
To gain 10% of the café and restaurant market share within a 10 mile radius of the Capitol Hill Location
Increase customer loyalty the 8 month period of November 2015- July 2016 by increasing the number of transactions by 40%

Communication Objectives
Increase new product awareness the 12 month period of November 2015- November 2016 by increasing the number of new customers by 25%
Reach 60% of primary market, 45% of secondary market, and 20% of tertiary market with use of print ad campaigns and social media campaigns within the 12 month period of November 2015- November 2016

Advertising Objectives
To increase the intent of trial of the primary target market by 15% for the 12 month period of November 2015 to November 2016
To increase new product recognition within the 12 month period of November 2015- November 2016 by increasing the number of new customers by 25%
Media Objectives
To stimulate demand by utilizing social media starting in October 2015 and continuing throughout entire test pilot period to increase the number of transactions by 40%.
Public Relations Objectives
To enhance brand image by 25% with the use of contests, giveaways, and an environmental campaign within the 12 month period of November 2015- November 2016
To garner at least 7 articles within targeted media quarterly within the 12 month test pilot period

Longer hours of operation
Restaurant service with extended menu
Alcoholic coffee beverages and other select sophisticate liquors
Starbucks experience
Product and brand equity
Continuous service
High quality food items
Top shelf selection of liquors
“Third place"
Established quality
Restaurant and bar experience in local café
Comfortable atmosphere
Low risk of value loss

Contingency Plan
Unexpected events can become volatile to customers loyalty. Therefore we plan with a 10.5% contingency
Why have a contingency plan?
a possible but not very likely future event or condition
What is our contingency plan?
Works Cited
Starbucks Fiscal 2013 Annual Report stated comparable sales growth during the recession was 6% but has increased 7%
To increase sales by 8% in the 12 month period of Nov 2015 – Nov 2016 with the addition of Alcohol Beverages and Restaurant Services
Seattle's unemployment 1.3%
Fastest growing city with 15 000 new jobs within the year 2012-2013 in industry
Company & Market Analysis
Positioning & Objectives
Forecast & Budget
Seattle Economic Report 2014
Full transcript