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Vertical Integration of Starbucks

Backward Integration

Benefits

introduction

  • Acquisition of its own farm fields in China, Africa and Latin America

  • experimentation and development of new coffee beans that distinguished the company from others.

  • Purchase agreements with farmers leading to ethical roasting of its own coffee beans by abiding its employees to the C.A.F.E. Practices

  • Exportation and storage of its own product in U.S and Europe

vertical integration of the past

  • Assumed control over all its operation systems, eg upstream management section ensures a better supply chain.

  • treated employees as partners by creating agreements that would benefit Starbucks and assure asset ownership

  • maximised profits by differentiating its products from other businesses

  • created in 1971, Starbucks aimed at providing coffee to restaurants and bars

  • bought coffee beans from the same farm growers as other coffee sellers

  • their product was distributed and stored by other partners giving starbucks less control over its supply chain.

Analysis of Starbucks vertical integration by looking into:

  • past strategy used up to year 2000

  • new strategy - backward integration

  • forward integration achieved once starbucks expanded wordwide

Forward Integration of Starbucks

The road to success

Conclusion

Expansion:

Starbucks in now in 60 countries with more than 27000 stores around the world.

Fast expansion with forward and horizontal integration.

Growth with licensing agreements and joint-venture partnerships.

Diversification:

Product and service diversification at store: mugs, CDs, bakery

Princi's partnership with Starbucks.

  • By being vertically integrated ‘to the extreme’, Starbucks now possesses more control over its product and produces the highest quality
  • endless supply
  • no competition
  • better asset ownership
  • enhanced forward integration

Jay

Elena

Javier

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