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Starbucks

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by

Jackie Jawitz

on 4 July 2014

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Transcript of Starbucks

SWOT Analysis
Business Level
Generic Business level Strategies ( Differentiation )
International Level
Corporate Governance
Corporate Level
- Low level of Diversification Dominant Business (between 70% and 95% of revenues from a single business unit)
Expansion into India
Entered in 2012 after failed joint venture attempt in 2007
Currently only ~30 locations
IJV: India
Partner: Tata Global Beverages Formed in 2012
Equity Arrangement: 50-50 joint venture
Reasons:
Trusted company in India
Raise the profile and use of Indian premium Arabica beans
Porter's 5 Forces
Threat of New Entrants (low)
High economies of scale
High brand awareness
Market is highly saturated
Financial resources

Bargaining Power of Suppliers (low)

Coffee bean producers all over the world
Starbucks is an important customer to the suppliers

Bargaining Power of Buyers (high)
Prices are very high

Threat of Substitute Products (medium-high)

Rivalry Among Existing Competitors (high)

Costa, McDonald’s
Caribou Coffee
Dunkin Donuts
Thousands of small local coffee shops and cafes
Introduction
Strategies
for
Success

Financial Capabilities
Accounting based performance measures
Organizational Capabilities
Organizational capabilities
1. One of the best leaders with greatest vision
2. Barista, supervisor, retail training programs
3. HR is very successful in choosing friendly staff
4. Most of the stores are owned and operated by the company

Technological Capabilities
Pike Place roast
Replaced outdated cash registers and computers
Replaced its espresso machines with the Mastrena
Created a customer rewards card
Free Wifi in all stores
Starbucks App


Operational Capabilities
R&D units are located in their principal headquarters
Centers of Innovation Excellence around the world
Consistent effort to innovate to meet customer needs
Internal Environment
External Environment
Core Products:
Coffee
Handcrafted beverages
Merchandise
Fresh food
Consumer products
Coffee, tea, ready-to-drink, ice cream

Evolution &
History
Major Markets
Goals
Life Cycle Model
Macro- Business
Final Analysis
Unique Strategies
Recommendations
Core Competencies
SWOT Analysis
“To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”



“Ensure 100% of our coffee is ethically sourced by 2015”

Major Competitors:
1. McDonald's Corporation
2. Nestlé S.A.
3. Dunkin' Brands Group

Stores in 60 different countries including:

Today, almost 18,000 stores in 60 countries.
Board of Directors &
Purpose
Responsibilities
Policies & Practices
Committees
Composition
- 12 members
Executive Compensation
Corporate Ethic's
By 2015, all of our coffee will be through C.A.F.E. Practices, Fairtrade, or another externally audited system.
In 2011, 86% -367 million pounds worth.
What Resulted...
Commitment
Employee Benefits
The man with the vision...
Rapid growth in past 2 decades
Growth has slowed
Closed locations
Refocused
- core competencies
-international expansion
Developing new system and processes
Shaping perception through advertising
Quality focus
Capability in R&D
Maximize HR contributions through low turnover and high motivation
Value Chain Integration
Competitive Actions:
Friendly staff
Location dominance
Main Mean of Diversification

Organizational Restructuring

- 2007 economic recession hit Starbucks hard.
- 2009 Schultz major downsizing. Closing 600 stores saving $850 million in costs.
2009: $9.46
2010: $23.28 (146% increase in 1 year)
2013: $76.95
Level and Type of Diversification
- Acquisition of Teavana
- Introduction of Verismo System

Reasons for this acquisition:
1- Increase diversification of products.
2- Reduce risk.
3- Eliminate a competitor.

http://www.verismo.com/en-us/

Summary of Opportunities & Threats
Opportunities
Extend supplier range
Expansion to emerging markets
Increase products offered
Threats
Rising prices of coffee beans
Increased competition from local competitors
Saturated markets
Strengths
No. 1 brand at $4 billion
Employee management
Howard Shultz
The Starbucks experience
loyal customers
Far reaching global presence
Financial strengths

Weaknesses
Expensive
Risk of aggressive expansion
Watered down experience
Opportunities
Extend supplier range
Emerging markets
Increase products offered





Threats
Rising prices of coffee beans
Local competitors
Saturated markets
Profitability Ratio
Liquidity Ratio
Leverage Ratio
Turnover Ratio
Offer the unique Starbucks experience
Focus on quality
Continuous product innovation
Ethics and good business practices
High level customer service

Full health-care benefits
CUP (Caring Unites Partners) Fund
Adoption Assistance
Starbucks U
Starbucks Commuter
Future Roast 401(k) Savings Plan
Starbucks Matching Contributions
“Bean Stock”
Coffee and Tea Markout

Energy drinks

Revamp its hiring, training and motivation programs to deliver the “quality-employee” as the company expands
Enforce employees to deliver high quality customer service in all of its locations
Order by Ipad at the beginning of the customer line to limit customer waiting times.
Expand the range of food offered in stores and add more health conscious options
Committees
-Turnover rate around 65%
- Other competitors as high as 400% per year
Employee Retention
"I think the currency of leadership is transparency"
Overview -- International Strategy
1997 - Opens first international location
Currently over 5500 locations overseas
Expansion into Asia (China, India)
Increasing International Sales
Country Selection Factors
Socio-Political (Tea culture, Indian Bureaucracy)
Demand
Macroeconomic
Entry Timing
Early follower strategy
Very slow, careful expansion
Rise of India's middle class

Entry Mode Selection
Country Specific factors Important for India, rest of Asia (culture, gvmnt
Wariness of being seen as "invading" brand/way of life
Prefers IJV's for Asia
Global Integration -- Hybrid Strategy
Sourcing
Regional Products
Store location and environment
Economic
Socio-Cultural
Political
Legal-Regulatory


Environment
Environmentally friendly
Free Wi-Fi
Contributes to communities
Reward card with free coffee
Gold card

General Lessons
Restructuring and innovation can save a company from downfall

“Invest in farmers and their communities by increasing farmer loans to $20 million by 2015”
“Reduce energy consumption by 25% in our company-owned stores by 2015”
“Reduce water consumption by 25% in our company-owned stores by 2015”
“Purchase renewable energy equivalent to 100% of the electricity used in our global stores by 2015”
“Develop comprehensive recycling solutions for our paper and plastic cups”
“Engage a total of 50,000 young people to innovate and take action in their communities by 2015”
“Implement front of store recycling in our company owned stores by 2015”
“Save 5% of beverages made in our stores in personal tumblers by 2015”
Ownership Concentration
Large Block
Shareholder's
Full transcript