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Starbucks Strategy

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The document summarizes Starbucks' global strategy in 2006, focusing on its rapid expansion, product lines, and coffee purchasing strategy. It analyzes the coffee industry and Starbucks' competitors. It concludes that Starbucks has focused on differentiation by serving niche buyers better than rivals through its unique capabilities and resources to serve customers. It recommends that Starbucks continues defending its position through superior ability to serve its target niche members.

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Starbucks’ Global Quest in 2006: Is the Best Yet to Come? Danny Nugroho RP – 13967/PS/MM/06 Retnowulan – 19421/PS/MM/06
Presentation Outline Introduction to Starbucks Industry Overview Company Overview Site Analysis Recommendations for Improvement Focused Recommendation for Improvement Final Action Plan Impact Analysis Wrap Up
Presentation Outline About Starbucks Overview Timeline Corporate Values and Business Principles Mission Statements Corporate Social Responsibility Starbucks’ Strategy Store expansion strategy Product line Coffee purchasing strategy Industry and Competitive Analysis Coffee industry Competitor analysis Generic competitive strategy PEST analysis Site 7-S analysis Conclusion Recommendation
Presentation Outline About Starbucks Starbucks’ Strategy Industry and Competitive Analysis Conclusion Recommendation
About Starbucks Overview Timeline Corporate Values and Business Principles Mission Statements Corporate Social Responsibility
Overview Established in 1971 at Seattle, Washington Famous for its quality fresh-roasted coffee beans and stylish atmosphere. Over 9,000 stores worldwide Product lines include : − beverages (coffee, Tazo tea, soda, juices) − pastries − whole coffee beans − coffee-related hardware and equipment − merchandise (mug, CDs)
Timeline 1971 – Starbucks Coffee, Tea, and Spice store (coffee bean roasting) opened in Seattle’s Pike Place Market. 1982 – Howard Schultz joined Starbucks. 1986 – Howard Schultz established Il Giornale Coffee Company. 1987 – Il Giornale acquired Starbucks and changed the name into Starbucks Corporation. 1992 – Starbucks decertified the union and made IPO. 1995 – Starbucks Coffee International opens in Japan − Starbucks implemented ESOP.
Timeline 1996 – Starbucks’ began selling bottled Frappuccino. 1999 – Starbucks acquired Tazo Tea. 2000 – Acquired Hear Music, a San Francisco-based company 2003 – Starbucks acquired Seattle’s Best Coffee 2005 – Introduced Starbucks Coffee Liqueur; Acquires Ethos Wate
Corporate Values and Business Principles Building a Company with Soul Opposing Franchising because of Quality Control and Culture Only selling coffee beans without artificial flavors. Satisfy customers by all means. Employees’ contribution and involvement in making Starbucks a better company
About Starbucks Mission Statements Company Mission Statement: “ Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.” Environmental Mission Statement: “ Starbucks is committed to a role of environmental leadership in all facets of our business.”
Mission Statement Six guiding principles: Provide a great work environment and treat each other with respect and dignity. Embrace diversity as an essential component in the way we do business. Apply the highest standards of excellence to the purchasing, roasting, and fresh delivery of our coffee. Develop enthusiastically satisfied customers all of the time. Contribute positively to our communities and our environment. Recognize that profitability is essential to our future success.
Corporate Social Responsibility “ Starbucks focuses its efforts on improving social and economic conditions for coffee farmers; minimizing environmental impact; making a positive contribution in the communities where they do business; and providing a great work environment for their partners (employees).” Establish the Starbucks Foundation in 1997 A major contributor of CARE, worldwide relief and development organization (Health, Education, and Humanitarian aid) Provides financial support to community literacy organizations Participate in local charitable projects. 2004 EnviroStars Recognized Leader Award – for its community service and environmental activities
Starbucks’ Strategy Rapid store expansion strategy Domestic store expansion International store expansion Employee Training and Recognition Real Estate, Store Design, Planning, and Construction Store ambience Product Line Coffee purchasing strategy
Starbucks’ Strategy Rapid store expansion strategy Domestic store expansion − A three-year expansion strategy − “ Starbucks everywhere” approach International store expansion − Company-owned and company-operated stores or licensing − Created a new subsidiary, Starbucks Coffee International − Expanded its consumer products channel in South Pacific region
Starbucks’ Strategy Employee Training and Recognition − Systems to recruit, hire and train baristas and store managers  screening  training programs  awards for partners Real Estate, Store Design, Planning, and Construction − A broad range of store formats (the right image and character) − A “stores of the future” project team − High-traffic, high-visibility store locations − Control of average store opening costs − Wi-Fi availability at stores
Starbucks’ Strategy Store ambience − The concept of “everything matters” − Assessment of standards
Starbucks’ Strategy Product Line Wide range of products choices Special product promotion Selling music CDs Joint ventures  PepsiCo  Dreyer’s Grand Ice Cream  Jim Beam Brands Acquisitions  Hear Music  Ethos Water Starbucks Cards Partnership with Bank One
Starbucks’ Strategy Coffee purchasing strategy Building relationship with growers and exporters, checking on agricultural conditions and crop yields, and searching out varieties and sources that would meet Starbucks’ standards. Using fixed-price purchase commitment and purchasing coffee future contracts Contributing to the sustainability of coffee growers and helping environment conservation Purchasing and marketing Fair Trade Certified coffee Promoting coffee cultivation methods that protected biodiversity and maintained a healthy environment
Industry and Competitive Analysis Coffee Industry C Corporate Values and Business Principles Mission Statements Corporate Social Responsibility
Industry and Competitive Analysis Coffee industry Coffee drinking trend Coffee beans production Competitor analysis Future goals Current strategy Assumptions Capabilities Generic competitive strategy PEST analysis Site 7S analysis
Industry and Competitive Analysis Coffee industry Coffee drinking trend − Coffee is the second most consumed drink after water. − Americans substitute specialty coffee for alcohol. − Coffee shops are a great place to meet people. − Coffee is an affordable luxury. − Consumers are more knowledgeable about coffee. Coffee beans production − In 1994, coffee was the second most traded commodity after Oil. − There are two types of Coffee, namely “basic” and “specialty”.
Industry and Competitive Analysis Competitor analysis 2 Types of Competitor: Coffee shops and restaurants Nationwide coffee manufacturers (rival brands of specialty coffee)
Industry and Competitive Analysis Competitor analysis Future goals To grow bigger To better position themselves as an alternative to Starbucks Current strategy Merger of local and regional chains of coffee shops etc. Assumptions − Competitors’ assumptions about themselves − Competitors’ assumptions about the industry and other companies in it
Industry and Competitive Analysis Competitor analysis Capabilities (areas of competitors’ strengths and weaknesses) − Product − Dealer/distribution − Operations − R & D − Financial strength − Organization & managerial ability − Personnel turnover
Industry and Competitive Analysis Generic Competitive Strategy
Industry and Competitive Analysis Focused differentiation Serve niche buyers better than rivals Buyers have distinctive preferences, special requirements, or unique needs Have unique capabilities to serve needs of target buyer segment Big enough to be profitable and offers good growth potential Costly or difficult for multi-segment competitors to meet specialized needs of niche members Starbucks has resources and capabilities to effectively serve an attractive niche Few other rivals are specializing in same niche
PEST Analysis Political Influences − Relationships between U.S. and countries producing coffee beans − Environmental regulations − Industry-specific regulations Economic Influences − Demand for food and beverages − Customers’ buying power − Exchange rate & taxation
PEST Analysis Social Influences − Trend − Consumer preferences − Changes in lifestyle and occupation − Education Technological Influences − advances in manufacture − biotech and agricultural development − IT developments
Site 7S Model Strategy Rapid store expansion strategy Product Line Coffee purchasing strategy
Site 7S Model Structure There are one store manager, one assistant manager, some shift supervisors and 16 partners/baristas
Site 7S Analysis Staffing Employee benefits package includes base salary, health care benefits, stock option plan, and − Health care benefits include preventive care, crisis counseling, dental care, eye care, mental health, chemical dependency, and medical costs for terminal illness up for 29 months. − Employees trainings that include basic 24 hour-training, Star Skills, Coffee Master Program, Servant Leadership Workshop, Career Power and Career Power for Coaches Workshop. − Awards for partners, which range from frequent awards to high-level cash awards.
Site 7S Analysis Systems − Centralized control over individual stores by headquarters − Total Quality Management (i.e. Just-In-Time) − Information system to support business operations. −
Site 7S Analysis Skills − coffee making − customer service − sales techniques
Site 7S Model Style Increase motivation through reviews and raises. Employees are allowed to make decisions and participate in
Site 7S Model Shared Values − Fun working environment − Treat each other with respect and care − D iversity is encouraged. − Maintain highest quality standards for products − S atisfy customers and compensate the unsatisfied ones. − CSR . − Respect employees by calling them partner. − The importance of profitability for future success
Conclusion Focuser can defend against challengers via superior ability to serve niche members
Recommendation Focuser can defend against challengers via superior ability to serve niche members
Starbucks Corporate Strategy

More Related Content

Starbucks Strategy

  • 1. Starbucks’ Global Quest in 2006: Is the Best Yet to Come? Danny Nugroho RP – 13967/PS/MM/06 Retnowulan – 19421/PS/MM/06
  • 2. Presentation Outline Introduction to Starbucks Industry Overview Company Overview Site Analysis Recommendations for Improvement Focused Recommendation for Improvement Final Action Plan Impact Analysis Wrap Up
  • 3. Presentation Outline About Starbucks Overview Timeline Corporate Values and Business Principles Mission Statements Corporate Social Responsibility Starbucks’ Strategy Store expansion strategy Product line Coffee purchasing strategy Industry and Competitive Analysis Coffee industry Competitor analysis Generic competitive strategy PEST analysis Site 7-S analysis Conclusion Recommendation
  • 4. Presentation Outline About Starbucks Starbucks’ Strategy Industry and Competitive Analysis Conclusion Recommendation
  • 5. About Starbucks Overview Timeline Corporate Values and Business Principles Mission Statements Corporate Social Responsibility
  • 6. Overview Established in 1971 at Seattle, Washington Famous for its quality fresh-roasted coffee beans and stylish atmosphere. Over 9,000 stores worldwide Product lines include : − beverages (coffee, Tazo tea, soda, juices) − pastries − whole coffee beans − coffee-related hardware and equipment − merchandise (mug, CDs)
  • 7. Timeline 1971 – Starbucks Coffee, Tea, and Spice store (coffee bean roasting) opened in Seattle’s Pike Place Market. 1982 – Howard Schultz joined Starbucks. 1986 – Howard Schultz established Il Giornale Coffee Company. 1987 – Il Giornale acquired Starbucks and changed the name into Starbucks Corporation. 1992 – Starbucks decertified the union and made IPO. 1995 – Starbucks Coffee International opens in Japan − Starbucks implemented ESOP.
  • 8. Timeline 1996 – Starbucks’ began selling bottled Frappuccino. 1999 – Starbucks acquired Tazo Tea. 2000 – Acquired Hear Music, a San Francisco-based company 2003 – Starbucks acquired Seattle’s Best Coffee 2005 – Introduced Starbucks Coffee Liqueur; Acquires Ethos Wate
  • 9. Corporate Values and Business Principles Building a Company with Soul Opposing Franchising because of Quality Control and Culture Only selling coffee beans without artificial flavors. Satisfy customers by all means. Employees’ contribution and involvement in making Starbucks a better company
  • 10. About Starbucks Mission Statements Company Mission Statement: “ Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.” Environmental Mission Statement: “ Starbucks is committed to a role of environmental leadership in all facets of our business.”
  • 11. Mission Statement Six guiding principles: Provide a great work environment and treat each other with respect and dignity. Embrace diversity as an essential component in the way we do business. Apply the highest standards of excellence to the purchasing, roasting, and fresh delivery of our coffee. Develop enthusiastically satisfied customers all of the time. Contribute positively to our communities and our environment. Recognize that profitability is essential to our future success.
  • 12. Corporate Social Responsibility “ Starbucks focuses its efforts on improving social and economic conditions for coffee farmers; minimizing environmental impact; making a positive contribution in the communities where they do business; and providing a great work environment for their partners (employees).” Establish the Starbucks Foundation in 1997 A major contributor of CARE, worldwide relief and development organization (Health, Education, and Humanitarian aid) Provides financial support to community literacy organizations Participate in local charitable projects. 2004 EnviroStars Recognized Leader Award – for its community service and environmental activities
  • 13. Starbucks’ Strategy Rapid store expansion strategy Domestic store expansion International store expansion Employee Training and Recognition Real Estate, Store Design, Planning, and Construction Store ambience Product Line Coffee purchasing strategy
  • 14. Starbucks’ Strategy Rapid store expansion strategy Domestic store expansion − A three-year expansion strategy − “ Starbucks everywhere” approach International store expansion − Company-owned and company-operated stores or licensing − Created a new subsidiary, Starbucks Coffee International − Expanded its consumer products channel in South Pacific region
  • 15. Starbucks’ Strategy Employee Training and Recognition − Systems to recruit, hire and train baristas and store managers  screening  training programs  awards for partners Real Estate, Store Design, Planning, and Construction − A broad range of store formats (the right image and character) − A “stores of the future” project team − High-traffic, high-visibility store locations − Control of average store opening costs − Wi-Fi availability at stores
  • 16. Starbucks’ Strategy Store ambience − The concept of “everything matters” − Assessment of standards
  • 17. Starbucks’ Strategy Product Line Wide range of products choices Special product promotion Selling music CDs Joint ventures  PepsiCo  Dreyer’s Grand Ice Cream  Jim Beam Brands Acquisitions  Hear Music  Ethos Water Starbucks Cards Partnership with Bank One
  • 18. Starbucks’ Strategy Coffee purchasing strategy Building relationship with growers and exporters, checking on agricultural conditions and crop yields, and searching out varieties and sources that would meet Starbucks’ standards. Using fixed-price purchase commitment and purchasing coffee future contracts Contributing to the sustainability of coffee growers and helping environment conservation Purchasing and marketing Fair Trade Certified coffee Promoting coffee cultivation methods that protected biodiversity and maintained a healthy environment
  • 19. Industry and Competitive Analysis Coffee Industry C Corporate Values and Business Principles Mission Statements Corporate Social Responsibility
  • 20. Industry and Competitive Analysis Coffee industry Coffee drinking trend Coffee beans production Competitor analysis Future goals Current strategy Assumptions Capabilities Generic competitive strategy PEST analysis Site 7S analysis
  • 21. Industry and Competitive Analysis Coffee industry Coffee drinking trend − Coffee is the second most consumed drink after water. − Americans substitute specialty coffee for alcohol. − Coffee shops are a great place to meet people. − Coffee is an affordable luxury. − Consumers are more knowledgeable about coffee. Coffee beans production − In 1994, coffee was the second most traded commodity after Oil. − There are two types of Coffee, namely “basic” and “specialty”.
  • 22. Industry and Competitive Analysis Competitor analysis 2 Types of Competitor: Coffee shops and restaurants Nationwide coffee manufacturers (rival brands of specialty coffee)
  • 23. Industry and Competitive Analysis Competitor analysis Future goals To grow bigger To better position themselves as an alternative to Starbucks Current strategy Merger of local and regional chains of coffee shops etc. Assumptions − Competitors’ assumptions about themselves − Competitors’ assumptions about the industry and other companies in it
  • 24. Industry and Competitive Analysis Competitor analysis Capabilities (areas of competitors’ strengths and weaknesses) − Product − Dealer/distribution − Operations − R & D − Financial strength − Organization & managerial ability − Personnel turnover
  • 25. Industry and Competitive Analysis Generic Competitive Strategy
  • 26. Industry and Competitive Analysis Focused differentiation Serve niche buyers better than rivals Buyers have distinctive preferences, special requirements, or unique needs Have unique capabilities to serve needs of target buyer segment Big enough to be profitable and offers good growth potential Costly or difficult for multi-segment competitors to meet specialized needs of niche members Starbucks has resources and capabilities to effectively serve an attractive niche Few other rivals are specializing in same niche
  • 27. PEST Analysis Political Influences − Relationships between U.S. and countries producing coffee beans − Environmental regulations − Industry-specific regulations Economic Influences − Demand for food and beverages − Customers’ buying power − Exchange rate & taxation
  • 28. PEST Analysis Social Influences − Trend − Consumer preferences − Changes in lifestyle and occupation − Education Technological Influences − advances in manufacture − biotech and agricultural development − IT developments
  • 29. Site 7S Model Strategy Rapid store expansion strategy Product Line Coffee purchasing strategy
  • 30. Site 7S Model Structure There are one store manager, one assistant manager, some shift supervisors and 16 partners/baristas
  • 31. Site 7S Analysis Staffing Employee benefits package includes base salary, health care benefits, stock option plan, and − Health care benefits include preventive care, crisis counseling, dental care, eye care, mental health, chemical dependency, and medical costs for terminal illness up for 29 months. − Employees trainings that include basic 24 hour-training, Star Skills, Coffee Master Program, Servant Leadership Workshop, Career Power and Career Power for Coaches Workshop. − Awards for partners, which range from frequent awards to high-level cash awards.
  • 32. Site 7S Analysis Systems − Centralized control over individual stores by headquarters − Total Quality Management (i.e. Just-In-Time) − Information system to support business operations. −
  • 33. Site 7S Analysis Skills − coffee making − customer service − sales techniques
  • 34. Site 7S Model Style Increase motivation through reviews and raises. Employees are allowed to make decisions and participate in
  • 35. Site 7S Model Shared Values − Fun working environment − Treat each other with respect and care − D iversity is encouraged. − Maintain highest quality standards for products − S atisfy customers and compensate the unsatisfied ones. − CSR . − Respect employees by calling them partner. − The importance of profitability for future success
  • 36. Conclusion Focuser can defend against challengers via superior ability to serve niche members
  • 37. Recommendation Focuser can defend against challengers via superior ability to serve niche members