Team 2: Carl Budenski, Zach Berman, Grace Swenson, Mollie

Wheeler, and Shafiq Nasran

Overview
Strategic Issues
Recommendations
Background
External Analysis
Internal Analysis
Competitive Actions

Strategic Issues
How do we get big and at the same time, stay small?
Keeping experiences consistent across the globe

Does store clustering cannibalize sales?

How do we diversify product offerings?
How do we horizontal integrate customer service?
How do we increase operational efficiency?

Recommendations
Maintain their brand image while adapting product offerings as they
expand internationally
Increase number of Ready-to-Drink offerings
Horizontal Integration - Develop delivery system for coffee customers
Vertical Integration - purchase of coffee growers

Background
Created by 3 promising entrepreneurs
Discovered by Howard Schultz
Il Giornale
Bought the Starbucks name
Developed strong management team
Employee Care
Expanded rapidly

Background
At the time of the case, Starbucks had
3,500 stores
17 countries
37,000 employees
Revenue of $2.2 billion
Net Income $95 million
Plans to continue expanding

General Environment
Retail Coffee Industry
Demographic
Rising Incomes
Economic
Affordable Luxury
Sociocultural
Baby Boomers
Health Trends
Fast-Paced Society

General Environment
Retail Coffee Industry (Continued)
Technological
Home Use
Global
Different Tastes
International Travel
Political/Legal
Varying Rules & Regulations

Porters Five Forces for Retail Coffee

Industry
Threat of Substitutes: Moderate
Low Switching Costs

Bargaining Power of Suppliers: Low

Bargaining Power of Buyers: Moderate
Industry Rivalry: High
Threat of New Entrants: Moderate

Strategic Groups

Zabars
Degree of
Specialty

Starbucks
Gloria Jeans

Nestle
General Foods
Proctor & Gamble
McDonalds
Burger King

Cost Leadership

Industry Structure & Life Cycle

Structure: Monopolistic
Stage in the Life Cycle: Growth/Maturity
Ready-to-Drink: Growth Stage

Vision and Mission Statements

Vision statement: To establish Starbucks as the
premier purveyor of the finest coffee in the world
while maintaining our uncompromising principles
while we grow

Mission Statement: To inspire and nurture the

human spirit - one person, one cup and one
neighborhood at a time

VRI Analysis: Delivery

Valuable: Yes
Rare: Yes
Difficult to Imitate: Partially

Organizational Structure

Competitive Actions
New Competitive Strategy:
Less focused on store growth
More focused on broadening product selection
Out of store products
Pricing points of products
Delivery

Competitive Actions

Motivation:
Increase revenues per purchase
Prevent market oversaturation
Unique customer experience

Competitive Actions
Entry Strategies:
Joint ventures
Acquisitions
Green Field investment
Competitive Dynamics:
Very competitive
No more first mover advantages

Corporate Analysis
Related Diversification: Economies of Scope
Leveraging core competencies by acquiring Starbucks in 1987
6 retail stores, roasting plant in Seattle and the Starbucks name
Related Diversification: Market Power
Pooled negotiating power by entering a long term licensing
agreement with Kraft
8500 supermarkets in 15 states
To accelerate sales growth in grocery channel

Corporate Analysis
Vertical Integration
Starbucks refused to franchise to ensure quality
control
Bought its own coffee direct from producing
countries
Recommendation
Continue to expand internationally through joint
venture
Control raw materials price by purchasing

Recommendations
Maintain their brand image while adapting product offerings as they
expand internationally
Increase number of Ready-to-Drink offerings
Develop delivery system for coffee customers
Vertical Integration - purchase of coffee growers

Conclusion
Strategic Issues
Recommendations
Background
External Analysis
Internal Analysis
Competitive Actions
Corporate Analysis

Questions?