Starbucks Internal Environment Evaluation

STARBUCKS INTERNAL FACTOR EVALUATON MATRIX

KEY INTERNAL FACTORS WEIGHT RATING WEIGHTED SCORE Internal Strengths 1. Reputation and name .15 3 .45 2. Financial Strength .10 4 .40 3. Employee quality & training .10 3 .30 4. Strong management team & business strategy .10 3 .30 5. Good relationship with suppliers .05 3 .15 6. Innovative ideas and aggressive Research and Development .15 4 .60 Internal Weaknesses 1. Lack of presence in coffee producing Countries & reliance on US market .10 2. Operation hurdles in new countries .05 3. Union disputes and legal actions .05 4. Overcrowding the market .10 5. Volatile coffee market causing selling price fluctuations .05 TOTAL 1.00

2 2 2 2 3 .10 .20 .15 2.95

.20 .10

As seen in the above Internal Factor Evaluation Matrix Starbucks rated score is well above the average of 2.50. With their reputation and brand name they are able to expand their business and offer new products with less effort than those companies who are not as well known. Starbucks financial position is another of its internal strengths. With a Net income of $550.80M, Revenue of $7.08B, and a Quarterly revenue growth

of 24.2% it is far ahead of its competitors and has ample funds available for its extensive research and development. Research and development is where Starbucks has another great advantage. This company is constantly introducing new products, flavors, and ideas to attract new customer sectors and further its world wide growth. Along with all of its new product introductions Starbucks is even able to introduce coffees from all over the world. The relationship this company has with its suppliers is excellent and allows them to import coffee from several countries to then export to their shops in other countries sharing these rich coffee beans worldwide. The management team that Starbucks has along with its well trained and valued employee team allow for Starbucks to provide knowledgeable and pleasant customer service and ambience in their shops. With all of these internal strengths Starbucks is stiff competition for any business trying to succeed in the coffee business.

The internal weaknesses for Starbucks, while there are some that need to be addressed should have little impact on the success of the company. The two main weaknesses both involve their over reliance on the US market and lack of business in other countries. This is an issue that is being improved and they are expanding into several countries, however they still have a lack of stores in the countries that are actually producing the coffee they sell. Having all such a reliance on the US market has also led to a saturation of the market and there are now situations where there are Starbucks right across the street from each other. As the company does expand and take their business into other countries they have to face the issues in the political, business, and social issues in those countries to know what it will take to be successful. There are also issues within the US that the company must face such as recent union and legal issues. It is quite possible that Starbucks will be the next to face lawsuits based on the fact that their products can contribute to obesity such as Mc Donalds has faced in the past. Also there have been strikes within the past couple of weeks for employees requesting more pay and more hours. These should be of little significance to the company as long as they are handled quickly and correctly as similar events have been handled in the past. The final weakness I see with this company is the price changes it must deal with for the coffee it sells. Coffee is a very volatile market and price fluctuations have to be passed on to the consumers. With the loyalty of the companies consumers and the value of the product it sells this will be a small problem for them and should have little effect as long as the market doesnt fluctuate to such a great extent that the prices need to be dramatically increased. With these weaknesses Starbucks is still leading the pact in this business and will continue to do so. It will continue to

expand into other venues and joint ventures and will continue to grow to be a world wide company.

Starbucks http://www.starbucks.com/aboutus/default.asp Associated Press Release: Starbucks, going global comes with headaches http://www.espressotec.com/icar4.html HR Spectrum (Sept/Oct 03) Starbucks Company Profile http://www.ilr.cornell.edu/depts/cahrs/downloads/PDFs/hrSpectrum/HRSpec03-10.pdf Yahoo direct competitor comparison http://finance.yahoo.com/q/co?s=SBUX Starbucks Corporation Competing in a Global Market http://bschool.washington.edu/gbc/2003%20Presentations/ITESM%20Mexico.pdf Starbucks Key Factors http://homepages.wmich.edu/~l2tripp/projectVpart2.htm Starbucks Corp, by Prof. Clifton Brown, Department of Accountancy, University of Illinois at Urbana-Champaign. All rights reserved, 2004 http://www.business.uiuc.edu/cebrown/accy503msa/Downloads/STARBUCKS%20CORP.pdf Datamonitor Starbucks Corporation Company Profile http://www.investor.reuters.com/data/files/Company%20Profile%20Sample%20for %20Reuters.pdf Starbucks Union http://www.starbucksunion.org/ Starbucks: Selling the American Bean How the coffee giant is turning around its image overseas By John Pastier, brand channel.com http://www.businessweek.com/innovate/content/dec2005/id20051201_506349.htm