Starbucks management case study

2. Alaa
Eman
Lobna
Nada
Passant
Riham
Sarah
Yassmin

3. Action Plan
SWOT Analysis
Objectives
Mission
Vision
History

4. Starting up Starbuck’s First store .

5. 1971 1982 1983 1985 1995 2014

7. 1971
Started Selling Coffee
beans in Seattle’s Pike
Place Market .
1987
Starbucks Added
handcrafted espresso
beverages to the menu .
1992
Starbucks became a
publicly traded company .
2011
Starbucks marked 40
years and began the next
chapter in their history .

10. Inspire and nurture the human spirit

12. Farmer
Support
Community
Involvement
Coffee
Purchasing

13. Recycling
Water
Conservation
Energy
Conservation

15. Strengths

16. •Starbucks has consistently been one of the fastest growing companies in the United States with over 1006
retail outlets in 1996.Over a five-year period starting in 1991, net revenues increased at a compounded
annual rate of 61%. In fiscal year 1996, net revenues increased 50% to $969 million from $465 million for the
same period the previous year.
•The firm’s senior executives have been considering international expansion. Specifically, they were
interested in Japan and other Asian countries; where Starbucks has little or no presence.
•Because Schultz ( joined Starbucks as retail sales and marketing manager)was stuck to his conviction not
to “ sacrifice long-term integrity and values for short-term profits”, in 1991 , sales shot up 84% , and the
company turned profitable after a loss of about $ 1.2 million from fiscal 1989 to 1990 due to overhead and
operating expenses ballooned due to expansion.
•In 1992 Schultz took the firm public at $17/share
•To stop potential copycats, Schultz opened 100 new stores in 1993 and another 145 in 1994.Additionally,
Schultz acquired the coffee connection, a 25-store Boston chain, in 1994.
•Currently, the firm operates stores in most of the major metropolitan areas in the United States and Canada,
including Seattle, New York, Chicago, Boston, Los Angeles,…etc.

17. • Its mail-order business serves customers throughout the United States.
•Starbucks sponsors community festivals, donates money to CARE for health and literacy programs in coffee-
growing countries, and donates to charity any packages of coffee beans that have been open a week.
•“Americans were raised on a commodity-like coffee composed of Arabica beans mixed with less-expensive
filler beans”; Starbucks coffee is strictly Arabica, and the company ensures that only the highest-quality beans
are used.
•Starbucks has worked on developing relationships with the countries from which it buys coffee beans.
•In 1992 Starbucks set a new precedent by outbidding European buyers for the exclusive Narino Supremo
bean crop. Starbucks collaborated with a mill in the tiny town of Pasto; there they set up a special operation to
single out the particular Narino Supremo bean, and Starbucks guaranteed to purchase the entire yield. This
enabled Starbucks to be the exclusive purveyor of Narino Supremo, one of the best coffees in the world.

18. •Roasting of the coffee bean is close to an art form at Starbucks. The company currently operates three
roasting and distribution facilities:
➢ Two in Seattle.
➢ One in East Manchester Township, York County, Pennsylvania.
•Starbucks provides a seductive atmosphere; its stores are distinctive and sleek, yet comfortable.
•Starbucks stores tend to be located in high-traffic locations such as malls, busy street corners, and even
grocery stores. They are all well lighted and music plays softly in the background. The firm employs a staff of
over 100 people whose job is to plan, design, and build the unique interiors and displays. The Starbucks’
interiors have inspired a slew of imitators.
•The packing of firm’s products is distinctive.
•Starbucks believes that happy employees are the key to competitiveness and growth.
•Starbucks promotes an empowered employee culture through employee training, employee benefits
programs, and an employee stock ownership plan. Each employee must have at least 24 hours of training.

19. •Starbucks offers its benefits package to both part-time and full-time employees.
•Starbucks has set a variety of distribution channels for its products. Besides its stand-alone stores, it
has setup cafes and carts in hospitals, banks, office buildings, supermarkets, and shopping centers.
•Other company partnerships are designed to form new product associations with coffee. For instance,
Starbucks has collaborated with Capital Records, Inc., to produce two Starbucks jazz CDs, available
only in Starbucks stores.
•Starbucks owns all of its stores outright with the exception of license agreements in airports. Schultz
feels it is important to the company’s integrity to own its stores.
•Starbucks has turned its attention to foreign markets for continued growth.

20. Opportunity

22. Weakness

23. • Starbucks lost money for three years running.
• In 1985 the investors were less enthusiastic in turning Starbucks into restaurant business.
• Because of the overlap in these divisions (marketing and retail North America), many employees
report to two division heads.
•The cost of coffee beans is expected to rise in the near future, and this will affect the prices of coffee
to be high.
• In period of 1989 - 1990 company lost $1.2 million on operating expenses of expansion
• process of milling after roasting is very critical as the whole batch might be discarded if not deemed
perfectly.
•Agreement with PepsiCo in 1996 brought a great failure with Mazagran product that was pulled
from stores after 1 month

24. Starbucks’, headquartered in Seattle, derives approximately 85% of its revenue from its domestic
US market.
An important long-term risk to the company’s stock is a lower valuation caused by a slowdown in
US sale store growth. Starbucks’ store sales growth has been largely driven by beverage
innovation, but there are questions over how long this can last.
The company’s lower returns per employee as compared to the industry average reflects adversely
upon its employee efficiency.
The company’s five year average returns on equity have been lower than the industry average.
The company has been facing certain difficulties in some of its international operations. Starbucks’
has faced problems of expansion, with a number of openings failing to be successful. Starbucks
has experienced continued same-store sales sluggishness in its Japanese operations.

25. Threats

26. • In 1960s to 1980s coffee consumptions were declining of around $6.5 billions annually.
• 1960 to 1980 world’s supply of coffee beans decreased.
•1960 to 1980 cost of coffee bean agriculture rose causing farmers to switch to more profitable crops.
• In 1980s appearance of general world trend of living more healthier to live longer
• In 1990 introduction of coffee homemade technology was introduced to consumers
• In period of 1993 to 1994 copycats for Starbucks coffee appeared
• Americans having a reputation of buying the cheapest coffee beans regardless the taste.
• Presence of canned coffee with low quality of coffee bean and high caffeine content at cheap prices
• Rose of new trend on coffee the decaffeinated brand of coffee

27. • reach ability of decaffeinated coffee brands through supermarkets and grocery stores
• In 1994 to 1996 the period of poor economy rose
• supermarkets, retail beverages, restaurants, coffee carts and small stores were considered
competitors
• Franchisers as Second cup, Gloria jeans’s coffee, Brother Gourmet were located in malls, trade
centers, and business groups
• Seattle’s Best Coffee SBC was expanding rapidly through selling franchise to its stores while
maintaining minimum capital
• SBC taking advantage of starbucks customer orientation and marketing of the new coffee specialties
and flavours introduced
• location of store, and stands were getting minimal due to its shortage and great competition between
brands

28. • Hiring the qualified personnel to operate stores and stands raised competition.
• newspapers claimed as per a group of human rights that employees at non US stores receive $3
less in wages than US stores
• coffee growers grow cheap coffee beans hybrids to be sold with high values
• the law set by securities and exchange commission that states if company’s shareholders were
• more than 500 the company has to report its financial performance on publish which reveal
• important information to competitors. ( Bean Stock Plan to encourage employees)

29. • Japanse are not used to on the Italian style coffee beverages
• Coca Cola had more than 80,000 vending machines in Tokyo selling canned coffee.
• 2 major huge competitors in Tokyo were;
• Doutor coffee referred to as McDonald’s coffee house,
• Pronto serves coffee and light snacks in the morning while at night switches to a
neighborhood bar-type serving light meals and alcoholic drinks.
average price for a cup of coffee in Tokyo was 339 yen
average price for a cup of coffee in Pronto 160 yen while in Doutor 18o yen.
(Starbucks $ 280 yen)

31. • To expand in 3 countries
within 3 years up to
26,000 stores
Goal
• Growth through
Expansion
Strategy

32. Objective Responsibility Timeline
1.Feasibilty Study For Expansion
2.Budget Planning :
a- Purchasing Stores
b-Equipment
c-Operating Expenses
d-Human Resources
e-Marketing and Promotion
3.Approval of Board of Directors
4.Design a Backup Plan for Crisis
planning and finance department 3 months
Conduct a meeting for Current employees , announcing the opening of new branches
.
HR department 1 week

33. Objective Responsibility Timeline
1.conduct research for competitive places and regions.
2.conduct research on competitors in the region:
a-Location Targeted
b-Price Range
c-Services Provided
3.Conduct a research on customers living standards , taste .
4.Plan for a marketing Campaigned and adverts .
5.setting a plan for promotions appealing to targeted Customers .
Marketing department 6 months
1.Uphold the highest professional standards in legal services and business ethics .
2.Protect Starbucks work in collaboration with business partners .
3.setting disciplines including corporate securities , intellectual properties , licensing &
litigation .
legal affairs department 2 months

34. Objective Responsibility Timeline
1.Purchasing of Stores equipment and any assets needed to start up the new Stores.
2.Setting the stores Ready for Operation
3.Start the actual operation of running the stores for the public .
planning and finance department 6 months
1.Internal Recruitment of first line and middle Managers .
2.recuiting new qualified staff .
3.Training the newly recruited staff .
4.Set the stores' employee structure .
5.Adjusting Policies and procedures according to each country's social and cultural
influences .
6.Setting compensation and benefits for employees according to living standards & law
of employment of each country .
HR department 1 month

35. Objective Responsibility Timeline
setting communication system between stores public relations department
2 weeks
start the actual operating of stores public relations department
1 month
1.Finding convenient supplier allocated closer to the stores (in the region).
2.cost of Effective raw material meeting quality standard .
supply chain department 1 month
1.Keep a periodic survey on customers satisfaction levels .
2.managing client relationships .
3.Arranging press conferences and events .
4.Bringing in business opportunities .
5.Building a relationship with the media .
6.Help to Clarify the organization's point of view to their constituency .
7.Manage an ongoing relation between top managers of malls , hypermarkets & trading
centers .
public relations department all through

36. Objective Responsibility Timeline
1.Keep a periodic survey on customers satisfaction levels .
2.managing client relationships .
3.Arranging press conferences and events .
4.Bringing in business opportunities .
5.Building a relationship with the media .
6.Help to Clarify the organization's point of view to their constituency .
7.Manage an ongoing relation between top managers of malls , hypermarkets &
trading centers .
public relations department all through
1.Refining Coffee beans according to corporation standards .
2.Inventory management : Quality Control of storing the products.
3.distribution planning for inventory and raw material.
supply chain department all through
1.Meeting Sales Targets , methods .
2.Reporting Sales outcomes .
3.keeping and Alternative Marketing Plan for sales crisis .
marketing department all through