1. Case Study: Starbuck’s Past
Present & Future
PRESENTED BY:
NAHID HOSSEN
ID: UGO1-37-14-083
Prepared for: Fabiha Enam
Assistant professor
State University of Bangladesh
2. Introduction of Starbucks
Company started in 1971 in Seattle, Washington
Grew from 55 stores in 1989 to over 15,000 stores today
Products sold include:
- beverages - pastries
- whole coffee beans - coffee related retail items
4. Starbuck’s Competitive Analysis
Market Structure
Monopolistic Competition
Competitive Activity
Many companies are in the market and competition is fierce
Competitors use location, product mix, and store atmosphere differentiation to
establish market niche
Industry Costs and Capital Structure
Low to moderate costs for each location
Major start-up expenditures are property and equipment
Major operating costs are labor and cost of sales
5. PEST Analysis for Starbuck’s
Political Influences
State & Local government controls
Economic Influences
Changes in disposable income could influence purchase levels
Social Influences
Consumer preferences could shift from coffee to other beverages
Technological Influences
Use of technology can improve operational efficiencies
6. CSR strategy for Starbucks
Major contributor to CARE since ’91’
Financial support to community literacy
organizations
Green Store Task Force
10 cent discount to customers bringing their own mugs
Coffee grounds given as soil amendments
8. Financial Analysis
Solvency
• Not extremely liquid but
capability in Financing short-
term debt will not be a problem
Profitability
• Profitable
•Below industry standards
•Declining in 2008 due to higher
operating costs
Financial
Leverage
•Initially the company was
financed majorly by equity
capital later over the years it
accepted debt majorly long
term
•Has ability to cover debt
9. LIQUIDITY RATIOS
YEAR 2008 2007 2006 2005 2004
CURRENT
ASSESTS
1,748.0 1,696.49 1,529.79 1,209.33 1,350.9
CURRENT
LIABILITY
2,189.7 2,155.57 1,935.62 1,227.0 746.26
CURRENT
RATIO
0 .8 0.79 0.79 0.99 1.81
LEVERAGE
YEAR 2008 2007 2006 2005 2004
DEBTS
3181.7 3,059.76 2,200.44 1,423.43 916.33
EQUITY
CAPITAL
2490.9 2,284.12 2,228.51 2,090.26 2,470.21
DEBT –
EQUITY
RATIO
1.28 1.34 0.99 0.68 0.37
11. GROWTH RATES %
STARBUCKS INDUSTRY S&P 500
Sales (5-Year
Annual Avg.)
20.57 18.96 12.90
Net Income (5-
Year Annual
Avg.)
3.52 9.23 15.13
Dividends (5-
Year Annual
Avg.)
NA NA 11.79
Company Industry S&P 500
5Yr Gross
Margin (5-Year
Avg.)
23.0 29.6 39.4
5Yr Net Profit
Margin (5-Year
Avg.)
6.3 8.9 11.5
Profit Margins %
12. STRATEGIES FOR NEXT FISCAL
Better operational excellence at the store level
More meaningful innovation to continue to differentiate the store
experience
Increased efficiencies and effectiveness in the general and administrative
infrastructure, to become more capable of navigating through the fluctuations
in the external environment.
13.
14.
15. Product Differentiation
Products: Coffee, beans, pastries, equipment, mugs,
containers, accessories, music CDs
“Everything matters” store ambience
Retention of coffee aroma
City specific mugs and t-shirts
Season special coffees, rare exotic coffees,
handcrafted beverages etc
Custom drinks and customer attention
16. Customer Willingness to PayCustomer Willingness to Pay
Starbucks charged coffee
at slightly higher rates
Location
Ambience (Everything
matters), seating, comfort
and convenience
COFFEE centered theme
Wi-Fi … more value, more
time, more business
17. New Products and Places
Music CDs
The Starbucks card
The Duet to Visa card
Wi-Fi internet
Starbucks coffee in supermarkets (in Flavor lock packaging)
Airports, Universities, airlines, equipment in hotel rooms,
business offices
Mail order sales
Amazon.com and other websites
18. Causes of the Problem
High Prices – Low Quality
Starbucks has always tried to maintain it’s price-point , with only a
minimal improvement in product quality.
Negative Image
Starbucks has a large number of negatives in my mind these days. We
also find out the customer of Starbucks has dissatisfaction on the size
of cup what they are serving for their beverage.
Poor Quality Control
Starbucks core coffee quality has also suffered, in a number of obvious
ways.
19. Potential solution for the problems
Solution for the High Price and Low Quality
In this condition if the Starbucks want to keep their Brand image good
they have to maintain product price on the basis of the product quality.
Solution for the Negative Image
The Starbucks should do an analysis on their loyal customer and the
potential customers about their beverage CUP size.
Solution for Poor Quality Control
Starbucks is a very renound in coffee Brand, so if the Starbuck do not
maintain their products taste for every time, that is not reputable for a
giant coffee Brad like Starbuck.