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Financial analysis of starbucks case study
Starbucks expansion history
Starbucks expansion history
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Introduction
In the 21st century, many people have become part of using coffee in their lives. This is when it is compared to how it was used in the 1950s. This can be said to have changed a lot as Espresso, Cappuccinos, Macchiato, Café Lattes and Frapuccinos which are now being offered by many restaurants and coffee shops that are found in the main town across the world. Starbucks was created in the year 1971 in Washington. The establishment was done by three scholars who are namely Zev Siegel, Jerry Baldwin and Gordon Bowker. The chief executive officer joined the company in the year 1981 and became in charge of the marketing company (Pham-Gia, 2009).
After the CEO had visited Italy, he had realized the importance of putting up a coffee bar and therefore he put up one which was namely II Giornalle. The coffee bar concept was and proved to be very successful and he managed to buy Starbucks. This happened in the year 1987. The two coffee bars that he had formed were changed to feature the brand that Starbucks used was much bigger than that of the II Giornalle.
He later embarked on a mission that was to ensure that there was expansion, which main aim was to open many more outlets that were to belong to Starbucks and the mission was set to be done in the United States. The current has set a mission is based on the inspiring and nurturing of the human spirit through a cup of Starbucks coffee.
The performance of Starbucks financially is not good. This lack of good financial statements is amidst the company experiencing a lot of increased revenue over the years since establishment. There are various factors that have been in the front and caused the lack of good revenue. The first major factor is competition that is increasing da...
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...the farmers directly which will lead to higher profit margins due to the fact that the agent fees will have to be done away with.
References
Ference, T. P., & Thurman, P. W. (2009). MBA fundamentals: Strategy. New York: Kaplan Pub.
Lussier, R. N. (2008). Management fundamentals: Concepts, applications, skill development. Mason, OH: South-Western/Cengage Learning.
Pahl, N. (2008). The idea behind the Starbucks experience: The main elements of Starbucks' strategic diamond. Munchen: GRIN Verlag.
Pham-Gia, K. (2009). Marketing strategy of 'Starbucks Coffee'. München: GRIN Verlag GmbH.
Starbucks Corporation. (2014). Starbucks Coffee Company. Retrieved on 30th April, 2014 from http://www.starbucks.com
Titman, S., Keown, A., & Martin, J.D. (2011). Financial management: Principles and applications. Upper Saddle River, NJ: Pearson/Prentice Hall.
In 2002, unexpected findings of a market research showed problems regarding customer satisfaction and brand meaning for Starbucks customers. The situation was unacceptable for a company whose overall objective is to build the most recognized and respected brand in the world. Starbucks was supposed to represent a new and different place where any man would relax and enjoy quality time, alone or with others. But the market research showed that in the mind of the consumers, Starbucks brand is viewed as corporative, trying to expand endlessly and looking to make lots of money. This huge gap between customers' perception and Starbucks' values and goals called for immediate action.
Founded in 1971 at Seattle’s Pike Place Market, Starbucks Coffee, Tea and Spices, as it was originally called, has been “brewing-up” its famous blends in over 43 countries, including the United States. Now called Starbucks Coffee Company, business isn’t just about the coffee and tea anymore. Starbucks has its own line of bottled water, handcrafted beverages, fresh food, entertainment, merchandise and a Starbucks Card. The company has received numerous awards for their outstanding business practices. Fortune Magazine has ranked them as one of “The Best 100 Companies to Work For” in 1998, 2000, 2002, and 2008 (Starbucks, 2008). The Starbucks Experience provides consumers and the general public a direct line a of business communication. From friendly baristas to press releases from CEO Howard Schultz, Starbucks keeps its “partners” informed.
Starbucks Coffee, Tea, and Spice opened its first store in April 1971 in the Pike Place Market in Seattle, by owners who had a passion for dark-roasted coffee that was popular in Europe, but hard to find in the U.S. (Harrison et al., 2005; Venkatraman & Nelson, 2008). The company’s mission was to provide Seattle with the best access to dark-roasted coffee, and sought to educated customers about the product. As a matter of customer education and acceptance of the product, Starbucks grew and expanded into the successful domestic market it is today. Much of this success can be attributed to a focus on the total customer experience and s...
Starbucks Corp, a US based company headquartered in Seattle, Washington, has more than 19,000 stores in 62 countries. Although most of its business activities are conducted in the US, it management must understand the differences of reporting practices around the world that are used for accounting practices. Some of the common factors that affect financial reporting that can cause companies to fail are: legal system, taxation, inflation, and political and economic ties.
Schultz, Howard, and Joanne Gordon. Onward: How Starbucks Fought for Its Life Without Losing Its Soul. New York: Rodale, 2011. N. pag. Print.
Gordon Bowker, Jerry Baldwin and Ziv Siegl founded Starbucks in 1971. Their goal was to sell the finest quality whole beans and ground coffees (Starbucks timeline and history, 2004). In 1982, Starbucks had grown to five stores and started serving coffee to restaurants and espresso bars. Harold Schultz was employed as the director of retail operations and marketing. Harold Schultz convinced the founders of Starbucks to open a downtown Seattle coffee bar, which opened in 1984. With the success of Seattle coffee bar, Schultz left Starbucks to start his own company named Il Giornale. In 1987, Il Giornale acquired Starbucks retail operations for 4 million dollars. In addition, Il Giornale changed its name to Starbucks Corporation and opened locations in Chicago and Vancouver, B.C. (Starbucks timeline and history, 2004).
In 2003, Starbucks was listed as one of the Fortune 500. Despite the ongoing recession, the company had managed a 31% increase in net revenues for the year. This was reasonable, considering they only spent about 1% of total sales on marketing. All of this, coupled with the fact that they were popular with customers and employees, was a sure recipe for success.
“Starbucks was named after Starbuck, first mate of the whaleship Pequod in Herman Melville’s Moby Dick…Starbuck was pluralized for ease of use” (Burks, 2009, p. 1). Now President, Chairman, and Chief Executive Officer, Howard Schultz formed Starbucks Corporation in 1987 after purchasing the name Starbucks, six stores and a roasting plant from previous owners, Jerry Baldwin and Gordon Bowker (Burks, 2009). Starbucks operates under a successful value chain management strategy. Their value chain encompasses a systematic approach to the way business is done. Robbins and Coulter (2012) point out, “A good value chain involves a sequence of participants working together as a team, each adding some component of value” (p. 520). Starbucks continually reviews every aspect of their business; from the organizational culture to values and ethics to strategy, planning and operations, management control and finally human resources and performance management, searching for those items that don’t contribute to the “Starbucks experience” which is what makes the Starbucks Corporation a successful business model.
The story of Starbucks coffee history begins in Seattle in 1971 when the first Starbucks opened at Pike Place Market, which is Seattle's and the Nation's oldest Farmer's Market. At this time the company was a local coffee roasting facility. That remained their core business until 1982 when Howard Schulz joined the company. He was the new marketing executive and began right away to convince more and more local cafes, upscale restaurants, and hotels to buy Starbucks coffee. The turning point for the company and the beginning of coffee history should be one year later when Schulz traveled through Italy. He got inspired by the Italian coffee bar tradition to serve fresh brewed Espresso and Cappuccino. He convinced the Starbucks founders to give his idea a chance and in 1985 he opened the first coffee bar in Seattle, named Il Giornale. (Wilson)
Starbucks is a worldwide company, known for is delicious brews of coffee and seasonal varieties of tasty drinks for any occasion. Starbucks opened with two main goals, sharing great coffee with friends and to help make the world a little better. It originated in the historic Pike Place Market of Seattle, Washington in 1971 by Jerry Baldwin, Zev Siegl and Gordon Bowker. The creation of Starbucks’ name came from the seafaring tradition of early coffee traders and the romance evoked from Moby Dick. At the time, this individual shop specialized in the towering quality of coffee over competitors and other brewing services enabling its growth to becoming the largest coffee chain in Washington with numerous locations. In the early 1980s, the current CEO Schultz saw an opportunity for growth in the niche market. After a trip to Italy he brought back the idea of a café style environment of leisure and social meetings to the United States we now see in Starbucks locations today. Schultz ultimately left Starbucks to open his own coffee shop, Il Giornale which turned out to be a tremendous success. Fast forward a year later, Schultz got wind that Starbucks was going to sell all their components of Starbucks including their stores and factories, he immediately acquired the funds to buy Starbucks and linked both operations. Within five years he was able to open more than 125 stores starting in New England, Boston, Chicago, and gradually entered California. He wanted Starbucks to be a franchise system based on the mission of telling the truth and emphasize the quality,
Starbucks, a coffee bean sales company did not have much of a marketing plan in place at its inception. Based in Seattle Washington the company began to sell coffee beans to espresso bars and upscale restaurants back in 1982. It took 11 years to progress to that level of production, they originally were a local store vendor at Pike Place Market. The director of marketing brought back the espresso bar idea from his travels in Milan. (Company Profile, 2015) The Pacific Northwest was filled with working class men and women that were drawn to the coffeehouse tradition brought in from Italy.
Starbucks is an international coffee house and it was created in 1971 when they opened the first store in Seattle, Newcastle. Currently, they own 21,000 stores in 65 different countries of the world, and their passion for the great coffee, excellent service and community interaction exceeds cultures and languages (Starbucks, 2014). This company is the number 1 brand coffeehouse chain in the world due to the best roaster, marketer and seller of speciality coffee. Its main slogan: “Our mission: to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time” (Jurevicius, 2013).
In 1971, three young entrepreneurs began the Starbucks Corporation in Seattle Washington. Their key goal was to sell whole coffee beans. Soon after, Starbucks began experiencing huge growth, opening five stores all of which had roasting facilities, sold coffee beans and room for local restaurants. In 1987, Howard Schultz bought Starbucks from its original owners for $4 million after expanding Starbucks by opening three coffee bars. These coffee bars were based on an idea that was originally proposed to the owner who recruited him into the corporation as manager of retail and marketing. Overall, Schultz strategy for Starbucks was to grow slow. Starbucks went on to suffer financial losses and overhead operating expenses rose as Starbucks continued its slow expansion process. Despite the initial financial troubles, Starbucks went on to expand to 870 stores by 1996. Sales increased 84%, which brought the corporation out of debt. With the growing success, Starbucks planned to open 2000 stores by year 2000.
With clear core values towards providing quality coffee, the best service, and atmosphere, Starbucks has enjoyed great success since it was founded 30 years ago. The company has being doing very well for last 11 years with 5% or more store sales increase, even with the rest economy still reeling from the post-9/11 recession. However recent research, conducted to Starbucks, have showed some concerns regarding company’s problem meeting customers’ expectations.
When I saw this discussion, I couldn’t help but think of Starbucks and the impact they’ve made throughout their 45 years of establishment. I worked with them for about 7 years and saw how unique they were from your everyday coffee and latte spots. A retail company with thousands of coffee shops in the US as well as in other countries, this particular retailer has been able to catch the eyes of all ages as well as locations throughout the world. For example, today college students utilize Starbucks locations to study rather than go to a nearby library. Starbucks is also known for its best coffee and espresso drinks (Latte or Frappuccino) and with one of its delicious espresso 's any student or just a person stopping in to enjoy its lounge area where there is free Wi-Fi is awesome! Starbucks lifecycle has made a 360 turn around and been revamped twice to accommodated the growing market. Customizing their brand to fit more in with everything and not just one thing. By doing this they’ve created multiple product lifecycles within their own lifecycle as a corporate company.