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Starbucks on the international market
Starbucks threats and opportunities
Starbucks on the international market
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Starbucks Corporation was formed in 1985. Starbucks Corporation start with purchase and roast the high-quality bean and sell them. Now Starbuck not only provide coffee but also tea and other beverages. The company brand product will be under name of Starbucks, Tazo, Teavana, Starbucks VIA, Starbucks Refreshers, Seattle’s Best Coffee, La Boulange, and Verismo brand . Starbucks Corporation sector now is in restaurant or specialty eateries. On 2013, Starbucks store reach into approximately 10,194 stores and approximately 9,573 licensed stores. Starbucks open in over than 50 countries. Starbucks headquarter is at 2401 Utah Avenue South, Seattle, WA, 98134. Overall Starbucks employees are 182.000.
One of the biggest operating risks of Starbucks is commodity price volatility. The price is related to dairy, sugar and coffee bean price especially when Starbucks need to maintain the supply or inventories to support the operation. Even Starbucks have a contract with all that commodity and also agreement about the price, the contract is only for 5 years, its mean after 5 years the product can be have higher prices. Below is the diagram for coffee price related to Starbucks share price.
Another operating risk of Starbucks is:
• Opening 3,000+ net new stores in Americas region by 2017
• Channel Development (CPG) to double its international footprint by 2015
• China on track to become second-largest market in 2014
• Starbucks VIA® Ready Brew, K-Cup® packs and now the Verismo System combine to create the strongest and most complete line-up of premium single-serve options in the global coffee industry
• Social and digital media, loyalty and mobile payment platforms transforming customer experience and deepening connection to c...
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...nvestor look on Stock history from 1 year, Starbucks stock goes up from 63.21 to 70.17 (even Starbuck stock is going down now). Starbucks net income also goes up from last year. Based on 1 year calculation, Starbucks is a company that attract investor to put investment.
References
Matthew. (2014). Must know risk: why Starbucks should hedge its shrubs. Retrieved on May 15, 2014 from http://finance.yahoo.com/news/must-know-risks-why-starbucks-210008292.html
Starbucks Corporation (n.d.). retrieved on May 15, 2014 from http://investor.starbucks.com/
http://www.stockresearching.com/2013/09/11/starbucks-fundamental-analysis-wacc-cost-of-debt-and-cost-of-equity-sbux/
http://quicktake.morningstar.com/StockNet/bonds.aspx?Symbol=SBUX&Country=usa
http://www.bloomberg.com/quote/SBUX:US
http://www.marketwatch.com/investing/stock/sbux/financials/balance-sheet
Starbucks Corporation purchases and roasts whole bean coffees and sells them. As of September 28, 2003 (fiscal year-end 2003), Starbucks operated a total of 4,546 retail stores. Starbucks sells coffee and tea products through other channels, and, through certain of its equity investees. The Company has two operating segments, United States and International, each of which include Company-operated retail stores and Specialty Operations. Starbucks opened 602 new Company-operated stores during fiscal 2003. As of fiscal year-end, Starbucks had 3,779 Company-operated stores in the United States, 373 in the United Kingdom, 316 in Canada, 40 in Australia and 38 in Thailand. ¡]Smart money, 2004¡^
This strategic capitalises on weaknesses since will decrease the cost of coffee beans/beverages but also Starbucks operating cost which they regularly ship across the world to various stores. Starbucks can capitalise on this weakness to improve their brand options. It adds value in the inbound logistics activities, operations and procurements. Starbucks should consider this option since it will decrease their operating cost and therefore will reduce the prices on their menu. The attractiveness is the exact same as mentioned in option 1.
The key to its success lies not only in the quality of its products but also the ability to differentiate itself from the competition. With Starbucks, it has always been about quality. The company manages stringent quality control measures for sourcing the finest coffee beans, roasting processes as well as customer service and ancillary products. Furthermore, differentiation is key to market control and Starbucks is unquestioningly the most differentiated specialized coffee brands in the world. From the design of its coffee shops to the music played to the types of products offered, everything has a touch of uniqueness.
The importance of economic indicators to the strategic planning process in any organization is the ability to benchmark economic conditions that contribute to improve profitability, business growth and market size. Leadership sets up the mission “to establish Starbucks as the most recognized and respected brand in the world.” In doing so, they have created a set of industry-leading, comprehensive coffee-buying guidelines addressing coffee quality, financial transparency, social and environmental responsibility. Starbucks strategy is also expanding market in globally to provide high quality coffee in convenient and visibility locations. They are continuing to innovate and extend the business with imaginative new ready-to-drink beverages and expanded packaged coffee offerings (Starbucks Corporation, 2007).
The threats facing Starbucks include trademark infringements and increased competition from local cafes and specialization of other coffeehouse chains, and the saturation of the markets in developed economies, and supply disruptions. Furthermore, the increasing prices of its inputs such as dairy products and coffee beans pose a threat
Schultz, Howard, and Joanne Gordon. Onward: How Starbucks Fought for Its Life Without Losing Its Soul. New York: Rodale, 2011. N. pag. Print.
Starbucks is currently the industry leader in specialty coffee. They purchased more high quality coffee beans than anyone else in the world and keep in good standings with the producers to ensure they get the best beans. Getting the best beans is only the first part, Starbucks also has a “closed loop system” that protects the beans from oxygen immediately after roasting to the time of packaging. They did this through their invention of a one-way valve which let the natural gasses escape but keeping oxygen out. This gave them the unique ability to ensure freshness and extended the shelf life to 26 weeks. Starbucks isn’t only about the coffee, it’s also about a place where people can escape to enjoy music, reflect, read, or just chat. It is a total coffee experience. The retail outlet has been responsible for much of Starbucks growth and has contributed substantially to their brand equity.
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).
According to Investopedia website, “a technique that reduces risk by allocating investments among various financial instruments, industries and other categories is known as diversification. Diversification is the most important component of reaching long-term financial goals while minimizing risk” (“Investopedia”, 2011). “Fundamentally, this strategy is about creating new products with new product life cycles and making existing ones obsolete” (Olsen, n.d.). With diversification, Starbucks would be able to enter new markets with new products. By having a diversification strategy enforced, this will create a path for effective growth for the business. As with any company considering new products in new markets, there are risks associated with it and Starbucks would need to be prepared to respond accordingly.
Starbucks has many business-level strategies, such as cost leadership strategy. Starbucks focused on increasing its profits and compete with other competitors (Starbucks,n.d). According to Starbucks (n.d), “a cost leadership business strategy focuses on gaining advantage by reducing its economic costs below all of its competitors. Although Starbucks targets product differentiation as their main business strategy, they have also implemented cost savings strategies in an effort to maximize profitability. An example of Starbucks cost saving strategy can be identified between 2007 and 2008 when their operational expenses increased by more than $125 million while sales for the same time period were beginning to dip. As outsourcing for distribution contributed to 70% of Starbucks operational expenses, they began targeting these outsourcing agreements for renegotiations in an effort to bring down costs.” Starbucks intended to reduce their
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 Company was established in 1971 with their first store in Western Avenue from that same year to 1976. They started as retailers of ground coffee tea and spices with a single in Seattle’s historic Pike Place Market. Starbucks is named after the first mate in Herman Melville’s Moby Dick and their logo is inspired by the sea-featuring a twin-tailed siren from Greek mythology. Starbucks had always wanted to inspire the human spirit. They believe in serving the best coffee by growing the coffee under quality standards. Starbucks believes rendering good services to customers is very significant to the success of the company. From just a narrow storefront, Starbucks now has more than 20,000 stores in over 60 countries and they offer some of the world’s finest fresh-roasted whole bean coffees. Their coffee houses have become a beacon for coffee lovers everywhere. Starbucks believe that they can elevate their customers, partners, suppliers and neighbours to create positive change. They call their corporate offices “a support centre” for some reasons. They try to make everything they do there to support their retail store partners and make an impact on the communities they serve. They have a research and development team of over 200 people which are responsible for the science behind their great products. They are the innovators of delicious beverages and brewing equipments. They drive the innovations, conduct the research and test products. They have a public affairs, communications and community team of over 50 people who promotes and protects the company’s reputation all around the world. They also have a partner resources team of over 500 people that help their partners all around the world become their very best...
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.
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.