Friday, June 10, 2011

Starbucks Case Study


Starbucks business summary


Starbucks Corporation purchases and roasts high quality whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, a variety of pastries and confections, coffee-related accessories and equipment, and a line of premium teas, primarily through its Company-operated retail stores. In addition to sales through its Company-operated retail stores, Starbucks sells coffee and tea products through other channels of distribution (specialty operations). Starbucks, through its joint venture partnerships, also produces and sells bottled Frappuccino coffee drink and a line of premium ice creams. The Company's objective is to establish Starbucks as the most recognized and respected brand in the world.

Executive summary

Problem identification
Starbucks is faced with the issue of how it should leverage its core competencies against various opportunities for growth, including introducing its coffee in McDonalds, pursuing further expansion of its retail operations, and leveraging the brand into other product areas. The case is written so that students need to first identify where Starbucks' competencies lie along the value chain, and then assess how well those competencies can be leveraged across the various alternatives. Also provides an opportunity for students to assess what is driving growth in this company. Starbucks has a tremendous appetite for cash since all its stores are corporate, and investors are betting that it will be able to continue its phenomenal growth so it needs to walk a fine line between leveraging its brand to achieve growth and not eroding it in the process.

Situational analysis

Business Level-Strategy: 
The business strategy of Starbucks' is identical to the corporate level strategy since the company is a single business company, focusing on only coffee-related products and retail stores. 

Corporate Level-Strategy: 
Starbucks corporate strategy has been to establish itself as the premier purveyor of the finest coffee in the world, while maintaining their uncompromised principles as the grow. The firm principles of the company are seen with its maintenance of a great and proven work environment for every staff member in its retail stores. It upholds diversity and promises the highest standards for its products. The company satisfies customers and gives back to the community and the environment. Also, Starbucks persists to be profitable and it is. They live by a strict, slow growth policy completely dominating a market before setting its sights further abroad. This strategy has gained them the advantage of being one of the fastest growing companies in the country. 

Structure and Control Systems: 
Starbucks believes that their employees are one of their important assets in that their only sustainable advantage is the quality of their workforce. They have accomplished building a national retail company by creating pride in the labor produced through an empowering corporate culture, exceptional employee benefits, and employee stock ownership programs. The culture towards employees is laid back and supportive. Employees are empowered by management to make decisions without management referral and are encouraged to think of themselves as a part of the business. Management stands behind these decisions. Starbucks has avoided a hierarchical organizational structure and has no formal organizational chart. The company has both functional and product based divisions. There is some overlap in these divisions with some employees reporting to two division heads. 

SWOT analysis

Strengths
·    Starbucks Corporation is a very profitable organisation, earning in excess of $600 million in 2004. The company generated revenue of more than $5000 million in the same year.
·         It is a global coffee built upon a reputation for fine products. It has almost 9000 cafes in almost 55 countries.
·    Starbucks was one of the Fortune Top 100 Companies to work for in 2005. The company is a respected employer that values its work force.
·      The organisation has strong ethical values and an ethical mission statement as follows, “Starbucks is committed to a role of environmental leadership in all facets of our business.”
·         Brand name recognition
·         Quality Products
·         Good Marketing Skills
·         Well Developed Corporate strategy
·         Visionary leader
·         Distribution
·         Manufacturing competencies
·         Exclusive marketing rights



Weaknesses
·     Starbucks has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter overtime.
·         The organisation has a strong base in the USA with more than three quarters of tehir cafes located in the home market. They need to look for a portfolio of countries to spread business risk.
·      The organisation is dependent on a main competitive advantage, the retail of coffee. This could make them slow to diversify into other sectors should the need arise.

Opportunity
·    Strabucks is very good at taking advantage ofopportunities. In 2004 the company created CD burning service in their Santa Monica cafĂ© with HP, where the customers create their own music CDs.
·     New products and services that can be retailed in their cafes such as Fair Trade products.
·      Co- branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services bith have potential.

Threats
·   Who knows whether the market of coffee will grow and stay in favour of the customers, or whether another type of beverage or leisure activity will replace coffee in future.
·         Starbucks is exposed to rise in the cot of coffee and other dairy products.
·        Since its conception in the Pike Place market, Seatle in 1971, Starbucks’ success has lead to the market entry of many competitors and copy cat brands that pose potential threats.

Recommendation analysis
Starbucks has become a great successful company in the coffee bean and beverage business and its strategy has been very effective. From the beginning, Schultz, the company's owner, has professed a strict, slow growing policy. He feels it is also important to keep all the stores company owned to improve and grow the business further. To further grow, Starbucks will need to expand further in other areas of the United States as well as internationally. Future joint ventures will expand the products into grocery and convenience store shelves through bottled beverages and ice cream flavors. Other joint ventures will allow further expansion into the brewery business, which will produce beer with Starbucks' coffee beans. Other partnerships will bring new products for Starbucks, such as jazz CDs, and tandem units with bagel bakeries. As the company expands, the culture and corporate strategy must be maintained for success. This will ensure the health of the organization throughout any future expansion.