STARBUCKS PRESENTATION REPORT

Organisation Structure y y Clear and distinct structure increases operational efficiency as there are fewer people to correspond to in a particular region This ensures that a regional president could not interfere with operations in another region

Pestel (Environmental) y y y Customers are able to ask for leftover ground coffee to be used as compost which is better for the environment than simply throwing them away By reducing size of bags and napkins, Starbucks annual solid waste has been reduced by 1.8 billion tones In 2008 Starbucks came under fire for allegedly wasting Millions of Litres of Water a Day under its policy of keeping a constant flow of water running in taps prevents germs breeding. Starbucks heavily boast about how green and environmentally friendly their corporation is so the wastage of such a natural resource goes against the mandate of Starbucks which puts the company in a bad light.

Pestel (Technological) y y Replaced its automatic espresso brewing machine, the Thermoplan Verismo 801 with the Clover brewing system in March 2008 Partnered with apple, enabling apple product users to use Starbucks wi-fi without needing to log in and notifies them of the song playing at that Starbucks store, allowing them to purchase if the wish Starbucks has taken advantage of recent technological advances by releasing an app that allows customers to buy coffee through their mobiles.

Pestel (Political) y The level of the tax levied on farmers in the countries that produces its coffee bean y High taxes imposed on farmer s means Starbucks would usually pay more for their purchase and vice versa. y Starbucks needs to evaluate the politically stability of countries it may expand into y An unstable government could lead to changes in taxation and/or legislation which may adversely affect Starbucks. Pestel (Social-cultural) Starbucks have added local tastes to menu s in the countries it occupies. However in 2002, reports showed that Starbucks` Japanese venture was in trouble and it announced that they expected to trade at a loss in 2003, many believed this was due to the fact that the companies coffee drinking experience was going against a century-old Japanese culture of green tea sipping.

Pestel (Legal) Monopolies Commission Starbucks may break monopoly legislation laws if their percentage of the market share is too big so they need to be aware of monopoly laws in the countries they occupy or plan to, so as not to break any laws. y Health and safety regulations Starbucks must comply with health and safety regulations wherever they plan to expand into Pestel (Economic) y y y y Poor state of US economy has caused Starbucks` growth and sales to falter. Products seen as luxuries, making it more vulnerable to be dropped from consumers expenditures. There must be an avenue of demand that is present in a country for what Starbucks are offering

Threat of Substitutes y y Close substitutes prevent firms from raising prices. Since Starbucks has relatively high prices they would want to reduce the similarity of substitutes as much as possible Starbucks aim to provide an overall experience which includes the product, service and environment. This means that substitutes are less effective in attracting customers from Starbucks Starbucks has also begun to sell bottled drinks such as Starbucks Coffee Bottled Frappuccino in supermarkets, which increases Starbucks consumer base

Threat of New Entrants y y y y The coffee market has relatively low barriers to entry (low capital investment, low sunk costs) and so it is not difficult for firms to enter the market However, the need to create distribution channels may deter some firms Existing firms could also choose to expand into the coffee market (like how Dunkin Donuts or McDonalds have done) However Starbucks has gained a reputation for high quality coffee and has strong consumer loyalty which means other firms would have to use measures such as advertising to increase brand/ product awareness Existing firms expanding into the market are likely to already have fairly strong branding and so would not need to spend as much money on advertising and marketing Starbucks benefits from large economies of scale. They can afford to invest in larger more efficient coffee roasting plants for example They already have good distribution networks and relationships with coffee bean suppliers which new entrants will have to gain.

y y y

Bargaining Power of Suppliers y There are many coffee suppliers around the world and the majority are in LEDC s (e.g. Brazil, Ethiopia). Since it is unskilled labour and most workers would have no alternative, Starbucks are able to buy at a low cost Also, since Starbucks are leading coffee bean buyer they are able to dictate the price at which they buy since their suppliers are reliant on them

Starbucks did join the Fairtrade organisation in 2000, but since then, in 2006 have been accused of unfair trading (with Ethiopia). This is likely to have damaged Starbucks image as a fair organisation with strong moral values

Strengths y y y y y Distinctive logo with a siren in a green background High quality control ensures customer satisfaction and that Starbucks maintain its good reputation Loyalty programme (customers are entitled for free membership when registering their Starbucks Card online) Creates job opportunities To ensure product consistency, recruited baristas are given extensive training, usually at least 24hours in the first week and are often trained in Seattle for 2 weeks

Weaknesses y y y y Starbucks product prices are still relatively high compared to competitors such as McDonalds and Dunkin Donuts Although Starbucks still dominates US market, Starbucks market share had fallen to 32.6% in April 2011 Starbucks should focus more on other potential markets such as South East Asia and China where economic growth is stronger and less people are cutting on spending Their aggressive expansion policy could lead to too many stores without suitable management in place, which can cause communicational problems

Opportunities y y Expand into growing markets, especially China, Brazil and India, where they will be able to increase revenue Starbucks VIA Instant Coffee has been released, and has brought Starbucks a revenue of 100 million dollars 10 months after its introduction. If they can ensure the continued success of VIA it could result in Partnered with Apple to sell songs in iTunes. Continued collaboration with large companies such as apple could help attract more consumers

y Threats y y y y

Intense competition within the industry such as Dunkin Donuts and Costa Economic slowdown has caused reductions in peoples spending, especially on more luxurious goods such as Starbucks coffee and could continue to do so in future Sentimental issue in the society about the negative effects of drinking coffee Natural disaster may decrease coffee bean supply

The Future y The U.S. market is already saturated and continuing to add to the 11,000 stores which are currently in place will place a burden on their capital while being unlikely to attract many more consumers. They may also suffer from firms stealing their customers such as is the case with Peet s Coffee Other firms continue to make large investments on advertising while Starbucks have reduced their advertising costs in recent years.

References http://www.starbucks.com/about-us/our-heritage http://www.starbucks.com/about-us/company-information/mission-statement http://starbucks.co.uk/menu/beverage-list/bottled-drinks http://www.enn.com/pollution/article/38357 http://news.starbucks.com/article_display.cfm?article_id=547 http://www.espressocoffeeguide.com/2011/06/starbucks-stock-starbucks-coffe-from-starbuxstarbuck-to-starbucks-history-and-gossip/ http://www.ibisworld.com http://www.mhhe.com/business/management/thompson/11e/case/starbucks.html http://en.wikipedia.org/wiki/Starbucks http://www.apple.com/pr/library/2007/09/05Apple-and-Starbucks-Announce-MusicPartnership.html http://news.cnet.com/8301-27076_3-20092682-248/starbucks-serves-up-free-iphone-apps/ http://www.guardian.co.uk/business/2007/jan/29/development.filmnews Management : An Introduction by David Boddy, page 112-142, fourth edition (2008), Financial Times/Prentice Hall