We’re not in the coffee business

serving people…

We’re in the people business

serving coffee.

-Howard Behar,
Director of Retail Operations

2
 • Founded by Jerry Baldwin, Zev Siegel, and
Gordon Bowker in 1971 in Seattle’s Pike Place
Market.

• Purchased by Howard Schultz in March of 1987

and turned in into what we see today.

• Schultz wanted to create a business that does

the right things for the right reasons and is
financially successful.

3
 Mission Statement

“Establish Starbucks as the premier purveyor of the

finest coffee in the world while maintaining our
uncompromising principles while we grow.”

4
 Guiding Principles
To support their mission statement the following six guiding principles
help guide the appropriateness of decisions:
• Provide a great work environment and treat each other with respect and
dignity.
• Embrace diversity as an essential component in the way we do business.
• Apply the highest standards of excellence to the purchasing, roasting and
fresh delivery of our coffee.
• Develop enthusiastically satisfied customers all of the time.
• Contribute positively to our communities and our environment.
• Recognize that profitability is essential to our future success.

5
 • Growth
– Number of stores
– Increase Net Revenue
• Preserve the Starbucks Experience
• Be a Leader in Corporate & Social
Responsibility

6
 • Balanced Scorecard Analysis based on Starbucks
Growth initiative
– A strategic “dashboard” executive management tool
• Where is Starbucks today? Where are they going?
• How will maintaining a Balanced Scorecard help in
achieving growth objectives?

7
 Financial
– Net revenue
– Same store sales
– Earnings per share

Customers 10,000 new stores Learning & Growth

– Increase core group in four years – Quality employees
– Support shade growth – Create the “Third Place”
– Sustainability index
– CSR
Operations
– New store growth
– Productivity
– Source coffee beans
8
 Causality Tree
Financial Same store sales Net revenue EPS

Customer Quality Products CSR Sustainability

Operations Productivity New store growth Source coffee beans

Learning Starbucks Experience Quality Employees

9
 • Attract & Retain Quality Employees
– Measure (1): Time to Fill
– Target (1): Less than 40 days
– Leading Indicator
------------------------------------------------------------------------------------------
– Measure (2): Percentage Voluntary Turnover
– Target (2): Less than 20%
– Lagging Indicator
------------------------------------------------------------------------------------------
– Measure (3): Percentage of Positions filled Internally
– Target (3): Greater than 50% for Supervisors and 80% for Unit
Managers
– Lagging Indicator

10
 • Maintain High Level of Employee Satisfaction
– Measure (1): Employee Satisfaction Survey
– Target (1): Greater than 70% Very Satisfied; 90% Satisfied
– Leading Indicator

------------------------------------------------------------------------------------------
– Measure (2): Percent Shrinkage
– Target (2): Less than 2%
– Lagging Indicator
------------------------------------------------------------------------------------------
– Measure (3): Employee Total Compensation
– Target (3): 30% above industry average
– Leading Indicator

11
 • Create the 3rd Place
– Measure (1): Employee Retention of Training
– Target (1): 90% of Benchmark
– Leading Indicator

------------------------------------------------------------------------
– Measure (2): Culture Compatibility Test
– Target (2): Score 80 +
– Leading Indicator

------------------------------------------------------------------------
– Measure (3): Secret Shopper Evaluation
– Target (3): Score of 95.45% (2 σ)
– Leading Indicator

12
 • Support New Unit Growth
– Measure: Sites under consideration vs. Benchmark
– Target: 1 : 1
– Leading Indicator

• Productivity
– Measure: Net Revenue per Labor Hour per Employee
– Target: Greater than $46.85
– Lagging Indicator

13
 • Increase the number of units
– Measure: Actual vs. Target
– Target: 1 : 1
– Lagging Indicator

• Source top quality coffee beans

– Measure (1): Contracts vs. Forecasted Demand
– Target (1): 105%
– Leading Indicator

--------------------------------------------------------------------------
– Measure (2): Purchased vs. Demanded
– Target (2): 100%
– Lagging Indicator

14
 • Support shade-grown coffee
– Measure: % coffee sourced from shade-grown farms
– Target: 25%
– Leading Indicator
• Grow top customers (18+ visits/month)
– Measure: # of visits per month
– Target: 5% annual growth
– Leading Indicator

15
 • Drive Sustainability
– Measure (1): % benchmark to index
– Target (1): Sustainability index
– Leading Indicator

-----------------------------------------------------------------------------------------
-
– Measure (2): # recycled paper products
– Target (2): 25%
– Lagging Indicator

16
 • Corporate and Social Responsibility
– Measure (1): % Fair Trade Coffee
– Target (1): Maintain or increase % year-to-year
– Lagging Indicator

-----------------------------------------------------------------------------------------
-
– Measure (2): % Organic Coffee
– Target (2): Maintain or increase % year-to-year
– Lagging Indicator

17
 • Net Revenue Increase
– Measure: Percent increase year-to-year
– Target: 20%
– Lagging Indicator

• Same Store Sales Growth

– Measure: Increase over previous period
– Target: 3-7%
– Lagging Indicator

18
 • Increase Firm Value
– Measure: Earnings per share
– Target: Increase 3.4% to $0.89 per share
– Lagging Indicator

19
 Beans

Value Chain Partners

Convenience

Consumers
Quality products

Investors
Drive Value / EPS

Employees
Starbucks Experience
Publics
Tax Base / CSR

20
 ↑ Sus. %
↑ Recycling
↑ Net Rev ↑ Rev/Unit ↑ EPS %Contract TQB
%Purchased TQB
%Shade Grown
Financial performance
# VPM %Fair Trade
%Organic
% Sites The 3 Place CSR
Growth rd
Considered.
% Sites
Constructed. ↓Shrinkage

Net Rev ↓Time to fill

Lbr Hr. ↓Vol. Turnover
Employees
↑ Promotions

↑ Compensation
Secret Shopper Compatibility Retention of training ↑ EE Satisfaction
21
 Financial
– Net revenue
– Same store sales
– Earnings per share

Customers 10,000 new stores Learning & Growth

– Increase core group in four years – Quality employees
– Support shade growth – Create the “Third Place”
– Sustainability index
– CSR
Operations
– New store growth
– Productivity
– Source coffee beans
22
Reasons for Unsatisfied Customers
• Focus on global expansion
– Starbucks went public in 1992 - raised $25 million
– Worldwide - Opening 3 stores daily on average
– Optimistic growth plan - Own 10,000 stores USA
• Focus on product Innovation
– One half day VS. 16 days working 8 hr shifts
– Clientele is changing with menu
– Increase of customization
– “Just Say Yes

23
Since the beginning…
• One store: whole coffee beans
• Transitioned to selling coffee drinks
• NOW:
– Went public in 1992, opened 140 stores
– 5000+ stores, 20 million customers
– Extensive drink menu
– Starbucks outside the coffee shop
24
 Competition
• Big Coffee Stores:
– Gloria Jeans
– Caribou Coffee
– Dunkin’ Donuts
• Small, Independent Shops
– More intimate/personalized
– More potential product mix
25
 Demand
• 109 million daily coffee drinkers
• 52 million on-occasion coffee drinkers
• 1/3 coffee consumption outside the home

• $21.5 billion total coffee market

– Starbucks share – 42%

26
Consumers and the Ideal Customer
• Changing clientele – new demographics
– Younger, less well-educated, lower incomes

• Highly satisfied customers = most profitable

customers

• Key factors for customer satisfaction

27 – Clean stores and friendly/attentive staff
 solutions
• Starbucks’ Proposal: Invest 40 million annually in
the company’s 4,500 stores, which would allow
20 additional labor hours a week/per store.
• Our Proposal: Do invest the 40 million annually,
but do not use every store. Research those
stores with higher volumes and invest in those.

28
Solutions cont….
• Add “bar-back” type employee

• Offer discounts and incentive offers

• Better rotation schedule to help prevent sluggish

employees
29
Evaluating the Solutions
• We will continue evaluating the effectiveness of our
plan by having monthly check-ups to determine
customer satisfaction
• Keep checking sales with respect to customer
satisfaction to make sure both stay positive
• Continue the Mystery Shopper Program

30
 Post-situation
• July 1st ,2008 – decision to close 600 stores
nationwide, expected to close within the next
year

• Starbucks Value Card

• Iced Brewed Coffee Card

31
 Thank you

32