A Report Presented to the Faculty of

Graduate School of

Philippine Christian University

GRADUATE SCHOOL OF BUSINESS AND MANAGEMENT

Master in Business Management

STRATEGIC MANAGEMENT I

A Case Analysis and Strategic Audit on

Starbucks

By:
JO ANNE V. GUEVARRA
MIRIAM LUNINGNING C. PADILLA
DBP Head Office

08 June 2020

Professor: BERNADETTE O. VILLALUZ, Ph.D.

 STRATEGIC AUDIT STRUCTURE
Table of Contents

I. Executive Summary……………………………………………………………………
II. Company Background…………………………………………………………………
III. Past Corporate Performance Indexes.……………………………………..………….
IV. Strategic Posture…………………………………………..….……………………….
A. Current Mission…………………………………………….…………..…………
B. Current Objectives…………………………………………..…………………….
C. Current Strategies………………………………………….….….….....................
D. Current Policies ……………………………..……………………………………..
(SWOT Analysis begins)
V. Corporate Governance…………………………………………………….…………..
A. Board of Directors …………………………………………………………………
B. Top Management …………………………………………………….……………
VI. External Environment (EFAS: Opportunities and Threats (SWOT)
A. Natural Environment………………………………………..……………………..
B. Societal Environment………………………………………..…………………….
C. Task Environment (Industry Analysis)……………………………………….……
D. Summary of External Factors…………………………………………….……….
VII. Internal Environment (IFAS: Strengths and Weaknesses (SWOT)
A. Corporate Structure……………………………………………..…………………
B. Corporate Culture………………………………………………………………….
C. Corporate Resources……..………………………………………………………..
1. Marketing ………………………………………………………………………
2. Finance……….…………………………………………………………………
3. Research and Development ………………….…………………………………
4. Operations and Logistics ……………………….………………………………
5. Human Resources ………………………………………………………………
6. Information Technology ……………………….……………………………….
D. Summary of Internal Factors……………………………………………………....
VII. Analysis of Strategic Factors (SWOT/SFAS) ………………………..…………….
A. Key Internal and External Strategic Factors (SWOT) …………………..………
1. Strengths……………………………………………………………………
2. Weaknesses……………………………………….………………………..
3. Opportunities………………………………………….…………………….
4. Threats…………………………………………………….………………...
B. Review of Mission and Objectives ………………………………………………
(SWOT analysis ends, Recommendation begins)
VIII. Alternatives and Recommendations ………………………………………………
A. Strategic Alternatives (pros and cons)……………………..……………………
B. Recommendations Strategy………………..…………………………………….
IX. Cost-Benefit Analysis……..………..……………………………………………….
X. Implementation……………………………………………………………………….
XI. Evaluation and Control………………………………………………………………
XII. Conclusion……………………………………………...…………………………..
XIII. References…………………………………………..…………………….. ……...
XIV. Appendix………………………………………………..…………………………
 I. EXECUTIVE SUMMARY

Starbucks is a global company operating in the coffee retail market since 1972. The company,

which has positioned itself as a seller of premium coffee products, has greatly expanded its market

position and presence in the past two decades. Today, the company is serving coffee enthusiasts in 64

countries and has grown to become the world’s largest coffee house company. Starbucks seemingly

undisputed market leadership position can be attributed to the company’s clever product diversification

and market expansion strategies. In response to changing consumer needs and demand, Starbucks has

evolved from a mere seller of coffee products to full-fledged chain “restaurant”, offering not only coffee

products but also other beverages, foods, and merchandise. Moreover, stagnating market growth in

developed economies has prompted the company to move into emerging economies with high growth

potential. Countries like China, India, and Brazil have been portraying increasing consumption rates of

coffee products for years and are likely to surpass coffee consumption in developed countries by 2020.

Despite a positive market outlook, Starbucks is in need of strategic counseling as the company

faces not to be underestimated challenges in the short- to medium-term. Those challenges emanate from

established competitors like McDonalds and Dunkin’ Donuts who defy Starbuck’s market leadership position

by driving aggressive low-pricing strategies in established and emerging markets. Moreover, new trends

in the coffee industry have opened up new segments with high growth potentials. Starbucks remains

unsure how tackle new segments and what impact trends could have on its product portfolio.

This report is meant to be a strategic pathfinder that aims at illuminating different strategic

alternatives in the light of the many opportunities and threats that lie ahead. The report will also give

advice on how to utilize internal strengths to capitalize on opportunities and how to minimize weaknesses

to avoid threats.

The internal position of Starbucks is strong, indicating that the company excels in utilizing

strengths to create competitive advantages. Core strengths of the company are its excellent brand image,
customer service, supply chain management, and financial position. With the help of the latter

capabilities, Starbucks is able to retain its market leadership position, improve the ability to open new

stores at top-sites, and mitigate volatilities in global coffee bean prices. One major weakness is that

continuous adaptations and additions to the product portfolio have resulted in various products lines

becoming unprofitable (overextension). The external position of Starbucks is balanced, indicating that the

company is only marginally able to respond to external forces. Since the economic downturn in

2008/2009, customers have grown more price-sensitive and low switching costs in the industry have

made them more prone to move to competing brands. Moreover, saturated markets at home have

increased the competitive pressure on Starbucks. Having missed the first-mover advantage in the single-

serve coffee segment, Starbucks has to quarrel with a number of competitors.

Despite heavy challenges in the external environment, the analysis has shown that Starbucks is

well-positioned to confront expected changes in the industry. The company is advised to continue key

strategies on corporate level: aggressive expansion strategy in emerging markets, product

development/positioning strategies for niche markets, retrenchment strategies for unprofitable product

lines, and alliances for reputable yet slow-growing product lines. Whilst the latter strategies are enough to

maintain and defend current markets shares, the company must undertake additional strategic changes to

achieve a sustainable market leader position in the short – to medium-term. Here it is important to

increase marketing spending to raise awareness among customers, retain the premium- pricing strategy to

boost brand image, establish trend-scouting facilities to foresee emerging consumer needs, and hedge

against volatilities in the market prices of coffee beans by employing forward contracts or similar hedging

strategies.

https://www.uhu.es/45122/temas/P&SC/Theme1_StarbucksCoffe_CaseStudy.pdf
II. COMPANY BACKGROUND

Starbucks originally started in 1971 by Jerry Balswin, Gordon Bowker, and Zev Siegl, with its

first shop located in Seattle's historic Pike Place Market. From this location, Starbucks sold high-quality

whole coffee beans, dark-roasted in small batches, the European way. 

The name of Starbucks was chosen in honor of the coffee-loving first mate in Herman Melville's

Moby Dick, and, because they thought the name evoked the romance of the high seas and the seafaring

tradition of the early coffee traders. The current company logo, is a twin-tailed siren, from Greek

mythology, encircled by the store's name.

In 1982, Howard Schultz, the now celebrated CEO of Starbucks, joined as director of retail

operations and marketing. Two years later, Mr. Schultz convinced the founders of Starbucks to test the

coffeehouse concepts in their downtown Seattle store, where the first Starbucks® Caffe Latte was served.

In 1987, Howard Schultz led a group of investors that purchased Starbucks from its' founders.

Since then, Starbucks has become the premier roaster and specialty coffee retailer in the world. Currently,

there are 18,000 stores in 62 countries. 

Along with selling high quality coffee beans, Starbucks offers a variety of specialty coffee drinks,

teas, hot chocolate, merchandise and a limited menu selection of food items. Their stores offer a clean,

relaxing atmosphere with free Wi-Fi for customers. 

 1971 Starbucks opens first store in Seattle’s Pike Place Market.

 1982 Howard Schultz joins Starbucks as director of retail operations and marketing. Starbucks

begins providing coffee to fine restaurants and espresso bars.

 1983 Schultz travels to Italy, where he’s impressed with the popularity of espresso bars in Milan.

He sees the potential to develop a similar coffeehouse culture in Seattle.

 1984 Schultz convinces the founders of Starbucks to test the coffeehouse concept in downtown

Seattle, where the first Starbucks Caffè Latte is served. This successful experiment is the genesis

for a company that Schultz founds in 1985.

 1985 Schultz founds Il Giornale, offering brewed coffee and espresso beverages made from

Starbucks® coffee beans.

 1987 Il Giornale acquires Starbucks assets with the backing of local investors and changes its

name to Starbucks Corporation. Opens in Chicago and Vancouver, Canada. Total stores*: 17

 1988 Offers full health benefits to eligible full- and part-time employees, including coverage for

domestic partnerships. Total stores: 33

 1989 Total stores: 55

 1990 Starbucks expands headquarters in Seattle. Unveils Starbucks Mission Statement “To

establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our

uncompromising principles as we grow.” Total stores: 84

 1991 Becomes the first privately owned U.S. Company to offer a stock option program that

includes part-time employees. Opens first licensed airport store at Seattle’s Sea-Tac International

Airport. Total stores: 116

 1992 Completes initial public offering (IPO). Total stores: 165

 1993 Opens roasting plant in Kent, Wash. Announces first two-for-one stock split. Total stores:

272

 1994 Opens first drive-thru location. Total stores: 425

 1995 Begins serving Frappuccino® blended beverages. Opens first LEED-certified store in

Hillsboro, Ore. Debuts its first album, “Blue Note Blend.” Announces second two-for-one stock

split. Opens roasting facility in York, Pa. Total stores: 677

 1996 Begins selling bottled Frappuccino® coffee drink through North American Coffee

Partnership. Opens stores in: Japan (first store outside of North America) and Singapore. Total

stores: 1,015

 1997 Establishes the Starbucks Foundation. Opens stores in: Philippines. Total stores: 1,412

 1998 Extends the Starbucks brand into grocery channels across the U.S. Opens in underserved

neighborhoods through joint-venture partnership with Magic Johnson. Launches Starbucks.com.

Establishes the CUP Fund emergency financial assistance fund for partners. Opens stores in:

England, Malaysia, New Zealand, Taiwan and Thailand. Total stores: 1,886

 1999 Acquires TazoTea. Partners with Conservation International to promote sustainable coffee-

growing practices. Announces third two-for-one stock split. Opens stores in: China, Kuwait,

Lebanon and South Korea. Total stores: 2,498

 2000 Establishes licensing agreement with TransFair USA to sell Fairtrade certified coffee in U.S.

and Canada. Opens stores in: Australia, Bahrain, Hong Kong, Qatar, Saudi Arabia and United

Arab Emirates. Total stores: 3,501

 2001 Introduces ethical coffee-sourcing guidelines developed in partnership with Conservation

International. Introduces the Starbucks Card. Announces fourth two-for-one stock split. Opens

stores in: Austria, Scotland, Switzerland and Wales. Total stores: 4,709
 2002 Establishes Starbucks Coffee Trading Company (SCTC) in Lausanne, Switzerland.

Launches Wi-Fi in stores. Opens stores in: Germany, Greece, Indonesia, Mexico, Oman, Puerto

Rico and Spain. Total stores: 5,886

 2003 Acquires Seattle Coffee Company, which includes Seattle’s Best Coffee® and Torrefazione

Italia® coffee. Opens roasting facilities in Carson Valley, Nev., and Amsterdam, Netherlands.

Opens stores in: Chile, Cyprus, Peru and Turkey. Total stores: 7,225

 2004 Opens first Farmer Support Center in San Jose, Costa Rica. Introduces Starbucks Coffee

Master Program. Opens stores in: France and Northern Ireland. Total stores: 8,569

 2005 Acquires Ethos Water. Announces fifth two-for-one stock split. Opens stores in: Bahamas,

Ireland and Jordan. Total stores: 10,241

 2006 Launches the industry’s first paper beverage cup containing post-consumer recycled fiber.

Opens stores in: Brazil and Egypt. Total stores: 12,440

 2007 Eliminates all artificial trans-fat and makes 2 percent milk the new standard for espresso

beverages. Opens stores in: Denmark, the Netherlands, Romania and Russia. Total stores: 15,011

 2008 Chairman Howard Schultz returns as chief executive officer and begins transformation of the

company. Acquires Coffee Equipment Company and its Clover® brewing system. Adopts new

Mission Statement “To inspire and nurture the human spirit – one person, one cup and one

neighborhood at a time.” Establishes social media presence, launching Starbucks first online

community, My Starbucks Idea. Also joins Twitter and debuts Starbucks Facebook page. Opens

stores in: Argentina, Belgium, Bulgaria, Czech Republic and Portugal. Total stores: 16,680

 2009 Launches Starbucks VIA® Instant. Opens Farmer Support Center in Kigali, Rwanda.

Launches My Starbucks Rewards® loyalty program and first iPhone app with Starbucks Card

mobile payment. Opens Roasting Plant in Sandy Run, S.C. Opens stores in: Aruba and Poland.

Total stores: 16,635

 2010 Expands digital offerings for customers with free unlimited Wi-Fi. Opens stores in: El

Salvador, Hungary and Sweden. Total stores: 16,858

 2011 Launches first annual Global Month of Service to celebrate company’s 40th anniversary.

Opens first Community Stores in Harlem and Crenshaw neighborhoods. Launches Starbucks® K-

Cup® packs.* Acquires Evolution Fresh. Opens Farmer Support Center in Mbeya, Tanzania.

Launches Create Jobs for USA to encourage small-business growth. Opens stores in: Guatemala,

Curacao and Morocco. Total stores: 17,003 * Keurig, K-Cup, and the K logo are trademarks of

Keurig Green Mountain, Inc., used with permission

 2012 Introduces Starbucks® Blonde Roast. Opens Farmer Support Centers in Manizales,

Colombia and Yunnan, China. Acquires La Boulange. Adds Starbucks Refreshers® to its

beverage platform. Acquires Teavana. Opens Starbucks Soluble Plant in Augusta, Ga. Launches

Verismo® System by Starbucks, a premium single-cup solution for at-home beverages Opens

stores in: Costa Rica, Finland, India and Norway. Total stores: 18,066

 2013 Strengthens ethical sourcing efforts with coffee farming research and development center in

Costa Rica. Starbucks CEO Howard Schultz reinforces company’s commitment to marriage

equality at company’s Annual Shareholders Meeting. Opens Evolution Fresh juicer in Rancho

Cucamonga, Calif. First military family stores open near military bases in Lakewood, Wash. and

San Antonio, Tex. Opens stores in: Vietnam and Monaco. Total stores: 19,767

 2014 Creates Starbucks College Achievement Plan with Arizona State University to offer

qualifying Starbucks U.S. partners the opportunity to complete a college degree through ASU’s

online degree program. Announces commitment to hiring 10,000 veterans and military spouses by

2018. Opens first Starbucks Reserve® Roastery in Seattle. Launches Starbucks Mobile Order &

Pay. Opens stores in: Brunei and Colombia. Total stores: 21,366

 2015 Launches Cold Brew iced coffee. Announces sixth two-for-one stock split. Commits to

hiring at least 10,000 Opportunity Youth by 2018 and leads the 100,000 Opportunities Initiative, a
 coalition of leading companies to create pathways to employment for young people. Expands

Starbucks College Achievement Plan to offer full tuition coverage for all four years of an

undergraduate degree for qualifying U.S. Starbucks partners. Commits to 25,000 partners

graduating by 2025. Reaches 99% ethically sourced coffee milestone and launches commitment to

provide coffee trees for farmers impacted by coffee rust. Announces the Sustainable Coffee

Challenge at the U.N. climate negotiations in Paris in partnership with Conservation International

and other industry leaders to make coffee the world’s first sustainably sourced agricultural product

in the world. Opens stores in: Azerbaijan, Cambodia, Kazakhstan and Panama. Total stores:

23,043

 2016 Opens store and on-site training center in Queens, N.Y. and Ferguson, Mo., the first of many

locations the company opens in diverse, low- to medium-income urban communities. Launches

FoodShare, a program to donate ready-to-eat meals to food banks across the U.S. Joins TurboVote

Challenge to encourage civic participation in the U.S. Debuts “Upstanders,” an original series that

spotlights civic engagement and service. Opens stores in: Andorra, Luxembourg, Slovakia, South

Africa, and Trinidad and Tobago. Total stores: 25,085

 2017 Expands hiring commitment to 25,000 service members, veterans and military spouses by

2025, after reaching milestone of 10,000 hires. Expands hiring commitment to include 10,000

refugees around the world by 2022. Kevin Johnson becomes chief executive officer. Howard

Schultz transitions to executive chairman. Debuts voice ordering with Starbucks mobile app and

Amazon Alexa platform. Opens Starbucks Reserve® Roastery in Shanghai. First Princi bakeries

for Starbucks open in Starbucks Roasteries. Opens stores in: Jamaica. Total stores: 28,039

 2018 Commits to new environmental goals: phasing our plastic straws by 2020 and operating

10,000 ‘Greener Stores’ globally by 2025. Opens Starbucks Reserve® Roastery locations in Milan

and New York. First U.S. Signing Store opens in Washington, D.C., led by partners fluent in
 American Sign Language. Howard Schultz retires from Starbucks, becomes chairman emeritus.

Opens stores in: Italy. Total stores: 29,865

https://stories.starbucks.com/uploads/2019/01/AboutUs-Timeline-1.24.19.pdf

III. CORPORATE PERFORMANCE INDEXES

SEGMENT FINANCIAL INFORMATION

Segment information is prepared on the same basis that our management reviews financial

information for operational decision-making purposes. In the fourth quarter of fiscal 2019, they realigned

Starbucks operating segment reporting structure to better reflect the cumulative effect of their

streamlining efforts. Specifically, the previous China/Asia Pacific ("CAP") segment and Europe, Middle

East, and Africa ("EMEA") segment have been combined into one International segment. Concurrently,

results of Siren Retail, a non-reportable operating segment consisting of Starbucks ReserveTM Roastery

& Tasting Rooms, certain stores under the Starbucks Reserve brand and Princi operations, which were

previously included within Corporate and Other, are now reported within the Americas and International

segments based on the geographical location of the operations.

Starbucks have three reportable operating segments:

1. Americas, which is inclusive of the U.S., Canada, and Latin America;

2. International, which is inclusive of China, Japan, Asia Pacific, Europe, Middle East, and

Africa; and

3. Channel Development

Non-reportable operating segments such as Evolution Fresh and unallocated corporate expenses

are reported within Corporate and Other. Revenues from their reportable operating segments as a
percentage of total net revenues for fiscal 2019 were as follows: Americas (69%), International (23%) and

Channel Development (8%).

The Americas and International segments include both company-operated and licensed stores. The

Americas segment is their most mature business and has achieved significant scale. Certain markets

within the International operations are either in various stages of development or undergoing

transformations of their business models. Therefore, they may require a more extensive support

organization, relative to their current levels of revenue and operating income, than our Americas

operations.

The Channel Development segment includes roasted whole bean and ground coffees, Seattle's

Best Coffee®, Starbucks- and Teavana-branded single-serve products, a variety of ready-to-drink

beverages, such as Frappuccino®, Starbucks Doubleshot®, Starbucks Refreshers® beverages and

TeavanaTM/MC iced tea, and other branded products sold worldwide outside of the company-operated

and licensed stores. Historically their consumer packaged goods ("CPG") have been sold directly to

grocery, warehouse club and specialty retail stores and through institutional foodservice companies. With

the establishment of the Global Coffee Alliance with Nestlé, a large portion of our Channel Development

business transitioned to a licensed model in the fourth quarter of fiscal 2018. The collaborative

relationships with PepsiCo, Inc., Anheuser-Busch InBev, Tingyi Holding Corp., Arla Foods and others for

their global ready-to-drink beverage businesses in this segment are excluded from the Global Coffee

Alliance.

REVENUE COMPONENTS

Starbucks generate the majority of our revenues through company-operated stores and licensed

stores.

Company-operated and Licensed Store Summary as of September 29, 2019:

 The mix of company-operated versus licensed stores in a given market will vary based on several

factors, including the ability to access desirable local retail space, the complexity, profitability and

expected ultimate size of the market for Starbucks and the ability to leverage the support infrastructure

within a geographic region.

COMPANY-OPERATED STORES

Revenue from company-operated stores accounted for 81% of total net revenues during fiscal

2019. Their retail objective is to be the leading retailer and brand of coffee and tea in each of their target

markets by selling the finest quality coffee, tea and related products, as well as complementary food

offerings, and by providing each customer with a unique Starbucks Experience. The Starbucks

Experience is built upon superior customer service and a seamless digital experience as well as clean and

well-maintained stores that reflect the personalities of the communities in which they operate, thereby

building a high degree of customer loyalty. Their strategy for expanding global retail business is to

increase their market share in a disciplined manner, by selectively opening additional stores in new and

existing markets, as well as increasing sales in existing stores, to support their long-term strategic

objective to maintain Starbucks standing as one of the most recognized and respected brands in the world.

Store growth in specific existing markets will vary due to many factors, including expected financial

returns, the maturity of the market, economic conditions, consumer behavior and local business practices.

Company-operated store data for the year-ended September 29, 2019:

 International store data includes the transfer of 377 company-operated stores in Thailand to

licensed stores as a result of the sale of operations late in the third quarter of fiscal 2019, and the transfer

of 82 company-operated stores in France and the Netherlands to licensed stores as a result of the sales of

operations in the second quarter of fiscal 2019.

Starbucks® company-operated stores are typically located in high-traffic, high-visibility locations.

The ability to vary the size and format of their stores allows to locate them in or near a variety of settings,

including downtown and suburban retail centers, office buildings, and university campuses and in select

rural and off-highway locations. They are continuing the expansion of their stores, particularly Drive Thru

formats that provide a higher degree of access and convenience, and alternative store formats, which are

focused on an elevated Starbucks Experience for their customers.

Retail sales mix by product type for company-operated stores:

(1)
“Other” primarily consists of sales of serveware and ready-to-drink beverages, among other items.

Stored Value Cards and Loyalty Program

The Starbucks Card, the branded stored value card program, is designed to provide customers with a

convenient payment method, support gifting and increase the frequency of store visits by cardholders, in

part through the related Starbucks® Rewards loyalty program where available. Stored value cards are

issued to customers when they initially load them with an account balance. They can be obtained in the

company-operated and most licensed stores in North America, China, Japan, and many of their markets in

their International segment, including here in the Philippines. Stored value cards can also be obtained on-

line, via the Starbucks® Mobile App, and through other U.S. and international retailers. Customers may

access their card balances by utilizing their stored value card or the Starbucks® Mobile App in

participating stores. Using the Mobile Order and Pay functionality of the Starbucks® Mobile App,

customers can also place orders in advance for pick-up at certain participating locations in several

markets. In nearly all markets, including the U.S., Canada and Philippines, customers who register their

Starbucks Cards are automatically enrolled in the Starbucks Rewards program. Registered members can

receive various benefits depending on factors such as the number of reward points (“Stars”) earned.

LICENSED STORES

Revenues from ther licensed stores accounted for 11% of total net revenues in fiscal 2019.

Licensed stores generally have a lower gross margin and a higher operating margin than company-

operated stores. Under the licensed model, Starbucks receives a margin on branded products and supplies

sold to the licensed store operator along with a royalty on retail sales. Licensees are responsible for

operating costs and capital investments which more than offset the lower revenues they receive under the

licensed store model.

In the licensed store operations, the leverage the expertise of their local partners and share their

operating and store development experience. Licensees provide improved, and at times the only, access to
desirable retail space. Most licensees are prominent retailers with in-depth market knowledge and access.

As part of these arrangements, they sell coffee, tea, food and related products to licensees for resale to

customers and receive royalties and license fees from the licensees. They also sell certain equipment, such

as coffee brewers and espresso machines, to the licensees for use in their operations. Employees working

in licensed retail locations are required to follow their detailed store operating procedures and attend

training classes similar to those given to employees in company-operated stores. In a limited number of

international markets, they also use traditional franchising and include these stores in the results of

operations from their other licensed stores.

Licensed store data for the year-ended September 29, 2019:

(1)
International store data includes the transfer of 377 company-operated stores in Thailand to licensed

stores as a result of the sale of operations late in the third quarter of fiscal 2019, and the transfer of 82
company-operated stores in France and the Netherlands to licensed stores as a result of the sales of

operations in the second quarter of fiscal 2019.

OTHER REVENUES

Other revenues primarily are recorded in their Channel Development segment and include sales of

packaged coffee, tea and ready-to-drink beverages to customers outside of their company-operated and

licensed stores. Historically, revenues have included domestic and international sales of their packaged

coffee, tea and ready-to-drink products to grocery, warehouse club and specialty retail stores and through

institutional foodservice companies. With the establishment of the Global Coffee Alliance in the fourth

quarter of fiscal 2018, other revenues include product sales to and licensing revenue from Nestlé under

this arrangement and the amortization of the up-front prepaid royalty.

https://stories.starbucks.com/press/2019/starbucks-reports-q4-and-full-year-fiscal-2019-results/
IV. STRATEGIC POSTURE

A. CURRENT MISSION

“To inspire and nurture the human spirit – one person, one cup and one neighborhood at a

time.” 

This mission statement reflects what the company does to keep its business running. It is clear that

target consumers are given emphasis in this corporate mission. The following components of

Starbucks’s corporate mission statement influence strategic management in growing the business:

1. Inspire and nurture the human spirit

2. One person, one cup and one neighborhood at a time

B. CURRENT OBJECTIVE

Starbucks has developed a mission statement that includes cultural development, innovation, high

performance and accountability as element of the company’s values. The corporate mission

statement defines the company’s goals. The company aims to meet this goal through the

development of a culture that embraces acceptance and is supportive of personal growth. As

stated in the company’s values, personal growth occurs through challenges and grows the
 company as well. This goal of acceptance extends into the company’s diversity and accessibility

policies.

C. CURRENT STRATEGIES

1. Adds five (5) million new digitally registered customers with digital flywheel since April

2018; active Starbucks Rewards Members up to 13% year-over-year to 15 million.

2. Three (3) newer major digital initiatives will contribute approximately 1-2% attributable

comps in FY 2019.

3. Raises target for cash returned to shareholders to $25 billion through FY 2020, including a

20% increase in the company’s regularly scheduled quarterly dividend.

4. Sharpens focus on optimizing store footprint, anticipates lower net new store growth in the

U.S. for FY 2019 – further concentrating growth in under penetrated markets.

5. Decisive steps being taken by leadership to address an anticipated 1% growth in Q3 FY

2018 global comparable sales.

6. Announces plans to drive G&A efficiency.

7. Will provide additional detail with respect to FY 2018 guidance during investor

presentation

D. CURRENT POLICIES

Starbucks policy is to deal honestly and fairly with government authorities and to comply

with valid governmental requests and processes. Partners must be truthful and straightforward in

their dealings with the government and may not direct or encourage another partner or anyone else

to provide false or misleading information to any government official or representative. Partners

must not direct or encourage anyone to destroy records relevant to an investigation.

https://www.starbucks.ph/media/Business-Ethics-and-Compliance-eng_tcm70-11290.pdf

E. SWOT ANALYSIS

Strength
  Brand recognition and consumer loyalty

 Diverse product portfolio catering to all taste and ages, including non-coffee beverages and

food items

 Excellent customer service and the value of the Starbucks experience

 Licensing relationships with top-brands such as Pepsi Cola and Tazo Tea that minimize

costs and leverage the strategic advantages of those companies

 Strong employee relationships

 Economies of scale providing superior distribution networks and supplier power

 Primly-located retail stores

 Positive image attributed to social responsibility

Weaknesses

 Pay 23% more for coffee than market prices

 Saturation of the market diminishes long‐term growth prospects

 No monetary switching costs for consumers

 Negative large corporation image

 Potential limitations of international expansion due to cultural clashes with American coffee

experiences

Opportunities

 Have the ability to reduce premiums paid for coffee

 Room for international expansion (78% of revenues came from the United States in fiscal

2007 and international same‐store sales growth is strong)xix

 Room to compete on multiple fronts including quality and price

  Increase licensing relationships to further utilize brand strength to capture profits at little

cost to the company

Threats

 Increasing coffee and dairy prices

 Intense competition in the specialty coffee beverage business

 Unfavorable economic conditions that lower the demand for expensive beverages

 Community resistance to store expansion

 The possibility that the demand for specialty coffee is a fad

 Diverging from the Starbucks experience

 Further diversification of fast food restaurants that cuts into market share
V. CORPORATE GOVERNANCE

A. BOARD OF DIRECTORS

In June 2018, Howard Schultz retired from Starbucks. In recognition of Howard’s 36-

year contribution to Starbucks, the board awarded him the honorary title of chairman

emeritus. Upon Howard’s retirement, Myron E. (Mike) Ullman, III was named chair and

Mellody Hobson was named vice chair. This transition was fully disclosed to shareholders in

June 2018 and is summarized in the Starbucks 2019 Proxy Statement.

As part of Starbucks mission we are committed to maintaining our uncompromising

principles while we grow. In this regard, our Board of Directors has adopted governance

principles and committee charters to lead Starbucks governance practices. Currently, our

board has 13 directors, a substantial majority of whom meet all of the independence

requirements of NASDAQ and the U.S. Securities and Exchange Commission.

LIST OF BOARD OF DIRECTORS:

 MYRON E. ULLMAN
Starbucks Board of Directors – Chairperson
J.C. Penny Company, Inc., former Chairperson

 MELLODY HOBSON
Starbucks Board of Directors – Vice Chairperson
Ariel Investments, LLC, Co-Chief Executive Officer and President

 RICHARD E. ALLISON, Jr.

Domino’s
Chief Executive Officer

 ROSALIND (ROZ) G. BREWER

Starbucks
Chief Operating Officer and Group President

 ANDREW CAMPION
Nike
Executive Vice President and Chief Operating Officer
  MARY N. DILLON
Salon, Cosmetic & Fragrance, Inc.
Chief Executive Officer

 ISABEL GE MAHE
Apple Inc.
Vice President and Managing Director of Greater China

 KEVIN JOHNSON
Starbucks
President and Chief Executive Officer

 JORGEN VIG KNUDSTORP

LEGO Brand Group
Executive Chairman

 SATYA NADELLA
Microsoft Corporation
Chief Executive Officer and Director

 JOSHUA COOPER RAMO

Kissinger Associates
Co-Chief Executive Officer and Vice Chairman

 CLARA SHIH
Hearsay System, Inc.
Chief Executive Officer

 JAVIER G. TERUEL
Colgate – Palmolive Company

LIST OF TOP MANAGEMENT/SENIOR OFFICERS:

 KEVIN JOHNSON
President and Chief Executive Officer

 ROSALIND (ROZ) G. BREWER

Chief Operating Officer and Group President

 ANDY ADAMS
Senior Vice President
Store Development

 KELLY BENGSTON
Senior Vice President,
Chief Procurement Officer, Global Sourcing
 LUIGI BUNINI
Senior Vice President,
Global Product Innovation

 BRADY BREWER
Executive Vice President,
Chief Marketing Officer

 MARTIN BROK
President,
Starbucks Europe, Middle East and Africa

 MICHELLE BURNS
Senior Vice President,
Global Coffee & Tea

 MICHAEL CONWAY
Executive Vice President & President,
International Licensed Stores

 LORI DIGULLA
Senior Vice President & General Manager
Starbucks Canada

 JOHN CULVER
Group President, International
Channel Development & Global Coffee & Tea

 GEORGE DOWDIE
Senior Vice President
Global Food Safety, Quality & Regulatory

 CHRIS FALLON
Senior Vice President
Business Technology

 TOM FERGUSON
Senior Vice President
International Retail Operation

 MARK FORDHAM
Senior Vice President & Deputy General Counsel
Law & Corporate Affairs

 JON FRANCIS
Senior Vice President
 Analytics & Market Research

 SHANNON GARCIA
Senior Vice President
U.S. Operations

 JEN FRISCH
Senior Vice President
Partner Resources, U.S. Retail, Licensed Stores and Operations Services

 SUMITRO GHOSH
Senior Vice President
Siren Retail

 RACHEL GONZALEZ
Executive Vice President
General Counsel & Secretary

 PATRICK GRISMER
Executive Vice President & Chief Finance Officer

 JOHN KELLY
Executive Vice President
Public Affairs & Social Impact

 JANET LANDERS
Senior Vice President
Business Technology

 ANGELA LIS
Senior Vice President
Partner Resources, Global Retail

 GERRI-MARTIN FLICKINGER
Executive Vice President
Chief Technology Officer

 HOLLY MAY
Senior Vice President
Global Total Rewards & Service Delivery

 HANS MELOTTE
Executive Vice President
Global Supply Chain
 TAKAFUMI MINAGUCHI
Chief Executive Officer
Starbucks China

 DUNCAN MOIR
President
Global Channel Development

 CARL MOUNT
Senior Vice President
Logistics & U.S. Retail Supply Chain

 DENISE NELSEN
Senior Vice President
U.S. Operations

 MARK RING
Senior Vice President
U.S. Licensed Stores & Latin America

 KYNDRA RUSSELL
Senior Vice President
Marketing

 MATTHEW RYAN
Executive Vice President
Chief Marketing Officer

 SANDRA STARK
Senior Vice President
Product

 SARA TRILLING
Senior Vice President & President
Starbucks Asia Pacific

 LEO TSOI
Chief Executive Officer
Starbucks China

 VIVEK VARMA
Chief Transformation Officer
  JILL WALKER
Senior Vice President
Corporate Financial Services, & Chief Accounting Officer

 JEFF WILE
Senior Vice President
Retail & Core Technology Services

 ROSEANN WILLIAMS
Executive Vice President U.S. Company
Operated Business &Canada

 BELINDA WONG
Chairman & Chief Executive Officer
Starbucks China

 GINA WOODS
Senior Vice President
Public Affairs

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VI. EXTERNAL ENVIRONMENT

A. POLITICAL/ LEGAL ENVIRONMENT

 Starbucks imports coffee beans from different countries and each of these

countries has its own tariff and customs regulations. In addition, any political

upheavals in the countries where Starbucks imports its coffee beans would greatly

interfere with the company’s operations.

 Starbucks is expected to file for all important permits and forms, before it can be

authorized to conduct business in a foreign country. The business operations of

Starbucks will also be affected by local and federal laws and regulations.

B. ECONOMIC ENVIRONMENT

 The global financial crisis of 2008 greatly affected the operations of Starbucks in

various countries. The recession resulted in an increase in the operational costs of

the company.

 The coffee industry is demand- driven and when economic conditions are harsh,

consumers treat coffee as a luxury and this affects sales. Exchange rate and

taxation shall also affect the operations of Starbucks through currency conversion.

C. SOCIO-CULTURAL ENVIRONMENT

 Consumers across the world are increasingly demanding fair practices, and this

has seen many firms change their operating practices in order to accommodate

these demands, and Starbucks is no exception.

 The company implemented the C.A.F.E program with a view to addressing issues

raised by customers regarding Starbucks’ social reasonability. The company has

 also had to adjust its product offerings in order to meet the growing demands of

the rising number of educated and health conscious consumers.

 For example, Starbucks now non-fat milk coffee. Consumers are also increasingly

becoming aware of the need to reduce their sugar intake and Starbucks has also

had to adjust the sugar content of its coffee products as well.

D. TECHNOLOGICAL SEGMENT

 Advances in technology affect product innovation, product services, customers’

store experience, and the way organizations are able to interact with other

business partners. Technological improvements can enable a company to market

its products directly to their target market using emails, text messages, and social

network sites as well.

 Through the use of technology, Starbucks has managed to change its product mix

to suit new market segments. A good example is the company’s VIA ready brew

and internet surfing services using Wi-Fi internet connectivity.

E. COMPETITORS

 The two main competitors of Starbucks are MacDonald’s McCafe and Dunkin

Donuts. On the one hand, McCafe maintains a low price strategy of its products.

On the other hand, Dunkin Donuts offers customers a variety of coffee flavors to

choose from, in addition to its emphasis on quality.

F. CUSTOMERS

 Starbucks provides interpersonal services to its customers in whereby there is high

contact between baristas, staff, and customers. The company has tried to change
 the formula of some of its products to suit the tastes and preferences of customers

in certain markets.

 The contact personnel at Starbucks play a very vital role in enhancing

relationships with customers. In this case, these contact persons act as the

company’s brand champions. The management at Starbucks recognizes the

important role played by the staff and Baristas, which is why they offer rewards

and incentives in recognition of their exemplary work.

G. SUMMARY

Starbucks Corporation can increase its revenues through expansion in developing

markets. This opportunity draws attention away from the U.S. market, where most of the

company’s revenues are generated. Also significant in this SWOT analysis is business

diversification, which can improve Starbucks’s long-term stability. For example, through

higher diversification, the company can reduce its dependence on its current industries,

thereby improving overall revenue growth opportunities. The industry environment also

presents the opportunity to strengthen the company’s presence and market share through

partnerships or alliances with other firms. For instance, alliance with major retailers

improves distribution and market share of the company’s consumer goods, such as ready-

to-drink coffee. The external strategic factors in this part of the SWOT analysis show that

Starbucks can improve its industry position by developing its operations to exploit the

opportunities in the global industry environment.

Starbucks Corporation competes against a wide variety of firms in the

international market. For example, the company competes against major restaurant chains

that offer low-cost coffee products. This external strategic factor threatens Starbucks
 because such competitors can reduce the company’s market share by competing based on

low prices. Also, this SWOT analysis considers imitation as a major threat against the

coffeehouse business. In light of the company’s weaknesses, the threat of imitation

involves firms that try to copy the taste, look and feel of Starbucks products. In addition,

the industry environment is subject to independent coffeehouse movements. These

movements are sociocultural efforts that support the operations of small independent

local coffeehouses, and oppose the expansion of multinational coffeehouse chains.

Successful marketing campaigns and branding strategies are needed to counteract the

effects of these trends. This part of the SWOT analysis of Starbucks Coffee Company

identifies external strategic factors that impose challenges to international expansion and

market penetration.

VII. INTERNAL ENVIRONMENT

A. PRODUCTS

Starbucks boasts of a wide variety of over 30 coffee products that customers can choose

from. The company is always introducing novel products in the market to suit the

changing demands, tastes and preferences of its growing customer base. Some of the

notable new products include “Instant via Ready” and “Tazo Tea Infusions”.

B. PRICE

Starbucks’ products are priced at a premium owing to the perceived upscale image in the

eyes of the consumers. In this case, Starbucks uses high pricing to differentiate itself from

the rest of the competition.

C. PLACE
 Most Starbucks coffee stores are located in neighborhoods with high traffic. The

company’s coffee stores are also located in different large chains. The “third place”

concept as practiced by Starbucks has helped to turn its stores into an ideal environment

away from home where customers can relax, surf the internet, or listen to music.

D. PROMOTION

One of the fundamental requirements for successful promotion is to facilitate friendly and

smooth interactions among the company’s representatives and the market without

compromising the efficiency manner in which a company is able to offer its services to

the target market.

Until very recently, Starbucks has relied on word of mouth and its large store presence as

its advertising and promotional and advertising tools. The management was convinced

that a memorable and distinct brand would result in customer loyalty and repeat business.

However, as competition becomes stiffer, Starbucks has had to embrace various

promotional strategies.

The success of any service firm largely depends on the ability of the organization in

question to target, acquire, get hold of, and retain keep the ‘right’ customers. Good

organizations are mainly based on cultivating customer retention relationships, as

opposed to the acquisition/transaction mentality. Starbucks is one such organization.

The firm knows that a loyal customer is often a reliable source of revenue for the firm for

many years, and hence viable business. This has seen Starbucks launch the Starbucks

Card to facilitate customer loyalty. Starbucks has also embraced a philanthropic

philosophy as a tool for promotion.

 The company contributes to different non-profit organizations in a bid to enhance brand

awareness and image among local communities.

E. SUMMARY

Starbucks Corporation has one of the world’s strongest and most popular brands. The

company has a growing population of loyal customers, which adds to the stability of the

coffeehouse business. In the SWOT analysis model, the extensive global supply chain

strengthens Starbucks by supporting operations. For example, the company has a global

network of suppliers that are carefully selected based on criteria pertaining to quality,

such as the quality of Arabica coffee beans. Also, the company gradually diversifies its

business, such as through the acquisition or development of subsidiaries like Ethos

Water, Seattle’s Best Coffee, and Teavana. Diversification minimizes the effects of

market and industry risks. The internal strategic factors identified in this part of the

SWOT analysis of Starbucks Corporation shows that the business has strengths that

promote resilience through diversification and a global supply chain.

Starbucks has high price points that maximize profit margins but reduce the affordability

of its products. This internal strategic factor is a weakness because it limits the

company’s market share, especially in areas with relatively lower disposable incomes.

Also, this SWOT analysis considers generalized standards a weakness that limits the

flexibility of the coffee and coffeehouse chain business. For example, the company’s

generalized standards for its crafted beverages reduce these products’ cultural alignment

with local target markets and associated consumer preferences. In addition, many

Starbucks products are imitable. For instance, small local competitors could develop

beverages that are not the same as but similar to the company’s products. Even the design
 and ambiance of the company’s cafés are imitable. This business environment condition

empowers competitors. The internal factors in this part of the SWOT analysis of

Starbucks Coffee Company show that the business must develop strengths to reduce the

adverse effects of imitation and the influence of high price points on the company’s

market share in the global industry.

RECOMMENDATIONS

Starbucks needs to bring some improvements and advancements in the company to keep its

market position stable and strong.

For this, few recommendations are given below:

1. Introduce diversification in products and services offerings. This will help

strengthen their position.

2. Bring innovation and technological advancements in the company to deal with

the rising competition and imitation.

3. Resolve the issues with the social activists that oppose international market

players.

4. Reduce prices of the products to attract more customers and increase the

affordability for all classes of consumers.

5. Implement creative marketing campaigns, promotional activities, and branding

strategies.

6. Contribute to community development, participate in Corporate Social

Responsibility (CSR), and sustainability practices.

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%20is,its%20internal%20and%20external%20environment.&text=Starbucks%20Coffee%20operates
%20in%20various,challenges%20in%20growing%20the%20business.
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analysis
VIII. ANALYSIS OF STRATEGIC FACTORS

A. KEY INTERNAL AND EXTERNAL STARTEGIC FACTORS

STARBUCKS OPPORTUNITIES – EXTERNAL STRATEGIC FACTORS:

1. Expansion in developing markets – Starbucks has coffeehouses mainly in the

US. Global expansion in a few areas like India, China and few regions of Africa

can give a great opportunity to the company.

2. Business diversification and Products Specifications – It can further diversify its

business operations to improve overall revenue growth opportunities. Besides,

developing products as per the customer preferences in the specific target market

is also a profitable opportunity.

3. Introducing new products – As the company is quite popular, introducing new

products and holiday flavors (Peppermint Mocha, Eggnog Latte, Gingerbread

Loaf) under its name would be profitable and welcomed in the markets.

4. Partnerships or alliances with other firms – Co-branding always benefits.

Starbucks has the opportunity to develop partnerships and alliances with major

firms. This would strengthen its presence and market share.

5. Gender Neutral Restrooms – Starbucks has introduced gender-neutral restrooms

to protect Lesbian, gay, bisexual, and transgender (LGBT) community against

 discrimination. It is in response to Anti-LGBTQ bills that discriminate against

specially transgender people. 

STARBUCKS THREATS – EXTERNAL STRATEGIC FACTORS:

1. Competition with low-cost coffee sellers  – Many coffeehouses offer products at

an affordable rate. This can threaten the future’s stability of Starbucks which

offers higher prices.

2. Competition with big outlets – Aggressive competition with multinational

companies like Dunkin Donuts and McDonald’s can also pose a threat to

its market position.

3. Imitation – Products can be imitated by both new and old rivals.

4. Independent coffeehouse movements – There are many sociocultural threats for

Starbucks. These sociocultural movements support small independent and local

coffeehouse and oppose the expansion of large multinational chains.

5. Controversy on California warning rule – A California judge ruled Starbucks

and other companies in March 2018 to provide warning labels on all their coffee

products. This was about preventing a violation from chemical use that may cause

cancer.

6. Philadelphia arrests – April 2018, two African-American men were arrested at

Starbucks that caused quite a controversy on social media against Starbucks.

Starbucks employees refused them to use the restroom because they didn’t

purchase anything. The CEO Kevin Johnson issued an apology to both men

eventually.
 7. Coronavirus – Starbucks has temporarily closed estimated 2000 stores in China

due to the outbreak of coronavirus. Considering Starbucks has 4123 stores in

China, and almost half the stores are closed, it will have negative impact on

their financials in 2020.   

STARBUCKS STRENGTHS – INTERNAL STRATEGIC FACTORS

1. Strong brand image – Starbucks Corporation is the most popular and strongest

brand in the food and beverage industry. Its size, volume, and the number of

loyal customers have kept growing over time. It has a brand value of $11.7

Billion as per 2019 Interbrand ranking. 

2. Strong financial performance – With an annual revenue of $26.5 billion and

profit of $3.6 Billion in 2019, Starbucks has a strong financial position in the

market.

3. Growth in stores:  It increased its number of stores from 1,886 to 31,256 between

1998 and 2019.

4. Extensive international supply chain – Starbucks is known to have an extensive

global network of suppliers. Starbucks sources its coffee beans from three coffee

producing regions, Latin-America, Africa, and Asia-Pacific. 

5. Acquisitions  – Company has acquired top 6 companies including Seattle’s Best

Coffee, Teavana, Tazo, Evolution Fresh, Torrefazione Italia Coffee, and Ethos

Water. These acquisitions have proven quite successful for Starbucks.

 6. Moderate diversification – Starbucks has also diversified its business operations

by introducing innovative merchandises and food items. One such example is the

addition of ice cubes made of Coffee which results in a stronger Coffee flavor.

7. Quality, Taste and Standardization – Due to its premium blends and delicious

coffees, Starbucks has extended globally. It offers excellent quality and

consistently standardized products in all the locations.

8. Efficiency, Strategic Planning, and Reinvestment Strategy – Starbucks reinvests

its profits in expanding its business in different locations. Its efficient operations

and well-planned strategic decisions have produced many advantages for the

company.

9. Employee treatment –It treats its employees very well which eventually

translates into happier employees serving customers well. Starbucks has been

consistently listed as one of the Fortune’s Top 100 Places to Work for.

10. Gender Neutral Restrooms – Starbucks has introduced gender-neutral restrooms

to protect Lesbian, gay, bisexual, and transgender (LGBT) community against

discrimination. It is in response to Anti-LGBTQ bills that discriminate against

specially transgender people. 

STARBUCKS WEAKNESSES – INTERNAL STRATEGIC FACTORS

1. High prices – For many middle tiers and working consumers, Starbucks’

offerings are more costly than McDonald’s and other coffee outlets. Its high

prices reduce affordability for the consumers.

2. Imitability of products – Starbucks doesn’t own the most unique products in the

market. This makes the imitability of products quite easy for other companies.

Other coffee shops and food chains like McDonalds McCafe and Dunkin Donuts

offer almost the same products.

3. Generalized standards for most products – Some of its product offerings are not

aligned with the cultural standards of other markets. For example, in some areas,

its crafted beverages do not associate with the consumer preferences.

4. European Tax avoidance – Due to its tax avoidance in the UK, it faced several

controversies and criticisms. Reuters’ investigation found out that it didn’t pay

tax on its £1.3 billion of sales in three years prior to 2012.

5. Procurement Practices – Many social and environmental activists criticized the

company for their unethical procurement practices. They claimed that it procures

coffee beans from impoverished third world farmers. It has also been accused of

violating “Fair Coffee Trade” principles.

6. Recall of Products – Over the years Starbucks has recalled a lot of in-demand

products. This can negatively affect the brand image of the company and lead to

the loss of customer base.

In March 2016, Starbucks recalled two products. One was the sausage, egg, and

cheddar breakfast sandwich and the other was cheese and fruit bistro box. The

reason for recalling these products was the threat of contamination and

allergens.
During routine testing, it was revealed that the facility that manufactured the

breakfast sandwiches had the presence of Listeria Monocytogenes on the contact

surface.

The 250 stores in Arkansas, Texas, and Oklahoma that showcased these

sandwiches had to remove them. The cheese and fruit bistro box was recalled

because it contained the almonds found in the box contained traces

of undeclared cashew nuts.

There was no warning label that highlighted the presence of cashew nuts. This

could be potentially life-threatening for people with cashew allergies.

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B. REVIEW OF MISSION AND OBJECTIVES

To inspire and nurture the human spirit—one person, one cup, and one
neighborhood at a time.

The Starbucks’s mission statement is not very precise but definitely reflects the special

focus of Starbucks on the customer. There are two things that are notable about

Starbucks’ mission statement. The first is the human spirit. The second is the oneness –

one cup, one person, one neighborhood. Seen from an analytical angle there are several
things missing from this statement whether we consider it a mission or a vision. It does

not spell out, its market, its customers or even its employees. It highlights none of those

aspects of business.  It spells out more like a philosophy at whose center is each

customer. Inspiring and nurturing the human spirit. Businesses are for the human society

and Starbucks believes in remaining focused on that. It is why its focus is on ethical

sourcing, maintaining ethics and compliance in every part of its business and on investing

in environment and empowerment. So, it believes in nurturing the human spirit and

inspiring others to do so by creating a more human society.

The second part of the mission statement is focused on the customer. It says one person,

one cup and one neighborhood at a time. One person – means every person is special

including customers and employees. It provides best customer service and with regards to

employee empowerment too it does a lot. It has created a harmonious work environment

where everyone can give his best; an environment that is free of discrimination and where

people can collaborate to create most satisfaction. One cup- Every cup that Starbucks

serves is special. This is the part of its mission statement that focuses on quality. It

sources only the best quality coffee from several parts of the world ethically because it

believes that those who grow coffee must benefit. However, the real thing is how

Starbucks does it. Every coffee served to Starbucks customers is special and is prepared

with utmost care. The premium flavor and aroma of Starbucks coffee is distinct in itself.

One neighborhood – This part is about the overall ecosystem of the Starbucks or to be

more precise regarding the environment at the Starbucks stores. Starbucks has established

a culture of customer service. Its third stop philosophy is well known. It gives its
customers a place between home and workplace where they can relax and enjoy premium

quality coffee.

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 To cut carbon emissions in half in its operations and supply chain, to conserve
or replenish half of the water used in operations and coffee production, and to
reduce by half the waste sent by the company to landfills from stores and
manufacturing.

Starbucks announced today that it’s going to slash the greenhouse gases it emits and

waste it sends to landfills in half over the next decade. It’s also committing to conserving

or replenishing 50 percent of all the water it draws for its operations and coffee

production by 2030.

The company also unveiled longer-term strategies to get greener, like switching to

reusable packaging and putting more plant-based products on its menu. But it hasn’t yet

set a deadline on those initiatives, and there are few details on how the company is going

to meet its targets. By its 50th anniversary next year, it plans to unveil more specifics on

its environmental goals.

Starbucks has a murky record on achieving its sustainability goals. It met its 2015

deadline to purchase enough renewable energy to power all its company-operated

locations in the US and Canada. But in 2008, it also set out to serve 25 percent of its

drinks in reusable containers by 2015. A few years after it set that self-imposed

deadline, Starbucks dropped that goal to 5 percent. By 2018, it served just 1.3 percent of

its drinks in personal reusable cups, despite a decade-long effort to get its customers to
 switch. If this history is any indication, meeting some of their new goals is going to be a

challenge, especially when it comes to reusable packaging or containers.

The company aims to meet this goal through the development of a culture that embraces

acceptance and is supportive of personal growth. As stated in the company’s values,

personal growth occurs through challenge and grows the company as well. This goal of

acceptance extends into the company’s diversity and accessibility policies.

RECOMMENDATION

The industry environment of Starbucks Coffee Company involves diverse challenges,

especially because of the company’s moderate diversification. The coffeehouse chain

business faces issues such as competition, imitation, and social trends that oppose

international players in local markets. Based on the current condition of the business, some of

the most notable strategic management concerns enumerated in this SWOT analysis of

Starbucks Coffee Company are the imitability of products and the corresponding threat of

imitation, the threat of competition involving low-cost sellers, and independent coffeehouse

movements.

A recommendation to protect Starbucks’s business against imitation is to aggressively

innovate, especially in the area of product development. Innovation can make the company’s

products more difficult to imitate. It is also recommended that Starbucks Corporation

consider pricing strategies that attract more customers. For instance, bundle pricing can help

address the threat of competition involving low-cost sellers. Furthermore, a suitable

recommendation in this case is to implement creative marketing and branding strategies that

build Starbucks’s corporate image as a contributor to community development. Such an

image can help reduce sociocultural opposition against the company. These
 recommendations focus on minimizing the negative impacts of the internal and external

factors enumerated in this SWOT analysis.

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%20in%20various,challenges%20in%20growing%20the%20business.

BACKGROUND

In 1971, the original Starbucks opened in Pike Place Market in Seattle, Washington by

three partners named Jerry Baldwin, Zev Siegal, and Gordon Bowker.  Their focus was to sell

coffee beans and equipment.  They purchased green coffee beans from Peet’s, a specialty coffee

roaster and retailer, during their first year of operation.  Later, they began buying coffee beans

directly from the growers.  In 1983, an entrepreneur by the name of Howard Schultz joined the

company; Schultz felt that the company should sell coffee and espresso drinks as well as coffee

beans.  The partners felt that selling coffee and espresso drinks would take away from their

primary focus of selling coffee beans.  Since the idea did not work, Schultz started his own

company called II Giornale coffee bar chain in 1985.  In 1987, the original owners of Starbucks

sold their chain to Schultz’s II Giornale.  Schultz changed II Giornale outlets to Starbucks chains

and quickly began to expand.

Starbucks coffee has grown into the largest coffeehouse company in the world

with 16,120 stores in 94 countries such as in Australia, Canada, China, Puerto Rico, etc. 

Starbucks has thirty blends and single origin coffee.  Starbucks brand coffee can also be
 purchased in local stores to brew at home.  Starbucks employs over 140,000 employees

worldwide with over five million customers a week.  At one point they had typical

customers coming in on an average of six times a month while loyal customers come in

on an average of eighteen times a month spending averaging $50.  Starbucks is one

of Fortune magazine’s 100 Best Companies to work for in 2008 and is Business

Ethics 100 Best Corporate Citizens for the fourth year.

Starbucks main competitors are quick-service restaurants and specialty coffee shops. 

There are an abundant number of competitors in the specialty coffee beverage industry. The

company believes that its customers choose among retailers primarily based on product service,

service, price, and convenience.  Starbucks, in recent times, has experienced drastic direct

competition from large US competitors from quick-service restaurants.  These restaurants have

significantly greater marketing and operating resources than they do. Starbucks is also faced with

well-established competitors in the International markets with increased competition in the

U.S. ready-to-drink coffee beverage market.

Starbucks whole bean coffees compete directly against specialty coffees sold

through supermarkets, specialty retailers and a growing number of specialty coffee stores.

Both their whole bean coffees and coffee beverages compete indirectly against all other

coffees on the market. Starbucks Specialty Operations face significant competition from

established wholesale and mail order suppliers, some of whom have greater financial and

marketing resources than the Company. Starbucks faces intense competition from both

restaurants and other specialty retailers for prime retail locations and qualified personnel

to operate both new and existing stores.

 The intensity of rivalry increases as businesses try to improve their position in the

industry.  In order to gain new customers, competitors may reduce prices, introduce new

products or substitutes, and increase marketing efforts.

For example, on February 26, 2008, Starbucks closed its operations for several

hours across the board to conduct employee training.  Dunkin Donuts took advantage of

this opportunity to gain new customers.  Dunkin Donuts offered a small latte, cappuccino

or espresso drink for 99 cents from 1 p.m. to 10 p.m. during Starbucks’ shutdown.

When Starbucks became a major competitor, it was because the company’s environment

was like none other and focuses on the benefit of the customer.  People considered Starbucks as a

“third place” after home and work.  Howard Schultz’s vision was not to build a coffee shop, but

instead build a company that treats people with dignity and respect.  He wanted to establish a

place where you can go relax and have a delicious coffee and smother yourself in a comfortable

seat that makes you feel like you’re sitting on your living room couch.  Ear pleasuring music will

be consuming your background and make a customer feel as if they are at their home away from

home.  Or a place where you can bring your laptop and get some work done if there were any

distractions at home or work.  Starbucks is also the type of place where you can meet a friend,

stay and talk for hours, and feel like you’re the only two people in the place.

Customers and employees as well receive an experience for Starbucks, in which Starbucks

constantly strives to pleasure everyone around them.  The environment is so inviting, relaxed,

and probably trendier than most people’s living room, and at the same time, quick paced if you

need a coffee to-go.  Starbucks has set an environment where the relationship between customers

and employees sets the company apart from other coffee shops.  Starbucks sets a different type
 of trend than any other coffee house that seems to be contagious to customers and even other

companies.

I. TIME CONTEXT

Economic Downturn in 2008-2009

II. VIEWPOINT

Howard Schultz – CEO, Starbucks Corporation

III. CENTRAL PROBLEM

The problem identified in the given case of Starbucks was regarding the economic

downturn in 2008-2009, that led to decline of the company’s revenue.

IV. OBJECTIVES

a. Must Objective
  To be able to provide a high quality coffee and products as accessible location

and affordable price;

 To be able to provide a community to share in the coffee drinking experience

and variety of choices; and

 To be able to sustain Starbucks’ growth and attain market leadership position

b. Want objective

 To be able to establish positive transformation with regards to personality

development of all the employees of the entire Santos Group of Companies in

general as influenced by his/her certain values;

 To be able to expand digital offering for customers with free Wi-Fi;

 To be able to expand more stores in other countries; and

 To be able to value ethics and good business practices

V. AREAS OF CONSIDERATION

a. Strength

 It is a global coffee brand built upon a reputation for fine products and

services

 Largest coffeehouse chain in the world

 Number one branch in coffeehouse

b. Weaknesses

 Vulnerable to the possibility that their innovation may falter over time

 Risk of losing their unique quality due to over-exposure

 The company’s high prices products

c. Opportunities
  The company has the opportunity to expand its global operations

 Expansion to retail operations

 Increasing product offering in different channels of advertising

d. Threats

 Cheaper alternatives

 Consumer trends towards more healthy food option rather than sweets

pastries/desserts and coffee

 High cost of coffee bean and dairy products

VI. ALTERNATIVE COURSES OF ACTION

ACA #1: International Expansion. Aggressive international opening/Store location

selection

 Advantage

1. Starbucks is a popular international firm.

2. This established themselves as the most recognized and respected

branch in the world and within their target market

3. Increasing profitability and return of investments

 Disadvantage

1. Bigger capital expenditures

2. More political and legal international institutions to follow

ACA #2: Training of employees improves Starbucks Experience for both the

employees and the customers. Ensuring that their (1) customers are

provided quality product, service and experience; and (2) for personal

development of their employees.

  Advantage

1. Starbucks approach the employees with good pay, benefits and

opportunities for personal development

2. Develop enthusiastically satisfied customers at all time

3. The company will be recognized and may attract more customers and

loyalty of old customers

 Disadvantage

1. Trainings/Seminars will be additional cost of the company

2. Some employees does not want change/improvement

ACA #3: Change in Marketing Strategy. Formulate marketing strategies such as

advertisements on television, radio and social media sites.

 Advantage

1. Exploration of untapped market.

2. Set-up specialized line of coffee at an affordable price

3. Attracts prospect customers

4. May increase sales and revenues

 Disadvantage

1. The Starbucks does not emphasize in distributing their products in the

supermarket

2. The packaging coffee in supermarket did not have the same taste as

coffee which mixed in the Starbucks.

VII. RECOMMENDATION
 Looking at perspective, we would recommend ACA #3. In order for Starbucks to

achieve its goal, the company must innovate or amend new strategies. A recommendation to

protect Starbucks’s business against imitation is to aggressively innovate, especially in the area

of product development. Innovation can make the company’s products more difficult to imitate.

It is also recommended that Starbucks Corporation consider pricing strategies that attract more

customers. For instance, bundle pricing can help address the threat of competition involving low-

cost sellers. Furthermore, a suitable recommendation in this case is to implement creative

marketing and branding strategies that build Starbucks’s corporate image as a contributor to

community development. Such an image can help reduce sociocultural opposition against the

company. These recommendations focus on minimizing the negative impacts of the internal and

external factors enumerated in this SWOT analysis.

Strategic marketing will give Starbucks the opportunity to promote their products and

services directly to the customers who most need them. A good direct marketing

campaign will:

 help you build relationships with new customers

 test the appeal of your product or service

 tell you which marketing approaches reach your target market

 provide customers with compelling content they can share with potential customers

 increase sales

 target your ideal customers

 improve customer loyalty

 However, direct marketing campaigns require careful planning and a clear understanding of

responsible direct marketing practice. Being aware of the benefits and challenges of direct

marketing will help you use direct marketing effectively.

VIII. PLAN OF ACTION

a. The Starbucks’ Executive Team shall approve the innovation and development of the

products and menus with healthy options.

b. The CEO shall prepare plan of action including:

 Product offerings

1. Start innovating some healthier products

2. Examine the menu and remove the products that are less sold by the

customers

 Mission, vision and values

1. Hire a nutritionist that would formulate a more healthy foods/drinks

2. Review the pricing and the quality of the products

3. Submit the plan of action to the Executive Team

4. Implement the plan

 Workforce Profile

1. Conduct a research of what products does the customers’ requests

2. Ensure high standard in all aspect of operations

Starbucks has limited challenges in developing a successful strategy in standard market

cycle meaning that they can easily satisfy its customers’ needs which works to their advantage

when it comes to competitive edge. Starbucks offer good services like nice ambiance, hospitable

crew and staff, cleanliness, and friendly services. They also provide Free Wi-Fi, Gift certificate,
and gift cads, Mobile Application, and you can also purchase their coffee bean and brewed it at

your homes. Apart from the product and services that Starbucks offer they also give back to the

community like if you purchase a bottle of ethos, you`re providing clean water for the

developing countries. Starbucks also have foundation that will help young people to contribute to

their communities and giving them opportunities to make a difference by supporting their efforts

to make the world a better place.

Starbucks is a customer oriented company that strives to offer Filipinos a combination of

great tasting, quality coffee products with excellent services.