Starbucks Corporation - 2009

Case Notes Prepared by: Dr. Mernoush Banton Case Author: Sharynn Tomlin

A.

Case Abstract

Starbucks Corporation !!!.Starbucks.co"# is a co"prehensi$e strate%ic "ana%e"ent case that inc&udes the co"pany's (isca& year-end Septe"ber 2)* 200) +inancia& state"ents* co"petitor in+or"ation and "ore. ,he case ti"e settin% is the year 2009. Su++icient interna& and e-terna& data are pro$ided to enab&e students to e$a&uate current strate%ies and reco""end a three-year strate%ic p&an +or the co"pany. .ead/uartered in Seatt&e* 0ashin%ton* Starbucks Corporation is traded on the Ne! 1ork Stock 2-chan%e under ticker sy"bo& SB34.

B.

Vision Statement Actua&#

,o inspire and nurture the hu"an spirit5one person* one cup* and one nei%hborhood at a ti"e.

C.

Mission Statement Actua&#

Our Coffee 6t has a&!ays been* and !i&& a&!ays be* about /ua&ity. 0e're passionate about ethica&&y sourcin% the +inest co++ee beans* roastin% the" !ith %reat care* and i"pro$in% the &i$es o+ peop&e !ho %ro! the". 0e care deep&y about a&& o+ this7 our !ork is ne$er done. Our Partners 0e're ca&&ed partners* because it's not 8ust a 8ob* it's our passion. ,o%ether* !e e"brace di$ersity to create a p&ace !here each o+ us can be ourse&$es. 0e a&!ays treat each other !ith respect and di%nity. And !e ho&d each other to that standard. Our Customers 0hen !e are +u&&y en%a%ed* !e connect !ith* &au%h !ith* and up&i+t the &i$es o+ our custo"ers5e$en i+ 8ust +or a +e! "o"ents. Sure* it starts !ith the pro"ise o+ a per+ect&y "ade be$era%e* but our !ork %oes +ar beyond that. 6t's rea&&y about hu"an connection. Our Stores 0hen our custo"ers +ee& this sense o+ be&on%in%* our stores beco"e a ha$en* a break +ro" the !orries outside* a p&ace !here you can "eet !ith +riends. 6t's about en8oy"ent at the speed o+ &i+e5so"eti"es s&o! and sa$ored* so"eti"es +aster. A&!ays +u&& o+ hu"anity.

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Our Neighborhood 2$ery store is part o+ a co""unity* and !e take our responsibi&ity to be %ood nei%hbors serious&y. 0e !ant to be in$ited in !here$er !e do business. 0e can be a +orce +or positi$e action5brin%in% to%ether our partners* custo"ers* and the co""unity to contribute e$ery day. No! !e see that our responsibi&ity5and our potentia& +or %ood5is e$en &ar%er. ,he !or&d is &ookin% to Starbucks to set the ne! standard* yet a%ain. 0e !i&& &ead. Our Shareholders 0e kno! that as !e de&i$er in each o+ these areas* !e en8oy the kind o+ success that re!ards our shareho&ders. 0e are +u&&y accountab&e to %et each o+ these e&e"ents ri%ht so that Starbucks5and e$eryone it touches5can endure and thri$e.

Mission Statement Proposed#

Our Coffee 6t has a&!ays been* and !i&& a&!ays be* about /ua&ity. 0e're passionate about ethica&&y sourcin% the +inest co++ee beans* roastin% the" !ith %reat care* and i"pro$in% the &i$es o+ peop&e !ho %ro! the". 0e care deep&y about a&& o+ this7 our !ork is ne$er done. 2* ;# Our Partners 0e're ca&&ed partners* because it's not 8ust a 8ob* it's our passion. ,o%ether* !e e"brace di$ersity to create a p&ace !here each o+ us can be ourse&$es. 0e a&!ays treat each other !ith respect and di%nity. And !e ho&d each other to that standard* ensurin% the &atest techno&o%y is i"p&e"ented +or producin% superior products to our &oya& custo"ers. <* )* 9# Our Customers 0hen !e are +u&&y en%a%ed* !e connect !ith* &au%h !ith* and up&i+t the &i$es o+ our custo"ers5e$en i+ 8ust +or a +e! "o"ents. Sure* it starts !ith the pro"ise o+ a per+ect&y "ade be$era%e* but our !ork %oes +ar beyond that. 6t's rea&&y about hu"an connection. :# Our Stores 0hen our custo"ers +ee& this sense o+ be&on%in%* our stores beco"e a ha$en* a break +ro" the !orries outside* a p&ace !here you can "eet !ith +riends. 6t's about en8oy"ent at the speed o+ &i+e5so"eti"es s&o! and sa$ored* so"eti"es +aster. A&!ays +u&& o+ hu"anity. =# Our Neighborhood 2$ery store is part o+ a co""unity* and !e take our responsibi&ity to be %ood nei%hbors serious&y. 0e !ant to be in$ited in !here$er !e do business. 0e can be a +orce +or positi$e action5brin%in% to%ether our partners* custo"ers* and the co""unity to contribute e$ery day. No! !e see that our responsibi&ity5and our potentia& +or %ood5is e$en &ar%er. ,he !or&d is &ookin% to Starbucks to set the ne! standard* yet a%ain. 0e !i&& &ead. ># Our Shareholders 0e kno! that as !e de&i$er in each o+ these areas* !e en8oy the kind o+ success that re!ards our shareho&ders. 0e are +u&&y accountab&e to %et each o+ these

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e&e"ents ri%ht so that Starbucks5and e$eryone it touches5can endure and thri$e. ?# :. 2. >. <. ?. =. ;. ). 9. Custo"er Products or ser$ices Markets ,echno&o%y Concern +or sur$i$a&* pro+itabi&ity* %ro!th Phi&osophy Se&+-concept Concern +or pub&ic i"a%e Concern +or e"p&oyees

D.
CPM

External Audit
Com!etiti"e Profile Matrix

Critical Success %actors

&eight

Starbuc#s &eighted 'ating Score

McDonald$s &eighted 'ating Score

Dun#in Donuts &eighted 'ating Score

Ad$ertisin% ,op Mana%e"ent Custo"er Ser$ice ,echno&o%ica& Ad$ances 6nternationa& Market Sa&es @&oba& 2-pansion (inancia& Position Custo"er Aoya&ty Market Share Product Bua&ity Marketin% Price Co"petiti$eness (otal

0.0= 0.0; 0.0) 0.0; 0.:0 0.:0 0.:2 0.:0 0.09 0.0) 0.0? 0.0) ).**

2 > < > > > 2 < 2 < > :

0.:2 0.2: 0.>2 0.2: 0.>0 0.>0 0.2< 0.<0 0.:) 0.>2 0.:? 0.0) +.,-

< < 2 < < < < 2 < 2 < <

0.2< 0.2) 0.:= 0.2) 0.<0 0.<0 0.<) 0.20 0.>= 0.:= 0.20 0.>2 -..,

> 2 > 2 : : > > : > 2 2

0.:) 0.:< 0.2< 0.:< 0.:0 0.:0 0.>= 0.>0 0.09 0.2< 0.:0 0.:= +.)/

O!!ortunities :. @our"et co++ee consu"ption rose !ith the drinker's educationa& &e$e&. ,hose !ho +inished co&&e%e bou%ht <9 percent "ore %our"et co++ee on a$era%e* and those !ith so"e post%raduate education bou%ht ;: percent "ore
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2. Si-teen percent o+ the 3.S. adu&t popu&ation consu"ed specia&ty co++ee on a dai&y basis* !hereas => percent indu&%ed occasiona&&y >. ,he %ro!th in popu&arity o+ specia&ty co++ees has increased* as on&y :> percent and ?9 percent o+ peop&e reported dai&y and occasiona& consu"ption* respecti$e&y* in 2002 <. Another trend that has sur+aced in the past decade has been consu"er re/uests +or or%anic co++ees* and "ore e"phasis !as p&aced by retai&ers on the %ro!in% en$iron"ent o+ the beans ?. Consu"ers are beco"in% "ore hea&th conscious and are &ookin% +or s!eats and snacks that are &o! in carbs C su%ar and ca&orie =. 6nternationa& "arket has a stron%er econo"y and accordin%&y* consu"ers !ou&d be ab&e to pay pre"iu" price +or specia&ty or %our"et co++ee (hreats :. ,he 200;D2009 %&oba& recession ne%ati$e&y a++ected the specia&ty co++ee industry 2. Eecent trends ha$e sho!n that so"e o+ the consu"in% pub&ic is concerned about the nutritiona& $a&ue o+ such products as those o++ered by the specia&ty co++ee sector and ha$e e$en cha&&en%ed the correctness o+ the &abe&in% and ca&orie in+or"ation posted on the products a$ai&ab&e at retai& out&ets. >. Fo&ati&ity in the stocks and co++ee price cou&d i"pact the purchasin% po!er +or the buyers <. S"a&&er co"petitors are e-pandin% their "arkets as !e&& as their product &ine o++erin%s ?. Co"petitors such as McDona&d's and Dunkin Donuts are beco"in% stron%er in o++erin% specia&ty co++ee a&on% !ith other co"p&e"entary products External %actor E"aluation 0E%E1 Matrix

2e3 External %actors

O!!ortunities :. @our"et co++ee consu"ption rose !ith the drinkerGs educationa& &e$e&. ,hose !ho +inished co&&e%e bou%ht <9 percent "ore %our"et co++ee on a$era%e* and those !ith so"e post%raduate education bou%ht ;: percent "ore 2. Si-teen percent o+ the 3.S. adu&t popu&ation consu"ed specia&ty co++ee on a dai&y basis* !hereas => percent indu&%ed occasiona&&y >. ,he %ro!th in popu&arity o+ specia&ty co++ees has increased* as on&y :> percent and ?9

&eight

'ating

&eighted Score

0.:

>

0.>

0.0) 0.09

< <

0.>2 0.>=

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percent o+ peop&e reported dai&y and occasiona& consu"ption* respecti$e&y* in 2002 <. Another trend that has sur+aced in the past decade has been consu"er re/uests +or or%anic co++ees* and "ore e"phasis !as p&aced by retai&ers on the %ro!in% en$iron"ent o+ the beans ?. Consu"ers are beco"in% "ore hea&th conscious and are &ookin% +or s!eats and snacks that are &o! in carbs C su%ar and ca&orie =. 6nternationa& "arket has a stron%er econo"y and accordin%&y* consu"ers !ou&d be ab&e to pay pre"iu" price +or specia&ty or %our"et co++ee (hreats :. ,he 200;-2009 %&oba& recession ne%ati$e&y a++ected the specia&ty co++ee industry 2. Eecent trends ha$e sho!n that so"e o+ the consu"in% pub&ic is concerned about the nutritiona& $a&ue o+ such products as those o++ered by the specia&ty co++ee sector and ha$e e$en cha&&en%ed the correctness o+ the &abe&in% and ca&orie in+or"ation posted on the products a$ai&ab&e at retai& out&ets. >. Fo&ati&ity in the stocks and co++ee price cou&d i"pact the purchasin% po!er +or the buyers <. S"a&&er co"petitors are e-pandin% their "arkets as !e&& as their product &ine o++erin%s ?. Co"petitors such as McDona&dGs and Dunkin Donuts are beco"in% stron%er in o++erin% specia&ty co++ee a&on% !ith other co"p&e"entary products (otal 0.: > 0.>

0.0) 0.09

< >

0.>2 0.2;

0.: 0.09

2 2

0.2 0.:)

0.0; 0.: 0.:

2 2 2

0.:< 0.2 0.2

).**

+.45

Positioning Ma!

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Nu"ber o+ Stores .i%h#

McDona&d's Starbucks

Narro! Product Aine I++erin%

0ide Product Aine I++erin%

Dunkin Donuts

Nu"ber o+ Stores Ao!#

E.

6nternal Audit
Strengths :. Starbucks e-pects to add appro-i"ate&y 20 net ne! stores to its %&oba& store base in +isca& 2. 2009 by c&osin% appro-i"ate&y <2? co"pany-operated stores in the 3nited States and addin% o+ appro-i"ate&y =0 co"pany-operated stores internationa&&y >. ,he co"pany p&ans to open appro-i"ate&y =? net ne! &icensed stores in the 3nited States and appro-i"ate&y >20 net ne! &icensed stores internationa&&y <. Capita& e-penditures +or +isca& 2009 are e-pected to re"ain unchan%ed* at appro-i"ate&y H=00 "i&&ion. ?. Aicensin% re$enues increased pri"ari&y due to hi%her product sa&es and roya&ty re$enues as a resu&t o+ openin% <>) ne! &icensed retai& stores in the &ast :2 "onth =. Stron% "arketin% and pro"otiona& ca"pai%n such as product p&ace"ent in "a8or ,F series ;. Starbucks a&so pro$ides e&ectrica& out&ets and* in so"e stores* !ire&ess access* +or custo"ers !ho "i%ht need to use their MP> p&ayers or &aptop co"puters

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). Starbucks' products can be +ound in con$enience stores* %rocery stores* depart"ent stores* "o$ie theaters* businesses* schoo&s* and e$en airports 9. Starbucks is rated by Fortune as one o+ the best top :0 p&aces to !ork :0. Starbucks a&so encoura%es the use o+ its 0eb site !here custo"ers are ab&e to re%ister their Starbucks' cards* recei$e nutritiona& in+or"ation about Starbucks' products* shop on&ine* search +or careers* and "uch "ore &ea#nesses :. <; percent drop in earnin%s in one year 200)# 2. (or the 2= !eeks endin% March 2009* Starbucks' re$enues decreased ; percent to H<.9? bi&&ion and net inco"e decreased ;2 percent to H)9.> "i&&ion >. Moody's 6n$estors Ser$ice recent&y do!n%raded Starbucks' credit ratin%s <. ,he 3.S. co"pany operated retai& business continued deterioratin% trends ?. (or the second /uarter o+ +isca& 2009* 3.S. tota& net re$enues !ere H:.) bi&&ion* a dec&ine o+ H:>:.? "i&&ion* or =.) percent* due to decreased re$enues +ro" co"pany operated retai& stores =. Many o+ Starbucks' 6nternationa& operations are in ear&y sta%es o+ de$e&op"ent that re/uire a "ore e-tensi$e support or%aniJation re&ati$e to the current &e$e&s o+ re$enue and operatin% inco"e in the 3nited States ;. 6nternationa& tota& net re$enues !ere H<>>.; "i&&ion +or the :> !eeks ended March 29* 2009* do!n H?9.; "i&&ion* or :2.: percent* co"pared !ith the sa"e period &ast year* pri"ari&y due to the i"pact o+ a stron%er 3.S. do&&ar re&ati$e to the British pound and Canadian do&&ar ). @&oba& Consu"er Products @roup CP@# tota& net re$enues decreased by 2 percent to H9<.) "i&&ion +or the second /uarter o+ +isca& 2009* due pri"ari&y to &o!er "ar%in on sa&es o+ packa%ed co++ee as a resu&t o+ discountin%* as !e&& as &o!er $o&u"e to the trade %inancial 'atio Anal3sis Dece"ber 2009#
7ro8th 'ates 9 &ells %argo 6ndustr3 S:P /**

Sa&es Btr $s year a%o /tr# Net 6nco"e 1,D $s 1,D# Net 6nco"e Btr $s year a%o /tr# Sa&es ?-1ear Annua& A$%.# Net 6nco"e ?-1ear Annua& A$%.# Di$idends ?-1ear Annua& A$%.#

->.;0 2>.90 2*=;;.)0 :>.0? 0.:0 NA

0.;0 :).20 :*)>2.:0 :<.:: <.>< NA

-<.)0 -=.00 2=.)0 :2.99 :2.=9 ::.)>

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Price 'atios

&ells %argo

6ndustr3

S:P /**

Current PC2 Eatio PC2 Eatio ?-1ear .i%h PC2 Eatio ?-1ear Ao! PriceCSa&es Eatio PriceCBook Fa&ue PriceCCash (&o! Eatio
Profit Margins 9

<<.2 =?.< :=.: :.;? ?.=2 :).<0

&ells %argo

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S:P /**

@ross Mar%in Pre-,a- Mar%in Net Pro+it Mar%in ?1r @ross Mar%in ?-1ear A$%.# ?1r Pre,a- Mar%in ?-1ear A$%.# ?1r Net Pro+it Mar%in ?-1ear A$%.#
%inancial Condition

20.; ?.; <.0 22.> ).= ?.=

&ells %argo

:9.9 9.0 ?.9 2:.2 ::.< ;.?

6ndustr3

>).9 :0.> ;.: >).= :=.= ::.?

S:P /**

DebtC2/uity Eatio Current Eatio Buick Eatio 6nterest Co$era%e Ae$era%e Eatio Book Fa&ueCShare
Adapted +ro" !!!."oneycentra&."sn.co"

0.:) :.> 0.9 NA :.) <.:0

0.20 :.< :.: 9.> :.; ?.;;

:.09 :.? :.> 2>.; >.< 2:.=>

Net Profit Margin 091

A"g P;E

Price; Sales

Price; Boo#

09C09 09C0) 09C0; :0C0= :0C0? :0C0< 09C0> 09C02 09C0: :0C00

2<.?0 <>.;0 >=.:0 <?.=0 <>.?0 <0.;0 >=.=0 <0.:0 <?.00 =;.)0

:.?: :.0; 2.:< >.<; >.2: >.=; 2.9: 2.?< 2.22 >.??

<.)< <.<2 ).<; ::.?= 9.20 ;.=0 ?.=2 <.;> <.:> =.?=

<.0 >.0 ;.: ;.? ;.) ;.> =.? =.< =.) <.>

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Boo# Value; Share

Debt; E<uit3

'eturn on E<uit3 091

'eturn on Assets 091

6nterest Co"erage

09C09 09C0) 09C0; :0C0= :0C0? :0C0< 09C0> 09C02 09C0: :0C00

H<.:0 H>.>9 H>.09 H2.9? H2.;2 H>.:: H2.=> H2.22 H:.): H:.?>

0.:) 0.?: 0.?? 0.>2 0.:> 0.00 0.00 0.00 0.00 0.0:

:2.) :2.; 29.< 2=.: 2>.; :?.; :2.) :2.> :>.: ).2

;.0 ?.= :2.= :>.: :<.: ::.? 9.= 9.? 9.) =.>

:<.< 9.< 2;.= :0=.< NA NA NA NA NA NA

Adapted +ro" !!!."oneycentra&."sn.co"

6nternal %actor E"aluation 06%E1 Matrix

2e3 6nternal %actors

Strengths :. Starbucks e-pects to add appro-i"ate&y 20 net ne! stores to its %&oba& store base in +isca& 2. 2009 by c&osin% appro-i"ate&y <2? co"panyoperated stores in the 3nited States and addin% o+ appro-i"ate&y =0 co"pany-operated stores internationa&&y >. ,he co"pany p&ans to open appro-i"ate&y =? net ne! &icensed stores in the 3nited States and appro-i"ate&y >20 net ne! &icensed stores internationa&&y <. Capita& e-penditures +or +isca& 2009 are e-pected to re"ain unchan%ed* at appro-i"ate&y H=00 "i&&ion. ?. Aicensin% re$enues increased pri"ari&y due to hi%her product sa&es and roya&ty re$enues as a resu&t o+ openin% <>) ne! &icensed retai& stores in the &ast :2 "onth =. Stron% "arketin% and pro"otiona& ca"pai%n such as product p&ace"ent in "a8or ,F series ;. Starbucks a&so pro$ides e&ectrica& out&ets and* in so"e stores* !ire&ess access* +or custo"ers !ho "i%ht need to use their MP> p&ayers or &aptop co"puters

&eight

'ating

&eighted Score

0.0= 0.0?

< <

0.2< 0.2

0.0;

<

0.2)

0.0= 0.0;

> <

0.:) 0.2)

0.09 0.0=

< >

0.>= 0.:)

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). StarbucksG products can be +ound in con$enience stores* %rocery stores* depart"ent stores* "o$ie theaters* businesses* schoo&s* and e$en airports 9. Starbucks is rated by (ortune as one o+ the best top :0 p&aces to !ork :0. Starbucks a&so encoura%es the use o+ its 0eb site !here custo"ers are ab&e to re%ister their StarbucksG cards* recei$e nutritiona& in+or"ation about StarbucksG products* shop on&ine* search +or careers* and "uch "ore &ea#nesses :. <; percent drop in earnin%s in one year 200)# 2. (or the 2= !eeks endin% March 2009* StarbucksG re$enues decreased ; percent to H<.9? bi&&ion and net inco"e decreased ;2 percent to H)9.> "i&&ion >. MoodyGs 6n$estors Ser$ice recent&y do!n%raded StarbucksG credit ratin%s <. ,he 3.S. co"pany operated retai& business continued deterioratin% trends ?. (or the second /uarter o+ +isca& 2009* 3.S. tota& net re$enues !ere H:.) bi&&ion* a dec&ine o+ H:>:.? "i&&ion* or =.) percent* due to decreased re$enues +ro" co"pany operated retai& stores =. Many o+ StarbucksG 6nternationa& operations are in ear&y sta%es o+ de$e&op"ent that re/uire a "ore e-tensi$e support or%aniJation re&ati$e to the current &e$e&s o+ re$enue and operatin% inco"e in the 3nited States ;. 6nternationa& tota& net re$enues !ere H<>>.; "i&&ion +or the :> !eeks ended March 29* 2009* do!n H?9.; "i&&ion* or :2.: percent* co"pared !ith the sa"e period &ast year* pri"ari&y due to the i"pact o+ a stron%er 3.S. do&&ar re&ati$e to the British pound and Canadian do&&ar ). @&oba& Consu"er Products @roup CP@# tota& net re$enues decreased by 2 percent to H9<.) "i&&ion +or the second /uarter o+ +isca& 2009* due pri"ari&y to &o!er "ar%in on sa&es o+ packa%ed co++ee as a resu&t o+ discountin%* as !e&& as &o!er $o&u"e to the trade (otal

0.0; 0.0< 0.0=

< > >

0.2) 0.:2 0.:)

0.0; 0.0= 0.0< 0.0= 0.0<

: 2 : : 2

0.0; 0.:2 0.0< 0.0= 0.0)

0.0>

0.0>

0.0<

0.0<

0.0>

0.0>

).**

+.44

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%.

S&O( Strategies
Strengths &ea#nesses

:. Starbucks e-pects to add appro-i"ate&y 20 net ne! stores to its %&oba& store base in +isca& 2. 2009 by c&osin% appro-i"ate&y <2? co"pany-operated stores in the 3nited States and addin% o+ appro-i"ate&y =0 co"pany-operated stores internationa&&y >. ,he co"pany p&ans to open appro-i"ate&y =? net ne! &icensed stores in the 3nited States and appro-i"ate&y >20 net ne! &icensed stores internationa&&y <. Capita& e-penditures +or +isca& 2009 are e-pected to re"ain unchan%ed* at appro-i"ate&y H=00 "i&&ion. ?. Aicensin% re$enues increased pri"ari&y due to hi%her product sa&es and roya&ty re$enues as a resu&t o+ openin% <>) ne! &icensed retai& stores in the &ast :2 "onth =. Stron% "arketin% and pro"otiona& ca"pai%n such as product p&ace"ent in "a8or ,F series ;. Starbucks a&so pro$ides e&ectrica& out&ets and* in so"e stores* !ire&ess

:. <; percent drop in earnin%s in one year 200)# 2. (or the 2= !eeks endin% March 2009* Starbucks' re$enues decreased ; percent to H<.9? bi&&ion and net inco"e decreased ;2 percent to H)9.> "i&&ion >. Moody's 6n$estors Ser$ice recent&y do!n%raded Starbucks' credit ratin%s <. ,he 3.S. co"pany operated retai& business continued deterioratin% trends ?. (or the second /uarter o+ +isca& 2009* 3.S. tota& net re$enues !ere H:.) bi&&ion* a dec&ine o+ H:>:.? "i&&ion* or =.) percent* due to decreased re$enues +ro" co"pany operated retai& stores =. Many o+ Starbucks' 6nternationa& operations are in ear&y sta%es o+ de$e&op"ent that re/uire a "ore e-tensi$e support or%aniJation re&ati$e to the current &e$e&s o+ re$enue and operatin% inco"e in the 3nited States ;. 6nternationa& tota& net re$enues !ere H<>>.; "i&&ion +or the :> !eeks ended March 29* 2009*

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access* +or custo"ers do!n H?9.; "i&&ion* or !ho "i%ht need to use :2.: percent* co"pared their MP> p&ayers or !ith the sa"e period &aptop co"puters &ast year* pri"ari&y due ). Starbucks' products can to the i"pact o+ a be +ound in con$enience stron%er 3.S. do&&ar stores* %rocery stores* re&ati$e to the British depart"ent stores* pound and Canadian "o$ie theaters* do&&ar businesses* schoo&s* ). @&oba& Consu"er and e$en airports Products @roup CP@# 9. Starbucks is rated by tota& net re$enues Fortune as one o+ the decreased by 2 percent best top :0 p&aces to to H9<.) "i&&ion +or the !ork second /uarter o+ +isca& :0. Starbucks a&so 2009* due pri"ari&y to encoura%es the use o+ &o!er "ar%in on sa&es o+ its 0eb site !here packa%ed co++ee as a custo"ers are ab&e to resu&t o+ discountin%* as re%ister their Starbucks' !e&& as &o!er $o&u"e to cards* recei$e nutritiona& the trade in+or"ation about Starbucks' products* shop on&ine* search +or careers* and "uch "ore
O!!ortunities S=O Strategies &=O Strategies

:. @our"et co++ee :. 6"p&e"ent product :. De$e&op a "arketin% consu"ption rose !ith de$e&op"ent by strate%y such as the drinker's educationa& introducin% or%anic KStarbucks Co"boL by &e$e&. ,hose !ho co++ee and disc&osin% o++erin% co"bination o+ +inished co&&e%e bou%ht the nutritiona& content to %our"et co++ee and <9 percent "ore the consu"ers S:* S2* cookie C cake or K2 +or :L %our"et co++ee on S>* S?* S=* S;* I:* I2* on ,uesdays and a$era%e* and those !ith I># 0ednesdays !hen the so"e post%raduate 2. Continue openin% "ore patrons can purchase education bou%ht ;: retai& stores o$erseas co++ee on ,uesday and percent "ore !here co++ee is in %et +ree re+i&& on 2. Si-teen percent o+ the de"and and "arket has 0ednesday 0:* 02* 3.S. adu&t popu&ation not been saturated by 0>* I:* I2* I># consu"ed specia&ty co"petitors S:* S2* S>* 2. 2stab&ish 8oint $enture co++ee on a dai&y basis* S<* S9* I=# !ith hote&s* air&ines* and !hereas => percent >. De$e&op ne! products retai&ers +or ha$in% "iniindu&%ed occasiona&&y !ith better nutritiona& Starbucks &ocations or >. ,he %ro!th in popu&arity $a&ue S=* S)* I:* I2* +or ser$in% pre"iu" o+ specia&ty co++ees has I<* I?# Starbucks co++ee in the

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increased* as on&y :> percent and ?9 percent o+ peop&e reported dai&y and occasiona& consu"ption* respecti$e&y* in 2002 <. Another trend that has sur+aced in the past decade has been consu"er re/uests +or or%anic co++ees* and "ore e"phasis !as p&aced by retai&ers on the %ro!in% en$iron"ent o+ the beans ?. Consu"ers are beco"in% "ore hea&th conscious and are &ookin% +or s!eats and snacks that are &o! in carbs C su%ar and ca&orie =. 6nternationa& "arket has a stron%er econo"y and accordin%&y* consu"ers !ou&d be ab&e to pay pre"iu" price +or specia&ty or %our"et co++ee
(hreats S=( Strategies

hote& roo"s or durin% the +&i%hts 0:* 02* 0>* 0<* 0?* I:* I2* I>* I=#

&=( Strategies

:. ,he 200;D2009 %&oba& recession ne%ati$e&y a++ected the specia&ty co++ee industry 2. Eecent trends ha$e sho!n that so"e o+ the consu"in% pub&ic is concerned about the nutritiona& $a&ue o+ such products as those o++ered by the specia&ty co++ee sector and ha$e e$en cha&&en%ed the correctness o+ the

:. 6"p&e"ent "arket :. Penetrate "arket by penetration strate%y by appea&in% to a !ider pro"otin% additiona& $ariety o+ consu"ers &icensin% retai& dea&s. 0=* ,<* ,?# ,his "ini"iJes the risks 2. Cutback on so"e o+ and capita& e-penditures operatin% e-penses such +or Starbucks S2* S>* tryin% to i"pro$e S<* S?* ,:* ,<* ,?# purchasin% po!er and 2. Ao!er prices o+ popu&ar %ettin% better prices +ro" drinks by H0.?0 and the supp&iers and pro"ote the price $endors 0<* ,<* ,?# decrease throu%h a%%ressi$e ad$ertisin% S=* S;* S)* ,:* ,<#

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&abe&in% and ca&orie in+or"ation posted on the products a$ai&ab&e at retai& out&ets. >. Fo&ati&ity in the stocks and co++ee price cou&d i"pact the purchasin% po!er +or the buyers <. S"a&&er co"petitors are e-pandin% their "arkets as !e&& as their product &ine o++erin%s ?. Co"petitors such as McDona&d's and Dunkin Donuts are beco"in% stron%er in o++erin% specia&ty co++ee a&on% !ith other co"p&e"entary products

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7.

SPACE Matrix (S
Conser"ati"e
; = ? < > 2 :

Aggressi"e

CA

6S
-; -= -? -< -> -2 -: -: -2 -> -< -? -= : 2 > < ? = ;

Defensi"e

-;

Com!etiti"e

2S

%inancial Stabilit3 0%S1 Eeturn on 6n$est"ent Ae$era%e Ai/uidity 0orkin% Capita& Cash (&o! %inancial Stabilit3 0%S1 A"erage Com!etiti"e Stabilit3 0CA1 Market Share Product Bua&ity Custo"er Aoya&ty Co"petition's Capacity 3ti&iJation ,echno&o%ica& Mno!-.o!

2 ? 2 ? ? -.,

En"ironmental Stabilit3 0ES1 3ne"p&oy"ent ,echno&o%ica& Chan%es Price 2&asticity o+ De"and Co"petiti$e Pressure Barriers to 2ntry En"ironmental Stabilit3 0ES1 A"erage 6ndustr3 Stabilit3 06S1 @ro!th Potentia& (inancia& Stabi&ity 2ase o+ Market 2ntry Eesource 3ti&iJation Pro+it Potentia&

-? -2 -> -? -2 =-..

-2 -: -: -> -2

? : 2 < >

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Com!etiti"e Stabilit3 0CA1 A"erage

=).,

6ndustr3 Stabilit3 06S1 A"erage

1-a-is: (S N 2S O >.) N ->.<# O 0.2 4-a-is: CA N 6S O -:.)# N >.0# O :.2

>.

7rand Strateg3 Matrix

'a!id Mar#et 7ro8th Quadrant II Quadrant I

&ea# Com!etiti"e Position

Strong Com!etiti"e Position

Quadrant III

Slo8 Mar#et 7ro8th

Quadrant IV

:. Ee&ated di$ersi+ication 2. 3nre&ated di$ersi+ication >. Point $entures

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6.

(he 6nternal=External 06E1 Matrix

(he 6%E (otal &eighted Score Stron% >.0 to <.0 6 A$era%e 2.0 to 2.99 66 0eak :.0 to :.99 666

.i%h >.0 to >.99

6F

6F

F6

(he E%E (otal &eighted Score

Mediu" 2.0 to 2.99

Starbuc#s Stores? 6nc.

F66

F666

64

Ao! :.0 to :.99

@.

ASPM
Create Pro"otiona& Strate%ies Such As QStarbucks Co"boQ Ir Eeduce ,he Price By H0.?0 Per Drink In Popu&ar Drinks AS (AS

2e3 %actors

&eight

De$e&op Ne! Products 0ith Better Nutritiona& Fa&ue AS (AS

2-pand 6nternationa&&y By Ipenin% Additiona& :00N Aicense Eetai&ers ,hrou%h Point Fentures AS (AS

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O!!ortunities @our"et co++ee consu"ption rose !ith the drinkerGs educationa& &e$e&. ,hose !ho +inished co&&e%e bou%ht <9 percent "ore %our"et co++ee on a$era%e* and those !ith so"e post%raduate education bou%ht ;: percent "ore Si-teen percent o+ the 3.S. adu&t popu&ation consu"ed specia&ty co++ee on a dai&y basis* !hereas => percent indu&%ed occasiona&&y ,he %ro!th in popu&arity o+ specia&ty co++ees has increased* as on&y :> percent and ?9 percent o+ peop&e reported dai&y and occasiona& consu"ption* respecti$e&y* in 2002 Another trend that has sur+aced in the past decade has been consu"er re/uests +or or%anic co++ees* and "ore e"phasis !as p&aced by retai&ers on the %ro!in% en$iron"ent o+ the beans Consu"ers are beco"in% "ore hea&th conscious and are &ookin% +or s!eats and snacks that are &o! in carbs C su%ar and ca&orie 6nternationa& "arket has a stron%er econo"y and accordin%&y* consu"ers !ou&d be ab&e to pay pre"iu" price +or specia&ty or %our"et co++ee (hreats ,he 200;-2009 %&oba& recession ne%ati$e&y a++ected the specia&ty co++ee industry Eecent trends ha$e sho!n that so"e o+ the consu"in% pub&ic is concerned about the nutritiona& $a&ue o+ such products as those o++ered by the specia&ty co++ee sector and ha$e e$en cha&&en%ed the correctness o+ the &abe&in% and ca&orie in+or"ation posted on the products a$ai&ab&e at retai& out&ets. Fo&ati&ity in the stocks and co++ee price cou&d i"pact the purchasin% po!er +or the buyers S"a&&er co"petitors are e-pandin% their "arkets as !e&& as their product &ine o++erin%s

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Co"petitors such as McDona&dGs and Dunkin Donuts are beco"in% stron%er in o++erin% specia&ty co++ee a&on% !ith other co"p&e"entary products (O(AB Strengths Starbucks e-pects to add appro-i"ate&y 20 net ne! stores to its %&oba& store base in +isca& 2009 by c&osin% appro-i"ate&y <2? co"pany-operated stores in the 3nited States and addin% o+ appro-i"ate&y =0 co"pany-operated stores internationa&&y ,he co"pany p&ans to open appro-i"ate&y =? net ne! &icensed stores in the 3nited States and appro-i"ate&y >20 net ne! &icensed stores internationa&&y Capita& e-penditures +or +isca& 2009 are e-pected to re"ain unchan%ed* at appro-i"ate&y H=00 "i&&ion. Aicensin% re$enues increased pri"ari&y due to hi%her product sa&es and roya&ty re$enues as a resu&t o+ openin% <>) ne! &icensed retai& stores in the &ast :2 "onth Stron% "arketin% and pro"otiona& ca"pai%n such as product p&ace"ent in "a8or ,F series Starbucks a&so pro$ides e&ectrica& out&ets and* in so"e stores* !ire&ess access* +or custo"ers !ho "i%ht need to use their MP> p&ayers or &aptop co"puters StarbucksG products can be +ound in con$enience stores* %rocery stores* depart"ent stores* "o$ie theaters* businesses* schoo&s* and e$en airports Starbucks is rated by (ortune as one o+ the best top :0 p&aces to !ork Starbucks a&so encoura%es the use o+ its 0eb site !here custo"ers are ab&e to re%ister their StarbucksG cards* recei$e nutritiona& in+or"ation about StarbucksG products* shop on&ine* search +or careers* and "uch "ore &ea#nesses <; percent drop in earnin%s in one

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year 200)# (or the 2= !eeks endin% March 2009* StarbucksG re$enues decreased ; percent to H<.9? bi&&ion and net inco"e decreased ;2 percent to H)9.> "i&&ion MoodyGs 6n$estors Ser$ice recent&y do!n%raded StarbucksG credit ratin%s ,he 3.S. co"pany operated retai& business continued deterioratin% trends (or the second /uarter o+ +isca& 2009* 3.S. tota& net re$enues !ere H:.) bi&&ion* a dec&ine o+ H:>:.? "i&&ion* or =.) percent* due to decreased re$enues +ro" co"pany operated retai& stores. Many o+ StarbucksG 6nternationa& operations are in ear&y sta%es o+ de$e&op"ent that re/uire a "ore e-tensi$e support or%aniJation re&ati$e to the current &e$e&s o+ re$enue and operatin% inco"e in the 3nited States 6nternationa& tota& net re$enues !ere H<>>.; "i&&ion +or the :> !eeks ended March 29* 2009* do!n H?9.; "i&&ion* or :2.: percent* co"pared !ith the sa"e period &ast year* pri"ari&y due to the i"pact o+ a stron%er 3.S. do&&ar re&ati$e to the British pound and Canadian do&&ar. @&oba& Consu"er Products @roup CP@# tota& net re$enues decreased by 2 percent to H9<.) "i&&ion +or the second /uarter o+ +isca& 2009* due pri"ari&y to &o!er "ar%in on sa&es o+ packa%ed co++ee as a resu&t o+ discountin%* as !e&& as &o!er $o&u"e to the trade. SDB(O(AB SDM (O(AB A(('AC(6VENESS SCO'E

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2.

'ecommendations

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De$e&op series o+ ne! co++ee* tea and +ruit drinks !ith better nutritiona& $a&ues +or hea&th conscious custo"ers. 6nitia&&y* enter se&ected "arket !ith predatory pricin% strate%y and then "o$e to &ar%er "arket.

L.

EPS/EBIT Analysis
H A"ount Needed: H?0 "i&&ion Stock Price: H2>.0= ,a- Eate: >:.>R 6nterest Eate: >.?R S Shares Iutstandin%: ;<0.2 Mi&&ion
Common Stock Financing Recession Normal Boom $1,000,000,00 $1,500,000,00 $500,000,000 0 0 0 0 0 500,000,000 1,000,000,000 1,500,000,000 156,500,000 313,000,000 469,500,000 343,500,000 687,000,000 1,030,500,000 742,368,257 742,368,257 742,368,257 0.46 0.93 1.39 Recession $500,000,000 1,750,000 498,250,000 155,952,250 342,297,750 740,200,000 0.46 70 Percent Debt - 30 Percent Stock Recession $500,000,000 350,000 499,650,000 156,390,450 343,259,550 740,850,477 0.46 Debt Financing Normal Boom $1,000,000,00 0 $1,500,000,000 1,750,000 1,750,000 998,250,000 1,498,250,000 312,452,250 468,952,250 685,797,750 1,029,297,750 740,200,000 740,200,000 0.93 1.39

EBIT Interest EBT Taxes EAT # Shares EPS

70 Percent Stock - 30 Percent Debt Recession EBIT Interest EBT Taxes EAT # Shares EPS $500,000,000 1,400,000 498,600,000 156,061,800 342,538,200 741,717,780 0.46

Normal $1,000,000,00 0 1,400,000 998,600,000 312,561,800 686,038,200 741,717,780 0.92

Boom $1,500,000,00 0 1,400,000 1,498,600,000 469,061,800 1,029,538,200 741,717,780 1.39

Normal $1,000,000,00 0 350,000 999,650,000 312,890,450 686,759,550 740,850,477 0.93

Boom $1,500,000,000 350,000 1,499,650,000 469,390,450 1,030,259,550 740,850,477 1.39

M.

E!ilogue

Starbucks is sho!in% si%ns o+ chan%e and that the chan%e has started to !ork. (or the +irst ti"e in ei%ht /uarters* the co"pany posted positi$e earnin%s. 6n +act* a&& 3S co"pany operated stores reported positi$e %ro!th in their sa&es. (or the &ast +e! years* the co"pany o$er-e-panded by openin% too "any stores and so"e too c&ose to each others. No!* they ha$e done an i"pressi$e 8ob

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restructurin% itse&+ and returnin% back to bein% pro+itab&e by c&osin% so"e stores and s&i""in% do!n its !ork+orce o$er the past +e! years. ,hey +urther e&i"inated e-cessi$e !aste in their operations and ha$e been tryin% to be &eaner in their day to day business processes. ,he co"pany's inno$ati$e nature has a&&o!ed it to capita&iJe on the socia& net!orkin% pheno"enon* as Starbucks is the "ost popu&ar brand on both ,!itter and (acebook. And o+ course* Starbucks e$en has an iPhone app&ication. ,echno&o%ica& "edia is e-pected to be the +uture o+ "arketin%* %i$in% Starbucks an ed%e !ith its "arketin% strate%y. 6n a press re&ease* .o!ard Schu&tJ stated that KStarbucks today is a better and stron%er co"pany than it has e$er been and 6 a" "ore opti"istic than e$er about its +uture.L 6 +ind it hard to tru&y be&ie$e this state"ent. Starbucks is better and stron%er today than it has been in years* but not in its entire history. ,he co""ent has a tad too "uch o+ an entrepreneuria& +ee& +or "y taste.

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