Coffee and Starbucks Essay Example for Free

Coffee and Starbucks Essay †¢ In 2006, the US based Starbucks Coffee Company, with over 11,000 stores in 36 countries was the No. 1 specialty coffee company in the world. †¢ Every week over 40 million customers visited Starbucks coffeehouses. †¢ After phenomenal success in the US, and revolutionizing specialty coffee culture, Starbucks undertook international expansion and popularized its specialty coffee worldwide. †¢ In the 1990s, Starbucks concentrated its expansion efforts mainly in Asia. The initial pages of the case delineate the origin and growth of Starbucks as a company and a super brand and the strategies adopted by it. †¢ In 2002, Starbucks announced that it was planning to enter India. Later it postponed its entry as it had entered China recently and was facing problems in Japan. †¢ In 2003, there was news again that Starbucks was reviving its plans to enter India. †¢ In 2004, Starbucks officials visited India but according to sources they returned unconvinced as they could not crystallize on an appropriate partner for its entry. †¢ In mid 2006, Starbucks announced that they were all set to offer the ‘Starbucks experience’ to Indians in the next 18 months. II. STRATEGIC POSTURE 1. MISSION. †¢ To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time. †¢ Expansion to Asia market 2. OBJECTIVES †¢ â€Å"We are looking forward to offering the finest coffee in the world, handcrafted beverages, and the unique starbucks experience† †¢ Our Coffee – â€Å"It has always been, and will always be, about quality. We’re passionate about ethically sourcing the finest coffee beans, roasting them with great care, and improving the lives of people who grow them. We care deeply about all of this; our work is never done. † †¢ Our Partners – â€Å"We’re called partners, because it’s not just a job, it’s our passion. Together, we embrace diversity to create a place where each of us can be ourselves. We always treat each other with respect and dignity. And we hold each other to that standard. † †¢ Our Customers – â€Å"When we are fully engaged, we connect with, laugh with, and uplift the lives of our customers – even if just for a few moments. Sure, it starts with the promise of a perfectly made beverage, but our work goes far beyond that. It’s really about human connection. † †¢ Our Stores – â€Å"When our customers feel this sense of belonging, our stores become a haven, a break from the worries outside, a place where you can meet with friends. It’s about enjoyment at the speed of life – sometimes slow and savored, sometimes faster. Always full of humanity. † †¢ Our Neighborhood – â€Å"Every store is part of a community, and we take our responsibility to be good neighbors seriously. We want to be invited in wherever we do business. We can be a force for positive action – bringing together our partners, customers, and the community to contribute every day. Now we see that our responsibility – and our potential for good – is even larger. The world is looking to Starbucks to set the new standard, yet again. We will lead. † †¢ Our Shareholders – â€Å"We know that as we deliver in each of these areas, we enjoy the kind of success that rewards our shareholders. We are fully accountable to get each of these elements right so that Starbucks – and everyone it touches – can endure and thrive. † 3. STRATEGIES †¢ International expand through joint ventures, licenses or by company own operation †¢ Building critical relationship to gaining additional market knowledge with government †¢ Consistency on service and product †¢ Postioning in Premium market 4. POLICIES †¢ India had embarked on a series of economic reforms since 1991 that had ersulted in higher growth rates, lower inflation, and significant increase in foreign investment †¢ Indian government permitted Foreign Direct Investment (FDI) up to 51% in retail trade of single-brand products with prior government approval. III. STRATEGIC MANAGERS a. BOARD OF DIRECTORS |Howard Schultz |William (Bill) Bradley | |Starbucks |Allen Company LLC | |founder, chairman, president and chief executive officer |managing director | |Robert M. Gates |Mellody Hobson | |former Secretary of Defense |Ariel Investments, LLC | | |president | |Kevin Johnson |Olden Lee | |Juniper Networks, Inc. |PepsiCo, Inc. | |chief executive officer |retired executive | |Joshua Cooper Ramo |James Shennan, Jr. | |Kissinger Associates |Trinity Ventures | |vice chairman |general partner emeritus | |Clara Shih |Javier Teruel | |Hearsay Labs, Inc. |Colgate Palmolive Company | |chief executive officer |retired vice chairman | |Myron Ullman, III |Craig Weatherup | |J. C. Penney Company, Inc. |Pepsi-Cola Company | |retired chairman and chief executive officer |retired chief executive officer | b. TOP MANAGEMENT Starbucks is realigning its top management to help drive its international growth, continued to strengthen Starbucks top management team, hiring people with extensive experience in managing and expanding retail chains. IV. 6F – 7S 6 FORCES 1. Customer bargaining power: The customer bargaining power of starbuck is actually low. It is because Starbucks able to satisfy the needs of the customers by providing various type of coffee and beverages. In other hand, Starbucks also fitting in with the beverages and food from each countries they are expand to, so that they dont have any problem in fulfilling the demand of the customers. 2. Supplier bargaining power: Starbucks get their coffee from South America and Indonesia mostly as their main supplier. Based on that the supplier bargaining power is also low since Starbucks demanding their own standard fof the high quality coffee and also another term that they set in order to sustain their products quality. 3. Other Stakeholder: The other stakeholder for Starbucks is basically come fro mthe government and the other social community. The government is only giving the regulation about the coffee shop, while the other hand social community mostly protest against starbucks about their products with high sugar and fat that can caused obesity and diabetes. But, the other stakeholder bargainig power is still low over Starbucks. 4. Substitute: The substitute for coffee as starbucks mostly offer as their own core products is low. It is because coffee is still favorable in some countries even though some parts in Asia prefer tea as their beverages, but Starbucks also could comply with it and keep growing and get profit from their coffee products. 5. New Entrants : For the new entrants for the same business area for starbucks is low. It is because some of the new entrants mostly can not compete with starbucks and mostly with small market share and retails. 6. Competitors between firms : As the competitors between firms for Starbucks is medium. The competitors is based on the India market. India has several coffee shop that provides the same services and products. Even though like that, Starbucks still get the upper hand on the situation, and for the American competitors, Starbucks has acquired some of their competitors, so that it wont affecting Starbucks. 7S analysis 1. Systems: Starbucks has their own system in servicing the customers. The system is the store is established closed to each otehr in a cluster of crowded places. Each of the stores will have the baristas (coffee maker) which are professional. The baristas will serve the customers. Beside that, Starbucks also prefer a non smoking area retail and not allowing the staff to use a high fragrance in order not to distrub the coffee aroma. 2. Style: The style of Starbucks is providing the coffee based on the italian style. They intent to make the coffee shop of Starbucks as the second home for the executive and also the other customers of their target market. They make the theme of the coffee shop as comfortable as in home with wooden decoration, opera and jazz musical which offer relaxing atmosphere. 3. Staff: As for the staff of Starbucks, it consists of 10,000 people that are spreading over 11,000 stores in 26 countries and it keeps growing from time to time as Starbucks are expanding their business to Asia. 4. Strategies: For the strategies of Starbucks. At first they open the retail of their shops in a cluster of a crowded and strategic places. This is for making a high barrier over the new entrants or competitors. Another thing that Starbucks also use the strategies of their theme that are different from the other coffee shop which is more like second home rather than juz for drink n go coffee shop. 5. Skill: Skills of Starbucks staf is on their baristas which is the professional coffee maker with talented and skillful ability in brewing the coffee. The baristas could make not only the plain coffee but also combining the art of design in the coffee they made as the decoration in order to make more prestige and value on their product. 6. Structure: Starbucks is lead by CEO and each or region also have their CEO that will responsible to the Starbucks in America. Beside that they also have the staff and baristas 7. Shared Value: The shared value of Starbucks is not to server and handle the coffee properly but also how to impart to customer, our passions for our products. Beside that the shared value of Starbucks is treating the customers very welll with the atmosphere of the shop so that they will feel like in second home situation. V. EXTERNAL ENVIRONMENT EFAS |External strategic factors |weight |rating |weight score | |OPPORTUNITY | |Expand the markets |0. 09 |4 |0. 36 | |To position Starbucks as a leader in a new industry, and in a sense, |0. 09 |4 |0. 36 | |educate a market about the quality of coffee, the experience and the | | | | |idea of Starbucks | | | | |India was ranked as the fourth largest economy in the world terms |0. 07 |5 |0. 35 | |purchasing power parity and tenth most industrialized country in the | | | | |world. | | | | | The middle class were increased in India |0. 1 |4 |0. 4 | |Drank coffee as a fashion statement |0. 07 |3 |0. 21 | | Growing interest in western consumer brand and luxury products |0. 06 |3 |0. 18 | |THREAT | | | |High competition |0. 1 |4 |0. 4 | |By 2002, Starbucks incurred huge losses in its Japanese operations |0. 06 |3 |0. 18 | |Another significant challenge that Starbucks could face was the |0. 05 |3 |0. 15 | |increasing rate of obesity in India | | | | |High rate of rent and cost labor |0. 06 |3 |0. 18 | | Asian people is tea drinkers |0. 07 |4 |0. 28 | |Included inadequate infrastructure, beraucracy, regulatory and foreign |0. 09 |4 |0. 36 | |investment control | | | | |Different culture, religion and regions |0. 09 |4 |0. 36 | |Total score |1 | |3. 77 |. Based on EFAS- IFAS analysis we thought that Starbuck should be on a growth strategy. Starbucks need to expansion to the Indian market and catch the opportunity by serving costumer needs because starbucks will be able to satisfy the desire for their coffee experience and build lot of stores to create brand awareness. Improve the network through creating joint venture with a lot of company in many specialties, like Maxim’s caterer, Beijing Mei Da Coffe Co. Ltd and Tata, and increasing quality and services. Using vertical growth in order to keep and improve its competitive position, control over scarce resource and guarantee quality. A. NATURAL ENVIRONMENT Starbucks has soil, water, pest, waste and energy management B. SOCIETAL ENVIRONMENT Politic India had embarked on a series of economic reforms since 1991 that had ersulted in higher growth rates, lower inflation, and significant increase in foreign investment Economic Many different prices High rent and cost of labor in Japan By 2005, China contributed to little less than 10 % of the global sales of Starbucks and by 2008, Starbuck expected to derive 20 % of its revenue from Chinese locations Social culture High quality of service and customer satisfaction. In Italy, the decor of the store and the menu were covered based on feedback from customers Its employees were required to refrain from using strong perfumes that could adversely the aroma of its coffee Starbucks has forest and biodiversity conservation to workers welfare, living conditions, health, safety, etc In 2005, Starbucks announces plans to donate funds and supplies to the Hurricane Katrina relief effort Technology In 2004, XM Satelite Radio and Starbucks announced the debut the Starbucks â€Å"Hear Music† channel on XM Radio Environmental Starbucks has soil, water, pest, waste and energy management Legal. Starbucks licensed Marriot and Aramark to open Starbucks outlets Starbucks maintained a non smoking policy at all its outlets worldwide VI. INTERNAL ENVIRONMENT IFAS |Internal strategic factors |weight |rating |weight score | |STRENGTH | |The world’s No. 1 specialty coffee retailer |0. 1 |5 |0. 5 | |Has high quality of coffee |0. 2 |5 |1 | |Starbucks became the majority owner of its operations in Southern China |0. 08 |3 |0. 24 | |Has unique concept and atmosphere to create a new coffee experience |0. 1 |4 |0. 4 | |Has strict quality control worldwide so the taste remains the same |0. 11 |5 |0. 55 | |WEAKNESS | |Too many market |0. 08 |3 |0. 24 | |Starbucks was opening stores too close each |0. 1 |3 |0. 3 | |The no smoking policy made many competitors took advantage and included an |0. 15 |4 |0. 6 | |elaborate food menu with coffee and had separate smoking areas | | | | |Didn’t have own roasting in Japan |0. 08 |3 |0. 24 | |Total score |1 | |4. 07 | A. CORPORATE STRUCTURE Divisional structure B. CORPORATE CULTURE †¢ Commitment to quality †¢ Teach baristas not only to handle coffee properly, but also how to impart to customers our passion for our products. †¢ Opposed the concept of franchising †¢ Word of mouth promotion C. CORPORATE RESOURCES 1. Marketing: †¢ Expand the business to grow their market share in regional and global section †¢ Positioning in premium market. †¢ Extent product line portfolio. †¢ Promotional activities to create brand awareness and introducing Coffe with high quality 2. Finance: †¢ Creating strategic alliances by joint venture. †¢ Reduce the price but not below the competition level †¢ Making acquisition with some big companies 3. Operation †¢ Managing supply lines †¢ Creating more efficience resources 4. Research and Development. †¢ Developmnet of RD to create more innovative and unique products (food and beverags) 5. Human Resources †¢ Maintaining the baristas to serve the coffee without losing the quality of service. VII. ANALYSIS OF STRATEGIC FACTORS A. SITUATIONAL ANALYSIS |STRENGTH | |The world’s No. 1 specialty coffee retailer | |Has high quality of coffee | |Starbucks became the majority owner of its operations in Southern China | |Has unique concept and atmosphere to create a new coffee experience | |Has strict quality control worldwide so the taste remains the same | |WEAKNESS | |Too many market | |Starbucks was opening stores too close each other. | |The no smoking policy made many competitors took advantage and included an elaborate food menu with coffee and had separate | |smoking areas | |Didn’t have own roasting in Japan | |OPPORTUNITY | |Expand the markets | |To position Starbucks as a leader in a new industry, and in a sense, educate a market about the quality of coffee, the | |experience and the idea of Starbucks | |India was ranked as the fourth largest economy in the world terms purchasing power parity and tenth most industrialized | |country in the world. | |The middle class is increase in India | |Drank coffee as a fashion statement | |Growing interest in western consumer brand and luxury products | |THREAT | |High competition | |By 2002, Starbucks incurred huge losses in its Japanese operations | |Another significant challenge that Starbucks could face was the increasing rate of obesity in India | |High rate of rent and cost labor | |Asian people is tea drinkers | |Included inadequate infrastructure, beraucracy, regulatory and foreign investment control | |Different culture, religion and regions | SFAS. | | | | |duration | |Strategic Factors |weight |rating |weight score |short |intermediate |long | |S5 Has strict quality control |0. 12 |4 |0. 48 | | |X | |worldwide so the taste remains the | | | | | | | |same | | | | | | | |W2 Starbuck was opening store too |0. 1 |3 |0. 3 |X |X | | |close each other | | | | | | | |W3 The no smoking policy made |0. 13 |3 |0. 39 |X |X | | |many competitors took advantage and| | | | | | | |included an elaborate food menu | | | | | | | |with coffee and had separate | | | | | | | |smoking areas | | | | | | | |O2 To position Starbucks as a |0. 13 |4 |0. 52 | | |X | |leader in a new industry, and in a | | | | | | | |sense, educate a market about the | | | | | | | |quality of coffee, the experience | | | | | | | |and the idea of Starbucks | | | | | | | |O4 The middle class were increased|0. 1 |3 |0. 3 | |X |X | |in India | | | | | | | |T4 Asian people is tea drinkers |0. 14 |4 |0. 56 |X |X | | |T5 Included inadequate |0. 14 |4 |0. 56 |X |X | | |infrastructure, beraucracy, | | | | | | | |regulatory and foreign investment | | | | | | | |control | | | | | | | |total score |1 | |3. 81 | | | | Based on the SFAS table that have been created there are some strategic strong point from Starbucks such as they have a famous brand image with high quality of coffee with strict quality control. As for the weakness, they are opening store too close each other so it will make a strict competition between starbucks itself and make â€Å"self cannibalization†. Another weekness starbuck has The no smoking policy made many competitors took advantage and included an elaborate food menu with coffee and had separate smoking areas. Whereas that market are potential to gain profit. Based on BMJ (British Medical Journal) 154 million men and 41 million women in India are smokers. Based from the Strengths and Weaknesses that Starbucks have, there also Opportunities that Starbucks position as a leader in a new industry, and in a sense, educate a market about the quality of coffee, the experience and the idea of Starbucks. Second opportunities Starbuck has is the middle class are increasing in India and was estimated at around 250 million and was growing in double digits in urban and second tier cities. For the Threats that Starbuck might encounter if they want to expand in India Market are Asian people especially Indian are tea drinker and Included inadequate infrastructure, bureaucracy, regulatory and foreign investment control TOWS ANALYSIS | Internal factor |Strenghts |Weakness | | |The world’s No. 1 specialty coffee |Too many market | | |retailer |Starbucks was opening stores too close | | |Has high quality of coffee |each | | |Has unique concept and atmosphere to |The no smoking policy made many | | |create a new coffee experience |competitors took advantage and included an| | |Has strict quality control worldwide |elaborate food menu with coffee and had | | |so the taste remains the same |separate smoking areas | | | |Didn’t have own roasting in Japan | | | | | | | | | |Eksternal factor | | |. Opportunity |S-O strategy |W-O strategy | |Expand the markets |Creating Joint Venture with other |Develop niche product | |To position Starbucks as a leader in a new |company in many specialities |Maintaining the quality of product and | |industry, and in a sense, educate a market |Building critical relationship to |excellent services | |about the quality of coffee, the experience |gaining additional market knowledge |Separated room for smokers and elaborated | |and the idea of Starbucks |with government |food menu | |India was ranked as the fourth largest |. Consistency on service and product | | |economy in the world terms purchasing power |Postioning in Premium market | | |parity and tenth most industrialized country| | | |in the world. | | | |The middle class were increased in India | | | |Drank coffee as a fashion statement | | | |Growing interest in western consumer brand | | | |and luxury products | | | |Threat |S-T Strategy |W-T strategy | |High competition |Extend their product line portfolio |Promotional activities to create brand | |. By 2002, Starbucks incurred huge losses in | |awareness and introducing Coffe with high | |its Japanese operations | |quality | |Another significant challenge that Starbucks| |Reduce the price but not below the | |could face was the increasing rate of | |competition level | |obesity in India | |Match the coffee shop with the culture, | |High rate of rent and cost labor | |like they offer special Indian tea | |Asian people is tea drinkers | | | |Included inadequate infrastructure, | | | |bureaucracy, regulatory and foreign | | | |investment control | | | |Different culture, religion and regions | | |. †¢ Creating Joint Venture with other company in many specialities †¢ Building critical relationship to gaining additional market knowledge with government †¢ Consistency on service and product †¢ Postioning in Premium market †¢ Develop niche product †¢ Maintaining the quality of product and excellent services †¢ Separated room for smokers and elaborated food menu †¢ Extend their product line portfolio †¢ Promotional activities to create brand awareness and introducing Coffe with high quality †¢ Reduce the price but not below the competition level. |