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Starbucks is the world leader in cultivating the perfect
coffeehouse experience. From ethically grown coffee to
environmentally conscious processes, and from partner-
employees who love their jobs to the over-the-top
customer experience they provide, her dominating
success is the result of genuine service come full circle.
To keep the Siren sitting pretty, delve into our strategic
recommendations; act on them, and the competition
wont amount to a hill of beans.
TABLE OF CONTENTS

Executive Summary
Starbucks
The Company
Mission and Vision Statement
Current Strategies
Corporate Level
Functional Level
Strategic-Consistency
Competitive Environment
Analysis of Outside Forces
Porters 5 Forces
Ethical Legal and Social Challenges
External Factor Evaluation
Competitive Profile Matrix
Assessment of Alternative Strategies
SWOT Analysis
Space Matrix
Grand Strategy Matrix
Summary
Recommendations
Expand Operations
Engage in Advertising
QSPM
Implementation
Evaluation
Closing Remarks







Starbucks:The rise, fall, and revival

For 20 straight years, Starbucks was on a magical carpet ride, he said. Everything we touched turned to gold. Howard Schultz
stepped down from CEO in 2000 to chief global strategist. He broke down and cried. The coffeehouse had gone negative for the first time, down
8.6 percent, and if the declines reached 14.8 percent, Starbucks would be insolvent.

In 2008 he returned and promised to turn things around. Schultz spent almost $33 million to bring 11,000 store managers to New
Orleans from all around the world. He was preparing a speech for them and his most trusted advisors told him, almost in unison, that he could
not share with them how desperate the situation really was.

First things first, managers spent 50,000 hours doing community service in the Ninth Ward, the area hardest hit by Katrina three years
before. We began to rekindle the values and guiding principals of the company, the balance and benevolence between profits and
responsibility, Shultz said.
Then came the moment of truth, his $33-million speech.

It went as follows:
We made the mistake in 07 and 08 of talking about millions of customers and thousands of stores, he
said. Thats ridiculous. The moment of truth for Starbucks, and for all of you, is one customer, one
Starbucks partner wearing that green apron, and that one experience based on the best-tasting coffee
on the planet. We have to live up to that and overachieve, so they not only come back, but tell a friend.
Store Managers can no longer be bystanders to anything we see. The world does not need Starbucks
Coffee. Its completely discretionary. There are hundreds of places across the street that can provide
coffee for a lower price.

A few months later, in response to quality concerns about the actual coffee, Schultz closed every store for retraining on how to make coffee.







EXECUTIVE SUMMARY

On a corporate level we are exceeding all expectations in regards to quality of both services/products and obligations to stakeholders. On the
competitive and functional end we are nurturing relationships with farmers, employees and customers. Protecting the Starbucks Experience is of
upmost importance, ensuring consistency with quality control and proper training.
Externally we are succumbed to economic swings and intense competition but we leverage with our up to date technology and our
socio-cultural and environmental awareness. Of the Porters 5 Forces, four out of the five are rated HIGH only leaving the bargaining power of
suppliers at a MEDIUM.

EFE- weighted score of 3.15 with the highest weighted opportunity being the growth of the coffee market in the U.S. is expected to grow at a
compound annual growth rate of 30%. The highest weighted threat is that prices for Arabica beans have doubled in price in the last year.

The average CPM scores of our competitors Dunkin Donuts and McDonalds are averaged 68% lower than our incredibly high rating of 3.61.

IFE highest weighted strength is that our net income increased by 24% during fiscal 2013.

Strategic alternatives- we need to everage the universal appeal of the Starbucks brand to penetrate new markets and push to normalize
everyday consumption of starbucks premium roast coffee for every adult. We need to use the appeal of our social responsibility and fair trade
practices as a selling point in our advertising campaign. We need to at least meet our competitors advertising expenditures, during 2013 we used
around 1/10
th
of the capital as Dunkin Donuts.

We are in a strong competitive position in a market with rapid growth and need to take the opportunity at hand for market penetration,
market/product development and backward integration.

With a deep analysis of the company we have come up with two important strategies to implement immediately.
1. Leverage the universal appeal of the Starbucks brand to penetrate new markets by expanding operations into China and India.
2. Break free of stoic precedent and use high road advertising and direct ads to match competition.




Where did they start?
Starbucks opened in 1971. Back then it was a single store in Seattles historic Pike Place Market; it is still open for business.
In 1983 Howard Schultz, a Starbucks employee, visited Italy and instantly fell in love with the romance of the coffee experience and brought the
idea home to the U.S.

I have tried to build the company that my father never got to work for, he said of his dream. Its the reason Starbucks was one of the first to
offer full health benefits in 1988 to all full- and part-time employees.

What put them on the map?
Theyve essentially become a place between home and work, a second home so to speak. Starbucks set out to be a different kind of company
and still holds close to its values since opening. Starbucks strives to make a connection and provide the romance of the Starbucks experience
with every single cup.

What core competency is of best value?
STRENGTHS: Starbucks owns 75% of the domestic coffee market and its customers are extremely loyal and are more than willing to pay higher
prices for the Starbucks experience.

STARBUCKS EXPERIENCE- is a unique blend of coffee expertise, product awareness, and customer service that has YET to be replicated by
competitors!

Their commitment to the environment and CSR is unwavering. Partners are treated well with benefits annual average pay $34,028. Rated
Fortune 100 Best Company to Work for. Employee turnover rate is an incredible 9%!

What is Starbucks currently doing?
La Boulange
May is global month of community service hosted by Starbucks

Today, with more than 18,000 stores in 62 countries, Starbucks is the premier roaster and retailer of specialty coffee in the world



TIMELINE

1971 first store in Seattle's Pike Place Market (just sold coffee beans)
1984 Howard Schultz (employee) convinces founders to test the COFFEE HOUSE concept and sold its first latte. (6 stores)
1987 Schultz bought Starbucks chain (17 stores)
1988 Offers FULL health benefits to all employees (33 stores)
1992 SBUX INTIAL PUBLIC OFFERING! (165 stores)
1996 Opens store outside of U.S. in Japan (1,015 stores)
1998 Extends Starbucks brand into grocery stores and launches Starbucks.com (1,886 stores)
2000 Howard Schultz steps down as CEO (3,501 stores)
2001 Implements ethical coffee sourcing guidelines- partnership with conservation international (4,709 stores)
2003 Acquires Seattle's Coffee Company (7,225 stores)
2008 Schultz RETURNS as CEO (16,680 stores)
2009 Introduces "skinny" line of drinks, health conscious choices that don't affect prices



HISTORY AND EVOLUTION

Starbucks locations serve hot and cold beverages, whole-bean coffee, micro-ground instant coffee, full-leaf teas, pastries, and
snacks. Most stores also sell pre-packaged food items, hot and cold sandwiches, and items such as mugs and tumblers. Starbucks
evening locations also offer a variety of beers, wines, and appetizers after 4pm. Through the Starbucks Entertainment division and
Hear Music brand; the company also markets books, music, and film. Many of the company's products are seasonal or specific to the
locality of the store. Starbucks-brand ice cream and coffee are also offered at grocery stores.

Starbucks originated in Seattle, on March 30, 1971. It all started when a roasting entrepreneur, Alfred Peet, inspired three
college friends to sell high-quality coffee beans. At first, they had the idea to name their coffee houses the Pequod (the ship in Moby
Dick). After voting, this name was denied and instead it was named after that ships first mate, Starbuck.

At first, the company sold just coffee beans and brewed coffee for customer testing only. By 1984, Starbucks operated six
stores in Seattle and finally introduced espresso coffee for sale, 13 years later.

Howard Shultz, a former employee, bought the Starbucks chain in 1987, and Starbucks quickly began to expand.
In 1992, Starbucks administered its IPO. By September 1993, the EPS had risen 70% than the previous year. The number of stores
doubled within the next two years.

After a trip to Italy to find new products, Schultz realized an opportunity to bring the caf community environment he found in
Italy to the United States and the Starbucks brand we know today began to take form. In 1996, they bought 150 stores of Seattles
best coffee for $72M.
In 2008, Starbucks introduced a loyalty program that has been wildly successful. When they began their beta testing the mobile
app and stored value system in which consumers can pay with their phone with pre-paid funds.

Now Starbucks is the largest coffee house company in the world with over 19,000 in 62 countries but Howard Shultz fights to
keep the small town feel and its success not to dilute the companys culture and the Starbucks experience.

In fiscal 2013 had more than 3 billion visits to its stores. In 2009, Starbucks made the move toward health conscious choices
that doesnt affect prices. It started selling salads and pastries without high fructose corn syrup and artificial sweeteners. The skinny
line of drinks, offers low calorie and sugar free versions of most popular drinks using skim or soymilk. They also have choices of
natural sweeteners like sugar in the raw, agave syrup, or honey. Starbucks even began to post calorie counts for drinks and baked
good.
MISSION AND VISION

Our mission: to inspire and nurture the human spirit one person, one cup and one neighborhood at a time (7) (8).
Were passionate about ethically sourcing the finest coffee beans and roasting them with great care while improving the lives of
people who grow them (6). Our business leads the sustainability model by leveraging technology to deliver consistent satisfaction to
customers and shareholders alike (4)(5). Our associates are partners, not just employees, because our work is not just a job; we share a
common passion (9). When we are fully engaged, we connect with, laugh with, and uplift the lives of all who come into contact with
our business. As we do business around the globe we show our customers we care and make our stores part of the community (3).
The process starts with the promise of a perfectly made beverage, but our work goes far beyond that: its really about human
connection (1)(2).

Starbucks current mission statement is as follows Our mission: to inspire and nurture the human spirit one person, one cup
and one neighborhood at a time (Starbucks: About us). This is the heart and soul of this corporation; this is what we feel makes
Starbucks special, what has made us stand out and what will be the driving force behind future success, if we can keep this goal in
mind. With Starbucks we are not just trying to sell coffee, were selling a great atmosphere, friendly service, and the greatest coffee we
can for the customer, each unique individual, getting the unique Starbucks experience that nourishes the body and soul.
One major goal of Starbucks is to focus on our coffee. It has always been, and will always be, about quality. Were 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. (Starbucks: About us) This starts with how we get our coffee beans. Starbucks
only buys some of the highest quality beans that meet our standards. Each coffee bean requires a unique balance of temperature and
time to reach its individual peak of aroma, acidity, body and flavor. (Starbucks: About us). It is also important that as a responsible
corporation that it is our goal to improve the lives of those who grow our coffee beans. This is our social responsibility and Starbucks
only buys beans that are handled ethically. Measures evaluated by third-party verifiers help protect the rights of workers and ensure
safe, fair and humane working and living conditions. Compliance with minimum-wage requirements and prohibition of child and
forced labor is mandatory (Starbucks: About us).
Our coffees are classified by three roast profiles Starbucks

Blonde Roast, Medium Roast and Dark Roast. Our blonde roast
has a nice mellow smooth taste this is our lightest brewed coffee. The medium roast is the perfect in between roast. It is not too
strong and not as light as our blonde roast. Starbucks added the dark roast blend in 1971 and its been booming ever since. This coffee
has a bold robust flavor that will get you going anytime of the day. We also have 11 dark roast flavored brews for any customer who
wants a strong taste to choose from.
We have made one of our main goals to be environmentally friendly. This includes reducing environmental impact as much as
possible. We built more energy efficient stores and try our hardest to conserve resources, such as water. In 2008, we set a goal to
reduce electricity use by 25 % in company-owned stores by 2015. Since then, weve implemented a number of energy initiatives and
have seen electricity use decrease by a total of 6.5% (Responsibility: Starbucks Corporation). We are installing ENERGYSTAR
qualified equipment to help us reach this goal. We also help assist our farmers to run their business in the most environmentally sound
way. We do this by having farmer support centers that can work with the farmers one on one with any help they may need and to help
manage their business the best they can. We find it our global responsibility to make an impact on anyone we can and especially with
our own partners in business.
Here is some good news for coffee enthusiasts: Starbucks will continue to beat the competition with an updated product
pricing strategy. Starting May 10, Starbucks will lower their prices on bagged coffee by 10 percent. The 12-ounce bag of coffee will
drop from $9.99 to $8.99 (Pricing strategy:Cleari). We need to keep up with our competition, last year Dunkin Donuts, Folders and
Maxwell house proposed a decrease in prices also. Our cooperation is finding ways every day to help out our customer and ensure
they keep purchasing our delicious flavors of coffee. 54% of Americans drink coffee every single day, we want to keep every
customer of ours more than satisfied, 54% is a very large market! We not only try to keep our prices low for a good cup of quality
coffee, we put a lot of time and energy into differentiating ourselves from the competitors. We make sure we have a comfortable place
to come and sit and have your coffee and breakfast sandwich. We have the best and most advanced brewing equipment. We also have
a dimly lit store with comfortable furniture for customers to lounge around and also we always have a light jazz soundtrack playing to
soothe the ear while enjoying your hot cup of Joe.
We are not only focusing on coffee drinkers, we are turning our attention more and more to tea drinkers also! Starbucks
(SBUX), the company that reinvented the modern coffee shop, is turning its attention to another venue: the teahouse. Last year the
19,000-cafe giant acquired Teavana, a chain of mall stores that sell tea and teaware. On Oct. 24, Starbucks opened the first Teavana
tea bar on New Yorks Upper East Side. It plans to open 1,000 stores in North America within 10 years (Wong). We also think tea
can help our business globally. The British consume 3 times the amount of tea Americans do in one year. We have a huge enthusiasm
for the tea market it is a 90 billion dollar global market. The companys market cap has grown from $5 billion in November 2008 to
over $57 billion today, underlining the 948 percent increase in Starbucks share price since then (Rudarakachana). Currently tea sales
only consume about 3% of Starbucks overall business, but we plan over the next few years to keep this number moving up. The tea
market has grown 32% since 2007, we have jumped on this trend by not only acquiring Teavana but also expanding our existing tea
the Tazo brand. Iced tea is available in green, black, or passion options, sweetened or unsweetened, with a variety of flavor additions
offered. There are also several different tea lattes, available iced or hot, and even a green or chai tea based Frappuccino. Just ordering
a Tazo tea bag with hot water is one of the least expensive beverages on the menu, and many different varieties are available
(Sahagian).
We consider ourselves a great employer. We offer part time employees full benefits. Their package would include, health,
medical, dental, vision and a 401k plan. If this is not enough we also extend these benefits to same and opposite sex spouses. We also
help employees partners going to school. Starbucks U will help reduce out-of-pocket expenses for your education regardless of
where you are in your career or academic journey. We offer discounts and savings on textbooks, tuition, technology, and more
(Starbucks: About us).


CURRENT STRATEGIES
CORPORATE LEVEL

At the corporate level we focus on the coffee that they sell, the coffee house experience for the customer and being socially
responsible while doing so. Their strategy is to sell more coffee than their competitors by having a superior product and a superior
experience that will drive sales and ultimately more profits.
Starbucks Business strategy- Starbucks business strategy is to backwards integrate effectively to control all aspects of growing and
producing the coffee beans and coffee. This is to control the quality and costs of the product. As well as to help improve the lives of
those who grow their coffee. They also have made it their plan to focus on service and atmosphere of every Starbucks this is to ensure
that each guest gets a personalized experience that will build loyalty. And both the service and the quality of there coffee is heavily
reliant on the skills, and morale of their employees. Their strategy is to maintain employees longer and keep them more motivated by
treated the employees better. The CEO explains that that providing benefits to an existing employee for a year cost half as much as
training a new employee. (Larimore) By having a strong team Starbucks has pushed for high standards for making and serving their
coffee.

FUNCTIONAL LEVEL

Strategizing at the functional level include the need for management to train all employees to a very high standard, In order to
maintain the high quality of their coffee. Each bean is selected only if it is of high quality. In stores the employees are trained to
double brew the coffee and add a very precise about of ingredients such as milk and sugar. The in stores experience is planned to be
customized by writing the name of each customer onto the cups. The strategy is to keep the retail stores clean and inviting. In order to
keep customers happy the plan is to constantly add new high quality menu items for their customers.
Strategic consistency at Starbucks is attained by exceeding all expectations of consumers in regards to quality of both service/product
and adhering to the obligations of the stakeholders. We feel that Starbucks is strategically consistent through all three levels of the
business. The strategy is to have great coffee, through the backwards integration and investment in their employees they have been
able to achieve this goal. They want a coffee house experience that is inviting which through their training and investment in the
buildings at maintaining a level of service above and beyond their competitors.






COMPETITVE ENVIRONMENT
FORCES BEYOND OUR CONTROL
It can be surprising just how many forces are actually outside the control of an entity yet exert a pressure that must be
negotiated. Following are some of these forces:
ECONOMIC
This is perhaps the most broad and far-reaching of the forces. The economies in which we operate experience a variety of
trends that directly affect our operations: inflation of the currency, recession, and unemployment to name a few. Every industry we
must consider the economy in which it operates, but particular factors apply to us. First is the discretionary income of consumers,
which is the amount of household income retained after basic living expenses have been paid. Discretionary income has a
proportional effect on the amount of sales we can expect; the less discretionary income a family retains, the more likely they are to
seek substitutes. The unemployment rate is a second important factor: as an entry-level employer we field job applications from
students to professionals in times of high unemployment, increasing our bargaining power in wages paid.
COMPETITIVE
The competitive forces are unforgiving and shift very quickly. As a vendor of specialty quality coffee and we are likely
immune to many of the effects of Cost leadership is a effective strategy by our competitors
Administration of the term, "Innovate or evaporate" is a strategy used at the corporate level down to the functional level. Starbucks is
one of a kind.
Competitive intelligence - These outside forces are important to us and our competitors; we must understand and measure them.

PORTERS 5 FORCES MODEL

One way to consider the forces affecting Starbucks is through the Porters Five Forces Model. We have determined the
following perspective:
Rivalry among competitors
o High: There are many distinctive competencies to develop in offerings, service, quality and consistency in our industry.
The high margins of our primary products are especially attractive.


Potential Entry of
New Competitors High
High margins earned on easy-to-prepare product
Well established franchises are relatively simple to join

Potential Development of Substitute Products High
Hot drinks such as tea
While soda consumption is down, high-caffeine energy drinks are a booming substitute

Barg of suppliers Suffers from Starbucks high volume purchasing and storing capabilities
Strengthened by the limited operations that conform to Starbucks' standards MEDIUM

Barg of Consumers HIGH Coffee is easy to prepare and available at nearly any food or drink establishment
Despite raving brand loyalty, customers are still price sensitive

ETHICAL AND LEGAL CHALLENGES













EXTERNAL FACTOR EVALUATION
Opportunities Weight Rating
Weighted
Score Threats Weight Rating
Weighted
Score
1
Growth of coffee market in U.S. attributed to $2 billion
of single-serve coffee sales and is expected to
increase at a compound annual growth rate of 30%. 0.1 4 0.4
Prices for arabica coffee beans have
doubled from $1.06 per pound to more
than 2 pounds 0.08 4 0.32
2
Americans aged 55+ possess more than 3/4 of U.S.
wealth and participate in viral marketing, making them
prime targets for Starbucks as customers 0.08 4 0.32
Dunkin Brands has actively and
aggressively marketed itself as the
antithesis to Starbucks and a provider
of reasonably priced and adequate
coffee 0.08 4 0.32
3
Rising middle class and changing demographics in
India have led to an increase in coffee consumption 0.06 2 0.12
Average Starbucks customer earns over
$75,000 per year, limiting target
demographic to upper class customers 0.05 2 0.1
4
Retail sales of coffee have increased 90% in China
since 2007 0.06 4 0.24
Milk, a prime ingredient in Starbucks'
lattes, could increase in price by 60
cents according to dairy analysts 0.05 1 0.05
5
Consumer spending in past decade for coffee
increased by 135% despite domestic demand rising
44%, indicating low price-elasticity-of-demand 0.06 4 0.24
McDonald's retains domiance in
breakfast segment with market share of
over 30%, threatening Starbucks' more
expensive breakfast menu 0.05 3 0.15
6
50% of all adults acknowledge a need to improve their
diets, allowing Starbucks to capitalize on this trend
with healthier Evolution Fresh products 0.05 3 0.15
Lack of rainfall and record high
temperatures in South America could
result in coffee shortage and negatively
affect Starbucks' supply chain 0.04 3 0.12
7
More than 1/5 of employees drink coffee brewed by the
cup, individually, as K-cups or pods 0.04 3 0.12
McDonald's offering McCafe specialty
drinks with similar flavors to Starbucks
that are approximately 76 cents less
expensive 0.04 2 0.08
8
Coffee consumption increased in Mexico by nearly
20% during 2005 0.03 2 0.06
Dunkin Brands has expanded beyond
traditional menu of coffee and donuts to
offer egg-white sandwiches to appeal to
more health-concious consumers 0.03 2 0.06
9
Caffeine intake from coffee increased among children
from 10% to 24% while caffeine intake from soda
decreased from 62% to 38% 0.03 3 0.09
Imported coffee products more
expensive in China due to high tax
rates and import duties 0.03 3 0.09
10
More than a million veterans are returning from
Afghanistan and could be potentially valuable to
Starbucks as future employees 0.02 3 0.06
McDonald's has begun selling
packaged ground and whole-bean
coffee in grocery stores 0.02 3 0.06
Total 1 3.15


COMPETIVE PROFILE MATRIX
Critical Success Factors Weight
Starbucks
Rating Score
Dunkin' Donuts
Rating Score
McDonald's
Rating Score
Market Penetration 0.1 3 0.3 1 0.1 4 0.4
Customer Service 0.1 4 0.4 2 0.2 1 0.1
Financial Profit 0.1 4 0.4 2 0.2 4 0.4
Customer Loyalty 0.1 4 0.4 3 0.3 1 0.1
Market Share 0.1 3 0.3 2 0.2 4 0.4
Product Quality 0.1 4 0.4 1 0.1 1 0.1
Top Management 0.1 4 0.4 3 0.3 3 0.3
Store Locations 0.08 4 0.32 1 0.08 4 0.32
R&D 0.08 4 0.32 3 0.24 4 0.32
Employee Dedication 0.07 4 0.28 2 0.14 1 0.07
Advertising 0.05 1 0.05 4 0.2 4 0.2
Price Competitiveness 0.02 2 0.04 3 0.06 4 0.08
Totals 1 3.61 2.12 2.79


Assessment of Alternative Strategies
SWOT Analysis
Strengths Opportunities
S1 The Starbucks brand is incredibly strong with a focus on the coffeehouse experience O1
Many countries such as China and India are developing a larger and
more prosperous middle class
S2 Starbucks customers are extremely loyal and will pay higher prices for their coffee O2
Many items complement coffee and tea drinks such as sandwiches
and pastries
S3 The commitment to enivornmental responsibility is unwavering and evolving O3 Drive thru services can be closely monitored to increase efficiency
S4 A well-developed presence with over 20,000 locations in 60 countries O4
As baby boomers retire, they will need leisure space to spend their
savings
S5 Partner-employees are treated well in terms of benefits O5 Spending on coffee drinks has increased 135% in the last ten years
S6 Starbucks app leverages a token economy with gift cards and gold star rewards O6
K-Cups and pods sales are expected to increase 30% compounded
yearly
S7
Established and solid backwards integration through fair trade prices paid for high quality
coffee O7
The extent of our commitment to the environment is not common
knowledge
S8
The leaderhship of Stabucks is sensitive to many issues facing its customers, partners,
and suppliers O8
There are no independant licensees producing Starbucks apparel
such as T-Shirts
S9 Ground or whole bean coffee is sold for home brewing methods O9
As tea drinking loses favor amongst world drinkers, coffee can serve
as substitute
S10
Good product diversification to include brewing sets, coffee cups other related
merchanidise O10 Many customers stay long enough to need meal-sized food offerings
Weaknesses Threats
W1 Starbucks must sell the customer on higher prices than that of their competitors T1
Starbucks participates in fair trade groups to supply coffee which
reduces its bargaining power
W2 Stores sell a focused line of coffee-based products with limited complements T2
McDonalds is expanding the McCafe line of drinks at significantly
lower prices
W3 The health effects of coffee are constantly debated T3
Dunkin' Donuts drinks sales represent 60% of its total sales, with a
stated adversarial role to Starbucks
W4
Traditionally high cash on hand means suggests investment opportunities are often
wasted T4
Anti-Starbucks sentiment gained an identity and voice due to
competitor's attack campaigns
W5 Coffee is a crop that is subject to climate fluctuations and other factors beyond control T5
Energy drinks are a growing, $39 billion industry that is continuing to
grow amongst young consumers
W6 Cash on hand is low due to recent litigation settlement of $2.2 billion T6
Negative perception as an elistist organization has proved hard to
shake
W7 There is no enforcement for people to spend or leave premesis T7
Multitude of established coffee brands are available at nearly every
grocery store
W8
Annual advertising budget of $300.86 million far below competitors who spend $2.3 billion
or more T8
Costs are very sensitive to a multitude of inputs such as dairy and
sugar
W9 In-store entertainment is inconsistent from location to location T9 International ingredients are subject to tarriffs
W10 Verismo sales have been slower than anticipated T10 Coffee industry is subject to regulation by the FDA
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
Reconcile image with customers in that they pay more for high quality partner-employees (S5, T1)
Break free of the stoic precedent and advertise in high-road, direct ads to meet competitors (W8, T2-T4)
Invite customers to "open mic" at all Starbucks at limited times to ensure local feel (W9, T6)
Engage in public relations health campaign to regain young energy drink consumers (W3, T5)
Justify our higher prices to consumers with value-added considerations in advertisements (W1, T6)
Strategic Alternatives
Influence trade agreements with the promise of new manufacturing (S10, T9)
Post calorie and nutrition information ahead of lawful requirement (S8, T10)
Push to normalize everyday consumption of coffee for every adult (W3, W8, O3)
Research and create a line of meal-sized food offerings (W2, O10)
Implement a 24hr Wi-Fi code printed on every receipt to discourage freeloaders (W7, O10)
Establish an advertisement campaign to bolster sales of single serve coffee drinks (W10, O6)
Leverage the universal appeal of the Stabucks brand to penetrate new markets (S1, O1)
Advertise our leadership in environmental responsibility (S3, O7)
Endorse a line of quality merchandise to include shirts and other wearable items (S2, O8)
Target boomer segment with a daily discount or reward through smartphone app (S6, O4)
Use the appeal of fair trade practice as a selling point for Starbucks (S2, T1)


Space Matrix

Internal Analyses: External Analyses:
Financial Position (FP) Stability Position (SP)
Return on Investment (ROI) 3 Rate of Inflation -1
Leverage 4 Technological Changes -1
Liquidity 3 Price Elasticity of Demand -1
Working Capital 3 Competitive Pressure -3
Cash Flow 2 Barriers to Entry into Market -4
Financial Position (FP) Average 3 Stability Position (SP) Average -2
Competitive Position (CP) Industry Position (IP)
Market Share -2 Growth Potential 6
Product Quality -1 Financial Stability 3
Customer Loyalty -1 Capacity Utilization 5
Technological know-how -1 Resource Utilization 3
Control over Suppliers and Distributors -1 Profit Potential 7
Competitive Position (CP) Average -1.2 Industry Position (IP) Average 4.8

Grand Strategy Matrix


Summary

Recommendations

Expand Operations

Leverage the universal appeal of the Starbucks brand to penetrate new markets (S1, O1)

Engage in Advertising

Break free of the stoic precedent and advertise in high-road, direct ads to meet competitors (W8,
T2-T4)

QSPM


Strengths Weight AS TAS AS TAS
1
Net income increased by 24% during full fiscal year and
revenue increased by 12% during full fiscal year of 2013
0.1 3 0.3 3 0.3
2 Same-store sales increased systemwide by 7% in 2013 0.07 4 0.28 4 0.28
3
Operating income increased 29% to $668.9 million, while
operating margin increased 2.2% to 17.6% in 2013
0.08 3 0.24 3 0.24
4
Comprehensive medical coverage offered to employees
along with benefits package that include bonuses and
discounted stock purchase options
0.05 0 0 0 0
5
Starbucks Experience is unique blend of coffee expertise,
product awareness, and customer service that has yet to
be replicated in other industries.
0.06 4 0.24 4 0.24
6
C.A.F.E. practices increase technical aid to coffee
producers and enhance verfification of suppliers
0.04 3 0.12 3 0.12
7
Free and unlimited Wi-fi in all stores in U.S. and Canada
provided by Google
0.05 3 0.15 3 0.15
8
Starbucks owns 75% market share of domestic coffee
market
0.07 1 0.07 3 0.21
9
Starbucks Mobile payment App allows customers to make
purchases in stores through specific smartphones at all
6,800 stores
0.05 2 0.1 4 0.2
10
Additional products offered including specialty beverages,
food, and related merchandise to complement primary
product
0.05 3 0.15 3 0.15
Expand Engage in high-

Weaknesses Weight AS TAS AS TAS
1
Tax evasion allegations regarding the
reducing of profits in UK and avoiding taxes
for prior three years
0.03 0 0 0 0
2
Privacy and security concerns regarding
company's knowledge of iOS app's
vulnerability and loss of customer data
0.05 0 0 0 0
3
High product prices may alienate customers
with minimal disposable income who are
also less concerned with product quality
0.03 1 0.03 2 0.06
4
Licensing agreement between Kraft and
Starbucks where Starbucks products were
distributed by Kraft have ended
0.05 0 0 0 0
5
Product recalls of food-related products in
November 2013 from La Boulange Cafe &
Bakery, a Starbucks partner
0.02 0 0 0 0
6
Global same-store sales growth for 2014
first quarter missed analysts' expectations of
a 5.9% increase
0.03 4 0.12 1 0.03
7
Revenue numbers for 2014 first quarter
missed Thomson Reuters estimates by $54
million
0.05 2 0.1 4 0.2
8
Comprehensive medical coverage offered
to employees along with benefits package
that include bonuses and discounted stock
purchase options
0.06 0 0 0 0
9
Return on equity decreased compared to
prior year's quarter by 26.9%
0.03 1 0.03 3 0.09
10
Accusations of an estimated 6.2 million
gallons of water waste per day by Starbucks
have led to criticism from environmental
experts
0.03 0 0 0 0
Expand
operations in
India and China
Engage in high-
road advertising
to meet
competitors
Opportunities Weight AS TAS AS TAS
1
Americans aged 55+ possess more than 3/4 of U.S.
wealth and participate in viral marketing, making them
prime targets for Starbucks as customers
0.08 0 0 0 0
2
More than 1/5 of employees drink coffee brewed by the
cup, individually, as K-cups or pods
0.04 1 0.04 4 0.16
3
Growth of coffee market in U.S. attributed to $2 billion of
single-serve coffee sales and is expected to increase at a
compound annual growth rate of 30%.
0.1 1 0.1 4 0.4
4
Rising middle class and changing demographics in India
have led to an increase in coffee consumption
0.06 4 0.24 3 0.18
5
50% of all adults acknowledge a need to improve their
diets, allowing Starbucks to capitalize on this trend with
healthier Evolution Fresh products
0.05 0 0 0 0
6
More than a million veterans are returning from
Afghanistan and could be potentially valuable to
Starbucks as future employees
0.02 0 0 0 0
7
Coffee consumption increased in Mexico by nearly 20%
during 2005
0.03 4 0.12 1 0.03
8
Retail sales of coffee have increased 90% in China since
2007
0.06 4 0.24 2 0.12
9
Consumer spending in past decade for coffee increased
by 135% despite domestic demand rising 44%,
indicating low price-elasticity-of-demand
0.06 3 0.18 3 0.18
10
Caffeine intake from coffee increased among children
from 10% to 24% while caffeine intake from soda
decreased from 62% to 38%
0.03 0 0 0 0
Expand Engage in high-
Threats Weight AS TAS AS TAS
1
Prices for arabica coffee beans have doubled from
$1.06 per pound to more than 2 pounds
0.08 0 0 0 0
2
Lack of rainfall and record high temperatures in South
America could result in coffee shortage and negatively
affect Starbucks' supply chain
0.04 0 0 0 0
3
Average Starbucks customer earns over $75,000 per
year, limiting target demographic to upper class
customers
0.05 3 0.15 4 0.2
4
Dunkin Brands has expanded beyond traditional menu
of coffee and donuts to offer egg-white sandwiches to
appeal to more health-concious consumers
0.03 0 0 0 0
5
Dunkin Brands has actively and aggressively
marketed itself as the antithesis to Starbucks and a
provider of reasonably priced and adequate coffee
0.08 0 0 0 0
6
Imported coffee products more expensive in China due
to high tax rates and import duties
0.03 4 0.12 1 0.03
7
Milk, a prime ingredient in Starbucks' lattes, could
increase in price by 60 cents according to dairy
analysts
0.05 4 0.2 4 0.2
8
McDonald's offering McCafe specialty drinks with
similar flavors to Starbucks that are approximately 76
cents less expensive
0.04 3 0.12 4 0.16
9
McDonald's has begun selling packaged ground and
whole-bean coffee in grocery stores
0.02 0 0 0 0
10
McDonald's retains domiance in breakfast segment
with market share of over 30%, threatening Starbucks'
more expensive breakfast menu
0.05 0 0 0 0
TOTALS 3.44 3.93
Expand Engage in high-

Implementation

We plan on implementing these strategies as soon as possible, to make sure our company
grows and thrives. Our first strategy is to use our cash on hand to invest into foreign markets.
This is particularly important in the fast developing countries, such as the BRICS countries.
Although Starbucks is already in 60 countries including these markets they have plenty of room
to grow. For instance looking at one of the most talked about and fastest growing economies in
the world, China, Starbucks has only 851 stores and their economic growth rate is 7.4%. In a
country with a population of over 1 billion and a geographic size close to the same size as the
United States, Starbucks has plenty of room to grow. When comparing to our domestic strength
Starbucks has over 13,000 locations this should be a model of the market share we should strive
for in the China market as well as all foreign markets. Although this clearly has its challenges in
order to implement this strategy it is important the Starbucks hires a team whose job it is to
research and develop the best products for each specific segment. For example there should be a
division of Starbucks devoted to the Chinese market. Doing the market research to determine
what the average disposable income is and what the demand is for each of Starbucks products
and services. This is crucial in determining the price point for each product. Determining what
products that market is missing. For instance, in the Chinese market, tea is a larger portion of the
menu than coffee. This does not mean to give up on coffee. Starbucks should launch an
aggressive advertising campaign to spark up more demand for coffee in countries like China. We
feel this will be affective because Chinas coffee consumption is up 90% since 2007.We also
plan to grow immensely in India where we only have about 50 stores and a population of 1.2
billion people. India also has a rising middle class and an economic growth rate if 4.7%.
In the next 3 years we plan to open 3 times as many stores in China and 10 times
as many in India. China will have a grand total of 2500 stores at the end of the 3 years and India
will have 500. By year one, we will have 500 new stores open in China, about 10 per week. India
in year one will have 104 new stores, 2 per week. Year 2 China is getting 550 new stores (11 per
week). India will increase to 156 stores in year 2 (3 per week). Year 3 China will get
approximately 700 and India 208. The average cost for each new building is 450,000. With the
2,218 stores we want to build construction will cost $998,100,000. We plan to spend a good
amount of money on marketing in each place to show how aggressive we are. We will be
budgeted A grand total of $110,900,000. Equivalent to about $50,000 per store, the total cost for
all of our training is the same. The total cost of our new project is $1,218,900,000. We will keep
the same ratios Starbucks already uses to pay for it. We will pay for this with 50% raised capital
stock, 20% cash on hand, and 30% debt.
Common Considerations

Thorough research needed for intended markets
Construction costs per store, including "encouragement"
Consistent training and management
Raising capital
International issues/regulations
Evaluation


Closing Remarks

Overall Starbucks has maintained a competitive advantage bringing gourmet coffee choices to
the masses. In order to stay competitive SBUX will need to continue focusing on its core
competencies to avoid losing its greatest asset "the Starbucks experience".
As competitors try to imitate, SBUX will need to massively increase advertising, even if only for
PR reasons. The world should know what a great company Starbucks is and strive to model after
a corporation so ahead of its times in social and ethical responsibility since its start in the 70's.
As a company that has been the industry leader since its conception, its strength lies in the brand
and enhancing the connection to their loyal customers.