Project report

Subject:

MARKETING
Topic:

STARBUCKS COFFEE

Submitted to:

Sir, AYAZ RESHI

Submitted by:
USMAN SABIR 181
NAUMAN QADEER 129
M.SHAKEEL 108
NAVEED AHMED 120
WASEEM ANJUM 190
SYED ADEEL HAIDER NAQVI 160
SUMAIRA SIDDIQ 158
M.WAQAS KHALID 115
SIDRA RIYAZ 153
REHMAN RATHORE 133

.
Comsats institute of science & technology Islamabad
 PROJECT
STARBUCKS

CONTENTS:
EXECUTIVE SUMMARY…………………………………………………….5
INTRODUCTION……………………………………………………………...5
CURRENT MARKET SITUATION ………………………………………….6
BUSINESS PORTFOLIO……………………………………………………...6
IT HELPED THIS INDUSTRY………………………………………………..7
MISSION STATEMENT ……………………………………………………...7
GOALS AND OBJECTIVES…………………………………………………..7
ISSUES…………………………………………………………………………7
SIZE OF THE BUSINESS……………………………………………………..8
COMPETITORS……………………………………………………………….8
COMPETITORS ANALYSIS………………………………………………….8
(SWOT ANALYSIS)…………………………………………………………...9
STRENTHS
WEAKNESSES
OPPORTUNITIES
THREATS
ECONOMICAL ASPECTS…………………………………………………….11
DEMPGRAPHICS……………………………………………………………...11
LEGAL ASPECTS………………………………………………………………11
CULTURAL ASPECTS………………………………………………………...11
TECHNOLOGICAL ASPECTS…………………………………………………11
GOVERNMENTAL ASPECTS…………………………………………………12
MAERKET RESARCH………………………………………………………….12
ACTION PROGRAMS………………………………………………………….12
MARKETING ORGANIZATION……………………………………………...13
MODES OF THE BUSINESS…………………………………………………...13
MARKET PROCESS……………………………………………………………14
NEW PRODUCT DEVELOPMENT…………………………………………….18
MARKETING MIX………………………………………………………………22
FINANCIAL AND STRATEGIC REVIEW……………………………………..24
KEYS TO SUCCESS…………………………………………………………….27
CRITICAL ISSUES………………………………………………………………27
INVOLVEMENT IN THE COMMUNITY………………………………………28
MARKETING QUESTIONNAIR………………………………………………..29
REFRENCES……………………………………………………………………..30

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EXECUTIVE SUMMARY:
STARBUCKS is preparing to launch its products in PAKISTAN. Where they target
Islamabad city with an outlet in the market. Despite of the competitors (DUNKIN
DONUTS, MC DONALD AND THE LOCAL BRANDS), we can compete because our
product offers a unique combination of features at a value added price and different
services. We are targeting specific segmentation (18-45) in the consumer market, taking
advantages of opportunities indicated by higher demand for beverages (tea, coffee, etc) in
winter season.
The primary marketing objective is to achieve first year of awareness, positioning and
ISB market share of 5%. The primary financial objective are to achieve first year sales
revenues of 20 million, keep first year losses to less than 5 million, and break-even early
in the second year.

INTRODUCTION TO STARBUCKS:
Starbucks Corporation is an international coffee and coffeehouse chain based in Seattle,
Washington, United States. Starbucks is the largest coffeehouse company in the world,
with 16,680 stores in 49 countries, including 11,068 in the United States, followed by
nearly 1,000 in Canada and more than 800 in Japan. Starbucks sells drip brewed coffee,
espresso-based hot drinks, other hot and cold drinks, snacks, and items such as mugs and
coffee beans. 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.

v Company started in 1971 in Seattle, Washington

The original Starbucks was opened in Pike Place Market in Seattle, Washington, in 1971
by three partners: English teacher Jerry Baldwin, history teacher Zev Siegel, and writer
Gordon Bowker. The three were inspired by entrepreneur Alfred Peet (whom they knew
personally) to sell high-quality coffee beans and equipment. From 1971–1976, that
first Starbucks was at 2000 Western Avenue; it then was relocated to 1912 Pike
Place, where it remains to this day. During their first year of operation, they
purchased green coffee beans from Peet's, and then began buying directly from
growers.

Entrepreneur Howard Schultz joined the company in 1982 as Director of Retail

Operations and
Marketing and after a trip to Milan, Italy advised that the company should sell
coffee and espresso drinks as well as beans. The owners rejected this idea,
believing that getting into the beverage business would distract the company from
its primary focus. To them, coffee was something to be prepared in the home.

5
 Certain that there was money to be made selling pre-made drinks, Schultz started
the Il Giornale coffee bar chain in 1985.
v The company HQ, in the old Sears, Roebuck and Co. catalog distribution
center building
v Grew from 55 stores in 1989 to over 16,680 stores today
From Starbucks' founding in later forms in Seattle as a local coffee bean roaster
and retailer, the company has expanded rapidly. In the 1990s, Starbucks was
opening a new store every workday, a pace that continued into the 2000s. The
first store outside the United States or Canada opened in the mid-'90s, and
overseas stores now constitute almost one third of Starbucks' stores. The company
plans to open a net of 900 new stores outside of the United States in 2009, but has
announced 900 store closures in the United States since 2008.

CURRENT MARKET SITUATION:

After doing R&D in PAK it gives us the positive response to launch our products into the
new market. Now-a-days the demands of the beverages are increasing so we have an
opportunity to invest according to the situation of the market. The people of Islamabad
are adopting the western culture so they are more interested of having a coffee in the
leisure. Although there are many strong competitors in the market, but we provide a
high quality and advanced technology product and services. The demand of the coffee
may flattens. To gain market share in the dynamic environment, STARBUCKS must
carefully target specific segments with features that deliver benefits valued by each
customer group.

BUSINESS PORTFOLIO:
v Coffee
v Tea
v Donuts
v Espresso-based hot drinks
v snacks
v mugs
v cookies
v milkshakes

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INFORMATION TECHNOLOGIES HAVE HELPED
THIS INDUSTRY:
v Business Intelligence
v Wi-Fi
Wi-Fi access improved sales and profits at Starbucks
Necessary to keep up with competition: common practice in the industry.
Advantage that it was free in most other areas. Required that Starbucks offer free
as well.
v Starbucks Card Duetto™ Visa® loyalty program

MISSION STATEMENT:
“To inspire and nature the human
spirit, one person, one cup and one neighborhood at a time”

GOALS AND OBJECTIVES:

The company’s objective is to establish STARBUCKS as the most recognized and

respected brand in the world. To create a STARBUCKS experience that makes people
come for the coffee, Stay for the ambience and environment, and return for the
connection to build an image separate from smaller coffee chains to clearly communicate
the values and commitments of the STARBUCKS business to their customers, instead of
only growth plans publicized in the media.

ISSUES:
In relation to the product launch, our major issue is the ability to establish a well-regarded
brand name linked to a meaningful positioning. We must invest heavily in the marketing
to create a memorable and distinctive brand image projecting innovation, quality and
value. We also must measure awareness and response so we can adjust our marketing
efforts as necessary.

7
SIZE OF A BUSINESS:
v We will introduce our product in small scale market so that we target those people
who want more taste in coffee
v Our franchise will have 24 hour service
v Any body make the order through internet using online facility
v We will give our customers hot and fresh home delivery

COMPETITORS:
Although the coffee is commonly used in Pakistan but STARBUCKS is not concern
where their customers really exist, they deliver it wherever they are. The coffee being
served belongs to different companies like Nestle, Dunkin Donuts but none of the
company is having its own delivery or home service in the city that’s the gap we are
basically going to target this distribution and product line gap.

COMPETITORS ANALYSIS:

STARBUCKS MCDONALD DUCKIN DONUTS LOCAL

v Coffee Burgers Donuts Coffee

v Tea Chicken, fish Munchkins
v Donuts Breakfast Breakfast sandwiches
v Espresso Beverages Flatbread sandwiches
v Snacks Desserts Coffee
v Mugs Happy meal Hot beverages
v Cookies cold beverages
v Milkshakes

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SWOT ANALYSIS FOR STARBUCKS COFFEE:

STRENGTH:
GREAT AND RICH TASTING COFFE

v Starbucks is very profitable and has a strong financial base, therefore allowing the
company to undertake new business ventures
v The company is internationally recognized and has a global presence
v Their reputation is one of fine products and services.
v Almost 16,680 cafes in almost 49 countries (SWOT)
v Widespread brand recognition, which in turn becomes brand preference, and
ideally eventually brand loyalty
v Strong customer base
v Respected employer
v Values its workforce
v Voted onto Fortune’s “Top 100 Companies to Work For” (2005)
v Strong ethical values and mission statement
v Disciplined innovator
v Understands the Adapt-or-Die theory of marketing
v Has the ability to roll out new products relatively quickly
v Translate into a considerable competitive advantage
v Focus on opening stores that have convenient access for pedestrians and drivers
v Helps the company capture an increasing share of the coffee market

WEAKNESSES:

If Pakistan store growth decreases, stock is lowered in value. Would suffer greatly if
Pakistan. Stores under performed because of economic conditions or increased levels of
competition
v High expenses coffee
v For high income
v It has also the side effects like yellowing the teeth

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OPPORTUNITY:

v We provide the entertainment of CD burning service where customer can

create their own music CD
v New products and services that can be retail in our café such as fair trade
products
v We will later on offers the CHOCO CREAMY SHAKE (DUE TO SUCCESS
OF ANALYSIS)
v We have opportunity to open the outlet in f/7 markaz, Islamabad

THREATS:

v The current situation of Pak allows us to make investment but we have a

threat of terrorism due to which we think we can lose our investment.
v Coffee may not stay in favor with customers and other types of beverages or
leisure activity could replace it
v Rise in the cost of coffee and dairy products could effect
v Rises in the costs of dairy products could affect the company’s margins
competition
v Competitive coffee shops
v Copy cat brands
v Restaurants
v Street carts
v Competition could enter the market at any time.
v At any time, a company with greater financial, marketing can enter in the
market

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ECONOMICAL ASPECTS:
v Purchasing power of citizens of Islamabad.
v Consumers and Investors confidence.
v Shift from rural areas to urban area

DEMOGRAPHIC ASPECTS:
v Demographics of Islamabad will not effect Starbucks arrival.
v Citizens of Islamabad have high income level therefore they have high
purchasing power
v Age groups ranging from 18-45 years will our main customers
v Age group 19-21 years who belongs to university students. This age group in
Islamabad is well supported by their families; therefore they will also buy
Starbucks coffee.
v People of Islamabad are brand conscious
v People of Islamabad are fashion oriented
v They prefer imported goods
v People of Islamabad are early adopters who used to try newly imported things
v Therefore demographics of Pakistan (Islamabad) are suitable for Starbucks
arrival

LEGAL ASPECTS:
v Tariff and non-Tariff barrier don’t effect star bucks arrival in Pakistan.
v No legal restriction for Starbucks Coffee houses.
v Pakistani laws don’t prohibit import of coffee beans and necessary technology

CULTURAL ASPECTS:
v Pakistani youth is adopting Western culture.
v Trend of coffee is increasing day by day.
v Citizens of Islamabad are status oriented so using Starbucks Coffee will be a
symbol of prestige item for them

TECHNOLOGICAL ASPECTS:
v The main technology used in Starbucks is Espresso

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 v It is one of the main specialty in the success of Starbucks
v It will promote our country technology
GOVERNMENTAL ASPECTS:
v No import restriction in Pakistan
v Liberal investment policy
v All economic sectors open to foreign direct investment (fdi)

MARKETING RESEARCH:
v We find out in our research that people of Islamabad are more aware of
international brands.
v It has really compelled us to introduce well known brands that catch the eyes of
the market.
v Due to high per capita income, most of the people are quality conscious, so price
factor will not be considered by them.
v People of Islamabad are more inclined towards the foreign brands rather than the
local brands.
v People of Islamabad are more brand conscious because of more education.
v Due to more exposure towards media, to make the people aware of our product
will not be a problem for us
.

ACTION PROGRAMS:
The star bucks will introduce in February. Following are the summaries of the action
programs we will use during the year to achieve our stated objectives.

First we will initiate a campaign to create awareness to target customers and generate
excitement for the outlet launching. We use different modes of advertising to create
awareness of our features, benefits and competitive advantages. We provide our products
and services according to the need and wants of the customers. We will give a trial to the
targeted customers and survey too. From the survey we conclude that who are our real
customers, attractiveness and chances of successful of our product. As the campaign
continues, we will add consumer sales promotion tactics such as giving away
STARBUCKS logo mugs as a premium. Now we will advertise on different bill boards to
support our outlet. After creating awareness and capturing some market share, we will
also endorse the celebrity to promote our product. After the successful of the product we
will expand our business and open a new outlet in KARACHI. In addition we will tally

12
and analyze the results of customer’s satisfaction service for use it in future promotions
and to provide feedback and marketing activities.

MARKETING ORGANIZATION:
We will hire chief marketing officer, who holds overall responsibility for all the
company’s marketing activities. We will contract an advertise agency for our promotional
activities, campaigns and public relations efforts

MODES OF BUSINESS:
IMPORTING:
v We will import coffee beans and espresso machines from USA
v We adopt this mode because there is no other alternate
v It is difficult to set manufacturing plant of beans at initial stage it will be very
costly
v Starbucks will not give the permission of setting manufacturing plant without
having any experience in franchising
v In importing products there is low risk

FRANCHISING:
v Franchising mode in Islamabad will be adopted to enter in Pakistani market
v It will capture the trust of brand loyal people
v It assures the standard quality

TURNKEY OPERATIONS:
v To maintain the standards of Starbucks we will arrange turnkey operations in
contract
v Because we have no skilled labor according to the standards of Starbucks
v Like handling of espresso machine
v Exact quantity of ingredients etc
v This cost will generate long term profit

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FINANCING:
v 40% of financing will be provided by the franchisee.
v Remaining 60% financing will be provided by the franchiser

MARKETING PROCESS:
The marketing process involves three major steps which are:

v Segmentation.
v Targeting the market.
v Positioning.

MARKET SEGMENTATION:
Market segmentation is process of dividing the market into distinct groups with distinct
needs, characteristics or behavior who might require separate products or marketing
mixes.
Following are the basis of segmentation.

v Geographic
v Demographic
v Psychographics
v Behavioral

The market for “STARBUCKS’ will be segmented using three parameters:

v Demographic: “STARBUCKS coffee” will target customers by their “Age”

because we make this product especially for “18-45.”
v Psychographic: As “STARBUCKS coffee” is a product which is associated
with the high class of the customer. Since it is a high quality product and has a

14
 new innovation done in it so when customers buy this they get a sense of secure
ness that product they are buying is of good quality and hygienic. “We charge
you because we give you more”.
v Geographical: We are planning to make our product available in Islamabad
city of Pakistan. As we want to cover as much customer circle as possible.

TARGET MARKETING:
Market segmentation reveals the firms market segment opportunities. It is a process in
which firm now has to evaluate various segments and decide how many and which one to
target. The following steps are involved in target marketing:

v Evaluating market segments.

v Selecting target market segments.
v Choosing a target market strategy.
v Socially responsible targeting.

EVALUATING MARKET SEGMENTS:

The first step of market targeting is to evaluate the various segments of the market and
decides which ones to target. While deciding which segments to aim for it takes into
account the size and expected profitability of a segment and its fit with the firm’s
resources and objectives
While evaluating the market segments for launching of “STARBUCKS coffee” took an
account of all the possible segments where our product could be liked or our company
can have a profitable business.
So, we have decided to target the market with the help of Demographic, Psychographic
and Geographical variables.

SELECTING TARGET MARKET SEGMENTS:

After the evaluating process now comes the turn of selecting the target markets, in which
to enter. Basically; a target market consists of set of buyers who share common needs or
characteristics that the company decides to serve.
We are mainly targeting on

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 v 18-45

CHOOSING A TARGET MARKETING STRATEGY:

After selecting the target market a company moves towards choosing a target market
strategy.
As we are launching “STARBUCKS coffee” for 18-45, we would prefer segmented
marketing (differentiated marketing) as it is the best marketing strategy for the newly
launched products because we best know who our customers are and it gives a right way
to achieve our targets because we know our customer well, we know their taste well.

PRODUCT POSITIONING:
After deciding which segments to target in the market, “STARBUCKS coffee” decides
what position it wants to occupy in segment. Product positioning is the place the product
occupies in consumers mind relative to competing products. The key to winning and
keeping target customers for our product is to understand their needs better than
competitors such as nestle; Nescafe & Dunkin Donuts.
“STARBUCKS coffee” will be placed in the minds of customers distinctively by using
following steps:

v Choosing a positioning strategy.

v Selecting an overall positioning strategy.

CHOOSING A POSITIONING STRATEGY:

The key to pleasing and maintenance of good customer s. is to understand their needs and
buying processes better than competitors do and to deliver more value then your
competitors’ .Thus while developing the positioning strategy first of all we had to find
out that on which ground we want to differentiate ourselves as compared with our
competitors
A product’s positioning can be based on one of the following differentiations:
v High quality roasted beans
v An international brand
v Home delivery service
v Starbucks Card Duetto™ Visa®
v Wi-fi

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CHOOSING THE RIGHT COMPETITIVE
ADVANTAGE:

While choosing the right competitive advantage we had to consider that:

v How many differences to promote

v Which differences to promote

As we are completely focusing on the better health conditions and pleasure states of our
customers Our Company is always concentrating upon quality and there is absolutely no
compromise on excellence of our product.
“We are giving our customers a product at competing prices so that they could
purchase our product without any kind of hesitation”.

“Company “Starbucks Card Duetto™ Visa®” created customer loyalty. Not

adopted by other rivals to date.”

“Perhaps in your local mall Barns and Noble or down the street from a local
McDonalds. There is no knowing where Starbucks is basically depending on where
you live”.
By promoting these differences we can surely have a great business and can retain
maximum numbers of customers by delivering value to out targeted customers.

SELECTING AN OVERALL POSITIONING STRATEGY:

According to the positioning map we are giving our customers more for same. We
provide the value for the customer which he is paying for our products

POSITIONING STATEMENT:
“To target 25-45 and beverages in
winter season our STARBUCKS COFFEE is high quality which we
provide them wherever the consumers are”

CONCLUSION:
v Starbucks has a winning blend of technology and brand-building
v Aggressive competition requires constant look to the future and
competitive edge.

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NEW PRODUCT DEVELOPMENT:
Once we carefully segmented the market, chosen its target customers, identified their
needs, and determined market positioning, now, it is better able to develop new product.
A various steps involved in the new product development process:

• Idea Generation.
• Idea Screening.
• Concept Development and Testing.
• Marketing Strategy Development.
• Business Analysis.
• Product Development.
• Test marketing.
• Commercialization.

IDEA GENERATION:
The process for our product development starts with the search of ideas. There are many
sources from where we collected the ideas for our product, basically, with the start of
winter season the need of beverages is high, customer demand for tea, coffee and other
beverages.
So for this purpose we generate different ideas from various resources like internal,
external, from our competitors, suppliers, distributors and also from our customers in
order to find better and good ideas.

IDEA SCREENING:
After making a large number of lists of different ideas we move to the next step that is
“Idea Screening” in which we spot good ides which are beneficial for us and also for our
target customers. We screened the different ideas that had been generated in bulk. But
after screening the ideas we preferred the idea to introduce STARBUCKS COFFEE in
Pakistan. Our product concept is a “delicious, hot n cold and high quality creamy

18
coffee in different flavors which you have in breakfast and break times during office
times or hanging with your friends”.
CONCEPT DEVELOPMENT AND TESTING:
CONCEPT DEVELOPMENT:
§ This is the step in which we make the concept about the product,
the product concept. Basically, it is a detailed version of the idea
stated in meaningful consumer terms.

After a detailed discussion on our idea we have tried to build a clear image
in the consumers mind by keeping certain things in mind.
• Delicious and creamy coffee.
• Fresh and different flavors.
• It should be good in taste and has good quality ingredients.

CONCEPT TESTING:
Concept testing is the process for testing new-products concepts with
groups of target consumers.
We asked opinions of public in order to know their view points. This is in order to
know that what people basically think about our product i.e. “STARBUCKS
COFFEE.” This process helps us to know whether the product has built its
perfect concept in the mind of the consumer or not.

MARKETING STRATEGY DEVELOPMENT:

Following a successful concept test, we developed a preliminary strategy plan for
introducing the new product in market. The plan consists of three parts.
• The first step describes the target market’s size, structure and behavior; the
planned product positioning; and the sales, market shares, and profit goals.
The target market for the “STARBUCKS COFFEE” is 18-45. The company
brands will be positioned at the competitive price as compare to its competitors
and higher quality.

• The second part or step outlines the planned price, distribution strategy, and
marketing budget.
The product will be offered in different flavors in mugs, at a retail price of 150/-.

• The third part of the marketing-strategy plan describes the long-run sales and
profit goals and marketing mix strategy over time.
The company intends to win a 5% percent market share and realize an after tax
return on investment of 12 percent. To achieve this return, product quality will
start high and be improved over time through technical research. Price will

19
 initially low as compared to competitors to gain large number of customers. The
total promotion will be boosted each year with the initial advertising.
BUSINESS ANALYSIS:
After developing the product concept and marketing strategy there is need to make
business analysis in which there is need to prepare sales, cost, and profit projections to
determine whether they satisfy company objectives.
We are trying to determine our costs revenues and sales in order to check that either we
are achieving our targets or not.

PRODUCT DEVELOPMENT:
In this stage we have given our product the final shape that is “STARBUCKS COFFEE”
according to the idea we have generated.

Development Introduction Growth Maturity Decline

“STARBUCKS COFFEE” is currently at introduction stage. It will enter in its growth

stage after success and awareness of it and after capturing the market share it will enter in
its maturity stage. And after that it may remain in maturity stage or the product may
proceed to decline phase.

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TEST MARKETING:
The stage of new-product development in which the product and marketing programs are
tested in more realistic market settings.
It is of three types:

1) Standard test marketing

2) Controlled test marketing
3) Simulated test marketing

We used controlled test marketing tool for the introduction of “STARBUCKS

COFFEE”.
In controlled test marketing, we finds a small number of representative test place
(Islamabad); conduct a marketing campaign in this city, and conduct consumer surveys,
and other measures to gauge product performance.

For this we launched “STARBUCKS COFFEE” outlet in F-7 after analyzing

questionnaires and used it in original launch.

COMMERCIALIZATION:
In this step the company introduces its product in to the market but major things to
consider are the timings and places.
We are ready to start delivering of delicious and high quality “STARBUCKS COFFEE”
to the target market.

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 MARKETING MIX
Marketing mix decisions focus on the product, promotion, price and place.

PRODUCT
v The name of our product is “STARBUCKS COFFEE” which clearly
gives an idea of our product. And the name of our product is easy to pronounce
and easy to remember.
v It is a high quality product
v “STARBUCKS COFFEE” is an instant break. It's deliciously nice and very
tasty..
v Our product can be of different sizes (small and large size) and depending upon
its target market.
v The design and packaging of our product reveals the quality and also promotes
its price and ingredients and its packaging preserves product for a fixed period
of time which is mentioned on it.

PROMOTION
Company realizes the importance of promotion mix for the success of any product. It is a
great tool to get competitive advantage. Increased cost problem of coordination
advertisement programs in multiple countries and a desire for the common world wide
company or product image have caused the company to seek greater control and
efficiency without sacrificing local responsiveness.
We have decided to use the following strategies for the promotion of our product.

v WORD OF MOUTH:
It is a personal communication about product between target buyers and
neighbors, friends, family members and associates. It is a very effective strategy
in which we plan to use word of mouth to introduce our product and also the
benefits of our product to the customers.
v PRINT MEDIA
We also use print media to promote our product and to advertise our product.
• Banners: we also decided to place our banners on all important
instructions of the cities in which we are launching our product.

22
 • Newspapers: we also advertise our product in news paper for the
publicity of our product.
• Magazines: we also give advertisement in weekly news paper for the sake
of promotion of our product.
v ELECTRONIC MEDIA:
Electronic media plays an important role in the promotion of STARBUCKS
COFFEE and for this purpose we have also decided to use electronic media.
• Local television media: we also use local television media to promote our
product among the customers.
• Radio: we also use this approach to air commercial of our product.
• Websites: we also made a website that contains all the information and all
necessary details regarding our product which the consumer would need to
know about the product.
v SALES PROMOTION
Sales promotion will be done through giving discounts on prices and bundle
offers for the initial phase.

We feel that this way of publicizing should bring us maximum result.

PRICING

v The price of “STARBUCKS” will be kept lower than the competitor to grab some
market share by keeping high quality and low profit margins. Basically we use
“penetration pricing strategy” in order to attract more customers.
v We will try to keep price lower in every size and also introduce sachet of lower
prices to increase our customer base.
v At the maturity level we will try to charge competing price to gain our profits.

23
STARBUCKS CORPORATION - FINANCIAL AND
STRATEGIC ANALYSIS REVIEW
Summary:
The "Starbucks Corporation - Financial and Strategic Analysis Review" is an in-depth
business, strategic and financial analysis of Starbucks Corporation The report provides a
comprehensive insight into the company, including business structure and operations.
The hallmark of the report is the detailed strategic analysis of the company.

GROWTH RATIO:

Growth Rates % Company Industry S&P 500

Sales (Qtr vs year ago qtr) -3.70 0.70 -4.80

Net Income (YTD vs YTD) 23.90 18.20 -6.00

Net Income (Qtr vs year ago qtr) 2,677.80 1,832.10 26.80

Sales (5-Year Annual Avg.) 13.05 14.11 12.99

Net Income (5-Year Annual Avg.) 0.10 4.34 12.69

Dividends (5-Year Annual Avg.) NA NA 11.83

FINANCIAL RATIO:

Financial Condition Company Industry S&P 500

Debt/Equity Ratio 0.18 0.20 1.09

Current Ratio 1.3 1.4 1.5

Quick Ratio 0.9 1.1 1.3

Interest Coverage NA 9.3 23.7

Leverage Ratio 1.8 1.7 3.4

Book Value/Share 4.10 5.77 21.63

Financial data in U.S. dollars

24
INCOME STATEMENT:
09/2009 09/2008 09/2007 09/2006
All amounts in millions except per share amounts.
(TTM) (TTM) (TTM) (TTM)
Operating Revenue 9,774.60 10,383.00 9,411.50 7,786.94
Total Revenue 9,774.60 10,383.00 9,411.50 7,786.94
Adjustment to Revenue 0.00 0.00 0.00 0.00
Cost of Sales 4,296.30 8,335.20 7,190.28 6,099.27
Cost of Sales with Depreciation 4,324.90 8,390.40 7,215.01 6,126.69
Gross Margin 5,478.30 0.00 0.00 0.00
Gross Operating Profit 5,478.30 2,047.80 2,221.22 1,687.68
R&D 0.00 0.00 0.00 0.00
SG&A 4,142.50 786.10 783.39 473.02
Advertising 0.00 0.00 0.00 0.00
Operating Profit 562.00 503.90 1,053.95 893.95
Operating Profit before Depreciation (EBITDA) 1,335.80 1,261.70 1,437.83 1,214.65
Depreciation 563.30 604.50 491.89 414.64
Depreciation Unreconciled 534.70 549.30 467.16 387.21
Amortization 0.00 0.00 0.00 0.00
Amortization of Intangibles 0.00 0.00 0.00 0.00
Operating Income After Depreciation 772.50 657.20 945.94 800.02
Interest Income 36.30 9.00 2.42 12.29
Earnings from Equity Interest 0.00 113.60 108.01 93.94
Other Income, Net 121.90 0.00 0.00 0.00
Income Acquired in Process R&D 0.00 0.00 0.00 0.00
Interest Restructuring and M&A -332.40 -266.90 0.00 0.00
Other Special Charges 0.00 0.00 0.00 0.00
Total Income Avail for Interest Expense (EBIT) 598.30 512.90 1,056.36 906.24
Interest Expense 39.10 53.40 0.00 0.00
Income Before Tax (EBT) 559.20 459.50 1,056.36 906.24
Income Taxes 168.40 144.00 383.73 324.77
Minority Interest 0.00 0.00 0.00 0.00
Preferred Securities of Subsidiary Trust 0.00 0.00 0.00 0.00

Net Income from Continuing Operations 390.80 315.50 672.64 581.47

Net Income from Discontinued Ops. 0.00 0.00 0.00 0.00
Net Income from Total Operations 390.80 315.50 672.64 581.47

Extraordinary Income/Losses 0.00 0.00 0.00 0.00

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Income from Cum. Effect of Acct Chg 0.00 0.00 0.00 -17.21
Income from Tax Loss Carry forward 0.00 0.00 0.00 0.00
Other Gains (Losses) 0.00 0.00 0.00 0.00

Total Net Income 390.80 315.50 672.64

564.26

BALANCE SHEET:

Balance Sheet for Starbucks Corp. (SBUX)

$ 23.06 -0.25 (-1.07%) Volume: 3.76 m 4:00 PM EST Dec 31, 2009

After Hours: $ 23.07 0.01 (+0.04%) Volume: 11.66 k 4:44 PM EST Dec 31, 2009
Balance Sheet Annual
Statement: View:

Assets in Millions of Dollars

09/2009 09/2008 09/2007 09/2006 09/2005

Cash and Equivalents 600 270 281 313 174

Marketable Securities 66 52 157 141 133
Receivables 271 330 288 224 191
Inventories 665 693 692 636 546
Other Current Assets - - - - -
Total Current Assets 2,036 1,748 1,696 1,530 1,209

Gross Fixed Assets 5,701 5,717 5,307 4,258 3,468

Accumulated Depreciation (3,164) (2,761) (2,416) (1,970) (1,626)
Net Fixed Assets 2,536 2,956 2,890 2,288 1,842
Intangibles 68 67 42 38 128
Other Non-Current Assets 677 635 499 412 335
Total Non-Current Assets 3,541 3,925 3,647 2,899 2,305
Total Assets 5,577 5,673 5,344 4,429 3,514

Liabilities in Millions of Dollars

09/2009 09/2008 09/2007 09/2006 09/2005

Accounts Payable 267 325 391 341 221

Short Term Debt 0 714 711 701 278
Other Current Liabilities 154 152 - - -
Total Current Liabilities 1,581 2,190 2,156 1,936 1,227

Long Term Debt 549 550 550 2 3

Deferred Income Tax - - - - -
Other Non-Current Liabilities 401 424 337 263 194

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Minority Interest - 18 17 - -
Total Non-Current Liabilities 950 992 904 265 196
Total Liabilities 2,531 3,182 3,060 2,200 1,423

Preferred Stock Equity - - - - -

Common Stock Equity 3,046 2,491 2,284 2,229 2,091
Total Equity 3,046 2,491 2,284 2,229 2,091
Total Liabilities & Stock Equity 5,577 5,673 5,344 4,429 3,514

KEYS TO SUCCESS:
v Rapidly expand retail operations
v Growth in its specialty sales and other operations
v Introduction of new products
v Continue to be widely available and welcoming
v Maintain reputation for having specialty and gourmet coffee
v Make customers feel welcome with friendly service
v Offers new technologies (Wi-fi, visa card)

CRITICAL ISSUES:
v Must increase customer satisfaction through improvements to service
v Friendlier and more attentive staff
v Faster and more efficient service
v Increase in personal treatment (remember customer’s name and order)
v More knowledgeable staff
v Better overall service

OFFER BETTER PRICES/INCENTIVE PROGRAMS:

v Free cups after “x” number of visits
v Reduction of price
v Offer promotions, sales to increase customer satisfaction
OTHER:
v Offer better quality and variety of products
v Improve atmosphere (friendly, welcoming)
v Reaching out to community through involvement and awareness
v More stores and convenient locations

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OTHER CRITICAL ISSUES STARBUCKS IS CRITICIZED
FOR AND MUST BE AWARE OF ARE:
v Clustering
v Driving out independents
v Loss of diversity
v Its policy toward farming communities in developing countries
v Fair trade
v Many of these issues are vital for Starbucks to improve their
v Customer’s satisfaction

INVOLVEMENT IN THE COMMUNITY:

v Contributing positively to surrounding communities is one of
v Starbucks’ guiding principles in the company’s mission statement.

v Organization to help Third World countries where Starbucks

purchases its coffee supplies.

v The company has an Environmental Committee that looks for

v Ways to reduce, reuse, and recycle waste, as well as contribute to
local community environmental efforts.

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 MARKETING
QUESTIONNAIRE

1. Have u ever heard the name of STARBUCKS? If yes (have you ever try that)
• ----------------------

2. Do you like COFFEE?

• Yes
• No

3. Which competitor’s products would you like to consume rather than

STARBUCKS?
• NESTLE
• LOCAL
• CADBURY
• Any other _____________________

4. At what number do you rate STARBUCKS amongst its competing firms (scale
of 1-10)?

___________________

5. If STARBUCKS offers you the “CHOCO CREAMY SHAKE”, so what would

be your response?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________

6. What size would you prefer buying?

• Large size bottle
• Small size

7. Which should be the price of the product?

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 • Large size (170, 160, 150)
• Small size (75, 85, 100)

8. Is winter the right season to launch the “CHOCO CREAMY SHAKE”?

• Yes
• No

9. Any comments about STARBUCKS and its new products.

___________________________________________________________________
___________________________________________________________________
___________________________________________________________________

SURVEY REPORT:
After the survey we found that 40-50% people are aware of the STARBUCKS.
Although they like coffee, but most of them said we want a good quality coffee. The
peoples who were not aware of STARBUCKS but after we told them about the
introduction of the STARBUCKS (it has 16,680 retail outlets around 49 countries
and high quality brand), this made them conscious of tasting such a coffee which is
a successful brand all over the world and they interested to have STARBUCKS in
PAK too. We also told them if we launch CHOCO CREAMY SHAKE, what is
there point of view? They said we will try it because of the name of such international
brand and we love chocolate too. Most of them prefer a large mug of a coffee and the
price should lie “between” 150-200. Most of the people using the NESTLE brand
“NESCAFE”. People rated for STARBUCKS lies 5-7 (average).

SURVEY WAS TAKEN FROM THESE PEOPLES:

v FA09-BCE-062
v FA09-BET-158
v SIR NOMAN SHAKIR
v FA09-BCE-115
v FA09-MBA-144
v FA08-BAR-033
v SP09-BSB-038
v FA07-BEL-064
v SP08-BEL-070
v FA09-MBA-049

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CONCLUSION OF THE SURVEY:
We found that people are interested to have a quality brand in PAK, so it’s a positive
sign for us. We decided to serve both large and small mug of coffee with a price of
150/- and 80/- respectively. After the awareness of the “STARBUCKS”, we will
launch the CHOCO CREAMY SHAKE in the market.

ORGANIZATION STRUCTURE:

MANAGER

FINANCE
SALES MANAGER HR MANAGER MANAGER

CRUE
MEMBER

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REFRENCES:

v http://www.hoovers.com/starbucks/--ID__15745--/free-co-profile.xhtml
v http://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=Gro
wthRates&Symbol=SBUX
v http://www.marketwatch.com/investing/stock/SBUX/financials
v wikipedia
v google
v starbucks.com

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