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Starbucks

Starbucks. Crystal Hill Stephen Lechtenberg Anand McGee Allison Purtell Jason Torres. Industry Overview. Highest imported product in world, second to oil U.S. Coffee Industry 20,000 stores, $11 Billion profit Top 50 companies, 70% of profit

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Starbucks

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  1. Starbucks Crystal Hill Stephen Lechtenberg Anand McGee Allison Purtell Jason Torres

  2. Industry Overview • Highest imported product in world, second to oil • U.S. Coffee Industry • 20,000 stores, $11 Billion profit • Top 50 companies, 70% of profit • Secure prime locations, drive store traffic, deliver high quality products

  3. Business and Economic Factors • Business Characteristics • Expansion, franchising and licensing, store traffic • Economic Characteristics • Coffee beans, futures contracts

  4. Forces for Driving Change • Environmental concerns • Sustainable coffee • Organic coffee, fair trade, and shade grown coffee • Customer’s desire for information • “Green” coffee

  5. Competitive Forces • Threat of New Entrants • Low startup costs, strong first mover advantage • Rivalry Among Existing Firms • Highly concentrated, highly competitive • Threat of Substitute Products • Low customer switching costs, differentiation • Bargaining Power of Customers • Millions of coffee consumers worldwide, little power • Bargaining Power of Suppliers • Firms hold power, suppliers compete against eachother

  6. Competitive Positions • Starbucks • First mover advantage (Blue Ocean) • Differentiation • McDonalds • McCafe division • Dunkin Donuts • Starbucks biggest competitor • Nestle

  7. Competitive Moves • Innovation • Contribute more capital to R&D • Expansion • Starbucks, 700 new stores in 2009 • McDonalds, 1,000 new stores in 2009 • Dunkin Donuts, 100 stores in Taiwan by 2017 • Product Differentiation

  8. Key Success Factors • Starbucks: • Continue disciplined expansion • Product differentiation • McDonald’s: • Most products for your dollar • Nestle: • Unmatched product and brand portfolio • Dunkin’ Donuts: • Innovation

  9. Attractiveness of Coffee Industry • Coffee beans are 2nd largest export • Large companies make up 70% of industry • Must secure prime locations, manage and increase store traffic, and sell high quality products • Companies must expand in order to succeed • Competition on price • Relationships with coffee producers is key • Overall attractive industry • Starbucks saw $1,000,000 profit per store in 2008 • Typical coffee shop saw $500,000 profit per store

  10. Marketing Efforts • Recognition in Hollywood • Loyal customers • Rewards programs • My Starbucks Rewards card • Facebook • Competition

  11. Financial outcomes • Consolidated Company revenue • $2.5 Billion in 2008 • $2.4 Billion in 2009 • Due to strengthening U.S. dollar • And fewer stores being opened in ’09 • High costs in closing 800 stores • Current stock price of $21.59 • Forecasted to increase in December

  12. Pricing • First price reduction in August 2009 • Due to 6% decrease in sales • On standard drinks by 5-15 cents • To attract non-loyal customers • Specialty drinks increased • Was last raised in 2007 by 5 cents • Loyal customers won’t leave • Trying to cut down costs by being more efficient in stores

  13. Strengths • Operational Techniques • Extending their market to other business channels • Joint ventures • Marketing and sales strategies • Focus on quality and experience vs. price

  14. Strengths • Customer service • “Develop enthusiastically satisfied customers all of the time.” • Wireless internet • Comment cards • Management techniques • Empowerment of employees • Every employee a “partner”

  15. Core Competencies • Vertically Integrated • Placement • “…to become the most recognized and respected brand in the world”

  16. Weaknesses • Lack of current new product development • Slow to diversify into new markets • Pricing strategies • Current marketing strategies not meeting marketing objectives • Younger, less educated customers with lower economic status

  17. Weaknesses • Market saturation has gotten in the way of products and services not meeting marketing characteristics • Low customer satisfaction • Speed of service • Inconsistency

  18. Opportunities • Co-branding • International expansion • India and Pacific • “Going green” practices

  19. Threats • Rising costs of coffee or dairy products • Copycat brands/Competition • McDonalds and Dunkin Donuts • Declining coffee market • New beverage or pastime could evolve

  20. Eliminate-Reduce-Raise-Create

  21. Competitive Strength • By keeping Focus on quality coffee and excellent customer service • Easier to acquire quality suppliers • Harder for competition to keep up

  22. Valuable Assets and Resources • Quality coffee • Diversified menu, reaching across 3 tiers of customers • Technology • Employees

  23. Starbucks’ Issues/Solutions Problem: Overexpansion Solutions: Transformation Agenda 1) Improving U.S. state 2) Re-igniting emotional attachment 3) Build for the long term 4) Expand around globe outside U.S.

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