Hbr Case Starbucks

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Starbucks
We take Coffee seriously!

Starbucks
Problem Statement • Is this best possible way to grow? • How much to extend in the quest for growth? • How do tap / react the opportunities?

About Starbucks
• Speciality coffee company – Arabica beans • CEO – Howard Schultz • 1000 retail locations in 32 markets throughout North America and 2 stores in Tokyo

About Starbucks
Channels • Retail Outlets – Bread and Butter – An experience store (Third Place) – Contribution to revenue: 86% – Educated customers and highly trained employees – Disciplined approach to Real Estate • Mostly owned • Excellent design • Store clustering • Role of Estate Managers and “street sniffers” – Growth plans of 20 – 40 stores p.m / 2000 stores by Year 2000

– International growth Plans

About Starbucks
Channels • Specialty sales – Agreements with retailers, wholesalers, restaurants and service providers – Revenue growth potential – Increased name recognition – Partnerships with companies that are leaders in their field – Partnerships involved • Serving Starbucks Coffee • Product Development • Store Development

About Starbucks
Channels • Specialty sales – Agreements with retailers, wholesalers, restaurants and service providers – Revenue growth potential – Increased name recognition – Partnerships with companies that are leaders in their field – Partnerships involved • Serving Starbucks Coffee • Product Development • Store Development

About Starbucks
Channels • New Ventures – New opportunities for coffee based products – Exploring new channels – Dreyer’s Ice-cream – Bottled Frappuccino, with Pepsi – Penetration into the grocery channel (Portland, Chicago) Mail order – For customers away from a Starbucks retail store – For regular home users – Direct mail program – “Encore” • Monthly shipments of ground or whole bean coffee



About Starbucks
Business Model • Sourcing: – Diversified sourcing portfolio – Close working relationship with exporters – Purchased coffee of very high quality from the exporters – Followed a three sample approach for QA – Foresee the issue of sustainable procurement of high quality coffee Roasting – Roasting is a key process in the activity chain. – Signature roasting curves – Packaging / Shelf life



About Starbucks
Business Model • Supply Chain Operations – Accurate forecasting process – Closed loop system from manufacturing to distribution – Willing to test new waters in terms of suppliers

About Starbucks
Organization • Human Resources – Flat Structure – Partner (Not employee) – Emphasis on communication – Higher wages + Insurance + Employee Stock Options – 24 hours training program for ALL employees – Recruitment is given high importance

About Starbucks
Organization • Organization Culture – 6 guiding principles – Own set of values – Passion at work – Diversity – Excellence Financial – Rapidly increasing stock price and EPS – High expectations on profitability – ‘BUY’ rated by 4 prominent investment companies – No franchisee retail outlets – High dependence on equity and debt financing (DE ratio of 1.6)



About Starbucks
Organization • Marketing – Retail business the source of brand equity – Positioned as an experience – Preferred outlet  Preferred brand – Remaining true to its core  COFFEE – A total coffee experience

Competitive Analysis
Resources
Type Organizational Resources Resource Flat Organizational Structure Strong Leadership – Howard Schultz Integrated Supply Chain Physical Resources Prime real estate for retail outlets

Technological Resources
Human Resources Innovation Reputational Resources

R & D - Proprietary ‘Roast Curves’
State of the Art Manufacturing Equipment Highly Trained ‘Baristas’ ‘Value driven profit pursuit’ Frappuccino – Innovation platform National Brand Relationship with ‘Exporters’ (Suppliers) Customer Service and Quality Products

Competitive Analysis
Capabilities • Real Estate Acumen • Supply Chain • Blends and Roast...
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