We chose Starbucks Company because it is more than just coffee, we like the concept of having a coffee bistro that offers an excellent espresso and serves as a great place where people come together to enjoy a nice and cozy atmosphere with Wi-Fi access while sipping coffee. Moreover, Starbucks does not believe in franchising, Mr. Howard Schultz (founder and CEO) made a clear point of having Starbucks retain ownership of every domestic outlet, which makes the company very successful. Starbucks has aggressively expanded its market not only in the United States, but globally. Howard Schultz has demonstrated that he has a clear vision and the company follows their mission statements. We as financial analysts used financial ratios to evaluate the company’s performance throughout the years 2009, 2010 and 2011. In conclusion, Starbucks it is a stable company that uses clever marketing, superior product as well as good old fashion hard work becoming a very large, and a successful multi-billion dollar business.
I. Firm, Industry and Environment
A. Description of firm and its management
• Is a coffeehouse chain company based in Seattle Washington • Is the largest coffeehouse company in the world
• Operates in over 61 countries and have 20,336 coffee shops. United Stated, which it is largest market, has a total of 13,123 coffee shops • Sells cold and hot drinks, coffee bean, salads, hot and cold sandwiches, sweet pastries, snacks and items such as mugs and tumbler Howard Schulz, founder and CEO:
• Acquired Starbucks in 1987 making this company one of the best coffee brand in the world. Schulz created a principle “how to make ordinary into extraordinary” with this concept Starbucks runs its business today • Management: Troy Alstead is the chief financial officer and chief administrative officer. He oversees the company’s global finance, technology, and supply chain operation. Cliff Burrows president Americas is responsible for all of Starbucks operations in United States, Canada, Mexico, and Latin America. John Culver is president of Starbucks in China and Asia Pacific. Michelle Gass is president of Starbucks Europe, Middle East and Africa Starbucks Corporate Strategy:
• Maximize market penetration
• Provide a relaxing, attractive social atmosphere
• Offer high-quality products
• Create a great working environment
• Achieve profitability
B. Competitive environment
The two major strong Starbucks’ competitors in the local US market are McDonalds and Dunkin Donuts. With advertising “America Runs on Dunkin,” Dunkin Donuts is promoting the idea that coffee is a regular drink rather than a “lifestyle.” Grabbing a cup of coffee every morning is looks like being a task to fulfill rather than an experience in itself. Dunkin Donuts offers a variety of coffee blends, chai tea, espresso, lattes, and cappuccinos, but it is not looking to become like Starbucks. With the addition of fast food companies into the coffee market, differentiation will be very critical to Starbucks survival. Starbucks must concentrate on offering customers the “lifestyle” and “experience” that they had over the years, and provide reason for customers to pay high price for their unique products. C. Economic climate and outlook
Overall Starbucks is performing well compared to the other previous year (2009-2010). Starbucks in the United States, which its largest market is performing better that the European market. The company had been struggling in Europe for sometimes because of the significant global and economic challenge according to Schultz. Starbucks company announced that the expected earnings for the current fiscal fourth quarter to be 44 to 45 cents a share, compared to 48, which is below the average of what analysts forecasted. At the same time the company is planning to have an accelerated...