August 24, 2008
Analysis of Current Situation
1. Economic Conditions: In a time of inflation when the purchase of nonessential items is down, Starbucks is feeling the effects.
a. 600 Starbucks locations will close by mid-year 2009
b. This represents 8.7% of the stores nationwide..affecting 44 states..88 locations in California alone.
c. 12,000 employees will lose their jobs…Starbucks will offer relocation packages to many employees, severances to others.
d. Fewer than 200 new US locations will be opened in 2009….this is in comparison to 900 new US locations projected to be opened in 2008.
e. Infrastructure realignments of non-store support staff resulted in the reduction of 1,000 positions.
f. In response to competition and imitators, Starbucks now offers the “bottomless” $1.00 coffee.
g. Wireless internet is no longer free and the comfortable lounges in the stores are being replaced with less comfortable furnishings.
2. Cultural, Social values and Trends:
a. Starbucks has prided itself on being an experience, not just a cup of coffee. Starbucks has become a social experience. Management focused efforts in becoming the “third place”…. If you weren’t at home or at work, you would be at Starbucks.
b. Starbucks has become a cultural brand such as iPod.
c. Starbucks has a Corporate Social Responsibility policy in place to fulfill its commitment to positively contribute to local communities and the environment.
d. Corporate partnerships with over 46 companies such as Barnes and Noble, Apple and Target contribute to its success.
e. Starbucks offers over 30 blends and single origin coffees.
f. In addition to coffee, Starbucks sell pastries, sandwiches, salads, music, merchandise such as coffee makers and espresso machines.
g. Starbucks has also entered the entertainment industry by selling music and books from emerging and established talent.
h. Employees are referred to as “partners”.
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