Starbucks: Case Study
Starbucks Case Study
I. Problem Statement
Starbucks has recently lost its brand image as a neighborhood coffee-shop experience. By offering breakfast, lunch and other food items, they have increased short-term profitability at the expense of maintaining the ‘Starbucks experience’ and long-term competitive distinction. II. Situational Analysis
1. Current Financial/Market Numbers
STOCK PERFORMANCE SELECTED YEAR-END ADJUSTED CLOSE SHARE / INDEX PRICES2002-2007 (ADJUSTED FOR DIVIDENDS / SPLITS) | | McDonald’sMCD | Panera BreadPNRA | StarbucksSBUX | Dow Jones Industrial AverageDJIA | 2002 | $13.17 | $34.81 | $10.05 | 8341.63 | 2003 | $20.66 | $39.52 | $16.36 | 10,453.92 | 2004 | $27.17 | $40.32 | $30.76 | 10,783.01 | 2005 | $29.16 | $65.68 | $29.60 | 10,717.50 | 2006 | $39.27 | $55.91 | $34.94 | 12,463.15 | 2007 | $53.56 | $35.82 | $20.19 | 13,264.82 |
The market for premium coffee beverages has experienced high growth throughout the 90s and early 2000s. Additionally, café-style restaurants (Panera) have recently began to see increased sales as they offer a relaxing atmosphere with free WiFi and music.
Objectives for Cost Structures:
By the end of 2007, more than two-thirds of company-owned US Starbucks were serving lunch sandwiches and other non-coffee beverage merchandise. Even though sales for sandwiches and other food products were going well, food sales offers a much lower contribution margin which has resulted in much lower profit margins in recent years; profit margins have dropped each year from 8.7% in 2004 to 7.1% in 2007 and are a mere 3% in the first quarter of 2008. Licensing sales, however, represent a margin of close to 100%. Finally, drive-thru sales has become the majority of sales for stores that offer such service. 2. The Relevant Market * The Starbucks Brand focuses on young and middle-age professionals, particularly in the middle to high social classes, seeking a relaxing environment to enjoy
I. Problem Statement
Starbucks has recently lost its brand image as a neighborhood coffee-shop experience. By offering breakfast, lunch and other food items, they have increased short-term profitability at the expense of maintaining the ‘Starbucks experience’ and long-term competitive distinction. II. Situational Analysis
1. Current Financial/Market Numbers
STOCK PERFORMANCE SELECTED YEAR-END ADJUSTED CLOSE SHARE / INDEX PRICES2002-2007 (ADJUSTED FOR DIVIDENDS / SPLITS) | | McDonald’sMCD | Panera BreadPNRA | StarbucksSBUX | Dow Jones Industrial AverageDJIA | 2002 | $13.17 | $34.81 | $10.05 | 8341.63 | 2003 | $20.66 | $39.52 | $16.36 | 10,453.92 | 2004 | $27.17 | $40.32 | $30.76 | 10,783.01 | 2005 | $29.16 | $65.68 | $29.60 | 10,717.50 | 2006 | $39.27 | $55.91 | $34.94 | 12,463.15 | 2007 | $53.56 | $35.82 | $20.19 | 13,264.82 |
The market for premium coffee beverages has experienced high growth throughout the 90s and early 2000s. Additionally, café-style restaurants (Panera) have recently began to see increased sales as they offer a relaxing atmosphere with free WiFi and music.
Objectives for Cost Structures:
By the end of 2007, more than two-thirds of company-owned US Starbucks were serving lunch sandwiches and other non-coffee beverage merchandise. Even though sales for sandwiches and other food products were going well, food sales offers a much lower contribution margin which has resulted in much lower profit margins in recent years; profit margins have dropped each year from 8.7% in 2004 to 7.1% in 2007 and are a mere 3% in the first quarter of 2008. Licensing sales, however, represent a margin of close to 100%. Finally, drive-thru sales has become the majority of sales for stores that offer such service. 2. The Relevant Market * The Starbucks Brand focuses on young and middle-age professionals, particularly in the middle to high social classes, seeking a relaxing environment to enjoy