Starbucks Risk Assesment

Topics: Coffee, Marketing, Starbucks Pages: 30 (10767 words) Published: August 29, 2011
1.Launch of a new product/service2
1.1 Flowchart for launch of a new product/service2
2.Reasons for a Failed Product Line2
2.1 Adverse Environment Conditions2
2.1.1 Industry Competition2
2.1.2 Political Implications2
2.1.3 Economic Events2
2.1.4 Evolving Social Factors2
2.2 Error in forecast of consumers’ response2
2.2.1 Incomprehensive Market Analysis2
2.3 Ineffective Product Launch2
2.3.1 Wrong Timing2
2.3.2 Unprofitable Product2
2.3.3 Inadequate Support2
3.SWOT Analysis2
3.1 Strengths2
3.1.1 Wide range of products sold through numerous locations2
3.1.2 Strong Brand Equity2
3.1.3 Excellent Research and Development capabilities2
3.1.4 Relationships with established players2
3.1.5 The Starbucks Experience2
3.2 Weaknesses2
3.2.1 Criticism and controversies dilute brand value2
3.2.2 Lack of Diversification2
3.2.3 Product recalls affect margins and brand image2

3.3 Opportunities2
3.3.1 Growth through acquisitions and partnerships2
3.3.2 Introduction of Starbucks VIA coffee essence in Japan and China2
3.3.3 Rapid expansion in China and entrance into a new market – India2
3.4 Threats2
3.4.1 Rising prices of raw ingredients2
3.4.2 Increasing health consciousness among Americans could affect demand2
3.4.3 Increasingly stiff competition from other giants like McDonalds and Dunkin Donuts2
4.Emerging/Current Trends2
4.1 Health-conscious customers2
4.2 Brand erosion due to changes in pricing and new product offerings2
4.3 Strategic alliance with Green Mountain Coffee Roasters2
4.4 Implication for strategic objectives and strategy formulation:2
5.Risk prioritization for Starbucks2
5.1 Risk of losing market share due to stiff competition2
5.2 Commodity price risk2
5.3 Currency risk2
5.4 Supply chain disruption risk2
5.5 Risk of changing consumer preference2
5.6 Risk of failure and breach of security of IT systems2
5.7 Product liability2
5.8 Risk of Non-Compliance with Laws and Regulations2
5.9 Risk of loss of key personnel2
5.10 natural hazard risk2
5.11 Risk Map2
6.Risk Responses and control devices/activities2

1. Launch of a new product/service
Being in a heavily competitive market, the need for lean, rapid and profitable new product development has never been more pressing. This is especially so as product life cycles are getting shorter and customers are more demanding as they are now spoilt for choice. Starbucks introduces on average, one new product each day. It is important for Starbucks to keep this trend going and constantly innovate to keep a step ahead of its competitors. Starbucks believe that it is not just about getting new customers; it is also about keeping the old ones interested. Hence they constantly engage in efforts to develop new ideas, products, and experiences for its customers. CEO Howard Schultz and other senior executives honed in the importance of always being open to re-inventing the Starbucks experience. In fact, at Starbucks, consumer input is an important part of their development process. A website was set up to encourage contribution of ideas, facilitate discussions and even allows consumers to see the development of their ideas. Starbucks has a dedicated Research & Development team whose job is to constantly design and develop their food and beverages. Expenditures allocated are high each year (2010: $9million, 2009: $7million and 2008: $7million) as Starbucks continues to invest in technical research and development activities, in addition to customary product testing and product and process improvements in all areas of its business. The first step to launching a new product is idea generation. At Starbucks, brainstorming sessions are conducted and consumers’ suggestions on the company’s website are taken into account. Next, these ideas are screened and those which are perceived to be the least likely to succeed...
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