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留学生作业代写:Starbucks Coffee

2017-07-08 来源: 51due教员组 类别: Report范文

下面为大家整理一篇优秀的Report范文- Starbucks Coffee,供大家参考学习,这篇论文讨论了星巴克咖啡。星巴克是一家美国咖啡店,总部设在华盛顿州的西雅图市。公司成立于1971年,之后迅速成长为一家拥有世界2万多个店面的国际公司。如今,星巴克不仅卖咖啡,还卖甜品和其他种类的饮料,星巴克的货架上还有如杯子等相关产品。毫无疑问,如今星巴克肯定是世界上最著名的咖啡店之一。

1. Introduction of Starbucks’ history and expansion

Starbucks,星巴克,留学生作业代写,essay代写,美国作业代写

1.1 Company snapshot

Starbucks Corporation is an American coffee shop headquartered in Seattle, Washington. Founded in 1971, it quickly grew to an international firm with more than 23,000 locations in the world. In 2014, the revenue was 16.447 billion USD, with 3.081 billion USD operating income. The total assets was 10,752 billion USD and total equity was 5.272 billion USD. The firm also has many well-known brands as subsidiaries such as Ethos Water, Teavana, Evolution Fresh, and etc. Nowadays, Starbucks does not only sell coffee, but also sells desserts and other kind of drinks. Other related products such as cups and mugs were also found on Starbucks’ shelves. It has definitely became one of the most famous coffee shops all over the world.

1.2 Initial growth period

On Starbucks’ official website, the corporate set its goals to be: share great coffee with their friends and help make the world a little better. The firm has operated strictly according to their goals. That sentence was true when the first Starbucks opened in 1971 and, amazingly, it is still true today. I will first give some background history of Starbucks. The firm opened its first shop on Pike Street in Seattle, Washington. Today if you visit Seattle, you will still see many people lined up in front of the first Starbucks shop to buy souvenirs and to feel the culture of this leading coffee shop in the world. The visitors can buy cups with a logo different from that on the other cups if you bought the coffee elsewhere. To own a cup from the first Starbucks in the world had a special meaning to many coffee lovers in the world. Although the first shop was quite small in terms of area, quickly developed and opened other shops. In 1981 Howard Schultz, the first Starbucks chairman and chief executive officer first walked into the Starbucks store and was attracted immediately by the coffee ever since his first visit. In 1983, Howard traveled to Italy and brought exotic feelings and added romance to making his coffee. It was also in that year that Starbucks started to profit. In 1987, the original owner sold Starbucks to him and then Starbucks coffee quickly began to expand. In the same year, Starbucks opened its first store outside of Seattle at Waterfront Station in Vancouver, British Columbia, and Chicago, Illinois. In the late 1980s, even though the initial economic downturn occurred when the company expanded into the Midwest and British Columbia, the company was not affected much and still profited. In the early 1990s, Starbucks travelled into California. By 1989, 46 stores existed across the Northwest and Midwest and Starbucks was roasting over 2,000,000 pounds (907,185 kg) of coffee annually. From that time Starbucks coffee accomplished a great achievement in that it shifted the store’s purpose into not only a place to drink a cup of coffee, but also a place for communication and relaxation. The way how Starbucks provided a comfort place for people to rest or chat switched the traditional concepts of a coffee shop and connected the idea of communication with a cup of coffee. It is nowadays very common to see people bringing a laptop and siting at Starbucks to work or a couple of people sitting around a table to have a meeting. 

1.3 International expansion

From the 1990s and onwards, Starbucks moved from the initial expansion period to the international expansion era. In 1991, Starbucks opened its first licensed airport store in Seattle Sea-Tac International Airport. A few years later, in 1996, the first Starbucks store outside North America was opened in Tokyo, a sign of Starbucks officially entering into the international arena. After two years, Starbucks expanded into the British market. According to New York Times, Starbucks accomplished this move by acquiring the British firm named Seattle Coffee Company using 83 billion USD. Starbucks soon changed all the designs of the store and started to operate under its name. In September 2002, Starbucks opened its first store in Latin America, in Mexico City. Currently there are over 500 locations in Mexico. Up until today, there are more than 27,000 stores the world. About one third of the shops were open in a foreign country and the expansion speed of the firm was amazing from 1987 to 2007. Records showed that on average, two more locations were opened around the world daily. In April 2003, Starbucks complete the purchase of Seattle’s Best Coffee.

On April 15th, 2003, the president of Starbucks said that Starbuck corps will acquire hometown rival Seattle Coffee Co. from its parents company by paying 72 million USD cash in exchange for its stocks. This deal not only added 150 more new stores to Starbucks, but also added the wholesales business to the business operations model. The Chairman of the Starbucks coffee Howard Schultz said “Acquiring the Seattle's Best and Torrefazione brands provides us an opportunity to launch the next phase of our specialty coffee growth”, and that “Both SBC and TI offer superb specialty coffees that are distinct from Starbucks flavor profiles, these brands will allow us to satisfy the desires of consumers with an affinity for the smooth flavors of SBC coffees and distinctive Italian recipes of Torrefazione Italia coffees, while focusing on expanding the demand for these types of specialty coffees.” As for the motivation for the acquisition, the management team believed that this move could better serve their customers. Different people have different tastes and some people may like the Seattle Best’s coffee smell. After Starbuck acquired Seattle Best, it can make the coffee flavor of Seattle Best to satisfy those customers who was used to the taste of Seattle Best. Starbucks can also attract more customers. Management believed that due to the large acquisition cost, the profit on the income statement may not look as attractive in the short run as in the long run because in the long run, the benefits of the acquisition will become more apparent. In September 2006, Starbucks’s competitor, Dietrich Coffee, sold its own retail store to Starbucks Coffee. Dietrich Coffee, based in Irvine, CA, was the first coffee house in Orange County when it was first established in 1983.

In 2003, Starbucks Company began to expand into the market of South America, it opened the first store in Lima in August 2003. After five years, Starbucks purchased the manufactory of Clover Brewing System in order to introduce the new coffee system, the “fresh-pressed” coffee system, they began testing this system at several Starbucks locations in Seattle, California, New York and Boston . In my opinion, this acquisition was very important to Starbucks since the customers are demanding more and more. They not only need a cup of high-quality coffee, but also want to receive their coffee as soon as possible and is often impatient to wait. The Clover Brewing System has given an opportunity for Starbucks because they own a technology that can increase the efficiency of coffee brewing significantly. This innovative machine has proven to be popular since Starbucks started to use the machine in its stores. Howard said “Strategically, this acquisition will demonstrate our commitment to provide Starbucks customers with individual brewed cups of the rarest and most exotic Starbucks coffee using the Clover brewing system.”  

1.4  Treating the customers

After the improvement of the coffee system, in the same year, Starbucks started a community website called “My Starbucks idea”, a website designed to collect suggestions and feedback from customs so that they could further expand the business and grasp a bigger share of the market. However, under the fierce competition, “How to keep your customer?” is the most important problem that Howard considered. Therefore, to encourage customers to continue to shop at Starbucks, a loyalty program was introduced for registered users of the Starbucks Card, which is just a simple gift card at the beginning. This card could offer many privileges such as free Wi-Fi internet access, no charge for soy milk and flavored syrups, and free refills on brewed drip coffee, iced coffee or tea. Today Starbucks is still energetically promoting the rewards program, for example, once you brought a cup of coffee, you will get a star reward and once you have enough stars, you could use them to change a cup of free drinking. Those sales-promotion program really helped Starbucks to attract a lot of potential customers and keep those customers for the long term. In order to provide Starbucks cards to users in a quicker, easier and more economics way, Starbucks launched the beta testing version of the mobile app in 2009. The App has a similar function to the Starbucks card, which also allows you to store money in the app so that you can buy items without carrying cash or credit cards in the future. I believe that it is an extraordinarily clever decision because it not only provided more convenience services to the customers, but also collected a great amount of money to Starbucks when customers deposited their funds into Starbucks. The shop can then utilize those money to further develop their business, make more investments with more sufficient funds. From 2012 to 2015, Starbucks continued to expand and opened its first store in many different place such as Ho Chi Minh City, Vietnam, Williamsburg. In this year, Starbucks announced that it will enter Italy, which is the 24thcountry in Europe and the first shop might be opened in Milan by 2017.

2. Organizational structure

When Starbucks was only funded in 1971, it adopted a business strategy of differentiation in selling only unique coffee beans in the American market to attract more customers since other shops do not sell this kind of coffee. During the first year that Starbucks opened its business, the company quickly opened six shops. However, at that time, the founders did not want to expand Starbucks further because the primary purpose for them to open Starbucks in the beginning was to spread the culture of coffee. They were worried that more shops would render Starbucks too commercialized and deviate from their initial motivation for building Starbucks. So back then, the organizational structure for Starbucks was fairly simply, with three co-founders and each in charge of management, operations, and sales. There is also a finance and accounting department to take care of the accounting books for the firm. Their immediate juniors were the six shop managers who were in charge of the daily business activities in their different shops.

In 1987, the current chairman Howard Schultz acquired Starbucks from the three co-founders and strived to expand this shop from Seattle to all over the USA. To better develop the firm, Howard Schultz recruited more talented men, complicated the organizational structure and outlined the specific roles for everyone in the firm. Howard Schultz divided the firm into three different division, business analysis department, business expansion department, and the research and development department. The business analysis department determined the plans for future expansion and the business expansion department turned those plans into action. The R&D department was in charge of innovations, creating new kinds of products, and the quality control of the products. Apart from this, each different department is separated into different teams so that the works can be further specified. For example, in the business analysis department, there is a team in charge of expansion plans, and also there is a team for asset management. There is a team of HR, and there is an accounting specialist’s team. In the R&D department, teams were broken down by different kinds of products that they sell: drinks, and desserts. In the business development department, some were in charge of communications while others were in charge of the supply chain. There is a manager for each team so that the manager can report any problems to the seniors, give any feedback to the juniors, and carry out specific plans.

In 1996, Starbucks was not satisfied in only leading the American coffee culture, instead, they turned their views into the world. The organizational structure shifted as the goals of the firm changed. The three departments expanded into seven different departments: the finance department, the international retail department, the supply chain and operations department, the worldwide public affairs department, the legal and corporation’s affairs department, the HR department, and the North America Retail department. There are also sub-departments under the seven major department. For example, there is a marketing department under the North America retail department. There is a coffee department under the supply chain operations department. There is the CSR and the legal department under the legal and corporation’s affairs department. The chart of the organizational flow is shown as follows:

3. The marketing strategies and models of Starbucks

From 1971, it only took 45 years for Starbucks to transform from a small café in Seattle to a global corporation, which owns an enormous amount of chain cafés all over four continents. In China, Starbucks takes even lesser time to develop its brand into a symbol of trendy style. Nevertheless, the café market in China was relatively mature long before Starbucks had entered. Before Starbucks, there were many dominating café brands such as UBC Coffee, Manabe Coffee and etc. Therefore, the question arises, what kind of marketing strategies and models did Starbucks, as a late-comer, use to survive and to rapidly expand in an existing market? I believe we can analyze this question from four aspects.

3.1 Cooperation and investment model

Starbucks would implement different cooperation and investment models flexibly basing on the given market condition around the globe. Similar to McDonald’s and its global expansion, Starbucks started its multinational business a long time ago by promoting three types of business structures: Co-partnership Company, License Agreement, or Sole Proprietorship. Starbucks’s expansion strategies on opening new cafés are very flexible, due to the fact that it adjusts its cooperation model to adapt the particular market. There are mainly four types of cooperation models: 1)the parent firm owns 100% shares. The shops in the UK, Thailand, and Australia, etc. all follow this model. 2)The parent firmowns 50% shares. Shops in Japan, Korea and etc. follow this model. 3) The parent firm has only a limited amount of shares, around 5%, such as shops in Taiwan, Hong Kong, Hawaii, and Shanghai before the capital increment. 4) The parent firm does not own any shares and authorized another company to operate in their local market . Those shops were common in the Philippines, Singapore, Malaysia and Beijing. Although Starbucks has different cooperation partners around the world, all of them are operating for the same brand. One of the advantages of this plan is that the firm ensured that operations are done all at the same time around the world while also specializing and using different strategies for different markets. When looking for a partner, Starbucks developed a strict selection of criteria such as the reputation of the partner, the ability to control quality and whether can use the Starbucks standards to train employees. Currently, Starbucks has three partnerships in China: Beijing Mei Da Coffee Co.ltd, who is the agency for northern China, TaiWei Uni-President Enterprise Corporation, the agency for southern area of China such as Shanghai, Suzhou. The right of agency for others southern area of China was given to a company in Hong Kong. It was due to such flexible investment strategy and cooperation model that the parent firm not only maintained an optimistic attitude to the Chinese market, but also increased their shares from 5% to 50%. It was shown that the parent firm has paid more attention on Chinese area and they might be increasing the investment again in the future.

3.2No franchises

The policy for the past 30 years for Starbucks had been to operate under wholesale stores instead of franchises. They were very strict in following this global rule because they believed that this is essential to keep the brand image and quality of their products and services. Analysts said that in China, had Starbucks allowed individual franchises, they might be growing at a much faster speed. However, at the same time, the quality might be compromised. They believed that franchises are aimed more at making money rather than running a business. Apparently for Starbucks, the unity and quality is more important. For wholesale stores, the parent company has some control while for franchises, the shop managers has more power. This can create more conflicts of interest. Starbucks emphasizes the importance of quality service. For example, they are willing to expense more wastes just to provide the clients with the best coffee. If it were a franchise, the shop manager might be more interested in keeping a low cost to generate more profit at the expense of comprising the quality of the coffee. Another reason for Starbucks to not to incorporate franchises is that franchises may encounter more legal problems and more legal professionals needs to be involved to solve those kind of problems. So Starbucks strictly forbids franchises.

3.3Marketing and advertising

Starbucks also believes that their shops themselves are the best advertisements. Although Starbucks does not spend much on publicly advertising the brand, they are good at marketing. Instead of putting up advertisements and encounter the high fees associated with this process, Starbucks marketed itself through the positive feedbacks of its old customers. When the high product and service quality left a good impression on the old customers, they will tell their positive experience to the others. As a result, more and more customers are attracted.

3.4  Sales characteristics

Starbucks emphasis on how to treat each and every single customer well. They claim that they will only serve one customer at a time and brew one cup of coffee at a time. To maintain a long term relationship with the customers is one of the key reasons for success for Starbucks. In order to provide the best service to the clients, Starbucks trained its employees well with communication skills, coffee brewing skills, and etc. to meet the different demands for different customers. From the moment a client entered into the shop, the employees started to treat them with smiles. When I entered Starbucks, all of the employees can calmly tell me all about a certain kind of coffee. When I ask them more questions about coffee brewing, they can always give me satisfactory answers. Starbucks would also hold regular meetings for the employees to exchange ideas and techniques about coffee brewing. Those kind of meetings and forums not only enhanced the employees’ technical knowledge, but also strengthened the relationship between the employees and their boss.

Starbucks also emphasizes the environment with which the customers drink the coffee. Their stores were also famous for the unique light color, music, and design. Starbucks provided a flexible place for customers to relax and chat. For example, one can move most of the desks and tables around so that they can sit wherever they want. What is more, Starbucks is also keen to listen to more feedback from the clients. Using ways such as traditional message books or the modern electronic apps, they provided places for the customers to leave their comments. Then they will improve according to those advice because they aim at serving the customers well. By increasing the customer’s level of satisfaction, Starbucks attracted new clients and kept the old clients.

3.5  Store designs

Starbucks encourages each store to have unique designs on top of keeping the overall style similar. At the headquarters in the US, Starbucks has an office for designing and hired designers to decide how the shops would look like . They would take into account the local culture in which the cafe is based and find the best way for Starbucks to be involved into that area. For every new cafe opened, they would take pictures of the street that could reflect the local culture. Then those pictures are sent back to the headquarters in the US for those designers to find the best way to incorporate a new Starbucks into the local area. Starbucks believes that an appropriate environment also enhances the experience for a client when drinking coffee

3.6  High quality services

On top of high quality coffee that they sale, Starbucks is also famous for the high quality services that they bring. The employees would not only provide you with professional knowledge about coffee, welcome you with warm smiles, but also gives you a free environment to do whatever you want. They turned Starbucks into a place for social and communication instead of just drinking coffee. The high quality service is also reflected in how they differentiated their product to suit the local customers’ demands. For example, in China, the Chinese definitely has different tastes than the Americans. To provide the best service for the Chinese, Starbucks provided local Chinese food and Chinese tea to better suit the customers. In addition, they would also sell cups and mugs with specific cities to stimulate the incentives for customers to consume and feel more involved with the Starbucks culture.

4. SWOT analysis

4.1Strengths

a. Brand image

Starbucks has become the world-wide famous cafe. Whenever people think about a coffee shop, they think about Starbucks. With 36.7% market share in the US and stores in four continents and over 60 countries, Starbucks is definitely one of the top brands of coffee in the world. When it opens new stores in small and rural cities, its brand name is one of the biggest advantages because so many people have heard about the name before. Many people will even be attracted to enter just because they are Starbucks. Whenever people gather, meet, or wait for each other, Starbucks is definitely one of the first names that will come to their mind.

b. Aesthetic appeal

As we have said before, Starbucks provided us a place not only for drinking coffee, but also a place for communication and relaxation. The environment it provided for us to do whatever we want is also one of the reasons why we wanted to go there. Whenever we needed Wifi, we would often look for a Starbucks nearby so that we can connect to the web. When we are tired of walking, we can simply go to a nearby Starbucks, enjoy the quiet environment and the beautiful music. Also, there are so many shops that we can easily find a cafe in only a couple of blocks. I have often seen students doing their homework in Starbucks or business men doing their business using their laptops at Starbucks.

c. Employee welfare

This is also a strength for Starbucks because if the employees are satisfied, they will be more willing to serve for their firm, thereby bringing a better experience for the customers. With more revenue generated, the employees will be paid even more. Thus, there is a positive cycle. Starbucks, on top of the training that they provide as we have discussed more, also provides the employees stock options and retirement benefits. It was rated as the top 100 firms where workers want to work for by Fortune Magazine.

4.2 Weaknesses

a. High expansion rate caused service quality and brand image to drop

Although we said that Starbucks did not aim to expand so quickly and wants to preserve the product quality over high expansion rates, in some countries, due to the local economic environment, Starbucks still did expand too fast at a price of compromising the quality. For example, in China, a country where rivalry and expansion has become a central idea deeply ingrained in players of the food industry, it is hard to maintain Starbucks’ original motivations and incentives. To cater the fast economic development in China, Starbucks quickly expanded and opened too many shops. Sometimes two shops were opened too closely to each other, resulting in direct competition between Starbucks stores. Another problem that came with the fast expansion is that they needed much more employees to work at the shops. However, the training is not catching up with the speed of new employees. In addition, some stores started using machines instead of coffee brewers to make a cup of coffee. Although machines are faster and costs less, they are still not as good as human in terms of making coffee of the same taste and high quality. However, one of the primary reasons for many old clients is to experience the handmade coffee. No matter how good your machine-made coffee is, many old clients did not like this change. As customer loyalty wavered, the brand image is affected and the sales declined.

b. Decreased product quality

While it might be easier to ensure high product quality in the domestic market, it is often harder to keep a high product quality in some overseas areas due to the longer distance from the key management persons and the local culture for some countries. For example, in countries such as China, where product quality is often a problem for the food industry, can Starbucks be different from the other firms are still sell the food without chemicals and poisonous additives? The problem is that the answer is negative. In 2005, the Chinese food “moon cake” made by Starbucks China is found to have a level of bacteria higher than the benchmark. Even in the US, Starbucks was found to add cochineal as the red food dye and caused allergies. More than 6500 people advocated for Starbucks to stop using the red food dye because it would cause serious effects for those people allergic to asthma. Examples such as those two were found online. Although Starbucks had relatively few problems with product quality, only one problem could negatively affect the brand image of Starbucks heavily. If Starbucks continue to be found with problems of food security, this will be an important weakness for the firm.

4.3 Opportunities

a. Innovation into new kinds of products

On top of making high quality coffee, Starbucks also has the option to diversify its products and make other kinds of drinks just like how it introduced the Chinese tea into the Chinese markets. Especially nowadays Starbucks has not only become a place to drink coffee, but also a place for relaxation, people who does not drink coffee also enter the shop for its environment. For those kind of clients, Starbucks has some non-caffeine drinks. However, it can further develop by innovating and thinking about other kinds of drinks, especially in countries where coffee culture is not such so prevalent. As long as Starbucks keep in mind that they should keep the high quality of products they serve, and that other products does not overtake the position of coffee, they are try some new products. Also, since Starbucks sells mugs as a souvenir, I believe that they can also produce other kinds of things as souvenirs because quite a lot of people like to collect those.

b. Technological innovations

With the fast growing technology nowadays, Starbucks can also take advantage of the technological advance. For example, Starbucks also the mobile app that allowed the customers to d e points. I believe that the app can be expanded even more to include other features. For example, what if people can order with the app and have the coffee sent to their home and office? In countries of extreme weather, people are often lazy to get outside and purchase. For those people who simply wanted to drink coffee instead of wanting to enjoy the environment, Starbucks may consider the option of delivery.

4.4 Threats

a. Huge Investment pressure

The first threat is that Starbucks has to face the huge investment pressure to open new stores. For example, in China, since Starbucks enter into the Shanghai in May 2000, Starbucks nearly open a new store every month and encountered over 30 million RMB a year for those new stores. In order to attract customers and build the high-quality brand, almost every singer store of Starbucks is opened in the prosperous area of Shanghai so that they had to pay a large amount of money for rent every mouth. Therefore, rental pressure is one of the major part of investment pressure of Starbucks. What is more, the Chief Executive Howard Schultz announced that “Seattle-based coffee giant's plan to open 500 new stores in the Chinese country every year for the next five years.” and it will operate at least 3400 coffee shops in China by 2019. That represented a 70% increase from the number of stores in 2000. If this plan is really carried out, the fixed cost of each store’s decoration is around 300,000 USD. Under this calculation, the high investment caused could be a threat.

b. High retail price in overseas market

The price of a cup of Grande brewed coffee in US is 2.65 USD. However, when this amount is transferred into the local currency, Starbucks may be charging a few too high for the local consumers, especially in countries where the average spending on food is much lower than that in the US. In countries such as China, the high price made Starbucks less competitive to local stores, especially in cities where the overall income for the residents is not high. The problem is that Starbucks did not actually need that much cost to produce a cup of coffee in China, yet they are selling the coffee for such a high price so that the price can be comparable with the US retail price. By analyzing the 2013 annual report, I discovered that although Starbucks increased its costs overseas, they also reaped a much higher profit margin in some countries. For example, the cost in Asia increased by 22% while the revenue increased by 0.1%. The operating profit margin in Asia in 2013 was 32%. However, in EMEA, the operating profit margin was only 1.9%. This figure indicated that in some areas in the world, Starbucks is charging too high a price. Although they are profiting now, this is a threat because the price of an item cannot forever be significantly higher than the intrinsic value of the item because arbitrage opportunities exists this way. The current profit margin could be explained by the high economic growth rate in some Asia countries. However, if the trend does not persist for the long term, Starbucks cannot forever make arbitrage profits by price differentiation.

c. Limited target customers in overseas markets

Anther threat is the limited target customers that Starbucks have in some overseas market. Due to cultural differences, some cultures were not accustomed of coffee or did not drink coffee from the beginning. For example, in China, the ancient Chinese did not drink coffee and it was not until the recent twenty years did coffee became popular in the Chinese culture. China, as one of the largest markets in Asia, has seen the problem that only youngsters drink coffee and visit Starbucks. From 2010, Starbucks sold some Chinese teas in their local shops. However, that was not enough to attract those who originally do not drink coffee. In China, the sales mainly depend on the group of people who are young and more open to new tastes, or those who came back from the western world and is used to drinking coffee. Although this number is increasing, it is still only a small percentage of the entire Chinese population. The reason why I categorized this problem as a threat is that even though the problem is not significant right now, the taste of the young customers in China may be changing fast. The trend in China is that whenever there is a new product, the youngsters change frequently and is less likely than the elders to be loyal to one brand or one particular kind of drink or food. So to solve the problem of limited target customers in some overseas market, Starbucks may have to think more about this issue.

5. Porter’s five forces analysis

5.1 Threat of new entrants

I would say that the threat of new entrants is moderate because the industry is a monopolistic competition and the barriers to entry is not that high. The core technology, making coffee, is not something secret and can also be learned by other firms. However, with more and more competitors, the overall industry profits will be driven down to a certain level that some firms not operating well will have to exist the market. For the long term, the threat of new entrants for monopolistic competition is generally considered moderate.

5.2 Threat of substitutes

I would say that the threat of substitutes is high because there are many places to go instead of cafes and there are many kinds of drinks that can be consumed instead of coffees. Unless people are very loyal to coffee and really needs coffee to bring them energy, they can easily switch over to other caffeine drinks that gives them power such as Coke. For cultures such as China, people can also drink tea to bring themselves a lively day. For those who buys desserts from Starbucks, they can also buy it from shops such as Einstein Bagels if all they wanted was a small dessert since they are hungry. People can also go to McDonalds for light food and for a place to rest when they are tired on the streets. As a result, Starbucks has many different kind of substitutes.

5.3 Bargaining power of buyers

The bargaining power of buyer is low because there are many buyers in the world and nobody is strong enough to influence the entire industry. Since the sales of coffee depends more on quantity instead of unit price, each single buyer can only make a tiny amount of difference when purchasing a cup of coffee. I would say that the sensitivity to coffee price is moderate. Since the price of a cup of coffee is not high, even if some people are short in cash, or when the price of coffee increases a little bit, it does not influence the sales of the coffee that much.

5.4 Bargaining power of suppliers

The bargaining power of suppliers is also low because there are many places where Starbucks can receive their coffee beans. They can also switch the suppliers without encountering too much switching costs. Since Starbucks has a large size and can operate at a large scale, they will more likely to encounter increasing returns to scale.

5.5 Competitors

The amount of competition in the industry is high because there are many other international coffee brands. For those who are loyal to one specific brand, then this does not matter. However, there are many people who does not care which type of coffee that they drink. They care more about the geographical convenience or price difference. If they live close to a Pacific Coffee, then they may consume there every day and it does not matter how high the product quality of Starbucks is. Since Starbucks is one of the leaders in the industry, more other brands will set their development goals targeted at how to beat Starbucks. For example, in China Starbucks is considered very high end, so some local coffee shop may lower the price and target those customers at the middle to low end. So how to differentiate itself from the competitors is important for Starbucks.

6. Recommendations

6.1Control growth rate, grasp core competency

As we have analyzed above, Starbucks is starting to loose loyal clients due to the decreased product quality. So I suggest that Starbucks can control the pace with which they grow so that they can make sure their product quality before expanding blindly. The firm should provide sufficient training for the employees so that they can bring the customers a good experience. When innovating with their products, be sure to add the Starbucks culture into those new products and to incorporate the local culture so that the customers will be dragged closer to the firm. Since the high product quality is what customers liked about Starbucks, the firm should emphasize more on the quality to attract new customers and to win back old customers.

6.2Maintain the brand image and focus on customers

The main purpose of controlling the growth rate as I said in 6.1 is to maintain the high quality of the products. When the products were delivered in lower quality, customers lose their confidence with you and they will not purchase your product again. When they share their negative experience with the others, the others also start to lose confidence in you. The brand image that was build little by little through mouth will also be destroyed with those clients. When another problem comes with quality, Starbucks should not only have a stricter governance system, but also use appropriate public relation methods to maintain the brand image. The way how you communicate with the customers and how you left your image with the customers is one of the most important things for a firm to thrive for a long time.

6.3 Increase the influence of the firm in the society

Starbucks is actually doing very well in this aspect in that it emphasizes on environmental protection, recycling cups, saving the water, and performing community services. I just want to emphasize that this is a very important aspect of running the business because it will change how the customers think about you. More customers will be attracted to you by your contribution to the society. Also, it is a great way to market yourself if the firm holds some activities related to contributing back to the society, sponsors some activities that protects the environment and etc. With those actions, the firm can build a better public image in front of the clients.

6.4 Embrace competition and look for partnerships

Starbucks has outperformed its competitors by its unique operations and sales business models. The company culture is also important in its contributing to its success. However, I believe that in the future, merely high product quality is not enough under the more and more fierce competition and the competitive environment. Look at how Coca Cola had partnerships with McDonalds, Nestea, P%G, and Disney in the US and you will see that finding strategic partnerships is also important for a business to thrive. Starbucks can also consider strategic mergers and acquisitions, both vertical and horizontal mergers, to expand itself and become more competitive in the market. 

7. Forecasting the future

7.1 Past financial statement analysis

To better forecast the future, we must always first analyze the past. This snapshot was taking from Starbuck’s 2015 annual statement. It showed the key financial data for the past five years so that we can see what the growth trend is like over the past five years. We can see that the net revenue have been increasing steadily. However, the operating income fluctuated in 2013. Apart from that year, the operating income also exhibited a stable growth trend. Without looking further at the details, we can conclude that the operating income is also doing well with only one year where the data is peculiar. The earning per share, due to the fluctuation in operating income, also dropped to a low level in 2013. Luckily, the figure also came back and surpassed its 2010 level in the recent two years. The fact that the cash dividend has been stable growing constantly is a good signal to the investors because they will get the message that the firm is doing well financially and will be more willing to invest in this firm. The capital expenditures was also increasing steadily, a sign that the firm is actively growing its capacity. A rough look at the balance sheet also showed that the firm has been growing in size. The capital structure has been kept relatively constant. The equity to assets ratio have been about 50% throughout the past five years. However, the long term debt to asset ratio have increased significantly over the past five years, suggesting that the firm is leveraging up even more to take full advantage of any growth options. This might be a good signal and might also be a bad signal. It is good to see a firm actively expanding and using up the opportunities by leveraging up. However, high leverage also meant that the risk might be more significant. It is also known that the long term debt is more risky than short term debt. So the firm has seen an increase in risk over the past five years.

7.2  Analysts’ forecasts

From the Market Watch website, we can see that most of the analysts recommended a buy option for the Starbucks stock and only a few analysts recommended the hold option. None of the analysts said to sell the stock. This means that in the future, the financial performance for Starbucks is estimated to be positive. From the NASDAQ website , we see that the restaurant industry is forecasted to grow at 10.2% while Starbucks is estimated to be a 19.86% earnings growth. This means that Starbucks is performing well above the industry. The price to earnings ratio is consistent with the industry average, at 29.7, according to the NASDAQ website. The consensus earnings forecast is 1.58 for 2015 and 1.89 for 2016. The PEG ratio is 1.63, which means that the price to earnings ratio is greater than the growth rate. This is also consistent with the growth strategy that we analyzed earlier in this paper: it is better for Starbucks to follow a moderate growth pace and concentrate more on product quality.

8. Conclusion

In conclusion, we can see that Starbucks, as the leading firm in the restaurant industry, has a long history, unique sales and operating strategies, high governance standards, strong financial performance. Both the Porter’s Five Forces’ analysis and the SWOT analysis indicated that the firm is in a strong position in the industry. The future financial forecast also suggested that will thrive in the future.

I believe that with the strong brand image, the high market share, and the positive customer experience, even though that Starbucks has seen some negative comments from clients in these couple of years and some fluctuations in the financial statements, it will be able to recover because it is such a strong brand. In some places Starbucks has even become another word for the word “coffee”. I wish a prospective future for this company.

Reference

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