Starbucks Analysis

Introduction

This report was written by three Arnhem Business School students for the purpose of providing a full analysis of the Starbucks Coffee Corporation.

Although Starbucks is operating internationally, this report is mostly based on the United States, as this is Starbucks domestic market and until today its main operating market.

First, the internal analysis gives an overview about Starbucks as a company.

Second, the external analysis is used for analyzing the market Starbucks is operating in.

Third, the strategic options possible for Starbucks are analyzed.

Last, an explanation will be given on how Starbucks should implement the best strategic option available.

Introduction 1

1 Executive Summary 4

INTERNAL ANALYSIS 5

2 The Company and its strategy 5

2.1 History: 6

2.2 Mission Statement 7

2.3 Global Strategy 8

2.3.1 Customer service excellence 8

2.3.2 Product quality 8

2.3.3 Accessibility 8

2.3.4 Innovative Business Strategy 9

2.3.5 Brand recognition 9

3 The Marketing Strategy 10

3.1 Product 10

3.2. Price 11

3.3 Place 11

3.4 Promotion 12

Helping the environment and community is proven to be a powerful marketing tool for Starbucks. Firstly, Starbucks helps the community and the environment, and at the same time creates the image of being a socially responsible company that contributes to better living standards. Customers are aware of the fact that when they buy something from the company, they also do something good for the community. 12

In addition to that Starbucks uses a non-typical approach to promote its products. Starbucks' products are neither advertised in TV nor radio commercials. Instead, Starbucks intents to build up a reputation and a strong brand image by using community programs and relying on word-to-mouth promotion. 12

4 Corporate Culture and Management Style 13

4.1 Executives 13

4.2 Board of directors 13

4.3 Employees 13

5 Financial Analysis 14

5.1 The first steps 15

5.2 The 1987-1992 period (private company) 15

5.3 The expansion (public company) 16

6 Conclusions Internal Analysis: 18

6.1 Strengths 18

6.2 Weaknesses 19

EXTERNAL ANALYSIS 20

7. Market Analysis 20

7.1 Demography 20

7.2 Economy 22

7.3 Technology: 23

7.4 Social and cultural: 24

7.5 Environmental: 25

7.6 Political: 25

8 Target groups 26

8.1 Young adults 26

8.2 Business people 26

8.3 Seniors 27

9 Competitor Analysis 28

9.1 Strategic group map 28

9.2 Caribou Coffee Company, Inc. 29

9.3 Diedrich Coffee, Inc. 29

9.4 Panera Bread Company (PNRA) 29

9.5 Other competitors US market 30

9.6 Competition in Europe and Asia 30

10 Porter's 5 forces 31

10.1 Threat of new entrants 31

10.2 Bargaining Power of Customers 32

10.3 Bargaining Power of Suppliers 32

10.4 Threat of Substitute Products or Services 33

10.5 The Intensity of rivalry among competitors 33

11 Conclusion External Analysis 34

11.1 Opportunities 34

11.2 Threats 35

* Volatile coffee markets 35

* Market/lifestyle fluctuations 35

* Fierce Competition 35

12.1 TOWS analysis: 37

12.2 Strategic options 37

13 Bibliography 39

Appendix 3 41

Further explanation Strategic Options: 41

Opportunities combined with Weaknesses: 41

Threats combined with Strengths: 41

Threats combined with Opportunities: 42

1 Executive Summary

Starbucks has become a well-known company for selling the highest quality coffee beans and best tasting coffee products. It was one of the first companies to realize that the real money to be made was in beverage retailing, not just coffee beans. Starbucks created a coffee for the coffee connoisseurs and got to great lengths to acquire only the highest quality of coffee beans. Store Managers of Starbucks coffees are extensively trained for one year. Starbucks has the distinction of being the public's educator on Espresso. They have also recently started to expand to packaged and prepared tea in response to the growing demand for this product. There are no other national coffee bar competitors in the same scale as Starbucks.

According to a 2004 report published by The World Bank, the term "specialty" coffee originated in the U.S.