Starbucks’ Mission & Strategic Choices
Starbucks’ Mission and Strategic Choices: Are They in Alignment? Executive Summary This paper examines strategic management, which encompasses business decisions and actions that: define the organization’s mission and objectives, determine the most effective utilization of organizational resources, select best courses of action to meet its mission, and seek to assure the effectiveness of the organization within the environment. This case study evaluates the strategic management process, and applies those concepts to a practical case study of Starbuck’s mission statement.
This case study is presented in the format of a formal business report – prepared by a consultant and presented to the Starbucks’ Board of Directors and CEO – that provides an analysis of Starbucks’ mission and strategic choices, and a summary of the alignment of those strategies to its mission.
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This report is based on a critical review of the Starbuck mission statement, goals, and objectives, which is then compared against the strategic choices that Starbucks has made (e. g. product differentiation, research and development, operations) to determine how well Starbuck’s strategic choices are aligned to the company’s mission and vision. Finally, this study answers the question: Will the company continue its past success? Randy Tanner, 2009 Starbucks’ Mission and Strategic Choices: Are They in Alignment? Cover Sheet: Starbucks Corp. 2401 Utah Avenue South Seattle, WA 98134 Phone: 206-447-1575 Fax: 206-682-7570 Web Site: http://www. starbucks. com Business Plan presented to:Howard Schultz, Chairman of the Board, President, CEO Starbucks Board of Directors
Prepared by:Randy S. Tanner Statement of Purpose:Analysis of Starbucks’ Mission and Strategic Choices: Are They in Alignment? Table of Contents Executive Summary4 Background4 Company Description4 Starbucks’ Mission, Vision, Goals and Objectives. 4 Strategies. 5 Management Team. 6 Business Model. 6 Infrastructure7 Offering. 7 Revenue Model. 7 Pricing. 8 Customers. 8 Competitors. 8 Stakeholders. 8 Marketing Strategy. 9 Financials. 9 Analysis10 Company Analysis. 10 Current Marketing Mix Strategies (Product, Price, People, and Promotion). 10 Current Target Markets10
Market Analysis. 10 Competition & SWOT Analysis. 11 Competitive advantage. 12 Financial Analysis. 12 Conclusion13 Are Starbucks’ mission and strategic choices in alignment? 13 Will the company continue its past success? 13 Executive Summary Are Starbucks’ mission and strategic choices in alignment? Yes. The strategies of innovation, product differentiation, and customer experience are directly aligned with Starbucks published mission “to establish Starbucks as the premier purveyor of the finest coffee in the world,” while “inspiring and nurturing” the spirit of their customers.
Starbucks continues to apply strategies to expand its product offering in both breadth and depth. Coupled with this strategy is the expansion of alternate distribution channels to multiply the potential in increased revenues. Each offering in the product portfolio reinforces the brand name and quality experience described in the company’s vision statement. The recent focus on increasing profits in existing stores is not a shift of business strategy, but more of a symptom of business maturity – less waste equals more profit.
The corporation has tempered its original goal of market dominance by saturation – slowing its growth in new stores – to market dominance with more efficient and more profitable stores with its strategy of disciplined expansion in key markets. The strategy of using the Seattle’s Best segment, vice Starbucks to expand the base of corporate customers also supports Starbucks’s prime mission. This elevation of Seattle’s Best does not create a corporate-sponsored competitor to the nearby Starbucks stores, but does serve as an alternate distribution channel for the company’s expanded product line.
Therefore, this strategy supports the overall brand quality of Starbucks as the “premier coffee,” yet captures additional customers that do not seek the branded Starbuck experience and would likely choose one the niche competitors. This strategy can cater to a slightly different clientele – in both coffee stores and supermarkets – and increase overall corporate revenues. Will the company continue its past success? Yes. A continued emphasis on customer satisfaction, coupled with effective strategies that develop new product lines, will stimulate revenue growth and stabilize share prices.
The current vision and path summarized by Starbucks president and CEO, Howard Schultz, is a commitment to “continually improving our customer experience as the roadmap to renewed growth and increasing profitability,” with emphasis on continued application of previously successful strategies, “we will continue to innovate and differentiate, two perennial hallmarks of the Starbucks brand. ” (Starbucks Financial Releases, 2009) Background
Strategic management is “a company-wide process that includes a long-term plan of action that assists in achieving an organization’s objectives and fulfills company vision,” (course material) and is comprised of four major elements: situation analysis, strategy formulation, strategy implementation, and strategy evaluation. (Bushman, (2007) This Strategic Management process includes the following steps: (Luca, 2009) 1. Developing a Vision/Mission/Goals and Objectives 2. Analyzing the environment company (internal and external) 3.
Identifying internal Strengths and Weaknesses and external Threats and Opportunities (SWOT) 4. Articulating strategic choices at the business, functional, and corporate levels 5. Selecting a strategy or strategies, based on in-depth internal and external analyses, to accomplish vision and mission goals. These strategies may exist at several levels: business, functional, corporate, and global. Company Description According to the company’s Factsheet (2009), Starbucks was founded in 1971 in Seattle’s Pike Place Market. The original name of “Starbucks Coffee, Tea and Spices” was later changed to “Starbucks Coffee Company. As quoted from Google Finance (Starbucks Corporation, 2009), Starbucks, together with its subsidiaries, “purchases and roasts whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, complementary food items, a selection of premium teas, and coffee-related accessories and equipment, through Company-operated retail stores. Starbucks also sells coffee and tea products and licenses its trademark through other channels. Starbucks produces and sells a range of ready-to-drink beverages.
The business segments of the Company are United States, International, and Global Consumer Products Group (CPG). The CPG segment includes packaged coffee and tea sold globally through channels, such as grocery stores and operates through joint ventures and licensing arrangements with consumer products business partners. ” Starbucks’ Mission, Vision, Goals and Objectives. Mission statements are “fundamental to the survival and growth of any business,” (Analoui and Karami, 2002) and “set the direction and goal for the long term, reflecting the strategic intent.(course material) According to Germain and Cooper (1990), an appropriate mission statement serves to “promote a sense of shared expectations amongst employees and communicate a public image of the firm to important stakeholders and groups in the company’s task environment. ” Starbucks’ mission statement as stated in the corporate Factsheet (2009) is “To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow. The company’s stated Vision, Goals, and Objectives may be found listed as “Our Starbucks Mission” in the corporate website (The Company, 2009). This vision is expressed as “To inspire and nurture the human spirit— one person, one cup, and one neighborhood at a time. ” Some of the company’s objectives – referred to as “guiding principles” – included in that strategic vision focus on: 1. Quality of the coffee 2. Robust partnerships 3. Human connection to customers 4. Unique atmosphere of the retail stores that encourages social interaction 5. Being accepted as neighbor in the community 6.
Obligation to shareholders (long-term success and profitability) Strategies. The original focus since the company’s beginning has been on product differentiation, in both the product and the store setting. This strategy emphasizes a premium product served in a unique atmosphere. Some claimed tactics employed to execute these strategies are to: (Factsheet, 2009) • Provide a great work environment and treat each other with respect and dignity. • Embrace diversity as an essential component in the way we do business. • Apply the highest standards of excellence to the purchasing, roasting, and fresh delivery of our coffee. Develop enthusiastically satisfied customers all of the time. • Contribute positively to our communities and our environment. • Recognize that profitability is essential to our future success Historical Strategies for business growth noted in the 2006 shareholder’s meeting included continued expansion of retail stores, and expansion of the company’s portfolio of unique and innovative products “to appeal to a broad consumer base. ” (Business Wire, 2006) These products included: • Premium and proprietary food offerings as a component of the Starbucks Experience. Introduction of warm breakfast items in Company-operated stores by 2008. • Joint venture with Apple to launch a Starbucks Entertainment Area on iTunes. • Introduction of a heated-on-demand vending initiative, • Expansion of its Kraft relationship to distribute Starbucks coffee into supermarkets. Recent changes to this original approach – which were in response to the recent economic downturn and drop in share prices – are aimed at retaining customers, rather than gaining new ones. According to Howard Schultz, the company’s CEO, “The issue at hand… is the cost of losing your core customer. (Adamy & Wingfield, 2009) These changes in business strategy shift the focus from market saturation with additional stores to: (Starbucks Newsroom, 2009) 1. Increasing profits in existing stores, 2. Expanding the product base, and 3. “Disciplined global store expansion in key markets. ” While continuing with the strategy of product expansion (to even include some non-food products), Starbucks has tempered its desire for continually opening new stores. This “disciplined” approach includes more niche targeting in key markets and even opening, or converting to, a Seattle’s Best vice Starbucks.
Some of the new tactics announced at the 2009 Shareholders Meeting to implement this strategy include: • A $500 million structural expense reduction to align the company’s cost structure to its current business strategy • Focused efforts to improve operational efficiencies with technology investments, and better training for store managers • Emphasizing the concepts of value and quality to the customer with selective price incentives • Launching VIA™ Ready Brew instant coffee to tap the $17 billion instant coffee market • Expanding alternate foodservice channels
Management Team. Corporate organization and key management team members include: (Reuters, 2009) Howard SchultzChairman of the Board, President, CEO Troy AlsteadChief Financial Officer, Chief Administrative Officer Arthur I. RubinfeldPresident – Global Development Martin P. ColesPresident – Starbucks Coffee International Clifford BurrowsPresident – Starbucks Coffee US Paula E. BoggsExec VP, General Counsel, Secretary Michelle GassExec VP – Marketing and Category Olden C. LeeInterim Exec VP – Partner Resources, Director Dorothy J.
KimExec VP – Global Strategy, Office of the CEO Peter D. GibbonsExec VP – Global Supply Chain Operations Culver, JohnExec VP, President – Global Consumer Products, Foodservice & Seattle’s Best Coffee Business Model. According to Osterwalder, Pigneur, & Tucci (2005), a company’s business model includes: infrastructure, offering, customers, and revenue model. 1. Infrastructure – the core capabilities and competencies, partnership network, or business alliances, and value configuration (what makes it mutually beneficial for a business and its customers). . Offering – the value of products and services offered for a specific customer segment, and how it differentiates itself from its competitors. 3. Customers – includes (1) the target audience for a business’ products and services, (2) the distribution channel used to reach the customers (includes marketing and distribution strategy), and customer relationship management. 4. Revenue model – the cost structure and revenue flows that define the company’s income. Infrastructure.
Starbucks infrastructure (sales & distribution model) began as a basic shopkeeper model; brewing and serving fresh, premium quality coffee in a relaxed “neighborhood” atmosphere. This model chooses a location frequented by targeted customers, employs low-wage workers, and establishes repeat business based on customer satisfaction and ease of access. Recent strategic management emphasis is trending toward, or adapting part of the Loyalty or Service Quality model to reinforce the perceived quality of the product. Part of this model is based on the belief that it is cheaper to keep customers than gain new ones.
Offering. The Starbucks brand portfolio is marketed as premium and, therefore, is luxury goods, relying on “consumer discretionary spending to drive sales. ” (Hattery, 2009) This portfolio includes Starbucks Entertainment, Starbucks Hear Music, Tazo, Ethos water, Seattle’s Best Coffee, and Torrefazione Italia Coffee – offers a variety of products and services through its retail stores and other channels, including: • 30 blends of Coffee • Handcrafted Beverages – fresh-brewed coffee, hot and iced espresso beverages, coffee and non-coffee blended beverages, and Tazo® teas. Merchandise – home espresso machines, coffee brewers and grinders, premium chocolates, coffee mugs and accessories, and gift items. • Fresh Food – baked pastries, sandwiches, and salads. • Starbucks Entertainment – selection of music, books, and film from both emerging and established artists. • Global Consumer Products – bottled Frappuccino® beverages, Discoveries® chilled cup coffee, DoubleShot® espresso drinks, Starbucks® Iced Coffee, whole bean coffee and Tazo® teas, Starbucks™ Coffee Liqueurs, and a line of premium ice creams. • Starbucks Card – a reloadable pre-paid debit card.
Revenue Model. Starbucks’ revenue model includes its cost structure and revenue flows. Starbucks operating costs are directly influenced by fluctuations in the commodity prices (milk and coffee beans) which have risen sharply in the past. Starbucks purchases teas and primarily Arabica coffee beans directly from international markets in Costa Rica, Africa, Asian Pacific, and China. The wholesale price of coffee beans is unstable and often susceptible to dramatic price changes from a variety of weather and political events that may, or may not, affect global production.
These reactionary prices can remain elevated for several years. Coffee prices in 2008, for example, were 20% higher on average than 2007, resulting in Starbucks paying an average price of $1. 42 per pound of green (unroasted) coffee. The price of Milk futures also rose dramatically from $13 to $18 per hundredweight in March, 2007, falling only recently to $17 in September, 2009. Starbucks’ revenue flow from its company operated coffeehouses relies on discretionary consumer spending, and can be affected by negative economic conditions. In fiscal 2008, Starbucks generated $10. billion in revenue through the sale of whole bean coffee, food, equipment, and beverages. The distribution channels included both its retail stores and specialty operations. [pic] Figure 1 – Revenue Categories Company operated retail stores (7,238 stores in North America and 1,979 international) generated 84 percent of the total revenue. (Hattery, 2009) The remaining 16 percent was generated through the specialty operations segment, which is chartered to “develop the company’s brand through third parties outside the traditional coffeehouse. This segment channels, and percentage of specialty operations revenue generated, include: 1. Licensed Stores (48 percent) located in airports and supermarkets that generate licensing fees, royalties, and retail revenue from coffee, tea, and CDs. 2. Foodservices Operations (25 percent) sells Starbucks coffee to restaurants, offices, hotels, and Barnes & Noble Cafes under different licensing contracts. 3. Packaged Tea and Coffee (21 percent) sold at various food stores. 4. Branded Products (4 percent) like ready-to-drink beverages and ice creams sold through partnerships with Pepsi and Dreyer’s.
Pricing. Starbucks has maintained a premium pricing strategy for its branded premium quality coffee beans and unique customer experience. Customers. Starbucks serves approximately 50 million customers a week in its stores. The target market is defined as “young (25-to-45 years old) professional men and women, in higher income brackets with stressful lives (at work, home, or both). Most members of this target market live in the suburbs and commute to work in urban areas. ” (Holmes, Bennett, Carlisle, Dawson, 2002) Competitors. Although Starbucks maintains a “dominant position in the specialty coffeehouse market and has no single clear rival in the sector,” (Hattery, 2009) competitors include other specialty coffee shops, doughnut shops, and restaurants. The closest specialty coffeehouse competitor is Caribou Coffee, with only 415 stores, with the major competition being “dispersed among the thousands of independent or small-chain coffee shops (i. e. , Diedrich Coffee, Inc, Coffee Heaven Intl. , Autogrill S. p. A. Stumptown Coffee Roasters, Intelligentsia Coffee & Tea, Inc), and McDonalds Corp. Stakeholders. Starbucks’ organizational stakeholders include both individuals and groups “who have an interest (give-and-take) relationship with the firm. ” (course material) These internal and external stakeholders of Starbucks are identified as: shareholders, employees (including board members, executives, managers, supervisors, and baristas), customers, suppliers, local communities, and global alliance partners Marketing Strategy.
As described in VoteForUs (n. d. ), since the company’s inception in 1971, its marketing strategy has “ignored the traditional advertizing avenues of billboards and commercials and focused on seven fundamentals to differentiate Starbucks from other cafes. ” These fundamental areas of marketing focus are: (VoteForUs, n. d. ) 1. Perfect Cup of Coffee – an emphasis on product quality (rich, delicious taste and aroma) to support the premium pricing structure. 2. Third Place – creating the “third place” for everyone to go to between home and work.
This is another differentiation technique, aimed to create a unique and relaxing experience or atmosphere with which Starbucks could be branded. 3. Customer Satisfaction – ensure that customers feel the uniqueness of enjoying their Starbucks coffee experience. 4. Creating a Starbucks Community – this marketing strategy has even expanded to create a community around their brand. On their website, individuals are encouraged to express their experiences with Starbucks history, and the company strives to “personally” join in the discussions. 5.
Smart Partnerships – create strategic partnerships that expand business opportunities and increase sales. 6. Innovation – a strategy to continually create new products or services that support their customer base or add new customer segments. (different coffee flavors, more food on their menu, and one of the first to offer internet capability in their stores) 7. Brand Marketing – The Starbucks marketing strategy has always focused on “word-of-mouth” advertising and viral marketing, letting the high quality of their products and services speak for themselves.
Financials. Evaluating the company’s financial statements since the economic low point of May 2008 – with its first quarterly decline in profit, and 38 percent stock plunge – Starbuck’s has managed to maintain a healthy balance sheet. Consolidated company revenues for Q3 2009 were $2. 4 billion, compared to $2. 6 billion in 2008, reflecting a five percent decline in store sales. Quarterly financial sheets verify the reduction in operating income and corresponding slight increase in net profits.
With the cost realignment scheduled to be completed in 2009, operating costs are expected to drop further. Total revenues for Q2 2009 show a positive rebound with a sustained upward trend over the last two quarters. Share prices – which bottomed around $8. 00 during Dec08 through Mar09 – have stabilized around $19. 00 for the last quarter. In response to the implemented cost reduction strategies, Standard & Poor’s raised the company’s short-term debt ratings (from “A-3” to “A-2) and “revised its outlook to ’stable’ from negative,” (Ogg, 2009), reaffirming the “BBB” corporate credit rating.
According to Ogg (2009), “S&P believes that the company’s performance will continue to stabilize and that the credit metrics will continue to improve or remain at the current levels. ” Analysis Alignment in the framework of strategic management refers to the mutual agreement and enforcement of the company’s vision, mission, and goals with its business strategies. These strategies are employed to achieve and maintain a competitive advantage in the market segment, and ensure long-term profitability for the company. Company Analysis.
This company analysis focuses on three factors or issues involved in maintaining a competitive advantage. These factors and issues are: (1) current target markets, (2) current marketing mix strategies, and (3) the strengths and weaknesses of the Company. The company’s marketing mix strategies are discussed in relation to the Five P’s of Marketing. The elements of Five P’s of Marketing include product, price, place, people and promotion. (Nimetz, 2009) These factors are explored in comparison to Starbucks’ published mission, vision statements, and guiding principles. To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow. • To inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time. ” Current Marketing Mix Strategies (Product, Price, People, and Promotion). Starbucks built its coffee stores on the principle product of Arabica coffee beans. This product was marketed as a premium quality item that “” The pricing scheme followed the premium quality scheme, offering the customer more than a cup of coffee.
Starbucks stores became the “third place” to go to and enjoy a unique atmosphere. One new strategy that CEO Howard Schultz brought with him was the emphasis on the role of sales clerks, or Barristers who brewed and served the coffee. Specialized training for employees reinforces their role in the customer’s perceived value of the product – the unique Starbucks experience. The promotion tactics employed by Starbucks broke with traditional concepts and avoided advertising, relying on word-of-mouth or viral advertising techniques where satisfied customers willingly share with others, and promote the Starbucks experience.
This viral advertising has proven quite effective. Current Target Markets. For most Starbucks most consumers, coffee is not just coffee, but more of a ritual – a deserved reward. However, although the targeted market of professionals contains a significant percentage of higher-income professionals, the recent decrease in sales (and corresponding drop in shares) implies that they too are affected by the economic downturn and willing to reduce their “rewards. ” Market Analysis. A market analysis reviews the specific market segment being targeted, and examines the demographic and social data required to “know your customer. This required information concerning the targeted customer includes: • Who they are • Where they are • How to reach them • Identifying their needs (what justifies premium price) • Size of market • Percentage of market captured • Market growth potential Starbucks market for its coffee stores is targeted at 25- to 45-year-old professionals looking for solitude, or social interaction, without alcohol. This higher-income crowd of young, college-educated represents a group which tends toward higher luxury-consumption levels.
The failure to successfully add drive-through service to its stores clearly differentiates its clientele from McDonalds or Java Hut customers whose needs or to grab a quick caffeine jolt on the way to or from work. According to Euromonitor International Plc, Starbucks has captured 52 percent of the global specialty coffee market. According to Mintel (global consumer research firm in Chicago) Starbucks controls 43 – 73% of the U. S. market share in coffeehouse sales in 2005, with its closest rivals being Caribou Coffee, and Peet’s Coffee and Tea.
Competition & SWOT Analysis. The SWOT analysis identifies and evaluates a company’s internal factors (strengths and weaknesses) and external factors (opportunities, and threats). This analysis helps to focus on key issues to consider in strategic planning. The following details are an updated paraphrase of the SWOT analysis from Marketing Teacher (2007): Strengths. • Starbucks Corporation is a very profitable organization, earning in excess of $459 million in 2008. The company generated revenue of more than $10. billion in 2008, exceeding revenue for 2007. • It is a global coffee brand built upon a reputation for fine products and services with approximately 9000 cafes around the globe. • Starbucks is know as a respected employer that values its workforce, and was one of the Fortune Top 100 Companies to Work For in 2005. • The organization displays strong ethical values and an ethical mission statement that emphasizes its commitment to environmental leadership. Weaknesses. • Starbucks has a reputation for new product development and creativity.
However, they remain vulnerable to the possibility that their innovation may falter over time. • The organization has a strong presence in the U. S. with more than three quarters of their cafes located in the home market. An increased percentage of international cafes would help to spread business risk. • The organization is dependant on a main competitive advantage, the retail of coffee. This could make them slow to diversify into other sectors should the need arise. Opportunities. • New products and services can be retailed in their cafes, such as Fair Trade products. The company has the opportunity to expand its global operations with the emerging markets for coffee in India and the Pacific Rim nations. • Additional co-branding with other manufacturers of food and drink can be pursued. • Capitalizing on the Seattle’s Best brand in both the retail and franchise markets could diversify revenue streams and spread business risk. • With recent economic conditions, and dwindling disposable income, Starbucks could pursue a larger market share of the home-brewed coffee market with increased advertising. Pursuing additional partnerships with manufacturers of other goods and services has potential to decrease Starbuck’s dependency on it single competitive advantage in retail coffee. Threats. • Starbucks has been branded and marketed as a luxury item, relying on the disposable income of its targeted customers. Regional, or national economic instability can be reflected quickly in revenue loss. • Future growth of the coffee market is uncertain. A change in the current fad of coffee shops would significantly impact Starbuck’s major source of revenue. • Starbucks is exposed to unpredictable cost increases in wholesale coffee and dairy products. Recent growth in the coffee house market has attracted many competitors, including copy cat brands and national restaurants that pose potential threats to Starbuck’s competitive advantage. Competitive advantage. Starbucks established an early dominance in the market segment of coffee houses, and sustains its competitive advantage through differentiation by capitalizing on a unique experience that offers ambiance and unusual product variety. The primary strategies employed to establish market dominance were branding, creativity, and saturation by store expansion. 1.
The branding strategies include quality product, personal service, a sense of community, and environmental responsibility. This strategy is strengthened by market and demographic analyses to slightly customize each store to the local city/community personality. 2. The creativity strategies emphasize “constantly looking for new ideas, new products, as well as new experiences for guests. ” (Thompson & Gamble, 1999) Successful products are retained while weaker products are eliminated in a continuing cycle of process improvement. 3. Although growth in the store expansion strategy has peaked, new stores are still being added.
This strategy has been modified from saturation by area concentration, to a more disciplined approach, that identifies key markets, based on market analysis that emphasizes individual store profitability. (Adamy & Wingfield, 2009) Financial Analysis. Starbucks has a solid financial status with multiple revenue streams from multiple coffee related products. A look at Starbucks Profit and Loss and Cash Flow tables (shown in Table 1) reveals a slight dip in gross revenue, but a positive trend for increased net income. This is probably a result of the recent cost restructuring and emphasis on store profitability.
Future revenue streams from coffee house sales are expected to increase from a combination of stable sales and higher efficiency. Revenue streams from alternate distribution channels show a slight, but steady increase, further bolstering Starbuck’s solid financial foundation. |In Millions of USD |Jun 2009 |Mar 20099 |Dec 2008 |Sep 2008 | Jun 2008 | |Revenue |2,403. 90 |2,333. 30 |2,615. 20 |2,515. 40 |2,574. 00 | |Total Revenue |2,403. 0 |2,333. 30 |2,615. 20 |2,515. 40 |2,574. 00 | |Gross Profit |539. 10 |470. 20 |481. 80 |393. 50 |452. 60 | Total Operating Expense |2,199. 90 |2,292. 40 |2,497. 50 |2,501. 20 |2,595. 60 | |Operating Income |204. 00 |40. 90 |117. 70 |14. 20 |-21. 60 | |Income Before Tax |217. 30 |34. 90 |98. 30 |-1. 20 |-33. 20 | |Net Income |151. 50 |25. 00 |64. 30 |5. 40 |-6. 70 | |Table 1 – Quarterly Financials Conclusion Are Starbucks’ mission and strategic choices in alignment? Yes.
The strategies of innovation, product differentiation, and customer experience are directly aligned with Starbucks mission “to establish Starbucks as the premier purveyor of the finest coffee in the world,” while “inspiring and nurturing” the spirit of their customers. Starbucks continues to expand its product offering in both breadth and depth. Coupled with this strategy is the expansion of alternate distribution channels that will multiply the potential in increased revenues. Each offering in the product portfolio reinforces the brand name and quality experience described in the company’s vision statement.
The recent focus on increasing profits in existing stores is not a shift of business strategy, but more of a symptom of business maturity. Less waste equals more profit. The corporation has shifted its goal from market saturation – slowing its growth in new stores – to market dominance with more efficient and more profitable stores with its strategy of disciplined expansion in key markets. Using the Seattle’s Best segment, vice Starbucks to expand the base of customers for the greater corporate good requires close examination.
As a corporate-sponsored competitor to the nearby Starbucks stores, this strategy seems in conflict with the prime mission. However, as an alternate distribution channel for an expanded product line, this strategy supports the overall brand quality of Starbucks as the “premier coffee,” yet can capture some additional customers that do not seek the branded Starbuck experience and would likely choose one the niche competitors. Seattle’s Best can cater to a slightly different clientele – in both coffee stores and supermarkets – with a different set of customer needs, while increasing overall corporate revenues.
Will the company continue its past success? Yes. A continued emphasis on customer satisfaction, coupled with effective strategies that develop new product lines, will stimulate revenue growth and stabilize share prices. The current vision and path summarized by Starbucks president and CEO, Howard Schultz, is a commitment to “continually improving our customer experience as the roadmap to renewed growth and increasing profitability,” with emphasis on continued application of previously successful strategies, “we will continue to innovate and differentiate, two perennial hallmarks of the Starbucks brand. (Starbucks Financial Releases, 2009) References Adamy, J. & Wingfield, N. (2009). Starbucks brews new strategies to fight slump. Wall Street Journal (Europe), p. 4. Retrieved July 11, 2009, from ProQuest Newsstand. (Document ID: 1662578621). Analoui, F. and Karami, A. (2002). CEOs and development of the meaningful mission statement. Corporate Governance, 2(3), 13-20. Retrieved August 31, 2009, from ABI/INFORM Global database. (Document ID: 181714601). Bushman, M. (2007). The major elements of the strategic management process. Associated Content website.
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