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Written by Angelin Baban

University of Surrey

Surrey Business School

BSc. International Business Management

URN:6326361

Business Report on the

Starbucks

Company and its internsh

ip suitabilit

y

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Executive Summary

The following report is aimed to analyze the suitability of Finance and Accounting internship provided by the Starbucks Company.Viability of this position will be determined by analysing the Starbucks Company as an organization and examing the benefits that occur to an undergraduate student.

The first segment of this report highlights the key features of the company.In short, Starbucks started just as a coffee retail company in Seattle 44 years ago, but suffered a rapid growth due to their strict marketing strategy.A brief history of the organisation together with the meaning of Starbucks brand and key company facts constitute the first section of this report.

The second section outlines the social behaviour of the company and an in-depth analysis regarding customers, competitors and supply chain is given.For the research and examination of the company’s main points has been used the theory of Porter Five Forces which deals both with differents strenghts and threats this company has.

The last two sections are dedicated to the Starbucks suitability for internship.A SWOT analysis is presented related to both company financial aspects and benefits for an undergraduate student to apply for an internship.This segment deals with every aspect of concern regarding the strenghts and opportunities, but presents the weaknesses and threats that may occur as well.

Based on the SWOT analysis, this report reaches the conclusion that Starbucks company is aware of all their issues, but it is demonstrated that is a suitable internship provider having a stable structure regarding the every core functions of their activity.

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Table of Contest

1. Evaluation of the organisation’s business activity..............................51.1 The Meaning of the Starbucks brand............................................51.2Company History............................................................................61.3Key Company Facts........................................................................7

1.4Operating Structure.......................................................................8

2 Operational Environment........................................................................92.1 Customer Profile...........................................................................92.2 Competition................................................................................10

2.2.1 Industry Competition.....................................................112.2.2 Threats of New Entrants................................................112.2.3 Threat of Substitute Products........................................122.2.4 Buyer’s Bargaining Power..............................................122.2.5 Bargaining Power of Suppliers.......................................12

3. 3.Strategic Analysis and Suitability for Internship..............................13

3.1Work Field...............................................................................13

3.2 SWOT Analysis – Strenghts....................................................13

3.3.SWOT Analysis –Weaknesses............................................13

3.4 SWOT Analysis – Opportunities.........................................14

3.5 SWOT Analysis – Threats...................................................14

4.Conclusion................................................................................................15

5.References............................................................................................... 16

6.Appendices...............................................................................................17

Final word count: 2657

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Table of Figures

Figure 1 –Starbucks Worldwide..........................................................................6

Figure 2 – Starbucks Corp:Total Revenues vs Operating Income.......................7

Figure 3 – Global Starbucks Outlets as at 29 September 2013..........................9Figure 4 – Porter Five Forces.............................................................................11

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1.Evaluation of the organisation’s business activity1.1 The Meaning of the Starbucks brand

Kotler et al. (2005) defines the term ”brand” as a combination of sign, name, design or symbol used to identify services or products and differentiate them from the competitors.It is safe to say that nowadays, companies are focusing more on their customers’ emotional involvement, as “the brand clearly reflects the company’s culture and the benefits it wants to convey” (Perera et al. 2009).Brand adds enormous value to company’s image on the market and represents an intangible asset for it.

Starbucks Corporation is knows as the biggest coffee company in the world, as it operates in 62 countries, having more than 60 million customers a week (Schultz, 2011). One of the things that makes Starbucks Company special is the fact that its employees are called partners, outlining a strong foundation on the open and direct relationship between them and the company. Figures tell that over 220 000 of the them represent the company in over 21 000 stores over the world.

From the beginning, Starbucks wanted to be so much more than just a company selling coffee.One of the Starbucks’ aim is to be referred as a ”third place” creating a balance between a social and personal environment and a person’s job and house. “Its brand has elements of uniqueness and differentiation that are essential to create positive associations in the minds of the consumers” (Perera et al., 2009, p. 181).

Furthermore, Starbucks was the first company which created a precedent in U.S.A by offering health-care coverage and equity in the form of stock actions to all staff members including even the part-time employees.Consequently, the company reached 16th place in Fortune magazine’s One Hundred Best Companies to Work For. Taking into consideration all of the above aspects, Starbucks Company has been clasified by Interbrand ( the world leading brand consultancy company) as one of the most valuable brand in the world.Moreover, after 42 years of booming development Starbucks’ stock price is 76.12 outlining a good performance in the last decade (See Appendix A).

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1.2 Company History

As every company has its own history, Starbucks’ story started back in 1950 when Alfred Peet, a german immigrant, begun to import Arabic Coffee to the U.S.A. “He saw coffee the same way wine producers see grapes: country of origin, region, property and crops” (Perera, 2009 p.179).In 1971, twenty years later, the first Starbucks coffee shop has been opened in Pike Place Market, Seattle.(See Apendix B). Even though the company started as a coffee beans seller, after a journey to Italy, the director of Retail and Marketing, Howard Schultz, decided that Starbucks should be more than just a company selling coffee in bags for personal consumption.Therefore, the coffee giant brought on the market new products as Starbucks made beverages. “This was the seed of what blossomed today into Starbucks Coffee Company” (Schultz, 2011, p.9).

As it can be seen in Figure 1, Starbucks Company managed to appear on every continent market.Apart from the two coffee cup symbols, which are to signify the orignal location of Starbucks (Pike Place Market, Seattle, US) and the first abroad location (Tokyo, Japan), the yellow markers signify the countries which have the most coffee shops, whereas the red ones are to point the countries in which is planned to expand in next decade.The green symbols indentify all the countries where Starbucks opened at least one store.

1.Source: Google Maps

1.3 Key Company Facts

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It can be clearly seen from the bar chart below that Starbucks Company leads the worldwide specialist coffee stores category, with a share value of 40% in 2013, significantly ahead of Whitbread Plc’s Costa Coffee (4%) and McDonald’s McCafé (3%). Moreover, Starbucks’s biggest presence can be noted in the US (63% of sales in 2013), but also a large leading presence of coffee shops is in five out of seven world regions, consequently in 30 out of the 54 markets analysed by Euromintor International.

On the same hand, Starbucks is struggling to establish itself as a global consumer brand, covering a wide range of products.While the coffee reamains its core identity and product, the company introduced new goods as carbonates, tea, juice, branded Greek yoghurt and even bakery goods.Nonetheless, the graph illustrates the year of 2013 as being the most prolific period when Starbucks experienced a dramatic rise of 12% in overall revenue, reaching US$ 14.9 billions.

2009 2010 2011 2012 2013

Total Revenues Operating Income

Figure 2.-Source: Starbucks Annual Report

Starbucks Corp: Total Revenues vsOperating Income 2009-2013

16,000 2,500

14,000 2,000

milli

o 12,000

1,50010,000

US

$ 8,000 1,000

6,000 500

4,000 0

2,000

0 -500

US

$

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1.4 Operating Structure

The pie chart below presents Starbucks Company using a 4 segment operating structure.While, it can be clearly seen that U.S. stores (Americas) represents a vast majority, with outlets in Canada, U.S.A and Latin America, ”EMEA” represents the operating stores in Europe, Africa and Middle East.”CAP” segment includes the rest of Asia Pacific and China, ”Channel Development” being the last segment comprising company’s sales through different retail channels, under the brands such as VIA Ready Brew, Tazo or Starbucks Refreshers.On a global scale, most of the Starbucks’s outlets are company-owned, a lighter franchising model in comparison to major global operators.This strategy helped the coffee giant to maintain a perfect operational control, but at the same time exposing it to a volatile risk.

Moreover, after a venture partnership with Maxim’s Caterers in 2011, Starbucks Company managed to acquire full ownership of its China outlets.In the same year, Starbucks developed a similar strategy in Europe, consequently helping them to acquire the ownership of Austrian and Swiss operations.

The biggest outlet expansion has been driven by licensed stores in 2013, when more than a half of net licensed stores opened to company-owned outlets.In the other hand, Starbucks’s bedrock will always remain the company-operated stores, which accounted for 79% of total net revenues in the fiscal year of 2013.

Global Starbucks Outlets as at 29 September 2013

Americas Company-

Operated Americas Licensed

EMEA Company-Operated

EMEA Licensed

CAP Company-Operated

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Figure 3-Source: Starbucks Annual Report

2. Operational Environment2.1 Customer Profile

Arising almost overnight from a small market in Seattle, Starbucks Company managed to satisfy their customers by providing quality premium beverages with a superior level of customer service, around the world (Isidro, 2004) .

Initially, Starbucks Company developed a strategy which aim was to position itself as an upscale brand, offering not only premium coffee products, but a rich experience as well.

”The Starbucks Experience” is one of the most important unique selling points (USP) from day one, aiming to be clasified by the customers as the ”third place” between their houses and jobs. Although, at the beginning the company considered to target young college students and neighbordhoods who were supposedly the most receptive customers to the idea of having a cup of coffee and spending quality time with their friends in Starbucks’ stores, with the booming expansion and growth, Starbucks widen its target market to include every indiviual regardless of their age.What began just as a niche market, eventually reached the point of including people from all facets of life.

It is general knowledge, that Starbucks is usually considered as an affordable luxury, fact which enabled the Company to widen its demographic reach in the recent years.At present, Starbucks’ target customer market is middle class, now price being clasified as a second priority, the status and the image of the company being the first concern.

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2.2 Competition

The Porter Five forces analysis illustrates a transparent view of the external factors and forces which may have a major influence in a business activity.This method of analysis enables different strategists to develop any strategies that may be required for a company to gain a competitive advantage or sustain the same business activity for a determined period of time.Moreover, Potter argued that ”Knowledge of these underlying sources of competitive pressure provides the groundwork for a strategic agenda or action” (Porter 1998). Therefore, it is vital to make this analysis in order to obtain a clear perspective of the industry and the underlying circumstance that may put pressure on the business activity (Figure 4).

2.2.1 Industry Competition

Among Porter Five Forces scheme, industrial rivalry has been identified as being the greatest force, having the potential to influence the competitiveness of the market and consequently, to change the rate of profit for each company.Although each five forces has its unique role and power, industrial competition remain the deciding factor in order to determine the profit rate. For instance, if competition within an industry is often mild or it is only led by a few competitors, usually the rate of profit will be higher.However, if

Figure 4- Source: https://www.scribd.com/doc/98 1

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competition is clasifies as an intense one, it would be outrageous for a company to expect ”spectacular return on investment” (Porter 1998) .

2.2.2. Threats of New Entrants

Due to the nowadays markets’ dynamicity, the threat of the new companies entering the market will bring the competition to a higher new level. Usually, the new entrants together with the desire to obtain a fair market share, bring new capacity and often substantinal resources, things that may cause a shake-up among the current companies (Porter 1998). As a matter of protection, every company that has already its presence in the market has to set up new high barriers for every new threat. Usually, these barriers consist of capital requirements, product differentation or restriction of distribution channels (Porter 1998).

The specialty coffee industry is certaintly governed by Starbucks, having no other company in size that might affect directly the market share.However, due to the fact that the coffee industry could suffer a shake-up as every new big rival enters the market, Starbucks Company will always have to struggle with a strong competition. For example, the new entrants of today market as Dunkin’ Donuts and McDonald’s which can be equal with Starbucks’ economic and social power, might influence different aspects as distribution channels and marketing strategies.

Although Starbucks Company has its unique advantages as ”Fairtrade Coffee” or registered beverages like ” Frappuccinos®”, the company may need to deal with pressure by cuting its prices in order to maintain its rate of investment.

2.2.3. Threat of Substitute Products

As Porter explained, the substitute products are those which come from different industries and might pose as a trade-off for products which are already in the underlying industry (Appendix C). For example, in the coffee industry, couple of substitute products can be the non-alcoholic one such soft drinks, tea, energy drinks and fruit juices or other coffee beverages.Even though the basic coffee is considered to be the only substitute product for specialty coffee, it is often seen as a lower quality product, representing no threat for the

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premium coffee.However, while the market presents several substitutes for Starbucks’ beverages, a cup of specialty coffee will always remain what customers would prefer to buy.

2.2.4 Buyer’s Bargaining Power

In 1998, Porter outlined the fact that the customers represents the most powerful force in an industry.They can manipulate and put pressure on companies in order to lower their prices, crate rivalry between companies and often deman better services.According to Porter, a group of buyers can be influential only if:

Their purchases represents large volumes of products. They represent a low income level category which consequently creates the need to

lower their buying costs. They present the same demand regarding one company’s outputs.

The only way for the customers of acquiring these powers is to act like a group.However, in the specialty coffee field, it is hard for them gain such forces due to the fact that coffee industry is more focused on an invidual level, rather than a group one (Larson 2008).

2.2.5 Bargaining Power of Suppliers

At the same time as customers can be an influental force among industries, suppliers can also extort influence on the companies in every industry. Beside having the opportunity of gaining bargain power, they can also decrease or increase the price of the products or the quality of the outputs (Porter 1998). The writer defines a powerful supplier group only if:

The product they offer it is unique or at least different from other’s suppliers outputs.

It poses a true threat for entering the industry at a fast pace. One industry does not represent the core revenue for the supplier.

3.Strategic Analysis and Suitability for InternshipThis section is to analyse different aspects of the internship and its suitability for the canditate.

3.1 Work Field

This internship is in a field that the candidate has a longstanding interest in, as demonstrated by prior work experience in finance and accounting. In the past, the candidate has worked part-time for a retail company as Basic Assistant Finance Manager,

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therefore he is familiarised with the terms and procedures that this type of company may present. Nonetheless, the experienced acquired during the past internship will lead to a shorter period of training which will enable the company to focus their resource on other field that may require.At present, this candidate is working as a staff member for a HCCS licensed company which has a common activity as the company in discussion.

3.2 SWOT Analysis - Strenghts

The main strenghts of this position is the global network of operations.Taking into consideration the fact that every Starbucks’ stores on the globe uses the same financial and accounting methods, the company offers a large number of opportunities for every candidate that may wish to work in the Finance Department. Moreover, it is general knowledge that Starbucks is known for his recognition of it employess (See Apendix C). The company admits that they are the main assets, therefore are provided with amazing benefits like retirement accounts, healthy culture and the most important, the stock option.

Furthermore, Starbucks Company offers the opportunity of a rotation based internship, meaning that every 6-months the candidate has the chance to visit and work in a different country or even continent.Finally, at the end of the internship every candidate will be provided with a formal full evaluation in consideration of a full-time career upon graduation.

3.3 SWOT Analysis – Weaknesses

Working in the finance department for a company may pose many challenges.To begin with, every new candidate might have to cope with strict deadlines, high-amount of data and figures, or even tasks that he is not used to do.However, it is often argued that finance is not only about the numbers, but experience also. Therefore, an undergraduate student may not have the neccesary experience to deal with specific accounting operations.

Secondly, achieving career success in finance department may be stressful and time consuming.A job in this field requires working for long hours under pressure. For example, one manager may need to revisit his financial decisions often in order to ensure that they are uptaded in case of an unpredictable change in the market.In plus, this may involve consolidation and collecting of significant amount of data which sometimes may be hard to understand.

3.4 SWOT Analysis – Opportunities

Starbucks internship programme would provide many opportunities to the candidate both on a professional and personal level.First of all, Starbucks is one of the many brands which is worldwide known.Being employed in such a company, will enhance candidate’s CV,

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consequently creating opportunities for him to become more employable and skilled in one department.Due to the fact that Starbucks Corporation has a strong finance department, the candidate will be trainedby experienced people, giving him the chance to discover new skills or abilities that he might use in the case of a job changing.

Another opportunity worth mentioning is that Starbucks offers permanent positions after graduation with high paid salaries, offering to the candidate a desirable leverage regarding future employment.

3.5 SWOT Analysis – Threats

Everything in this world has its downsides and applying for a Starbucks internships it is no exception to it.Although there are plenty of factors that one candidate might have control upon, negative external conditions may poses a negative influence regarding the employability.First of all, one candidate has to take into consideration the competition from his cohort of university applicants.For instance, even though a candidate may graduate a higher degree, one of his competitors may have a better work experience which is usually more desirable as a future employee.

On the same hand, due to an unstable economic environment one candidate may suffer after being canceled on different benefits that he might have had in the past or even the salary might decrease in order for the company to maintain its activity on a profit scale.

Finally, when applying for a worldwide company job after graduation, a candidate has to consider not only his needs, but company’s also.He might be asked to work in a different location, not because he is not qualified, but a different outlet may need the candidate.

4.Conclusion

By analysing this sector and the business as a whole, it can be clearly seen that Starbucks is performing well both on a company and partners level.After an in-depth analysis of

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Starbucks’ employability scheme, results sugested that the internship provided by the company for the candidate in the following respects:

Work experience Team working Coping with pressure Global opportunities Job benefits Compatibility with studied course

In conclusion, even though Starbucks Company presents its own weaknesses and threats due to different social, political and economical problems, it has been demonstrated that the company has the necessary knowledge and structure in order to provide a rounded work field of high quality, tools which are to help the candidate both in the long and short term, fostering his social and employment development, providing networking opportunities and placing him in an international work environment.

5.References

Csaszar, F. A. (2012) “Organizational structure as a determinant of performance: Evidence from mutual funds”, Strategic Management Journal, 2012 (33), pp. 611-632. EBSCOhost [Online]. Available at: http://web.ebscohost.com[(Accessed: 24th April 2015].

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Kotler, P., Wong, V., Saunders, J. and Armstrong, G. (2005) Principles of Marketing. 4th edn. Harlow: Pearson Education Limited.

Larson, R. (2008). Starbucks a strategic analysis: past decisions and future options [Electronic version]. Brown University. (Accessed: 4th May 2015)Porter, M. E. (1980) Competitive Strategy: Techniques for analysing industries and competitors. 1st edn. New York: Free Press.

Schultz, H. (2011) Onward. How Starbucks Fought for Its Life without Losing Its Soul. 1st edn. Chichester: John Wiley & Sons

Isidro, I. (2004). Learning from Starbucks: 10 lessons for small businesses [Electronic

version]. Power Home Biz. Retrieved online:

http://www.powerhomebiz.com/vol144/starbucks.html [Accessed :17th May 2015]

Websites

Confederation of British industry, Boosting employability skills. Available at: http://www.cbi.org.uk/business-issues/education-and-skills/in-focus/employability/ (Accessed: 20 th April 2015).

Starbucks Porter’s Five Forces Analysis 2014- Research Methodology. [ONLINE] Available at: http://research-methodology.net/starbucks-porters-five-forces-analysis-2014/. [Accessed 15th May 2015]

Libertyedu. 2015. Libertyedu. [Online] Available at: http://digitalcommons.liberty.edu/cgi/viewcontent.cgi?article=1005.html [Accessed: 17th May 2015)

6.Appendices

Appendix A

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Appendix B

Appendix C

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Director of Catering

Starbucks Manager

Assistant Manager

Supervisors

Partners

Placement Student

3. Source: University of Surrey Hospitality Conference and Catering