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David Hayoun Sarah HoltEmese KardhordoErin MaharMarie Poisson
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AGENDA• Emese
• Company Background• Industry • New Approach
• Marie• Problem• BMI• Benefits of Integrating the Community
• David• Sustaining Innovation• Breaking Industry/Company
• Erin• Implementation• Breaking the risk-return ratio
• Sarah• Challenges• Risk • Fallout
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COMPANY BACKGROUND• 1977 Seattle, WA • 18,600 stores/60 countries • Largest coffee house chain in the world• Founders – Jerry Baldwin, Zev Siegel,
Gordon Bowker• President & CEO – Howard Schultz (1981)
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THE COMPANY• Competitive Advantage
• “The Starbucks Experience” (consistency)
• Core Competencies• Customer Service• Continuous Product Involvement
• Strategic Assets• Market Share
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COFFEE INDUSTRY• #1 in coffee shop market share• Competitors: Dunkin Brands
• #3 in coffee production• Competitors: The J.M. Smucker Company, Kraft
Foods, Green Mountain Coffee, Nestle
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NEW APPROACH• “It is no longer enough to serve customers,
employees and shareholders. As corporate citizens of the world, it is our responsibility to serve the communities where we do business by helping to improve the quality of citizen’s education, employment, health care, safety, and overall daily life, plus future prospects”
(Forbes, 2011). Howard Schultz
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Evolution FreshSeattle, WA
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PROBLEM
• Gap in their Business Model• Concentration on the food being sold• Goal is to surge sales of the food
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BUSINESS MODEL INNOVATION• Integrating the community into local
Starbucks locations by introducing local cuisine into the hot food line
• Healthy, fresh, nutritious, easily accessible, and on-the-go options
• Choosing suppliers
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BENEFITS OF INTEGRATING THE COMMUNITY
• Make meaning• Increase the community of co-developers• Overcome limiting beliefs• Experimenting the firm
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SUSTAINING or DISRUPTIVE INNOVATION?
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BREAKING INDUSTRY/COMPANY DOGMAS
• Industry dogmas• Fast = unhealthy • Food and smell
• Company dogmas• Consistency• Corporate
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IMPLEMENTATION
1. Point of entry • Boulder, CO• Yakima, WA
2. Finding local suppliers 3. Experiments
• Success rate• If suppliers like it• If customers like it• How much to purchase/day
4. Purchasing plan• Rate of purchase and re-sell• How much to purchase
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BREAKING THE RISK RETURN RATIO
• Becoming part of the community • Supports Mission Statement• Adds meaning/Betters brand name
• Increase number of sales• Convenience• Increased quality of food
• Attraction of a new customer base • Increase in Operating Income
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∆ IN OPERATING INCOME Current Twice as well 3 times as well 5 times as well Total Revenue $ 780,000 $ 819,000 $ 858,000 $ 936,000 Revenue from food $ 39,000 $ 78,000 $ 117,000 $ 195,000 Cost of Sales $ 327,667 $ 340,499 $ 350,249 $ 369,749 Cost of Sales from food $ 13,333 $ 26,166 $ 35,916 $ 55,416 Operating expenses $ 348,800 $ 344,933 $ 344,933 $ 344,933
Shipping food (assuming shipping is
10%) $ 3,333 Utility expense for food (assuming 1% ) $ 533 Operating Income $ 103,533 $ 133,567 $ 162,817 $ 221,317 All Stores $1,553,000,000 $2,003,510,000 $2,442,260,000 $3,319,760,000 % Change in OI 29.01% 57.26% 113.76%
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CHALLENGES
• Purchasing• Research local suppliers & develop
relationships • Purchasing agreements
• Barriers to entry • Finding the willing and suitable suppliers
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RISK
Immediate Risks
• Quality of food• Customer frustration in changing food lines during experimentation
Midterm Risks
• Cost of experimentation• Not able to find a suitable and/or reliable supplier
Long Term Risks
• Lack of standardization between store location hot food options• Absence of increase in revenue
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FALLOUT
• Ordering incorrect amount • Orders need to be sold the same day • Products are not successful • Food poisoning
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Conclusion• We will be introducing local hot foods to
Starbucks in small to mid-sized cities• The material presented is an experiment, it
can be scaled upwards
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