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Executive Summary

Vision Statement:

The bottom line is we always figured that putting people

before products just made good common sense. So far, its

been working out for us. Our relationships with farmersyield the highest quality coffees. The connections we makein communities create a loyal following. And the support

we provide our baristas pays off everyday.

Mission Statement:Establish Starbucks as the premier purveyor of the finest

coffee in the world while maintaining our uncompromising

principles while we grow


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Executive Summary

Company Overview

1971 in Seattles Pike Place Market

Went public 1992

1999 Hear Music

2006 Starbucks Entertainment

Competing Internationally


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Company Background

Founding Shareholders

Jerry Baldwin, Zev Siegel, and

Gordon Bowker, Howard Schultz

Company Management

Howard Schultz with other investors


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Executive Summary

Strategy Tactics

Customer Orientation,

Employees, and Customization

Market Analysis

Domestic is saturated and

mature Intense Competition

Low Capital Requirements


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Executive Summary

Market Plan Ambiance and Personal

Experience Customers prefer known brand

names, have high disposableincome

Financial Plan Growth in Revenues

Profit Margins 3-5%


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Industry Analysis

Principle Products

Unique Features

Sales Growth / Profit Margins

Industry Data and Prospects

Maturity of Line Trends


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Products Unique Features

Variety of products

Customers experience


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Sales Growth and

Profit Margins

Profit margin 3-5%

Sales increased 20% in 2006

Sales predicted to increase 14%


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Pretax Profits

Retail operations 2006: $6,583,098

Retail operations 2005: $5,391,927

Foodservice operations 2006: $343,168

Foodservice operations 2005: $304,358

Licensing operations 2006: $860,676

Licensing operations 2005: $673,015


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Industry Data

Franchises, coffeehouse chains, andindependently owned coffee houses

Supplier Power

Buyer Power

Threat of Substitution


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Product Maturity and Trends

Domestic Market Saturation

International Market Growing

Leader in trend of young coffeedrinkers

Brand and culture to coffee drinking


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Opportunities

Ease of entry

Industry growth

Buyer power


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Threats

Brand identity

Economies of scale

Substitutes


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Marketing and Sales

Customer Profile

Distribution Systems

Pricing

Stage in Product Life-Cycle

Advertising/Promotioncompared to competitors


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Customer-End user ProfileAge 18-34

Internet users

Men and women

Majority of ethnicities

High disposable income

Prefer brand names and vulnerable tosocietal/cultural influences


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Distribution

Directly to customers throughown retail stores

Partnerships with grocery andretail outlets


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Marketing and Pricing

A way of life

Coffee house environment

Charges a premium price

Maturity stage of life cycle


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Competition

Major Competitors:

1) Peets Coffee and Tea

2) Caribou Coffee Company


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Competition

Revenue Growth Over Last Year

Starbucks: 22%

Peets: 20.1% Caribou: 19.3%

Starbucks accounts for $5,485 Million in sales annually

MORE THAN TRIPLING ANNUAL SALES OF PEETSAND CARIBOU COMBINED!


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Competition

Net Earnings as % of Revenues

Starbucks: .06% to 7.2% of revenues

Peets: to 3.8% of revenues

Caribou: worse than previous year to (3.8%)of revenue


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Competition

Intensity of Rivalry

Rivalry is mostly determined by:

geographical location brand identity.

Highly saturated areas = more intense rivalry

Competitors with established brand identity = Bigger threat.

Starbucks competitors pose little threat and rivalry is low

Maintains monopolistic stance.


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Competition

Competitive Advantages

3 Unique Competencies:

1) Employees Unique Culture2) Customer Orientation Brand Intimacy

3) Customization Unique Experience

Third Place Philosophy


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Competition

Entry and Exit Barriers

Relatively Low

Low technological requirements

Low capital requirements

Easy to enter and exit this industry


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Competition

Pricing

Prices slightly higher than competition

Starbucks: $1.70 for a 16 oz. cup of coffee

Competitors: Between $1.50 - $1.75 for samecup of coffee


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Competition

Advertising and Promotional Effort

Amount of Selling, Administrative, andGeneral Expenses as a % of Revenues:

Starbucks = 6%

Peets Coffee = 9%

Caribou = 52%


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Structure

Sense of Empowerment

Regionalized Leadership

Team Work

Constant Differentiation


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Strategy

Differentiate

Constant Internal R&D

Tactics

Focus on Growth

New Product Categories andChannels

Maintain Core Values


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Management Team

Baristas Standardization of Skills

Employee Empowerment as aTactic 40 Vice Presidents

One Store Manager

Two Assistant Managers


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Control

Ground Level

Reduced Bureaucracy

Standardization of Skills

Upper Management

Team Work

Regionalized Leadership 40 Vice Presidents


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Compensation

Sense of Empowerment

20 hrs + Receive Stock and

Health Care

Other Compensation Includes

Retirement Savings Plan,Discount Stock, ManagementBonus, Life Insurance, DiscountMerchandise


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Recommendations

Multi Domestic Approach Allows for Regionalized Customization

In Line With Current Goals ofCustomization and Customersatisfaction

Locally Market Saturation and 3rd Place

Mentality


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Conclusion

Differentiation Strategy

Empowerment and Sense ofCommunity

Highly Regionalized Leadership and

Localized Customization

Constant Innovation


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Q&A


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Starbucks Peets Caribou

% of Marketing 6% 9.80% 52.90%

% of COGS 40.80% 46.90% 4.00%Total Revenue 7,786,942$ 210,493$ 236,229$

Total Assets 4,428,941$ 153,005$ 136,308$

Total Liabilities 2,200,435$ 25,566$ 47,905$

% AR of Assets 14.60% 4.40% 2.50%

% AP of Liabilities 17.60% 43.20% 48.46%

Net Income 564,259$ 7,816$ (9,059)$

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