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STARBUCKSCanon Consultants: Wai Yin Chan

Tik Fai Ling

Angel On Kee Wong

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Agenda• Background

• Issue

• Brief Recommendation

• SWOT Analysis

• Rival Analysis

• Alternatives

• Recommendation

• Implementation Plan

• Finances

• Conclusion

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Starbucks Background

• First Store in Seattle’s Pike Place Market1971

• Began selling bottled Frappuccino coffee drink through North American Coffee Partnership (Pepsi-Cola North America)

1987

• Starbucks came out with their first mail-order catalog, enabling mail-ordering of their coffee in all 50 states

1988

• Acquireed Tazo, a tea company based in Portland, Oregon

1998

• Grew from 55 stores to 15,000 stores

1989 - 2013

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ISSUEHow does Starbucks compete with the rival and sustain its success for

future?

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Brief Recommendation

Improvement

DevelopmentExpansion

Marketing

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SWOT Analysis – Strength and Weakness

Strength Weakness

• Companies Value $6.9 billion

• Largest coffeehouse chain in the

world

• Strong brand image with quality

coffee

• No. 19 in Forbes’ The World’s

Most Innovative Companies

• Employee management

• Consistently strong financial and

operating performance

• Lack of internal focus

• Need more of a wide spread

customer base

• Product Pricing

• Stores can become crowded at times

• Increasing Number of competitors

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Opportunities Threat

• Extend supplier range

• Expansion to emerging economies

• Increase product offerings

• Expansion of retail operations

• Co-branding with other food

manufactures

• Rising prices of coffee beans and dairy

products

• Trademark infringements

• Increased competition from local cafes

and specialization of other coffeehouse

chains

• Market Saturation

SWOT Analysis – Opportunities and Threat

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RIVAL: DUNKIN’ DONUTS

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Dunkin’ Donuts: Strength and WeaknessStrength Weakness

• Strong Brand Name• High Percent of Change in

Sales• Over 100 varieties of donuts• Popular for a number of

bakery products like coffee, tea, and hot chocolate

• Innovative ways to retain customer by issuing coupon and discount

• Constant rift with the franchisee owners and numerous instance of suing them

• High competition in this industry makes them hard to gain more market share.

• Lack of Products Choice • Limited Geographic

Presence• Weak Advertising Strategy

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Market Share Comparison Between 2011 & 2013

2011

2013

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Positioning

Price

Quality

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Alternatives

Options 1• Status Quo

Option 2• Refocused

on the Price Strategy

Option 3• Store

expansion to boost up the % of change

Option 4• Refocused

on Customer Experience and Distribution Channel

Recommendation

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2014

2015

2016

Expansion:Starbucks Mobile Store

Development:Starbucks

Culture

Improvement:Starbucks Apps and Customer

Experience

Marketing:Promoted through different media

2017

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IMPLEMENTATION PLAN

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Target Audience

•Most of the Starbucks are located in big cities /

shopping mall

•Middle to Upper Class

•Business associates

•Either single / married

•Have a tendency for a greater amount of disposable income

•College Student

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YOU WANT MORE AUDIENCE!!!

Starbucks

Custome

rs

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Phase I: Expansion of Starbucks Mobile Stores

•Bypass some of the flow from store to truck

•Goal: Make it internationally

• In major cities’ commercial district

• Irregularly to do promotion in College

•Tasting Event for New Product

•Offer “Buy one get one free”

Phase I• Expansion

Phase II• Improvement

Phase III• Development

Target: 3 trucks in

every city in 2017

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Phase I: Expansion of Starbucks Mobile Stores

Phase II: Customer Experience

•Training Program (Focused on Customer)

•Train the employees to remember the loyal or frequent

customers’ names and orders, have conversations with

customers, etc.

•Creating customer intimacy

•Customers to feel special and welcome

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Phase I• Expansion

Phase II• Improvement

Phase III• Development

Make your customer experience warmer and friendlier

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How to encourage the employee?

• “Star of the Month”

• Allow the consumer to pick the best

employee of the month

• Reward the “Star of the Month” with bonus

• Monthly Bonus: $100-200

• Increase employee’s loyalty

• Increase the willingness to serve better

Lola

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Phase II – Starbucks AppsPhase I• Expansion

Phase II• Improveme

nt

Phase III• Developme

nt

Source: Google Play Website

1. Make it more user friendly

2. Top Ten Favorite Drinks

3. Allow Customer to Buy Products on Apps

4. Creating personalized promotions

• Combining the customers’ personal / non personal

about them

• The amounts and types of purchases they make or

any benefits they receive through Starbucks Cards

Programs.

5. Add More Categories

• Examples: Drinks Menu, Food Menu, Nutrition

Menu

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PHASE III – Create Starbucks Culture

•Enhance the Store

Experience

•Increase the loyalty

•Uniformity of “Name on the

Cup”

•Make it become a culture of

Starbucks

Phase I• Expansion

Phase II• Improvement

Phase III• Development:

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PHASE III – Promote the Starbucks Culture

Embedded Advertisements

Music Video

TV program• Big Bang

Theory• Broken Girl

Movie

Phase I• Expansion

Phase II• Improveme

nt

Phase III• Developme

nt:

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FINANCE

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Starbucks’s Sales Dunkin’ Donuts’ Sale

YearSales

% of Change

2008 8624

2009 8141 -5.6

2010 8943 9.9

2011 9205 2.9

20121000

78.7

20131065

46.5

Year

Sales

% of Change

2008

5572

2009

5706

2.4

2010

5921

3.8

2011

6433

8.6

2012

6774

5.3

2013

7150

5.6

• Starbucks Seems to be unstable

• Dunkin’ Donut is more stableFinance – Sales Forecast

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Finance - Growth Rate

Growth rate of Starbucks:

3.975%Growth rate ofDunkin’ Donut:

5.14%

We hope to:• Make the growth rate more stable• Increase the growth rate gradually catch up with the growth rate of

Dunkin’ Donut

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Finance – Sales Forecast

2015$11,201.62

2016$11,777.38

2017$12,382.74

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Finance - Phase I

•Target 3 trucks in every city in 2017

•$60,000 to get a food truck on the ground

• 13 cities

• Operating Cost for 1 truck $50,000

•First try to operate 1 truck in each city

• Total budgets to buy trucks in 2014 - 2015: $780,000

• Cost of operating trucks: $650,000

Source: http://www.forbes.com/sites/investopedia/2012/09/27/the-cost-of-starting-a-food-truck/

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Finance - Phase II

Spend 1100 hour for

making an apps

Hire Specialist:

$150 / hour

Approximated Cost:

$165,000

Source: http://appmuse.com/appmusing/mobile-app-development-costs-revisited/

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Finance - Phase IIIAverage cost of TV commercial for one quarter:$109,000Average cost of TV commercial for one year:$436,000

Cost of Making a tier 1 commercial:$5,000

Assume 4 commercial per year

Total cost of making commercial $20,000

Source: http://www.adweek.com/news/television/their-prime-broadcast-spot-costs-soar-132805

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Conclusion

Attract more

people by increasing exposure if food trucks

Enhance our

application to

increase data

exchange with

customer

Increase loyalty by increase intimacy

with customer

Increase customer by more

aggressive advertising

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QUESTIONS?

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Appendix A – Starbucks Mission Statement in 2013

Our MissionTo inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.

Our Vision Our Goals

CoffeeIt has always been, and will always be, about quality. We’re passionate about ethically sourcing the finest coffee beans, roasting them with great care and improving the lives of people who grow them. We care deeply about all of this; our work is never done.

PartnersWe’re called partners, because it’s not just a job, it’s our passion. Together, we embrace diversity to create a place where each of us can be ourselves. We always treat each other with respect and dignity. And we hold each other to that standard.

Customers

When we are fully engaged, we connect with, laugh with and uplift the lives of our customers – even if just for a few moments.Sure, it starts with the promise of a perfectly made beverage, but our work goes far beyond that. It’s really about human connection.

StoresWhen our customers feel this sense of belonging, our stores become a haven, a break from the worries outside, a place where you can meet with friends. It’s about enjoyment at the speed of life – sometimes slow and savored, sometimes faster. Always full of humanity.

Neighborhood

Every store is part of a community, and we take our responsibility to be good neighbors seriously. We want to be invited in wherever we do business. We can be a force for positive action – bringing together our partners, customers and the community to contribute every day. Now we see that our responsibility – and our potential for good – is even larger. The world is looking to Starbucks to set the new standard, yet again. We will lead.

Shareholders

Every store is part of a community, and we take our responsibility to be good neighbors seriously. We want to be invited in wherever we do business. We can be a force for positive action – bringing together our partners, customers and the community to contribute every day. Now we see that our responsibility – and our potential for good – is even larger. The world is looking to Starbucks to set the new standard, yet again. We will lead.

Environmental

Understanding of environmental issues and sharing information with our partners.

Developing innovative and flexible solutions to bring about change.

Striving to buy, sell and use environmentally friendly products.

Recognizing that financial responsibility is essential to our environmental future.

Instilling environmental responsibility as a corporate value.

Measuring and monitoring our progress for each project.

Encouraging all partners to share in our mission.

Source: Company Website

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Appendix B – Starbucks Financial Performance(2007-2013)

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Appendix C – Dunkin’ Donuts’ Financial Performance (2008-2013)

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Appendix D – Majority of Starbucks Retail Sales

Specialty Coffee Beverage61%

Food16%

Whole-Bean Coffees15%

Coffee-related products8%

Specialty Coffee Beverage FoodWhole-Bean Coffees Coffee-related products

Source: Company Website