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Starbucks Strategy
1. Starbucks
Strategic Context Presentation
Group 4; 2:00 p.m.
Justin Lenhert, Brandon Terrebonne, T.J. Owen, Matt Bruns, Tim Johnson, Ben Carrier, Brent Reilly
1
2. Table of Contents
1. Strategic History.....................................Slides 3-8
2. Strategic Group Analysis........................Slides
9-12
3. Five Forces Analysis................................Slides
13-23
4. Macroenvironmental Analysis...............Slides
24-30 2
3. Table of Contents
1. Strategic History.....................................Slides 3-8
2. Strategic Group Analysis........................Slides
9-12
3. Five Forces Analysis................................Slides
13-23
4. Macroenvironmental Analysis...............Slides
24-30 3
4. Strategic History of Starbucks
Bags
of
Beans:
The
Tall
Age:
The
Grande
Age:
The
VenM
Age:
1971
–
1987
1988
–
1995
1996
–
2002
2003
–
2010
Founded
in
Sea7le
as
a
premium
Schultz
gained
popularity
Starbucks
expands
with
many
Starbucks
conMnues
to
expand
roasted
bean
retailer,
then
by
giving
part-‐Mme
new
products
such
as
rapidly
in
new
internaMonal
Howard
Schultz
entered
the
employees
full
benefits.
frappuccino,
ice
cream,
and
Tazo
markets.
Sociocultural
picture
and
started
the
idea
of
Starbucks
went
public
as
Tea.
Store
openings
increase
undertakings
increase,
as
does
Starbucks
as
a
coffee
retailer.
SBUX.
exponenMally
and
their
stock
value.
internaMonally.
5. Bags of Beans: 1971-1987
AcquisiLons
and
AddiLons
Intended
Strategy:
To
sell
specially
roasted,
quality
Corporate
Expansion
coffee
beans
to
individual
consumers.
Sociocultural
Events
Emergent
Strategy:
With
Schultz’s
Total
Store
Count
persistence,
Starbucks
First
Mover
Advantages:
begins
brewing
and
selling
Starbucks’
use
of
the
highest
coffee
to
consumers.
Also,
quality
roasted
beans.
Schultz’s
bean
markeMng
is
Starbucks
was
one
of
the
first
expanded.
Italian
Café
style
coffee
retailers
in
the
U.S.
1971 1982
1985 1987:
Howard
founds
Il
Giornale,
offering
brewed
Total
Stores:
17
Starbucks
opens
first
Howard
Schultz
joins
Starbucks
as
director
of
retail
coffee
and
espresso beverages
made
from
store
in
Sea4le’s
Pike
operaMons
and markeMng.
Starbucks®
coffee
beans.
Place
Market. 1984 1987
1972 Howard
convinces
the
founders
of
Starbucks
to
test
Il
Giornale
acquires
Starbucks
assets
with
the
A
Second
Starbucks
the coffeehouse
concept
,
first Starbucks®
Caffè
La7e
backing
of
local investors
and
changes
its
name
opens
in
Sea7le is
served.
to
Starbucks
CorporaMon.
6. The Tall Age: 1988-1995
Super
Ordinate
Goal:
Intended
Strategy:
Establish
Starbucks
as
the
premier
purveyor
Focus
on
employee
saMsfacMon
through
of
the
finest
coffee
in
the
world
while
benefits
and
stock
opMons
to
reduce
maintaining
our
uncompromising
principles
turnover,
thus
saving
money
in
the
long
run.
while
we
grow.
Emergent
Strategy:
With
gaining
popularity,
Starbucks
begins
to
spread
rapidly
across
the
U.S.
and
North
America,
although
Schultz
originally
emphasized
slow
expansion.
First
Mover
Advantages:
Schultz
provided
health
benefits
and
private
stock
opMons
to
full
and
part-‐Mme
employees
alike.
1990
Starbucks
expands
1995
1988 headquarters
in
1992 1993 Begins
serving
Frappuccino®
Offers
full
health
benefits
Sea7le. Completes
iniLal
public
offering
(IPO),
Opens
roasLng
plant
blended
beverages.
with
stock
being traded
on
Nasdaq
under
in
Kent,
Wash. Introduces
Starbucks®
super-‐
to
eligible
full-‐
and
part-‐ 1991 the
trading
symbol “SBUX.” premium
ice
cream.
Lme
employees.
Becomes
the
first
privately
1993
1989 owned
U.S.
company
to
offer
a
Announces
first
two-‐for-‐one
stock
1993
1995
Total
stores:
55
stock opLon
program
that
split. Total
stores:
272
Total
stores:
677
includes
part-‐Mme
employees.
7. The Grande Age: 1996-2002
First
Mover
Intended
Strategy:
Advantages:
Enter
new
markets,
slowly
Bo7led
Frappuccino
expand
and
dominate,
then
entered
the
market,
move
on
to
a
new
market.
Starbucks
entered
Emergent
Strategy:
the
music
industry
During
this
period,
Starbucks
with
Hear
Music
was
expanding
way
faster
than
acquisiMon.
intended
and
into
more
markets.
1996 2000
Begins
selling
bo4led
Frappuccino®
through
1998 1999 Introduces
coffee
category
that
exhibits
a
partnership
with
Pepsi-‐Cola. Acquires
Tazo,
a
tea
company
based
in
Partners
with
ConservaLon
shade
grown,
organic
and Fair
Trade
Opens
stores
in:
Japan
(first
store
outside
of
Portland,
Oregon InternaLonal
to
promote
CerMfied™
selecMons.
North
America)
and Singapore. sustainable coffee-‐growing
Forms
Urban
Coffee
OpportuniLes,
a
joint
venture
with
Earvin “Magic”
Johnson’s
pracMces.
2002
Total
stores:
1,015 Starbucks
enters
into
licensing
Johnson
Development
Corp.,
to
develop
Starbucks
stores
in
diverse,
urban
and
agreements
with
naLonal
Fair Trade
1997 suburban
communiMes.
Acquires
Hear
Music,
a
San
organizaLons
to
sell
Fair
Trade
Establishes
The
Starbucks
FoundaLon,
Francisco–based
music
company.
CerLfied™
coffee
in
the countries
benefiMng
local
literacy programs
in
Extends
the
Starbucks
brand
into
grocery
where
Starbucks
does
business.
communiMes
where
Starbucks
has
channels
through
licensing
agreement
with
Krad
Foods,
Inc. Total
stores:
5,886
coffeehouses.
8. The Venti Age: 2003-2010
Intended
Strategy:
First
Mover
ConMnue
to
expand
while
also
Advantages:
building
their
image
of
social
Starbucks’
responsibility.
Facebook
fan
page
and
Twi7er,
Emergent
Strategy:
Though
sociocultural
efforts
MyStarbucksIdea.
were
strong,
their
customer
com,
VIA
Ready
service
was
lacking,
which
led
to
Brew
Coffee.
Schultz
coming
back
on
board
as
CEO
to
reinforce
this
area.
2003
Acquires
Sea4le
Coffee
Company,
which
includes
Sea4le’s
Best 2008 2009
Coffee
and
Torrefazione
Italia
Chairman
Howard
Schultz
returns
as
chief
execuLve
Launches
Starbucks
VIA™
Ready
coffee
brands.
2005 officer. Announces
a
renewed
focus
on
customer
Brew
Coffee.
Acquires
Ethos
Water.
experience
and innovaLon. Opens
second
Starbucks
Farmer
2004 Launches
MyStarbucksIdea.com,
Starbucks
first
online
Support
Center
in
Kigali,
Rwanda.
Opens
first
Starbucks
Farmer
2006 community. Starbucks
helps
save
lives
in
Africa
Support
Center
in
San
Jose,
Launches
the
industry’s
first
Announces
Starbucks™
Shared
Planet™,
the
company’s
through
their
partnership
with (RED)
Costa Rica. paper
beverage
cup
containing
longterm commitment
to
conducMng
business
™.
postconsumer recycled
fiber. responsibly.
2007
Total
stores:
8,569 Total
stores:
15,011 Total
stores:
16,680 Total
stores:
16,635
9. Table of Contents
1. Strategic History.....................................Slides 3-8
2. Strategic Group Analysis........................Slides
9-12
3. Five Forces Analysis................................Slides
13-23
4. Macroenvironmental Analysis...............Slides
24-30 9
10.
Strategic
Group
Analysis
of
the
U.S.
Retail
Specialty
Non-‐Alcoholic
Coffee
Industry
12. Threats
and
OpportuniMes
Derived
from
Strategic
Group
Analysis
• Main
OpportuniLes
• Main
Threats
Increasing
popularity
of
energy
drinks/ Fast
food
and
on
the
go
retailers
trying
shots
to
accommodate
for
the
lifestyle
type
Increasing
demand
for
health
conscious
consumer
food/beverages
High
compeMMon
weakens
first
mover
NegaMve
publicity
for
sol
drinks
as
an
benefits
on
innovaMve
store
concepts
unhealthy
drink
choice
Increasing
threat
from
tea
stores
Increasing
popularity
of
smoothies
Economies
of
scale
facilitate
good
quality
coffee
availability
12
13. Table of Contents
1. Strategic History.....................................Slides 3-8
2. Strategic Group Analysis........................Slides
9-12
3. Five Forces Analysis................................Slides
13-23
4. Macroenvironmental Analysis...............Slides
24-30 13
14. Five
Forces
Analysis
of
the
Lifestyle
Strategic
Group
in
the
U.S.
Specialty
Non-‐Alcoholic
Beverage
Industry
Threat
of
SubsMtute
Products
Rivalry
Bargaining
Threat
of
Among
Power
of
New
CompeMng
Buyers
Entrants
Firms
Bargaining
Power
of
Suppliers
14
15. Threat
of
SubsMtute
Products
Determinant
Strength
of
Determinant
Strength
of
Force
Amount
of
SubsLtutable
Products
High
High
Price-‐Performance
Trade-‐Off
Moderate
Moderate
Profit
Level
of
Industry
Moderately
High
Moderately
High
Switching
Costs
Low
Low
Fast
Food
Coffee
• Price-‐Performance
Trade-‐Off
Low
Low
• Profit
of
the
SubsMtute
Moderate
Moderate
• Switching
Costs
Low
High
• Overall
Moderately
Low
Moderate
On
The
Go
Coffee
• Price-‐Performance
Trade-‐Off
Low
Low
• Profit
of
the
SubsMtute
Moderate
Moderate
• Switching
Costs
Low
High
• Overall
Moderately
Low
Moderate
Overall
Strength:
High
Overall
high
strength
of
threat
of
subsMtute
products
contributes
to
low
industry
profitability.
15
16. Threat
of
New
Entrants
Strength
of
Determinant
Sub-‐Determinate
Strength
of
Force
Determinate
Switching
Costs
-‐
Low
Low
FuncLonal
Differences
Low
Product
DifferenLaLon
Moderate
Psychological
Differences
Moderately
High
Capital
Requirements
-‐
Moderately
High
Moderately
High
Access
to
DistribuLon
Channels
High
Access
to
CriLcal
Resources
High
Access
to
Necessary
Inputs
High
History
of
Firms
Lashing
Out
Moderate
Limited
Resources
Moderately
High
Expected
RetaliaLon
Moderate
Likeliness
to
Cut
Prices
Low
Growth
in
Focal
Industry
Moderate
Economies
of
Scale
-‐
Moderately
High
Moderately
High
Government
RegulaLon
of
Entry
Low
Onerous
RegulaLon
of
Focal
Government
Policy
Low
Moderately
Low
Industry
Patent
ProtecLon
for
ExisLng
Firms
Moderate
Overall
Strength:
Moderate
Overall
moderate
strength
of
threat
of
new
entrants
contributes
to
moderately
low
industry
profitability.
16
17. Bargaining
Power
of
Suppliers
Determinant
Strength
of
Determinate
Strength
of
Force
ConcentraLon
of
Supply
Industry
High
High
relaLve
to
Focal
Industry
Switching
Costs
High
High
SubsLtute
Products
Low
Low
Importance
of
Product
to
Buyer
High
High
Labor
Force
Moderately
High
Moderately
High
Forward
IntegraLon
Low
Low
Overall
Strength:
Moderately
High
Overall
moderately
high
strength
of
supplier
bargaining
power
contributes
to
moderately
low
industry
profitability.
17
18. Bargaining
Power
of
Buyers
Determinant
Strength
of
Determinant
Strength
of
Force
ConcentraLon
of
Buying
Industry
Moderately
High
Moderately
High
relaLve
to
Focal
Industry
Volume
of
Purchases
Low
Low
Switching
Costs
Moderately
Low
Moderately
High
Product
DifferenLaLon
Moderate
Moderate
Price
SensiLvity
Moderate
Moderate
Backward
IntegraLon
Moderately
Low
Moderately
Low
Overall
Strength:
Moderate
Overall
moderate
strength
of
buyer
bargaining
power
contributes
to
moderate
industry
profitability.
18
19. Rivalry
Among
CompeMng
Firms
Strength
of
Determinant
Sub-‐Determinant
Strength
of
Force
Determinate
Industry
Growth
-‐
Moderate
Moderate
CompeLtor
Balance
-‐
Moderate
Moderate
Fixed
Costs
-‐
High
High
Switching
Costs
-‐
Moderate
Moderate
FuncLonal
Differences
Low
Product
DifferenLaLon
Moderate
Brand/Psychological
Differences
High
Economic
RaLonale
Moderate
Exit
Barriers
Moderately
High
Psychological
RaLonale
Moderately
High
Firm
ConcentraLon
-‐
Low
Low
Overall
Strength:
Moderate
Overall
moderate
strength
of
compeMng
firm
rivalry
contributes
to
moderate
industry
profitability.
19
20. Five
Forces
Analysis
of
the
Lifestyle
Strategic
Group
in
the
U.S.
Specialty
Non-‐Alcoholic
Beverage
Industry
High
Threat
of
Aggregate
Industry
Analysis
=
Strength
of
Force
SubsMtute
• Strength
of
Forces:
Moderately
High
Products
• Profitability
of
Industry:
Moderately
Low
Moderate
Moderate
Rivalry
Bargaining
Threat
of
Among
Power
of
New
CompeMng
Buyers
Entrants
Firms
Moderate
Bargaining
Power
of
Suppliers
Moderately
High
20
22. Sources
of
Firm
Profitability
Firm
Profit
Excellent
SF
&
SI
Profit
for
the
Average
Firm
in
Industry
2
Poor
SF
&
SI
U.S.
Specialty
Non-‐Alcoholic
Beverage
Industry
Excellent
SF
&
SI
Profit
for
the
Average
Firm
in
Industry
1
Poor
SF
&
SI
Industry
1
Industry
2
23. Threats
and
OpportuniMes
Derived
from
Porter's
5
Forces
• Main
OpportuniLes
• Main
Threats
Decreasing
power
of
suppliers
based
on
CompeLLon
within
the
industry
rising
the
knowledge
of
an
Arabica
coffee
due
to
new
entrants
bean
surplus
Coffee
shops
have
low
start
up
costs
12
countries
have
higher
coffee
Increasing
threat
in
instant
coffee
consumpMon
than
the
US
Power
of
buyers
increasing
since
home
Power
of
buyer
shil
as
longer
working
brewed
Robusta
coffee
bean
prices
are
hours
make
caffeinated
products
more
decreasing
necessary
Increased
availability
of
household
Increase
in
coffee
commodity
prices
espresso
machines
reflect
an
increasing
demand
for
the
coffee
industry
as
a
whole
23
24. Table of Contents
1. Strategic History.....................................Slides 3-8
2. Strategic Group Analysis........................Slides
9-12
3. Five Forces Analysis................................Slides
13-23
4. Macroenvironmental Analysis...............Slides
24-30 24
25. Demographic
Main Opportunities Main Threats
Millennials/Gen-Y leading “Baby Boomers” getting older and
demographic spending on leaving workforce
restaurant food and drinks Birthrate is declining and people are
Population expected to grow to having fewer kids.
over 9 billion by 2050
25
26. Technology
Main Opportunities Main Threats
Expansion of broadband and Expansion of internet creates
wireless technology increased corporate visibility
Expansion of mobile internet
technology
26
27. Sociocultural
Main Opportunities Main Threats
“Green Movement” and Push to support local businesses
Sustainability Increase in visibility and critical view
Shift towards more Corporate Social of corporations
Responsibility Consumers become more price
Customers are demanding faster and value conscious
service, faster communication, and a
faster way of life
27
28. Economic
Main Opportunities Main Threats
Overall savings rate falling, Coffee and Diary prices expected
particularly in younger generations to rise around 20% in 2010 and
2011
Ongoing high unemployment in the
United States
28
29. Global
Main Opportunities Main Threats
Taking advantage of Asian markets Hundreds of millions of people
and services world-wide rely on the coffee
Break down of international trade industry for jobs
barriers Break down of international trade
Global education and work skills barriers
improving
Hundreds of millions of people
world-wide rely on the coffee
industry for jobs
Global education and work skills
improving
Increasing consumption of coffee
around the world, particularly in China
29
30. Political/Legal
Main Opportunities Main Threats
Chinese tariffs cut 9.4% overall in Rise of Fair Trade Movements
the past decade Political instability in Columbia and
Central American counties
30
31. Table of Contents
1. Strategic History.....................................Slides 3-8
2. Strategic Group Analysis........................Slides
9-12
3. Five Forces Analysis................................Slides
13-23
4. Macroenvironmental Analysis...............Slides
24-30 31
32. References
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Márquez,
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2010
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2010.
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2010
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Melissa
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2010.
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33
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"Starbucks
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2010.
<h7p://zenobank.com/index.php?
symbol=SBUX&page=quotesearch>.
"Tea
ConsumpMon
StaMsMcs
-‐
Countries
Compared
-‐
NaMonMaster."
NaHonMaster
-‐
World
StaHsHcs,
Country
Comparisons.
Web.
24
Sept.
2010.
<h7p://www.naMonmaster.com/
graph/foo_tea_con-‐food-‐tea-‐consumpMon>.
Web
Staff.
"ENERGY
DRINKS:
Health
Officials
See
Rise
in
Energy
Drink
ConsumpMon
among
Young
Adults
-‐
KSTU."
Fox13now.com
Salt
Lake
City
-‐
KSTU.
17
Aug.
2010.
Web.
24
Sept.
2010.
<h7p://www.fox13now.com/news/kstu-‐energy-‐drinks-‐warning-‐utah-‐
health,
0,4453498.story>.
"YouTube
-‐
Man
Drinking
Fat.
NYC
Health
AnM-‐Soda
Ad.
Are
You
Pouring
on
the
Pounds?"
YouTube
-‐
Broadcast
Yourself.
Web.
24
Sept.
2010.
<h7p://www.youtube.com/watch?v=-‐
F4t8zL6F0c>.
34
39.
Strategy
FormulaLon
Strategy
ImplementaMon
Fit
and
Performance
Vision,
Mission,
Purpose,
Goals,
Mantra
Vision/Mission/Purpose:
Stated
Mission:
“To
inspire
and
nurture
the
human
spirit
–
One
person,
One
cup,
and
One
Neighborhood
at
a
Mme.”
• Our
Coffee
“Has
always
been,
and
will
always
be,
about
quality.”
• Our
Partners
“We
embrace
diversity
to
create
a
place
where
each
of
us
can
be
ourselves.
We
always
treat
each
other
with
respect
and
dignity.”
• Our
Customers
Our
work
goes
far
beyond
fine
coffee.
“It’s
really
about
human
connecMon.”
• Our
Stores
“Our
stores
become
a
haven,
a
break
from
the
worries
outside…It’s
about
enjoyment
at
the
speed
of
life…”
• Our
Neighborhood
“We
take
our
responsibility
to
be
good
neighbors
seriously.”
• Our
Shareholders
–
“As
we
deliver
in
each
of
these
areas,
we
enjoy…success
that
rewards
our
shareholders.”
Vision:
“While
we
are
a
coffee
company
at
heart,
Starbucks
provides
much
more
than
the
best
cup
of
coffee—we
offer
a
community
gathering
place
where
people
come
together
to
connect
and
discover
new
things.
We
are
always
looking
for
innovaMve
ways
to
surprise
and
delight
our
customers.”
-‐
Howard
Schultz
40.
Strategy
FormulaLon
Strategy
ImplementaMon
Fit
and
Performance
Vision,
Mission,
Purpose,
Goals,
Mantra
Goals:
• Become
the
leading
retailer
and
brand
of
coffee
in
each
of
our
target
markets
by
selling
the
finest
quality
coffee
and
related
products,
and
by
providing
each
customer
with
a
unique
experience
• Refocus
on
the
consumer
experience
in
stores
and
our
posiMon
as
a
third
place
between
home
and
work
where
people
can
gather
together
for
human
connecMon
• Achieve
sustainable
growth
in
established
internaMonal
markets
while
at
the
same
Mme
invesMng
in
emerging
markets
such
as
China,
Brazil,
and
Russia
• Focus
on
relevant
informaMon
and
profitable
growth
opportuniMes
through
the
offering
of
new
products
and
pla€orms
• ConMnue
to
be
known
as
a
corporate
leader
in
social
responsibility
Mantra:
The
Third
Place.
41. Table of Contents
• Strategy
FormulaLon
• SOGs:
Vision,
Mission,
Purpose,
Goals,
and
Mantra
• Strategy
as
PosiLon:
Business
Level
Strategy
• Strategy
ImplementaMon
• Skills:
VRIO
Analysis/Core
Competence
Metaphor
• Style:
OrganizaMonal
Culture
Analysis
• Structure:
OrganizaMonal
Structure
Analysis
• Fit
and
Performance
• Fit:
Modified
7S
analysis
• Performance:
Financial
Analyses
43.
Strategy
FormulaLon
Strategy
ImplementaMon
Fit
and
Performance
Porter’s
Strategy
Typology
Type
of
Advantage
DifferenLaLon
Low
Cost
Scope
of
Advantage
Broad
Broad
Broad
Scope
DifferenLaLon
Low
Cost
(Starbucks)
Narrow
Focused
Focused
Scope
Low
Cost
DifferenLaLon
44.
Strategy
FormulaLon
Strategy
ImplementaMon
Fit
and
Performance
Business
Level
Strategy
Analysis
Type
of
Advantage:
DifferenLaLon
Perceived
Uniqueness
of
Product…
• Intense
focus
on
the
experience,
store
atmosphere,
and
quality
service
• Powerful
brand
name:
“grabbing
some
Starbucks”
instead
of
“grabbing
a
cup
of
coffee”
• “It’s
not
just
a
cup
of
coffee.
It’s
Starbucks”
…Leads
to
a
Willingness
to
Pay
a
Premium
Price
• Higher
prices
than
numerous
other
compeMtors
such
as
Dunkin
Donuts
and
McDonalds
• Similar
prices
to
local
and
regional
specialty
shops
such
as
Kaldi’s
and
Lakota
• Numerous
news
and
opinion
arMcles
about
high
product
prices
45.
Strategy
FormulaLon
Strategy
ImplementaMon
Fit
and
Performance
Business
Level
Strategy
Analysis
Scope
of
Advantage:
Broad
Geographic
• Nearly
16,000
retail
stores
in
over
50
countries
Consumers
• Serves
a
variety
of
customers
from
around
the
world,
in
both
rural
and
urban
locaMons,
and
across
many
demographics
Products
• A
variety
of
products
-‐-‐
including
specialty
coffees
and
drinks,
sandwiches
and
pastries,
instant
coffees,
teas,
ice
cream,
alcoholic
products,
and
more
46.
Strategy
FormulaLon
Strategy
ImplementaMon
Fit
and
Performance
Strategy
FormulaMon:
Strengths
and
Weaknesses
Strengths
•
Strong
focus
on
customer
experience
aligns
well
with
Mantra:
“The
Third
Place”
(VMPG/M)
•
Customer
affinity
for
quality
Starbucks
products
has
led
to
strong
brand
idenMficaMon
(Business
Level
Strategy)
•
InternaMonal
development
goals
posiMon
Starbucks
to
take
advantage
of
emerging
markets
(VMPG/M)
•
New
products
have
allowed
Starbucks
to
penetrate
new,
profitable
markets
(Business
Level
Strategy)
Weaknesses
•
Premium
prices
and
price
hikes
drive
less-‐affluent
customers
to
cost-‐leadership
providers
such
as
McDonalds
and
Dunkin
Donuts
(Business
Level
Strategy)
•
Rapid
expansion
has
led
to
over-‐saturaMon
in
U.S.
markets,
causing
Starbucks
to
recently
close
some
outlets
(VMPG/M)
47. Table of Contents
• Strategy
FormulaMon
• SOGs:
Vision,
Mission,
Purpose,
Goals,
and
Mantra
• Strategy
as
PosiMon:
Business
Level
Strategy
• Strategy
ImplementaLon
• Skills:
VRIO
Analysis/Core
Competence
Metaphor
• Style:
OrganizaMonal
Culture
Analysis
• Structure:
OrganizaMonal
Structure
Analysis
• Fit
and
Performance
• Fit:
Modified
7S
analysis
• Performance:
Financial
Analyses
49. VRIO
Framework
Resource/Capability V R I O
WiFi Internet Access
R&D Skills
Ability to Raise Capital
Coffee Brewing Equipment
Human Resource Management
Coffee House Set Up
Employee Compensation
Quality Product Mix
Coffee House Locations
Employee Benefits
Socially Responsible Corporate Image
Buying Power
Number of Coffee Houses
Propensity for Innovation
Core
Competencies
Relationships with Coffee Farmers
Customer Experience
Corporate Leadership & Vision
Renowned Brand
50.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
CC
Metaphor:
In
Every
Starbucks
Cup…
Core
Competencies
End
Products
-‐
Corporate
Leadership
&
Vision
-‐
RelaLonships
with
Farmers
-‐
Propensity
for
InnovaLon
• More
than
16,000
stores
in
over
50
countries
-‐
Customer
Experience
• More
than
30
blends
and
premium
arabica
coffees
• Full
menu
of
coffees,
-‐
Renown
Brand
espressos,
blended
beverages,
smoothies,
and
teas
51. Table of Contents
• Strategy
FormulaMon
• SOGs:
Vision,
Mission,
Purpose,
Goals,
and
Mantra
• Strategy
as
PosiMon:
Business
Level
Strategy
• Strategy
ImplementaLon
• Skills:
VRIO
Analysis/Core
Competence
Metaphor
• Style:
OrganizaLonal
Culture
Analysis
• Structure:
OrganizaMonal
Structure
Analysis
• Fit
and
Performance
• Fit:
Modified
7S
analysis
• Performance:
Financial
Analyses
53.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
OrganizaMonal
Culture
Analysis
54.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
OrganizaMonal
Culture
Analysis
55.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
Strength
OrientaMon:
5
Cohesive
and
Strong
-‐Summary-‐
Starbucks’
culture
is
centered
around
an
obsession
with
coffee.
Ranging
from
partners
to
the
Chief
ExecuHve
Officer,
coffee
is
a
way
of
life
for
every
member
of
the
organizaHon.
From
growing
in
the
mountains
of
Costa
Rica
to
the
final
product
in
your
local
retail
store,
partners
are
oriented
to
the
many
facets
of
coffee
from
training
on.
• “Monthly
Mingle”
events
are
held
to
bring
together
employees
across
retailers
and
encourage
cohesive
and
strong
unity
amongst
all
employees.
• Starbucks
sponsors
over
50
clubs
to
inspire
the
sharing
of
interests
and
to
sMmulate
a
work/life
balance.
– Bowling
League,
China
Club,
SCUBA
Club,
French
Club,
Bike
Club,
Japanese
Club,
and
Parents
Network
are
some
of
the
examples.
• Starbucks’
culture
encourages
the
valuing
of
employees.
Thus,
individual
stores
conduct
internal
recogniMon
programs
to
ensure
appreciaMon
for
hard
work
and
being
a
valuable
team
member
of
Starbucks.
56.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
OrganizaMonal
Culture
Analysis
57.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
Outcome
OrientaMon:
4.5
Focused
on
Performance
-‐Summary-‐
Starbucks
culture
encourages
premium
customer
service.
One
store
manager
claims
he
has
300
locals
frequent
his
store
daily.
He
knows
their
names,
what’s
going
on
in
their
lives,
and
of
course,
their
preferred
choice
of
beverage.
Starbucks
culture
encourages
hard
work
in
the
presence
of
the
creaHon
of
a
relaxing,
comfortable
environment
for
customers.
• Starbucks
is
a
publicly
traded
company
and
has
a
fiduciary
responsibility
to
shareholders
to
earn
a
profit
and
grow
quarterly.
• Starbucks
has
a
strong
sense
of
idenMty
and
unity
amongst
its
employees;
however,
customer
service
and
excellence
in
product
quality
transcend
enjoyment
of
work.
Starbucks
strives
to
achieve
both.
Although,
it’s
always
about
the
customer.
58.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
OrganizaMonal
Culture
Analysis
59.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
Support
OrientaMon:
1
Focused
on
People
-‐Summary-‐
Starbucks
was
founded
with
a
culture
dedicated
to
the
welfare
of
those
who
appreciate
and
respect
the
coffee
bean.
Starbucks’
culture
encourages
partners
to
wake
up
daily
and
head
to
work
hoping
to
do
two
things:
share
great
coffee
with
friends
and
to
help
make
the
world
a
li[le
be[er.
Starbucks
provides
incredible
employee
benefits
from
the
day
you
step
onboard.
Each
compensaHon
package
is
specially
tailored
to
you.
• “The
Starbucks
Total
Pay
package
is
called
“Your
Special
Blend”
because
it’s
just
for
you.
Your
Special
Blend
might
include:
• CompeMMve
pay,
Insurance:
medical,
prescripMon
drug,
dental,
vision,
life,
disability,
Bonuses,
Paid
Mme
off,
ReMrement
savings
plan,
Stock
opMons
and
discounted
stock,
purchase
plan,
AdopMon
assistance,
DomesMc
partner
benefits,
Emergency
financial
aid,
Referral
and
support
resources
for
child
and
eldercare,
A
free
pound
of
coffee
each
week.”
• “It’s
a
lot
like
working
with
friends.
We
call
each
other
“partners.”
We
respect
our
customers
and
each
other.
We’re
dedicated
to
serving
ethically
sourced
coffee,
caring
for
the
environment
and
giving
back
to
the
communiMes
where
we
do
business.
And
we’re
sMll
small
enough
to
remember
your
name
when
you
walk
in
the
door.”
60. Table of Contents
• Strategy
FormulaMon
• SOGs:
Vision,
Mission,
Purpose,
Goals,
and
Mantra
• Strategy
as
PosiMon:
Business
Level
Strategy
• Strategy
ImplementaLon
• Skills:
VRIO
Analysis/Core
Competence
Metaphor
• Style:
OrganizaMonal
Culture
Analysis
• Structure:
OrganizaLonal
Structure
Analysis
• Fit
and
Performance
• Fit:
Modified
7S
analysis
• Performance:
Financial
Analyses
62.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
OrganizaMonal
Structural
Analysis
Organic
Structure
Dimension
of
Structure
MechanisLc
Structure
Formalization
The extent to which rules
Few
(formal)
wri7en
rules
exist in written form and Lots
of
(formal)
wri7en
and
regulaMons;
more
cover a wide range of rules
and
regulaMons;
“by
informal
approach.
contingencies. the
book”
approach.
1 2 3 4 5 6 7 8 9 10
—Although
Starbucks’
culture
is
one
of
employee,
or
“partner”,
empowerment
and
saMsfacMon,
there
sMll
exists
much
literature
on
policies
and
pracMces
for
the
corporaMon.
—With
such
a
large
internaMonal
company,
such
standards
need
to
be
in
place
to
keep
the
machine
running
smoothly
and
consistently
in
every
store.
63.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
OrganizaMonal
Structural
Analysis
Organic
Structure
Dimension
of
Structure
MechanisLc
Structure
Centralization
Decision
making
is
The extent to which decisions Decisions
are
made
at
or
delegated
to
empowered
are made at or near the top of near
the
top
of
the
individuals
at
lower
levels
the organization’s hierarchy. organizaMon.
in
the
organizaMon.
1 2 3 4 5 6 7 8 9 10
—Again,
due
to
their
large
size,
Starbucks
requires
a
more
mechanisMc
approach
in
dealing
with
decisions
and
bureaucracy
in
order
to
sustain
a
stable,
consistent
image
internaMonally.
—”In
response
to
a
rash
of
unhealthy
hallway
conversaMons
that
were
undermining
the
effecMveness
of
Starbucks
project
teams
in
the
early
2000s,
then-‐CEO
Orin
Smith
posted
“EffecMve
MeeMng
Rules”
signs
in
every
conference
room.”
64.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
OrganizaMonal
Structural
Analysis
Organic
Structure
Dimension
of
Structure
MechanisLc
Structure
Hierarchy of Authority
The extent to which there are
many levels in the
Flat,
horizontal
hierarchy.
organization’s hierarchy. Tall,
verMcal
hierarchy.
1 2 3 4 5 6 7 8 9 10
—Starbucks
has
a
fairly
general,
balanced
hierarchy
of
authority
that
leans
slightly
to
the
mechanisMc
side,
which
is
understandable
for
a
large
company
that
sMll
holds
the
interests
of
lower
level
employees
close
at
heart.
—One
interesMng
caveat
in
their
hierarchy
is
their
inclusion
of
“The
Customer”
on
their
organizaMonal
chart.
65.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
Company
Hierarchy
CEO
Level
1
Howard
*
“The
Starbucks
culture
believes
}
Schultz
there
is
only
one
organizaMonal
chart
that
truly
ma7ers
to
a
customer-‐first
business,
and
that
Board
of
Directors
Level
2
one
has
every
employee
symbolically
reporMng
to
the
real
Upper
Management
Level
3
boss—the
customer.”
Regional
(Middle)
Managers
Level
4
Store
Managers
Level
5
Shil
Supervisors
Level
6
Clerk
Supervisors
Level
7
Baristas
Level
8
66.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
OrganizaMonal
Structural
Analysis
Organic
Structure
Dimension
of
Structure
MechanisLc
Structure
Specialization
Employees
perform
a
wide
The extent to which tasks are Each
employee
performs
range
of
tasks
in
their
job;
subdivided into separate jobs only
a
narrow
range
of
fluid
roles;
overlapping
tasks;
rigid
roles;
task
are
tasks.
separated
with
li7le/no
1 2 3 4 5 6 7 8 9 10
overlap.
—Whether
a
barista,
clerk,
or
manager,
each
task
is
clearly
defined
and
rigid
to
the
employee.
—SpecializaMon
helps
their
stores
funcMon
more
efficiently
and
smoothly
because
each
employee
has
their
roles
solidified,
allowing
their
coffee
to
be
delivered
to
customers
in
the
quickest
way
allowable.
67.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
OrganizaMonal
Structural
Analysis
Organic
Structure
Dimension
of
Structure
MechanisLc
Structure
Standardization
People
are
free
to
create
The extent to which things are OrganizaMon
consistently
and
introduce
new
ideas
done the same, time after time. and
rouMnely
does
things
which
means
that
their
the
same
way
Mme
aler
organizaMons
are
less
Mme.
likely
to
rouMnely
do
1 2 3 4 5 6 7 8 9 10
things
the
same
way
Mme
aler
Mme.
—Starbucks’
unique
menu
and
drink-‐building
style
allows
customers
to
fully
customize
their
order,
which
leads
to
freedom
for
the
baristas,
and
customers,
to
make
whatever
drink
they
desire.
—Their
menu
and
coffee
offered
fluctuates
seasonally,
and
they
also
offer
a
“Blend
of
the
Day”
which
varies
day-‐to-‐day.
68.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
Structural
Dimensions
Summary
6.2
Moderately
MechanisLc
—Although
Starbucks’
culture
is
fun-‐loving
and
free
spirited,
the
overall
management
takes
the
form
of
Moderately
MechanisMc.
This
became
a
requirement
due
to
the
company’s
rapid
expansion
and
their
now
massive,
internaMonal
stature.
Starbucks
Center
–
Sea7le,
Washington
69.
Strategy
FormulaMon
Strategy
ImplementaLon
Fit
and
Performance
Strengths
and
Weaknesses
DisMlled
from
Strategic
ImplementaMon
Strengths
Weaknesses
• Corporate
Leadership
and
Vision
• Service
Speed
(VRIO)
(CC)
• Product
Prices
(VRIO)
• RelaMonships
with
farmers
(CC)
• Stuck-‐in-‐the-‐Middle
with
change
• Propensity
for
innovaMon
(CC)
(OC)
• Customer
Experience
(CC)
• Renown
Brand
(CC)
• Strong
sense
of
idenMty
(OC)
• OrganizaMon’s
focus
on
people
(OC)
70. Table of Contents
• Strategy
FormulaMon
• SOGs:
Vision,
Mission,
Purpose,
Goals,
and
Mantra
• Strategy
as
PosiMon:
Business
Level
Strategy
• Strategy
ImplementaMon
• Skills:
VRIO
Analysis/Core
Competence
Metaphor
• Style:
OrganizaMonal
Culture
Analysis
• Structure:
OrganizaMonal
Structure
Analysis
• Fit
and
Performance
• Fit:
Modified
7S
analysis
• Performance:
Financial
Analyses
71.
Strategy
FormulaMon
Strategy
ImplementaMon
Fit
and
Performance
Fit:
Modified
7S
Analysis
Strategy
Structure
Style
Super
Ordinate
Goals
Systems
Skills
Staff
72.
Strategy
FormulaMon
Strategy
ImplementaMon
Fit
and
Performance
Fits
Fit:
Modified
7S
Analysis
Super
Strategy
Ordinate
Structure
Style
Skills
Goals
Excellent
Strategy
Good
Super
Ordinate
Goals
Average
Structure
Poor
Style
Skills
73.
Strategy
FormulaMon
Strategy
ImplementaMon
Fit
and
Performance
Modified
7S
Analysis:
Best
Fits
• Strategy
and
Super
Ordinate
Goals(Excellent)
– Diverse
work
force
is
encouraged
and
helps
a7ract
customers
in
diverse
markets.
– Providing
a
high
quality
product
that
leaves
customers
saMsfied
and
a7ributes
to
repeat
customers
and
higher
profits.
• Skills
and
Super
Ordinate
Goals
(Excellent)
– Every
barista
hired
receives
at
least
24
hours
of
training
in
the
first
two
to
four
weeks.
– Training
also
includes
a
four-‐hour
workshop
called
“Brewing
the
Perfect
Cup”.
74.
Strategy
FormulaMon
Strategy
ImplementaMon
Fit
and
Performance
Modified
7S
Analysis:
Worst
Fits
• Super
Ordinate
Goals
and
Style
(Average)
– Strong
value
for
providing
partners
with
above
average
benefits.
– Management
has
decided
in
recent
years
to
cut
back
on
benefits
to
partners
due
to
the
economy.
• Strategy
and
Style
(Average)
– Management
communicate
to
partners
about
major
business
decisions
that
affect
the
company.
– Partners
are
not
feeling
the
benefits
of
the
cost
cu…ng
and
increases
in
efficiency
as
much
as
the
upper
management
and
stockholders.