MBA RTU Candidates: Group 1 Presentation

1. Starbucks Corporation (2009)
Rizal Technological University
Graduate Studies
Presentors:
Carlo D. Acosta
Silvino M. Omboy Jr.

2. VIEWPOINT
Howard Schultz
President & Chief Executive Officer
Starbucks Corporation

3. STATEMENT OF THE PROBLEM
 Basing on the company income statement, there is a decline
in the net income of the corporation from $672,638 M in Sept
2007 to $315,500 M in Sept 2008. This is due to an increase in
competition with rival firms like McDonald’s, 7-Eleven and
Dunkin Donuts.

4. STATEMENT OF OBJECTIVES
 Increase in net income of the company yearly from 2009 to
2017 by 10% and to increase the market share of the
company in the coffee drinking population thus eliminating or
decreasing competition from rivals.

5. Financial Ratios 2008 2009
Revenue 10,383 9,775
Gross Margin % 19.2 55.8
Operating Income (USD Millions) 504 562
Net Income (USD Millions) 316 391
Net Margin % 3 4
Return on Assets (ROA) % 5.73 7
Return on Equity (ROE) % 13.2 14.1
Earnings Per Share (EPS 0.43 0.52
Cash Conversion Cycle 25.4 43.5
Current Ratio 0.8 1.3
Quick Ratio 0.3 0.18
Debt/Equity 0.22 0.18
Revenue Growth % 10.3 -5.9

6. AREA OF CONSIDERATION
STRENGTHS
 A.1 Location
 Store location and design: Starbucks has stores in the most prime and strategic location
across the world. Their stores are distributed to premium, high-traffic, high-visibility
locations near number of places, in retail areas, offices, universities, and in some rural and
off-highway locations across the globe
 A.2 Quality Assurance
 Product Quality: They give utmost importance to the quality of their products and avoid
standard quality for greater production output
 A.3 Operations
Retail operations: Starbucks sell its packed coffee products, iced beverages and
merchandizes through large retailers.
 Global Brand: Starbucks has a substantial geographical presence across the world and
maintain a 36.7% market in the United States. It has operations in over 60 nations.
Starbucks is the most familiar brand in the coffee restaurant sector and is ranked 91st in
the best global brands of 2013.
Internal Environmental Factors (Micro)

7. STRENGTHS
 A.4 Human Resources
 Manpower. Starbucks is known for its highly knowledgeable staff. They are the key
assets of the company and they are given with better remunerations like stock
options and retirement benefits. It is rated as one of the 100 best places to work
by Fortune Magazine.
 Multitude Product Mix: Starbuck portfolio of products accommodates to all age
groups and in consideration with the demographic factors.
 A.5 Research and Development
 Technology: Starbucks capably leverages technology with its “Starbucks App’ in
apple and android devices. They make substantial investments in technology to
upkeep their growth every year.
 A.6 Corporate Social Responsibility
 Return costumers due to CSR Initiatives: Their stores are locale friendly, they
advocate recycling and reducing waste.
 Consumer loyalty: Starbucks has cult following status among patrons and they
have also applied loyalty programs to drive trustworthiness with the employment
of the Starbucks Rewards programs and Starbucks Card.
Internal Environmental Factors (Micro)

8. WEAKNESSES
 A.7 Financial Environment
Product Cost: Starbucks does differentiate their goods with high quality
couple with the ‘Starbucks Experience’, in times of economic slowness,
customers go switching costs to other player’s products with lower prices to
avoid paying a premium.
 A.8 Operations
Self-Competition: Due to aggressive growth and overload due to
overcrowding in the market leads to aggressive same-brand competition.
diminishes long term growth targets of Starbucks. In the United States alone
Starbucks operates 8078 stores.
Overdependence in the US Market: In line with self-cannibalization of the US
market. Starbucks generates an enormous fraction of its total revenue from
US and this makes it affected to prospects of the US economic situation.
Negative image of large corporation: Like other large corporation, Starbucks
does come under greater scrutiny and have to invest in CSR. It also maintain
tight control over labor practices.
Internal Environmental Factors (Micro)

9. OPPORTUNITIES
 B.1 Politico-Legal Environment
 Emerging Markets: The increase satiety and self-competition in the US market makes its
international strategy even more significant. The Philippines also sees a huge boom in Starbucks
stores across the country. It can weight its size, experience, financial prowess and efficiencies to
add new market share.
 B.2 Economic and Technological Environment
 Technological advances: Starbucks has leveraged the use of mobile devices applications and
the social media. It has partnership with Square, a mobile payments app fully integrated with its
Starbucks app.
 Rise of Social Media: Social media has now been a major player in advertising major brands like
like Starbucks. Facebook alone has billion of users which can translate to hefty profits if utilized
properly
 Socio-cultural Environment
 Product mixes and offerings: Starbucks recently started to expand product mix by venturing
into the tea and fresh juice product offerings with a mergers and acquisition. This provides
significant opportunities for Starbucks products and product-lines.
External Environmental Factors (Macro)

10. THREATS
 B.4 Economic and Technological Environment
Competition: The biggest threat that Starbucks existence is with its market being at a
a mature status. Increased pressure on Starbucks from its competitors like Dunkin
Brands, McDonalds, Coffee bean, Pete’s Coffee, mom and other specialty coffee
stores. Dunkin Brands had at its main threat in the US market by trailing Starbucks
with a 24.6% market share.
First World Coffee Market Saturation: Starbucks gets a significant amount of its
revenue from the developed world where there is high market saturation
G7 Countries Economy: In an ever more economically integrated world, an economic
economic crisis like the one in 2008-2009 may have a trickle-down effect from the
developed markets to the developing markets. This threat would hurt revenues for
Starbucks as people shift away from expensive product mixes to stay in cheaper mixes
during economic difficulty.
External Environmental Factors (Macro)

11. B.5 Natural Environment
 `Coffee Market Price Volatility: There has be substantial fluctuations in the market prices
of high quality coffee beans, which is beyond control of Starbucks.
 `Environmental Areas of Concern. Being a large company, Starbucks uses considerable
amount of clean drinking water around the globe. This will come into conflict
to the developing world, whereas access to clean water is very limited.
 B.6 Socio-cultural Environment
 Market tastes and lifestyle: The shift towards more healthy products, accounting risk of
coffee culture being just a craze represent a threat for Starbucks going stable in to the
 The world coffee culture: Starbucks coffee culture may not be widely accepted in other
countries as part of their international expansion strategy. East Asians prefer tea over coffee.
 B.7 Politico-Legal Environment
 Legal Constraints in Emerging Markets: The different political and legal institutions in the
third world sphere varies incredibly different. For example China which is a big market for
premium coffees has unstable regulatory environment.
External Environmental Factors (Macro)

12. ALTERNATIVE COURSES OF ACTION (ACA)
 Aggressive international store openings.
 Set-up specialized line of coffee at an affordable price

13. QUALITATIVE ANALYSIS
ACA #1 ACA#2
Advantages Advantages
1. Achieve objective - More
international stores to be open
2. Starbucks is a popular
international firm, gaining more
followers in east Asia's specifically
China and India.
1. Achieve objective - create new blend
at low price
2. Exploration of the untapped market.
Disadvantages Disadvantages
1. Bigger capital expenditures
2. More Political and legal
international institutions to follow.
1. large cost on new blend - more
materials to be use and need to test it
before it sold
2. More sourcing activities for raw
materials and Suppliers.

14. QUANTITATIVE ANALYSIS
Decision Matrix
ACA#1 ACA#2
a.) Market Share 3 2
b.) Profitability 2 1
c.) Sustainability 2 1
d.) Cost efficient 1 1
e.) Speed of implementation 3 2
Total 11 7
Legend: 1 = Good 2 = Better 3 = Best

15. CONCLUSION
Based on the analyses of the qualitative and quantitative data, it
can be concluded that:
1. ACA#1 is a better option than ACA#2. Therefore, Increasing
international presence and exposure is preferable than
developing a new blend of coffee/product line. This is taking
advantage of Starbucks’ popularity worldwide.
2. Increase worldwide presence can positively impact the net
income of the company overtime.

16. PLAN OF ACTION
Activities Person Responsible Time Frame
1. Meeting with the Executive team Howard Schultz - President and CEO, Cliff Burrows
- President (SBUX US), Martin P. Coles - President
(SBUX Int'l), Arthur Rubin field - President (SBUX
Global Development)
3 days
2. Creation of FS, Strategic plan,
marketing plan and financial plan
Howard Schultz - President and CEO, Cliff Burrows
- President (SBUX US), Martin P. Coles - President
(SBUX Int'l), Arthur Rubinfield - President (SBUX
Global Development)
20 days
3. Budgetary review of Executive team Howard Schultz - President and CEO, Cliff Burrows
- President (SBUX US), Martin P. Coles - President
(SBUX Int'l), Arthur Rubinfield - President (SBUX
Global Development)
3 days
4. Plan Implementation Howard Schultz - President and CEO, Cliff Burrows
- President (SBUX US), Martin P. Coles - President
(SBUX Int'l), Arthur Rubinfield - President (SBUX
Global Development)
Continous
5. Program Evaluation and review Internal Audit Department Continous

17. REFERENCES
 David, F. (2012). Strategic Management, Concept and Cases 13th Edition. New Jersey.
Prentice Hall.
 Dyck, B. and Neubert M. Management (2016): Current Practices and New Direction.
Boston: Cengage Learning.
 Jones, G. and George, J. (2016). Contemporary Management 9th Edition. New York: Mc-
Graw Hill Education.
 www.starbucks.com
 www.starbucks.com/companyinformation
 www.starbucks.com/buisnessethicsandcompliance
 www.starbucks.com/boardofdirectorsbiography
 www.starbucks.com/diversityandinclusion
 Starbucks’10-K Form submissions to the United States’ SEC.