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Stratergic Analysis

4721 words - 19 pages

Strategic Analysis Of Starbucks Corporation
Strategic Analysis Of Starbucks Corporation
By: Nithin Geereddy (ID: 80842082)

Strategic Analysis Of Starbucks Corporation
1) Introduction:
Starbucks Corporation, an American company founded in 1971 in Seattle, WA, is a premier roaster, marketer and
retailer of specialty coffee around world. Starbucks has about 182,000 employees across 19,767 company
operated & licensed stores in 62 countries. Their product mix includes roasted and handcrafted high-
quality/premium priced coffees, tea, a variety of fresh food items and other beverages. They also sell a variety of
coffee and tea products and license their trademarks through other channels such as licensed stores, grocery and
national foodservice accounts. 1 Starbucks also markets its products mix with other brand names within its
portfolio of companies, which include Teavana, Tazo, Seattle's Best Coffee, Starbucks VIA, Starbucks Refreshers, Evolution Fresh, La Boulange and Verismo. Starbucks had total revenue of $14.89 billion as of
September 29 th , 2013.
2
2) External Environment Of The Retail Market For Coffee & Snacks:
2.1) Industry Overview and Analysis:
Starbucks primarily operates and competes in the retail coffee and snacks store industry. This industry
experienced a major slowdown in 2009 due to the economic crisis and changing consumer tastes, with the
industry revenue in the US declining 6.6% to $25.9 billion. Before this, the industry had a decade of growth
consistent. Due to the economic slump, consumers spent less on luxuries like eating out, choosing to purchase
low-price items instead of high-priced coffee drinks due to shrinking budgets. 3 The industry grew at a low
annualized average growth rate of 0.9% from 2008 till 2013 with current industry revenues at $29 billion in the
US. The industry is now forecasted to grow at an annualized rate of 3.9% over the next five years, with a potential
to reach $35.1 billion revenues in the US. This growth would be mainly driven by an improving economy,
increase in consumer confidence and expanding menu offerings within the industry. Starbucks dominates the
industry with a market share of 36.7%, Dunkin Brands with 24.6% and other competitors like McDonalds, Costa
Coffee, Tim Horton's etc. taking the rest as shown in Appendix 1.4
2.2) Industry Life Cycle and Market Share Concentration:
This industry is in a mature stage with a medium level concentration. Starbucks and Dunkin Brands make up
more than 60% of the market share (Appendix 1), giving them considerable market power in determining industry trends. Industry Structure is given in Appendix 3.
2.3) Industry Demand Determinants and Profitability Drivers:
The industry's demand for premium coffee and snack products are mainly driven by a number of factors which include disposable income, per capita coffee consumption, attitudes towards health, world pricing of coffee and
demographics. This industry is highly sensitive to the macroeconomic...

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