This Case Study Is In Regards To Starbucks' International Expansion Strategy. It Describes The Advantages And Risks Which May Be Caused By Expansion To Europe

6965 words - 28 pages

Starbucks CoffeeOvervalued Stock Despite Strong GrowthProspectsBusiness Analysis andSecurity ValuationPrepared by Erik Eselius, Jon D. Taylor, Olivier te Boekhorst, and Peter WintersFor Professor Charles LeeJohnson Graduate School of Management, Cornell UniversityApril 29, 1997TABLE OF CONTENTSTABLE OF C 2EXECUTIVE SUMMARY........................................................................................................................ 3OVERVIEW OF STARBUCKS............................................................................................................... 4Business Ove 4Recent Stock Performance.............................................................................................................. 4COMPETITIVE ANALYSIS .................................................................................................................... 5Rivalry Among Existing Firms.......................................................................................................... 5Threat of New Entrants .................................................................................................................... 6Threat of Substitute Products........................................................................................................... 6Bargaining Power of Buyers............................................................................................................. 7Bargaining Power of Suppliers......................................................................................................... 7STARBUCKS STRATEGY..................................................................................................................... 8Channels .......... 8Product Diversification ..................................................................................................................... 9Human Res 10Retail Outlets.. 10ACCOUNTING ANALYSIS................................................................................................................... 12Discussion of Key Items in Financial Statements .......................................................................... 12Ratio Analysis: Profitability and Productivity.................................................................................. 13Earnings 15Bankruptcy Prediction .................................................................................................................... 17EBO VALUATION. 18EPS Forecasts ............................................................................................................................... 18Long-term Growth Rate.................................................................................................................. 18Cost of Equity. 18Dividends ....... 18Target ROE.... 18Stock Value .... 19DISCOUNTED CASH FLOW ANALYSIS............................................................................................ 20Cost of Capital 20Sales Drivers.. 21Capital Expenditures...

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