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GOING GLOBAL FAST

Starbucks Coffee

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Group One

Members

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Presentation Contents

1. Company Profile

2. Company Performance

3. SWOT & Industry PEST Analysis

4. Profile of USA, Japan, and China Operations

5. Conclusion6. Q&A

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Company Profile

Starbucks Corporation engages in the purchase, roasting, and sale of whole bean coffees

worldwide. It offers brewed coffees, Italian-style espresso beverages, cold blended

beverages, various food items, and a selection of premium teas, as well as beverage-

related merchandise and equipment, through its retail stores. In addition, Starbucks

Corporation produces and sells ready-to-drink beverages, which include bottled

beverages, espresso drinks, chilled cup coffees, and ice creams. Its brand portfolio

includes Starbucks, Seattles Best Coffee, Tazo, Frappuccino, Starbucks DoubleShot,

Starbucks Discoveries, Starbucks super-premium Tazo Tea, and Starbucks super-

premium. As of September 27, 2009, the company operated 8,800 retail stores.

Starbucks Corporation was founded in 1985 and is based in Seattle, Washington.

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5 year stock performance

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SWOT ANALYSIS

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Strengths

Well-recognized Brand

Having made public since 1982, The Starbucks coffee brand is the most

well recognized coffee brand in the world. With its strong brand awareness

from its consumer, Starbucks coffee even has its own loyal consumers.Branches Everywhere

The expansion of so-called blanketing the area with stores proven to be

succeeded and has made this coffee shop ubiquitous and has increased the

level of satisfaction of its consumers.

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Strengths

Attractive, Comfortable and Entertaining Stores

Well-equipped with comfortable chairs, wireless internet connections, and

even selection of music, make Starbucks as one of the coziest hangout place for

having a discussion with friends, searching for inspiration a and even rendezvousspot.

Innovative Ways to Attract Consumers

Innovations on its products including Technology Innovations, ex: Starbucks

Express, new varieties of coffee and pastries each month and also have a special

service such as the ability to burn your own music CD from the sample online music

you hear in the counter.

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Weaknesses

Expensive Price

Being positioned as a premium coffee brand, an average price of a cup of

Starbucks coffee is considerably expensive. $3 for a cup of coffee will make its price-

sensitive buyer will look for other brand that is less cheaper but offer the same value(ex: Coffee Bean & Tea Leaf, 85 degree).

High Employee Turnover

Nowadays, working in Starbucks has not been the greatest experience ever

again. Since the pay of the workers doesntcome close with the daily workload they

have to handle. This thing will also affecting on Starbucks reputation. With their

premium brand positioning, they supposed to have delivered its employee a bettersalary.

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Opportunities

Strong brand image in customer mind about

coffeeshop

Fastest global brandBest Global Brand ( 90th

place in 100 Global Brand Rank 2009 )

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Opportunities

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Opportunities

Operates 1,200 stores build overseasplenty room

to grow the business

Opening stores in Vienna, Zurich, Madrid, Berlin,

Jakarta, Mexico, Puerto Rico - new opportunities to

expanding to other countries and new target market

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Threats

Target of terrorism, as a symbol of free-market capitalism.

Self cannibalismbecause so many stores close together

Experience saturated and mature market

in U.S Growing competition in rival coffee chain.

Demographic shiftbaby boomer 90 to future consumers

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INDUSTRY PEST ANALYSIS

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Industry PEST Analysis

Political Influences Relationships between coffee producing nations and US

State & Local government controls

Economic Influences Constant demand for food and beverages

Changes in disposable income could influence purchase levels

Social Influences Consumer preferences could shift from coffee to other beverages

Technological Influences Use of technology can improve operational efficiencies

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USA

Regional Operations Profile

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USA Operations

Starbucks Corporation is an international coffeehouse that has

built one of the world's most powerful and recognizable brands

upon high-quality coffee and the unique "Starbucks

Experience."

Starbuckshas sought to capitalize on its growing popularity

through expansion; the addition of over 1,500 stores in just over

a year brought its total store count to over 16,600 in 2008. In

fiscal 2008, the company's stores (retailer and licensed)generated US$ 10.4 billion in revenue

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USA Operations

Self-Cannibalization Risk

An additional challenge facing Starbucks may

be its own dominance - with a Starbucks on

every street corner in some parts of its core U.S.

market and an average of 8.5 new locations

opened weekly in the country.

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USA Operations

Self-Cannibalization

Starbucks percentage of new stores growth

In 1999 it had 2,000 stores but in 2007 it was pushing a 10,000company owned stores mark. Lets put this in perspective: in

1999 Starbucks opened 447 stores - 1.8 stores per working day;

in 2007 that number more than tripled to 1,403 stores a year -

5.5 stores per working day.

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USA Operations

Economic Recession

With the current economic conditions, Starbucks facessignificant headwinds. While past concerns over commodities

prices, particularly coffee beans and milk, have subsided, a shift

in consumer spending triggered by a global economic recession

may decrease sales in the coffeehouse market in general.

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USA Operations

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USA Operations

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USA Operations

Starbucks has set the following financial and operational targets for fiscal 2010:

The company is targeting revenue growth in the low-to-mid single digits,

driven by modestly positive comparable store sales, a 53rd fiscal week, andapproximately 300 planned net new stores.

Starbucks is targeting approximately 100 net new stores in the U.S. and

approximately 200 net new stores in International markets. Both the U.S.

and International net new additions are expected to be primarily licensed

stores.

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USA Operations

Starbucks outlook on the U.S. operating margin has further improved; the company is now

targeting full-year operating margin improvements for both the U.S. segment and the

International segment (excluding restructuring charges) of 200 to 250 basis points. The CPG

segment margin is expected to remain in its current range of 35% to 40%. The cumulative result

of these expected margins is a consolidated non-GAAP operating margin that is anticipated toreach double digits.

Capital expenditures are expected to be in the range of $500 million to $550 million.

Approximately half of this amount will be allocated to renovations and store equipment

upgrades, one quarter to systems upgrades, and one quarter to new stores and other capital

investments.

Starbucks expects cash flow from operations to be approximately $1.4 billion, and free cash flowof approximately $900 million.

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JAPAN

Regional Operations Profile

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Japan Operations

For the Japanese, tea is a traditional bracing drink during a day,

although it does not mean that there is no demand for coffee.

Japan is the 3rd biggest importer of coffee in the world(2008)

=> Japan a good market for coffee industries

Japan approach to Japaneses life was a huge challenge for

Starbucks. Different tastes, cultural like smoking and Japanese

fluctuating economymade Starbucks to face real problems

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Japan OperationsThe trend for smoking in Japan is well known. Many

people smoke and expect to be able to smoke in the

restaurants, pubs and coffee shops.

Starbucks became a very popular place among non-

smoking females who wanted to drink their coffee in

peace away from smoke and crowd

Moreover, the policy of Starbucks

was to be everywhere and do not let

the customer to cross the street. What

is more, people were surprised by theamount and location of Starbucks

stores. The stores are located very

close to themselves

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Japan Operations

The Japanese perfection and hard-working, a huge market

potential for coffee in Japan. Big population and fast lifestyle

attract the Japanese to drink more coffee instead of tea which is

already well known. Coffee company has to be well preparedand offer something more than just an average taste coffee

Starbucks had an experience on other non American markets

and is known worldwide. The expansion was quite risky,

Starbucks assumed that they do not have to localize Starbucksand its goods on the Japanese market

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Japan Operations

Starbucks Japan's fiscal Q1 pretax profit (quarter ended June 30) rose 9.4%

to 1.32 billion yen ($11.1 million), driven mostly by expanded food sales. Its

food menu was updated to match local tastes better, and also to capitalizeon the fact that 80% of customers consume in-store, whereas the same

percentage of customers take-out in the U.S. The main reason for Starbucks

Japan's difficulties is due to intense competition coming not only from rival

coffee shops, but also from convenience stores and vending machines.

Japan is Starbuck's second largest market with 630 stores andplans for 1,000 by 2010

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Japan Operations

A "local" strategy it implemented last year has

paid off nicely so far but why ruin a good thing

by putting pressure on the firm to expand atthat rate compared to its 50-75 new store range

over the past two years. Starbucks Japan

currently has 624 stores.

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Japan Operations

The market is not quite saturated and the brand

continues to grow.

Besides the introduction of Japanese-style

drinks, the company has significantly expanded

its food offerings, including a special line

of Wellnesssandwiches.

http://www.starbucks.co.jp/food/sandwich.htmlhttp://www.starbucks.co.jp/food/sandwich.htmlhttp://www.starbucks.co.jp/food/sandwich.htmlhttp://www.starbucks.co.jp/food/sandwich.htmlhttp://www.starbucks.co.jp/food/sandwich.html

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Japan Operations

Moreover Starbucksmay be on the way toextending itself into Japan's high-end cafemarket.

Opening of a luxury Starbucks Cafein Tokyo'sRoppongi Hills is imminent, and that the poshnew shop is part of a Japan-only effort to

strength the brand's competitiveness.

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CHINA

Regional Operations Profile

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China Operations

Starbucks eyes China as next major market

China, tea-drinking country will be 2nd home market for Starbucks after U.S.

It's going to be a huge opportunity for Starbucks.

The first Starbucks store located in mainland China Beijing in Jan of 1999

through a licensing agreement with Mei Da Coffee Co.Ltd.

It has also opened in the China cities such as Changzhou, Chengdu,

Chongqing, Dalian, Dongguan, Foshan, Hangzhou, Kunshan, Nanjing, Ningbo,

Qingdao, Shaoxin, Shenyang, Shenzhen, Suzhou, Tianjin, Wuxi, Wuhan and

Xian .

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China Operations

Customers in China have embraced the high-quality arabica coffee,

personalized handcrafted beverages and the unique Starbucks Experience

offered in Starbucks stores. And Coffee represents change in a new western

lifestyle and its becoming more popular for the young people in China. Starbucks shares our coffee passion and expertise with customers in China

by encouraging them to sample, savor and enjoy its premium coffee.

At the end of the second quarter of fiscal 2009, there are more than 690

Starbucks locations throughout Starbucks Greater China, which includes the

Peoples Republic of China, Hong Kong, Macau and Taiwan.

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China Operations

Starbucks will see China become the company's next major market after the

United States in the near future. "It's absolutely very, very important. This has

really become our second home market," said Wang Jinlong, the company's

head for Greater China. Wang said profit contributions from the rapidly growing

Chinese market more than doubled in 2009. Starbucks Chief Executive HowardSchultz said earlier this month he saw the potential for thousands of stores in

China. Starbucks, whose current 2010 forecast calls for 100 net new stores in the

United States and around 200 net new international cafes, has nearly 700 cafes

in China. Starbucks also raised its financial forecasts for 2010, a sign a year-long

turnaround effort is boosting margins and putting it back on track for growth.

Source: Reuters Nov 24, 2009

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CONCLUSION

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Conclusion

Starbucks is going to be a larger company 3, 5, and 10 years from

now. The main reason Starbucks will grow is because coffee and

tea are both enormous markets, domestically and globally.

Second, Starbucks has low penetration rates in terms of thenumber of locations it has, especially in the BRIC countries.

Finally, Starbucks has nice potential for growth in packaged

coffee, ready to make beverages, and the instant coffee

markets, especially internationally.http://seekingalpha.com/article/172178-why-starbucks-will-grow

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Q & A