asmo company project / starbucks

ASMO Company ProjectStarbucks CoffeeWOR1LE001B-4 1 December 2011

A presentation by…

Julia Nykänen

Annika Nuutinen

Paula Tuppurainen

Leban Ibrahim

Henna Hiltunen &

Anna Winschel

STARBUCKS COFFEE™

Business description

Industry

Business strategy

Marketing

Marketing communication

Finance

I N T H I S P R E S E N T A T I O N. . .

B U S I N E S S D E S C R I P T I O N

W H A T I S S T A R B U C K S ?

Founded in Seattle, 1971

International coffee house chain

Lead by Howard Schultz

Goal – “to be one of the most inclusive companies globally, working toward full equity, inclusion and accessibility”

Ethics are important – working closely with farmers

Coffee/consumer foodservices industry

☞ Premium coffee, tea and food (sweet & salty)

☞ Focused on customer experience – not just coffee!

☞ Owns other brands☞ Tazo© Tea

☞ Seattle’s Best Coffee®

☞ Starbucks VIA® Ready Brew

W H A T I S S T A R B U C K S ?(CONT)

S T A R B U C K I N T E R N A T I O N A L L Y

☞ 17,009 stores in 55 countries

☞ Largest markets are Japan, UK and China

☞ The first Starbucks location outside North America opened in Tokyo, Japan, in 1996

☞ Starbucks entered the U.K. market in 1998

☞ The company plans to expand to 1,500 stores in China by 2015.

☞ Closing 70% of its Australian stores.

☞ Focus on profitable growth and expand into world’s fastest growing economies.

☞ Was buying out competitor’s leases.☞ Establish several prime locations in a

small geographical area.

M E T H O D S

☞ Effective way to take advantage of all communication channels.

☞ Teams that report to heads of the organization other than the primary supervisor.

☞ Successful communication upward, downward, and with its employees.

☞ Contribute freely to the work☞ Starbucks website☞ Newsroom☞ Social networks☞ Transparent image

O R G A N I Z A T I O N A L S T R U C T U R E

Matrix structure

T H R E E – R E G I O N S T R U C T U R E

☞ First Starbucks Seattle, Washington, on March 30, 1971

☞ From 1971–1976, the first Starbucks was at 2000 Western Avenue relocated to 1912 Pike Place

☞ 1984 owners purchasing PEETS & 1987

selling the chain to Schultz's Il Giornale

☞ Inspiration source entrepreneur Alfred Peet

H I S T O R Y

H I S T O R Y (CONT)

Remarkable locations outside the U.S. . . .

First store outside the U.S.

CLOSURES:

☞ Israel, 2004☞ Australia (61/84 stores), 2008

Original brown logoused 1971-87

Green logoused 1987-2010,still used as a secondary

Redesigned logo usedfrom 2011

S T A R B U C K S L O G O

D R I N K S

☞ Bottled drinks☞ Brewed Coffee☞ Chocolate Beverages☞ Espresso Beverages☞ Frappuccino® Blended

Beverages☞ Juices☞ Milk☞ Teas☞ Smoothies

P R O D U C T S & S E R V I C E L I N E S

F O O D

Bakery Bistro

boxes Petites Hot

breakfast Salads Sandwiche

s Ice cream Yogurt

P R O D U C T S & S E R V I C E L I N E S

(CONT)

S T A R B U C K S® C H R I S T M A S B L E N D

S U P P L Y C H A I N

I N D U S T R Y

Coffee

A R E A S

☞ Customer foodservices(bars&cafés)

☞ Hot drinks, tea

S I Z E OF I N D U S T R Y

☞ Europe is the biggest market for coffee and in customer foodservices but has the least potential for growth

☞ Asia pacific is the market for growth

☞ The three biggest companies make up over 40% of the global retail value

☞ Starbucks globally the 8th

☞ In North America shares are more equal, Starbucks 3rd with 10%

M A R K E T S H A R E S

Stores are heading to. . .

☞ Central and South America☞ Asia Pacific☞ CHINA

M A I N T R E N D S

☞ Sustainability

☞ Environment

☞ Premiumisation

☞ External environments

☞ Economic

☞ Sociocultural

M A I N T R E N D S (CONT)

B U S I N E S S S T R A T E G Y

V I S I O N

☞ The connections we make in communities create a loyal following.

☞ The support we provide our baristas pays off everyday.

☞ To become a national company with values and principles.

☞ Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.

☞ Encourage, provide warmth and cherish each one of our fellow neighbours with a sip of our amazing coffee.

M I S S I O N

☞ To build a company with soul.

☞ Starbucks management was also emphatic about the importance of pleasing customers.

☞ To make sure that customers are surely satisfied.

☞ The theme was “ JUST SAY YES ” to customer request.

V A L U E S

☞ Unique competencies.

☞ Employees – unique culture customer orientation.

☞ Brand intimacy- customization unique experience.

C O M P E T I T I V E A D V A N T A G E S

M A R K E T I N G M I X – 4 P’S

PRODUCT ☞ Starbucks specialized in coffee and related beverages. ☞ Sells Italian coffee- style espresso beverages & premium teas. PRICE

☞ On September 22.2010 star bucks announced that it would be raising prices due to increasing price of coffee beans and other raw metrical.

PLACE

☞ The coffee holding company. Inc. is located at 3475 victory blvd, Staten island. Network.

PROMOTION

☞ Starbucks started a community website, my star bucks designed to collect suggestion and feed back from customers.

M A R K E T I N G M I X – 4 P’S

Starbucks (3.10.2010)

Tim Horton's (2.1.2011)

Caribou coffee (2.1.2011)

Revenue 10,7 million USD 2,55 million USD 0,28 million USD

Gross profit 6,25 million USD 0,92 million USD 0,15 million USD

Operating income1 420 000 million

USD 877 800 million USD 10 100 USD

Net income 945 600 USD 627 900 USD 9400 USD

Total assets 6,39 million USD 2,50 million USD 0,10 million USD

Total equity 3 670 000 USD 1 450 000 USD 62 300 USD

Profit marging 9 % 25 % 3 %

Pre tax ROE 39 % 59 % 16 %

Current ratio 1,55 2,05 2,00

Quick ratio 1,16 1,85 1,09

Cash ratio 81 % 144 % 78 %Inventory turnover 1,97 % 2,52 % 1,10 %

C O M P E T I T O R S

Starbucks (3.10.2010)

Tim Horton's (2.1.2011)

Caribou coffee

(2.1.2011)

0

2000000

4000000

6000000

8000000

10000000

12000000

10707400

2552705

283997

Revenue

Starbucks (3.10.2010)

Tim Horton's (2.1.2011)

Caribou coffee (2.1.2011)

0

200000

400000

600000

800000

1000000

1200000

1400000

16000001419400

877812

10107

945600

627946

9400

Operating income Net profit

C O M P E T I T O R S V I S U A L I S E D

M A R K E T I N G

☞ Effort to satisfy all customers equally

☞ High prices –> customers of middle or higher economic class

☞ Businessmen & women -> fast serving times

☞ Teenagers –> trendy & cozy environment

☞ Free Wi-Fi attracts working people with laptops

☞ Wide menu for both young & old☞ Coffee – adults

☞ Hot chocolate, smoothies – young

C U S T O M E R S

S E G M E N T A T I O N

☞ Offers companies office coffee service

☞ Mission is to point out the importance of having a coffee break at the office

☞ Portion packs, single cup or vending

B U S I N E S S

☞ Recycling ☞ Water usage ☞ Other issues affecting the climate

change

☞ At least 1 type of waste is recycled in ALL stores

☞ Recyclable & reusable cups☞ Renewable energy☞ HVAC

☞ Ethical sourcing☞ Coffee and Farmer Equity (C.A.F.E.)☞ Safe, fair & humane working

confitions

E T H I C S & E N V I R O N M E N T

☞ People ordering take-away

☞ Busy traffic areas

☞ Good quality coffee at home

☞ Starbucks sells whole bean coffee for home consumption

L O C A T I O N & T I M E

☞ Most of Starbucks coffee houses are located in urban areas

☞ New trends are born in cities ☞ Young people are following trends and as a

result they want trendiness at cafés ☞ Promotion strategy concentrates on word of

mouth ☞ High density areas are ideal

U R B A N

☞ Wants Starbucks to be a full experience

☞ “Third place” between home and school or work

☞ Entertainment

☞ Socializing – 49%

☞ Relax – 43%

☞ Study & work – 26%

Y O U T H

M A R K E T I N G C O M M U N I C A T I O N

☞ Advertising is different

☞ Focusing on the experience in the cafés and the quality of products

☞ Mission statement

☞ Uniqueness and standing out

☞ Learning from Starbucks:

10 Lessons for Small Businesses an article by Isabel Isidro, managing editor of PowerHomeBiz.com

S T R A T E G Y

☞ Starbucks Corporate Social Responsibility statement

☞ Commitments to origins, environment, communities and partners

☞ “Building greener stores”☞ “Protecting clean water”☞ “The path to sustainable coffee”

R E S P O N S I B I L I T Y

☞ Own distribution system

☞ Own farmers

☞ Selling a variety of whole and ground bean coffees in grocery and warehouse club stores, also for example frappucinos and flavoured ice-creams

☞ Delivering coffee through direct distribution

C H A N N E L S

☞ Free Wi-Fi in stores located in Unites States Starbucks digital network

☞ Starbucks on Facebook and Twitter☞ Mobile applications Starbucks card

mobile Starbucks for Android

☞ iPhone apps from Starbucks

I N T E R N E T & M O B I L E

F I N A N C E

CONSOLIDATED STATEMENTS OF EARNINGS

(SHORTENED, 2010)Company-operated retail 8963,5

Licensing 1340,9

Foodservice and other 403

Total specialty 1743,9

Total net revenues 10707,4

Cost of sales including occupancy costs 4458,6

Store operating expenses 3551,4

Advertising expenses 176,2

Depreciation and amortization expenses 510,4

General and administrative expenses 569,5

Restructuring charges 53

Total operating expenses 9436,1

Operating income 1419,4

Earnings before income taxes 1437

Income taxes 488,7

Net earnings attributable to Starbucks 945,6

Liabilities and equity

C O N S O L I D A T E D B A L A N C E S H E E T S(2010)

AssetsCurrent assets

Cash and cash equivalents 1164Short-term investments—available-for-sale securities 236,5

Short-term investments—trading securities 49,2

Accounts receivable net 302,7Inventories 543,3

Prepaid expenses and other current assets 156,5

Deferred income taxes net 304,2Total current assets 2756,4Long-term investments—available-for-sale securities 191,8Equity and cost investments 341,5Property plant and equipment net 2416,5Other assets 346,5Other intangible assets 70,8Goodwill 262,4TOTAL ASSETS 6385,9

Current liabilities

Accounts payable 282,6

Accrued compensation and related costs 400

Accrued occupancy costs 173,2

Accrued taxes 100,2

Insurance reserves 146,2

Other accrued liabilities 262,8

Deferred revenue 414,1

Total current liabilities 1779,1

Long-term debt 549,4

Other long-term liabilities 375,1

Total liabilities 2703,6

Shareholders’ equity

Common stock 0,7

Additional paid-in capital 106,2

Other additional paid-in-capital 39,4

Retained earnings 3471,2

Accumulated other comprehensive income 57,2

Total shareholders’ equity 3674,7

Noncontrolling interests 7,6

Total equity 3682,3

TOTAL LIABILITIES AND EQUITY 6385,9

S T A R B U C K S, 2010 A N D 2011

63%18%

11%

9%

Revenue mix by product type

Beverage

Food

Whole bean and soluble

Other

2010☞ Revenue ~ $10 700

million☞ Net profit ~ $946 million☞ Operating marging

13,3%

2011☞ Revenue $11 700 million☞ 9% growth (11%

excluding extra week in 2010)

☞ Operating marging 14,8%

78%

22%

Revenue by area

United StatesOther countries

Equity ratio 57,7 %Relative indebtedness 25,2 %

Net profit marging 8,8 %

Quick ratio 1,16Current ratio 1,55

Quality of earnings -11,89 %

Net ROA 15,8 %ROE 30,9 %

Earning power of sales 9,16 %Capital turnover rate 3,50Inventory turnover 1,971 %Total asset turnover 1,68

P/B 19.11.2011 8,5P/E (NASDAQ 20.11.2011) 25,94

KEY FIGURES

L A S T F I V E Y E A R S

0

2000

4000

6000

8000

10000

12000

Net revenues 2006-2010

2006 2007 2008 2009 2010

Mil

lion

USD

2007 2008 2009 2010

-100 %

-50 %

0 %

50 %

100 %

150 %

200 %

21 %

10 %-6 %

10 %18 %

-52 %

12 %

153 %

19 %

-53 %

24 %

142 %

Growth 2006-2010, %

Net revenues

Operating income

Net profit

2006 2007 2008 2009 2010

Net revenues 7786,9 9411,5 10383 9774,6

10707,4

Operating income 894 1053,9 503,9 562 1419,4

Net profit 564,3 672,6 315,5 390,8 945,6

Profit marging 7,2 % 7,1 % 3,0 % 4,0 % 8,8 %

☞ http://www.starbucks.com/business

☞ http://www.starbucks.com/about-us/company-information/mission-statement

☞ http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-Statements/Starbucks-Coffee-Mission-Statement.htm

☞ http://www.vendingmarketwatch.com/article/10317126/a-new-professionalism-defines-ocs

☞ http://blogs.indews.com/marketing/starbucks_competitors.php

☞ http://www.hoovers.com/free/co/burn.xhtml?ID=15745?cm_ven=PAID&cm_cat=YHS&cm_pla=CSP&cm_ite=SBUX_competitors

☞ http://www.vendingmarketwatch.com/article/10317126/a-new-professionalism-defines-ocs

☞ http://www.quora.com/What-is-starbucks-market-share-globally-and-in-the-US

☞ http://www.espressocoffeeguide.com/2011/06/starbucks-coffee-2011-2012-starbuck-locations-expand-starbux-revolution-new-starbucks-logo/

☞ http://www.mhhe.com/business/management/thompson/11e/case/starbucks-2.htm

☞ http://www.voteforus.com/starbucksmarketingstrategy.html

☞ http://www.powerhomebiz.com/vol144/starbucks2.htm

☞ http://www.transfairusa.org/sites/default/files/Impact%20Report%202010-11%20COFFEE-LowRes.pdf

Sources

Thank you for listening!