David Hayoun Sarah HoltEmese KardhordoErin MaharMarie Poisson

AGENDA• Emese

• Company Background• Industry • New Approach

• Marie• Problem• BMI• Benefits of Integrating the Community

• David• Sustaining Innovation• Breaking Industry/Company

• Erin• Implementation• Breaking the risk-return ratio

• Sarah• Challenges• Risk • Fallout

COMPANY BACKGROUND• 1977 Seattle, WA • 18,600 stores/60 countries • Largest coffee house chain in the world• Founders – Jerry Baldwin, Zev Siegel,

Gordon Bowker• President & CEO – Howard Schultz (1981)

THE COMPANY• Competitive Advantage

• “The Starbucks Experience” (consistency)

• Core Competencies• Customer Service• Continuous Product Involvement

• Strategic Assets• Market Share

COFFEE INDUSTRY• #1 in coffee shop market share• Competitors: Dunkin Brands

• #3 in coffee production• Competitors: The J.M. Smucker Company, Kraft

Foods, Green Mountain Coffee, Nestle

NEW APPROACH• “It is no longer enough to serve customers,

employees and shareholders. As corporate citizens of the world, it is our responsibility to serve the communities where we do business by helping to improve the quality of citizen’s education, employment, health care, safety, and overall daily life, plus future prospects”

(Forbes, 2011). Howard Schultz

Evolution FreshSeattle, WA

PROBLEM

• Gap in their Business Model• Concentration on the food being sold• Goal is to surge sales of the food

BUSINESS MODEL INNOVATION• Integrating the community into local

Starbucks locations by introducing local cuisine into the hot food line

• Healthy, fresh, nutritious, easily accessible, and on-the-go options

• Choosing suppliers

BENEFITS OF INTEGRATING THE COMMUNITY

• Make meaning• Increase the community of co-developers• Overcome limiting beliefs• Experimenting the firm

SUSTAINING or DISRUPTIVE INNOVATION?

BREAKING INDUSTRY/COMPANY DOGMAS

• Industry dogmas• Fast = unhealthy • Food and smell

• Company dogmas• Consistency• Corporate

IMPLEMENTATION

1. Point of entry • Boulder, CO• Yakima, WA

2. Finding local suppliers 3. Experiments

• Success rate• If suppliers like it• If customers like it• How much to purchase/day

4. Purchasing plan• Rate of purchase and re-sell• How much to purchase

BREAKING THE RISK RETURN RATIO

• Becoming part of the community • Supports Mission Statement• Adds meaning/Betters brand name

• Increase number of sales• Convenience• Increased quality of food

• Attraction of a new customer base • Increase in Operating Income

∆ IN OPERATING INCOME  Current Twice as well 3 times as well 5 times as well Total Revenue $ 780,000 $ 819,000 $ 858,000 $ 936,000 Revenue from food $ 39,000 $ 78,000 $ 117,000 $ 195,000     Cost of Sales $ 327,667 $ 340,499 $ 350,249 $ 369,749 Cost of Sales from food $ 13,333 $ 26,166 $ 35,916 $ 55,416     Operating expenses $ 348,800 $ 344,933 $ 344,933 $ 344,933

Shipping food (assuming shipping is

10%) $ 3,333   Utility expense for food (assuming 1% ) $ 533      Operating Income $ 103,533 $ 133,567 $ 162,817 $ 221,317    All Stores $1,553,000,000 $2,003,510,000 $2,442,260,000 $3,319,760,000 % Change in OI   29.01% 57.26% 113.76%

CHALLENGES

• Purchasing• Research local suppliers & develop

relationships • Purchasing agreements

• Barriers to entry • Finding the willing and suitable suppliers

RISK

Immediate Risks

• Quality of food• Customer frustration in changing food lines during experimentation

Midterm Risks

• Cost of experimentation• Not able to find a suitable and/or reliable supplier

Long Term Risks

• Lack of standardization between store location hot food options• Absence of increase in revenue

FALLOUT

• Ordering incorrect amount • Orders need to be sold the same day • Products are not successful • Food poisoning

Conclusion• We will be introducing local hot foods to

Starbucks in small to mid-sized cities• The material presented is an experiment, it

can be scaled upwards