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Starbucks in 2004: Driving to get Global Dominance Strategic Managing STRA 703 Assignment Made by: Sherif Hendi (M1100758) Provided to: Doctor Gamal Shehata Questions Queen. NO .

1 What are the important thing elements of Starbucks strategy as of 2004? (What is the shop concept, the customer offerings and differentiators? The expansion approach? The monetary strategy? The personnel management and cultural responsibilities? Execute a five forces analysis? ) Q. No . 02 What was the first strategic eyesight and aims and how would they progress? What is your opinion of Starbucks’ mission statement?

What quality would you provide Howard Schultz for his job since the CEO Starbucks and why? Q. No . a few What is your examination of Starbucks financial performance during years 1998-2003? (Growth rates, earnings, control of main cost categories, financing, ROE, and PRICE TO EARNINGS ratio? ) Q. Number 04 What were the real key issues faced by Starbucks in 2004? Q. Number 05 What recommendations would you make to Howard Schultz to support the company growth and support strong financial performance inside the years forward? Q. NUMBER 1 Precisely what are the key aspects of Starbucks strategy as of 2004? ANS: Important elements of Starbucks’ Strategy

Starbucks adopted a lot of innovative strategies throughout its voyage from 1971 to 2005. These strategies in brief happen to be as follows: – * The restaurant/store idea * The offering of Innovative manufacturer product line * Differentiation from competition * National and worldwide expansion 2. Distribution stations (Pepsi partnership/online store/Dreyer partnership) * Successful Financial managing (Centralized Information Systems) * Capitalizing on improving the people element * Participating in social responsibility programs (CARE). Competitive Advantages or Differentiators Their differentiating elements will be as follows: – They were the pioneers to introduce flavored coffee bar thought in USA * Email order sales * Referral marketing * Staff motivation ways to attain increased employee dedication * Easy distribution channels * Presenting chemical totally free cultivation procedure. Q. No . 02 What grade do you give Howard Schultz intended for the job he has done since CEO of Starbucks? Anticipate to support your answer depending upon how well (or not so well) he offers performed the five responsibilities of ideal management mentioned in Chapter 2 . ANS: Howard Shultz gets a grade of 95% in his Strategic Management approach.

For me Howard Shultz just failed to do best in the area of advertising as he would not spend enough budgets about advertising and product creativity. Last but not the least is the fact he would not attempt to analyze the environment properly while entering into new physical areas at the. g. he opened a store down street in Chicago, il which was a bad idea as a result of cold weather circumstances. Other than that, selection a great process of performing all the five duties of Ideal Management Queen. No . several What was Howard Schultz’s initial strategic perspective for Starbucks? Is his present strategic vision pertaining to Starbucks not the same as the one he previously in the eighties?

How many times has his strategic eyesight changed? Can be his present strategic eye-sight likely to go through further evolution? ANS: Howard Shultz first Strategic Eyesight “To establish Starbucks as the most recognized and revered brand in the world.  Ideal Objectives 2. They planned to have 12-15, 000 shops by the year-end 2005. 2. They aimed to provide a good work environment and treat the other person with respect and pride. * That they believed in dealing with diversity while an essential component in the way they do organization. * To make use of the highest specifications of quality to the purchasing, roasting and fresh delivery of caffeine. To develop devoted and pleased customers all the time. * To contribute favorably to their neighborhoods and environment, and know that profitability is vital to upcoming success of business. Just how did they evolve? On the earlier phases they promised themselves that they may not leave even a single stone unturned to make Starbucks the most known and respected company in the world. Consequently , they thought that this could only be possible in the event they will develop these proper objectives since its components basis to earn the respect and fame for any business. Queen. No . 3

What is your evaluation of Starbucks financial overall performance during years 1998-2003? (Growth rates, success, control of main cost classes, financing, ROE, and PRICE TO EARNINGS ratio? ) Growth Rate| Years| 1998| 1999| 2000| 2001| 2002| 2003| Progress rate| 0| 0. 2889| 0. 29095| 0. 2164| 0. 2415| 0. 2391| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profitability| Years| 1998| 1999| 2000| 2001| 2002| 2003| Working profit margin | almost eight. 34| being unfaithful. 29| on the lookout for. 4| 10. 57| being unfaithful. 6183| twelve. 42| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ROE| Years| 1998| 1999| 2000| 2001| 2002| 2003| Come back on equity| 8. 6| 1 . 58| 8. 23| 13. 1| 18. 35| 12| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Value Per Making Share| Years| 1998| 1999| 2000| 2001| 2002| 2003|

Price Per Earning Share| 0. 19| 0. 27| 0. 24| 0. 46| 0. 54| 0. 67| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Control of Major Cost Groups In this part we have examined that just how Starbucks managed its fixed cost. If we talk about the locations, it had been very expensive to get land and after that develop it as a retail outlet, so to conquer this problem Starbucks started procurment the area for permanent periods.

In our opinion, it was a leave impressive move to cut down their fixed cost. Secondly they will observed that to get the certificate was very costly for them, and so they built contracts together with the partners who had license with them. Auto financing For the financing, Starbucks instead of taking financial loans preferred increasing the value. It was a much better idea to generate capital since they did not need to pay any short-term and long term interests up against the borrowings. Queen. No . apr What had been the key concerns faced simply by Starbucks in 2004? Every single company confronts major challenges, even businesses that are because successful as Starbucks.

Even though have an spectacular reputation, include won various awards like top lasting retail store honor and most moral company honor etc, and in many cases give back for their community, they can be still facing challenges similar to other company. Following are the most obvious challenges that Starbucks is coping with: – 5. Schultz was overflowing with the ideas for the business, early on this individual noticed that first-time customers sometimes felt apprehensive in the stores for their lack of know-how about fine capuccinos and because store employees sometimes came across like a little pompous or better than coffee starter. Howard Schultz when came back from Italia shared his ideas for adjusting the formatting of Starbucks’ store with Baldwin and Gordon Bowker. But rather than winning approval for trying out some of his ideas, Schultz encountered solid resistance although after a 12 months Schultz been successful in earning the approval from Baldwin and Bowker. 2. After sometimes Baldwin and Bowker again went against the ideas of Schultz therefore he became so irritated and kept Starbucks at the end of 1985 to spread out his very own separate Espresso Bars in high-traffic down town spots. Schultz bought Starbucks in 1987 after the twenty months of acquiring, some employees experienced unappreciated that there was a feeling of prior managing had forgotten them. So , Schultz made a decision to make building a new relationship of mutual esteem between employees and managing. * Starbucks lost the money because it expanded marketplace to Chicago because in Chicago that was the first downtown shop opened onto the street instead of into the main receiving area of the building where they placed it, in the winter several weeks, customers were hesitant to go out in the breeze and chilly to acquire a cup of joe.

It was costly to supply refreshing coffee for the Chicago shops from Seattle warehouse. 5. The challenge to Starbucks, in Schultz look at, was how to attract, motivate, and reward retail store employees in a fashion that would make Starbucks a company that individuals would want to improve and that would generate keen commitment and higher level of customer support. * A values and principles “crisis arose in Starbucks in 1989 when customers starting requesting non-fat milk to make Cappuccinos and lattes (an espresso espresso with frothy steamed milk) So , Starbucks started advertising both fat milk and nonfat milk Cappuccinos and lattes. We were holding facing a defieicency of Wi-Fi (wireless internet service) in 2002, the number of accesses was in the millions by simply T-Mobile, internal research showed that the typical connection last approximately forty-five minutes So , in October 2003, Starbucks announced that they will expand Wi-Fi power to additional locations and could have 2700 stores equipped with internet access by simply year end. * We were holding also facing challenges from other competitors.

In 2003 there are an estimated 14000 specialty coffee outlets in the us but they weren’t competent enough to put in pressure at Starbucks. Queen. No . 05 What advice would you make to Howard Schultz to sustain the corporation growth and support good financial efficiency in the years ahead? Recommendations After inspecting the whole example, we started to be able to offer few ideas to Howard Schultz which can be handy to sustain the growth and support strong economic performance inside the forthcoming years: – * He ought to spend even more budgets about advertisement of goods. He should certainly bring innovations in his items because we saw in this case study that he was motivated by coffee bars thus he copied the whole theme of Italian espresso bars and the idea of dark roasted veggie was an old one as well. * Before entering to any kind of new physical region he should analyze the market environment of that particular region even as saw that at Chicago there was a concern of cold weather and his shop was at down-town-street. Furthermore, the labor costs and rent of building had been higher too. * At the stores Starbucks’ technique to train customers about how to make espresso was not a good suggestion ecause that support all their business model. Consequently , it should be avoided in future. Above elaborated points were having details about the strategies of Starbucks which forced it intended for the Global dominance till 2005. Starbucks is actually the recognized and respected company in the world and if it can get over the shortcomings which we all identified in that case nobody can create bother for doing it to be successful and there will be no point kept as a blunder on its part. Reference point www. starbucks. com Case Study “Starbucks in 2004: Traveling for Global Dominance authored by Arthur A. Thompson, Amit J. Shah and Thomas F. Hawk.

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