Starbucks is an international specialty coffee chain company. Operating more than 16,000 stores in over 50 countries worldwide to date, it is the largest coffeehouse company in the world (Starbucks Corporation 2010). Set back in year 1971, Starbucks specialized in coffee and other related beverages such as Italian-style espresso beverages, cold blended beverages, and a selection of premium teas, also with certain related businesses like complementary food items, coffee-related accessories and equipments (DataMonitor 2010). Starbucks' business operation can be breaks down into three segments - the United States, international, and global consumer products group (CPG). The United States and international segments, which is Starbucks' core businesses, comprise the company-operated retail store and its domestic and overseas licensing businesses; the global consumer product groups segment focus on the sales of packaged coffee and tea through other intermediaries like grocery stores and convenient stores (DataMonitor 2010).
1.1 Objectives of report:
The objectives of this report are as follow:
1.1.1. Investigating the business situation of Starbucks Corporation in 2009.
1.1.2. Conducting necessary analysis to indentify the company's problems and means to solve these problems.
1.1.3. Developing three alternative solutions to address the identified problems.
1.1.4. Developinga functional level action plan for one of the above said solutions.
1. Problem Statements:
1.1. Worldwide economic crisis
The sales of Starbuck has decline on a significant proportion. Analyzing from its financial statement, Starbucks achieved an increase of 20.86 percent of sales in year 2007. In year 2008, such increase has been reduced to 10.32%. It got worse in year 2009 where the sales have a negative growth of 5.83 percent (Microsoft 2011). Such unfavorable growth includes decreases in number of transactions and average value per transaction. The decreases in these two elements indicate that fewer customers buy Starbucks products and customers that still purchase its products buy less than they used to.
On the other hand, Starbucks' cost of goods sold also increase due to the continuous rising price of dairy products and other inputs and more expensive storefront space add weight on the earnings of Starbucks (Cable News Network 2011).
The major cause of these symptoms is the global financial crisis started in the middle of year 2007 with possible remaining risks until today. Due to such a global financial meltdown, inflation drove up the operating cost of Starbucks and took away a big chunk of its profit (Cable News Network 2011).
Under better economic situations, consumers have higher levels of willingness to pay for what they perceived as good or premium products. However during and after such crisis, people are cutting back their purchases on nonessential products, like premium coffee since they have lesser disposable income. Therefore, it causes the drop in total sales of Starbucks.