Group report group 8starbucks case study analysis

NATIONAL ECONOMICS UNIVERSITY SCHOOL OF ADVANCE EDUCATION PROGRAM -*** - GROUP REPORT: GROUP Starbucks Case Study Analysis Group Member: 11204520 – Trần Hải Anh 11200577 – Hà Mai Chi 11204864 – Nguyễn Hiền Dung 11204980 – Vũ Thái Duy 11205130 – Trương Ngọc Hà 11205579 – Nguyễn Mai Khanh 11206457 – Vũ Nguyễn Hương Nhi 11206350 – Nguyễn Như Minh Ngọc 11207198 – Lê Kiều Trang Class: Advanced Finance 62A Professor: Deane Van Pham, Ph.D Hanoi, January 2023 Table of Contents A EXECUTIVE SUMMARY B Company profile .3 Case Summary ANSWER QUESTIONS Question What was Howard Schultz’s original strategic vision for Starbucks? How many times has his strategic vision changed or evolved into something different? Is Kevin Johnson likely to continue with Shultz’s latest strategic vision for Starbucks for several more years or is the vision likely to undergo change in 2020 and beyond? Question Which one of the five generic competitive strategies discussed in Chapter most closely approximates the competitive approach that Starbucks is employing? Question What are the key policies, practices, business principles, and procedures that underlie how Howard Schultz and Starbucks’ management implemented and executed the company’s volving strategy? Question What “values” does Starbucks have? How well they connect to the present strategy and to the manner in which the company conducts its business? 10 Question What is your evaluation of Starbucks social responsibility strategy? Is it sincere or just something the company does and talks about to create a good public image? .11 Question What is your assessment of Starbucks’ financial performance during fiscal years 2015– 2019? 14 Question What issues confront the company as of mid-2020? What should Kevin Johnson and other Starbucks senior executives be worried about? .17 Question What recommendations would you make to Kevin Johnson to sustain the company’s growth, improve the company’s financial performance, and move the company ever closer to operating excellence in the years ahead? .19 C CONCLUSION 20 D REFERENCES 21 List of Tables Table Starbucks Gross profit margin period 2015-2019 14 Table Starbucks Net profit margin period 2015-2019 14 Table Starbucks Return on Equity period 2015-2019 .15 Table Starbucks Return on Assets period 2015-2019 .15 Table Starbucks Current Ration period 2015-2019 16 Table Starbucks Debt-to-Equity period 2015-2019 16 Table Starbucks Debt-to-Assets period 2015-2019 16 A EXECUTIVE SUMMARY Company profile Starbucks Corporation - the giantic coffee and coffeehouse company in the world, is headquarters in Seattle, Washington Starbucks was founded by Zev Siegl, Gordon Bowker and Jerry Baldin in the year of 1971, and currently, Howard Schultz will continue as the chief executive officer of Starbucks until April 1,2023 and will serve as Laxman Narasimhan’s advisor through 2023 while continuing on Starbucks Board of Director Starbucks has multiple types of brands, namely Teavana teas, Tazo, Ethos bottled water, Princi bakery products Evolution Fresh and La Boulange, Seattle’s Best Coffee, However, Starbucks Coffee is the most well-known name The company’s aspiration is “to inspire and nurture the human spirit - one person, one cup, and one neighborhood at a time" so that people come to Starbucks to arrange meetings, study, work or even chat with their friends To achieve the goal, the corporation is pursuing to develop additional global outlets in the United States, China, and several potential Asian markets Starbucks Corporation has achieved tremendous success with over 45 years of explosive development with amazing numbers: 32,000 stores located in 78 countries (April 2020) and annual sales revenue of $26.5 billion in 2019 Starbucks operates in several sectors with various consumer groups, with coffee being the primary business Starbucks serves freshly roasted and handcrafted high-quality coffee, tea, a diversity of fresh food items, as well as a number of various beverages In addition, the company also offers equipment such as grinders, specialty brewing, and coffee makers Case Summary In order to spur the growth of the corporation, in January 2017, the CEO and enterprise founder, Howard Starbuck launched a somewhat grandiose strategic initiative to inject more innovation and fresh approaches into the company’s operations by opening 20-30 Starbucks Reserve™ Roasteries and Tasting Rooms; 1,000 Starbucks Reserve stores worldwide and transforming about 20 percent of the company’s existing portfolio of Starbucks stores into upgraded Starbucks Reserve coffee bars He believes that with the innovation, Starbucks can bring and enhance the unique customer experience However, shortly after launching the initiative, according to the case study, Starbucks’ CEO Howard Schultz stepped down, handing up the post to Kevin Johnson, Starbucks' chief operating officer with whom Schultz had worked closely for the previous two years Shultz remained on the company's board of directors as chairman, focusing on social projects and plans for the luxury Roastery locations and Starbucks Reserve brand Johnson swiftly reduced the scope of all three of Schultz's potentially transformative strategic moves., owing primarily to their high costs and highly dubious profitability, and proceeded to navigate Starbucks back to the strategic path it had firmly pursued for the majority of the previous decade B ANSWER QUESTIONS Question What was Howard Schultz’s original strategic vision for Starbucks? How many times has his strategic vision changed or evolved into something different? Is Kevin Johnson likely to continue with Shultz’s latest strategic vision for Starbucks for several more years or is the vision likely to undergo change in 2020 and beyond? What was Howard Schultz’s original strategic vision for Starbucks? Howard Schultz’s original strategic vision first came from the idea of the main owners of Starbucks When Schultz first met the Starbucks founders, he was impressed and motivated by their desire to provide customers quality coffee, inform them about the value and quality of dark-roasted coffees, and set the company apart from competitors with fresh-roasted, wholebean coffee.… After that meeting, his love for coffee and Starbucks had grown and he wanted to be a part of the development of this brand His original strategic vision was more consolidated by his trip to Milan, Italy in 1983 Schultz was stunned by how well-liked and energetic the Italian coffee shops were Every one of them had a distinctive personality of its own, but they all had a superb performer who put on a show with grace, and there was a sense of camaraderie among customers and the barista Coming back from the trip, he realized that the coffee industry required more than just selling beans and showing consumers the value of making their own grind and home brew His original yet innovative idea for Starbucks was to serve freshly brewed coffee, espressos, as well as cappuccinos not only in casual way but also as an American take on the Italian coffee bar culture With this concept, he wanted to make the customers think that going to Starbucks is like seeking for new experience; having a special treat, and a special location to catch up with friends How many times has his strategic vision changed or evolved into something different? His vision had changed several times, especially from the idea of Starbucks being only retailer to become a national company with value and guiding principles that employees could be proud of This happened when Il Giornale Coffee Company (Howard’s Coffee followed Italian coffee bar style) acquires Starbucks in 1987 and Howard became Starbucks president and CEO After times of development, Howard vision for Starbucks had transformed from a domestic shop to an international company Starbucks expanded its market outside the continental United States and recently with 35,711 Starbucks stores worldwide When making extension outside the Pacific Northwest, Howard original vision of serving dark-roasted coffee, espressos, and cappuccinos… had to change in many ways to fit into new markets The first change happened when the Starbucks store was first opened in Chicago The idea of selling dark-roasted coffee did not work since Chicagoans are only interested in fresh coffee The company solved the problem by putting freshly toasted beans in Flavor Lock bags with a one-way valve to assure the quality of the coffee His vision continues to change in the mid-1990s, with the dedicated of become market leader, Howard launched a long-term strategy plan to expand Starbucks' product offerings beyond its retail stores and also to boost Starbucks consumer buying sales across a broader range of distribution channels and market segments His strategy had been conducted in many ways like selling Starbucks packaged coffees outside its retail store; offering tea and non-coffee drinks; selling not only coffee but also accessories, drinkware, merchandise, coffee-making equipment…etc Howard strategy vision at this time was to take advantage of Starbucks growing brand awareness and brand-name strength and create a broader foundation for sustained long-term growth in revenues and profits His most change in vision occurred in January 2017, Howard launched a strategy to inject more innovation and fresh approaches into the company’s operations and to spur growth by concentrating in Starbucks Reserve His target was to open about 20-30 Starbucks Reserve Roasteries and Tasting Room, open 1000 Starbucks Reserve stores worldwide to bring premium experiences to customers and promote the company’s recently introduced Starbucks Reserve coffee Although after announcing the initiative, Schultz turned his chair over to Kevin Johnson, but his vision still affects the vision of new chairman and this strategy still be conducted partly by Kevin after that Is Kevin Johnson likely to continue with Shultz’s latest strategic vision for Starbucks for several more years or is the vision likely to undergo change in 2020 and beyond? After receiving new position of president and chief operating officer of Starbucks, Johnson adapted part of Schultz’s latest strategic vision of developing more on Starbucks Reserve However, he quickly scaled back the sizes of Schultz’s strategy due to their cost and questionable profitability Kevin Johnson had brought back the strategic path that Starbucks had been "running" for most of its time in the past decade All of his objectives to achieve by 2030 and all of them showing the Starbucks change with the purpose of protecting the environment With his latest vision, we can see the change in the strategic view of Kevin Johnson after Howard Schultz based upon the fast-evolving business environment Nevertheless, at any time, Kevin’s priority is to maintain the core vision of Howard Schultz Question Which one of the five generic competitive strategies discussed in Chapter most closely approximates the competitive approach that Starbucks is employing? Starbucks has used a number of fundamental strategies to outperform its competitors As a result, via significant research and analysis, several aspects of five generic competitive strategies have been implemented Broad differentiation strategy, however, is the choice that most fits the description The wants and needs of Starbucks customers are too varied to be fully met by a consistent product line Yet, Starbucks has incorporated a combination of buyer’s desirable features into its products while remaining distinctive enough to see itself apart from the competitors’ products and services offerings There is numerous evidence to support that the strategy of Starbucks chooses to concentrate on is broad differentiation strategy and here are some proves: Strategic target Starbucks has a broad cross-section of the market; its target customer is very diverse However, Starbucks keeps introducing new items to the market in various forms, through various channels, new categories, and alternative shop formats Specifically, Starbucks introduced Starbucks VIA® Ready Brew, packets of roasted coffee in an instant form, in the fall of 2009, in an effort to appeal to a larger segment of coffee drinkers who are at home or on-the-go coffee drinkers Moreover, Starbucks altered its menu offerings in stores in 2008 including yogurt parfaits, fruit cups, skinny lattes, a 300-calorie farmer's market salad with all-natural dressing, and a line of 250-calorie "better-for-you" smoothies in order to satisfy customer demands for healthier food and beverage options as well as to attract customers who don’t drink coffee And there are many other strategies to attract massive customers Competitive strategy Document continues below Discover more from: Development Strategy 15 documents Go to course Chiến lược phát triển doanh nghiệp Thaco 31 Development Strategy 100% (15) competitive forces that shape strategy 17 Development Strategy None Ppd Oct 2022 WS6Prof Dev Plan Development Strategy None Nhan xet báo: How to keep workers engaged, not vacant Development Strategy None Thoat kiep trai hen keodau 231 Development Strategy None Component A guidance 2022-23 Development Strategy None Starbucks has the capacity to provide customers with more desirable options than those of its rivals Starbucks pays attention to more essential components than just sales Stores in Starbucks are modified both the design and the atmosphere to fit well with the destination where they are located More specifically, four store templates that could be customized to fit various store sizes and environments were released in 1996 Each template had its own color schemes, component materials, and lighting configurations Furthermore, many stores have seating areas for customers to gather and enjoy their service with innovative coffee beverages and interesting food selections or even have a conversation with a barista about coffee In some crowded places, the stores are designed for customers to take their products away quickly Product line It is undoubted that Starbucks has many product variations, a wide selection, and a focus on differentiating features The product line in Starbucks is a crucial part of its success Along with several coffee varieties, ice cream with coffee flavor is ranked first place in selling, merchandise, and distributing tea and food products all over the world Product emphasis Starbucks also strives for its product superiority In spite of having a wide range of different products, Starbucks always upholds hygiene Moreover, even if it builds in any differentiation characteristics, customers are still willing to pay for it because, from the beginning, Starbucks always guarantees the products’ high quality and uniqueness Marketing emphasis The staff in Starbucks are all well-trained to provide a standard service They always have to make sure that the best service is offered in their stores This approach has raised Starbucks’ reputation and created a professional workplace Keys to maintaining strategies Starbucks constantly emphasizes the improvement for products, services, and constant innovation to keep one step ahead of its rivals They put equal emphasis on better items and shop locations Because it is aware of the two essential elements that can lead to reputation and success They also cooperated with numerous partnerships and tried to investigate new market niches The coordination with PepsiCo in their beverage being bottled is an exemplification of this differentiation Resources and capabilities required Their capabilities concern every quality, design intangibles, and innovation Starbucks continues to provide consumers with novel coffee and other products in a variety of packaging, new category offerings, a diversity of distribution methods, a variety of packaging options, new product categories, distribution channels, and shop designs Intensify the company's efforts to behave ethically when sourcing high-quality coffee and have a positive impact on the communities where it operates and make ever-increasing efforts to protect the environment Question What are the key policies, practices, business principles, and procedures that underlie how Howard Schultz and Starbucks’ management implemented and executed the company’s volving strategy? There has been a lot of implementation and execution done by Howard Schultz and Starbucks’ management team to pursue the entity’s volving strategy These tactics involve carrying on diverse key policies, practices, business principles and procedures, which played a significant role in not only driving the company’s success but also positioning themselves on the map of coffee globally Therefore, Howard has created a value-driven place to fulfill the desirable sense of need for both employees and customers Howard Schultz was meticulous about setting the store design and ambience to create what so-called “Starbucks Experience” In terms of “Store design”, the company created interior designing teams including architects and designers whose job was to convey the Starbucks-driven image and characteristic Each store possesses its own unique way of serving different customers’ needs The company also thinks globally with the incorporate a diversified local materials and craftsmanship According to “Store Ambience”, the company kept the authenticity of a coffeeshop where all the design of interiors and vibes was made to be coffee-driven All the store’s characteristics are coherently matched to create a consistent, attractive, stimulating environment that elicited and signaled the company’s not only sensation but also passion for coffee Therefore, Starbucks was and has been able to meet the needs of customer types and add more value to customers’ experience During the mid-1990s, the CEO of Starbucks - Howard carried out a long-term strategic campaign to expand its products offerings and enter new market segments Starting with the distribution of Starbucks packaged coffees outside its retail store, Starbucks made a joint venture with PepsiCo to launch bottled Frappuccino in 1994 One year after, the company allied with Dreyer’s Grand ice cream and Unilever to sell Starbucks-brand ice cream and hit the market with the Affogato, following the Acquisition of Tazo Tea in 1990 The introduction of Starbucks Reward Card in 2001, which allows payment is made with a quick card swipe or using the “star” earned, was a life changing strategy The following is about Seattle Best coffee Acquisition, the Ethos Water acquisition, the introduction of new coffee blends, … and the acquisition of Teavana Tea in 2012 These strategic objectives help to strengthen brand awareness and create a strong foundation to preserve long-term growth in revenues and profits In 2010, Starbucks carried out a new team called Consumer Products Groups (Channel Development segment) to advance the external sales of its products The team held responsibility for the sales and distribution of Starbucks which contributed $2.3 billion sales and $927.1 million operating income in fiscal year 2018 Moreover, with the passion to go globally, Starbucks partnered with Nestle Immediately, the company strengthened their value chain in terms of distribution logistics channel, which helps to increase not only the sales revenue and its profit margin as system of distribution has been working efficiently, but also accelerated the brand awareness as the company continues to expand more through different distribution channels In addition to creating value to customers, Howard Schultz and Starbucks’ management team put a significant amount of effort into meeting the needs of employees and making a great place to work A lot of new regulations were forced by Howard to create better incentives and work motivation for Starbucks’ employees To be specific, in 1988, he convinced the board of directors to implement health care coverage for all employees including two-thirds of the workforce, part-timers and unmarried partners By doing this, the company was able to increase employee loyalty, commitment to the company’s mission and reduce the expense of staff turnover As a result, it helped raise the value of customers in addition to enhancing the worth and contribution of individuals In addition, Howard pursued employee stock purchase, stock option, and 401(k) plans By way of regular payroll deductions of between – 10% of base pay, for instance, qualified employees could purchase shares at a percent discount These policies had a long-term impact on Starbucks’ success as the policy established a link between employees’ contributions and the company’s market value In addition to financial incentives, Howard thought that with its competitive pay scale it would attract motivated people with above-average skills as his approach is to offer employees good pay and a full range of benefits His perspective “If you treat your employees well, that is how they will treat customers”, contributes to the development of long-term relationships with clients With the right training system and recognition incentives, Starbucks employees have the ability to serve all customized orders Therefore, it is not only a “100 Best Companies to Work for” 14 times from 14 times over the period of 10 years, but also a major contribution to bringing value to customers Additionally, Starbucks had a detailed strategy dealing with suppliers through coffee purchasing strategy Its coffee sourcing consists of three vital elements: first, purchasing price is proportional with production cost; second, utilize purchasing arrangements that minimize price changing; third, directly connect to local and small coffee growers To be specific, Starbucks used a system of price-to-be-fixed purchase agreements and commitments, which the quantity, quality, delivery period and other negotiated terms, such as forward contracts to hedge “C” price which Starbucks preserve the “green” quality of coffee bean The company also has a strong relationship with suppliers and manufacturers of other materials needed in the selling process Finally, Starbucks established a code of conduct with each supplier for the seek of responsibility and ethical manner Howard Schultz guided Starbucks to pursue Corporate Social Responsibility (CSR) with a strategy that takes social and environment by core The CEO of Starbucks came up with social and environment-driven elements in its strategy to achieve beneficial outcomes over the past 30 years, including:  Fair compensation to small and local high quality green coffee farmers in low-income nations  Environmental responsibility  Offering chances for their employees to pursue their ambitions  Donations made to charities Question What “values” does Starbucks have? How well they connect to the present strategy and to the manner in which the company conducts its business? What “values” does Starbucks have?  To improve product quality and create a welcoming environment, Starbucks adheres carefully to its ideals The guiding principle is “to build a company with soul" The business generally pledges to never give up on pursuing coffee's excellence  Starbucks' motto is "just say yes" to consumer demand, therefore management emphasizes that client satisfaction is a top concern Employees were taught to go above and beyond; taking heroic efforts is essential in a diverse range of situations  Since employees are encouraged to use their voices, retaliation is not an issue at Starbucks Employee participation in identifying what is proper or wrong is desired Additionally, staff members have a great deal of freedom to suggest improvements that might improve Starbucks as a business 10 The steps listed below, which Starbucks has successfully applied, all lead to the values listed above:   Fostering a welcoming culture where everyone feels at home Taking bold action, upsetting the existing norm, as well as discovering fresh avenues for our business and each other's development  Being in the moment and communicating with openness, respect, and decency  We put in our full effort, are accountable for the results, and give everything We prioritize performance while keeping empathy in mind Furthermore, it is essential to adhere to the highest ethical standards and to be mindful of one's moral and legal commitments How well they connect to the present strategy and to the manner in which the company conducts its business?  Our coffee: Starbucks carefully selects the best beans and roasts them to the highest standards in order to provide the greatest coffee possible Starbucks has such a strong dislike for coffee with artificial flavors that they are obsessive about finding the right beans The corporation also cares about the farmers who grow the beans and their quality of life They give each of these their utmost attention  Our partner: For Starbucks, running a business is a passion In order to provide a space in which everyone can be themselves, they respect variety and make an effort By providing incentives, rewards, and prizes, the corporation frequently highlights the value of its employees  Our customers: Employees are regarded as providing expert customer care because of the lengthy training process A place for emotional intimacy is Starbucks  Our stores: Starbucks' goal is to arrange the decor in accordance with the local geography and culture The purpose of the action is to provide customers who visit Starbucks a sense of calm and comfort  Our neighborhood: Starbucks admits that every location belongs to a certain neighborhood Their objective is to positively influence the communities in their immediate area through contribution Over and above that, they are kind neighbors and actively involved in a variety of schemes aimed at fostering community involvement, including the Starbucks Youth Action Grant, which provides financial support for community service to young people in designated neighborhoods  Our shareholders: Starbucks describes their commitment to their stockholders as success Starbucks pledges to take all necessary steps to ensure the survival and 11 prosperity of the business and its associated personnel By growing into the current worldwide behemoth that is Starbucks, they have so far excelled in doing this Question What is your evaluation of Starbucks social responsibility strategy? Is it sincere or just something the company does and talks about to create a good public image? Corporate Social Responsibility in businesses has many different definitions Corporate Social Responsibility is the responsibility a business must act honorably, treat employees well, promote diversity in the workforce, protect the environment, and actively seek to improve the quality of life in the communities where it works as well as in society at large (Thompson, 2022) Businesses are resorting to social activities to strengthen their image in the minds of their clients because they recognize that consumers demand more from high-quality goods and services Being aware of this core value to achieve the sustainable development of company, Howard Schultz and Starbucks make effort to “build a company with soul” which means socially and environmentally responsible including community, ethical sourcing, and environment Responsibly sourced products Starbucks is morally upright and civic-minded company The business participates in a variety of social programs, including "Ethical Sourcing," which works with local growers directly Even small farmers in low-income countries will receive fair pay for high-quality green coffee This leads to meeting the basic needs of small coffee growers, raising the living standard, and promoting best practices in coffee production In addition, the Coffee, and Farmer Equity (CAFE) program was created to produce high-quality coffee with financial incentives for farmers The C.A.F.E Practice model focuses on four key aspects: safe, product quality, the price received by farmers, and working conditions Regarding social responsibility, third parties will be obliged to defend farmers' rights to support the establishment of a secure workplace, fair salaries, and a prohibition on child labor Besides, Starbucks educates these small farmers about the benefits of using sustainable agricultural practices through the direction of agronomists and coffee experts Furthermore, this company also provides funds and loans to coffee farmers for renovating and infrastructure improvements As a result, Starbucks firmly claims that 99% of its coffee is sourced ethically, according to its 2018 Global Social Impact Report 12 Environmental responsibility Environmental stewardship plays a significant role in the successful CSR activities of Starbucks It has undertaken a number of eco-friendly initiatives to become the attain high levels it is today In further detail, the corporation understood that the majority of its revenue came from discarded cups, which had a detrimental influence on the environment As a result, Starbucks shops give customers a 10-cent discount when they bring their own recyclable or single-serve cups Moreover, they run additional campaigns that encourage clients to consume environmentally friendly products Additionally, Starbucks introduced a number of new strategies to make the business' environmental management efforts greatly enhanced The firm wants to employ clean energy sources to have a minimal negative impact on the environment and give the community access to green energy Specifically, in Washington, there are more than 700 Starbucks coffee shops that provide renewable energy In addition, the amount of water used decreased successfully by 1600 LEED-certified stores in 20 countries Therefore, according to the EPA's Green Power Partnership National Top 100 ranking, the corporation was also the top consumer of renewable power in its industry All of these actions significantly lower the rate of pollution Offering chances for their employees to pursue their ambitions After several years of operation, Starbucks has helped to better the lives of numerous residents of the neighborhood Specifically, Starbucks hired and trained those aged from 16 to 24, veterans, military spouses, and refugees to provide them with a stable job, and increase their living standard Starbucks constantly aims to give its workers advantages, including job security and educational opportunity The organization welcomes all individuals, including those who are jobless, veterans and military spouses, as well as female and minority representation, fostering a diverse and equitable workplace The majority of Starbucks' CSR initiatives benefit the neighborhood by lowering unemployment, eradicating illiteracy, and balancing labor resources Charitable contributions In 1997, The Starbucks Foundation was founded with the intention of supporting charitable activities They get significant financing from either private contributions or the 13 Starbucks Coffee Company Until now, about 200 donations have been given by Starbucks to charitable organizations such as the American Red Cross, Save the Children, Global, and products Their main goal is to assist underprivileged people who suffered severe harm from calamities, hunger, and warfare in transforming their civilizations It can be said that Starbucks is a company that takes its commitment to corporate social responsibility seriously to forge and preserve strong bonds with its clients, partners, investors, and shareholders The public perception of Starbucks has been positively impacted by all of these actions This company was selected as one of the "100 Best Corporate Citizens" in the Corporate Responsibility Magazine This recognition may draw an increasing number of ethical customers who are willing to spend money on Starbucks products This may also be appropriately identified as a motivating factor for corporate social responsibility Question What is your assessment of Starbucks’ financial performance during fiscal years 2015–2019? To estimate Starbucks’ financial performance, financial ratios have been used to indicate It can be seen clearly that Starbucks’ financial indicators are currently very stable, indicating healthy growth from the fiscal years 2015 to 2019 Starbucks annual revenue increased steadily from 2015 to 2019 Profitability Ratios Gross profit margin represents the portion of revenue that can be used to pay for operating expenses and other expenditures Starbucks gross profit margin increased from 59.36% in 2015 to 67.83% in 2019 and peaked at 67,92% in 2018 Table Starbucks Gross profit margin period 2015-2019 Financial Year 2019 2018 2017 2016 2015 Net Revenue 26,508.60 24,719.50 22,386.80 21,315.90 19,162.70 Cost of Sales 8,526.90 7,930.70 8,486.80 8,511.10 7,787.50 Gross Profit 17,981.70 16,788.80 13,900.00 12,804.80 11,375.20 67.83% 67.92% 62.09% 60.07% 59.36% Gross Profit Margin Net Profit Margin indicates after-tax profits per dollar of sales In Starbuck’ case, the percentage in 2015 and 2019 were 14.39% and 13.56%, respectively, which simplifies a 14 decline of 0.83%, in other words, operating expenditures and/or product costs are increasing expenses might be rising more rapid than sales Table Starbucks Net profit margin period 2015-2019 Financial Year Net earnings attributable to Starbucks Net Revenue 2019 2018 2017 2016 2015 $3,594.60 $4,518.00 $2,884.97 $2,817.70 $2,757.40 $26,508.60 Net Profit Margin 13.56% $24,719.5 18.28% $22,386.80 12.89% $21,315.9 13.22% 19,162.70 14.39% Similar to Gross Profit Margin, Net Profit Margin also reached the highest percentage in 2018 Return on Equity (ROE) measures the return stockholders benefit on their capital investment in the company, specifically Starbucks Here, it is clear that in 2019, Starbuck’s stockholders had a negative ROE of –57,68% which implies that they are losing on their investment in the company In the period from 2015 their investment in the company From 2015 to 2017, the company witnessed a steep rise from 47,38% to 52,87% Especially, in 2018, Starbuck maximized its after-tax profit at 384,25% Table Starbucks Return on Equity period 2015-2019 Financial Year Net earnings attributable to Starbucks 2019 2018 2017 2016 2015 $3,594.60 $4,518.00 $2,884.97 $2,817.70 $2,757.40 Total Stockholder' Equity -6,232.00 1,175.80 5,457.00 5,890.70 5,819.80 Return on Equity (ROE) -57.68% 384.25% 52.87% 47.83% 47.38% Return on Assets (ROA) is an analysis of how much money the stockholders earn from a company’s total assets The ratio was 22.21% in 2015, which was higher than that of 2019 with 18.70% This suggests that the company may have been over-investing in assets that not generate revenue growth Starbuck should be aware of this sign Table Starbucks Return on Assets period 2015-2019 Financial Year Net earnings attributable to 2019 2018 2017 2016 2015 $3,594.60 $4,518.00 $2,884.97 $2,817.70 $2,757.40 15 Starbucks Total Assets 19,219.60 24,156.40 14,365.60 14,312.50 12,416.30 Return on Assets (ROA) 18.70% 18.70% 20.08% 19.69% 22.21% Liquidity Ratios Current Ratio measures how well the company can pay off its current debts if it liquidates its current assets in the short term Starbucks usually had a current ratio between 1.5 and 2, which means that the company is in a good position when it comes to liquidity Table Starbucks Current Ration period 2015-2019 Financial Year 2019 2018 $12,494.2 2017 2016 2015 $5,283.40 $4,757.90 $3,971.00 Current Assets $5,653.90 Current Liabilities 6,168.70 5,684.20 4,220.70 4,546.80 3,648.10 0.9 2.2 1.3 1.0 1.1 Current Ratio Leverage Ratios Long-term debt-to-equity shows how much debt the company has, compared to the money that shareholders have invested in the business The debt-to-equity ratios for Starbucks from 2015 to 2017 ranged between 0.40 and 0.72, however in 2017 it increased to 72 and it is advised that investors keep track of this ratio overtime to see if it is getting closer to being risky In 2018, the ratio peaked at 7.73, which was considered highly risky In 2019, Starbuck had a negative D/E ratio, which means that it had negative shareholder equity, the company had ample debt and was at risk of going bankrupt Table Starbucks Debt-to-Equity period 2015-2019 Financial Year 2019 2018 2017 2016 2015 Total Debt $11,167.00 $9,090.20 $3,932.60 $3,585.20 $2,347.50 Total Stockholder' Equity (6,232.00) 1,175.80 5,457.00 5,890.70 5,819.80 (1.79) 7.73 0.72 0.61 0.40 Debt to Equity Debt to Assets ratio calculates how much the borrowed funds is used to finance the business’ operations The lower the better A high ratio denotes excessive debt use and hihger 16 risk of insolvency Starbucks’ Debt to Assets ratio spread from 0.19 in 2015 to 0.58 in 2019, which is relatively safe Table Starbucks Debt-to-Assets period 2015-2019 Financial Year 2019 2018 2017 2016 2015 Total Debt 11,167.00 9,090.20 3,932.60 3,585.20 2,347.50 Total Assets 19,219.60 24,156.40 14,365.60 14,312.50 12,416.30 0.58 0.38 0.27 0.25 0.19 Debt to Assets In conclusion, the analysis shows that Starbucks was in a strong financial position Despite a few hiccups in terms of debt However, there were some indicators such as Returnon-equity, Debt-to-Equity, which refers to debt should be paid closely attention as implicit risk Soon, Starbucks is expecting to continue the growth in annual sales in the fiscal year, along with investing in cutting-edge and regenerative agricultural practices, reforestation, etc which mainly focused on sustainability Those indicators prove that the strategy such as internationalization, making licensed stores, widening its products, mix sales conducted by Starbucks’ board of directors was efficient to the growth of its financial position Question What issues confront the company as of mid-2020? What should Kevin Johnson and other Starbucks senior executives be worried about? What issues confront the company as of mid-2020? As of mid-2020, one of the biggest issues that Starbucks faced was the outbreak of COVID-19 pandemic The COVID-19 crisis from the beginning of 2020 until now has a significant impact on businesses, especially service-related companies as the governments of most countries around the world practice social distancing policy Due to the lockdowns and social distance policy, Starbucks has experienced a drop of about $2 billion in quarterly income The epidemic resulted in the closedown of hundreds of franchise stores The Seattlebased coffee giant said over the following 18 months it would permanently close up to 400 stores in the US and reduce the number of new store openings by half, to roughly 300 that fiscal year Some shops are being closed or shifted to drive-through and pickup-only locations, as customers prefer convenient, contactless, mobile ordering and amid the outbreak In a news release, CEO Kevin Johnson stated that navigating through the COVID-19 crisis, plans to transform stores to adapt to the current situation were being speed up, meanwhile still offering a safe, comfortable, and convenient experience for our clients." 17 The same thing happened with the Asia market Since the end of January, when COVID-19 raged in the country of billions of people, Starbucks had to close 2,000 out of a total of 4200 stores in this market Because China and the United States topped the list of nations with the most Starbucks locations worldwide, the world’s largest coffee chain’s revenue declined significantly by over $3 billion Another problem that Starbucks had to deal with was the change in the authority of the company executives as Kevin Johnson takes charge of CEO whereas Howard Schultz decided to step down from the position Why should Kevin Johnson and other Starbucks senior executives be worried about? Expanding too quickly Despite lowering its original target of 600 additional stores, Starbucks still intended to launch about 300 new locations in 2020 The company said that as part of its "U.S store portfolio transformation, new Starbucks Pickup stores will be added in dense markets such as New York City, Chicago, Seattle, and San Francisco Additionally, convenience-driven enhancements like curbside, drive-through, and walk-up windows will be opened in suburban areas The Seattle-based business had more U.S locations than McDonald, but it has been struggling to attract customers to deliver the rapid growth that investors were expecting In addition, Starbucks had 4,351 company-operated stores in China as 2020 March, with over 600 Starbucks stores in Shanghai alone However, the company’s goal was to have 5,000 Starbucks stores in China by 2021 Adding more stores no longer works to boost sales as the coffee company’s stores were competing with each other, leading to cannibalization Rather than attracting new customers, new stores are pulling customers away from existing ones On the other hand, market saturation is also one of the problems that Starbucks’s executives should take notice of The fact there are Starbucks stores in practically every neighborhood indicates that there are no longer any chances to create new businesses High competition rates McDonald's McCafé and all-day breakfast are becoming an increasing threat to Starbucks at home, whereas Starbucks is up against fierce competition from domestic startups that have surpassed Starbucks' "third place" strategy and managed to duplicate it overseas Luckin Coffee has threatened the leadership position of Starbucks in the coffee market in China Luckin Coffee is the number one competitor of Starbucks in the coffee market in China Established in 2017, the chain has successfully attracted and met the demand and taste 18 of Chinese consumers The company set a goal to have more store locations than Starbucks by the end of the fiscal year 2019 Luckin has provided the customer with "pickup stores”, mobile apps, has a source of premium Arabica coffee beans which could be a strong rival as having some of the characteristic alike to Starbucks Thus, Starbucks has to come up with ideas to compete in the market Another interesting rival to the coffee chain in China is HeyTea Whereas Luckin Coffee and Starbucks still competes with coffee-related beverages, HeyTea focuses on tea, which Chinese are in love with HeyTea therefore has a large, established, and enthusiastic demand—something neither Starbucks nor Luckin have Additionally, HeyTea was among the first to take an upscale position in response to this demand (similar to Starbucks) Economic recession: due to the pandemic The Seattle coffee chain has been forced to change the ways of doing business as the pandemic strikes in 2020 CEO Kevin Johnson said the hardest decision he had to make was to eliminate some jobs and consolidate some roles Streamlining the company to boost innovation was one of the burdens challenging Starbucks’s top executives Moreover, early in 2020, when the economy was recovering from the pandemic, Kevin Johnson announced an additional three new environment goals for the company Although has long been stuck to sustainability, environmental activities whether Starbucks can actually achieve those goals is still a big question Question What recommendations would you make to Kevin Johnson to sustain the company’s growth, improve the company’s financial performance, and move the company ever closer to operating excellence in the years ahead? Kevin Johnson took over the new role as president and CEO in April 2017, when Howard Schultz declared his intention to resign as Starbucks' executive chairman a month ago People’s expectations and attention has been focused on the new CEO, and there are some strategies he may use to retain Starbucks’ sustainable growth rate and enhance its financial performance in the years to come International market development Starbucks needs to concentrate on its global expansion Although Starbucks Corporation achieves remarkable success with over 32,000 stores located in 78 countries (April 2020), its expansion in Asia has been quite slow, due to significant differences in culture, religion, taste and so on Especially the tea culture and different types of coffee seeds has 19 popularly used in Vietnam, China, Korea and Japan In order to meet the local taste, it is neccesary for Starbucks to act locally by releasing tea or milk tea like new beverages Besides the US, Japanese is the biggest market where Starbuck's goods are consumed Additionally, no one can dispute Starbucks' notable expansion in China It could be a fantastic idea for Starbucks to expand and create additional locations in both Japan and China Nevertheless, Vietnam is also a promising market which shares common in tea culture with those countries Therefore, Starbucks also needs to build up suitable approaches and strategies for some markets in Asia to reduce expenditure and take full of its advantage Price strategy A lot of customers consider Starbucks as a high-price brand, which make them shy away from visiting this coffee shop Accordingly, slightly decline the price is a viable option that Starbucks need to take into consideration and test Then, Starbucks can be able to reach additional customers who are dissatisfied with the present pricing On the other hand, if managements are not satisfied with this strategy, they can offer new bargains to promote goods such as buy one get one free during offpeak hours, like pm to pm on weekdays This could enhance the flow into Starbucks during the non-"rush hours" and draw customers who may have never tasted Starbucks products before but are recently intrigued by the new deal When tasting high quality coffee drinks, customers then could be willing to spend more on Starbuck coffee Alternative suggestions can be given away Starbucks items such as tote bags, bottles, drink coasters, or cups when customers accumulate enough points needed for membership These options will not only engage the customers, but also raise their loyalty Continuous innovation and diversify menu Innovating need to be taken seriously when it comes to sustain Starbucks's growth, especially in the product development The way to enhance the value a business provides to its clients is adding additional features to products Consequently, this solution not only enables Starbucks to enhance both its profitability and its profound reputation, but 20 also more difficult for other companies to imitate their products In addition, Starbucks can also create drinks which are made from Robusta instead of Arabica coffee seeds Applying this alternative ingredient will help Starbucks overcome its weakness of unconvinced flavor to a considerable part of Vietnamese Since Robusta coffee seeds are much cheaper than Arabica ones, people experience premium atmosphere and service with a reasonable price when choosing Starbucks C CONCLUSION To summarize, Starbucks is without a doubt one of the most successful global corporations in the world Although there are no significant opponents for Starbucks' dominance in international markets at the moment, they not take it for granted Starbucks is still attempting to develop new strategies to provide additional value to customers and to expand the company's value proposition in order to strengthen their position in the industry However, they face numerous hurdles in order to achieve attractive growth and operational excellence that our group have stated above Starbucks' future will continually be determined by its ability to protect and perpetuate its competitve advantage, t counteract weaknesses, prevent any external and internal threats, and ultimately seize potential chances If Starbucks accurately identified and addressed the challenges in the current and approaching circumstances, it could stay optimistic about future growth and flourish 21 D REFERENCES 2018 Report: Creating opportunities (2019, August https://stories.starbucks.com/stories/2019/creating-opportunities/ 12) Retrieved from Green Power Partnership National Top 100 (2022, October 24) Retrieved from https://www.epa.gov/greenpower/green-power-partnership-national-top-100 Starbucks (2018) 2018 Global Social Impact Report (Rep.) Retrieved from https://stories.starbucks.com/uploads/2019/08/2018-Global-Social-Impact-Report.pdf Staff, R (2020) Starbucks forecasts over $2 billion drop in quarterly income as COVID-19 hits Reuters Retrieved from https://www.reuters.com/article/us-starbucks-oultookidUSKBN23H21C?fbclid=IwAR2z-oDnApCfL99nJkI6EDMcPStHEbz5nFzLDJzmj7daXzWPdjWThZwNw4 Thompson, A A., Peteraf, M A., Gamble, J., & Strickland, A J (2022) Crafting and executing strategy: The Quest for Competitive Advantage: Concepts and cases (23rd ed.) New York: Mcgraw-Hill Education Tyko, K (2020, June 10) Will your local Starbucks close? Coffee giant says it will close 400 stores but expanding pickup options USA Today Retrieved from https://www.usatoday.com/story/money/food/2020/06/10/coronavirus-starbucksclosing-stores-expanding-mobile-only-options/5332786002/?fbclid=IwAR2zZOEGd8JgTmDKyfTsBSwo9L_mKX0imMyZVowUuaf6f2IadIPDoyS-UQ 22