group report starbucks case study analysis

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 beyOiđ.... Case Summa

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 "—— 3 1 Company profile " HH 3 PM? + an ẮẰẮ (4Ý 3 B.D ANSWER QUESTIONS nh HH HH Hà HH HH Hy Hiếu 4 Question 1 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 beyOiđ St nhà HH HH TH HH Tà KH HH Hành 4 Question 2 Which one of the five generic competitive strategies discussed in Chapter 5 most closely approximates the competitive approach that Starbucks is employing? 00.0.0 ee 6 Question 3 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 STVATC QV? oe iiccccccccncesneenecntentecteesneeneeenennesseeeeeenseeneenecteeseeceeenesnesnesserecsesnesnecnrsesectessesnestirsessciessesneenenee ss 8 Question 4 What “values” does Starbucks have? How well do they connect to the present strategy and to the manner in which the company conducts its DUSIMESS? HH HH Hà nha nhe 10 Question 5 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? 00 tees ll Question 6 What is your assessment of Starbucks’ financial performance during fiscal years 2015— Z0 20075 14 Question 7 What issues confront the company as of mid-2020? What should Kevin Johnson and other Starbucks senior execufives be vuorriedl QĐOH? ch HH TH HH KH HH ch 17 Question 8 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 operdting excellence in the year qh€đđÌ? SH HH HH TH HH KH HH KH TH HH hy 19 €.Ố CONCLUSION LH Ho HH Hà HH Ho HH HH HH HH ru 20 D REEFERENCES nh HH Hà HH Hàn Hee 21

List of Tables

Table 1 Starbucks Gross profit marein period 2015-20119 L2 1 1 211011111211 1011111112111 1 kg 14 Table 2 Starbucks Net profit margin period 2015-2019 L1 121 1211211111111 1 151111 111 11 1118 xk, 14 Table 3 Starbucks Return on Equity period 2015-20 19 ác 1211211111111 11111111212 120111211 Hà 15 Table 4 Starbucks Return on Assets period 2015-20 19 c1 11212212 110111111111112 0111211 11 tr ykg 15 Table 5 Starbucks Current Ration period 2015-2019 c2 121 12211211111111201 1111111111112 11H 1 kg 16 Table 6 Starbucks Debt-to-Equity pertod 2015-20119 c c1 11 1111111 1011111111111 1111101111111 yên 16 Table 7 Starbueks Debt-to-Assets period 2015-20 9 c cL 11 1011111101 1101111111 1111101111120 111k vkg 16

A EXECUTIVE SUMMARY

1 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

2 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 1 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?

1 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, whole-

bean 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.

2 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

3 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 2 Which one of the five generic competitive strategies discussed in Chapter 5 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

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 3 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 turmover 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 1 — 10% of base pay, for instance, qualified employees could purchase shares at a 5 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 4 with social and environment-driven elements in its strategy to achieve beneficial outcomes over the past 30 years, including:

e Fair compensation to small and local high quality green coffee farmers in low-income

nations

e Environmental responsibility

e¢ Offering chances for their employees to pursue their ambitions

e Donations made to charities

Question 4 What “values” does Starbucks have? How well do they connect to the present strategy and to the manner in which the company conducts its business?

1 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.

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

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

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