Starbucks Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

STARBUCKS

Approach to the Case

Financial

Historical financial performance reveals that growth and profitability ratios are constantly declining but based on the future projection of financial results; the profitability of Starbucks will begin to improve but growth rate in revenues will still follow a declining trend and this will be confirmed by 15% growth in specialty coffee industry and fall in per capita consumption of coffee in the US. However, launch of Starbucks’ new marketing strategy will attract more customers with project profitability. Additionally, the impact of selling through specialty sale agreements on brand image of Starbucks is expected to decline in future and this is confirmed by the marginal growth in sales revenues as per the forecast. Moreover, the fall in cost of sales show that Starbucks will be able to establish good relations with not only farmers but also with the exporters and decline in cost of sales is confirmed by lower cost of fuel in future.

Meanwhile, the projected results show that asset utilization will improve in future that will be confirmed by management of inventory through improved inventory control system. In addition to this, accounts payable and turnover ratios will increase and the same will be confirmed through management of inventory that will avoid excessive cost tied up in inventory.

External Environment

Starbucks has been able to secure a competitive position through introduction of innovative coffee products and integration of technology systems in its operations and advanced technology has given it a competitive edge.

However, if Starbucks does not take care of the technological changes in coffee industry then it may lose its competitive position because the quality and taste of coffee depends on the technology used.

Business and Corporate Strategy

Starbucks’ strategy is to develop its worldwide coffee brand through high quality and innovative products with worlds’ best work force; moreover, Starbucks is opening more outlets. It wants to exceed customer expectations and give a memorable experience through their every interaction with Starbucks. Additionally, it gives importance to cultural values and makes sure that growth and expansion do not erode cultural values.

Starbucks’ strategy and mission will lead to success in future because innovation and customer satisfaction is at the heart of business success.

Operations and Organization

Starbucks purchases high quality coffee beans from farmers and its quality control system insures the quality standards. Moreover, Starbucks has reached wide market and retail stores offer a unique experience and these outlets also serve community services to its consumers, which gives it a competitive advantage.

However, quality of coffee beans depends on skills of farmers and rapidly changing technology can affect the uniqueness of its coffee taste, moreover, an increase in fuel prices can affect inventory management. Meanwhile, proposed marketing strategy will target the world market of coffee lovers, which will help to achieve growth in sales revenues.

Is Starbucks growing in the best way possible?

Starbucks is growing through specialty coffee agreements, business ventures along with grocery stores and strategy is quite sensible because Starbucks has good knowledge of coffee products and it has a large variety of coffee products offering to new markets, however, Starbucks is delaying its marketing strategy that can help in order to create public awareness about the availability of Starbucks’ coffee products in local grocery stores. Moreover, business partners do not give a unique experience of Starbucks’ retail outlets. Therefore, Mr. Schultz’ concern is somehow valid because Starbucks can achieve more growth by establishing its own outlets instead of growth through other means.

Is Starbucks overextending in its quest for growth?

Starbucks offers unique coffee to premium consumers, therefore, establishment of new distribution channels will overextend its operations and this will not contribute to profit maximization in contrast to pursuing growth through establishment of own its outlets or by offering competitive prices. Therefore, overextension is not required and Mr. Schultz’ concern is valid in this regard.

How Starbucks should react to the opportunities available to it?

Starbucks has the world coffee market as a potential opportunity to increase its sales revenues and Starbucks can exploit its existing supply chain system to monitor and manage the inventory in the world market. Meanwhile, establishment of its own retail stores in high class areas of the world will lead to an increase its customer base, which will strengthen its competitive position. Mr. Schultz’ is recommended to exploit opportunity in the form of world market for coffee products in order to earn more revenues and should not consider McDonald’s offer.

Based on the analysis of Starbucks operations and its strategies, we as a consultant will recommend Mr. Schultz to look for growth opportunities by exploring new market segments and by introducing innovative products. Product development strategy is already a part of Starbucks corporate strategy, which should be emphasized in order to attract consumers and retain the ........................

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