BUSINESS STRATEGY (MM5012)

YOUNG PROFESSIONAL 47 A

LECTURER : M. HAMSAL

STARBUCKS CORPORATION BUSINESS MODEL

By :
Karina Sastavinadia (29112055)
Reyza Hamida Praja (29112067)
Inayah Toha Ali (29112082)
Cut Anggun Venina (29112087)
Adyssa R. Larasati Z. (29112089)
29112

MASTER OF BUSINESS AND ADMINISTRATION PROGRAM

SCHOOL OF BUSINESS MANAGEMENT
INSTITUT TEKNOLOGI BANDUNG
2013
 TABLE OF CONTENTS

Sectio Content Pag

n e
TABLE OF i
ii
CONTENTS.........................................................................................
1. 1
LIST OF
1.1 1
1.2 ATTACHMENTS.................................................................................... 2
1.2.1 PREFACE............................................................................................................. 2
1.2.2 2
...
1.3 3
Background...........................................................................................................
1.4 5
2 ... 7
2.1 Company at A 7
2.1.1 7
Glance..............................................................................................
2.1.2 7
Vision....................................................................................................................
2.1.3 8
2.1.4 ... 9
2.2 Mission.................................................................................................................. 10
2.3 11
...
2.4 12
External and Internal
2.5 12
3 Analysis................................................................................. 14
3.1 Companys Business 14
3.2 14
Strategy.................................................................................
3.3 15
BUSINESS MODEL
16
ANALYSIS.......................................................................... 17
Business Model
Elements........................................................................................
Customer Value
Propositions..................................................................................
Profit
Formula..........................................................................................................
Key
Resources.........................................................................................................
Key
Processes..........................................................................................................
Value Chain
Analysis..............................................................................................
Activity
Map............................................................................................................
Business Model and Value Propositions

i
Alignment...............................................
Business Model Needs
Analysis.............................................................................
CONCLUSION AND
RECOMMENDATION.....................................................
Conclusion............................................................................................................
...
Recommendation..................................................................................................
...
Lesson
Learned.......................................................................................................
REFERENCES.....................................................................................................
EXHIBITS............................................................................................................
...

i
 LIST OF ATTACHMENTS

Exhibit Content Page

A THE STARBUCKS OUTLET.......................................................................... 17
B 18
PORTERS GENERIC STRATEGIES.............................................................
C 19
D STARBUCKS VALUE CHAIN ANALYSIS................................................... 20
E STARBUCKS ACTIVITY MAP...................................................................... 21
F BUSINESS MODEL & VALUE PROPOSITION ALIGNMENT................... 22
G STARBUCKS BUSINESS MODEL NEEDS ANALYSIS.............................. 23
H STARBUCKS FISCAL 2012 FINANCIAL HIGHLIGHTS............................
STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF 24
I 25
EARNINGS.......................................................................................................
J
STARBUCKS CORPORATION CONSOLIDATED BALANCE SHEETS...
26
STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF
CASH FLOWS..................................................................................................

ii
 SECTION 1

PREFACE

1.1 Background
Starbucks commitment to creating shareholder value through the lens of humanity is truly a
cornerstone of Starbucks global strength, especially as they pursue the most ambitious agenda
in their companys history. Two years ago, they embarked on a strategic plan, the Blueprint
for Profitable Growth, in which they would leverage multiple channels of distribution. The
measure of their success can be seen in the past years performance:
a. Starbucks consolidated global revenues reached a record $13.3 billion, a 14 percent
increase, with revenue growth driven by a 7 percent rise in global comparable store sales
and a 50 percent rise in revenue from Channel Development.
b. Their operating income was $2 billion, a 16 percent increase, with their consolidated
operating margin rising to 15 percent, up 20 basis points from last year.
c. Starbucks record earnings-per-share growth continued, up 10 percent in 2012 to $1.79
from last years $1.62.
d. Through share repurchases and dividends, they returned approximately $1.1 billion to
shareholders.

While they are proud of their achievements, they have learned never to take their success for
granted, which is why three primary attributes will continue to drive their every decision and
action. First, they will remain committed to their coffee core. Second, they will exercise
relevant, timely, and courageous innovation. And third, they will ceaselessly honor their
values. They firmly believe that the ability to adhere to these attributes is what defines the
most enduring organizations of their time.

The first Starbucks opens in 1970s. The name comes from Herman Melvilles Moby Dick, a
classic American novel about the 19th century whaling industry. The seafaring name seems
appropriate for a store that imports the worlds finest coffees to the cold, thirsty people of
Seattle. In 1990s Starbucks expands beyond Seattle, first to the rest of the United States, then
the entire world. After becoming one of the first companies to offer stock options to its part-
time employees, Starbucks becomes a publicly traded company.
1.2 Company at A Glance
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Starbucks Corporation is an international coffee and coffeehouse chain based in Seattle,

Washington. Starbucks is the largest coffeehouse company in the world, with 17.009 stores in
50 countries, including over 11.000 in the United States, over 1.000 in Canada, over 700 in
the United Kingdom, and over 150 in Turkey. The first Starbucks was opened in Seattle,
Washington, on March 30, 1971 by three partners: English teacher Jerry Baldwin, history
teacher Zev Siegl, and writer Gordon Bowker. From 1971 until 1975, the first Starbucks was
at 2000 Western Avenue; it then was relocated to 1912 Pike Place, where it remains to this
day. The first Starbucks location outside North America opened in Tokyo, Japan, in 1996.

1.2.1 Vision
Starbucks vision is Establish Starbucks as the premier provider of the finest coffee in the
world while maintaining our uncompromising principles while we grow. By this vision, they
tend to staying true to their core purpose and capabilities as they grow. They also innovate
with timely relevance, courage, and conviction. Last but not least, they honoring their
cultures values and guiding principles.

1.2.2 Mission
The mission statement of Starbucks is To inspire and nurture the human spirit one person,
one cup, and one neighborhood at a time. Theyre passionate about ethically sourcing the
finest coffee beans, roasting them with great care, and improving the lives of people who
grow them. To their partners, they always treat each other with respect and dignity also. For
their customers, it starts with the promise of a perfectly made beverage, but their work goes
far beyond that. When their customers feel the sense of belonging, their stores become a
haven, a break from the worries outside, a place where customers can meet with friends.
Every store is part of a community, and they take their responsibility to be good neighbors
seriously. They want to be invited in wherever they do business. They can be a force for
positive action bringing together their partners, customers, and the community to
contribute every day. Now they see that their responsibility and their potential for good are
even larger. The world is looking to Starbucks to set the new standard. For their shareholders,
they know that as they deliver in each of those areas, they enjoy the kind of success that
rewards their shareholders. They are fully accountable to get each of these elements right so
that Starbucksand everyone it touchescan endure and thrive.

1.3 External and Internal Analysis

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Porters Five Forces (5F+1) and PESTEL analysis can be used as the tool to analyze
Starbucks external environment. SWOT analysis can be used as a tool to analyze Starbucks
internal environment.

a. Porter Five Forces (5F+1)

Competitive rivalry: High
Starbucks usually would face local coffee producers. Local competitors had advantages of
knowing local market while Starbucks still has not known the market yet.
Power of suppliers: Medium
Starbucks is known as a company which provides its coffee from its own suppliers. Due to its
large size, Starbucks can exert significant pressure on its suppliers. It treats the relationship as
a partnership.
Power of buyers: High
Starbucks must develop a strategy to attract more customers in every expansion they did.
There is room for new entry into the local coffeehouse market, but new entrants face
formidable barriers to entry to compete with Starbucks directly in the coffeehouse segment.
Threats of new entrants: Medium
The local competitors might be seen as threats due to relatively large support from the
government.
Threats of substitute: Medium
People in around world also consumes large amount of tea. Soft drinks produced by Pepsi
and Coca Cola also substitute product that may become threat.
Other stakeholder: High
Government in a country will determine policies related to international trading and foreign
investment. Not every country has supporting policies related to foreign investment.

b. PESTEL
Political
In some countries, a policy that opposed westernization of the local culture still exist, it
shown little tolerance towards foreign countries while particularly towards foreign
investment.
 4

Economical
Foreign companies often see a country to invest based on respectable rank for credit facilities.
It would be much harder to invest in low economy countries.
Socio-cultural
The educated youth with English speaking skills implies towards increasing of coffee
consumption which was considered as exclusive beverage compared to traditional tea. Tea-
based culture can be opposing coffee-based culture.
Technological
The growing usage of technology in many sectors of industry and services would help
improving in quality of coffee continuously.
Environmental
Most countries were largely polluted in water and air. Garbage is most one of the
environmental issues faced by many countries.
Legal
The enforcement of copyright and trademark is questionable largely due to high rate of
copyright piracy in some countries.

c. SWOT
Strengths: Starbucks is the biggest coffee house in the world; Strong global name and
strongly recognize; High quality and innovative product; Strong financial positions.
Weaknesses: Product price mostly more expensive than competitor; Focus too much on
their coffees; store were in America, when change happened in U.S (economic or
politics) could affect company operations; Company operated retail stores.
Opportunities: Increasing number of population; Number of world coffee consumption
increase; Government reform on liberalizations investment; Consumers behavior that
want to be seen interested in western premium brand; Increasing trend for franchises in
many countries.
Threats: Government regulation about product brand; Strong competition among
specialist coffee in many countries; Coffee was imaged as premium and expensive
product; Increasing number of health conscious consumers; In many countries, consumers
were price sensitive; Several countries prefer to drink tea and milk than coffee.
 5

1.4 Companys Business Strategy

Starbucks strategy to expand their market to new country is a specific challenge for the
company. The barriers to entry sometimes is really high, the image of exclusive coffee shop
of Starbucks could be another problem of this entrance. Starbucks strategy is in focus
differentiation on the Porter Generic Strategies.

Besides its stand-alone stores, Starbucks has set up cafes and carts in hospitals, banks, office
buildings, supermarkets, and shopping centers. Other distribution agreements have included
office coffee suppliers, hotels, and airlines. Office coffee is a large segment of the coffee
market. Associated Services (an office coffee supplier) provides Starbucks coffee exclusively
to thousands of businesses round the United States. Starbucks has deals with airlines, such as
an agreement with United Airlines to provide Starbucks coffee to Uniteds nearly 75 million
passengers a year. Starbucks, through a licensing agreement with Kraft Foods Inc., offers its
coffee in grocery stores across the United States.

In 1995, the firm established a subsidiary called Starbucks Coffee International Inc. At that
time, the subsidiary consisted of 12 managers located in Seattle. Today, this subsidiary is led
by Australian expatriate Peter Maslen and is staffed with about 180 experienced multi-
national and multi-lingual managers located in Seattle and three regional offices around the
world. This group is responsible for all Starbucks business development outside North
America, including developing new businesses, financing and planning stores, managing
operations and logistics, merchandising, and training and developing Starbucks international
managers. Starbucks first non-North American store was opened in 1996 in Tokyo.

When venturing overseas, there is a Starbucks way. The company finds local business
partners in most foreign market. It tests each country with a handful of stores in trendy
districts, using experienced Starbucks managers. It sends local baristas to Seattle for 13
weeks of training. Then it starts opening stores by the dozen. Its coffee lineup doesnt vary,
but Starbucks does adapt its food to local tastes. In Britain, it won an award for its mince pie.
In Asia, Starbucks offers curry puffs and meat buns. The company also fits its interior dcor
to the local architecture, especially in historic buildings. Although Starbucks is committed to
owning its North American stores, it has sought partners for much of its overseas expansion.
Starbuckss approach to international expansion is to focus on the partnership first, country
second. They rely on the local connection to get everything up and working. The key is
finding the right local partners to negotiate local regulations and other issues. They look for
partners who share their values, culture, and goals about community development. They look
 6

for firms with: Similar philosophy to theirs in terms of shared values, corporate citizenship,
and commitment to be in the business for the long haul; Multi-unit restaurant experience;
Financial resources to expand the Starbucks concept rapidly to prevent imitators; Strong real-
estate experience with knowledge about how to pick prime real estate locations; Knowledge
of the retail market; The availability of the people to commit to their project.

In an international joint venture, it is the partner that chooses store sites. These are submitted
for approval to Starbucks, but the partner does all the preparatory and selection work. When
first entering a market, theyre looking for different things in the first one to three years than
later on. During these early years, theyre building their brand. Their stores are the biggest
source of advertising, since they dont do a lot of separate advertising. So they have a higher
investment in stores in the first three years. About 60-70% of stores opened in these first three
years are their high brand-builders. First, they look for extremely visible sites in well-
trafficked areas and focus on three major factors: demographics, branding potential, and
financials. Second, they categorize sites on an A to D scale. A sites are signature sites that
are qualitatively superior to all other sites within the trade area (an area within which
Starbucks chooses to locate one store). They rarely take a C or D store. Third, they ask
their international Market Business Unit (MBU) to send in the site submittal package with
quantitative and qualitative measures, such as how the site meets Starbucks established
criteria and the partners agreed-upon criteria. This package is reviewed by a number of
functional units--operations, finance, and real estate--within the International Group. Fourth,
they move into the design phase, which is done in Seattle using information provided by the
partner. Next, they negotiate the lease with landlord and initiate the construction when the
appropriate permits are obtained. Finally, they turn over the store to operations. The whole
process takes about 13-16 weeks from start to finish.
 SECTION 2

BUSINESS MODEL ANALYSIS

2.1 Business Model Elements

A business model consists of four interlocking elements that taken together, create, and
deliver value. The most important to get right, by far, is the first.

2.1.1 Customer Value Propositions

A successful company is one that has found a way to create value for its customers that is a
way to help customers get an important job done. By job it means a fundamental problem
in a given situation that needs a solution. The value proposition of Starbucks focused on a
brand strategy that was comprised of three components. The brand strategy was best captured
by the phrase live coffee. This phrase reflected the importance of keeping the national
coffee culture alive. From a retail perspective, this meant creating an experience that people
would want to incorporate into their everyday lives. There were also three components to the
branding strategy. The first component was simply the coffee. Starbucks offered the highest-
quality coffee in the world and controlled much of the supply chain as possible to help insure
that. Starbucks worked directly with growers to purchase green coffee beans, it oversaw the
custom-roasting process, and it controlled distribution to retail stores around the world. The
second brand component was service, or what was also referred to as customer intimacy.
This included simple things such as remembering someones name or drink order. The third
brand component was atmosphere. Starbucks stated that people came for the coffee but
stayed for the atmosphere. Therefore it was important to provide a comfortable atmosphere
that allowed a sense of community. All of these things combined led to a compelling value
proposition.

2.1.2 Profit Formula

The profit formula is the blueprint that defines how the company creates value for itself while
providing value to the customer. Starbucks generate revenues through company-operated
stores, licensed stores, consumer packaged goods ("CPG"), and food service operations. In
2012, company-operated stores generate net revenue of $ 10.534,5 millions, licensed stores
generate $ 1.210,3 millions, consumer packaged goods ("CPG") and food service operations
generate $ 1.554,7 million. In total, Starbucks generates $ 13.299,5 million of net revenue in

7
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2012. In other hand, cost structure of Starbucks operations in 2012 is $ 11.512,8 million. The
margin after tax from the Starbucks operation in 2012 is $ 1.383,8 million. In 2012 they
declared cash dividends per share by $ 0,72.

Consolidated net revenues were $ 13,3 billion for fiscal 2012, an increase of 13,7%, or $ 1,6
billion over fiscal 2011, primarily due to increased revenues from company-operated stores
(contributing $ 902 million), driven by an increase in comparable store sales (approximately
7%, or $ 680 million). Cost of sales including occupancy costs as a percentage of total net
revenues increased 170 basis points, driven by increased commodity costs (approximately
160 basis points), primarily due to higher coffee costs. Store operating expenses as a
percentage of total net revenues decreased 120 basis points, due to increased Channel
Development and licensed store revenues. Store operating expenses as a percent of company-
operated store revenues decreased 10 basis points due to increased sales leverage. Other
operating expenses as a percentage of total net revenues decreased 20 basis points. As a
percentage of net revenues excluding company-operated store revenues, other operating
expenses decreased 350 basis points. This decrease was primarily driven by increased sales
leverage (approximately 150 basis points), the absence of charges in fiscal 2012 related to the
Seattles Best Coffee store closures in Borders bookstores (approximately 80 basis points)
and a shift in the timing of marketing spend (approximately 60 basis points). Income from
equity investees increased $ 37,0 million, primarily due to an increase in income from their
North American Coffee Partnership (approximately $13 million), Japan (approximately $11
million) and Shanghai (approximately $10 million) joint venture operations. The combination
of these changes, along with increased sales leverage on depreciation and amortization
(approximately 40 basis points) and general and administrative expenses (approximately 40
basis points), resulted in an increase in operating margin of 20 basis points over fiscal 2011.

2.1.3 Key Resources

The key resources is the key elements that create value for the customer and the company and
the way those elements interact. Starbucks purchases green coffee beans from multiple coffee
producing regions around the world and custom roast them to their exacting standards, for
their many blends and single origin coffees. They depend upon their relationships with coffee
producers, outside trading companies and exporters for their supply of green coffee. In
addition to coffee, they also purchase significant amounts of dairy products, particularly fluid
milk, to support the needs of their company-operated stores. Starbucks owns and has applied
to register numerous trademarks and service marks in the US and in additional countries
 9

throughout the world. The duration of trademark registrations varies from country to country.
They own numerous copyrights for items such as product packaging, promotional materials,
in-store graphics and training materials. They also hold patents on certain products, systems
and designs. In addition, Starbucks has registered and maintains numerous Internet domain
names, including Starbucks.com, Starbucks.net, and Seattlesbest.com. Starbucks
employed approximately 160.000 people worldwide as of September 30, 2012.

2.1.4 Key Processes

Successful companies have operational and managerial processes that allow them to deliver
value in a way they can successfully repeat and increase in scale. The Starbucks idea changed
the norm from buying coffee as a drink to the experience of enjoying coffee. It was an
uplifting experience that was complemented with the layout designed to provide an inviting
environment. Starbucks strategy was to open only companyowned stores and avoid
franchising. This enabled the company to keep full control of quality of its products and
services. At the same, Starbucks tried to control as much of the supply chain as possible in
order to keep the quality of coffee at high and consistent levels by working with growers and
enforcing coffee standards.

Employees were trained on both hard skills and soft skills when hired to work for a
Starbucks retail store. This equal emphasis on the hard and soft skills further highlighted
Starbucks strategy to make the experience pleasant for the customer. In addition to that there
was also the Just Say Yes policy for which the employees went beyond company rules in
order to satisfy the customers. They believe if the Starbucks employees were happy, then this
would lead to higher customer satisfaction. For this reason, Starbucks employees were among
the highest paid hourly workers, they enjoyed health benefits and they had stock options. This
resulted in one of the lowest employee turnover rates in the industry and a consistently high
employee satisfaction rate. Furthermore, the majority of promotions for Starbucks were
within its own ranks. Starbucks coffee was targeted primarily towards the affluent, well
educated, whitecollar people. Being able to attract such an affluent demographic and serving
them by providing superior service, helped in being able to provide the service at a consistent
level and keep the customers satisfied.
2.2 Value Chain Analysis
Primary Activities
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Inbound Logistics: Starbucks inbound logistics involve company agents choosing coffee
beans producers mainly in African continent, communication the standards related to the
quality of coffee beans, establishing strategic relationships with suppliers and organizing
the supply-chain management.
Operations: Starbucks operations are conducted in more than 50 countries in two ways:
direct operation of the stores by the company and licensing.
Outbound Logistics: The outbound logistics for Starbucks has traditionally involved
selling its products through its stores without any intermediates.
Marketing and Sales: Starbucks does not heavily invest in marketing relying instead on
the word-of-mouth achieved through the high quality of products and high level of
customer services.
Service: Providing superior level of customer services is one of the Starbucks main
objectives and it is driven from the mission statement of the company. Accordingly, the
company staffs are encouraged to go to great lengths in order to ensure the high level of
customer satisfaction.

Support activities
Infrastructure: Starbucks infrastructure includes a range of general support activities such
as management, planning, finance, accounting, legal support and government relations
that are required to support the work of the entire value-chain.
Human Resource Management: The workforce is duly perceived to be the most valuable
resource by Starbucks. Accordingly, a wide range of training and development programs
are available for them and they are motivated by both, tangible and intangible incentives.
Technology Development: Starbucks relies on technology for cost-saving purposes, as
well as, ensuring the consistency of the quality of products and offering a high level of
customer experience in general.
Procurement: This involves purchasing items that are needed for the production of final
products or offering services. For Starbucks, it would be coffee beans and raw food items,
as well as fixed assets such as buildings, machinery etc.

2.3 Activity Map

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Starbucks set out to be a different kind of company. Starbucks used focus differentiation
strategy for achieving and maintaining their sustainable competitive advantages.
Enjoyable products such as ice cream, grocery of coffee, ready-to-drink and liqueurs. But
the most famous from Starbucks product is delivering the high quality coffee either in
grocery or ready to drink.
Reliable manufacturing focuses on the essence of what they do, produce the best coffee,
and also Starbucks is known as a company which provides its coffee from its own
suppliers. In order to keep the farmers supply them the best coffee, they pay premium
price. Starbucks has already produced 4 roasting plants around the world (blonde roast,
medium roast, dark roast, and seasonal favorites) and over 40 years of roasting
excellence.
Decentralize operation created and defined the idea of coffeehouse experience. Starbucks
has two ways to conduct their operations in more than 50 countries which are direct
operation of the store by the company and licensing.
Sustaining coffee communities for keeping the high quality of coffee products. Starbucks
always pay their local farmers with paying fair prices or premium prices and has long-
term contracts with its supplier or local farmers. Starbuck has certified and conservation
coffees. Starbucks also has standardized C.A.F.E Practices by buying guidelines that
reward suppliers who meet the companys criteria for quality, economic transparency and
social and environmental performance.
Customer oriented service to provide superior level of customer services as one of the
Starbucks main objectives and the company staffs are encouraged to go to great lengths.
Starbucks focused to provide entertainment in their store. In Starbucks, customer can also
enjoy with great coffee and internet at their fingertips because Starbucks facilitate
wireless internet in their store.
Being responsible company to dedicated their self and earning the trust and respect of
their customers, partners, and neighbors. Starbucks committed to upholding a culture
where diversity is valued and respected. The others responsibilities of Starbucks are
Environmental Stewardship and facilitating farmer support center. In Environmental
Stewardship, they share their customers commitment to the environment and caring for
planet earth together by developing programs such as trying to develop more
environmentally friendly cups and expand their recycling program in an effort to reduce
the waste they create.
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2.4 Business Model and Value Proposition Alignment

By understanding the value propositionbusiness model interaction can creating robust and
scalable business models that ensured its success market breakout. It consists of six elements,
which are:
Price: A value that will purchase a finite quantity, weight, or other measure of a good or
service. Cost that customer have to spent for having one product or service. In Starbucks,
the product price is in premium level, the price is high as the quality they offer.
Features: On feature, it providing benefits to customers. Feature is distinctive
characteristic of a goods or service that sets it apart from similar items, in the case of
competitor. Starbucks always innovate the product by adding new flavor frequently,
depend on what season theyre up to, without decreasing the basic flavor. Now,
Starbuckss features are original/customized.
Quality: Quality is a measurement of excellence or a state of being free from defect,
deficiency and significant variation. Starbucks spend a lot of time in origin countries
searching for the finest coffeesones with distinct flavors that enchant, amaze and
captivate. It makes their quality of coffee is excellent.
Support: Support is range of services to assist customer in making cost effective and
correct of a product. In Indonesia, Starbucks managed by Mitra Adi Perkasa Group
(MAP) as the only retailer, so all the supply, distributed from MAP. With this condition,
Starbucks in Indonesia has a comprehensive support.
Availability: Availability is about channels opportunities to expand reach in local and
international market. In Indonesia Starbucks easily found in big city instead in small city,
mostly on department store and also can be found globally in the world, so it on
selective/universal level.
Reputation: Maintain strong brand image on a product and continue to build awareness.
Starbucks has a very strong brand image in Indonesia as number one premium coffee
shop so it has prestigious reputation.

2.5 Business Model Needs Analysis

Price ( 1 = premium 3 = competitive)
Starbucks should reduce the price so they can compete with new entry local competitor in
order to keep the loyal costumer and attract all segments of consumer. Starbucks should enter
 13

the competitive market price but keep on innovating without lowering the quality of the
product.
Feature (2 = original / customize 2 = original / customized)
Starbucks has a good R&D team in innovating to the flavor and the variants of beverages. In
flavor also, they keep innovating with launch the seasonal flavor of drink, when the summer
come they have breeze menu, or Christmas edition every December in Frappuccino with
cherry without forgetting their original flavor like caramel macchiato, or green tea
Frappuccino which is best-selling in Indonesia. It makes their coffee is on original/customize
feature.
Quality (1 = excellent 1 = excellent )
Starbucks have an excellent quality product shown by the ingredients of the coffee bean.
Each coffee bean requires a unique balance of temperature and time to reach its individual
peak of aroma, acidity, body and flavor. Their coffees are classified by three roast profiles
Starbucks Blonde Roast, Medium Roast and Dark Roast.
Support ( 1 = comprehensive 1 = comprehensive)
Starbucks relationship to its retailer is comprehensive so it has to be maintained since they
only taken by MAP Group. Starbuckss raw material, ingredient and souvenir are distributed
exclusively by MAP Group.
Availability ( 4 = selective/universal 5 = universal)
Starbucks has 20.891 stores in 62 countries around the world. In Indonesia, Starbucks can
found easily in big cities, especially in department stores. Starbucks needs to reach universal
market by expand into small city with possible market, so it should keep up the universal
market and they should keep expanding the market into all country in the world.
Reputation ( 1 = prestigious 1 = prestigious )
Until now, Starbucks become number one coffee shop brand in the world, even though the
emerging competitors offer cheaper price with similar taste, Starbucks undefeatable to
compete. It still has its loyal costumer, and keep up as the leading coffee shop brand. So
Starbucks should maintain its prestigious reputation.
 SECTION 3

CONCLUSION AND RECOMMENDATION

3.1 Conclusion
Starbucks is a multinational company. It buys, roasts, and sells whole bean specialty coffees
and coffee drinks through an international chain of retail outlets. From its beginnings as a
seller of packaged, premium specialty coffees, Starbucks has evolved into a firm known for
its coffeehouses, where people can purchase beverages and food items as well as packaged
whole bean and ground coffee. Starbucks is credited with changing the way Americans--and
people around the world--view and consume coffee, and its success has attracted global
attention. Starbucks has consistently been one of the fastest growing companies in the United
States and the world. They need to maintain their competitive advantage through focus
differentiation strategy. To continue the rapid pace of growth, the firm must keep expand
internationally, specifically further expansion in Europe, Asia Pacific, and Latin America.
Expanding in these three continents represents both a challenge and an opportunity to
Starbucks. They had achieved an increasing margin compared to last year financial and they
need to maintain this great trend. Starbucks has good key resources and key processes to
support their operations.

3.2 Recommendation
There are several recommendations that can be proposed to support current operations of
Starbucks. From marketing view, Starbucks needs to maintain its product and brand images
as promise of quality and luxurious brand; create promotion program and advertising through
all appropriate media to gain wider brand awareness; localized product and promotion; and
create program to educate consumers about coffee. From organization view, Starbucks should
considering to hire local employee; open more store in overseas trough joint venture or
franchise, especially in urban area to become more universal; and initiate strategic alliance
with local company. From R&D and production view, Starbucks needs to maintain product
innovation and create new product with local taste or culture. From operation view, Starbucks
needs to cooperate with local supplier for coffee; educate people about equal standard
operation in new franchise; and considering about competitive price policy if possible.

3.3 Lesson Learned

In seeing the happy worker as the best way to earn a happy customer, Starbucks has shifted
the marketing processes to a really driving customer demand from the personal connection

14
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created through the process in their stores. Due to the personal nature of the coffee
buying experience, Starbucks wanted to create the satisfied employee, which in turn leads
to lower turnaround, more stable management, and a more predictable store environment.
Starbucks tends to making high quality beverages by creating a product offering that
generates a multitude of choices from a relatively small number of components is
essential. The highly customizable practice of ordering coffee, which was almost always
discouraged at other stores, was embraced at Starbucks. With the invention of technology
devices, Starbucks has recognized that their best customers are fully immersed in these
new technologies. When looking for growth markets to expand into as the North
American markets seemed to be developing nicely, Starbucks began looking into new
markets globally. Starbucks looked at cultural factors in determining where would be
most likely a favorable response to their coffee houses.
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Starbucks Corporation Fiscal 2012 Annual Report

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 EXHIBIT A

THE STARBUCKS OUTLET

EXHIBIT B

PORTERS GENERIC STRATEGIES

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 EXHIBIT C

STARBUCKS VALUE CHAIN ANALYSIS

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 EXHIBIT D

STARBUCKS ACTIVITY MAP

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 EXHIBIT E

BUSINESS MODEL & VALUE PROPOSITION ALIGNMENT

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 EXHIBIT F

STARBUCKS BUSINESS MODEL NEEDS ANALYSIS

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 EXHIBIT G

STARBUCKS FISCAL 2012 FINANCIAL HIGHLIGHTS

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 EXHIBIT H

STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS

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 EXHIBIT I

STARBUCKS CORPORATION CONSOLIDATED BALANCE SHEETS

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 EXHIBIT J

STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS

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