Group Introduction

Khurram Shehzad ( ID – 9262 )

Tayyaub Khalid ( ID – 9254 )
Ehtisham Arif (ID – 8716)

MBA 1.5
3rd Semester
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 Case Study

Starbucks Corporation
(Starbucks Coffee company)
 Starbucks Coffee company History And
Introduction
Starbucks, American Company that is the largest coffeehouse chain in the world. The first Starbucks
opened in Seattle, Washington, on March 31, 1971, by three partners.
They invested and borrowed some money to open the first store in Seattle and named it “Starbucks
from novel Moby dick .

Alfred Peet, a coffee entrepreneur, was a major inspiration to the founders of Starbucks.
Peet’s success encouraged the Starbucks founders to base their business model on selling high-
quality coffee beans, and Peet’s became the initial supplier of coffee beans to Starbucks.

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Starbucks Coffee company History And Introduction
The Howard Schultz
In 1981 Howard Schultz, a sales representative for
Hammarplast, a Swedish company that made kitchen
equipment from which Starbucks bought drip-coffee makers,
noticed how large the company’s orders were, which
encouraged him to pay it a visit. Schultz was so impressed that
he decided to pursue a career at Starbucks, and he was hired as
the head of marketing in 1982.

1982
Howard Schultz joins Starbucks as director of retail operations
and marketing.
 1983
Schultz travels to Italy, where he’s impressed with the popularity of espresso bars in
Milan. He sees the potential to develop a similar coffeehouse culture in Seattle.
Schultz convinces the founders of Starbucks to test the coffeehouse concept in Seattle,
and he thought of doing something similar in Starbucks. However, Baldwin and Bowker
were not passionate about Schultz’s idea.

Seeing that he would not be able to persuade Baldwin and Bowker to embrace the café
idea, Schultz left Starbucks in 1985 and started his own coffee chain called Giornale,
which was an immediate success, quickly expanding into multiple cities.

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 In March 1987 Baldwin and Bowker decided to sell Starbucks, and Schultz was
quick to purchase the company.

Starbucks soon became the largest coffee-house chain in the world.

Number of locations 28,218 (2018)

Products
1. Coffee Beverages
• Espresso
• Cappuccino
• Frappuccino
2. Smoothies
3. Tea
4. Baked Goods and Sandwiches

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 Starbucks Coffee’s Corporate Vision Statement
Starbucks Coffee’s corporate vision is “to establish Starbucks as the premier
source of the finest coffee in the world while maintaining our uncompromising
principles while we grow.” This corporate vision statement has the following
components relevant to the business:
1. Premier source
2. Finest coffee in the world
3. Uncompromising principles
4. Growth

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 Existing Mission
The current mission statement for Starbucks corporation is, “to
inspire and nurture the human spirit – one person, one cup and one
neighbourhood at a time (Company Information, 2016)”.
Proposed Mission Statement
“We exist to make a difference in our consumer’s lives by
providing high-quality Product and service ingredients,
ethics, and an impact in their communities.”
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 Internal Factors Evaluation Matrix
Rating Weighted
Key Internal Factors Weight
(1-4) Score
Strengths
High-Quality Product 0.15 4 0.6
Variety of Products 0.10 4 0.4
Excellent Customer Service 0.05 3 0.15
Brand Loyalty 0.10 3 0.3
Internationally known brand 0.10 3 0.3
High Ethical Standards 0.10 3 0.3
Weakness
High Product Prices 0.10 2 0.2
Easily Imitable Products 0.05 1 0.05
High Operating Cost 0.10 2 0.2
High Cost for Expansion 0.05 2 0.1
Difficulty in Growth 0.05 2 0.1
Lack of Internal Focus 0.05 1 0.05
TOTAL 1.00 2.75
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 Internal Factors Evaluation Matrix
The internal factors evaluation matrix analyzes the internal strengths and
weaknesses of a firm. In the IFE matrix shows how much Starbucks
strengths and weaknesses affect the firm. Each strength and weakness is
rated to calculate the weighted score and then added together to obtain the
total weighted score. Starbuck’s total weighted score came out to be 2.75,
which is the extent to which Starbucks responds to their internal factors.

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 External Factors Evaluation Matrix
Weighted
Key External Factors Weight Rating (1-4)
Score

Opportunities
Entrance of New Products 0.05 1 0.05
Partnerships with other Firms 0.05 2 0.1
Domestic Expansion 0.1 4 0.4
Global Expansion 0.15 4 0.6
Growing Product Demand 0.1 3 0.3
Entering New Markets 0.05 1 0.05
Threats
Competitive Industry 0.15 4 0.6
Low-Cost Competitors 0.1 2 0.2
International Difficulties (Increased 0.05 1 0.05
competition from local coffee companies)
Imitating Competitors 0.05 2 0.1
Rising Market 0.05 1 0.05
Other Differentiated Products 0.1 3 0.3
Total 1.00 2.8

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 External Factor Evaluation (EFE) Matrix
The external factor evaluation matrix analyzes the external opportunities
and threats of a firm. The EFE matrix shows the weight that the
opportunities and threats has on Starbucks and then is rated to obtain each
factor’s weighted score. Each weighted score is then added together to
obtain a total weighted score, in which Starbucks scored 2.8, which shows
how effective Starbucks is able to respond to their external factors.

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 Matching Stage

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 Strategic Position and Action Evaluation
Matrix (SPACE)
Internal Dimensions External Dimensions
Competitive Position (CP) Industry Position (IP)
Market Share -1.00 Growth Potential 5.00
Product Quality -1.00 Profit Potential 5.00
Customer Loyalty -2.00 Financial Stability 3.00
Product Life Cycle -1.00 Industry Rivals 3.00
Brand Image -2.00 Entry into Global Market 4.00
Average -1.40 Average 4.00
(-1.40) + (+4.00)
Total X-Axis Score 2.6
Financial Position (FP) Stability Position (SP)
Current Ratio 5.00 Price of Competition -4.00
Inventory Turnover 4.00 Demand Variability -2.00
Profit Margin 4.00 Risk of International Expansion -2.00
Return on Equity 3.00 Price increase of Coffee Beans -3.00
Return on Assets 3.00 Competitive Pressure -4.00
Average 3.80 Average -3.00
(3.80) + (-3.00)
15 Total Y-Axis Score 0.8
 SPACE Matrix
FP
6
Conservative 5
Aggressive
• Market Penetration • Market Penetration
• Market Development 4 • Market Development
• Product Development 3 • Product Development
• Related Diversification • Diversification
2
• Integration
1 X= 2.6, Y = 0.8

CP IP
-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6

Defensive -1 Competitive
• Related Diversification • Horizontal Integration
-2
• Retrenchment • Market Penetration
• Divestiture -3 • Market Development
• Liquidation -4
• Product Development

-5

-6
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SP
 The Internal-External (IE) Matrix
Grow and Build
Horizontal Integration The IFE Total Weighted Scores
Market Penetration
Strong Average Weak
Market Development 3.0 – 4.0 2.0 – 2.99 1.0 – 1.99
Product Development
3.0 2.0 1.0
4.0

High I II III
3.0 – 4.0
3.0

The EFE IV V VI
Medium
Total
2.0 - 2.99
Weighted
scores 2.0

Low VIII IX
VII
1.0 - 1.99

Hold and Maintain Harvest or Divest

1.0
Market Penetration Retrenchment
Market Development
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Divestiture
 The Internal-External (IE) Matrix
The IFE Total Weighted Scores
Starbucks Strong Average Weak
Weighted scores 3.0 – 4.0 2.0 – 2.99 1.0 – 1.99
IFE: 2.75 3.0 2.0 1.0
EFE: 2.80 4.0

High I II III
3.0 – 4.0
3.0

The EFE IV V VI
Medium
Total
2.0 - 2.99
Weighted
scores 2.0

Low VIII IX
VII
1.0 - 1.99
Hold and Maintain
Market Penetration
1.0
Market Development
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 Decision Stage

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 Quantitative Strategic Planning
Matrix (QSPM)
▪ The Quantitative Strategic Planning (QSPM) Matrix
uses a firm’s internal strengths and weaknesses and
external opportunities and threats and gives them
each a weight according to market and product
development to calculate their attractiveness scores.
The attractiveness scores are then added up to
determine which aspect a company should focus on.
 QSPM
Quantitative Strategic Planning Matrix Market Development Product Development
Key factors Weight AS TAS
Opportunities
Entrance of New Products 0.08 2 0.16
Partnerships with other Firms 0.1 3 0.30
Domestic Expansion 0.12 4 0.48
Global Expansion 0.15 4 0.60
Growing Product Demand 0.05 3 0.15
Entering New Markets 0.05 3 0.15
Threats
Competitive Industry 0.15 3 0.45
Low-Cost Competitors 0.1 2 0.20
International Difficulties (Increased competition
from local coffee companies and international 0.02 1 0.02
entrants in emerging market)
Imitating Competitors 0.08 3 0.24
Rising Market 0.02 4 0.08
Other Differentiated Products 0.08 3 0.24
Total 1.00
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AS TAS
4 0.32
2 0.20
2 0.24
2 0.30
3 0.15
2 0.10
3 0.45
3 0.30
1 0.02
1 0.08
3 0.06
4 0.32
 Quantitative Strategic Planning Matrix Market Development Product Development

Key factors Weight AS TAS AS TAS

Strengths
High-Quality Goods 0.15 2 0.45 4 0.60
Variety of Products 0.10 3 0.40 4 0.40
Excellent Customer Service 0.08 4 0.16 1 0.08
Brand Loyalty 0.05 4 0.10 1 0.05
High Availability 0.08 3 0.32 2 0.16
High Ethical Standards 0.12 3 0.36 1 0.12
Weakness
High Product Prices 0.15 2 0.15 2 0.15
Easily Imitable Products 0.07 3 0.21 1 0.07
High Operating Cost 0.10 2 0.20 1 0.10
High Cost for Expansion 0.05 2 0.10 1 0.05
Difficulty in Growth 0.03 1 0.03 1 0.03
Lack of Internal Focus 0.02 2 0.04 2 0.04

Total 1.00 5.80 4.39

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 Starbucks is seen with an attractiveness score of 5.8 in Market
Development and 4.39 in Product development, meaning that Starbucks
should focus more on furthering themselves in the market rather than
trying to make new products.

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 Alternative Strategies
▪ Alternative Strategies
▪ Through analyzing Starbucks Corporation through different matrices I was able
to come up with couple of different strategies that Starbucks could implement
within their corporation.
▪ 1. Lowering Costs
▪ If Starbucks is able to lower their operating costs, expansion costs, and the
prices of their inventory that they order, while maintaining the same amount of
quality on their products and service, they could potentially rid themselves of 3
major weaknesses in their company. This also allows them to compete in the
same level with their low cost competitors.
▪ 2. Further Their Differentiation
▪ Starbuck’s products are not very different from other coffee companies, other
than their quality. If Starbuck’s provided a new type of drink that could not be
easily imitated by the public then that would increase their customer base
because there would be another option on the menu that no one could obtain
24 anywhere else.
 Specific Strategies and Long-Term Objectives
The two main aspects of Starbucks Corporation that they could
improve on are lowering their costs and setting themselves apart
from their competitors. To lower their costs, they could purchase
cheaper ingredients, while maintaining the same quality in their
products and lower their costs in operations or land. This could
lead to a lowering in their products for customers, which could lead
to customer growth and market share growth within their industry.
Secondly, Starbucks could come up with a new drink that has
never been thought of. This leads to differentiation within their
industry and will also cause consumer growth because, assuming
the new product is a massive success, and will also lead to growth
in their market share.

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 THANKS!

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