Starbucks
Our Team
Kshitij Khare
Debayan Maji
Mousam Dutta
Abhinav Bisen
Choudhary Prathamesh
Arghya Das
Abhikalpa Sonowal
Debapriyo Mukherjee
TABLE OF CONTENTS
Agenda
01.
INTRODUCTION
05. ANALYSIS OF STARBUCKS
02.
COFFEE INDUSTRY ANALYSIS
06.
EVALUATION OF MCDONALD’S OFFER
03.
PESTLE ANALYSIS
07.
RECOMMENDATION
04.
STARBUCKS STRATEGY
08.
CONCLUSION
Introduction
Examining Starbucks' strategic position, core competencies, and competitive landscape, providing
insights into its strengths, weaknesses, and growth opportunities in the specialty coffee industry
Founding and Early Years (1971)
Starbucks was founded in 1971 in Seattle, Washington, by
Jerry Baldwin, Zev Siegl, and Gordon Bowker.
The company started as a retailer of high-quality coffee
beans and equipment.
Shift to Coffeehouse Model (1987)
Schultz acquired Starbucks from its original founders,
with backing from investors.
The company transitioned from a retail-focused business
to a coffeehouse model, offering brewed coffee, espresso
drinks, and a welcoming environment for customers.
Howard Schultz Joins (1982)
Howard Schultz joined Starbucks as Director of Retail
Operations and Marketing.
Inspired by Italian coffee culture during a trip to Milan,
Schultz envisioned Starbucks as a coffeehouse that
offered a unique customer experience rather than just
selling beans.
Rapid Expansion (1990s)
Starbucks began aggressive expansion across the United
States and entered international markets, opening its first
store outside North America in Tokyo, Japan, in 1996.
It became synonymous with the "third place" concept—an
inviting space between home and work.
Coffee Industry Analysis
Second most traded commodity after oil
Popularity of specialty coffee
COFFEE
Concept of variation originated
with the coffee grower
Basic Coffee
Suffering market
Lower quality beans
Specialty Coffee
Growing at a rate of 15% per year
31% of Total coffee consumption
High quality Arabica bean
SPECIALTY
COFFEE
MARKET
Suppliers
•Specialty coffee companies deal with exporters directly
•Farmer > Collector > Miller > Exporter > Importer > Seller
Pricing
•Direct reflection of quality & quantity available at any given instance
•Difficult to forecast prices – harvest dependent on various factors
Consumers
•Per capita consumption of 1.7 cups/day/person in US
•US ranked 10th in terms of kgs of coffee/person consumed in 1985
Specialty Coffee Industry
Profile of coffee buyers
22% US consumers purchased (lived &
worked in urban areas, income>35000$)
2 parent family, stay at home mother – 41%
more than avg.
Single people – 39% more than avg.
College degree – 49% more than avg.
Individuals aged 30-59 > Aged 20-29
Product based competition
Specialty Coffee competed with basic coffee, tea, juice, soft drinks,
alcohol and other coffee & non coffee related drinks
Flavored Coffee
25% of total coffee sales
Not sold by Specialty coffee
sellers like Starbucks, Peet’s etc.
Popular among non-coffee
drinkers, younger coffee drinkers
and those interested in low calorie
substitutes for desserts or snacks
Grocery chain
Competition with specialty
coffee in grocery chain
81% of total sales – expected
to fall to 46% in 1999
Increase in purchase amount
from specialty stores
Community Gathering Places
Change in Socialization pattern
Late 1990s, resurgence of outside the
home entertainment
Coffeehouses – more accessible than bars
Coffee – from a breakfast drink to an
anytime beverage, social catalyst
Retail Competition
By 1999, expected 10000
coffee retail outlets – 5500
bars & cafes, rest carts
Low barriers to entry –
more than 3485
competitors
Huge potential for growth
in US and Canadian
markets – only 22%
Starbucks stores as % of
total possible stores
Strong Position of Starbucks in Coffee
Industry
Starbucks has the highest
TEV/EBITDA ratio (25.1), indicating
strong market valuation and expected
future growth.
Among U.S. competitors, Diedrich
(15.6) follows Starbucks but still
trails significantly.
Second Cup (13.2) leads in Canada,
but overall, Canadian companies have
lower TEV/EBITDA values compared
to U.S. firms.
Starbucks significantly outperforms all
competitors in market capitalization,
with $2,438.5 million, dwarfing both
U.S. and Canadian companies.
Among Canadian companies, Cara has
the highest market capitalization
($440.2 million), while Second Cup lags
at $137.2 million.
The U.S. competitors have considerably
lower market caps
Starbucks has the highest net margin among
U.S. firms (6.0%), indicating strong
profitability.
In Canada, Cara (5.8%) and Van Houtte
(4.7%) are performing well, whereas Second
Cup (-3.7%) is struggling.
Brothers (-14.0%) has the worst net margin,
indicating significant financial challenges.
PESTLE Analysis
P
T
POLITICAL
TECHNOLOGICAL
E
L
ECONOMICAL
LEGAL
S
E
SOCIAL
ENVIRONMENTAL
Industry Insights
The coffee industry is driven by
urbanization, sustainability
demands, and digital innovation,
offering growth opportunities.
However, it faces challenges like
climate risks, regulatory
compliance, and economic
volatility affecting consumer
spending.
Applying highest
standards of Quality
Offering a memorable
experience
Product diversification
Using state-of-art
equipment
Creating world class
logistics & manufacturing
organisations
New channels of
distribution
VRIO Analysis: Deep dive into
competitive strengths
Resource/Capability
Value (V)
Rarity (R)
Imitability (I)
Organization (O)
Key Highlights
Strong Brand Recognition
Highly
recognizable brand
Unparalleled brand
recognition
Difficulty in
replication of brand
recognition
Established itself as
category leader
Ability to command premium pricing
Long-term dominance in the specialty
coffee industry
Quality & Consistency
High-quality
coffee
Consistent flavor
profile
Reliable sourcing
agreements
Supply Chain Efficiency
Cost efficiency &
reliability
Proprietary supplier
agreements
Requires scale &
logistics expertise
Retail Store Experience
Community space
between home &
work
Replication of
similar experience
Requires investment
in design & layout
Employee Empowerment
Improves service
quality
Extensive employee
benefits & training
Treating employees
as partners
Extensive Quality Control
Integrated logistics &
supply chain
Specialty roasting techniques
Direct supplier relationships &
proprietary roasting processes
Hiring logistics experts to enhance
operations
Forecasting system that predicts
demand across different locations
Uniform store experience
across locations
Store design & ambiance, enhances the
customer experience
High-end competitors can replicate
similar store atmosphere
Robust HR policies
Employee benefits exceeding industry
norms
Direct communication with leadership
SWOT ANALYSIS
S
W
O
T
Strength
Weaknesses
Opportunities
Threats
Reach out to new customer
Global Presence
New distribution channels
Dependency on premium
Close relation with the
products -
exporters
Challenge in designing a
Employee oriented
nationally consistent
Real estate opportunistic
merchandising program
Devour on Customer
Challenge to motivate real
Experience
Installation of state-of-art
estate staffs
base through introduction of
Starbucks Espresso Carts –
Doppio
Enter greater international
market ahead of competitors
Focus on Asia Pacific
Greater participation in
Specialty sales contracts
roasting and manufacturing
Introduction of Starbucks
equipment
coffee to higher echelon
Dealing with exporters not
producers –
Difficult to get price
confirmations –
Stagnant growth in US – low per
capita coffee consumption
High competition
Huge potential for growth in US
and Canadian markets
restaurants and day part chains
INSIGHTS
Supply chain standardization
and localized merchandising
Innovating through exclusive contracts and
high-end partnerships
Expanding beyond premium coffee into affordable
options and specialty products
Reducing dependency on premium
suppliers and diversifying sources
Should Starbucks sell its coffee in joint
venture in McDonalds Store (1997) ?
Advantages
Threats
Increased Reach
Sales Growth
Brand Introduction
Competitive Edge
Brand Dilution
Pricing Conflicts
Loss of Store Traffic
Supply Chain
Our Final Decision is to not proceed with the joint venture as it
would reduce margins for starbucks when the speciality coffee of
starbucks is growing at 20%
Thank You
Rimberio
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