Starbucks Corporation
Finance 331
Dr. Perumpral
Jessie Collie, Jon Barber, Rachel Galyean
We chose Starbucks because of the increasing growth in the company. Starbucks has
become very popular amongst many different social groups. Like a fashion statement, it is the
new trend to have a cup of Starbucks in your hand. We are very interested in learning more
about the Starbucks Corporation.
Starbucks is a dominant multinational coffeehouse that is based in the United
States. It is also the largest coffeehouse company in the world, with 7,521 company-owned and
5,647 licensed stores in 40 countries, making a total of 13,168 stores worldwide. Starbucks
principal activity is to purchase and roast high-quality whole bean coffee and sells them along
with fresh rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, a
variety of food items, coffee related accessories and equipment, a selection of premium teas and
a line of compact discs.
From its founding in Seattle, Washington, as a local coffee bean roaster and retailer,
Starbucks has expanded rapidly. In the 1990s, the company was opening a new store every
workday, a pace that continued into the 2000s. Domestic growth has since slowed down, though
the company continues to expand in foreign markets and is opening 7 stores a day worldwide.
The first international location outside of the U.S. and Canada was established in 1996, and they
now constitute almost one third of Starbucks' stores.
As of February 2007, Starbucks had 7,521 company-owned outlets worldwide: 6,010 of
them in the United States and 1,511 in other countries and U.S. territories. In addition, the
company has 5,647 joint-venture and licensed outlets, 3,391 of them in the United States and
2,256 in other countries and U.S. territories. This brings the total locations (as of February 2007)
to 13,168 worldwide.
SWOT Analysis
Starbucks Corporation is a very profitable organization, earning in excess of $600 million
in 2004.The company also generated revenue of more than $5000 million in the same year. Some
of the company’s strengths that are perceived by management are upholding their strong ethical
corporation culture. This is paramount to Starbucks success. Starbucks Business and Ethics
programs provide guidelines and help their partners make ethical decisions. Also, Starbucks has
continued to grow and is rapidly and has almost 9000 café’s in over 40 countries. It is a global
coffee brand built upon a reputation for fine products and services and is also becoming very
popular with a diverse group of customers. Starbucks was also featured in the Fortune Top 100
Companies to Work For
in 2005. This company is a respected employer that values its
workforce. Many of Starbucks customers enjoy the soothing environment and love the personal
experience they receive when they are in the store. Also, many customers spend time in the store
as a place to relax or to meet with friends.
Some of the weaknesses and controversy that surround Starbucks from the outside world
are that some people view Starbucks as a symbol of what is wrong with globalization. Also,
some of the methods Starbucks have used to expand and maintain their dominant market
position, such as buying out competitors' leases, acquiring independent coffee shops and
converting them into Starbucks stores, and clustering several locations in a small geographical
area have been labeled anti-competitive by critics. Some of the weaknesses perceived by
management are that the organization has a strong presence in the United States with more than
three quarters of their cafes located in the home market. It is often argued that they need to look
for a portfolio of countries, in order to spread business risk. Also, the organization is dependent
on a main competitive advantage, the retail of coffee. This could make them slow to diversify
into other sectors should the need arise.
Starbucks are very good at taking advantage of opportunities. In 2004 the company
created a CD burning service in their Santa Monica café where customers could create their own
music. Also, the company has the opportunity to expand its global operations. Mew markets for
coffee such as India and the Pacific Rim nations are beginning to emerge.
Some threats that Starbucks are facing are who knows if the market for coffee will grow
and stay in favor with customers, or whether another type of beverage will replace coffee in the
future. Since the success of Starbucks, many competitors and copy cat brands have entered the
market which may pose a potential threat to the company. Not to mention Starbucks is
susceptible to the rises in cost of coffee and dairy products.
Price Analysis
 Price = 23.6
 Estimate r = 60.5%
 Po = 41.23
 R = 13.19%
 Price = 1.99
 Yes, we would purchase the stock because the actual price is lower than
computed price
In conclusion, based on the SWOT, ratio, and price analysis, Starbucks would be a great
company to invest stocks in. This corporation has continued to grow since it was opened and is
also growing internationally. They are already very efficient in using their resources to
maximize profits and as the five year average indicates, their profits are extremely stable and
predictable. We are very optimistic about the financial health and stability of Starbucks. Even
though some areas of the company could improve, it is neither in danger of becoming a risk to
stockholders nor in any way close to being unstable. Starbucks is a fast growing corporation and
will continue to improve and grow in its future.