CASE 1-1 Starbucks-Going Global Fast WRITTEN CASE ANALYSIS FORMAT (Ten points will be deducted from your grade if you do not follow this case format) You will be working on two (2) case studies. Your case analysis should not simply restate the facts of the case; they should take your understanding of the case to a higher level. Demonstration of a high level of understanding requires application of the various concepts and models as presented in prior management/business classes as well as this class to the situation in the case. Please analyze, do not report. This is the format to follow: Cover Page: Name of the case, your name and date. 1. Executive Summary: This should be the last section you work on. Start with a statement covering the contents of the case analysis. Include a brief assessment of the situation, strategic recommendation and expected results of recommended strategy. Do not exceed one and a half pages. Key Problems: Identify the core problems in the case. 1. Analysis and Evaluation: This section should form the bulk of your paper. Evaluate the problem and support your evaluation with facts. If you add exhibits then ensure that you discuss them. You are at liberty to utilize relevant models and concepts from your current and past business classes in your analysis. Recommendation: Recommend your strategic choice based on identified alternatives. Note that there are no perfect solutions. Do not forget to discuss the strengths and weaknesses of the strategy you have selected. Indicate how the strategy fits with the key problems identified. V. Implementation Plan: This section should present the process by which the strategy can be implemented. Identify what should be done, who should do it and when it should be done. If there are challenges that should be considered then make sure you draw the readers' attention to them. Please note that your written case study will be graded as a "professional" report. Please critique your report for spelling errors and grammatical mistakes. What the company has done since the case study is of no importance. They may have implemented a strategy, different from what you suggested, making them more or less successful. This does not matter. You do not need to research the company outside of the case as provided. CASE 1-1 Starbucks-Going Global Fast The Starbucks coffee shop on Sath And Pine Street in Indeed, the crowding of so many womes so close together downtown Seattle sits werene and odesty memarkable become a national joke, eliciting quips such as this headline in The any other in the chain bought years ago by entrepreneur Howard, satirical publication "A New Starbucks Opens in Restroom Schultz. A few years ago, however, the overall made front of Existing Starbucks." And on the company admits that while pages round the world. During the World Trade Organisatie talks is practice of blanketing an area with stones helps achieve market in November 1999, protesters flooded Searches and one dominance, it ean cul sales exiting "We probably self their targets we Starbucks, a symbol, to the aftermarket capcannibalise our stores at a rate of 30 percent a year." Schulsays talium run amok, another multinational out to the earth Adds Lehman Brothers Inc analyst Mitchell Speiser: Startuck is And the crowd of posters and not were black at defining point in its growth it's reaching a level that makes anarchists who trushed the storing windows smashed and harder and harder to grow, just due to the law of large number ilstate green and white degli of To Buplicate the returnerede hack espresso Says an angry Schulter's but I think people are has no choice but to export is conceptively. Indeed, illinformed. It's very difficult to protest against acon of Cake, analysts Sarucio only two years at most before saturates the bottle of Pepsi, cea can of Fire Starbucks both this bar US market. The chain now operates more than 7000 international tous brand and a place where you can pand break a window. You outlets, from len to ristol. That love plenty of room to grow can't break a can of Coke." Most of its planned new stores will be built overseas representing The store was quickly repared and the protester sattered to 35 percent increase in its foreign base. Most recently, the chainhas other cities. Yet, cup by cup, Starbucksmall scalinating the opened stores in Vienna, Zurich. Madrid, Berlin, and even in faral word, is geen and white emblem becomes on lakarta Athens comes next. And within the text year, Starbucksplan three continents. In 1999, Starbucks Corphed 2 stores abroad to move into Mexico and Puerto Rico Hut global expansion poses Today. It has about 7.000-and it's still in the early stages of a plan to hupe risks for Starbucks. For oc thing. It makes less money on each colonize the globe. If the protesters were among in their acties, they overseas store because most of them are operated with local partners went wrong about Starbucks ambitions. They were just early While that makes it easier to start up on forein turf, it reduces the The story of how Schultz & Co transformed a pedestrian company's share of the profits to only 20 percent to 50 percent modity into an upscale comercy has fairytale quality Moreover, Starbucks to cope with some predictable chal Starbucks grew from 17 coffee shops in Seattle tower 19,000 outlets lenges of becoming a mature company in the United States. After in 58 countries Sales have climbed an enge of 20 percent riding the wave of successful baby boomers through the 1990s, the ally since the company went public, peaking $10.4 billion in 2004 company faces an ominously lestile reception from its future con- before filling to $9.8 billion in 2009. Praes bounded ahead anwes sumers, the twenty-or thirty-somethings. Not only are the activista age of 30 percent per year through 2001, pg 573 milli among them tunted off by the power and Image of the well known then dropping to $582 million and set 2005 and 2009. brand, but many others also say that Starbucks' latte-sipping sophis Tespectively. The firm closed 475 stores in the US 2009 to reduce ticates and piped-in Kenny G music are a real turnoff They don't costs. But more recently. 2017 mended to $22.4 million feel wanted in a place that sells designer coffee at $3 a cup profits with an oppof41 Even the thirst of alls for high price coffee cannot be taken Still, the Starbucks name and image connect with millions of for granted. Starbucks growth over the early part of the past decade consumers around the globe. Up until recewone of the coincided with a remarkable sue in the economy. Consumer fastest growing brands in annual Wire of the top pending tanked in the downturn, and those $lattes were an easy 100 global brands. On Wall Street State of the last place for people on a budget to cut back great rowth stories. It stock, including for sured mene To be sure Starbuckt has a lot poing for it as it confronts the chal than 2.200 percent over a decade sure Walmart, Generallenge of repainting its fast and steady wih. Nearly free of debt, Electrie. Pepsi Coca-Col. Microsoft in total returns for expansion with internal cash flow And Starbucks can maintain In 2006 the stock price pested at over $40, wer which it felt titipon its image because mout Mures are compared $4, and then again rebounded to more than 50 per share There are no franchies tot sloppyhout running things y Schu's team is hard to get i relying on mystique and word of mouth, whether here or een home market that is quickly becoming med. The firm's 12.000 the company a bundle on making Starck spendu Jocations in the United States are mostly in besar 0 million annually on advertising, of hy rent of urts, and shopping malls, Inco Sarthe there is a Star revenues, usually just for new lors of coffee drinks in the sun trucks outlet for every 9.400 people and the compty considers and product launches, such as its new in-store weh service. Med that to be the upper limit of offeeshops in Manhattan's consumer companies its shell out and of millioner 24 square miles, Starhockshes 124 cale with me on the way year. Moreover, Starbucks for the first time bices competition from That one for every 12,000 people that there could be large U.S. competitors such as McDonald's and its new McCafe room for even more stues. Given such concetto it is likely to Schultz remains the heart and soul of the operation. Raised in take annual same store sales increase of 10 percent or more if the a Brooklyn public housing project he found his way to Starbucks company is going to match its historic overall prowth That, as any chain of Seattle coffee shops, as a marketing executive in the they might say at Starbucks is a tall order to early 1980s. The name came about when the original owners looked CS1-2 30 16 weeks or less and recouping the initial investment in three years. The stores may be cases of tranquility, but management's expansion tactics are something else. Take what critics call its "predatory real estate strategy-paying more than market-rate rents to keep com- petitors out of a location. David C. Schomer, owner of Espresso Vivace in Seattle's hip Capitol Hill neighborhood, says Starbucks approached his landlord and offered to pay nearly double the rate to put a coffee shop in the same building. The landlord stuck with Schomer, who says: "It's a little disconcerting to know that some- one is willing to pay twice the going rate." Another time. Starbucks and Tully's Coffee Corp. a Seattle-based coffee chain, were com- peting for a space in the city. Starbucks got the lease but vacated the premises before the term was up. Still, rather than let Tully's get the space, Starbucks decided to pay the rent on the empty store so its competitor could not move in Schultz makes no apologies for the hardball tactics. The real estate business in America is a very, very tough game," he says. "It's not for the faint of heart." Still, the company's strategy could backfire. Not only will neighborhood activists and local businesses increasingly resent the tactics, but also customers could grow annoyed over having fewer choices. Moreover, analysts contend that Starbucks can maintain about 15 percent square footage growth in the United States equivalent to 550 new stores-for only about two more years. After that it will have to depend on overseas growth to maintain an annual 20 percent revenue growth. Starbucks was hoping to make up much of that growth with more sales of food and other noncoffee items but stumbled some what. In the late 1990s. Schultz thought that offering 58 sand- wiches, desserts, and CDs in his stores and selling packaged coffee in supermarkets would significantly boost sales. The specialty busi- ness now accounts for about 16 percent of sales, but growth has been less than expected What's more important for the bottom line, though, is that Star- backs has proven to be highly innovative in the way it sells its main course: coffee. In 800 locations it has installed automatic espresso machines to speed up service. And several years ago, it began offer ing prepaid Starbucks cards, priced from $5 to $500, which clerks swipe through a reader to deduct a sale. That says the company, cuts transaction times in half, Starbucks has sold $70 million of the cards. When Starbucks launched Starbucks Express, its boldest experi- ment yet, it blended java, web technology, and faster service. At about 60 stores in the Denver area, customers could pre-order and prepay for beverages and pastries via phone or on the Starbucks Express website. They just make the call or click the mouse before arriving at the store, and their beverage would be waiting-with their name printed on the cup. The company decided in 2003 that the innovation had not succeeded and eliminated the service. And Starbucks continues to try other fundamental store changes. It announced expansion of a high-speed wireless Internet service to about 1.200 Starbucks locations in North America and Europe. Partners in the project--which Starbucks calls the world's largest Wi-Fi network-include Mobile International, a wireless sub sidiary of Deutsche Telekom, and Hewlett-Packard. Customers sit in a store and check e-mail, surf the web, or download multimedia a group of twentysomethings hypnotized for a market study, When their defenses were down, out came the bad news. "They either can't afford to buy coffee at Starbucks, or the only peers they see are those working behind the counter." says Mark Barden, who conducted the research for the Hal Riney & Partners ad agency (now part of Publicis Worldwide) in San Francisco. One of the recurring themes the hypnosis brought out was a sense that people like me aren't welcome here except to serve the yuppies," he says. Then there are those who just find the whole Starbucks scene a bit pretentious Katie Kelleher, 22, a Chicago paralegal, is put off by Starbucks Itah jan terminology of grande and venti for coffee sizes. She goes to Dunkin' Donuts, saying: "Small, medium, and large is fine for me." As it expands, Starbucks faces another big risk that of becom- ing a far less special place for its employees. For a company mod- eled around enthusiastic service that could have dire consequences for both image and sales. During its growth spurt of the mid- to late-1990s, Starbucks had the lowest employee turnover rate of any restaurant or fast-food company, largely thanks to its then unhcard- of policy of giving health insurance and modest stock options to part-timers making barely more than minimum wage. Such perks are no longer enough to keep all the workers happy. Starbucks' pay doesn't come close to matching the work load it requires complain some staff. Says Carrie Shay, a former store manager in West Hollywood, California: "If I were making a decent living, I'd still be there. Shay, one of the plaintiffs in the suit against the company, says she earned $32.000 a year to run a store with 10 to 15 part-time employees. She hired employees, man aged their schedules, and monitored the store's weekly profit-and- loss statement. But she also was expected to put in significant time behind the counter and had to sign an affidavit pledging to work up to 20 hours of overtime a week without extra pay-a requirement the company has dropped since the settlement. For sure, employee discontent is far from the image Starbucks wants to project of relaxed workers cheerfully making cappuccinos. But perhaps it is inevitable. The business model calls for lots of low wage workers. And the more people who are hired as Starbucks expands, the less they are apt to feel connected to the original mission of high service-bantering with customers and treating them like family. Robert J. Thompson, a professor of popular culture at Syracuse Uni- versity, says of Starbucks. "It's turning out to be one of the great 21st century American success stories-complete with all the ambiguities." Overseas, though, the whole Starbucks package seems new and to many young people, still very cool. In Vienna, where Starbucks had a pala opening for its first Austrian store, Helmut Spudich. a business editor for the paper Der Standard predicted that Star bucks would attract a younger crowd than would the established cafes. "The coffeehouses in Vienna are nice, but they are old. Star bucks is considered hip," he says. But if Starbucks can count on its youth appeal to win a welcome in new markets, such enthusiasm cannot be counted on indefinitely. In Japan, the company beat even its own bullish expectations, growing to over 900 stores after opening its first in Tokyo in 1996. Affluent young Japanese women like Anna Kato, a 22year-old Toyota Motor Corp. worker, loved the place. "I don't care if it costs more, as long as it tastes sweet." she says sitting in the world's busiest Starbucks in Tokyo's green circle logo that we that of Starbucks Conve Shibuya district. Yet same store sales growth has fallen in Japan. Starnience stores also are packed with canned coffee drinks, including buckstop foreign markets Tivals offer similar fare. Meanwhile in Coca-Cola Co's Grocabundandbrews with extra caffeine or England, Starbucks' second biggest overseas market, with over 400 made with gourmet coffee beans stores, imitatoes are popping up left and right to steal market share. Schutz declined to speculate onestly how much coffee Star Entering other big markets may be tougher yet. The French bucks might sell through Japan's convenience stores "We wouldn't seem to be ready for Starbucks sweeter taste, says Philippe Bloch he doing this if it wasn't important both strategically and econom cofounder of Columbus Cafe. a Starbucks like chain But he wcally" he said ders if the company can profitably cope with France's arcane repos The company has so immediate plans to introduce the beverage lations and generous labor benefits. And in Italy, the epicenter of in the United States, this has in the past brooght home prod European coffee culture, the notion that the locals will handon acts launched in Agreen tea firappuccino, first launched in their own 200.000 collee bars en masse for Starbucks strikes many Asia was later introduced in the United States and Canada, where as ludicrous. For one, Italian coffee bars prosper by serving food as company officials say it was well received well as coffee, an area where Starbucks still struggles. Also, Italian Starbucks has done well in Japan, how the mond analways coffee in cheaper than U.S.java and say Italian purists, much bet heen smooth. After cutting the boots first laps store in 1996, ter. Americans pay about $1.50 for an espresso. In northern Italy the company began opening dress for New shops the price is 67 cents in the south, just 55 cents Schultz insists that attracted large, but the effect of the market became Starbucks eventually will come to Italy. It'll have a lot to prove when saturated. The company returned to profitability and set profits it does. Carlo Petrini, founder of the antiglobalization movement jumped more than sold to 36 yeni 2007 declined again to Slow Food is that Starbucks substances served in styrofoam 2.7 bilion yen in 2009, and increased as to billion yen by 2013 won't cut it. The cups are paper, of course. But the skepticism is real In Japan, the firm successfully sloped a broader men for its As Starbucks spreads out. Schult will have to be increasingly stores, including customised product-cater sandwiches and less sensitive to those cultural challenges. For instance, he flew to lure weet dessert. The strategy increased same ales and overall several years ago to meet with the Foreign Secretary Shimon profits. The firm has added 15 new ones since 2006, including Peres and other Israeli officials to discuss the Middle East crisis some drive through. But McDonalds hastacked the He won't divulge the nature of his discussions. But subsequently Japanese market with the introduction of McCafe coffee shops at a Seattle synagogue, Schult let the Palestinians have it. With Starbucks opened its first in Africa 2016, hoping to tap Starbucks outlets already in Kuwait Lebanon Oman, Qatar, and into an expanding commerciau degawerall weakness in the Saudi Arabia, he created a mild uprostatong Palestinian support economy. It will open up just 12 15 ores y despite a capac ers. Schultz quickly backpedaled, saying that his words were taken ity on the content of 150 coding to company estimates out of context and asserting that he is "pro-peace for both sides In 2018. China opening a newery 15 hours, with 1.000 There are plenty more minefields ahead. So far, the Seattle of planned her the next few year Shanghaibuts the largest Sur fee company has compiled an envios record of growth. But the buckstoer in the wod. Stocks as paling coffee culture in China Riddy buzz of that initial expansion is wearing oft. Now, Starbucks where the reward will be temptable powth for decades is waking up to the grande challenges faced by any corporation ben 10 come." CEO Kevin Jose wid Mobile in North America on becoming a global powerhouse Startrucks is struggling to the nationales In a 2005 bid to boost sales in its largest international market Starbucks Corp. expanded its business in Japan, beyond cales QUESTIONS and into convenience stores, with a line of chilled coffee in plas tie cups. The move tives the Seattle based company a chance to sa puidese Exhibit and its description in Chapter 1, and do grab a chunk of Japan's $10 billion market for coffee sold in cans the following bottles, or vending machines rather than made to order at cafes. It 1. Identify the controllable and uncontrollable elements that is a lucrative but fiercely competitive sector, but Starbucks, which Susbockshas encountered is entering global markets has become a household name since opening its first Japanese store, is betting on the power of its brand to propel sales of the new 2 What are the major sources of ink facing the company! Dis drinks. Also, introducing a to the menu in 2015 and a per cum potential solution cent increase in sales Stores in Japan now number close to 1.700 1. Critique Starbucks overall corporate strategy and come up Starbucks is working with Japanese beverage maker and distrib with your own to replace their utor Suntory Lad. The Discoveries and Doubleshot lines are 4. What advice would you be for Socks in Africa! In the company's first foray into the ready-to-drink market outside China? North America, where it sells a line of bottled and canned coffee also underscores Starbucks determination to expand its presence So. in Asia by catering to local tastes. For instance, the new product Stop De comes in two variations-espresso and latte-that are less weet than their U.S.counterparts, as the coffee maker developed them SATA There to suit Asian palates Starbucks officials said they hope to establish The SO2006 2 their product as the premium chilled cup brand, which, at 210 ye "Much Deutscher Stage (51.87). will be priced at the upper end of the category Sare Sesso Starbucks faces steep competition. Japan's chilled cup market is teeming with rival products, including Starbucks lookalikes. One of the most popular brands called Mt. Rainier is emblazoned with 1. CS1-1-CSS WRITTEN CASE ANALYSIS FORMAT (Ten points will be deducted from your grade if you do not follow this case format) You will be working on two (2) case studies. Your case analysis should not simply restate the facts of the case; they should take your understanding of the case to a higher level. Demonstration of a high level of understanding requires application of the various concepts and models as presented in prior management/business classes as well as this class to the situation in the case. Please analyze, do not report. This is the format to follow: Cover Page: Name of the case, your name and date. 1. Executive Summary: This should be the last section you work on. Start with a statement covering the contents of the case analysis. Include a brief assessment of the situation, strategic recommendation and expected results of recommended strategy. Do not exceed one and a half pages. m. Key Problems: Identify the core problems in the case. IV. Analysis and Evaluation: This section should form the bulk of your paper. Evaluate the problem and support your evaluation with facts. If you add exhibits then ensure that you discuss them. You are at liberty to utilize relevant models and concepts from your current and past business classes in your analysis. Recommendation: Recommend your strategic choice based on identified alternatives. Note that there are no perfect solutions. Do not forget to discuss the strengths and weaknesses of the strategy you have selected. Indicate how the strategy fits with the key problems identified. vi Implementation Plan: This section should present the process by which the strategy can be implemented. Identify what should be done, who should do it and when it should be done. If there are challenges that should be considered then make sure you draw the readers' attention to them. Please note that your written case study will be graded as a "professional" report. Please critique your report for spelling errors and grammatical mistakes. What the company has done since the case study is of no importance. They may have implemented a strategy, different from what you suggested, making them more or less successful. This does not matter. You do not need to research the company outside of the case as provided