Porters Five Forces Study of Starbucks

Porters Five Forces Study of Starbucks Executive Summary: Given case study maps the situation of the company in 2009. In this assignment we will date back to a timeline of about 25 years and see how Starbucks developed their business. We will also see the strategies applied and the present situation of the company with the application of Porters five competitive forces. Finally we will have a look at the future recommendations to reap a profit from the business Part: 1 Starbucks Coffee Company Founded in year 1971 First headquarter in Seattle USA Business in 37 countries Expansion started 1982 with Howard Schultz joined Starbucks has evolved from being a $.50 million business to a business that worth $6.4 billion Howard Schultz is the Chairman, President Chief executive officer History: 1971: Pike Place Market in Seattle was the first place where Starbucks store was settled 1982: Howard Schultz joined the company as marketing and retailing head 1985: Espresso bar concept 1987: Schultz purchased Starbucks and merged his business Giornale Coffee House with Starbucks 1987: Expands Business in the American market by starting outlets in British Columbia and Chicago 1992: With a business comprising of 165 outlets, Starbucks gets listed with its first public stock offering. 1996: Expands business to Japan, Tokyo was the first place. 2003: Starbucks expansion continues at a robust rate and it translates into a company with 6400 outlets worldwide. 2008: Global economic meltdown resulted loss in profitability, Starbucks decided to shuts down 600 outlets across the world and also exits the Australian market. Howard Schultz Chairman, President Chief executive officer VISION, OBJECTIVES AND MISSION Vision Statement: To establish Starbucks as most familiar and appreciated brand in the world and become a national business with values and guiding principles that employee could be proud of The vision statement clearly describes the dream or the future of the company that is to be the worlds most well known coffeehouse and also to be the most appreciated and positively graded brand by all levels of people around the world. The company also focuses its vision to employee satisfactions, so that the employees will be happy. Objectives of Starbucks: Is to grow by making employees feel valued Is to recognize that every dollar earned passes through employees hands The Six principles are: Respect and dignity Quality Diversity Profitability Satisfied customers Commitment Corporate Values and Business Principles: Building a Company with Soul Opposing Franchising because of Quality Control and Culture Only selling coffee beans without artificial flavors. Satisfy customers by all means. Employees contribution and involvement in making Starbucks a better company Corporate Social Responsibility: Establish the Starbucks Foundation in 1997 A major contributor of CARE, worldwide relief and development organization (Health, Education, and Humanitarian aid) Participate in local charitable projects. Provides financial support to community literacy organizations 2004 EnviroStars Recognized Leader Award for its community service and environmental activities Value Chain: Starbucks do not have a vertically integrated supply chain. It always works at increasing its relationship with its suppliers through the fair trade initiative Success Factors for Starbucks: Factors which helped Starbucks to gain success Starbucks were the first coffee makers in business Starbucks started their operation in the year 1987 under Howard Schultz Within the first five years they had 150 stores. First specialty coffee retailing chain in the market. First move advantage gave Starbucks a reason to establish a value proposition within customers and comes with a unique brand positioning. Profits were huge enough to allow them invest in their expansion plans. Market Research: Starbucks performed comprehensively study for expansion and enter into new markets. 1991 was the year in Starbucks moved to California resulted after a lot of market research. The reason why California people adapt quickly to changing lifestyle and that is the reason of choosing California. Employee Satisfaction Motivation: Starbucks played a major role in this aspect. Highly motivated and well trained staff resulted the high level of employee satisfaction. Starbucks offered health benefits to their employees for employees who worked more than twenty hours in a week. Starbucks Strategies (1983- 2008) Schultz restored the old and honest employees of Starbucks to give the best service to the customers. Dave Lawrence was hired as a executive vice presented and charged with leading operation, finance and human resources. In order to increase the market share, Starbucks has differentiated itself in providing a unique experience to its customers. In order to create a unique value proposition, Starbucks have created stores with specific themes. Secondly they have a focus on different flavors of beverages to suit peoples needs. Starbucks have developed the market for specialty coffee industry for America. In this context, Starbucks have created brand awareness and henceforth have created a demand for coffee stores amongst American population. Therefore, they have taken coffee from a commodity market to a specialty item. New logo was invented to match the culture of the Starbucks and Giornale. New espresso machines were equipped and look more Italian than old world nautical Chicago store opened in October 1987 as per expansion strategy Identifying inability of the customers for having a cup of coffee in the winter season in Chicago, Schultz solved the problem of freshness and quality assurance by putting freshly roasted beans in special flavor lock bags that used vacuum packaging technique. Portland, oregon was the next market the company entered. Entered in L.A in late 1991. Opened 15 new stores in 1988, 20 in 1989, 30 in 1990, and 53 in 1992, producing a total of 161 stores in US. Also went for franchising concept to retrieve the cost for new store expansion. In order to make Starbucks a great place to work Schultz accepted to expand healthcare coverage to include part-time workers. To oversee the expansion process Starbucks created zone wise vice presidents to direct the development of each region and to implant the Starbucks culture in the newly opened stores. Starbucks had created a new subsidiary, Starbucks coffee international, to orchestrate overseas expansion and build the Starbucks brand name globally via license. To accommodate its strategy of rapid store expansion. In august 2002 Starbucks teamed up with T-mobile USA, the largest carrier-owned Wi-Fi services, to experiment with Providing internet access and enhanced digital entertainment to patrons at over 1200 Starbucks locations. Part 2 Starbucks Performance (Fiscal 2009 Annual Report) Stores Open : Store Sales Growth: (1) Store openings are reported net of closures. (2) Of the approximately 800 total US stores identified for closure, 566 stores and 205 stores were closed in fiscal 2009 and 2008, respectively. (3) Starbucks restructured its Australia market by closing 61 stores in fiscal 2008. Of the approximately 100 International stores (incremental to the Australia closures in fiscal 2008) identified for closure, 41 stores were closed in various markets in fiscal 2009. Net Revenues: Operating Cash Flow Capital Expenditures: Company revenues decreased from fiscal 2008, primarily attributable to a 6% decline in comparable store sales, comprised of a 4% decline in transactions and a 2% decline in the average value per transaction. Foreign currency translation also contributed to the decline with the effects of a stronger US dollar relative to the British pound and Canadian dollar. The weakness in consolidated comparable store sales was driven by the US segment, with a comparable store sales decline of 6% for the year. The International segment experienced a 2% decline in comparable store sales. The Company derived 16% of total net revenues from channels outside the Company-operated retail stores, collectively known as specialty operations. The decrease in Foodservice and other revenue was primarily due to the softness in the hospitality industry. Schultzs Actions in 2008/2009 Retrained all the store employees They reduced operating costs by $600m per anum Simplified the product range They Closed 1,000 worst-performing stores Introduced Fairtrade coffee Started advertising Porters Five Forces Potential entry of Competitors (Low). Differentiation: Coffee industry companies tries to achieve differentiation in their service qualities through stores ambience, staff and complimentary products. Hence it becomes difficult for new players to imitate the existing business models. Potential development of substitute products (Low) Companies such as Pepsi and Coca Cola have been a threat to specialty coffee retailing from a substitute perspective. In the current situation this threat has been lowered considerably Bargaining power of suppliers (High) Trade Policy Farmers associations that practice the fair trade policy. In US this initiative is called the TransFair initiative. Users of these are certified coffee beans are regarded as more reputed by customers and hence most companies such as Starbucks are forced to buy from these farmers. This increases the bargaining power of suppliers. Differentiation Because of the taste differentiation companies need to procure an assortment of different varieties of coffee beans from different specialized farmers. This results the increase in the bargaining power of suppliers. Rivalry among competing firms (High) It faces tough competition from local baristas due to price factor. Starbucks is priced higher than these local players. Starbucks faces stiff competition from McDonalds, Dunkin Donuts and a number of players. Overall the industry is growing but at a slow rate and there are lot of players. Cost: In terms of switching cost, consumers do not pay a high amount when they needs to switch their preferences from Starbucks to other coffee shops. Starbucks have lost a number of its customers because of the high prices. Customers opine that they get the same coffee in other places at lower prices. Bargaining power of consumer (Moderate) Loyalty Programs: Repeated purchases from a single customer become guaranteed customers are bounded to the organization through Loyalty Cards Low Switching Cost It usually plays a negative factor to the companys growth by increasing the bargaining power of buyers. SWOT Analysis Strength: Starbucks has proven to give an outstanding performance in customer service and experience. It has its own unique playback songs system which can be used to listen to your choice. Starbucks have changed coffee to a recognized beverage. One of the major strategies of Starbucks is that it has never used expensive television advertising campaigns or brand ambassadors to advertise, instead it has relied more on its universally present cafes, word of mouth publicity and the ambience of its stores. It has maintained a high level of service through which it has achieved a consistent level of customer satisfaction. Weakness: Customers are never loyal to a single store and keep on changing their stores, because when ever Starbucks enters any international market it opens a large number of stores within close vicinity Sales of individual stores are never stable. Because of the recent recession, the levels of same store sales and margins have come down. The fourth quarter results have shown a loss of 70% in the companys net income and share prices have fallen by 33 cents. There has been a closure of 600 stores and lay off for 6700 stores. Opportunities: Along with coffee Starbucks has also branched out to produce DVDs, CDs, t-shirts and other proprietary food product offerings. The market for these products has grown considerably and gives a great opportunity to Starbucks for leveraging their brand. Starbucks should also look at exploring some of the emerging economies in South Eastern Asia such as India where the economy is stable. Threats: The economic recession is a threat for Starbucks since they had to close down a large number of stores leading to declining profits and large level of unemployment. McDonalds and Dunkin Donuts serve high quality green coffee also which is an impending factor on Starbucks growth. Starbucks is facing major challenges from competitors such as McDonalds and Dunkin Donuts. Strategic Synopsis: Starbucks faces an extremely challenging fiscal 2009 due to the ongoing economic slowdown. It noted that its customers may have less money for discretionary spending as a result of job losses, foreclosures, and bankruptcies. Any resulting decreases in customer traffic or average value per transaction will negatively impact the companys financial performance as reduced revenues result in sales de-leveraging which creates downward pressure on margins. The company also said it expects negative comparable store sales for fiscal 2009 and that additional restructuring measures may be needed in the future if Starbucks is unable to improve its financial performance. PART: 3 Customer, Market, Market Segment: Customer Segment: Its is well known for its coffee as well as the relationships formed with its customers. This targets college students and business people in general, as well as individuals. Target Market Starbucks us always adult -focused and look forward to aim to connect with their customers, childrens and communities through different types of advertisements tactics. College age group and post graduates are the big growing market. Market Attraction Targeting adults and young adults is a good mechanism for Starbucks because this age level has the same interests as the foundation that promotes arts, culture, education, and the environment (starbucks.com). The company satisfies their customers through their advertising, support programs and, of course, their coffee. Resources and Capabilities A: Resources, capabilities and Strategic Assets: Every company or organization needs and owns certain resources, capabilities or competencies and also assets which are a necessity to endure and prosper globally. The resources consist of: Creating Competitive Edge Intangible Resources Recipe Employee relationship Large customer base Reputation of products and services Tangible Resources Large number of outlets Machinery equipments Operations in 37 countries RESOURCES CATEGORIES STARBUCKS RESOURCES PHYSICAL RESOURCES Operation in 40 countries Conventionally taste and environment. Effective segmentation. Supply chain management. Large number of outlets. FINANCIAL RESOURCES Turnover of  £46.56 billion in 2009. Gross margins of  £4.13 billion in 2009. Profit of  £2.1 billion in 2009. HUMAN RESOURCES Greatly competent labour force. Young and prosperous. INTELLECTUAL CAPITAL Reputation for excellence Brand image built as taste, environment. Strategic capability of Starbuck: CATEGORIES STARBUCK RESOURCES THRESHOLD RESOURCES solid supply chain. Young and affluent workforces. THRESHOLD COMPETENCIES Quality. Reliability. Dealings and relationship with its employees and customers. UNIQUE RESOURCES Hi-tech coffee machines equipments. Extraordinary labour force CORE COMPETENCIES Technology. Speed of production. Known as The Best coffee provider B: Structure, Culture and organizational knowledge There are very less companies who can boast to be as consistent as Starbucks in terms of attracting the customers which is always adjusting itself for the demand of the time with seamless quality and efficiency. The adjustment which is the company is willing to accept all the time is what makes it different from the rest. Their philosophy of the Starbucks is to provide product which are marvel of taste but also come with value and satisfaction. B: STRATEGIC CHOICE Identification of Strategic Options Ansoffs Product/Market Matrix Considering the approach of STARBUCKS they should continue to go with what they are doing currently. It means stick to what they do best. I think that they do need to enter new markets for themselves and in particular ASIA. Currently STARBUCKS is not one of the most commonly used or known brands in ASIAN region. To pin point the region the areas to focus must be China and South Asian markets. STARBUCKS has set its sights on Chinese Niche market with view of the massive growth in Chinese economy and the wealth generated. Working in China would also mean that they will be able to work with the best available technology and also the fast growing consumer market that exists within China. Other region of interest can be South Asian emerging markets and in particular India who are enjoying a massive boom in economy and also buying power. In my opinion the strategy used needs to be Business to Customer or B2C as this strategy has already served STARBUCKS Group very well in the past. The benefit of the strategy will be that it will be Product driven and will also maximize the value of the transaction and plus they will have larger target markets. This will also ensure that there will be a single step buying process and will enhance brand identity and also the brand image will also work as an extra helping hand for the company. B2C strategy will ensure the brand loyalty and also will promote emotional buying decisions which will base on status, price or may be desire. RECOMMENDATIONS FOR ACTION Starbucks should continue with its operation in the growing economies and markets and diversify themselves to new markets where ever possible. As most of markets of Europe and America are at a stage of maturity, the realistic option for growth is diversion to new markets. The markets of Europe and America are older and also are very established for the Starbucks and it also has developed a brand loyal segment of customers behind them. That is the reason they need to consolidate the work they have so far put in to the emerging markets and consumers. To put the strategy into action STARBUCKS needs to consider the below stated aspects so that the transition or change over to new markets is as smooth as it can get. The timing is one of the major aspects which need to be taken care off or estimated beforehand. Since company already has its plants based in INDIA and CHINA; they still need to develop them further to enhance production and meet the growing demand of a growing market and also a growing consumer base. The time it will take for them to either acquire or go into further and further of franchise growth model. The other important type of strategy in which STARBUCKS has been largely successful is by creating their 100% subsidiaries in the emerging markets so that it becomes a strategic asset for the company and would usually mean that it will be cost effective manufacturing by producing it in developing countries; which means that they will have relatively less expensive labour at their disposal in comparison with already developed countries and markets. The constraints for company can be the rise in prices of raw materials will definitely impact pricing and positioning of the brand. They will also have to work extensively to keep up to date with taste of consumers and also their preferences in terms of product. Another factor can be the potential of the markets suggested will definitely appeal to the competition and it might trigger a price war and fierce rivalry amongst the industry players. The fluctuation in international business will also affect STARBUCKS in particularly the international currency market. This strategic plan may be able to help STARBUCKS achieve a safer journey ahead and they will be able to sustain a strong foothold in the world. Starbucks should continue to open new locations worldwide. Starbucks is extremely dependent on its domestic success, and yet has a variety of countries it has not explored opportunities in. However, it is recommended that Starbucks tread lightly and with caution, insuring proper social and cultural analysis before plunging into a country. This is apparent in the fact that Starbucks was forced to close three retail stores in Singapore last year.   

“White Man’s Burden” Essay -- Literary Analysis

Rudyard Kipling’s 1899 poem â€Å"The White Man’s Burden† epitomizes the European man’s view on imperialism, Euro-centrism and social Darwinism. Four centuries before 1899, such ideas were briefly hinted in the letter from Christopher Columbus to King Ferdinand and Queen Isabella, however by 1899 these attitudes strengthened and developed fully into their complete meaning. The U.S and Europe’s imperialism in the nineteenth century were the most influential ever in the history of human civilization. The immense motive for imperialism came from social factors including religion and Social Darwinism. Missionaries frequently rushed to Africa and Asia to convert its people to Christianity. On the other hand, social Darwinism argued the survival of the fittest- applying science to racism, which fed ideas of European racial superiority. After landing on the African continent, Europeans felt they had a duty to civilize Africa, which is explicitly indicated by â€Å"The White Man’s Burden.† When white men invaded countries in Africa, they saw a new group of people who wore very little clothing and lived in simple buildings. This gave the Europeans the idea and need to help these people become more developed and evolve socially (Bentley and Ziegler 912). Rudyard Kipling’s "The White Man's Burden" encouraged the United States to impose colonial rule in the Philippines. Stanzas like â€Å"To wait in heavy harness,†¨ On fluttered folk and wild – Your new-caught, sullen peoples, †¨Half-devil and half-child†, indicates that Kipling believed main taining oversea colonies was a burden for the colonial empire because the empire was responsible for the inferior people. His reference to Filipinos as being both half devil and half child explicitly means that new ca... ...entley, J. H., Ziegler, H. F. Traditions & Encounters: A Global Perspective on the Past. Vol II – From 1500 to the Present. Fourth Edition. McGraw Hill, 2007. 2. Reilly, K. Worlds of History: A Comparative Reader. Third Edition. Bedford / St. Martin’s, 2007. 3. â€Å"Napoleonic Wars (1799-1815).† History of War. 2000. Dugdale-Pointont. 27 April, 2008 . 4. â€Å"Convention Revising the General Act of Berlin, February 26,1885, and the General Act and Declaration of Brussels, July 2,1890.† American Journal of International Law. 1921, 15(4), 314-321. 5. â€Å"Social Darwinism.† Explore the World of Replicators. 2000. Think Quest. 27 April, 2008 . 6. â€Å"Age of Discovery.† HCS-OSU. 1992. OSU. 27 April 2008 .

Death of a Hired Man

Subject Matter The subject matter of the poem is of a couple that live on a farm. Mary is sat waiting for Warren to arrive home. When she sees him she tells him that Silas is back. The two start talking about Silas and Mary tells Warren how worn out he looks. They talk about how he used to work on the farm and the boy that used to work with him, who is now a scholar to Silas's dislike. Mary then tell warren that Silas has come here to die and how he sees this place as his home. Warren mentions Silas rich brother and how Silas wont go to see him because of his pride.Warren goes inside to how Silas is doing and when he returns out side he tell Mary that he is dead. Themes The themes that are present in this poem is life as well as death, Family & Friendship, Home and belonging. Life & Death The sense of death is set when Mary says â€Å"he has come home to die:/ you needn't be afraid he'll leave you this time† and the couple start to reminisce of Silas's life and the things that he used to do. Character Development Mary’s character is shown us from the first line.Although the day has been busy—busy enough that she and her husband had to go their separate ways to get everything done, with Warren returning from the market at or after dark, Mary just waits at the table, being close to Silas should he wake up, but not occupied with end-of-day tasks such that she might miss the sound of Warren’s approach. She does not dare miss Warren at the door, and prepare him for what he will find in the kitchen. Mary is a mixture of kindness, firmness, and resolve. She advises her husband to â€Å"Be kind† then â€Å"you mustn’t laugh at him† and then â€Å"Go look. See for yourself. Yet she only does this after she has softened Warren’s hard crust. She is concerned that Warren will hurt Silas’ feelings. She dragged Silas into the house, gave him tea, tried to make him smoke, urges him to talk about his situation. Sh e is comforting to the wayward worker. And his sorry condition â€Å"hurt [her] heart the way he lay/ And rolled his old head on that sharp-edged chair-back. † Yet, she is firm and resolved. Before Warren ever gets home and gives her consent, she has fed and entertained Silas, and made up a bed for him. She seems fairly certain that she can convince Warren that Silas must stay.Yet, she also trusts her man. While he has that crust she must break through, she allows him time alone with Silas and seems sure that Warren will do the right and charitable thing. Warren's Character Warren’s Character Contrasts with Mary’s in â€Å"The Death of the Hired Man† Warren returns from the market, probably at late twilight, expecting to find dinner on the table, and instead finds the next-to-worthless Silas returned, in the dead of winter, at a time when farm hands are not really needed. He hears that Silas plans to â€Å"ditch the meadow† this time, something tha t apparently has come between them before.Warren sees himself as a kind man. He has put up with Silas in times past, perhaps for several seasons. The words imply several cycles of hiring, leaving for better wages or for whatever, return in the off-season, and re-hiring. Warren, rather than interfere when Silas argued the value of education with the young farm hand working a summer while in college, stayed â€Å"well out of earshot† and let them argue. He has been kind. Yet he is cynical. He smiled at Mary’s description of Silas as â€Å"a miserable sight,† drawing from her a mild rebuke. Will Silas really work this time?Mary describes his condition as poor, and thinks he might be past his working days. Warren disputes that sight unseen. If Silas is to stay with them he is to work for his keep. Warren is not uncharitable; he just believes Silas' brother, whom he thinks is well-to-do, should be the one to provide care. Silas, the Unreliable Hired Man Although Sila s never speaks in this poem, much is revealed about him. He has a disdain for learning. He has trouble staying with a job when he thinks he can make more money elsewhere. He takes advantage of peak labor times to sell himself to the highest bidder.He makes promises he cannot keep, such as â€Å"ditching the meadow. † This is a curious phrase. What does it mean? Is the meadow poorly drained and in need of having some ditches cut—hard, backbreaking labor? If so, it appears Silas abandoned Warren and Mary when they needed him most. Or is this some kind of useless task that Silas thought needed doing but which Warren had no intention of paying for? Either way, although it is a point of contention between the farm couple and the laborer, the fact that Silas is fixated on it declares his stubbornness.Conflict Handled Through Words and Actions, not Telling The conflict between Warren and Mary reaches a peak when Mary says, â€Å"he has come home to die,† and Warren say s, â€Å"Home is the place where, when you have to go there, they have to take you in. † Mary seems to bristle at this and gives a sharp reply: â€Å"I should have called it/ Something you somehow haven’t to deserve. † What does this mean? Is it a generic description of home, that no one has to do something to deserve what should be theirs?Or is she saying that Warren is not deserving of the home he has, a stronger statement? The conflict is sharp enough that Warren leaves the front steps and does something meaningless: he walks a few feet, picks up a small stick, brings it back to the steps, breaks it, and throws the parts away. He seems to be doing something physical as a means of breaking the tension with his wife. The poem ends with the three main characters well developed, mostly through dialog but also through a minimum of actions. Much can be learned about them in these few lines excellently crafted.

Essay on Crowdsourcing AOL case - 630 Words

MIS Management Information System Crowdsourcing at AOL Case Analysis 1. A brief analysis of the case study AOL engaged in what is called â€Å"micro-tasking†, and is believed to revolutionize the virtual workforce. Micro-tasking is what Daniel Maloney, an AOL executive, applied when he was faced with inventorying a vast video library. He broke the large job into small pieces and utilized a crowdsourcing IT platform, Mechanical Turk, in order to describe each task that he required to be done. Each worker was asked to find web pages containing a video and identify the video’s source and location. The project started within a week and completed in a couple of months. The total labor cost was as low as it would‘ve been to hire two man-month†¦show more content†¦He assembles and controls the entire project. 2-3. What factors should be considered when deciding whether or not to crowdsource a particular part of a business? I think the following three points implies factors to decide. 1) Any tasks that require advanced knowledge in a certain area should not be crowd sourced. Because managers controls a large number of workers and review the quality of services, critical functions related to company’s brand should not be crowd sourced. 2)Even if each company has its strategic capability, crowdsourcing vital areas that sustain company’s capabilities might lead a company to lose its advantage. 3) Crowd sourcing is more suitable for non-creative, simple works to be break into micro tasks. 2-4. Describe the advantages and disadvantages of crowdsourcing. I consider that the advantages of crowdsourcing not only reduce cost, but also provide working opportunities with a large number of general people. For example, 1) Total labor cost can be reduced. 2) It’s generally faster than hiring temp staff or traditional outsourcing firms 3)Mothers, who quit working even if they have working experiences, can utilize working opportunities in order to work as a part time job. 4) Crowdsourcing provide NEET (Not in Education, Employed and Trained) people with opportunities to join something social activities. On the other hand, disadvantage implies that 1) Dishonest companies maliciously utilize people without caring forShow MoreRelatedMarketing Management 14th Edition Test Bank Kotler Test Bank173911 Words   |  696 Pages 16) When demand is ________, it implies that more customers would like to buy the product than can be satisfied. A) latent B) irregular C) overfull D) full E) negative Answer: C Page Ref: 8 Objective: 2 Difficulty: Easy 17) In the case of ________, consumers dislike the product and may even pay a price to avoid it. A) nonexistent demand B) overfull demand C) irregular demand D) negative demand E) declining demand Answer: D Page Ref: 8 Objective: 2 Difficulty: Easy