1.

CASE BACKGROUND
2. ENVIRONMENT ANALYSIS
A. GENERAL ENVIRONMENT
A.1 OPPORTUNITIES
A.1.1. SOCIO- CULTURAL-DEMOGRAPHIC FORCES
- Those who finished college bought 49 percent more gourmet coffee on average, and
those with some postgraduate education bought 71 percent more. They also found that
households with children and two working parents bought 28 percent more gourmet
coffee.
- Recent trends have shown that some of the consuming public is concerned about the
nutritional value of such products as those offered by the specialty coffee sector and
have even challenged the correctness of the labeling and calorie information posted on
the products available at retail outlets.
-
A.1.2. TECHNOLOGICAL FORCES
-

A.1.3. ECONOMIC FORCES

- Company-operated retail revenues increased due to the opening of 236 new company-
operated retail stores in the last 12 months, favorable foreign currency exchange rates,
primarily on the Canadian dollar, and comparable store sales growth of 2 percent for
fiscal 2008.

A.1.4. ENVIRONMENT FORCES

-

A.1.5. POLITICO-LEGAL FORCES

- (2002) acquired 129 Seattle’s Best Coffee coffeehouses, as well as certain wholesale
distribution rights.
- Starbucks store licensing operations opened to nearly 40 countries in foodservice
accounts primarily in Canada and Japan.
- (2001) Starbucks opened a store in Zurich, Switzerland, marking its first venture into
continental Europe.

A.2 THREATS
A.2.1. SOCIO-CULTURAL-DEMOGRAPHIC FORCES

A.2.2. TECHNOLOGICAL FORCES

A.2.3. ECONOMIC FORCES

- The 2007–2009 global recession negatively affected the specialty coffee industry.

A.2.4. ENVIRONMENT FORCES

A.2.5. POLITICO-LEGAL FORCES

B. OPERATING ENVIRONMENT
B.1 OPPORTUNITIES
B.1.1. RIVALRY AMONG COMPETING FIRMS
- Media exposure concerning McDonald’s versus Starbucks coffee products actually
helped his firm by creating “unprecedented awareness for the coffee category overall.”
B.1.2. POTENTIAL NEW ENTRANTS
B.1.3. SUBSTITUTE PRODUCTS
B.1.4. BARGAINING POWER OF SUPPLIERS
B.1.5. BARGAINING POWER OF BUYERS
B.1.6. INDUSTRY GROWTH
B.1.7. SHAREHOLDERS’ ACTIONS
B.1.8. CREDITORS’ ACTIONS
B.1.9. COMMUNITY PERCEPTIONS
- Starbucks relies more on its image advertising than traditional advertising. Part of that
image is how the customer not only views the retail outlet but how responsible the
company is to their communities and employees.
B.2 THREATS
B.2.1. RIVALRY AMONG COMPETING FIRMS
- You can now wake up to smell the $4.00 per cup coffee at Starbucks. But McDonald’s is
now running an ad saying, “$4.00 coffee is dumb” as the firm attacks Starbucks around
the world with its $1.00 (and less) coffee
B.2.2. POTENTIAL NEW ENTRANTS
- Starbucks strives to elevate the simple task of drinking coffee to a new level with its retail
outlets seen as a place for socialization, relaxation, and reflection.
B.2.3. SUBSTITUTE PRODUCTS
- In July 2009, Starbucks began grinding coffee each time a new pot is brewed, instead of
grinding coffee only in the morning. Starbucks wants customers to smell coffee aroma all
day long. This change is part of the company’s effort to reinvigorate the “Starbucks
experience” in the face of heavy competition from McDonald’s, 7-Eleven, and Dunkin’
Donuts.
B.2.4. BARGAINING POWER OF SUPPLIERS
B.2.5. BARGAINING POWER OF BUYERS
B.2.6. INDUSTRY GROWTH
- First setback in 2002 when its Japanese operation posted a $3.9 million loss, despite a
15 percent increase in revenues and 108 new store openings, and the first low
performance locations were closed.
B.2.7. SHAREHOLDERS’ ACTIONS
B.2.8. CREDITORS’ ACTIONS
- Moody’s Investors Service recently downgraded Starbucks’ credit ratings.
B.2.9. COMMUNITY PERCEPTIONS

C. INTERNAL ENVIRONMENT
C.1 STRENGTHS
C.1.1. MARKETING
- Its stores are designed to make customers comfortable.
- Starbucks also encourages the use of its Web site where customers are able to register
their Starbucks’ cards, receive nutritional information about Starbucks’ products, shop
online, search for careers, and much more.
- U.S. operations sell coffee and other beverages, complementary food, whole bean
coffees, and coffee brewing equipment and merchandise primarily through company-
operated retail stores
- CPG operations also produce and sell ready-to-drink beverages that include, among
others, bottled Frappuccino beverages, Starbucks’ DoubleShot espresso drinks, and
Discoveries chilled cup coffee, as well as Starbucks’ super-premium ice creams and
Starbucks’ Coffee and Cream Liqueurs, through its joint ventures and marketing and
distribution agreements.
C.1.2. PRODUCTION/OPERATIONS
- Starbucks also provides electrical outlets and, in some stores, wireless access, for
customers who might need to use their MP3 players or laptop computers.
- They have introduced the Starbucks’ card with the hope of strengthening customer
loyalty by improving service.
C.1.3. FINANCE
C.1.4. ORGANIZATION & MANAGEMENT
- Starbucks is rated by ten Fortune as one of the best top 10 places to work.
C.1.5. HUMAN RESOURCES
C.1.6. RESEARCH & DEVELOPMENT
- Research and development is constantly in pursuit of the new products and service that
are both trendy and stable. Starbucks’ products can be found in convenience stores,
grocery stores, department stores, movie theaters, businesses, schools, and even
airports.
C.1.7. MANAGEMENT INFORMATION SYSTEMS
- Starbucks also encourages the use of its Web site where customers are able to register
their Starbucks’ cards, receive nutritional information about Starbucks’ products, shop
online, search for careers, and much more.

C.2 WEAKNESSES
C.2.1. MARKETING
- In response to recent economic times, the company has also adjusted prices on certain
of its more popular products in an effort to show responsiveness to the more budget-
conscious consumer.
C.2.2. PRODUCTION/OPERATIONS
- Starbucks closed 600 underperforming stores in the United States in 2008 and plans to
open only about 200 new stores in 2009.
C.2.3. FINANCE
 - A 47 percent drop in earnings in one year. For the 26 weeks ending March 2009,
Starbucks’ revenues decreased 7 percent to $4.95 billion and net income decreased 72
percent to $89.3 million.
C.2.4. ORGANIZATION & MANAGEMENT
- Redundant positions
C.2.5. HUMAN RESOURCES
C.2.6. RESEARCH & DEVELOPMENT
C.2.7. MANAGEMENT INFORMATION SYSTEMS

NOT SURE:
- In response to recent economic times, the company has also adjusted prices on certain
of its more popular products in an effort to show responsiveness to the more budget-
conscious consumer. (Internal E: Marketing) W
- The U.S. company operated retail business continued deteriorating trends. (External:
Economic) T
- International total net revenues were $433.7 million for the 13 weeks ended March 29,
2009, down $59.7 million, or 12.1 percent, compared with the same period last year,
primarily due to the impact of a stronger U.S. dollar relative to the British pound and
Canadian dollar. (External: Economic)
- On June 15, 2009, 7-Eleven began rolling out iced coffee at its 5,000 self-service
beverage counters across the United States. Iced coffee has become a very popular
drink in the United States, especially among women and teenage girls. Iced coffee is
clearly a female drink according to many analysts, perhaps because it is low calorie and
high caffeine.
- In July 2009, Starbucks began grinding coffee each time a new pot is brewed, instead of
grinding coffee only in the morning. Starbucks wants customers to smell coffee aroma all
day long. This change is part of the company’s effort to reinvigorate the “Starbucks
experience” in the face of heavy competition from McDonald’s, 7-Eleven, and Dunkin’
Donuts.
- You can now wake up to smell the $4.00 per cup coffee at Starbucks. But McDonald’s is
now running an ad saying, “$4.00 coffee is dumb” as the firm attacks Starbucks around
the world with its $1.00 (and less) coffee
- Starbucks strives to elevate the simple task of drinking coffee to a new level with its retail
outlets seen as a place for socialization, relaxation, and reflection.

KEY STRATEGIC FACTORS

Strengths:
1. CPG operations also produce and sell ready-to-drink beverages that include, among
others, bottled Frappuccino beverages, Starbucks’ DoubleShot espresso drinks, and
Discoveries chilled cup coffee, as well as Starbucks’ super-premium ice creams and
Starbucks’ Coffee and Cream Liqueurs, through its joint ventures and marketing and
distribution agreements.
 2. Its stores are designed to make customers comfortable.
3. Starbucks also provides electrical outlets and, in some stores, wireless access, for
customers who might need to use their MP3 players or laptop computers.
4. Research and development is constantly in pursuit of the new products and service that
are both trendy and stable. Starbucks’ products can be found in convenience stores,
grocery stores, department stores, movie theaters, businesses, schools, and even
airports.

Weaknesses:
1. In response to recent economic times, the company has also adjusted prices on certain
of its more popular products in an effort to show responsiveness to the more budget-
conscious consumer.
2. Starbucks closed 600 underperforming stores in the United States in 2008 and plans to
open only about 200 new stores in 2009.
3. A 47 percent drop in earnings in one year. For the 26 weeks ending March 2009,
Starbucks’ revenues decreased 7 percent to $4.95 billion and net income decreased 72
percent to $89.3 million.
4. Redundant positions

Opportunities:
1. Starbucks relies more on its image advertising than traditional advertising. Part of that
image is how the customer not only views the retail outlet but how responsible the
company is to their communities and employees.
2. Those who finished college bought 49 percent more gourmet coffee on average, and
those with some postgraduate education bought 71 percent more. They also found that
households with children and two working parents bought 28 percent more gourmet
coffee.
3. (2002) acquired 129 Seattle’s Best Coffee coffeehouses, as well as certain wholesale
distribution rights.
4. Company-operated retail revenues increased due to the opening of 236 new company-
operated retail stores in the last 12 months, favorable foreign currency exchange rates,
primarily on the Canadian dollar, and comparable store sales growth of 2 percent for
fiscal 2008.

Threats:
1. The 2007–2009 global recession negatively affected the specialty coffee industry.
2. You can now wake up to smell the $4.00 per cup coffee at Starbucks. But McDonald’s is
now running an ad saying, “$4.00 coffee is dumb” as the firm attacks Starbucks around
the world with its $1.00 (and less) coffee
3. In July 2009, Starbucks began grinding coffee each time a new pot is brewed, instead of
grinding coffee only in the morning. Starbucks wants customers to smell coffee aroma all
day long. This change is part of the company’s effort to reinvigorate the “Starbucks
experience” in the face of heavy competition from McDonald’s, 7-Eleven, and Dunkin’
Donuts.
 4. Starbucks strives to elevate the simple task of drinking coffee to a new level with its retail
outlets seen as a place for socialization, relaxation, and reflection.

D. EXTERNAL FACTOR EVALUATION MATRIX

Key External Factors Weight Rating Weighted Score
Opportunities:
1. (Community Perception) Starbucks relies more on its image advertising 0.06 4 0.24
than traditional advertising. Part of that image is how the customer not
only views the retail outlet but how responsible the company is to their
communities and employees.
2. Those who finished college bought 49 percent more gourmet coffee on 0.16 4 0.64
average, and those with some postgraduate education bought 71 percent
more. They also found that households with children and two working
parents bought 28 percent more gourmet coffee.
3. (2002) acquired 129 Seattle’s Best Coffee coffeehouses, as well as 0.09 3 0.27
certain wholesale distribution rights.
4. Company-operated retail revenues increased due to the opening of 236 0.13 4 0.52
new company-operated retail stores in the last 12 months, favorable
foreign currency exchange rates, primarily on the Canadian dollar, and
comparable store sales growth of 2 percent for fiscal 2008.

Threats:
1. The 2007–2009 global recession negatively affected the specialty coffee 0.2 1 0.2
industry.
2. You can now wake up to smell the $4.00 per cup coffee at Starbucks. But 0.15 2 0.3
McDonald’s is now running an ad saying, “$4.00 coffee is dumb” as the
firm attacks Starbucks around the world with its $1.00 (and less) coffee
3. In July 2009, Starbucks began grinding coffee each time a new pot is 0.1 2 0.2
brewed, instead of grinding coffee only in the morning. Starbucks wants
customers to smell coffee aroma all day long. This change is part of the
company’s effort to reinvigorate the “Starbucks experience” in the face of
heavy competition from McDonald’s, 7-Eleven, and Dunkin’ Donuts.
4. Starbucks strives to elevate the simple task of drinking coffee to a new 0.11 3 0.33
level with its retail outlets seen as a place for socialization, relaxation,
and reflection.

1 22 2.7

E. INTERNAL FACTOR EVALUATION MATRIX

Key Internal Factors Weight Rating Weighted Score

Strengths
1. CPG operations also produce and sell ready-to-drink beverages that 0.11 3 0.33
include, among others, bottled Frappuccino beverages, Starbucks’
DoubleShot espresso drinks, and Discoveries chilled cup coffee, as well
as Starbucks’ super-premium ice creams and Starbucks’ Coffee and
Cream Liqueurs, through its joint ventures and marketing and distribution
agreements.
2. Its stores are designed to make customers comfortable. 0.13 4 0.52
3. Starbucks also provides electrical outlets and, in some stores, wireless 0.2 4 0.8
access, for customers who might need to use their MP3 players or laptop
computers.
4. Research and development is constantly in pursuit of the new products 0.15 3 0.45
and service that are both trendy and stable. Starbucks’ products can be
found in convenience stores, grocery stores, department stores, movie
theaters, businesses, schools, and even airports.
Weaknesses:
1. In response to recent economic times, the company has also adjusted 0.15 2 0.3
prices on certain of its more popular products in an effort to show
responsiveness to the more budget-conscious consumer.
2. Starbucks closed 600 underperforming stores in the United States in 0.1 2 0.2
2008 and plans to open only about 200 new stores in 2009.
3. A 47 percent drop in earnings in one year. For the 26 weeks ending 0.07 1 0.07
March 2009, Starbucks’ revenues decreased 7 percent to $4.95 billion
and net income decreased 72 percent to $89.3 million.
4. Redundant positions. 0.09 2 0.09
1 20 2.76

F. COMPETITIVE PROFILE MATRIX

Starbucks Mcdonald’s Dunkin Donuts

Key Internal Factors Weight Rating Weighted Rating Weighted Rating Weighted
Score Score Score
1. Customer loyalty and feedback 0.2 4 0.8 3 0.6 3 0.6
2. Ability to get newly R&D developed 0.4 4 1.6 2 0.8 2 0.8
products into market very quickly
3. Price competitiveness 0.3 2 0.6 4 1.2 4 1.2
4. Experience 0.2 4 0.4 1 0.1 2 0.2
TOTAL 1.0 14 3.4 10 2.7 11 2.8

G. ASSUMPTIONS
G.1. KSF2-O
– The Socio-Cultural-Demographic environment presents great opportunity because
KSF2-O and statistics show that the US is the 2009’s 4th most educated country in the
world.
G.2. Positive Community Perspective
– The market shows favorable opportunity due to positive Community Perspective.
G.3. KSF3-S
– The company shows market strength in terms of KSF3-S (addressing the needs and
wants of their customers).

4. ALTERNATIVE COURSES OF ACTION

A. TOWS MATRIX

B. IE MATRIX
Grow & Build (I, II, & IV) – intensive, integrative
Hold & Maintain (III, V, & VII) – Market Penetration, Product Development
Harvest or Divest (VI, VIII, IX) – Retrenchment, Divestiture

C. GRAND STRATEGY MATRIX

X – Axis: IFE = 2.76 (Strong Competitive Position)

Y – Axis: Positive Community Perspective (Rapid Market Growth)
Quadrant I
Appropriate Strategy – Market Development
FOR REFERENCE:

https://www.statista.com/statistics/184272/educational-attainment-of-college-diploma-or-higher-
by-gender/

US, 4th most educated country

https://www.businessinsider.com/these-are-the-10-most-educated-countries-in-the-world-2012-2