DESK REPORT ON

STARBUCKS

Submitted to
Balaji Institute of Telecom & Management, Sri Balaji University,
Pune
In partial fulfilment of the requirement of the award for the
Master’s in business administration (MBA)

Submitted by
Priya Singh
TM2120121

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Acknowledgements

I would like to heart fully acknowledge my gratitude and thanks to all the
people who gave their ample support right from the initial stage of the desk
report, appreciated it and encourage till its completion.
I sincerely express my thanks to Dr. Rashmi Mahajan Deputy Director and Dr.
Nitesh Behare Faculty Mentor, “Balaji Institute of Telecom and Management,
Pune” for his valuable guidance and intellectual suggestions during this
project. I would also thank my Institution and my faculty members for helping
me in doing this.

Priya Singh
TM2120121

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Company Overview
Established in 1971, Starbucks opened operations in Seattle’s Pike place markets with the
future aim of providing coffee to restaurants and surrounding bars. In 1982, Starbucks
recruited Howard Schultz, who after visiting Italy tried to adapt the same principles in order
to a strong bar culture. Schultz who led the marketing and retail efforts of Starbucks utilized
company’s ability to provide quality coffee beans and opened up a new store called Il
Giornale, which brewed coffee from these beans.
In 1987, Giornale took over assets of Starbucks and changed its name to Starbuck
Corporation. By the end of year, Company increased the number of stored to 17 and
furthered its location span by entering Chicago and Vancouver. After three years in around
1990, Starbucks took further steps in expansions of the Seattle headquarters and an
increase in resources of the opening of new roasting plant. Starbucks also developed
relationships and other ventures during early nineties as it looked for development
organizations to further its progress. By 1995, Starbucks really established its name with
opening of 676th store as well as increasing products in store with the addition of compacts
discs, books etc a result of previously popular experiment with in – house music. In the later
years, Starbucks kept stretching its span by intering into international markets in Japan,
Singapore and Hawaii.
In year 2000, Starbucks had progressed so far that 3300 stores were already opened, the
company had ventured into countries ranging from England to China & Australia.

At present, Starbucks process International stores numbered to 5113 and 11567 stores in
United states. In early 2008, Schultz returned to Starbucks as CEO to attempt a turnaround
strategy for the struggling chain as Starbucks didn’t respond quickly enough when the US
and global economy started to weaken.

Overall, the Starbuck’s Vision of becoming a worldwide global brand seems to be working in
favour of the company and is helping it to attract the attention of many major companies
who would like to share a partnership. This approach gives much strong holds or strong
basis for future development of international markets, where further strengthens the
mission to become one of the leading specialty coffee retailers of the world.

Starbucks, the leading retailer, roaster and brand of specialty coffee in the world has been
struggling as of faltering economy, its own rapid growth (international expansions, and
growing presence in 44 countries) and increased competition from cheaper rivals. In the first
quarter of 2008, company’s net income feel to $108.7 million down 28% from the same
period of 2007. Starbucks shares have tumbled over the previous two years and the
company has struggled to maintain its differentiation in the face of growing competition. It
has also suffered to the effects of the crisis in the housing market, which has put a pinch on
sales. Company has also suffered from rising costs of storefront space and wholesale prices
for coffee and dairy products.

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Organization structure of Starbucks

Starbucks functions through a “matrix organizational structure”. Starbucks has a company

hierarchy to ensure that each job, or responsibility, gets done efficiently and effectively.
From top to bottom, this hierarchy begins with functional structure, geographic division,
product based divisions, and all the way down to, teams.

Functional structure
Functional structure is the business function of the company.
This includes having the CEO on top, monitoring and controlling what is occurring within the
business.
There are other departments such as HR department, finance department, and the
marketing department.
They are on the top chain of the company’s structure as it is part of the company’s
headquarters, and its decisions and regulations must be followed through the entire
company.

Geographical Division
The company currently has three regional divisions in the global market which is Pacific-
Asia, America, and Europe, the Middle East, and Africa.
Then further geographic divisions such as the Western, Northwest, Southeast, and
Northeast.
Each division has a senior vice president; meaning that they report to two superiors: the
geographic and functional heads. This is a good thing because this allows closer managerial
support.

Product- based
This division is focused on different products that company has to offer. There is different
type of products for each department such as baked goods, coffee, and merchandise. This
type of structure is extremely efficient for people in different departments as they focus
primarily on one product only.

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Introduction

Starbucks Corporation is an American

multinational chain of coffeehouses and roastery reserves headquartered
in Seattle, Washington. It is the world's largest coffeehouse chain.

As of November 2021, the company had 33,833 stores in 80 countries, 15,444

of which were located in the United States. Out of Starbucks' U.S.-based
stores, over 8,900 are company-operated, while the remainder are licensed.

In 2021–2022, votes to join Starbucks unions were successful at multiple

Starbucks locations, including in cities such as Seattle, Buffalo, Rochester,
Ithaca, Kansas City and Manhattan.

The rise of the second wave of coffee culture is generally attributed to

Starbucks, which introduced a wider variety of coffee experiences. Starbucks
serves hot and cold drinks, whole-bean coffee, micro-ground instant
coffee, espresso, caffe latte, full and loose-leaf teas,
juices, Frappuccino beverages, pastries, and snacks. Some offerings are
seasonal, or specific to the locality of the store. Depending on the country,
most locations provide free Wi-Fi internet access.

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Starbucks Biography
 Starbucks was founded on March 31, 1971 by Jerry Baldwin, Gordon Bowker, and
Zev Siegel.
 In 1982 Howard Schultz joined Starbucks as director of retail operations and would
become the single most important person to join the company.

 On a visit to Italy Schultz was inspired by the coffeehouse culture and wanted to
bring the same experience to American customers.
 When Schultz introduced the new model to their stores it resulted in massive
popularity and growth for company. This effect has molded Starbucks into the
cultural touchstone it is today.
 The company experienced rapid growth going public in1992, and growing tenfold by
1997, with locations around the United States, Japan and Singapore.

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Company Profile:

Particulars Description

Type Public
Industry Coffee shop
Founded March 30, 1971
Pike Place Market, Elliott Bay, Seattle, Washington, U.S.
Founders Jerry Baldwin
Zev Siegl
Gordon Bowker

Headquarters 2401 Utah Avenue South, Seattle, Washington, United States

Area served 84 countries
No. of locations 33,833(2021)
Key people Howard Schultz, interim CEO Mellody Hobson, Chairperson
Kevin Johnson, President & ex-CEO
Products  Coffee beverages
 Smoothies
 Tea
 Baked goods
 Sandwiches

Revenue US$29.06 billion (2021)

Operating income US$4.87 billion (2021
Number of employees 383,000 partners (2021)
Website https://www.starbucks.com/

Vision
• Being a premier purveyor means that Starbucks Coffee wants to achieve leadership
in providing its products, especially coffee of the best quality.
• Analysts and critics point out that coffee from McDonald's or Dunkin Donuts may be
better than Starbucks coffee in some aspects.
• These principles include ethical conduct and a warm culture.

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Mission
• Starbucks Coffee inspires and nurtures the human spirit starting with its employees.
• At Starbucks, employees' and customers first names are used.
• The one (person cup and neighbor) at a time component of the mission statement
show that the firm ensures meaningful impact on every employee and customer.

Starbucks Value:
 With our partners, our coffee, and our customers at our core, we live by these
values:
 Creating a culture of warmth and belonging, where everyone is welcome
 Acting with courage, challenging the status quo, and finding new ways to grow our
company and each other
 Being present, connecting with transparency, dignity, and respect
 Delivering our very best in all we do, holding ourselves accountable for results
 We are performance driven, through the lens of humanity."

Leadership
Currently, the company has 25,000 branches in 40 countries.
The CEO is deputized by several senior vice presidents who are in charge of key departments
of the company.
Among the departments is store development, headed by Andy Adams, global product
developments (Luigi Bonini), Marketing and branding (Brady Brewer), and channel
development headed by Michelle Burns.

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Starbucks Goals
 Make 100% of all cups recyclable by 2015
 Reduce energy consumption by 25% and cover 100% of the electricity with
renewable energy
 Reduce water consumption by 25% in all company owned stores
 Improve farmers access to help them generate additional income
 Build all new company-owned stores to achieve LEED Certification

Market Strategy:
Some of the methods Starbucks has used to expand and maintain their dominant market
position, including buying out competitors' leases, intentionally operating at a loss, and
clustering several locations in a small geographical area (i.e., saturating the market), have
been labelled anti-competitive by critics.[14] For example, Starbucks fuelled its initial
expansion into the UK market with a buyout of Seattle Coffee Company but then used its
capital and influence to obtain prime locations, some of which operated at a financial loss.
Critics claimed this was an unfair attempt to drive out small, independent competitors, who
could not afford to pay inflated prices for premium real estate.

Macro Environmental Analysis:

PESTEL Analysis –

 Political/ Legal Factors:

1 Increasing tensions between United States and the rest of the world directly effects the
business environment operated worldwide.

2. allegations give poor brand image to company. Branding being the strongest competitive
advantage can be harnessed by any allegations.

3. Starbucks rely heavily on coffee beans which imported from various countries. So possible
threat like change in import laws etc may directly impact the productivity, cost etc affecting
the level of consumption for Starbucks coffees.

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Economic Factors:
These are the major factor that derives and nurture the direction f the economy firm
operates in.

Starbucks have been facing problems due to economic recession in countries worldwide
which resulted in various stores to be closed down and decrease in net profit margin.
Economic factors directly influence buying power of consumers and thus resulting in direct
losses in sales.

Social/ Cultural Factors:

Starbucks is committed to a role of environmental leadership in all faces of its business. Company
follows stringent standards to develop and maintain social sustainability. Which creates positive
outcome and stronger brand in corporate social world.

Technological Factors:
Starbucks is very vigilant in adopting and innovating ways to better customers’ experience.
For example, with the introduction of Starbucks card the company has created opportunity
to improve customer service, shorten lines and more better and efficient services. Starbucks
tied $100 million deal with Compaq to provide free wifi services to its consumer’s needs.

Business Strategy:
The Starbucks mission and principles are encompassed by three major strategic stances i.e.-

The Third Place after work and home – Created by Starbuck’s unique ambience

Establishing human Connections – Starbucks strives to maintain this through ecosystem

management, sustainable practices, supplier networks maintenance, innovation and firm
transparency.

Providing quality experience everyday.

Internal Environment Analysis:

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SWOT Analysis is a tried-and-true management paradigm that allows a company like ICICI
Bank to evaluate its business and performance against that of its competitors. ICICI Bank is a
well-known name in the banking and financial services industry.

STRENGTHS:
 Brand Image: Starbucks is among few companies that has successfully created
awareness for specialty coffee category while maintaining superior brand. Starbucks
is considered to be among strongest brand serving second most traded commodity –
Coffee. Starbuck emerged itself as a brand or gateway to western culture which
became very popular in China and Japan.

 Innovative Business Strategy: Starbucks innovative business Strategy resulting to

better staff behind counter, ambience of the store and its fabulous products has
enchanted the point of consumer interaction and spending.

 Strong Finances: Starbucks after becoming public company has raised high from 2
decades and developed high trust in its investors to believe in Starbucks and giving it
independence to develop further. Starbucks possess high capital and high income
resulting from sales. Company has its own stores worldwide giving better capital to
sign more ventures.

WEAKNESS:
 Reliance on U.S. Market: Starbucks is a global company and has a presence in 37
countries. However major revenue and profit for Starbucks comes from its domestic
market ranging to 80% from US only. Company has suffered severe losses in
Australia and in Europe in previous 2 yrs. Given its presence globally and the
opportunities for further expansion, the company needs to be looking at generating
proportion of revenue outside its domestic markets.

 Large Corporate image: Starbucks struggles with the backlash despite efforts to
seem are connected with community. They are generally been related as Wall-mart
of coffeehouses.

 Expensive Price: Starbucks and other coffeehouses has caused the price of coffee to
increase up to 300%.i.e $3 -$4. Though this price can still be acceptable in markets of
developed nations where buying power of consumers are high. However, such prices

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 in emerging economies will represent Starbucks more of luxury good and where
limited persons can come and enjoy the its products.

OPPORTUNITIES:
 Expansion in developing markets

Starbucks has coffeehouses mainly in the US. Global expansion in emerging

economies such as India, China and few regions of Africa can give a great opportunity to
the company.

 Business diversification and Products Specifications

It can further diversify its business operations to improve overall revenue growth

opportunities. Besides, developing products as per the customer preferences in the
specific target market is also a profitable opportunity.

 Introducing new products

As the company is quite popular, introducing new products and holiday flavours
(Peppermint Mocha, Eggnog Latte, Gingerbread Loaf) under its name would be
profitable and welcomed in the markets.

 Partnerships or alliances with other firms

Co-branding always benefits. Starbucks has the opportunity to develop partnerships

and alliances with major firms. This would strengthen its presence and market
share.

 Exploit Latest Coffee Trends and Technologies

Although Starbucks is at the forefront of cutting-edge coffee technology, there is still

room for expansion. From best foam technology to snap-chilling, back to black, and
RSI-reducing gizmos, there are endless possibilities offered by the latest coffee
trends and technologies.

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  Adopt Price Differentiation

Some coffee houses are growing their customer base rapidly by offering regular and
premium coffee to cater to different classes. Starbucks can offer regular coffee that
is priced lower to capture the middle-class while serving its expensive variety as
premium. 

 Strengthen Online Channels

The pandemic has discouraged in-store consumption with more coffee drinkers
opting for take-away. Starbucks can strengthen its online sales channels to attract
more customers to pick their coffee cup beside or in pickup locations

 .  Coffee Delivery Service

Currently, customers rely on Uber Eats, Grub hub, and Postmates for its Starbucks

coffee delivery. Starbucks can start its own coffee delivery service for better
customer experience.

 Coffee Subscription

Panera bread has already started coffee subscription service. Starbucks can also try
new coffee subscription business model to expand its customer base.  

THREATS:
 Competition with low-cost coffee sellers

Many coffeehouses offer products at an affordable rate. This can threaten the
future’s stability of Starbucks which offers higher prices.

 Competition with big outlets

Aggressive competition with multinational companies like Dunkin Donuts and

McDonald’s can also pose a threat to its market position.

 Imitation

Products can be imitated by both new and old rivals.

 Independent coffeehouse movements

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 There are many sociocultural threats for Starbucks. These sociocultural movements
support small independent and local coffeehouse and oppose the expansion of large
multinational chains.

 Third-party Delivery Suppliers (union) Strike

Starbucks’ supply chain consists of many third-party contractors and stakeholders,

which makes it difficult to manage the entire chain effectively. In 2019, Starbucks
coffee houses in the Mid-West grappled with shortages after employees of a major
supplier went on strike.

External Environment Analysis:

Michael Porter defines five forces impacting a firm’s competitiveness- threat of substitutes,
threat of new entrants in the industry, bargaining power of suppliers, bargaining power of
customers, and the intensity of competition within the industry.

Suppliers:

Starbucks Corporation as big size organization can put significant pressure on its suppliers.
As per its goals and values it does not abuse this power as it is not in its best interests. It
treats its relationship with supplies as a partnership and possess high operating standards for
its suppliers. Starbucks ensures its supplier make reasonable profit so that they can meet
company’s corporate standards and expectations which include environmental policies such
as excessive packaging, energy conservation and farming methods and employee benefits.

Dairy, paper products, Coffee are the major inputs into the Starbucks operation. It is fully
dependant on its supply of coffee ad demands a high-quality bean thus it has developed
various programs in the development of farmers and coffee producing regions. Starbucks
also grows its supply base as it grows its retail base and to keep its supplies in business and
loyal it pays a premium to ensure this.

Overall, the threat pressured by suppliers is moderate due to the instability of green coffee
industry and the scarcity of the high-quality bean that the company demands.

Customers:
The thread of customers is low for Starbucks because of low likelihood of backward
integration, Starbucks differentiated products, diversified customer base and company’s
ability to shape consumer taste and demand. It is generally been presumed that
coffeehouse products are of superior quality that other venues which gives competitive
advantage to Starbucks.

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Starbucks itself is well established bran worldwide and one of Starbucks’ branding strategy
of differentiation as third place experience is unique and contributed a lot to its success.

Competitors:

For Starbucks where its products can be found from specialty coffee mainstream to
convenience stores and gas stations, defining the basis for competition is difficult. Starbucks
competes in two ways i.e., product and venue. But considering both aspects Starbucks faces
high competition in both segments. Various companies like MacDonald’s Mc Cafe, Dunkin
Doughnuts, Costa etc. have emerge and provides better products in low prices and with
other meals. Coffeehouses gives tough competition as Starbucks prices are higher in prices
and have limited product line. Also, in some countries like Japan, Australia, Europe etc.
Starbucks faces low sales as people taste preferences are not much likely favouring
Starbucks products. In Japan, taste of coffee is considered to be artificial.

Therefore, Competitive threat for Starbucks is from moderate to high due to increasing
number of firms penetrating Market and product line.

New Entrants:

There is room for new entry into the market, but new entrants face formidable barriers to
entry to compete with Starbucks directly in the coffeehouse segment. Starbucks had
developed better skills, networking, brand image and distribution channel which might take
years for new entrants to directly compete with Starbucks. Also, Starbucks is able to interact
creatively with customers and partner with suppliers by utilizing its knowledge.

Also, Starbucks got its stores located at the best geographic location worldwide thus helping
it gain competitive advantage.

As one of the strongest brands, Starbucks products are highly differentiated and provide
unique experience. Furthermore, Company has developed loyal customer base that is willing
to trust the new products including books, movies and DVDs.

Considering Starbucks’s Scale and competitive advantage, it has posed barriers to entry. But
Market is difficult to define and changes or innovative approaches may also a disruption to
occur from a low-end player or new channel of distribution which Starbuck may not be
prepared for. Thus, threat for new entrant is slow but Starbuck need to be vigilant.

Substitutes:

Similar to competitors, Threat of substitute exist in two levels. The first is the coffeehouse
experience. The experience customers receive from Starbucks Coffee outlets can also be
received from bards and cafes. The experience is providing people a place to hand out and
meeting friends. Starbucks projects itself as community place or third place. In this regard
various substitutes like community centres, parks, churches, bars etc can be better
substitutes.

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The second Level is the product level. Even the product can further broken down into the
need for a caffeine boost and the need for a special drink. So, considering both of these,
substitutes for coffee include tea, soft drinks, energy drinks, smoothies etc. Starbucks
address this threat by increasing this product range with non-coffee drinks. It also acquired
Tazo Tea and blended sodas and Frappuccino drinks were sold too.

However, considering this threat of substitute is low as coffee being iconic product and the
environment provided by Starbucks is too unique among itself.

Core Competencies and Competitive advantage:

 Human Resource Management: Starbucks created an environment and an
organization around its employees as one of its most important assets and sources
of sustainability. The empowering corporate culture, above industry standard
employee benefits and employees stock ownership programs have aided in crafting
an exceptional workforce that takes pride in its work and is treated with respect and
dignity. Cultures towards employees is laid back and supportive and are empowered
by management to make decision without management referral and are encouraged
to consider themselves as a part of business. This type approach benefitted
Starbucks in reducing staff turnover expenses and attracted highly skilled and
passionate staff

 Marketing: Starbucks has created a brand that presents an understanding of

people’s values, lifestyles, and needs. The company’s attention to the experiential
factor has been pivotal to its success.

Products of Starbucks

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