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Starbucks Presentation (7!26!14)

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13 views22 pages

Starbucks Presentation (7!26!14)

Uploaded by

Igor Miranda
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Maintaining Competitive Advantage

in a Mature Market
MGMT S-5000: Strategic Management
Igor Miranda
Evan St. George
Introduction
● How does an established company in a
mature industry work to build & maintain a
competitive advantage?
○ Defining competitive advantage
○ Defining mature industry

● Using Starbucks (SBUX) as an


example to examine the issue
Competitive Advantage in a Mature
Industry
● Earnings stabilize & growth prospects are
diminished; Room for product refinements
Competitive Advantage in a Mature
Industry
● Revenues tend to fluctuate with economy
● Company numbers begin to level off with
increased market saturation (M&A possible)
● Technology & Processes are well defined
● Profit margins generally low/steady
Companies in mature industries must attain
competitive advantages through innovation:
Starbucks Overview
● Specialty coffee retailer founded in 1971
● CEO: Howard Schultz
● Store count:
● 1971: 1 1987: 17
● 1995: 677 2004: 8,569
● Today: 20,863
● SBUX currently has 38% of overall
market share (market leader)
Coffee & Snack Shops Industry

● Consumer spending rebound


● Product expansion driving revenue growth
● Emerging economies offer
new opportunities for growth
Coffee & Snack Shops Industry
● Market share leaders:
● Starbucks (37.7%)
● Dunkin’ Brands (25.5%)
● Tim Hortons (2.2%)
● Krispy Kreme (2.1%)
Five Forces Analysis
Threat of new entrants Threat of substitutes

Competitive
Rivalry

Threat of powerful Suppliers Threat of powerful buyers

New Entrants Substitutes Powerful Suppliers Powerful Buyers Rivalry


- Low initial investment
- No switching costs for + Differentiated
consumers - Other beverages
products - Big rivals such as
- Big companies such as + Starbucks’ Size and Dunkin Donuts and
McDonald’s entered the - Home-made
Scale + Diversified McDonalds and
coffee market coffee
consumer base several small players
+ Economies of Scale:
favorable access to raw - Rising coffee prices
- No switching cost
materials and learning - Many options in - No switching costs
for consumers
curve the market
+ Brand power
Major Threats to Starbucks
● Highly competitive industry
● Competitors on both a national & local scale
● Substitutes also prevalent
● Saturation of the US Market
● Same store sales growth predicted to slow
● Global coffee bean prices spiking
● Risks associates with overseas
expansion (cultural & economic)
Starbucks Experience

HR & Store High-Quality Customer


Technology
Environment Products Responsiveness

Innovation & Expansion


HR & Store Environment
● Employee Tuition Benefit
● LEED Certified Stores & Green Building Prgm
● In-store Customer Experience
HR & Store Environment
High Quality Product & Experience
● Premium ingredients from their coffee beans,
to their bakery items, teas, and juices.
● Quality of products and the
quality of customer service
● “Ambition of ranking among
the world’s most admired brands
and enduring companies…”
- Howard Schultz, 2013
Customer Responsiveness
● Continued Expansion of the Product Portfolio
● Yogurt smoothies
● Tea (Teavana & Oprah collaboration)
● Healthy Juices (Evolution Fresh acquisition)
● Soda (Fizzio)
● Alcohol
Customer Responsiveness
● Bakery / Breakfast offerings
● Lunch Menu & Sandwich offerings
● “Treat Receipt”
Technology
● Mobile payment system & Mobile App
● Customer Loyalty Program
International Expansion
● Latin America
• 700 stores across 13
markets in Latin America.

• Just opened its first store


in Colombia – joint
venture with Alsea and
Grupo Nutresa.
International Expansion
• 3,882 Starbucks locations: 906
● China & Asia Pacific owned and 2,976 franchised.
• Starbucks plans to add
approximately 750 locations in
fiscal 2014 – largest number of
stores that SBUX plans to add in
any region for the year.
• 9% growth in comparable-store
sales.
• Revenue rose 29.1% to $255.7M
International Expansion
● Europe, Middle East & Africa (EMEA)
• SBUX has 1,969 locations in Europe, the Middle East, and
Africa: 853 are company-owned, and 1,116 are franchises.
• Revenue rose just 1.6% to $1.16 billion year-over-year, and
comparable-store sales were flat.
Recommendations
● Selective product line expansions
● Alcohol, lunch items, where appropriate
● Packaged goods/coffee in grocery chains
● Differentiated growth strategies
● “Smart growth” in the U.S. given market maturity
● Aggressive strategy internationally
● Maintain technological leadership
● Targeted mobile marketing
● Leverage media channels
Sources & References
• Barney, J. and Hesterly, W. (2012). “The Five Forces Model of Environmental Threats.”
Strategic Management and Competitive Advantage, pp. 35-50.
• http://www.investopedia.com/terms/m/matureindustry.asp
• http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-financialhighlights
• http://clients1.ibisworld.com/reports/us/industry/majorcompanies.aspx?entid=1973
• http://news.starbucks.com/news/starbucks-continues-expansion-in-india-with-opening-o
f-new-flagship-store-i
• http://www.fool.com/investing/general/2013/11/20/starbucks-global-expansion-is-gaini
ng-steam.aspx

• http://
www.fool.com/investing/general/2014/06/30/the-starbucks-growth-story-is-far-from-ove
r.aspx

• http://
www.bloomberg.com/video/starbucks-brews-profits-as-it-looks-towards-lunch-TT9qi8hz
QUandvsf0LPD2A.html

• http://www.starbucks.com/about-us/company-information

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