Starbucks Corporation is one of the world's fastest growing companies. Originally founded as a single store in Seattle, Washington in 1971, Starbucks now operates more than 15,000 coffee shops across the globe, with an average of 220 locations in each of the 50 U.S. states. Starbucks' goal is to "establish itself as the most recognized and established brand in the world." They are well on their way to doing so. Each outlet offers customers a relaxed atmosphere to unwind with a selection of more than 40 menu items and specialty drinks.
Even as a global leader, Starbucks still has a fair share of threats. On the other hand, they have an almost unlimited opportunity potential. The main threat to Starbucks is the volatility within the commodity market; coffee being the second largest traded commodity in the world. Coffee prices have been rising continuously for the last several years. A Five Forces Analysis was conducted to determine that the overall profit potential for Starbucks Corporation is moderate.
[...] Starbucks has realized the necessity of improving their image in order to avoid competition with lower cost competitors. They hope that with some strategic advertising this may be possible. Reputation Reputation is one of the most important things to the Starbucks Corporation. They have worked very hard over the years to secure an image as the best coffee producer in the world. But their reputation goes well beyond the coffee. They have worked to gain a reputation for the unique customer experience they offer. [...]
[...] Since they opened over 37 years ago, Starbucks has grown into an international corporation with over 15,000 stores. Shareholders have continuously pushed for growth and Starbucks has accommodated their desires. Recently this growth has become a problem for Starbucks and public perception of the company has started to decline. Some are beginning to view Starbucks more like a fast food chain rather than a unique, personal, individualized cafe. This has been discussed, but it is important to realize the part that location has played in Starbucks reputation. [...]
[...] Because Starbucks roasts their own coffee, they claim that they can ensure better flavor than any other company. This definitely adds value to their company and bolsters the image that Starbucks is the best at what they do. After the roaster, the coffee beans are shipped to the stores where the coffee is sold. This is the part of Starbucks that most people know and recognize well. Starbucks has worked to integrate itself vertically in some crucial areas, and it has added value to the firm and helped Starbucks gain a solid reputation. [...]
[...] Especially with McDonald's and Dunkin Donuts able to offer premium coffees for a significant discount in comparison to Starbucks products. Starbucks has also lost some of its original appeal with customers. As mentioned previously, they have commoditized much of the ‘Starbucks Experience', going as far as selling advertising space on their receipts. Lately there has been a lot of talk within Starbucks about returning to their roots. We don't believe it is too late for Starbucks and we have several recommendations to fix the existing problems. [...]
[...] INTERNAL EVALUATION Resources and Capabilities Starbucks Corporation has historically been a financially stable company with liquidity ratios higher than the industry average. Starbucks had a P/E ratio of 47.1 in 1998 and took advantage of this resource by obtaining both short and long-term capital finances. One financial contributor that Starbucks works with is called EcoLogic Finance, a company that offers critical financial resources and a source of hope for struggling farm communities. Starbucks hopes that this partnership will help increase relations and shipments with their existing coffee bean suppliers. [...]
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