Sturbucks in U.S, Japan, China

1
Going global fast

• Starbucks Coffee

2
Group One Members
3
Presentation Contents

• Company Profile
• Company Performance
• SWOT Industry PEST Analysis
• Profile of USA, Japan, and China Operations
• Conclusion
• QA

4
Company Profile

• Starbucks Corporation engages in the purchase,
  roasting, and sale of whole bean coffees
  worldwide. It offers brewed coffees,
  Italian-style espresso beverages, cold blended
  beverages, various food items, and a selection of
  premium teas, as well as beverage-related
  merchandise and equipment, through its retail
  stores. In addition, Starbucks Corporation
  produces and sells ready-to-drink beverages,
  which include bottled beverages, espresso drinks,
  chilled cup coffees, and ice creams. Its brand
  portfolio includes Starbucks, Seattles Best
  Coffee, Tazo, Frappuccino, Starbucks DoubleShot,
  Starbucks Discoveries, Starbucks super-premium
  Tazo Tea, and Starbucks super-premium. As of
  September 27, 2009, the company operated 8,800
  retail stores. Starbucks Corporation was founded
  in 1985 and is based in Seattle, Washington.

5
5 year stock performance
6
SWOT Analysis
7
Strengths

• Well-recognized Brand
• Having made public since 1982, The Starbucks
  coffee brand is the most well recognized coffee
  brand in the world. With its strong brand
  awareness from its consumer, Starbucks coffee
  even has its own loyal consumers.
• Branches Everywhere
• The expansion of so-called blanketing the area
  with stores proven to be succeeded and has made
  this coffee shop ubiquitous and has increased the
  level of satisfaction of its consumers.

8
Strengths

• Attractive, Comfortable and Entertaining Stores
• Well-equipped with comfortable chairs, wireless
  internet connections, and even selection of
  music, make Starbucks as one of the coziest
  hangout place for having a discussion with
  friends, searching for inspiration a and even
  rendezvous spot.
• Innovative Ways to Attract Consumers
• Innovations on its products including Technology
  Innovations, ex Starbucks Express, new varieties
  of coffee and pastries each month and also have a
  special service such as the ability to burn your
  own music CD from the sample online music you
  hear in the counter.

9
Weaknesses

• Expensive Price
• Being positioned as a premium coffee brand, an
  average price of a cup of Starbucks coffee is
  considerably expensive. 3 for a cup of coffee
  will make its price-sensitive buyer will look for
  other brand that is less cheaper but offer the
  same value (ex Coffee Bean Tea Leaf, 85
  degree).
• High Employee Turnover
• Nowadays, working in Starbucks has not been the
  greatest experience ever again. Since the pay of
  the workers doesnt come close with the daily
  workload they have to handle. This thing will
  also affecting on Starbucks reputation. With
  their premium brand positioning, they supposed to
  have delivered its employee a better salary.

10
Opportunities

• Strong brand image in customer mind about
  coffeeshop
• Fastest global brand Best Global Brand ( 90th
  place in 100 Global Brand Rank 2009 )

11
Opportunities
12
Opportunities

• Operates 1,200 stores build overseas plenty
  room to grow the business
• Opening stores in Vienna, Zurich, Madrid, Berlin,
  Jakarta, Mexico, Puerto Rico - new opportunities
  to expanding to other countries and new target
  market

13
Threats

• Target of terrorism, as a symbol of free-market
  capitalism.
• Self cannibalism because so many stores close
  together
• Experience saturated and mature market
• in U.S
• Growing competition in rival coffee chain.
• Demographic shift baby boomer 90 to future
  consumers

14
Industry pest analysis
15
Industry PEST Analysis

• Political Influences
• Relationships between coffee producing nations
  and US
• State Local government controls
• Economic Influences
• Constant demand for food and beverages
• Changes in disposable income could influence
  purchase levels
• Social Influences
• Consumer preferences could shift from coffee to
  other beverages
• Technological Influences
• Use of technology can improve operational
  efficiencies

16
Usa

• Regional Operations Profile

17
USA Operations

• Starbucks Corporation is an international
  coffeehouse that has built one of the world's
  most powerful and recognizable brands upon
  high-quality coffee and the unique "Starbucks
  Experience."
• Starbucks has sought to capitalize on its growing
  popularity through expansion the addition of
  over 1,500 stores in just over a year brought its
  total store count to over 16,600 in 2008. In
  fiscal 2008, the company's stores (retailer and
  licensed) generated US 10.4 billion in revenue

18
USA Operations

• Self-Cannibalization Risk
• An additional challenge facing Starbucks may be
  its own dominance - with a Starbucks on every
  street corner in some parts of its core U.S.
  market and an average of 8.5 new locations opened
  weekly in the country.

19
USA Operations

• Self-Cannibalization
• Starbucks percentage of new stores growth
• In 1999 it had 2,000 stores but in 2007 it was
  pushing a 10,000 company owned stores mark. Lets
  put this in perspective in 1999 Starbucks opened
  447 stores - 1.8 stores per working day in 2007
  that number more than tripled to 1,403 stores a
  year - 5.5 stores per working day.

20
USA Operations

• Economic Recession
• With the current economic conditions, Starbucks
  faces significant headwinds. While past concerns
  over commodities prices, particularly coffee
  beans and milk, have subsided, a shift in
  consumer spending triggered by a global economic
  recession may decrease sales in the coffeehouse
  market in general.

21
USA Operations
22
USA Operations
23
USA Operations

• Starbucks has set the following financial and
  operational targets for fiscal 2010
• The company is targeting revenue growth in the
  low-to-mid single digits, driven by modestly
  positive comparable store sales, a 53rd fiscal
  week, and approximately 300 planned net new
  stores.
• Starbucks is targeting approximately 100 net new
  stores in the U.S. and approximately 200 net new
  stores in International markets. Both the U.S.
  and International net new additions are expected
  to be primarily licensed stores.

24
USA Operations

• Starbucks outlook on the U.S. operating margin
  has further improved the company is now
  targeting full-year operating margin improvements
  for both the U.S. segment and the International
  segment (excluding restructuring charges) of 200
  to 250 basis points. The CPG segment margin is
  expected to remain in its current range of 35 to
  40. The cumulative result of these expected
  margins is a consolidated non-GAAP operating
  margin that is anticipated to reach double
  digits.
• Capital expenditures are expected to be in the
  range of 500 million to 550 million.
  Approximately half of this amount will be
  allocated to renovations and store equipment
  upgrades, one quarter to systems upgrades, and
  one quarter to new stores and other capital
  investments.
• Starbucks expects cash flow from operations to be
  approximately 1.4 billion, and free cash flow of
  approximately 900 million.

25
Japan

• Regional Operations Profile

26
Japan Operations

• For the Japanese, tea is a traditional bracing
  drink during a day, although it does not mean
  that there is no demand for coffee. Japan is the
  3rd biggest importer of coffee in the world(2008)
  gt Japan a good market for coffee industries
• Japan approach to Japaneses life was a huge
  challenge for Starbucks. Different tastes,
  cultural like smoking and Japanese fluctuating
  economy made Starbucks to face real problems

27
Japan Operations
The trend for smoking in Japan is well known.
Many people smoke and expect to be able to smoke
in the restaurants, pubs and coffee
shops. Starbucks became a very popular place
among non-smoking females who wanted to drink
their coffee in peace away from smoke and crowd

• Moreover, the policy of Starbucks was to be
  everywhere and do not let the customer to cross
  the street. What is more, people were surprised
  by the amount and location of Starbucks stores.
  The stores are located very close to themselves

28
Japan Operations

• The Japanese perfection and hard-working, a huge
  market potential for coffee in Japan. Big
  population and fast lifestyle attract the
  Japanese to drink more coffee instead of tea
  which is already well known. Coffee company has
  to be well prepared and offer something more than
  just an average taste coffee
• Starbucks had an experience on other non American
  markets and is known worldwide. The expansion was
  quite risky, Starbucks assumed that they do not
  have to localize Starbucks and its goods on the
  Japanese market

29
Japan Operations

• Starbucks Japan's fiscal Q1 pretax profit
  (quarter ended June 30) rose 9.4 to 1.32 billion
  yen (11.1 million), driven mostly by expanded
  food sales. Its food menu was updated to match
  local tastes better, and also to capitalize on
  the fact that 80 of customers consume in-store,
  whereas the same percentage of customers take-out
  in the U.S. The main reason for Starbucks Japan's
  difficulties is due to intense competition coming
  not only from rival coffee shops, but also from
  convenience stores and vending machines. Japan is
  Starbuck's second largest market with 630 stores
  and plans for 1,000 by 2010

30
Japan Operations

• A "local" strategy it implemented last year has
  paid off nicely so far but why ruin a good thing
  by putting pressure on the firm to expand at that
  rate compared to its 50-75 new store range over
  the past two years. Starbucks Japan currently has
  624 stores.

31
Japan Operations

• The market is not quite saturated and the brand
  continues to grow.
•  Besides the introduction of Japanese-style
  drinks, the company has significantly expanded
  its food offerings, including a special line
  of Wellness sandwiches. 

32
Japan Operations

• Moreover Starbucks may be on the way to extending
  itself into Japan's high-end cafe market.
• Opening of a luxury Starbucks Cafe in Tokyo's
  Roppongi Hills is imminent, and that the posh new
  shop is part of a Japan-only effort to strength
  the brand's competitiveness.

33
china

• Regional Operations Profile

34
China Operations

• Starbucks eyes China as next major market
• China, tea-drinking country will be 2nd home
  market for Starbucks after U.S. It's going to be
  a huge opportunity for Starbucks.
• The first Starbucks store located in mainland
  China Beijing in Jan of 1999 through a
  licensing agreement with Mei Da Coffee Co.Ltd.
• It has also opened in the China cities such as
  Changzhou, Chengdu, Chongqing, Dalian, Dongguan,
  Foshan, Hangzhou, Kunshan, Nanjing, Ningbo,
  Qingdao, Shaoxin, Shenyang, Shenzhen, Suzhou,
  Tianjin, Wuxi, Wuhan and Xian .

35
China Operations

• Customers in China have embraced the high-quality
  arabica coffee, personalized handcrafted
  beverages and the unique Starbucks Experience
  offered in Starbucks stores. And Coffee
  represents change in a new western lifestyle and
  its becoming more popular for the young people
  in China.
• Starbucks shares our coffee passion and expertise
  with customers in China by encouraging them to
  sample, savor and enjoy its premium coffee.
• At the end of the second quarter of fiscal 2009,
  there are more than 690 Starbucks locations
  throughout Starbucks Greater China, which
  includes the Peoples Republic of China, Hong
  Kong, Macau and Taiwan.

36
China Operations

• Starbucks will see China become the company's
  next major market after the United States in the
  near future. "It's absolutely very, very
  important. This has really become our second home
  market," said Wang Jinlong, the company's head
  for Greater China. Wang said profit
  contributions from the rapidly growing Chinese
  market more than doubled in 2009. Starbucks
  Chief Executive Howard Schultz said earlier this
  month he saw the potential for thousands of
  stores in China. Starbucks, whose current 2010
  forecast calls for 100 net new stores in the
  United States and around 200 net new
  international cafes, has nearly 700 cafes in
  China. Starbucks also raised its financial
  forecasts for 2010, a sign a year-long turnaround
  effort is boosting margins and putting it back on
  track for growth.
• Source Reuters Nov 24, 2009

37
conclusion
38
Conclusion

• Starbucks is going to be a larger company 3, 5,
  and 10 years from now. The main reason Starbucks
  will grow is because coffee and tea are both
  enormous markets, domestically and globally.
  Second, Starbucks has low penetration rates in
  terms of the number of locations it has,
  especially in the BRIC countries. Finally,
  Starbucks has nice potential for growth in
  packaged coffee, ready to make beverages, and the
  instant coffee markets, especially
  internationally.
• http//seekingalpha.com/article/172178-why-starbuc
  ks-will-grow

39

• Q A