1、StarbucksPresentation OutlineIntroduction to StarbucksIndustry OverviewCompany OverviewSite AnalysisRecommendations for ImprovementFocused Recommendation for ImprovementFinal Action PlanImpact AnalysisWrap UpIndustry OverviewIndustry DefinitionSpecialty Eatery Industry Fits within the largest segmen
2、t of disposable income spending-food and beverages Steady growth in this segment in the 1990s has led to an abundant number of new companies As demand for convenience has made eating out a normal routine,the demand for specialty food services has increased in recent yearsIndustry and Competitive Ana
3、lysisMarket Structure Monopolistic CompetitionCompetitive Activity Many companies are in the market and competition is fierce Competitors use location,product mix,and store atmosphere differentiation to establish market nicheIndustry Costs and Capital Structure Low to moderate costs for each locatio
4、n Major start-up expenditures are property and equipment Major operating costs are labor and cost of salesIndustry PEST AnalysisPolitical Influences Relationships between coffee producing nations and US State&Local government controlsEconomic Influences Constant demand for food and beverages Changes
5、 in disposable income could influence purchase levelsSocial Influences Consumer preferences could shift from coffee to other beveragesTechnological Influences Use of technology can improve operational efficienciesCompany OverviewStarbucks Corporate StrategyMaximize market penetrationProvide a relaxi
6、ng,attractive social atmosphereOffer high-quality productsCreate a great working environmentAchieve profitabilityStarbucks SWOT AnalysisStrengths Largest market share in industry Differentiated atmosphereWeaknesses Aggressive expansion could lead to managerial/financial problemsOpportunities Whole b
7、ean sales in supermarketsThreats Lack of ownership of coffee farms can lead to price fluctuationsCompany Financial Performance(1998 FY)Revenues$1,308.7 million (%of Sales)Gross Margin 195.7 million 15%Pre-tax Profit Margin 116.4 million 8.9%Net Income 68.4 million 5.2%Return-on-Assets 8.7%Return-on-
8、Equity 11.0%Debt-to-Equity 0.0412 mo.Revenue Growth 28.4%Company Financial Performance(1998 FY)-10%-5%0%5%10%15%20%25%30%Net ProfitMarginROEROADebt/Equ12-Mo RevGrowthIndustryStarbucksSite AnalysisSite CharacteristicsLeased store located on Central Street in WellesleyStore has over 1,000 square feet
9、of retail space and 1,000 square feet of office and storage space in the basement Second most profitable store in the fourteen store regionLocated one block away from Commuter Rail train station and in busy retail shopping areaOnly one direct competitor(Au Bon Pain)in the areaSites Operational Resul
10、ts(1998 FYTD 11 Months)Financial Operations 1998 1997%Total Sales$760,576$796,688 (4.5%)COGS 242,593 262,945 (7.7%)C/M 517,983 533,743 (3.0%)Fixed Exp.367,746 431,923 (14.9%)EBIT$150,237$101,820 47.6%No money spent on independent advertisement Local entertainment budget underutilizedVolume of Sales
11、vs.Contribution Margin%$0$50,000$100,000$150,000$200,000$250,000$300,000EspressoDrinksWholeBeansDrip CoffeePastriesBlendedBeveragesOtherBeveragesServewarePackagedFood/TeaMediaBrewingEquipment0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%100.0%Dollar Volume SoldProduct Contribution Margin%Site 7-S
12、 AnalysisSite 7-S AnalysisStrategy Stores strategy is to create a comfortable Third Place environment Serve customer a customized high-quality product Achieve high level of profitability by focusing on high-margin items while generating add-on sales Minimize overall expenses by focusing on controlla
13、ble expensesSite 7-S Analysis Corporate organization is tall with four levels of management above store managementBaristasBaristasBaristasShift SupervisorsAssistant ManagerStore ManagerStructure Functional in structure and relatively flatSite 7-S AnalysisStaffing Location has one manager,an assistan
14、t manager and 16 partners Benefits package includes health,dental,and vision care,stock options,free shift drinks,and a free pound of coffee each week Raises are based on semi-annual performance evaluations with raises ranging from 0-5%Bonuses are not utilized,but the location has given away non mon
15、etary rewardsSite 7-S AnalysisSystems Corporate headquarters exercises controls over individual sites Total Quality Management is specifically built into their processes Utilizes a large amount of information technology(IT)Internal controls for the store are determined by the manager based in part o
16、n information provided by the IT systemThe use of IT at StarbucksCorporate ITSystemIndividualStoresIndividualStoresSales,Inventory,StaffingSales,Inventory,StaffingIndividualStoresInventory,Orders,TransfersVendors,Distributors,Mgmt.,ChannelMembersOrders,Budgets,Future SalesSite 7-S AnalysisSkills Mos
17、t important skills include“people skills”and drink preparation ability Partners receive training to learn about products,brewing methods,and sales techniques Retraining mainly occurs during new product roll-outs,although this site does not use regular meetings,but instead one-to-one discourseOrder C
18、ycle TimesTake Customers OrderBottleneckOrder?Pastry?.53 Min.53 MinYesYesNoPastry?.40 Min.27 MinYesNoNoBottleneck Capacity 114/HrSite 7-S AnalysisStyle Basic management style is Laissez Faire Management motivates through reviews and raises Work duties are assigned by shift supervisors Employees are
19、allowed to use initiative and empowered to make decisionsSite 7-S AnalysisShared Values (from Mission Statement)Provide a great work environment Treat each other with respect and dignity Embrace diversity Apply the highest quality standards for products Develop enthusiastically satisfied customers C
20、ontribute to the community and environment Recognize that profitability is essential to future successAlignment of Store with Corporate StrategyContrary to the mission statement focus,the reduction of staffing levels appears to be more important than developing satisfied customersThe relevance of th
21、e benefits package is misaligned considering the average age of employeesThe high turnover rate of partners and managers is detrimental to customer environmentRecommendationsRecommendations For Improvement1.Revamp the employee reward system2.Tighten focus on creating the“Third Place”environment3.Foc
22、us profitability measures on profitable sales,not just reduction in staffingRevamp Employee Reward SystemLarge percentage of the staff are under the age of twentyBenefits package focuses on medical,dental,and vision care,as well as the employee stock optionsOutside of hourly wage,and semiannual rais
23、es,there are few monetary rewardsImprove“Third Place”EnvironmentSite has a very high employee turnover rateManager“promoted”to a another store in hopes of improving their poor performanceSite has very poor handicapped accessibilityCondition of restroom in each of our visits was poor and had no baby
24、changing areaFocus Profitability Measures on More Than Just StaffingStore is underperforming on some high margin product segmentsToo high a focus on minimizing direct labor as a key to achieve profitabilityFocus on high-margin items and profitable add-on salesBy increasing pastry sales by 33%,store
25、would realize a$16K increase in contributionFocused RecommendationImprove“Third Place”EnvironmentPros and Cons of Discounted OpportunitiesRevamp the Employee Reward SystemPros Employees are motivated with more incentive to perform Lower employee turnover rates Positive reinforcement which leads to h
26、igher feelings of job satisfactionCons Pay and benefit structures dictated by corporate HQ Cost of benefits would additional benefits lower site profitability New reward system requires additional managementPros and Cons of Discounted Opportunities(Cont.)Focus Profitability Measures on More Than Jus
27、t StaffingPros Higher staffing levels benefit other employees Better customer service Improved customer focus could lead to higher salesCons Staffing is a cost that will decrease profitability Upper-level management perception of low employee productivity Employees may get in each others wayThree-St
28、ep Action Plan For ImprovementDecrease employee turnover rate Focus on hiring older employees where benefits package is more appropriate Base raises on performance rather than maximizing raises for economic reasons Develop and actively maintain a reward system for employees(i.e.employee of the month
29、)Develop a system of regular employee communications/meetingsAction Plan(cont.)Improve site accessibility and cleanliness Upgrade front door and restrooms for handicapped accessibility Add a baby changing station Redesign restroom to separate cleaning supplies from bathroom or move cleaning supplies
30、 to another location Focus employee attention on restroom cleanlinessAction Plan(cont.)Enhance Starbucks differentiated atmosphere Utilize entertainment budget to hire outside entertainers,have book/poetry readings,etc.Display the stores collection of games and activities more prominently Make the l
31、ocation more of a“scene”Impact Analysis-BenefitsBy focusing on the initial recruitment and hiring stage,and by rewarding employees based on merit current turnover rates will be reduced.By focusing on site accessibility and cleanliness,the physical facility will not detract from atmosphere.By improvi
32、ng Starbucks atmosphere,it will become a more attractive place to go.Potential RisksCustomers may not react positively to the changes being madeNot enough available employees to meet re-aligned hiring needsClaims of age discrimination and negative affect on sales in youth demographicCosts associated
33、 with planned change Wrap-UpStarbucks is the market leader in a growing market segmentStarbucks is known world-wide for its high-quality food products and differentiated“Third Place”atmosphereThe Wellesley location embodies the ideals of the corporate mission and has been very profitable,but there are still opportunities for improvementConclusion/Questions
