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... y exchange risk was accounted for when the Company has entered into forward foreign exchange contracts to hedge foreign currency risk in fiscal 2001. Starbucks targeted international expansion through licensing a reputable and capable local company in selected countries to develop and operate the stores. Joint Ventures in stores outside US, SCI to overlook international expansion and build the Starbucks brand name globally via licensees. By the end of 2000, Starbucks had more than 3, 500 locations worldwide, serving more than 12 million customers per week in 17 countries (annual report, 2001). Plan to have 650 locations through out Europe by the end of 2003.
Please view details of International expansion in Appendix F, (b). The Future: Renee Mauborgne, (FT, 111099) in support of Shultzs vision claims that the Starbucks story is about value innovation. Offering buyers fundamentally new and superior value in traditional businesses through innovative ideas and knowledge. The Companys retail goal is to become the leading retailer and brand of coffee in each of its target markets by selling the finest quality coffee and related products and by providing superior customer service, thereby building a high degree of customer loyalty. Starbucks strategy is directed towards increase of Starbucks market share in existing markets and new markets worldwide to support the Starbucks brand through the introduction of new products and the development of new distribution channels. Starbucks strategic expansion till now was achieved via its joint ventures with Pepsi and Dreyer's, its move to sell coffee in supermarkets, the possibility of marketing fruit-juice drinks and candy under the Starbucks label, and world wide web presence represented an ongoing drive on Schultz's part to continually reinvent the way Starbucks did business.
Starbucks' expansion carries inherent risks. Many brands cannot do both retail and packaged goods. Too many extensions can erode a brand's identity. Wall Streeters say Starbucks should move onto supermarket shelves under a dual-brand strategy, but Mr. Schultz says that will not happen because the brand might suffer. In addition to fluctuating coffee prices, management believes that in the future, the Company's results of operations and earnings could be significantly impacted by other factors such as increased competition within the specialty coffee industry, the Company's ability to find optimal store locations at favorable lease rates, the increased costs associated with opening and operating retail stores in new markets, the Company's continued ability to hire, train and retain qualified personnel, and the Company's ability to obtain adequate capital to finance its planned expansion.
Potential financial problems are described in Appendix G. Conclusion: In relation to Starbucks strategy for world presence, Starbucks annual report states: Going forward, we will pursue only those opportunities that we feel will complement our core operations. Therefore, Starbucks global sustainability and strategic development lays in ability to successfully reconfigure their value chain in a way that improves value for money and their competitive position. Synergy was achieved through continuous market development, product development and backward integration strategies. Starbucks continues to expand globally, seeks new ventures within the industry and hopes to remain competitive. Appendices: Appendix A: Sumatra Ghosh al of INSEAD proposed a framework comprising three categories of strategic objectives and three sources of advantage that can be used to achieve them.
Assembling these into a matrix results in the following framework: Strategic Objectives Sources of Competitive Advantage National Differences Scale Economies Scope Economies Efficiency in Operations Exploit factor cost differences Scale in each activity Sharing investments and costs Flexibility Market or policy-induced changes Balancing scale with strategic & operational risks Portfolio diversification Innovation and Learning Societal differences in management and organization Experience - cost reduction and innovation Shared learning across activities. Appendix B: Products: In 1997, the company introduced its Starbucks Barista home espresso machine. Power Frappuccino, packed with protein, carbohydrates, and vitamins was tested in several markets during 1997 Fruit-juice beverages in 1997. Chai Tea Last, a combination of black tea, exotic spices, honey, and milk appeared in stores in 1998. Jazz and blues CDs, with Starbucks background music, appeared for sale on customers request and proved to be a significant addition to the product line. Starbucks selling coffee in supermarkets 1998 In 1999, Starbucks opened up its new prototype Internet caf&# 1081; called Circadia, providing 18 Internet connections, laptop rentals, a computer kiosk and a 10 -person conference room equipped with a large-screen computer of presentations.
In 2000, To tea and Hear Music Appendix C: Roasting Plants: By 1998, Starbucks had three roasting plants: The company's first plant was built in 1989 to supply the company's mail-order needs for the next 10 years. In 1993, a 305, 000 -square-foot plant was opened in Kent, Washington, output mainly catered to stores west of the Mississippi. In 1994, the company began construction of an $ 11 million roasting facility in York, Pennsylvania, that could be expanded to 1 million square feet to supply stores east of the Mississippi. Appendix D: Real Estate, Store Design, Store Planning, and Construction: Starting in 1991 in-house team of architects and designers were set up to create a store development process to ensure that each store would convey the right image and character, as majority of the sites were rented and differed in shape and size.
Fireplaces, leather chairs, newspapers, couches, and lots of character added a cozy living room like feel to Starbucks. Each store also reflected the personality of the community and the neighborhood. As majority of sites were positioned in busy down town locations, Starbucks emphasized atmosphere of ambience that offered customers an escape from their busy lives into a peaceful place to relax, chat, meet friends or read a news paper. In 1995 Starbucks decided to reduce average store-opening costs by centralizing the buying process, developing standard, often fixed contracts with suppliers, favoring contractors with good cost-control practices. Standard minimum amount of equipment needed by each store was outlined by operations, orders were placed in volumes accordingly at 20 - 30 % discounts, and delivered to stores just in time from vendors or Starbucks warehouses.
Store layouts and costs involved were developed electronically. All these measures allowed for cost cutting and reduced store development time from 24 to 18 weeks. Schultz and Olsen took Starbucks ambiance concept even further, when confronted their project team with a stores of the future project in 1995. Their vision of the store was of: an authentic coffee experience that conveyed the artistry of espresso making, a place to think and imagine, a spot where people could gather and talk over a great cup of coffee, a comforting refuge that provided a sense of community, a third place for people to congregate beyond work or the home, a place that welcomed people and rewarded them for coming, and a layout that could accommodate both fast service and quiet moments. " Extensive research was undertaken by a team of developers into the history of coffee, from coffee growing to coffee-making techniques.
Based on already evolved corporate identity of Starbucks, four new store designs were created, each identified with one of the stages of coffee making. In 1996, Starbucks opened new stores based on one of the four templates: growing, roasting, brewing, and aroma each distinguish by own color combinations, and lighting scheme. New structure eased a problem of expansive store customization, as now the company could vary the materials and details to adapt to different store sizes and settings: downtown buildings, college campuses, shopping areas. Two mini-store formats and movable stations in line with design concept described above were introduced the same year, to cater to office-building lobbies, and other stores. According to this project has accomplished: better store designs, lowered store opening costs, and expanded sales as new formats allowed for new positioning strategies. Appendix E: HR: Starbucks annual report states, that People are crucial to ensuring that the company delivers the Starbucks Experience every day.
Starbucks is attempting to plant its values in the company culture to give employees a sense of meaning to their work even if it is just pouring a cup of coffee. Starbucks ongoing commitment to providing a great work environment has also had many positive impacts on partners and customers. To ensure that partners share in Starbucks success, they are provided stock option grants to eligible partners under the Bean Stock Plan for the 10 th consecutive year, 401 K option is also available. Starbucks' has a strong management team, hiring people with extensive experience in managing and expanding ret...
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