ESLSCA Business School Fall 2018

Scenarios Facing Starbucks

Starbucks Coffee Company is North America's leading roaster and retailer of specialty coffees.
Headquartered in Seattle, WA, Starbucks purchases and roasts high-quality whole bean coffees and sells them
along with fresh, rich-brewed, Italian style espresso beverages, a variety of pastries and confections, and
coffee-related accessories and equipment - primarily through its company-operated retail stores. In addition,
Starbucks sells whole bean coffees through a specialty sales group and supermarkets.

Starbucks objective is to establish itself as the premier purveyor of the finest coffee in the world. To achieve
this, the Company plans to continue to rapidly expand its retail operations, grow its specialty sales and other
operations, and selectively pursue opportunities to leverage the Starbucks brand through the introduction of
new products and the development of new distribution channels.

The company’s aggressive plans to reach 25,000 international stores in the next few years are, however, faced
with a series of challenges. Starbucks faces stiff competition from well-established local players that offered
specialty coffee at lower prices. The global coffee market is a very competitive sector, and Starbucks must
compete against the likes of restaurants, coffee shops, and street carts. A major competitor, with substantially
greater financial, marketing and operating resources than Starbucks, could enter this market at any time and
compete directly against the company.

The supply and prices of coffee experience high volatility. The company’s requirements for quality standard
coffee exposes it to multiple factors in the producing countries, including weather, political and economic
conditions which may adversely affect the company’s business. Green coffee prices have been affected in the
past, and may be affected in the future, by the actions of organizations and associations that attempt to
influence prices of green coffee through agreements establishing export quotas or restricting global coffee
supplies. The actions of these associations could disrupt Starbuck’s operations.

Despite the growing consumerism in many regions of the world and eagerness among the younger generation
to imitate western lifestyles, Starbucks is -like any other American brand- prone to anti-American
movements. In the Middle East for example, Arab students called for a boycott of American goods and
services, due to the alleged close relationship between the United States and Israel. Criticism is also received
from NGO’s that urged the company to acquire certified coffee beans, ensuring that those beans were grown
and marketed under certain economic and social conditions.

Q1: Identify the basic trends and driving forces in Starbucks environment. Try to group the linked
forces into two main groups, and define the plausible high-level scenarios.

Class Exercise Page 1