Name: Medhat Abde whab Subject: STRA 701 1. What are the key elements of Starbucks strategy as of 2004?

The Key elements of stare bucks Strategy in 2004 was the following - The store concept Starbucks provides high quality black roasted coffee and coffee bar with Italian style - Product and services differentiation
High quality coffee beans Italian espresso and cappuccino Coffee making equipments Coffee mugs
Frappuccino (cold cappuccino)

Starbucks Music collection Coffee Ice cream

- Expansion Expansion based on not only had favorable demographic profiles but also Could be serviced and supported by the companys operations infrastructure Management believed that its Starbucks everywhere approach cut down on delivery and management costs, In markets outside the continental United States (including Hawaii), Starbucks had a two-pronged store expansion: either open company-owned and company-operated stores or else

license a reputable and capable local company with retailing know-how in the target host country to develop and operate new Starbucks stores. In most countries, Starbucks used a local partner/licensee to help it recruit talented individuals, set up supplier relationships, locate suitable store sites, and cater to local market conditions. Starbucks looked for partners/licensees that had strong retail/restaurant experience, had values and a corporate culture compatible with Starbucks, were committed to good customer service, possessed talented management and strong financial resources, and had demonstrated brand-building skills - Human resource management Schultz believed it was essential, not just an intriguing option, to build a company that valued and Respected its people, that inspired them, and that shared the fruits of success with those who contributed to the companys long-term value.. So the company offered attractive benefits for the employees as the following Desiccative Health Care Program for all employees Stock Option Plan The company replaced word employee with Partners Effective training plane - Social responsibility
Howard Schultzs effort to build a company with soul

2. What grade would you give Howard Schultz for the job he has done as CEO of Starbucks? Be prepared to support your answer based on how well (or not so well) he has performed the five tasks of strategic management discussed in Chapter 2. I think he did very well He was crafted the company vision and mission to considered all the stockholders ,and The draft was submitted to all employees for review, and several changes were made on the basis of employee comments. But I think his decision to open stores in Chicago was not prefect time wise. 3. What was Howard Schultzs original strategic vision for Starbucks? Is his present strategic vision for Starbucks different from the one he had in the 1980s? How many times has his strategic vision changed? Is his present strategic vision likely to undergo further evolution? Schultz strategic vision was Schultz told the group that his vision was for Starbucks to become a national company with values and guiding principles that employees could be proud of. He indicated that he wanted to include people in the decision-making process and that he would be open and honest with them.
Now Starbucks Vision is

Every day, we go to work hoping to do two things: share great coffee with our friends and help make the world a little better 4. Has Starbucks strategy evolved as the strategic vision has evolved?

5. What are the key policies, practices, and procedures that underlie how Howard Schultz and Starbucks management have implemented and executed the chosen strategy?

The cornerstone value in the effort to build a company with soul The company would never stop pursuing the perfect cup of coffee by buying the best beans and roasting them to perfection Schultz remained steadfastly opposed to franchising, so that the company could control the quality of its products and build a culture common to all stores He was adamant about not selling artificially flavored coffee beansWe will not pollute our high-quality beans with chemicals Employees were trained to go out of their way, and to take heroic measures if necessary, to make sure customers were fully satisfied Senior executives wanted employees to be vocal about what Starbucks was doing right, what it was doing wrong, and what changes were needed. Management wanted employees to be involved in and contribute to the process of making Starbucks a better company. Provide a great work environment and treat each other with respect and dignity. Embrace diversity as an essential component in the way we do business.

Apply the highest standards of excellence to the purchasing, roasting, and fresh delivery of our Coffee. Develop enthusiastically satisfied customers all of the time. Contribute positively to our communities and our nvironment. Recognize that profitability is essential to our future success. 6. What is your assessment of Starbucks financial performance during fiscal years 1998-2003? Does the companys performance indicate that Starbucks strategy is working well?

Investment Returns % Return On Equity Return On Assets

Company 12.6 5.6

Industry 25.8 13.2

Both the ROE and ROA are lower than the industrys average, which means that the company is not using both the equity and their assets properly to increase their revenue. Profit Margins % Gross Margin Pre-Tax Margin Net Profit Margin Company 16 4.4 3.03 Industry 27 13.2 8.5

Starbucks margins are lower also that the industrys average, especially in 2008 where the net profit margin reduced to 3.03 from 6.3 in 2007. Financial Condition Company Industry Debt/Equity Ratio 0.40 0.46 Current Ratio 0.80 1 Quick Ratio 0.48 0.7 Starbucks generally manages their debs and liabilities wisely, and this considers a financial strength for the company

Year 2008 Sales 10,383,000 Net Income 315,500

2007 9,411,497 672,638

2006 7,786,942 564,259

2005 6,369,300 494,467

Although the total sales was increased in the last 4 years, the net income was reduced, especially in 2008 when it reached almost half 2007.

7. What issues confront the company as of 2004? What should Starbucks management be worried about? Starbucks should be worried about Some industry experts expected the gourmet coffee market in the United States to be saturated by 2005 There were at least 20 small local and regional chains that aspired to compete against Starbucks in their local market arenas While it had been anticipated in the late 1990s that local and regional chains would merge to better position themselves as an alternative to Starbucks Numerous retail entrepreneurs had picked up on the growing popularity of specialty coffees and opened coffee bars in high pedestrian- traffic locations to serve espresso, cappuccino, lattes, and other coffee drinks Starbucks management should comfortable because of the following International market was much more wide open as of early 2004 Coffee still accounted for 87 percent of all coffee consumed in the United States in 2002; some industry experts believed that this statistic signaled that the gourmet coffee segment was still emerging

8. What recommendations would you make to Howard Schultz to sustain the companys growth and support continued strong financial performance in the years ahead? - Increase International Expansion while the international market still in introduction stage and the company market share is 1% - Starbucks should create a more business and technology friendly atmosphere in its stores - Provide a free samples of the CD`s Music or with a small fees - He should spend more on advertising - Increase Connection with Customer - Continually Improve the Coffee and the products - Becoming More Environmentally Friendly