Starbucks Strategy

Starbucks

Strategic Context Presentation
Group 4; 2:00 p.m.
Justin Lenhert, Brandon Terrebonne, T.J. Owen, Matt Bruns, Tim Johnson, Ben Carrier, Brent Reilly
1

Table of Contents

1. Strategic History.....................................Slides 3-8

2. Strategic Group Analysis........................Slides
9-12

3. Five Forces Analysis................................Slides
13-23

4. Macroenvironmental Analysis...............Slides
24-30 2

Table of Contents


9-12

13-23

24-30 3

Strategic History of Starbucks
Bags
of
Beans:

The
Tall
Age:

The
Grande
Age:

The
VenM
Age:

1971
–
1987
1988
–
1995
1996
–
2002
2003
–
2010

Founded
in
Sea7le
as
a
premium
Schultz
gained
popularity
Starbucks
expands
with
many
Starbucks
conMnues
to
expand

roasted
bean
retailer,
then
by
giving
part-‐Mme
new
products
such
as
rapidly
in
new
internaMonal

Howard
Schultz
entered
the
employees
full
beneﬁts.
frappuccino,
ice
cream,
and
Tazo
markets.
Sociocultural

picture
and
started
the
idea
of
Starbucks
went
public
as
Tea.
Store
openings
increase
undertakings
increase,
as
does

Starbucks
as
a
coﬀee
retailer.
SBUX.
exponenMally
and
their
stock
value.

internaMonally.

Bags of Beans: 1971-1987
AcquisiLons
and
AddiLons

Intended
Strategy:

To
sell
specially
roasted,
quality

Corporate
Expansion

coffee
beans
to
individual

consumers.
Sociocultural
Events

Emergent
Strategy:

With
Schultz’s
Total
Store
Count

persistence,
Starbucks
First
Mover
Advantages:

begins
brewing
and
selling
Starbucks’
use
of
the
highest

coffee
to
consumers.
Also,
quality
roasted
beans.
Schultz’s

bean
markeMng
is
Starbucks
was
one
of
the
first

expanded.
Italian
Café
style
coffee
retailers
in

the
U.S.

1971 1982
1985 1987:

Howard
founds
Il
Giornale,
offering
brewed
Total
Stores:
17

Starbucks
opens
first
Howard
Schultz
joins
Starbucks
as
director
of
retail
coffee
and
espresso beverages
made
from

store

in
Sea4le’s
Pike
operaMons
and markeMng.
Starbucks®
coffee
beans.

Place
Market. 1984 1987
1972 Howard
convinces
the
founders
of
Starbucks
to
test
Il
Giornale
acquires
Starbucks
assets
with
the

A
Second
Starbucks

the coffeehouse
concept
,
first Starbucks®
Caffè
La7e
backing
of
local investors
and
changes
its
name

opens
in
Sea7le is
served.
to
Starbucks
CorporaMon.

The Tall Age: 1988-1995
Super
Ordinate
Goal:

Intended
Strategy:
Establish
Starbucks
as
the
premier
purveyor

Focus
on
employee
saMsfacMon
through
of
the
finest
coffee
in
the
world
while

benefits
and
stock
opMons
to
reduce
maintaining
our
uncompromising
principles

turnover,
thus
saving
money
in
the
long
run.
while
we
grow.

Emergent
Strategy:

With
gaining
popularity,
Starbucks
begins

to
spread
rapidly
across
the
U.S.
and
North

America,
although
Schultz
originally

emphasized
slow
expansion.

First
Mover
Advantages:

Schultz
provided
health
benefits
and

private
stock
opMons
to
full
and
part-‐Mme

employees
alike.

1990
Starbucks
expands
1995
1988 headquarters

in
1992 1993 Begins
serving
Frappuccino®

Offers
full
health
benefits

Sea7le. Completes
iniLal
public
offering
(IPO),
Opens
roasLng
plant

blended
beverages.
with
stock
being traded
on
Nasdaq
under
in
Kent,
Wash. Introduces
Starbucks®
super-‐
to
eligible
full-‐
and
part-‐ 1991 the
trading
symbol “SBUX.” premium
ice
cream.
Lme
employees.
Becomes
the
first
privately
1993

1989 owned
U.S.
company
to
offer
a

Announces
first
two-‐for-‐one
stock
1993
1995

Total
stores:
55
stock opLon
program
that

split. Total
stores:
272

Total
stores:
677
includes
part-‐Mme
employees.

The Grande Age: 1996-2002
First
Mover

Intended
Strategy:

Advantages:

Enter
new
markets,
slowly
Bo7led
Frappuccino

expand
and
dominate,
then
entered
the
market,

move
on
to
a
new
market.
Starbucks
entered

Emergent
Strategy:

the
music
industry

During
this
period,
Starbucks
with
Hear
Music

was
expanding
way
faster
than
acquisiMon.

intended
and
into
more

markets.

1996 2000
Begins
selling
bo4led
Frappuccino®
through
1998 1999 Introduces
coffee
category
that
exhibits

a
partnership
with
Pepsi-‐Cola. Acquires
Tazo,
a
tea
company
based
in
Partners
with
ConservaLon
shade
grown,
organic
and Fair
Trade

Opens
stores
in:
Japan
(first
store
outside
of
Portland,
Oregon InternaLonal
to
promote
CerMfied™
selecMons.
North
America)
and Singapore. sustainable coffee-‐growing

Forms
Urban
Coffee
OpportuniLes,
a
joint

venture
with
Earvin “Magic”
Johnson’s

pracMces.
2002
Total
stores:
1,015 Starbucks
enters
into
licensing

Johnson
Development
Corp.,
to
develop
Starbucks
stores
in
diverse,
urban
and
agreements
with
naLonal
Fair Trade

1997 suburban
communiMes.
Acquires
Hear
Music,
a
San
organizaLons
to
sell
Fair
Trade

Establishes
The
Starbucks
FoundaLon,
Francisco–based
music
company.
CerLfied™
coffee
in
the countries

benefiMng
local
literacy programs
in
Extends
the
Starbucks
brand
into
grocery
where
Starbucks
does
business.
communiMes
where
Starbucks
has
channels
through
licensing
agreement

with
Krad
Foods,
Inc. Total
stores:
5,886
coffeehouses.

The Venti Age: 2003-2010
Intended
Strategy:

First
Mover

ConMnue
to
expand
while
also
Advantages:

building
their
image
of
social
Starbucks’

responsibility.
Facebook
fan

page
and
Twi7er,

Emergent
Strategy:

Though
sociocultural
efforts
MyStarbucksIdea.
were
strong,
their
customer
com,
VIA
Ready

service
was
lacking,
which
led
to
Brew
Coffee.

Schultz
coming
back
on
board
as

CEO
to
reinforce
this
area.

2003
Acquires
Sea4le
Coffee
Company,

which
includes
Sea4le’s
Best 2008 2009
Coffee
and
Torrefazione
Italia
Chairman
Howard
Schultz
returns
as
chief
execuLve
Launches
Starbucks
VIA™
Ready

coffee
brands.
2005 officer. Announces
a
renewed
focus
on
customer
Brew
Coffee.
Acquires
Ethos
Water.

experience
and innovaLon. Opens
second
Starbucks
Farmer

2004 Launches
MyStarbucksIdea.com,
Starbucks
first
online
Support
Center
in
Kigali,
Rwanda.
Opens
first
Starbucks
Farmer
2006 community. Starbucks
helps
save
lives
in
Africa

Support
Center
in
San
Jose,
Launches
the
industry’s
first
Announces
Starbucks™
Shared
Planet™,
the
company’s
through
their
partnership
with (RED)
Costa Rica. paper
beverage
cup
containing
longterm commitment
to
conducMng
business
™.

postconsumer recycled
fiber. responsibly.

2007
Total
stores:
8,569 Total
stores:
15,011 Total
stores:
16,680 Total
stores:
16,635

Table of Contents


9-12

13-23

24-30 9

Strategic
Group
Analysis
of
the

U.S.
Retail
Specialty
Non-‐Alcoholic

Coﬀee
Industry

Starbucks Aggregate Micro Sub-Industries

Threats
and
OpportuniMes

Derived
from
Strategic
Group
Analysis

•  Main
OpportuniLes
•  Main
Threats

  Increasing
popularity
of
energy
drinks/   Fast
food
and
on
the
go
retailers
trying

shots
to
accommodate
for
the
lifestyle
type

  Increasing
demand
for
health
conscious
consumer

food/beverages
  High
compeMMon
weakens
first
mover

  NegaMve
publicity
for
sol
drinks
as
an
benefits
on
innovaMve
store
concepts

unhealthy
drink
choice

  Increasing
threat
from
tea
stores

  Increasing
popularity
of
smoothies

  Economies
of
scale
facilitate
good
quality

coffee
availability

12

Table of Contents


9-12

13-23

24-30 13

Five
Forces
Analysis
of
the
Lifestyle
Strategic
Group
in
the
U.S.

Specialty
Non-‐Alcoholic
Beverage
Industry

Threat
of

SubsMtute

Products

Rivalry

Bargaining
Threat
of

Among

Power
of
New

CompeMng

Buyers
Entrants

Firms

Bargaining

Power
of

Suppliers

14

Threat
of
SubsMtute
Products

Determinant
Strength
of
Determinant
Strength
of
Force

Amount
of
SubsLtutable
Products
High
High

Price-‐Performance
Trade-‐Off

Moderate
Moderate

Profit
Level
of
Industry
Moderately
High
Moderately
High

Switching
Costs
Low
Low

Fast
Food
Coffee

•  Price-‐Performance
Trade-‐Off
Low
Low

•  Profit
of
the
SubsMtute
Moderate
Moderate

•  Switching
Costs
Low
High

•  Overall
Moderately
Low
Moderate

On
The
Go
Coffee

•  Price-‐Performance
Trade-‐Off
Low
Low

•  Profit
of
the
SubsMtute
Moderate
Moderate

•  Switching
Costs
Low
High

•  Overall
Moderately
Low
Moderate

Overall
Strength:
High

Overall
high
strength
of
threat
of
subsMtute
products

contributes
to
low

industry
profitability.

15

Threat
of
New
Entrants

Strength
of

Determinant
Sub-‐Determinate
Strength
of
Force

Determinate

Switching
Costs
-‐
Low
Low

FuncLonal
Differences
Low

Product
DifferenLaLon
Moderate

Psychological
Differences
Moderately
High

Capital
Requirements
-‐
Moderately
High
Moderately
High

Access
to
DistribuLon
Channels
High

Access
to
CriLcal
Resources
High

Access
to
Necessary
Inputs
High

History
of
Firms
Lashing
Out
Moderate

Limited
Resources
Moderately
High

Expected
RetaliaLon
Moderate

Likeliness
to
Cut
Prices
Low

Growth
in
Focal
Industry
Moderate

Economies
of
Scale
-‐
Moderately
High
Moderately
High

Government
RegulaLon
of
Entry
Low

Onerous
RegulaLon
of
Focal

Government
Policy
Low
Moderately
Low

Industry

Patent
ProtecLon
for
ExisLng
Firms
Moderate

Overall
Strength:
Moderate

Overall
moderate
strength
of
threat
of
new
entrants
contributes
to

moderately
low
industry
profitability.

16

Bargaining
Power
of
Suppliers

Determinant
Strength
of
Determinate
Strength
of
Force

ConcentraLon
of
Supply
Industry
High
High

relaLve
to
Focal
Industry

Switching
Costs
High
High

SubsLtute
Products
Low
Low

Importance
of
Product
to
Buyer
High
High

Labor
Force
Moderately
High
Moderately
High

Forward
IntegraLon
Low
Low

Overall
Strength:
Moderately
High

Overall
moderately
high
strength
of
supplier
bargaining
power
contributes
to

moderately
low
industry
proﬁtability.

17

Bargaining
Power
of
Buyers

Determinant
Strength
of
Determinant
Strength
of
Force

ConcentraLon
of
Buying
Industry
Moderately
High
Moderately
High

relaLve
to
Focal
Industry

Volume
of
Purchases
Low
Low

Switching
Costs
Moderately
Low
Moderately
High

Product
DiﬀerenLaLon
Moderate
Moderate

Price
SensiLvity
Moderate
Moderate

Backward
IntegraLon
Moderately
Low
Moderately
Low

Overall
Strength:
Moderate

Overall
moderate
strength
of
buyer
bargaining
power
contributes
to

moderate
industry
proﬁtability.

18

Rivalry
Among
CompeMng
Firms

Strength
of

Determinant
Sub-‐Determinant
Strength
of
Force

Determinate

Industry
Growth
-‐
Moderate
Moderate

CompeLtor
Balance
-‐
Moderate
Moderate

Fixed
Costs
-‐
High
High

Switching
Costs
-‐
Moderate
Moderate

FuncLonal
Differences
Low

Product
DifferenLaLon
Moderate

Brand/Psychological
Differences
High

Economic
RaLonale
Moderate

Exit
Barriers
Moderately
High

Psychological
RaLonale
Moderately
High

Firm
ConcentraLon
-‐
Low
Low

Overall
Strength:
Moderate

Overall
moderate
strength
of
compeMng
firm
rivalry
contributes
to

moderate
industry
profitability.

19

Five
Forces
Analysis
of
the
Lifestyle
Strategic
Group
in
the
U.S.

Specialty
Non-‐Alcoholic
Beverage
Industry

High

Threat
of
Aggregate
Industry
Analysis

=
Strength
of
Force
SubsMtute

•  Strength
of
Forces:
Moderately
High

Products

•  Proﬁtability
of
Industry:
Moderately
Low

Moderate
Moderate

Rivalry

Bargaining
Threat
of

Among

Power
of
New

CompeMng

Buyers
Entrants

Firms

Moderate

Bargaining

Power
of

Suppliers

Moderately
High
20

Sources
of
Firm
Profitability

Firm
Profit

Excellent
SF
&
SI

Profit
for
the
Average

Firm
in
Industry
2

Poor
SF
&
SI

U.S.
Specialty
Non-‐Alcoholic
Beverage
Industry

Excellent
SF
&
SI

Profit
for
the
Average

Firm
in
Industry
1

Poor
SF
&
SI

Industry
1
Industry
2

Threats
and
OpportuniMes
Derived
from
Porter's

5
Forces

•  Main
OpportuniLes
•  Main
Threats

  Decreasing
power
of
suppliers
based
on
  CompeLLon
within
the
industry
rising

the
knowledge
of
an
Arabica
coffee
due
to
new
entrants

bean
surplus
  Coffee
shops
have
low
start
up
costs

  12
countries
have
higher
coffee
  Increasing
threat
in
instant
coffee

consumpMon
than
the
US
  Power
of
buyers
increasing
since
home

  Power
of
buyer
shil
as
longer
working
brewed
Robusta
coffee
bean
prices
are

hours
make
caffeinated
products
more
decreasing

necessary

  Increased
availability
of
household

  Increase
in
coffee
commodity
prices
espresso
machines

reflect
an
increasing
demand
for
the

coffee
industry

as
a
whole

23

Table of Contents


9-12

13-23

24-30 24

Demographic

Main Opportunities Main Threats
  Millennials/Gen-Y leading   “Baby Boomers” getting older and
demographic spending on leaving workforce
restaurant food and drinks   Birthrate is declining and people are
  Population expected to grow to having fewer kids.
over 9 billion by 2050

25

Technology

  Expansion of broadband and   Expansion of internet creates
wireless technology increased corporate visibility
  Expansion of mobile internet
technology

26

Sociocultural
  “Green Movement” and   Push to support local businesses
Sustainability   Increase in visibility and critical view
  Shift towards more Corporate Social of corporations
Responsibility   Consumers become more price
  Customers are demanding faster and value conscious
service, faster communication, and a
faster way of life

27

Economic

  Overall savings rate falling,   Coffee and Diary prices expected
particularly in younger generations to rise around 20% in 2010 and
2011
  Ongoing high unemployment in the
United States

28

Global

  Taking advantage of Asian markets   Hundreds of millions of people
and services world-wide rely on the coffee
  Break down of international trade industry for jobs
barriers   Break down of international trade
  Global education and work skills barriers
improving
  Hundreds of millions of people
world-wide rely on the coffee
industry for jobs
  Global education and work skills
improving
  Increasing consumption of coffee
around the world, particularly in China

29

Political/Legal
  Chinese tariffs cut 9.4% overall in   Rise of Fair Trade Movements
the past decade   Political instability in Columbia and
Central American counties

30

Table of Contents


9-12

13-23

24-30 31

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See
Rise
in
Energy
Drink
ConsumpMon
among

Young
Adults
-‐
KSTU."
Fox13now.com
Salt
Lake
City
-‐
KSTU.
17
Aug.
2010.
Web.

24

Sept.
2010.
<h7p://www.fox13now.com/news/kstu-‐energy-‐drinks-‐warning-‐utah-‐
health,
0,4453498.story>.

"YouTube
-‐
Man
Drinking
Fat.
NYC
Health
AnM-‐Soda
Ad.
Are
You
Pouring
on
the
Pounds?"

YouTube
-‐
Broadcast
Yourself.
Web.
24
Sept.
2010.

<h7p://www.youtube.com/watch?v=-‐
F4t8zL6F0c>.

34

Starbucks

Strategy Formulation, Implementation, Fit and Performance
Group 4; 2:00 p.m.
Justin Lenhert, Brandon Terrebonne, T.J. Owen, Matt Bruns, Tim Johnson, Ben Carrier, Brent Reilly
35

Table of Contents

•  Strategy
FormulaMon

•  SOGs:
Vision,
Mission,
Purpose,
Goals,
and
Mantra

•  Strategy
as
PosiMon:
Business
Level
Strategy

•  Strategy
ImplementaMon

•  Skills:
VRIO
Analysis/Core
Competence
Metaphor

•  Style:
OrganizaMonal
Culture
Analysis

•  Structure:
OrganizaMonal
Structure
Analysis

•  Fit
and
Performance

•  Fit:
Modiﬁed
7S
Analysis

•  Performance:
Financial
Analyses

Table of Contents

•  Strategy
FormulaLon

•  SOGs:
Vision,
Mission,
Purpose,
Goals,
and
Mantra

•  Strategy
as
PosiMon:
Business
Level
Strategy

•  Strategy
ImplementaMon

•  Skills:
VRIO
Analysis/Core
Competence
Metaphor

•  Style:
OrganizaMonal
Culture
Analysis

•  Structure:
OrganizaMonal
Structure
Analysis

•  Fit
and
Performance

•  Fit:
Modiﬁed
7S
analysis

•  Performance:
Financial
Analyses

Strategy
FormulaLon

Strategy
ImplementaMon

Fit
and
Performance

Strategy
FormulaLon
&
Strategy
ImplementaLon

Strategy

FormulaLon

Strategy

(as
PosiMon)

Structure
Style

(OS,
VCA)
(L&C)

SOGs,

SG,
VMPGs,

Strategy

(as
Plan)

Systems
Skills

(VCA)
(CC,
VCA)

Staﬀ

(L&C,
VCA)

Strategy

ImplementaLon

Strategy
FormulaLon

Strategy
ImplementaMon

Fit
and
Performance

Vision,
Mission,
Purpose,
Goals,
Mantra

Vision/Mission/Purpose:

Stated
Mission:
“To
inspire
and
nurture
the
human
spirit
–
One
person,
One
cup,
and
One
Neighborhood
at
a
Mme.”

•  Our
Coffee
“Has
always
been,
and
will
always
be,
about
quality.”

•  Our
Partners
“We
embrace
diversity
to
create
a
place
where
each
of
us
can
be
ourselves.

We
always
treat
each
other

with
respect
and
dignity.”

•  Our
Customers
Our
work
goes
far
beyond
fine
coffee.

“It’s
really
about
human
connecMon.”

•  Our
Stores
“Our
stores
become
a
haven,
a
break
from
the
worries
outside…It’s
about
enjoyment
at
the
speed
of
life…”

•  Our
Neighborhood
“We
take
our
responsibility
to
be
good
neighbors
seriously.”

•  Our
Shareholders
–
“As
we
deliver
in
each
of
these
areas,
we
enjoy…success
that
rewards
our
shareholders.”

Vision:
“While
we
are
a
coffee
company
at
heart,
Starbucks
provides
much
more
than
the
best
cup
of
coffee—we
offer
a

community
gathering
place
where
people
come
together
to
connect
and
discover
new
things.
We
are
always
looking
for

innovaMve
ways
to
surprise
and
delight
our
customers.”

-‐
Howard
Schultz

Strategy
FormulaLon

Strategy
ImplementaMon

Fit
and
Performance

Vision,
Mission,
Purpose,
Goals,
Mantra

Goals:

•  Become
the
leading
retailer
and
brand
of
coffee
in
each
of
our
target
markets
by
selling
the
finest
quality
coffee
and

related
products,
and
by
providing
each
customer
with
a
unique
experience

•  Refocus
on
the
consumer
experience
in
stores
and
our
posiMon
as
a
third
place
between
home
and
work
where
people

can
gather
together
for
human
connecMon

•  Achieve
sustainable
growth
in
established
internaMonal
markets
while
at
the
same
Mme
invesMng
in
emerging
markets

such
as
China,
Brazil,
and
Russia

•  Focus
on
relevant
informaMon
and
profitable
growth
opportuniMes
through
the
offering
of
new
products
and
pla€orms

•  ConMnue
to
be
known
as
a
corporate
leader
in
social
responsibility

Mantra:

The
Third
Place.

Table of Contents

•  Strategy
FormulaLon

•  SOGs:
Vision,
Mission,
Purpose,
Goals,
and
Mantra

•  Strategy
as
PosiLon:
Business
Level
Strategy

•  Strategy
ImplementaMon

•  Skills:
VRIO
Analysis/Core
Competence
Metaphor

•  Style:
OrganizaMonal
Culture
Analysis

•  Structure:
OrganizaMonal
Structure
Analysis

•  Fit
and
Performance

•  Fit:
Modiﬁed
7S
analysis

•  Performance:
Financial
Analyses

Strategy
FormulaLon

Strategy
ImplementaMon

Fit
and
Performance

Porter’s
Strategy
Typology

Type
of
Advantage

DifferenLaLon
Low
Cost

Scope

of
Advantage

Broad
Broad
Broad

Scope
DifferenLaLon
Low
Cost

(Starbucks)

Narrow
Focused
Focused

Scope
Low
Cost

DifferenLaLon

Strategy
FormulaLon

Strategy
ImplementaMon

Fit
and
Performance

Business
Level
Strategy
Analysis

Type
of
Advantage:
DifferenLaLon

Perceived
Uniqueness
of
Product…

•  Intense
focus
on
the
experience,
store
atmosphere,
and
quality
service

•  Powerful
brand
name:
“grabbing
some
Starbucks”
instead
of
“grabbing
a
cup
of
coffee”

•  “It’s
not
just
a
cup
of
coffee.

It’s
Starbucks”

…Leads
to
a
Willingness
to
Pay
a
Premium
Price

•  Higher
prices
than
numerous
other
compeMtors
such
as
Dunkin

Donuts
and
McDonalds

•  Similar
prices
to
local
and
regional
specialty
shops
such
as

Kaldi’s
and
Lakota

•  Numerous
news
and
opinion
arMcles
about
high
product
prices

Strategy
FormulaLon

Strategy
ImplementaMon

Fit
and
Performance

Business
Level
Strategy
Analysis

Scope
of
Advantage:
Broad

Geographic

•  Nearly
16,000
retail
stores
in
over
50
countries

Consumers

•  Serves
a
variety
of
customers
from
around
the
world,
in
both
rural
and
urban
locaMons,

and
across
many
demographics

Products

•  A
variety
of
products
-‐-‐
including
specialty

coﬀees
and
drinks,
sandwiches
and
pastries,

instant
coﬀees,
teas,
ice
cream,
alcoholic

products,
and
more

Strategy
FormulaLon

Strategy
ImplementaMon

Fit
and
Performance

Strategy
FormulaMon:
Strengths
and
Weaknesses

Strengths

• 
Strong
focus
on
customer
experience
aligns
well
with
Mantra:
“The
Third
Place”
(VMPG/M)

• 
Customer
affinity
for
quality
Starbucks
products
has
led
to
strong
brand
idenMficaMon
(Business
Level

Strategy)

• 
InternaMonal
development
goals
posiMon
Starbucks
to
take
advantage
of
emerging
markets
(VMPG/M)

• 
New
products
have
allowed
Starbucks
to
penetrate
new,
profitable
markets
(Business
Level
Strategy)

Weaknesses

• 
Premium
prices
and
price
hikes
drive
less-‐affluent
customers
to
cost-‐leadership
providers
such
as

McDonalds
and
Dunkin
Donuts
(Business
Level
Strategy)

• 
Rapid
expansion
has
led
to
over-‐saturaMon
in
U.S.
markets,
causing
Starbucks
to
recently
close
some
outlets

(VMPG/M)

Table of Contents

•  Strategy
FormulaMon

•  SOGs:
Vision,
Mission,
Purpose,
Goals,
and
Mantra

•  Strategy
as
PosiMon:
Business
Level
Strategy

•  Strategy
ImplementaLon

•  Skills:
VRIO
Analysis/Core
Competence
Metaphor

•  Style:
OrganizaMonal
Culture
Analysis

•  Structure:
OrganizaMonal
Structure
Analysis

•  Fit
and
Performance

•  Fit:
Modiﬁed
7S
analysis

•  Performance:
Financial
Analyses

Strategy
FormulaMon

Strategy
ImplementaLon

Fit
and
Performance

Strategy
FormulaLon
&
Strategy
ImplementaLon

Strategy

FormulaLon

Strategy

(as
PosiMon)

Structure
Style

(OS,
VCA)
(L&C)

SOGs,

SG,
VMPGs,

Strategy

(as
Plan)

Systems
Skills

(VCA)
(CC,
VCA)

Staﬀ

(L&C,
VCA)

Strategy

ImplementaLon

VRIO
Framework

Resource/Capability V R I O
WiFi Internet Access

R&D Skills

Ability to Raise Capital

Coffee Brewing Equipment

Human Resource Management

Coffee House Set Up

Employee Compensation

Quality Product Mix

Coffee House Locations

Employee Benefits

Socially Responsible Corporate Image

Buying Power

Number of Coffee Houses

Propensity for Innovation
Core
Competencies

Relationships with Coffee Farmers

Customer Experience

Corporate Leadership & Vision

Renowned Brand

Strategy
FormulaMon

Strategy
ImplementaLon

Fit
and
Performance

CC
Metaphor:
In
Every
Starbucks
Cup…

Core
Competencies
End
Products

-‐
Corporate
Leadership
&
Vision

-‐
RelaLonships
with
Farmers

-‐
Propensity
for
InnovaLon
•  More
than
16,000

stores
in
over
50

countries

-‐
Customer
Experience
•  More
than
30
blends

and
premium

arabica
coﬀees

•  Full
menu
of
coﬀees,

-‐
Renown
Brand
espressos,
blended

beverages,

smoothies,
and
teas

Table of Contents

•  Strategy
FormulaMon

•  SOGs:
Vision,
Mission,
Purpose,
Goals,
and
Mantra

•  Strategy
as
PosiMon:
Business
Level
Strategy

•  Strategy
ImplementaLon

•  Skills:
VRIO
Analysis/Core
Competence
Metaphor

•  Style:
OrganizaLonal
Culture
Analysis

•  Structure:
OrganizaMonal
Structure
Analysis

•  Fit
and
Performance

•  Fit:
Modiﬁed
7S
analysis

•  Performance:
Financial
Analyses

Strategy
FormulaMon

Strategy
ImplementaLon

Fit
and
Performance

OrganizaMonal
Culture
Analysis

Strategy
FormulaMon

Strategy
ImplementaLon

Fit
and
Performance

Strength
OrientaMon:
5
Cohesive
and
Strong

-‐Summary-‐

Starbucks’
culture
is
centered
around
an
obsession
with
coffee.
Ranging
from
partners

to
the
Chief
ExecuHve
Officer,
coffee
is
a
way
of
life
for
every
member
of
the

organizaHon.
From
growing
in
the
mountains
of
Costa
Rica
to
the
final
product
in
your

local
retail
store,
partners
are
oriented
to
the
many
facets
of
coffee
from
training
on.

•  “Monthly
Mingle”
events
are
held
to
bring
together
employees
across
retailers

and
encourage
cohesive
and
strong
unity
amongst
all
employees.

•  Starbucks
sponsors
over
50
clubs
to
inspire
the
sharing
of
interests
and
to

sMmulate
a
work/life
balance.

–  Bowling
League,
China
Club,
SCUBA
Club,
French
Club,
Bike
Club,
Japanese
Club,
and
Parents

Network
are
some
of
the
examples.

•  Starbucks’
culture
encourages
the
valuing
of
employees.
Thus,
individual
stores

conduct
internal
recogniMon
programs
to
ensure
appreciaMon
for
hard
work
and

being
a
valuable
team
member
of
Starbucks.

Strategy
FormulaMon

Strategy
ImplementaLon

Fit
and
Performance

Outcome
OrientaMon:
4.5
Focused
on

Performance

-‐Summary-‐

Starbucks
culture
encourages
premium
customer
service.
One
store

manager
claims
he
has
300
locals
frequent
his
store
daily.
He
knows

their
names,
what’s
going
on
in
their
lives,
and
of
course,
their

preferred
choice
of
beverage.
Starbucks
culture
encourages
hard
work

in
the
presence
of
the
creaHon
of
a
relaxing,
comfortable
environment

for
customers.

•  Starbucks
is
a
publicly
traded
company
and
has
a
ﬁduciary

responsibility
to
shareholders
to
earn
a
proﬁt
and
grow
quarterly.

•  Starbucks
has
a
strong
sense
of
idenMty
and
unity
amongst
its

employees;
however,
customer
service
and
excellence
in
product

quality
transcend
enjoyment
of
work.
Starbucks
strives
to
achieve

both.
Although,
it’s
always
about
the
customer.

Strategy
FormulaMon

Strategy
ImplementaLon

Fit
and
Performance

Support
OrientaMon:
1
Focused
on
People

-‐Summary-‐

Starbucks
was
founded
with
a
culture
dedicated
to
the
welfare
of
those
who

appreciate
and
respect
the
coffee
bean.
Starbucks’
culture
encourages
partners
to

wake
up
daily
and
head
to
work

hoping
to
do
two
things:
share
great
coffee
with

friends
and
to
help
make
the
world
a
li[le
be[er.
Starbucks
provides
incredible

employee
benefits
from
the
day
you
step
onboard.
Each
compensaHon
package
is

specially
tailored
to
you.

•  “The
Starbucks
Total
Pay
package
is
called
“Your
Special
Blend”
because
it’s
just

for
you.
Your
Special
Blend
might
include:

•  CompeMMve
pay,
Insurance:
medical,
prescripMon
drug,
dental,
vision,
life,

disability,
Bonuses,
Paid
Mme
off,
ReMrement
savings
plan,
Stock
opMons
and

discounted
stock,
purchase
plan,
AdopMon
assistance,
DomesMc
partner

benefits,
Emergency
financial
aid,
Referral
and
support
resources
for
child

and
eldercare,
A
free
pound
of
coffee
each
week.”

•  “It’s
a
lot
like
working
with
friends.
We
call
each
other
“partners.”
We
respect
our

customers
and
each
other.
We’re
dedicated
to
serving
ethically
sourced
coffee,

caring
for
the
environment
and
giving
back
to
the
communiMes
where
we
do

business.
And
we’re
sMll
small
enough
to
remember
your
name
when
you
walk
in

the
door.”

Table of Contents

•  Strategy
FormulaMon

•  SOGs:
Vision,
Mission,
Purpose,
Goals,
and
Mantra

•  Strategy
as
PosiMon:
Business
Level
Strategy

•  Strategy
ImplementaLon

•  Skills:
VRIO
Analysis/Core
Competence
Metaphor

•  Style:
OrganizaMonal
Culture
Analysis

•  Structure:
OrganizaLonal
Structure
Analysis

•  Fit
and
Performance

•  Fit:
Modiﬁed
7S
analysis

•  Performance:
Financial
Analyses

Strategy
FormulaMon

Strategy
ImplementaLon

Fit
and
Performance

OrganizaMonal
Structural
Analysis

Organic
Structure
Dimension
of
Structure
MechanisLc
Structure

Formalization

The extent to which rules

Few
(formal)
wri7en
rules
exist in written form and Lots
of
(formal)
wri7en

and
regulaMons;
more
cover a wide range of rules
and
regulaMons;
“by

informal
approach.

contingencies. the
book”
approach.

1 2 3 4 5 6 7 8 9 10

—Although

Starbucks’
culture
is
one
of
employee,
or
“partner”,
empowerment
and

saMsfacMon,
there
sMll
exists
much
literature
on
policies
and
pracMces
for
the

corporaMon.

—With
such
a
large
internaMonal
company,
such
standards
need
to
be
in
place
to
keep

the
machine
running
smoothly
and
consistently
in
every
store.

Strategy
FormulaMon

Strategy
ImplementaLon

Fit
and
Performance

OrganizaMonal
Structural
Analysis

Organic
Structure
Dimension
of
Structure
MechanisLc
Structure

Centralization

Decision
making
is
The extent to which decisions Decisions
are
made
at
or

delegated
to
empowered
are made at or near the top of near
the
top
of
the

individuals
at
lower
levels
the organization’s hierarchy. organizaMon.

in
the
organizaMon.

1 2 3 4 5 6 7 8 9 10

—Again,
due
to
their
large
size,
Starbucks
requires
a
more
mechanisMc
approach
in

dealing
with
decisions
and
bureaucracy
in
order
to
sustain
a
stable,
consistent
image

internaMonally.

—”In
response
to
a
rash
of
unhealthy
hallway
conversaMons
that
were
undermining

the
eﬀecMveness
of
Starbucks
project
teams
in
the
early
2000s,
then-‐CEO
Orin
Smith

posted
“EﬀecMve
MeeMng
Rules”
signs
in
every
conference
room.”

Strategy
FormulaMon

Strategy
ImplementaLon

Fit
and
Performance

OrganizaMonal
Structural
Analysis

Organic
Structure
Dimension
of
Structure
MechanisLc
Structure

Hierarchy of Authority

The extent to which there are

many levels in the

Flat,
horizontal
hierarchy.

organization’s hierarchy. Tall,
verMcal
hierarchy.

1 2 3 4 5 6 7 8 9 10

—Starbucks
has
a
fairly
general,
balanced
hierarchy
of
authority
that
leans
slightly
to

the
mechanisMc
side,
which
is
understandable
for
a
large
company
that
sMll
holds
the

interests
of
lower
level
employees
close
at
heart.

—One
interesMng
caveat
in
their
hierarchy
is
their
inclusion
of
“The
Customer”
on
their

organizaMonal
chart.

Strategy
FormulaMon

Strategy
ImplementaLon

Fit
and
Performance

Company
Hierarchy

CEO
Level
1

Howard
*
“The
Starbucks
culture
believes

}

Schultz
there
is
only
one
organizaMonal

chart
that
truly
ma7ers
to
a

customer-‐ﬁrst
business,
and
that

Board
of
Directors
Level
2

one
has
every
employee

symbolically
reporMng
to
the
real

Upper
Management
Level
3
boss—the
customer.”

Regional
(Middle)
Managers
Level
4

Store
Managers
Level
5

Shil
Supervisors
Level
6

Clerk
Supervisors
Level
7

Baristas

Level
8

Strategy
FormulaMon

Strategy
ImplementaLon

Fit
and
Performance

OrganizaMonal
Structural
Analysis

Organic
Structure
Dimension
of
Structure
MechanisLc
Structure

Specialization

Employees
perform
a
wide
The extent to which tasks are Each
employee
performs

range
of
tasks
in
their
job;
subdivided into separate jobs only
a
narrow
range
of

fluid
roles;
overlapping
tasks;
rigid
roles;
task
are

tasks.
separated
with
li7le/no

1 2 3 4 5 6 7 8 9 10

overlap.

—Whether
a
barista,
clerk,
or
manager,
each
task
is
clearly
defined
and
rigid
to
the

employee.

—SpecializaMon
helps
their
stores
funcMon
more
efficiently
and
smoothly
because
each

employee
has
their
roles
solidified,
allowing
their
coffee
to
be
delivered
to
customers

in
the
quickest
way
allowable.

Strategy
FormulaMon

Strategy
ImplementaLon

Fit
and
Performance

OrganizaMonal
Structural
Analysis

Organic
Structure
Dimension
of
Structure
MechanisLc
Structure

Standardization

People
are
free
to
create
The extent to which things are OrganizaMon
consistently

and
introduce
new
ideas
done the same, time after time. and
rouMnely
does
things

which
means
that
their
the
same
way
Mme
aler

organizaMons
are
less
Mme.

likely
to
rouMnely
do
1 2 3 4 5 6 7 8 9 10

things
the
same
way
Mme

aler
Mme.

—Starbucks’
unique
menu
and
drink-‐building
style
allows
customers
to
fully
customize

their
order,
which
leads
to
freedom
for
the
baristas,
and
customers,
to
make
whatever

drink
they
desire.

—Their
menu
and
coffee
offered
fluctuates
seasonally,
and
they
also
offer
a
“Blend
of

the
Day”
which
varies
day-‐to-‐day.

Strategy
FormulaMon

Strategy
ImplementaLon

Fit
and
Performance

Structural
Dimensions
Summary

6.2
Moderately
MechanisLc

—Although
Starbucks’
culture
is
fun-‐loving
and
free
spirited,
the
overall
management

takes
the
form
of
Moderately
MechanisMc.
This
became
a
requirement
due
to
the

company’s
rapid
expansion
and
their
now
massive,
internaMonal
stature.

Starbucks
Center
–
Sea7le,
Washington

Strategy
FormulaMon

Strategy
ImplementaLon

Fit
and
Performance

Strengths
and
Weaknesses
DisMlled
from

Strategic
ImplementaMon

Strengths

Weaknesses

•  Corporate
Leadership
and
Vision
•  Service
Speed
(VRIO)

(CC)
•  Product
Prices
(VRIO)

•  RelaMonships
with
farmers
(CC)
•  Stuck-‐in-‐the-‐Middle
with
change

•  Propensity
for
innovaMon
(CC)
(OC)

•  Customer
Experience
(CC)

•  Renown
Brand
(CC)

•  Strong
sense
of
idenMty
(OC)

•  OrganizaMon’s
focus
on
people

(OC)

Table of Contents

•  Strategy
FormulaMon

•  SOGs:
Vision,
Mission,
Purpose,
Goals,
and
Mantra

•  Strategy
as
PosiMon:
Business
Level
Strategy

•  Strategy
ImplementaMon

•  Skills:
VRIO
Analysis/Core
Competence
Metaphor

•  Style:
OrganizaMonal
Culture
Analysis

•  Structure:
OrganizaMonal
Structure
Analysis

•  Fit
and
Performance

•  Fit:
Modiﬁed
7S
analysis

•  Performance:
Financial
Analyses

Strategy
FormulaMon

Strategy
ImplementaMon

Fit
and
Performance

Fit:
Modiﬁed
7S
Analysis

Strategy

Structure
Style

Super

Ordinate

Goals

Systems
Skills

Staﬀ

Strategy
FormulaMon

Strategy
ImplementaMon

Fit
and
Performance

Fits

Fit:
Modiﬁed
7S
Analysis

Super

Strategy
Ordinate
Structure
Style
Skills

Goals

Excellent

Strategy

Good
Super

Ordinate

Goals

Average

Structure

Poor

Style

Skills

Strategy
FormulaMon

Strategy
ImplementaMon

Fit
and
Performance

Modified
7S
Analysis:
Best
Fits

•  Strategy
and
Super
Ordinate
Goals(Excellent)

–  Diverse
work
force
is
encouraged
and
helps
a7ract

customers
in
diverse
markets.

–  Providing
a
high
quality
product
that
leaves
customers

saMsfied
and
a7ributes
to
repeat
customers
and

higher
profits.

•  Skills
and
Super
Ordinate
Goals
(Excellent)

–  Every
barista
hired
receives
at
least
24
hours
of

training
in
the
first
two
to
four
weeks.

–  Training
also
includes
a
four-‐hour
workshop
called

“Brewing
the
Perfect
Cup”.

Strategy
FormulaMon

Strategy
ImplementaMon

Fit
and
Performance

Modified
7S
Analysis:
Worst
Fits

•  Super
Ordinate
Goals
and
Style
(Average)

–  Strong
value
for
providing
partners
with
above

average
benefits.

–  Management
has
decided
in
recent
years
to
cut
back

on
benefits
to
partners
due
to
the
economy.

•  Strategy
and
Style
(Average)

–  Management
communicate
to
partners
about
major

business
decisions
that
affect
the
company.

–  Partners
are
not
feeling
the
benefits
of
the
cost

cu…ng
and
increases
in
efficiency
as
much
as
the

upper
management
and
stockholders.

Starbucks Strategy

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