I. Trouble Statement
Starbucks has recently dropped its brand image as being a neighborhood coffee shop experience. By providing breakfast, lunch break and other foods, they have elevated short-term success at the expenditure of maintaining the вЂStarbucks experience' and long-term competitive distinction. II. Situational Research
1 . Current Financial/Market Figures
CHOSEN YEAR-END TWEAKED CLOSE DISCUSS / INDEX PRICES2002-2007 (ADJUSTED FOR RETURNS / SPLITS)| | McDonald'sMCD| Panera BreadPNRA| StarbucksSBUX| Dow Jones Industrial AverageDJIA| 2002| $13. 17| $34. 81| $10. 05| 8341. 63
2003| $20. 66| $39. 52| $16. 36| 10, 453. ninety two
2004| $27. 17| $40. 32| $30. 76| 15, 783. 01
2005| $29. 16| $65. 68| $29. 60| 15, 717. 55
2006| $39. 27| $55. 91| $34. 94| doze, 463. 12-15
2007| $53. 56| 35 dollars. 82| 20 dollars. 19| 13, 264. 82
The market pertaining to premium coffee beverages provides experienced large growth over the 90s and early 2000s. Additionally , cafГ©-style restaurants (Panera) have lately began to discover increased sales because they offer a relaxing atmosphere with free Wi-fi and music.
Objectives pertaining to Cost Buildings:
By the end of 2007, much more than two-thirds of company-owned ALL OF US Starbucks were serving lunch time sandwiches and also other non-coffee beverage merchandise. Though sales for sandwiches and also other food products had been going well, foodstuff sales offers a much lower contribution margin which has led to much lower profit margins in recent years; income have lowered each year by 8. seven percent in 2005 to six. 1% in 2007 and are also a mere 3% in the initial quarter of 2008. License sales, however , represent a margin of close to totally. Finally, drive-thru sales is one of the majority of product sales for retailers that offer such service. 2 . The Relevant Market
2. The Starbucks Brand concentrates on young and middle-age professionals, especially in the middle to high cultural classes, in search of a relaxing environment to enjoy refreshing, gourmet coffee. * " Third PlaceвЂќ вЂ“ home, office, and then Starbucks * Main Demand: Presented drive-thru window and breakfast/lunch food items in an effort to bring in new clients to the Starbucks experience (Note: These possess led to the watering straight down of the brand image and will be resolved later. ) * Supplementary Demand: Efforts to take away from fast food opponents by offering a unique atmosphere when enjoying high quality coffee drinks * Following the introduction of the extended foodstuff menu, same store product sales had steadily decreased: 2004: Same shop sales grew at 10%
2007: 2% in the final quarter of 2007
several. Product Based business model
" Coffee-House cultureвЂќ was enhanced by having beans floor in store by baristas which will created a personal/intimate coffee encounter:
Coffee Bean SupplierStarbucks in-Store GrindingCustomer
The Starbucks knowledge has become watered down by without having coffee beans in-house and floor in every store. Rather coffee and food happen to be ground/prepared in distribution center and transported to each store.
4. Customers' Determinant Features
* Recognized high end caffeine products вЂ“ dark roasted * High Class Atmosphere
2. Affordable Luxury
* Comforting environment in a fast paced world
5. Essential Competitors
* Junk food market leader and Starbucks biggest competition when it commenced offering " McCafeвЂќ and tea and pastries. 2. Traditionally situated itself with an American-oriented family image * In 2007 Customer reports rated McDonalds frequent coffee while better mouth watering than Starbucks * In 2008 B announced its " baristasвЂќ who would put on aprons through adding an estimated captal up to $1 billion of annual sales 5. McDonalds markets their coffee between $1. 99 and $3. 29 which is 1 / 3rd the cost of Starbucks coffee which can be priced among $2. sixty-five and...