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Individual Case Study Analysis

Sasha Kingsley

Azusa Pacific University

Dr. Dan Kipley

Submission: December 16, 2016

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Table of Contents

Executive Summary …………………………………………………………………… …………………………3-4

Existing Mission, Objectives, and Strategies ……………………………………….…..……………….5-6
A New Mission Statement ……………………………………………………………... …………………………6
Analysis of Firm Structure ………………………………………………………….……………………………..6
SWOT (TOWS) Analysis ……………………………………………………………… …………………………7-8
Five Forces Analysis ……………………………………………………...…………………………………......8-10
Confrontation Matrix …………………………………………………………………... ……………………10-11
Impact/ Probability Matrix …………………………………………………….……….. .……….. .…….11-12
Positioning Map ………………………………………………………………...……….………...………...…12-13
EFE Matrix ………………………………………………………………...…………… .……….. .……….. .….13-14
IFE Matrix ………………………………………………………………..…………….. .……….. .……….. .….14-15
IE Matrix ………………………………………………………………..……………….………...………...……..15-16
SFAS Matrix …………………………………………………………………………… .……….. .……….. .…..16-17
Competitive Profile Matrix ……………………………………….….………………… .……….. .………17-18
BCG Matrix ……………………………………………...…………………………….. .……….. .……….. .…..18-20
GE/ McKinsey Matrix …………………………………………………………………. .……….. .……….. .20-22
Industry Life Cycle (ILC) Analysis …………………….……………………………… .……….. .……22-23
SPACE Matrix …………………………………………….…………………………… .……….. .……….. .…23-24
Grand Strategies Matrix ……………………………………………………..………….………...………........ 25
QSPM Matrix …………………………………………………………………………...………...………...….. 26-27
OSPP Matrix ………………………………………………………………….………...………...………...….. 28-29
Recommended Specific Strategies, Long-Term Objectives, and Alternatives ……..... 30-31
Current Firm Ratios ………………………………………………………………...…...………...………......... 32
Pro-Formal Financial Statements ………………………………….......………………..………...………. 32
References …………………………………………………………….………………...………...………...………..33

Executive Summary

In 1971, three men who were previously academic teachers and writers turned

entrepreneurs named Zev Siegl, Jerry Baldwin and Gordon Bowker founded a coffeehouse

chain and American coffee company named Starbucks. They met while they were pursuing

their college degrees at University of San Francisco. Starbucks is now known as one of the
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most successful coffeehouse chains in the world due to its unique and wide variety of coffee

products along with its homely atmosphere.

Starbucks is currently under the leadership of CEO, Howard Schultz, who has been in

charge of Starbucks as the CEO since 2008 and has taken them to new heights. Starbucks is

on the NYSE (New York Stock Exchange) Market and has a stock price of USD $57.76 under

the symbol “SBUX”. Starbucks has grown tremendously over the years and has become the

best selling coffeehouse in the world. Its success has depended a lot on its customer service

and high quality products. This has led them to having such a great brand name and

customers have stayed loyal to Starbucks, which has given them the competitive advantage

over their competitors solely because of the name itself.

A company that has grown so large and thrived on its success globally. Starbucks

continues to still expand internationally and franchise their coffeehouse in all continents of

the world. Their constant ability to make changes and create new products to keep customers

invested in their products has been their goal and strategy.

The following report will analyze Starbucks development strategies; internal and

external environment to get a clearer picture of how well Starbucks is really performing. In

addition, the report will give further strategy recommendations on how Starbucks can further

succeed in the coming years. A series of matrices will be completed and analyzed to show the

strengths, weakness, opportunities, threats and other varying internal and external

components and how well Starbucks is responding to these matters on a year over year basis.

In addition, the report will give the firm’s performance ratios from the years of 2013-2015 to

show the growths and trends that they had in the past 3 years.
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Existing Mission

Starbucks’ mission statement goes as it follows- “To inspire and nurture the human

spirit – one person, one cup and one neighborhood at a time (Starbucks Our Mission)”.

Objectives
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Starbucks has the mission to be one of the best and most recognized coffee houses in

the world. But their objectives are their plans that they feel are necessary to take in order to

achieve their goals and missions. Starbucks plans to grow their market into areas such as Asia

and Africa. Not only are they trying to build their brand image, but expansion is one of their

biggest missions in the coming years, as they want to dominate the coffee industry and

increase their market share rapidly.

Strategies

Starbucks today is highly recognized and respected. However, as stated in their

mission, they want to be the absolute best that makes them have a more respectable name

than what they already have. Starbucks has a significant advantage over its competitors and is

looking to implement strategies that involve their Market development strategy and product

development strategy. The strategy and plan to open up new markets in new places has been a

big goal of Starbucks for a long time.

Starbucks will incorporate their market development strategy, as they plan to open up

their markets internationally. They continue to look on to build their franchise into places like

China, Africa and Middle East. Such growth potential in new places can help them to really

have that international advantage over their competitors that they don’t have. Starbucks plans

to open up new stores in different countries and sell their existing products, which will

expand their market in terms of countries.

Moreover, Starbucks will look to incorporate a product development strategy.

Starbucks already has a wide variety of products and is known for it. They will continuously

create and innovate new products based on seasonal terms and long-term basis. The variety

will help them to increase sales, as customers will be invested in new and changing products.

A New Mission Statement

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Starbucks Corporation has their own mission statement, but to implement a change in

their mission statement would be ideal in terms of what their plans and strategies are for the

future. The statement would go as follows- “As a coffeehouse, we aim to satisfy the needs of

our customers by providing thirst-quenching drinks and maintaining relationships with them

through gaining social responsibility around the world.”

Analysis of Firm Structure

In analyzing the firm structure, it enables a person to better understand what

Starbucks position is in their industry and how they fare with its competitors. Starbucks has

been growing continuously ever since it was founded in 1971 and has had to implement

changes in their business strategies and plans. Starbucks uses the matrix structure, as it helps

to provide structure within the divisions and functions of the firms. Which in turn helps the

higher authority better understand the circular flow and positioning of the company.

Starbucks aim is to continuously improve their financial performance and branding image

with its customers, as customer service is a priority.

SWOT (TWOS) Analysis

In this matrix known as the SWOT Matrices, is a commonly used analysis and matrix

to compare a firm’s strengths, weaknesses, potential opportunities and strengths. In addition,

the SWOT analysis also matches the strengths and weaknesses with its opportunities and
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threats. The SWOT analysis allows firms to see what areas they can focus on to improve

internally and externally as there are various factors of threats that come with the

opportunities that can potentially affect the future of the firm or company.
According to Table 1, Starbucks has a ton of opportunities that also come with a lot of

risk and threats as shown in the SWOT analysis. It has some internal and external strengths

and weaknesses that affect the supply chain management and operating factors of the firms.

As shown in Table 1, Starbucks strengths are its high quality products, variety of products

and its customer services. These are three strengths that have made Starbucks so popular and

innovative as a coffee shop. Some of their weaknesses are its high prices and high cost for

expansion. In addition, some of the opportunities presented in the SWOT analysis are critical

for Starbucks to move in a direction of high revenue and market growth.

Table 1: Showing the SWOT analysis for Starbucks Corporation.

SWOT (TOWS) Analysis Strengths Weaknesses

1 High Quality Products 1 Uneven International
Growth
2 Variety of Products 2 High Cost for Expansion
3 Best-selling coffeehouse 3 Dependency of Suppliers
4 Effective global supply 4 High prices
chain
5 Great customer Service 5 Imitation of products
6 High number of stores 6 Lack of unique product
variety
7 Great ambience 7 High Operating Cost
Opportunities SO Strategies WO Strategies
1 Lunch items S1, O4, O6 W1, O2, O4, O7
2 Expansion in Asia, Middle
S2, O4, O6, O7
East, and Africa
3 Lounging area opening S3, O2, O5, O7 W4, O2, O7
4 Diversification of Product
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Mix S4, O2, O5, O7 W5, O6, O7

5 Partnerships with other Firms
S5, O7
6 Product Innovation
7 Potential for higher sales S6, O2, O4, O5, O6 W6, O4
S7, O3
Threats ST Strategies WT Strategies
1 Competition from Low-Cost S1, T6, T7 W2, T4
Coffee Sellers
2 Specific Market
S2, T5
3 Increased shipping costs W4, T7, T3, T1
4 Risks of Franchising
5 Imitation of products S3, T2, T5
6 Decrease in supply of coffee W5, T5, T2
beans
7 Price increase of Coffee
Beans W7, T1, T7

Five Forces Analysis

As outlined in Porter’s five forces model, there are five forces known as threats of

substitutes, bargaining power of suppliers, bargaining power of buyers, threats of new

entrants, and competitive rivalry in an industry (Kipley, Analyzing the External Environment

of the Firm). Starbucks Corporation faces these five forces within its industry.

Threats of Substitutes- High

Starbucks has competitors such as McCafe, Peet’s Coffee, Dunkin Donuts and Coffee

Bean Tea & Leaf. These competitors sell alternative products to what Starbucks sells at a

cheaper price, and customers who want to save money may start buying the alternative

product for Starbucks, as they would save money. The threat of the lower cost product is what

could potentially hurt Starbucks, as their products are priced much higher than their listed

competitors.

Bargaining power of suppliers- Low

Starbucks can always rely on various coffee bean suppliers. The suppliers for the

ingredients to make a cup of coffee doesn’t require for them to stick to one supplier, as they

pick whomever they want.

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Bargaining power of buyers- moderate

Coffee seems to be a daily necessity for most people, and there are a lot of customers

who love going to their favorite coffeehouse to purchase their daily cup of coffee. Although

Starbucks has competition where they sell lower cost products, its brand name and customer

loyalty doesn’t come into much question as customers have continuously purchased

Starbucks coffee over the years, as the company only continuously grows in revenues and

sales.

Threats of New Entrants- Low

Even though it may be fairly easy for new coffee houses to enter the coffee industry, it

may take a long time for them to build the reputation that Starbucks has. Starbucks is an

advocate for the coffee industry, and it is going to take a lot of money for the new entrants to

really try and beat Starbucks in today’s world. Starbucks does not have much to worry about

when it comes to any new levels of competition.

Competitive rivalry with industry- Moderate

Although the coffee industry is fairly competitive, it isn’t too much of a force against

a company like Starbucks. There it faces a moderate level of competitive rivalry within the

industry. Since Starbucks is far ahead in the competition as of today, they don’t have too

many stresses in the short-run as no one is going to overtake their market share or market

growth in the near future at the rate that Starbucks has been continuously improving over

time.

Confrontation Matrix

The confrontation matrix is important for the firm’s analysis, as it is more in-depth

analysis going forward from the SWOT analysis. It allows managers to get a better picture of

the firm’s approach to their business strategies and to analyze whether they are facing any
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strategy issues. According to Table 2, it shows that Starbucks has a few strengths that

outperform the rest. The main three strengths are identified as their high quality products,

strong customer service and the fact that the firm is the best selling coffee house in its

industry. These are clear indicators that show that firm has a high growth rate and revenue

growth over the years and that it’s a part of their strategic mission and objectives. Starbucks

confrontation mix is a great indicator of how well their company is performing and heading

towards its goals and missions.

Table 2: Showing the Confrontation Matrix for Starbucks Corporation

Confrontatio
n Opportunities Threats
Matrix O1 O2 O3 O4 O5 O6 O7 T1 T2 T3 T4 T5 T6 T7
S1 3 3 3 2 3
S2 2 2 2 2 2
Strengths

S3 1 1 3 3 1 1
S4 3 3 1 1 3
S5 3
S6 2 1 2 1
S7
W1 1 3 3
W2 2 2 2
Weaknesses

W3 3
W4 1 2 1
W5 1 1
W6
W7 2 1 2 3
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Impact/Probability Matrix

As mentioned in the five forces analysis and SWOT matrices analysis, it shows that

Starbucks does not have to many potential risks to face as an industry leader. It is mainly used

to analyze the potential probability of occurrence and the various levels of impacts that the

threats and opportunities will have on the firm. According to Figure 1, the firm has divided

the impacts of risk into three segments known as- low, medium and high. In the medium

level-risk category, there are potential threats of the increase in price and decrease in supply

of coffee beans, increased shipping costs and the issue that Starbucks is in too specific of a

market niche. Three biggest risks that are placed in the high-level of risk and probability of

occurrence are: the potential competitive threat from low-cost competitors, risks of

franchising and the imitation of Starbuck’s products. Having analyzed and determined these

risks, it helps Starbucks as a Corporation can prevent and minimize the potential threats that

could hurt them as a firm.

Figure 1: Showing the Impact/ Probability Matrix for Starbucks Corporation

Positioning Map
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The Positioning Map, which is also known as Strategic Group Mapping, is a

“graphical representation of where your business and your competition fit into the

marketplace (Kipley, Analyzing the External Environment of the Firm)”. The position map is

essential for the firm to understand where it’s company lands in terms of the relationship

between two factors- price and quality. The size of company’s bubble represents the market

share that they have in the industry. According to Figure 2, it shows us that Starbucks is the

clear industry leader in comparison to its competitors within the industry. In terms of quality,

Starbucks is exceeding their competitors by a large margin and it clearly shows that there is a

big difference in the quality and success of the Starbucks brand. Also, according to Figure 2,

Starbucks shows that are operating at a higher price in comparison to its competitors and their

quality of products are much higher, which in turn helps them to take most of the market

share. The competitors who are in the lower-price range do have the opportunity to steal

some of the market share that Starbucks holds because of the low-prices.

Figure 2: Showing the Positioning Map for Starbucks Corporation.

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EFE Matrix
The EFE (External Factor Evaluation) Matrix is a matrix evaluates the potential for

the firm’s ability to respond to the external factors that exists in our environment that could

potentially impact Starbucks. The EFE Matrix takes the Opportunities and Threats, which are

known as the external environmental factors that affect the company. The opportunities and

threats are taken from what was analyzed in the SWOT analysis initially. According to table

3, the weighted score of 2.93 indicates that the company is responding at a decent rate to its

external factors.

Table 3: Showing the EFE Matrix for Starbucks Corporation

External Factor Evaluation (EFE) Matrix
Key External Factors Weight Rating Weight Score
Opportunities
Lunch items 0.06 3 0.18
Expansion in Asia, Middle East, and Africa 0.14 4 0.56
Lounging area opening 0.06 4 0.24
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Diversification of Product Mix 0.08 4 0.32

Partnerships with other Firms 0.04 1 0.04
Product Innovation 0.11 2 0.22
Potential for higher sales 0.12 4 0.48
Threats
Competition from Low-Cost Coffee Sellers 0.07 3 0.21
Specific Market 0.04 2 0.08
Increased shipping costs 0.02 2 0.04
Risks of Franchising 0.07 2 0.14
Imitation of products 0.04 3 0.12
Decrease in supply of coffee beans 0.05 2 0.1
Price increase of Coffee Beans 0.1 2 0.2
TOTAL 1.00 2.93

IFE Matrix

The Internal Factors Evaluation Matrix (IFE Matrix) is used to “identify and

evaluate the major strengths and weaknesses and assess their relationship in the

functional areas of business (Kipley, Analyzing the Internal Environment of the Firm)”.

This is a little different from the EFE Matrix, as it analyzes the internal factors as

opposed to the external factors.

According to Table 4, it shows that weighted scores of all the internal factors

come up to a total of 2.87 in terms of its response to its internal factors of the

corporation. The main strengths and weaknesses are the ones that play the key role in

terms of the firm’s strategic position.

Table 4: Showing the IFE Matrix for Starbucks Corporation.

Internal Factor Evaluation (IFE) Matrix
Key Internal Factors Weight Rating Weight Score
Strengths
High Quality Products 0.14 3 0.42
Variety of Products 0.11 4 0.44
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Best-selling coffeehouse 0.13 4 0.52

Effective global supply chain 0.10 4 0.4
Great customer Service 0.08 1 0.08
High number of stores 0.10 2 0.2
Great ambience 0.02 4 0.08
Weaknesses
Uneven International Growth 0.07 3 0.21
High Cost for Expansion 0.04 2 0.08
Dependency of Suppliers 0.02 2 0.04
High prices 0.09 2 0.18
Imitation of products 0.02 3 0.06
Lack of unique product variety 0.03 2 0.06
High Operating Cost 0.05 2 0.1
TOTAL 1.00 2.87

IE Matrix

The IE (Internal-External) Matrix is a matrices that uses the weighted scores from the

IFE and EFE matrices to plot a point in the IE Matrix to show the firm’s strategic position.

There are 9 cells in the grid and they each represent a specific strategic position of the firm at

the current state depending on the Internal-External factors responsiveness. Based on the

position of the firm, the firm implements strategies going forward and the IE Matrix allows

them to see which strategies they fall under: grow and build (cells 1, 2, 4), hold and maintain

(cells 3, 5, 7), and harvest or divest (cells 6, 8, 9).

According to Figure 3, Starbucks falls in cell number 5 with the weighted scores of

2.93 (EFE) and 2.87 (IFE). This means that they are in the hold and maintain strategy for the

next periods; however, they are very close to the grow and build strategy which clearly shows

that Starbucks is moving in the right direction in terms of their Market Development Strategy

which enables them to expand easily as a big corporation.

Figure 3: Showing the IE Matrix for Starbucks Corporation.

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SFAS Matrix

According to Table, the adjusted weighted score is a 3.05. This matrix is known as

the SFAS (Strategic Factor Analysis Summary) matrix, which enables firms to see their

strategic position when it comes solely down to the most important factors from the IFE and

EFE Matrix. These factors are seen as the ones that have the most impact on the company’s

growth. Also, the strategic factors are viewed as either long-term, short-term or intermediate-

term goals of the company.

Table 5: Showing the SFAS Matrix for Starbucks Corporation.

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Competitive Profile Matrix

The Competitive Profile Matrix (CPM Matrix) is “used to design an offense or

defensive strategy by identifying the major strengths and weaknesses of the firm in

relationship to its major industry competitors” (Kipley, Analyzing the External

Environment of the Firm). The main idea of this matrix is to compare the strengths and

weaknesses of Starbucks to its main competitors and to get a better evaluation on what

part of their strategic operations they would need to improve. The CPM compares

Starbucks Corporation to its competitors based on several critical success factors. The

critical success factors are: brand image and loyalty, product quality, customer

satisfaction, market share, price, financial position, global expansion, innovation,

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customer service, and customer loyalty in the coffee industry. Based on these several

critical factors, Starbucks can analyze to see whether they are operating effectively in

these factors.

According to Table 6, Starbucks is clearly way ahead of its two competitors, Peet’s

Coffee and McCafe. Starbucks has a total weighted score of 3.24, while Peet’s Coffee has a

score of 2.77 and McCafe has a total of 2.46. In short, one can conclude that Starbucks is

an industry leader by a significant margin based on these success critical factors.

Table 6: Showing the Competitive Profile Matrix for Starbucks Corporation.

Starbucks Peet’s Coffee McDonald´s

Corporation (McCafe)
Critical Success Factors Weight Ratin Weighted Rating Weighted Rating Weighted
g Score Score Score
Customer Satisfaction 0.14 4 0.56 4 0.56 2 0.28
Product Quality 0.14 4 0.56 2 0.28 2 0.28
Brand Name 0.07 4 0.28 3 0.21 2 0.14
Market Share 0.09 4 0.36 3 0.27 2 0.18
Price Competitive 0.12 1 0.12 3 0.36 4 0.48
Financial Position 0.09 2 0.12 3 0.18 3 0.18
Global Expansion 0.07 4 0.28 1 0.07 4 0.28
Innovation 0.08 2 0.16 2 0.16 3 0.24
Customer Service 0.12 4 0.48 3 0.36 2 0.24
Customer Loyalty 0.08 4 0.32 4 0.32 2 0.16
TOTAL 1.00 3.24 2.77 2.46

BCG Matrix

The BCG Matrix, also known as Boston Consulting Group Matrix, which is based

on the company’s relative market share and market growth rate. Within the matrix, there are

four quadrants that are numbered off 1-4. Managers and analysts can see whether their

company’s products and operations are effective and performing well based on their success

rate of the BCG model. In Quadrant 3, it shows where a company would have both high
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relative market share and market growth rate and these companies are known as “Stars.” In

Quadrant 2, these companies that lie here are known as “Question Marks” and these

companies have high market growth but low market share. In Quadrant 1, Companies have

high market share and low growth rate and are known as “Cash Cows”. Finally in Quadrant

4, these firms that lie here have low market share and growth rate and are known as “Dogs.”

According to Table 7. Starbucks has a high Market Share of 42.4% with a 0.74

relative market share. It’s industry growth rate is 16.35% and is doing far better than its

competitors and has a significant advantage over them as an industry leader. According to

Figure 4, Starbucks Corporation is a company that is known as a “Star” due to their high

market growth rate and relative market share. Some of the strategies that “Stars” use to

develop and grow as a firm is: Backward/forward integration, market penetration, market

development and product development. These strategies can be used to full effect to help

Starbucks expand the firm globally and to continuously grow in their product mix to increase

their advantage over their competitors in the industry.

Table 7: Showing the BCG Matrix for Starbucks Corporation.

Company Market Share Relative Market Share Industry Growth Rate

Starbucks Corporation 42.4% 0.74 16.35%

Dunkin Donuts 25.5% 0.34 6.5%

Other´s 32.1% 0.47 11%

Figure 4: Showing the BCG Matrix for Starbucks Corporation.

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GE/McKinsey Matrix

The GE/McKinsey Matrix was founded by the McKinsey Consulting Group and it

“maps various SBU´s on a grid to show their performance relationship to the industry

with three improvements over the BCG Matrix” (Kipley, Corporate Strategy).The

matrices uses two factors to show the relationship between a firm’s industry

attractiveness and business unit strength. Within the two factors, there are several

components of the two factors that are analyzed for the firm’s weighted score to get an

understanding of where the firm would lie on the GE/McKinsey Matrix based on the two

main factors.

According to Table 8, the weighted score for industry attractiveness is 3.8 and

business unit strength is 3.45. According to figure 5, analysts concluded that Starbucks

Corporation is a company that should be heavily invested in, as the blue star is placed in

the top right quadrant of the GE/McKinsey Matrix, which indicates that the firm has

strong industry attractiveness and high business unit strength. So in turn, Starbucks

should invest in more investments and try to attain some of their goals in order to really
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grow even more as an industry leader to exponentially grow their brand name and

growth rate of the company if they want to continue succeeding in the way that they

have as the best selling coffeehouse in the coffee industry.

Table 8: Showing the GE/ McKinsey Matrix for Starbucks Corporation

Figure 5: Showing the GE/ McKinsey Matrix for Starbucks Corporation

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Industry Life Cycle Analysis

The Industry Life Cycle (ILC) Analysis is “the most fundamental variable in

determining the appropriate business strategy for a firm” (Kipley, Business-Level

Strategy)”. In order to determine the position of the cycle that companies like Starbucks

is in, and ILC analysis is critical. There are five stages known as in this sequence:

Emergence, Accelerating growth, decelerating growth, maturity and decline. These five

stages all mean that the firm would be operating differently with different strategies.

According to Figure 6, Starbucks Corporation is in the mature stage. This means

that they are still doing extremely well as this stage means that it has rapid growth to

significantly slower growth. This shows that Starbucks is a company that is currently

just about at its peak or slowly on its way to declining if some strategies aren’t changed

within the next 5-10 years. Therefore, Starbucks has to increase sales with the ideas of

product innovation and franchising internationally. This would help foreign countries to

experience the products and service that is so well known and succeeding in most

countries globally.
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Figure 6: Showing the Industry Life Cycle (ILC) Analysis

SPACE Matrix

The Strategic Position and Action Evaluation Matrix (SPACE Matrix), which

based on a four- quadrant framework with axes of internal and external dimension, is

“used to determine the type of strategy a company should undertake” (Kipley, Corporate

Strategy). But firstly, a table is created just Table 9 to show the internal and external

strategic position, which will create an x-axis value and on the y-axis, the two factors are

Financial Strength and Environmental stability.

According to Table 9, the total x-axis score is 1.71 and the total y-axis score is

1.36. As shown in figure 7, Starbucks Corporation is at an aggressive position in terms of

their strategy based on the position on the Space matrix analysis, as it’s the positive x

and y axis value quadrant. Moreover, Starbucks incorporates an aggressive strategy with

its market development, market penetration, product development, and diversification.

Table 9: Showing the SPACE Matrix for Starbucks Corporation.

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Figure 7: Showing the SPACE Matrix for Starbucks Corporation

Grand Strategies Matrix

The Grand Strategies Matrix is a matrix that presents a company’s strategic position

in conjunction to the BCG matrix, GE/McKinsey Matrix, SWOT Matrix, SPACE Matrix and

IE Matrix. The Matrix includes components of market growth and competition of the
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industry. As shown in figure 8, there are four quadrants that show whether the company is in

a market with rapid/slow market growth and strong/weak competition. Based on the analysis

from the conjunction of the five matrices, Starbucks is said to be in Quadrant 1, which means

that the industry that it is in has rapid market growth and strong competition. The Grand

Strategies matrix is a direct correlation of the results presented in the matrices presented

earlier and the market and product development strategies, as well as their integration, related

diversification and market penetration methods has helped them to become such a successful

company over the years.

Figure 8: Showing Grand Strategies Matrix (Kipley, Corporate Strategy)

QSPM Matrix

The QSPM (Quantitative Strategic Planning Matrix) Matrix is considered to be a

high-level and method of analysis. It is a long method that compares alternative

strategies to see which strategy is best suited for the firm in achieving its short, medium
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and long-term goals. The QSPM is defined as, “a strategic management approach for

objectively evaluating possible strategies based on previously identified external and

internal critical success factors” (Kipley and Jewe 116).

The QSPM matrix involves a complex process that begins with using and

implementing the weights that were used in the EFE and IFE matrices for the strengths,

weaknesses, opportunities and threats. The QSPM matrix is analyzed from a market and

product development standpoint, so it will have a total attractiveness score for each

once the weighted score is multiplied by the rating.

According to Table 10, Starbucks’ market development sector received a high

score of 4.56 and the product development sector received a score of 4.81. The

difference is so minor, as the product development has a slight advantage of 0.25 and

Starbucks should focus more on its market development strategy. This will enable

Starbucks to be more efficient and grow in the market and gain higher amounts of

market share. Implementing both strategies is obviously ideal and that would help

Starbucks further to gain its successful advantage over its competitors and continuously

build on a larger reputation.

Table 10: Showing the Quantitative Strategic Planning Matrix for Starbucks Corporation.
Quantitative Strategic Planning Matrix Market Product
Development Development
Key Factors Weight AS TAS AS TAS
Opportunities
1 Lunch items 0.06 2 0.12 2 0.12
2 Expansion in Asia, Middle East, and 0.14 4 0.56 4 0.56
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Africa
3 Lounging area opening 0.06 2 0.12 1 0.06
4 Diversification of Product Mix 0.08 4 0.32 3 0.24
5 Partnerships with other Firms 0.04 3 0.12 3 0.12
6 Product Innovation 0.11 2 0.22 3 0.33
7 Potential for higher sales 0.12 3 0.36 4 0.48
Threats
1 Competition from Low-Cost Coffee 0.07 2 0.14 2 0.14
Sellers
2 Specific Market 0.04 3 0.12 2 0.08
3 Increased shipping costs 0.02 3 0.06 1 0.02

4 Risks of Franchising 0.07 2 0.14 2 0.14

5 Imitation of products 0.04 2 0.08 2 0.08
6 Decrease in supply of coffee beans 0.05 1 0.05 1 0.05
7 Price increase of Coffee Beans 0.1 1 0.1 1 0.1
1.00
Strengths
1 High Quality Products 0.14 4 0.56 4 0.56
2 Variety of Products 0.11 3 0.33 4 0.44
3 Best-selling coffeehouse 0.13 4 0.52 3 0.39
4 Effective global supply chain 0.10 3 0.30 1 0.10
5 Great customer Service 0.08 3 0.24 3 0.24
6 High number of stores 0.10 3 0.30 1 0.1
7 Great ambience 0.02 3 0.06 1 0.02
Weaknesses
1 Uneven International Growth 0.07 2 0.14 1 0.07
2 High Cost for Expansion 0.04 1 0.04 2 0.08
3 Dependency of Suppliers 0.02 2 0.04 3 0.06
4 High prices 0.09 1 0.09 1 0.09
5 Imitation of products 0.02 2 0.04 3 0.06
6 Lack of unique product variety 0.03 1 0.03 1 0.03
7 High Operating Cost 0.05 1 0.05 1 0.05
TOTAL 1.00 4.56 4.81

OSPP Matrix

The OSPP (Optimal Strategic Performance Positioning) Matrix is a computer based

program matrix system that helps to determine the firm’s position on various factors such as

strategic posture, strategic investment, future competitive position, and future industry

prospects. The OSPP application will calculate the variable and position the firm’s
 Kingsley 28

performance position. A firm like Starbucks would definitely benefit from such an analysis,

as they get a clearer picture of how they can take on various strategies that they could

improve to help improve their performance even further.

According to Figure 9, Starbucks has an environment turbulence level of 3.28 and

innovation aggressiveness of 3.09 and marketing aggressiveness of 4.10. This comes to show

aggressive in their development and sales strategies. As shown in the analysis, all of the

general management capabilities are said to be operating very aggressively. However, one can

conclude despite Starbucks operating so aggressively they have managed to build such a

great reputation that works effectively and has helped them to build such a great franchise

and produce large amounts of revenue year over year. The OSPP matrix is a very calculative

analysis that requires time to complete as a lot of questions and scores are calculated together

to get the score that were shown in figure 9. An alteration of a score can change any of the

values shown in figure 9 because the scores were all derived from the inputted results.

As shown in figure 9, Starbucks will be in zone 1 of figure 10. This means that

Starbucks performance is ideal and successful in terms of its strategies and results.

Figure 9: Showing the Optimal Strategic Performance Positioning Matrix for Starbucks
Corporation
 Kingsley 29

Figure 10: Showing the general Map for the Performance Position (Application OSPP)

Recommended Specific Strategies, Long-Term Objectives, and Alternative Strategies

 Kingsley 30

This report had used the business matrix strategy that Starbucks Corporation

itself uses to channel their information through divisions on their operations and

strategy. Recommendations for Starbucks will be provided in the following paragraphs.

The OSPP matrix was ideal in finalizing and determining that Starbucks

Corporation should aggressive, and growing strategies. The SPACE matrix was essential

to showing how aggressive Starbucks is an organization in their approach to market

development, product development, market penetration and diversification. The BCG

matrix clearly showed Starbucks position in its industry market and it clearly presented

its large market share in the coffee industry. It also showed that Starbucks has a

significant advantage in terms of market growth and relative market share. Lastly, the

Grand Strategies matrices was great in showing that Starbucks is effective in various

components and that it should apply the pressure to continuously increase its market

share, revenues and market growth as a leading coffee house in the industry.
My own recommendation would be to continue to use the market development and

product development strategy. By developing these two strategies, Starbucks can

exponentially grow their organization into something special and increase their revenues and

market share. With the market development strategy, Starbucks can increase their popularity

to the rest of the world and will help them to achieve the goal of expansion and franchising.

Franchising has the potential for a firm to increase their sales and revenues in large amounts

if they are able to execute the plan correctly. Moreover, product development will be a

strategy that I believe would be worth more focusing on because if Starbucks wants to retain

their customers, having innovative and a diverse mix of products is only going to interest

more and more new customers into their stores.

In short, this report clearly shows that Starbucks internal and external environment

can clearly help them going into the future. It has a lot of potential to succeed in its industry

and can potentially dominate the coffee industry even more. There market share and revenue
 Kingsley 31

has been growing over the years and is another of their plans and strategies to increase

consistently. Also, Starbucks goal of being the respectable brand that it is, is only looking

bright in terms of its future as customers have stayed loyal and with the new strategies that

they implementing they will only win more customers with their approach.

Current Firm Ratios

Table 11: Showing the Current Firm Ratios for Starbucks Corporation
Starbucks Corporation
Current Ratios
2015 2014 2013
 Kingsley 32

GPM (Gross Profit Margin) 59.36% 58.30% 57.14%

NPM (Net Profit Margin) 14.39% 12.57% 0.06%
ROE (Return on Equity) 97.87% 79.23% 0.43%
ROA (Return on Assets) 72.63% 59.23% 0.31%
ROI (Return on Investment) 31.38% 26.81% 0.14%
ROCI (Return on invested Capital) 42.32% 50.27% 0.40%
EPS (Earnings per Share) (in US Dollar) 1.85 1.35 0.01
EBITA (in thousands of US Dollar) 4,907,300 3,972,200 453,800
Current Ratio 1.19 1.37 1.02
Quick Ratio 0.64 0.81 0.71
Debt/Equity Ratio 1.14 1.04 1.57

Pro-Formal Financial Statements

Table 12: Showing the Pro-Formal Financial Statements for Starbucks Corporation
Starbucks Corporation
Pro-Formal Financial Statements Actual in Millions of US Dollar
Fiscas 2015 2014 2013
Total Revenue 19,163 16,448 14,867
Cost of Revenue Total 13,199 11,497 10,668
Depreciation/ Amortization 894 710 621
Total Operating Expenses 15,232 13,367 15,069
Operating Income 3,931 3,081 -202
Net Income Before Taxes 3,903 3,160 -230
Net Income After Taxes 2,759 2,068 8.80
DPS - Common Stock Primary Issue 0.68 0.55 0.45
Gross Dividend 1,016 827 669

References

Kipley, D. (2015). Chapter 1: An Introduction to Strategy. Power Point Presentation,

Azusa Pacific University

Kipley, D. (2015). Chapter 2: Analyzing the External Environment of the Firm. Power
Point Presentation, Azusa Pacific University
 Kingsley 33

Kipley, D. (2015). Chapter 4: Functional Strategies. Power Point Presentation, Azusa

Pacific University
Kipley, D. (2015). Chapter 6: Corporate Strategy. Power Point Presentation, Azusa Pacific

University
Kipley, D. (2015). Chapter 7: International Strategy. Power Point Presentation, Azusa
Pacific University
Kipley, D & Jewe, R. (2014) Effective Strategic Management – From Analysis to

implementation. 1st. Cognella Academic Publishing, 2014. Print

“Our Mission”. Starbucks About Us. Starbucks, n.d. Web 20 April 2016. Retrieved from

http://www.starbucks.com/about-us/company-information/mission-statement