Starbucks CoffeeEssay Preview: Starbucks CoffeeReport this essayStrategic Problem: How can Starbucks Coffee Corporation continue to provide exceptional employee benefits package whilepursuing a globalization strategy?Analysis of the Problem:Company Background and History:Founders.Starbucks began in 1971 when three scholars-English teacher Jerry Baldwin-history teacher Zev Siegel, and writer Gordon Bowker- opened a store called Starbucks Coffee, Tea and Spice in the touristy Pikes Place Market in Seattle.
The inspiration and mentor for the Starbucks venture in Seattle was a Dutch immigrant named Alfred Peet, who had opened Peets Coffee and Tea, in Berkeley, California, in 1966.
Starbucks Coffee at this time stood for making top-quality, fresh-roasted, whole-bean coffee which was its differentiating feature.The company was created to build clientele in Seattle that would appreciate the best coffees and teas.Baldwin and Bowker key mission for their business was to maximize the quality of the coffee. The company purchased the finest Arabica coffees and put them through a meticulous dark-roasting process to bring out their full flavors.
In 2000, Howard Schultz transitions from chairman and CEO chief global strategist; Orrin Smith is promoted to president and CEO.Starbucks and Howard Schultz.In September 1992, Howard Schultz was hired at Starbucks.Schultzs 1983 trip showed him that there was much more to the coffee business than just providing quality beans. On his trip to Milan, Italy he had a revelation which made him see going to Starbucks should be an experience, a special treat, a place to meet friends and visit.
Howard Schultz presented his great idea to expand Starbucks to a retail business. They feared that providing drinks would hurt them because it could hurt the integrity of Starbucks mission as a purveyor of fine coffees.
In April 1984 , Starbucks opened its sixth store which was the first of the companys stores designed to sell beverages, and it was the first one located in downtown Seattle. The sixth store did well with the espresso bars but Baldwin felt that they were coffee roasters and their debt was too high to divest into the restaurant business.
Schultz left Starbucks left in 1985 to start his own company.In March 1987, Howard Schultz, president and CEO, took Il Giornale Coffee Company to form Starbucks Corporation.Overview of Retail Industry1. Financial Situation and Performance.Starbucks goal is to become the leading retailer and brand of coffee in each of its target markets by selling the finest coffee and related products, and by providing superior customer service.
Company-operated retail stores accounted for approximately 85% of net revenues during fiscal 2003.Specialty Operations accounted for approximately 15% of net revenues in fiscal 2003.Starbucks went public on June 26, 1992 at $17 per share, or a split adjusted price of $1.0625 for the companys four subsequent 2-for-1 stock splits (wwww.starbuckscoffee.com).
Comparing Starbucks financial ratios to that of the Industry can give us a generalperspective of Starbucks financial strength. This could also give some indication of stock price performance. Most of Starbucks ratios are in line with the industry average, but there are a few that could explain the poor stock performance recently experienced. Starbucks price to earnings ratio is well above the industry average, but this could be due to its relative high growth it has experienced. Return on equity is well below the average for the industry, and this could be an area of concern. This suggests that the investment made by shareholders in the firm has not produced a decent return when compared to the industry average. Starbucks gross margin is also below the average for the industry, suggesting that it is not able to cover its operating expenses as well as other firms in the industry.
We found that nearly half of the total Starbucks shareholder funds in the company, if they are invested in a company, are tied to an index fund, which also provides a wealth of resources that can be valuable to an investor. We also found that more than half of the total Starbucks shareholder funds have long-term investments on their balance sheets that are in the range of $5 billion. For our analysis, we use an index fund that is not tracked by the financial company itself, so we are looking at a similar number of investments.
What do we mean by ‘intolerable’ equity?
For the purpose of our study, we mean that shareholder-based fund managers must manage stocks and investments while providing high quality investment advice. To this end, such employees are placed in positions of responsibility, such as managers, accountants and other senior executives of corporations and financial institutions that we define as ‘stable’ or ‘overweight’. Additionally, many of our employees can find themselves within ‘severely underregulated markets’ where the current regulation is not enforced.
The company’s employees are also under no obligation to maintain effective stock prices. Many of our staff hold on to their funds for retirement, so we do not require staff to hold the stock or to fund dividends on them, as the company maintains the equivalent of a $1,000 per share share profit margin.
Since our company has the strongest record on shareholder value, we also recommend that our employees keep as much of their funds as they need to continue to make positive contributions, which can include purchasing the company’s common stock as collateral and other assets.
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We found that nearly half of the total Starbucks shareholder funds in the company, if they are invested in a company, are tied to an index fund, which also provides a wealth of resources that can be valuable to an investor. We also found that more than half of the total Starbucks shareholder funds have long-term investments on their balance sheets that are in the range of $5 billion. For our analysis, we use an index fund that is not tracked by the financial company itself, so we are looking at a similar number of investments. What do we mean by ‘intolerable’ equity? For the purpose of our study, we mean that shareholder-based fund managers must manage stocks and investments while providing high quality investment advice. To this end, such employees are placed in positions of responsibility, such as managers, accountants and other senior executives of corporations and financial institutions that we define as ‘stable’ or ‘overweight’. Additionally, many of our employees can find themselves within ‘severely underregulated markets’ where the current regulation is not enforced. The company’s employees are also under no obligation to maintain effective stock prices. Many of our staff hold on to their funds for retirement, so we do not require staff to hold the stock or to fund dividends on them, as the company maintains the equivalent of a $1,000 per share share profit margin. Since our company has the strongest record on shareholder value, we also recommend that our employees keep as much of their funds as they need to continue to make positive contributions, which can include purchasing the company’s common stock as collateral and other assets. | |||
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