Organizational Design and Change at Starbucks Courtney Owens, Alyssa Shirley, Jen Smith, Jessica Wagner

B U S 4 1 8 , N i g e l D a v e y

Fall

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Table of Contents Introduction.................................................................................................................................................3 Internal and External Environment...................................................................................................3 Goals and Strategies .................................................................................................................................6 Organizational Design..............................................................................................................................9 Effectiveness..............................................................................................................................................11 Conclusion/Recommendations.........................................................................................................13 References...................................................................................................................................................14 Appendices.................................................................................................................................................17

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Introduction The Starbucks story begins 41 years ago in Pike Place Market, Seattle. Ten partners (employees) worked for the startup and Starbucks sold only coffee beans and tea. Today there are over 17,500 stores in 60 different countries, with 200,000+ partners. Although Starbucks is world renowned for its coffee, the company has expanded its offerings to a variety of drinks, food products, and beverage-­‐related accessories and equipment. The company reports a strong 14% increase in total net revenues for the fiscal year of 2012 for a record of $13.3 billion. (Q4 FY12 Earnings Release; Canto).

Culture and the customer experience has been key to Starbucks success, and it is very well positioned to continue to be a global leader. The journey certainly has not been without struggles, but Starbucks innovative approach to change revolving around customer experiences has fueled the company’s notable success. CEO Howard Schultz attributes the firm’s strong performance to “our unique business model, which continues to leverage our emotional connection to consumers, our global retail footprint, our diversified consumer packed goods channel (CPG) channel distribution capabilities and ongoing innovation across all areas (FY11 Annual Report). This study intends to examine Starbucks and outline how its organizational design, goals, and strategies have allowed it to properly respond to the internal and external environment in order to perform effectively as an organization.

Internal and External Environment

External Environment

Starbucks is the dominating force in the Specialty Eateries industry (NAICS 722515). Coffee shops account for 40 percent of the industry revenue. Donut shops claim 20 percent of sales, followed by ice cream and other frozen treat locations with 15 percent of the industry. The remaining portion of the industry includes shops for special snacks such as pretzels, smoothies, and popcorn. Starbucks is a clear leader in the industry with a market cap of $34.9 billion (Yahoo Finance). Starbucks must respond to a rapidly changing external environment to keep an advantage over competitors. Four aspects of the external environment Starbucks operates within have been identified and analyzed.

Political/Legal With stores located around the world, companies in this industry are required to adhere to government regulations and changing political environments in dozens of countries. The decisions of foreign governments may affect the vitality of a company’s presence and ability to turn a profit abroad. Coffee companies need to successfully navigate tariffs and customs when importing coffee to the United States. Much of the world’s coffee is grown in Africa (Brown, 2011). As with any company operating in the United States, businesses in this industry must file appropriate

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forms and pay appropriate taxes to the federal and state governments.

Economic Starbucks had its first ever decline in customers in 2008 when the U.S. economy turned. In 2009 profits decreased by 6% (Brown, 2011). Specialty foods and beverages became viewed as a commodity that can be cut back on by consumers. Americans still need their caffeine fix but are opting for low cost options. Players in this industry compete in a slowed economy by offering both low price menus choices, and higher priced specialty items.

Social/Cultural

Companies like Starbucks and Dunkin’ Donuts have a niche market of gourmet coffee consumers they are trying to reach both in the U.S. and abroad. Much of Starbucks’s success is attributed to its achievement of creating a new culture both in the atmosphere of its stores and variety of coffee beverages offered (Larson, 2008). The company continues to grow consumer loyalty by stimulating a “Starbucks culture” through happy hours, and special promotions like the highly anticipated Starbucks ‘Christmas cup’.

Consumer demand has evolved from a simple cup of drip coffee to an array of cappuccinos, lattes, Americanos and the like. Specialty eateries also offer an assortment of menu items to reach all segments in the market. Snacks and beverages are available in varying prices, flavors, and calorie levels. Starbucks and other companies in the industry have boosted their international presence to reach the vast majority of those around the globe who consume coffee and tea. Technological Advances in technology have allowed Starbucks to venture into different markets and create new products. The chain is well known for offering free Wi-­‐fi to customers in all 51,000 of its locations (Adkins). An app is available for mobile payment, simply requiring customers to enter their Starbucks number to use their smartphone for purchases and tracking reward points. The coffee giant has embraced and leveraged social media sites like Facebook and Twitter, often creating events to advertise deals on beverages.

Internal Environment

A SWOT analysis takes information from the external environment and identifies internal strengths and weaknesses, as well as external opportunities and threats for a company. This tool is helpful to determine the current state of a business, and what factors can be leveraged to benefit the company. As the industry leader, Starbucks must constantly be aware of both the internal and external environments it operates within. A SWOT matrix can be found in Appendix A.

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Strengths Each Starbucks store offers more than just a convenient cup of coffee, but is “…a community gathering place where people come together to connect and discover new things. We are always looking for innovative ways to surprise and delight our customers”, comments Schultz (“Financial release”). His words reflect the company culture of serving the customer with a high quality product and comfortable and consistent store atmosphere.

Schultz also emphasizes the importance of supporting Starbucks partners (baristas). The motivation and quality of baristas and other employees is perhaps the most important strength of the company and is the driving factor behind the success of Starbucks’s vision. Starbucks attracts the best employees by offering competitive wages and providing part-­‐time workers with healthcare benefits (Brown, 2011). In just 40 years, Starbucks has positioned itself as the most recognizable brand within the industry, and is quickly becoming an iconic brand around the world. Logos and other branding have added immense value to the Starbucks name. Unlike other companies in with stores located across the U.S. and globally, Starbucks does not use franchising, except in certain locations such as airports, which enables consistency and open communication among all storefronts (Schwartz, 2011).

Weaknesses Starbucks expanded rapidly through 2007, when 3.7 stores were opened daily, totaling of 1,342 new stores for the year. The result was self-­‐cannibalization where competition between new and existing stores led to underperformance of some locations (Trefis Team). In 2008-­‐2009 Starbucks underwent restructuring and 890 stores were closed in a move to increase the number of customers per store. Expansion slowed for several years due to economic recession in the U.S, but has since been on the rise.

While Starbucks is the largest and most recognizable company within its industry, it faces heavy competition and a declining market share. The company must be aware of competition among stores, as well as in coffee bean sales, coffee makers, and other new ventures. Tully’s, Caribou Coffee, and Dutch Bros. have continued to expand their businesses and retail locations. New entrants to the industry like McDonalds have begun to offer gourmet coffee on the go at lower prices. Starbucks has not responded to this competition in pricing, as its coffee has remained more expensive than all competitors.

Opportunities The most obvious opportunity for Starbucks is expanding internationally to emerging markets. Coffee and tea are consumed worldwide and the strong financial performance of Starbucks will allow it to take the risk of opening new stores abroad. Working internationally, Starbucks can continue to maintain good relationships with suppliers and create new distribution agreements. Starbucks is not limited to

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expansion into international markets, but may also capitalize on growing U.S. markets like health and wellness.

Starbucks also has the opportunity to continue extending its brand into new products, specifically utilizing technology advances. The company currently strives to use the latest technology for payment options within stores. The brand has been extended with a venture into the music industry, a Starbucks music label called Hear Music. Starbucks has had success in the launch of several new products like its line of instant coffee, Starbucks Via. Further extension of these projects and adding products into new industries will continue to grow the Starbucks brand.

Threats Starbucks faces growing and intensified competition as consumer taste for gourmet coffee products grows. Rivalry exists between Starbucks and existing coffee shops, local shops, coffee carts, and the multitude of substitutes for a cup of coffee. The growing saturation of coffee shops in the U.S. could also threaten the future growth of Starbucks and other companies in the industry.

While Starbucks tries to employ a “local coffee shop” atmosphere, the company can’t escape the fact that it is a Fortune 500 company, which may deter some customers. Along with negative connotations of being a corporate company, Starbucks has often received damaging publicity revolving around the wages and treatment of coffee farmers. The firm has taken steps to make its products ethically sources, but is still a long way off from offering all Fair Trade items.

Goals and Strategies Mission & Vision The first critical component to discuss in this section is strategic intent, which encompasses a defined mission, official goals, operational goals, and competitive strategies. It is essential that an organization use strategic intent and its components to give it and its employees direction, focus, legitimacy, motivation, standards of performance, and decision guidelines. Starbucks mission statement is to “inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” (“Our Starbucks mission”). An expanded mission statement addressed the needs of each of the six stakeholder groups is available in Appendix B, and will be discussed further in another section.

Vision is another important aspect of developing specific goals and strategies. Starbucks vision can be traced back to its inception in 1971. Since then, Starbucks has strived to do two things with every single workday: to “share great coffee with our friends and help make the world a little better.” Schultz envisions Starbucks as “a place for conversation and a sense of community” and has set out to make Starbucks a “different kind of company…that [brings] a feeling of connection” ("Our heritage").

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One functional purpose of official goals and mission statements is that they describe the value system of the organization. Melanie Canto of Starbucks comments: “values and fundamentals drive strategy,” and that “people value the company doing what it says it will do.” Thus, by identifying what is important to the company and where it would like to be, a strategy for how to achieve this can then be developed. An example of Starbucks mission statement and values in action is seen in how Starbucks reacts to tough economic times. Canto described how when the economy takes a downturn, Starbucks gives even more effort to support the community. The company will engage in projects that benefit the community, and will hold wages and the prices its pays for materials above that of the average regardless of conditions. The discovery has been that when Starbucks gives back to communities when they struggle, then people will be more likely to return the favor with their purchases. Operative Goals An important part of successfully implementing strategy is developing goals that are specific, measurable, attainable, realistic, and timely. Setting these goals will give the organization a measure by which to evaluate its success. However, in order to truly excel and be a top competitor, an organization must set “stretch” goals – goals that present a challenge and will discourage the company from becoming stagnant. One general, overreaching goal that Starbucks has set is to “balance profitability with a social conscience” (FY11 Annual Report). There are a variety of operative goals that Starbucks has delineated that help it to achieve this.

One of Starbucks goals is to become a bigger player in the Health and Wellness sector, which represents a $50 billion market. The company’s first move towards achieving this was the acquisition of Evolution Fresh, Inc., a super-­‐premium juice company. Starbucks has also introduced the Bistro Box platform in response to consumer’s desires for “more choices with wholesome ingredients.” These menu options include items such as cheese and fruit, chicken and hummus, and tuna salad and fresh veggies. The response to both of these endeavors has been strong. Schultz comments that “effective innovation is about responding to, predicting and creating customers’ needs while staying true to our core values,” a statement that certainly rings true in respect to the company’s moves into the Health and Wellness sector (FY11 Annual Report). Another goal Starbucks is working to achieve is that of further global expansion. The 2011 Annual Report expresses its intent to enter into India and develop China as a second home market. It also aimed to open 800 new stores globally for the year 2012. Reflecting on Year 2011’s results, Starbucks U.S. Retail segment exceeded all operating and performance metrics and saw continued acceleration of growth outside of North America. The company attributes this success to “disciplined execution enabling us to leverage that growth into higher profits” (FY11 Annual Report).

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Setting excellent goals is only tells part of the story however; it is crucial that progress towards or achievement of each goal be measured and the results be analyzed. This will allow for the company to continuously improve and gauge its level of success. Appendix C highlights some key operative measures from the year 2007 through 2011. The graph entitled “Comparable Store Sales Growth” visually depicts the hit Starbucks stores took from the 2008 recession, as well as its subsequent return from -­‐6% growth in 2009 to positive 8% in 2011. Further, Starbucks has been able to maintain a positive upward trend in the other five displayed financial measures, despite the temporary suboptimal economic environment (FY11 Annual Report). The 2011 Annual Report puts forth the question “how might we use our scale for good?” This question aims to address Starbucks desire to have a social conscience in conjunction with profitability. In the year 2011 the company created 3,700 jobs, and set a challenging goal of introducing 12,500 more globally in the year 2012. Unemployment is prominent issue in the U.S. and Starbucks has acknowledged its ability to play a part in “restarting the nation’s jobs engine” (FY11 Annual Report).

Strategies & Alignment with the Environment Organizational goals are achieved through the successful implementation of strategy, which is influenced by the internal and external environment. Contingency theory is a key concept to consider in order to understand how this is done. The theory accounts for the fact that strategy, environment, size, culture, and technology all interact together to affect organizational design. These contextual factors are not only affected by the external environment but also each other, and also influence organizational design, as it must fit the contingency factors. Starbucks has done a very good job of aligning its strategies and goals with the external environment, as will be demonstrated by the following discussion.

Starbucks has established a very solid foundation and has forward momentum propelling it towards successful attainment of obtaining strategic objectives. Schultz even comments that Starbucks is “remarkably well positioned to pursue our diversified, multichannel, multibrand, business model.” The firm is following a channel development strategy, in part achieved by a growing portfolio of branded products. Starbucks also strives to differentiate itself from competitors, a strategy that is partially achieved by the powerful assertion of the firm’s coffee authority “across multiple channels while creatively enhancing the food and beverage experience for [customers]” (FY11 Annual Report). Starbucks acknowledges the different opportunities and strengths it has that will allow it to maintain its position as the industry leader, and strives to take advantage of such in order to create a sustainable competitive advantage. First of all, the company has a very strong global brand image, and has discovered that it can get customers to try just about any product. With this unmatched loyalty, Starbucks has attempted to leverage such in conjunction with diversified growth strategies in order to develop and capitalize upon Starbucks opportunities. The company can

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introduce any new idea or product it wants and withdraw when it becomes apparent that the new endeavor is not catching on without experiencing any negative repercussions in terms of image or customer loyalty (Canto, 2012).

Although the company has many positive things going for it, things do not always go as planned. With the downturn of the economy in 2008, Starbucks experienced losses as the rest of the nation did. The chain was opening eight stores a day, which upon completion of a sensitivity analysis proved to be too fast. As a result of the recession and the rise of electronic information, the bookstore Borders closed its doors for business. Being as Starbucks had a partnership with Borders, the result was the closing of 225 Starbucks shops in Border’s bookstores (Canto, 2012). However, its adaptive culture, focus on the customer, and organizational design allowed it to effectively move past these difficult times.

Moving forward Starbucks has demonstrated its ability to effectively respond to the external environment, as shown by its success with matching the stores to the personality of each store location. When Starbucks began to expand globally, it had to consider that each country might not react the same way to the same products, and had to develop different game plans for getting customers into the store. Starbucks developed a strategy such that stores were designed in a locally relevant fashion, such that they reflected the community in which they were located. When introducing drive-­‐thrus, Starbucks was concerned that the addition did not fit with the company’s strategic intent. However, the company tried to make the drive-­‐thru feel the same as it would on the inside, by adding features such as placing plants on the outside walls. Stores were adapted to the consumers they serviced, and as a result sales increased by 35% at each location that installed a drive-­‐thru (Canto, 2012).

Another example of Starbucks correctly aligning strategy with the environment is its focus on technology as a part of the customer experience. As identified previously, Starbucks established a loyalty program called My Starbucks Rewards, which allows customers to make payments from their mobile device. Using these Starbucks Card Apps, customers can also customize and save their favorite drinks and order straight from their device. These innovative ideas were hugely popular and have strengthened Starbucks already unmatched loyalty from its customers. By leveraging social media, Starbucks has been able to “respond to the constantly changing marketplace in ways that strengthens [its] connection with customers” (Canto, 2012; FY11 Annual Report).

Organizational Design In 2008 Schultz returned as the CEO of Starbucks due to the economic crisis, which caused Starbucks to struggle. He realized that he needed to reorganize the company and realign its strategies to move the focus back to the ‘customer experience’ within U.S. field operations and centralize or consolidate the support functions. He did this by changing the organizational structure of Starbucks in the following areas: U.S. Field operations, divisions, and support functions.

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Starbucks’s United States operations changed from two divisions to four, which are Western/Pacific, Northwest/ Mountain, Southeast/Plains, and Northeast/ Atlantic. Previous to 2012, Starbucks had Starbucks U.S. and Starbucks International, but it now has 3 regions, which are the Americas, China and Asia, and EMEA or Europe and it has emphasized more leadership at the helm of each region. The structure within the United States allows leadership to be closer to the customers and partners which definitely increases the amount of on the job training and mentoring that takes place within the company as well as allowing for heightened accountability. According to a letter from Schultz, divisions are now structured so that, “Each division will be led by a senior vice president, reporting directly to the U.S. president” (Starbucks.com, 2012). Each division does report to the president of U.S. operations, but internally each department will report to their respective functions. The following support functions have been combined or reorganized into functional teams to ensure that they share the same goals and visions: U.S. Store Development, U.S. Licensed Stores, U.S. Finance, Partner Resources, Marketing, In-­‐
Store
Experience, Global Supply Chain, Global Communications, and Partner & Asset Protection.

Starbucks current organizational design is a hybrid organizational design, encompassing a geographical structure, functional structure, and a horizontal structure. Starbucks has executives that are based in their birthplace, Seattle, Washington and they oversee the whole corporation. Starbucks is then broken down into 3 geographical regions globally and furthermore into 4 geographical regions within the United States and this allows it to target the varying geographical markets quite differently based on each location, culture, climate, and lifestyle; These geographic regions within Starbucks are managed by district managers who report to Starbucks’s executives directly.

Next, major functions are grouped together within geographical divisions; for example, within the United States there is a finance department, marketing department, human resources department, etc. And lastly, each storefront within Starbucks has a horizontal structure, which “organizes employees around core processes” (Daft, 2008). When restructuring, Starbucks went back to its roots, focusing on the customers and their experience, which was neglected during the rapid expansion that took place before 2007. The firm redesigned its vertical structure along its horizontal workflows and processes at the lowest level, which has created an emphasis on customers and resulted in a flatter more adaptive culture.

When Schultz returned to his position as CEO in 2008 Starbucks’s goal was to go back to the company’s roots and have an adaptive culture that matched its new flatter organizational structure. Starbucks’s six-­‐point mission statement helps guide it to ensure that the organic culture is nourished and it focuses on its partners, customers, shareholders, stores, neighborhood, and coffee. Refer again to Appendix B for the six-­‐point mission statement. In somewhat of a domino effect, Starbucks

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believes that if its partners are happy and well taken care of in a communication Fall rich environment where they are respected, then they will enrich the lives of and truly connect with their customers. A happy satisfied employee and a customer that feels valued helps to create an environment at stores where customers “customers feel this sense of belonging, our stores become a haven, a break from the worries outside” (Starbucks.com, 2012). Starbucks main concern when it comes to its coffee is quality and ensuring its beans are ethically sourced, because it genuinely care about everyone that is involved in the business of making coffee beans for the company. This leads to a deep concern for the neighborhoods that Starbucks operate in and it want to be the leader in positive change. If the previous five parts of the mission statement are followed consistently, then shareholders will reap the benefits and undoubtedly be happy.

As mentioned earlier, Starbucks places great importance on its relationship with its employees and has a culture that promotes collaboration and communication.

Starbucks’s district managers are encouraged to visit stores often and promote open communication among employees, which are referred to as “partners”. If partners work more than 20 hours they receive impressive benefits, such as: healthcare, tuition reimbursement, stock options, career development, and retirement plans. Starbucks’s benefits packages cost the company more than its coffee does, which clearly emphasizes the company’s culture of being relationship driven. Starbucks is currently rated as 73 on Fortune’s 100 Best Places to Work list and has a considerably lower turnover rate than other businesses in the retail industry. Starbucks treats its partners well and believes that employees share in the “Starbucks experience” and employee satisfaction is what causes the low turnover rate.

Effectiveness Starbucks is centric around innovation, and this drives its high effectiveness. The organization is a forerunner in the not only the coffee industry, but the business world as a whole. Starbucks effectively utilizes its organizational structure, internal and external environmental factors, decision making processes, and organizational goals to maintain its status as one of the most successful corporations in the world. The organization has experienced some setbacks and slow times of growth, but through that, it has always maintained its organizational effectiveness. Starbuck’s collaborative and adaptive culture fosters internal process effectiveness. While Starbucks’s strategy and structure are not perfectly aligned, the current structure allows for the company to have successful communication upward, downward and laterally with its employees, causing internal processes to run smoothly. The company values innovation, and genuinely wants the employees to have a good work experience. The company culture of caring for employees, and wanting them to succeed leads the company towards its productivity. The low turnover rate and rating on Fortunes 100 Best Places to Work list attests the effectiveness of their corporate culture and drive for a positive work environment.

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Starbucks has a clearly designed system for resource acquisition that has proved highly effective. The company profile claims “we take a holistic approach to ethically sourcing the highest quality coffee.” Starbucks employs responsible purchasing practices making sure that it attains the best resources (beans) in a way that protects it and the growers. Once Starbucks has attained resources, it has a highly effective supply chain to integrate the resources into the organizations. The company restructured its supply chain in 2008 after seeing a growth in costs but loss in sales, and has seen savings of estimated $500 million since the switch. While effective acquisition of resources in only one small part of the big picture of Starbucks effectiveness, it paints a picture for the way the rest of the business is run (FY11 Annual Report).

Starbucks is also successful in attaining resources in the form of acquisitions of other companies. Starbucks has been continually buying out other coffee shops and many of its operators in foreign countries. Through acquisition Starbucks has also successfully acquired Tazo Tea, Ethos Water, and Evolution fresh juices, all of which are products sold in nearly every Starbucks store. Starbucks most recent acquired a San Francisco based bakery, La Boulange, for a staggering $100 million, making that the company’s largest acquisition to date. This acquisition will push Starbucks further into the fast food type market where it has recently been competing, as La Boulange offers French pastries and a variety of salads and sandwiches (Choi 2012).

In a time when other organizations of its kinds are seeing sales declines, Starbucks recently reported sales increases of 6% (O’Toole 2012). Not only are sales increasing, but Starbucks market share and share prices also are rising. Starbucks stock is currently strong, clearly satisfying shareholders. Soon, the corporation plans to introduce newer products (such as: low calorie refresher drinks, juices, a juice bar in Washington and Verismo single serving coffee brewers) to continue to boost sales. Analysts are predicting earnings of 39 cents per share, an increase of about 15 percent from the year-­‐earlier period, on revenue of $3.18 billion for Starbucks in the next year with the addition of this new product lines.

Starbucks also plans to expand from the current 500 stores in China, to 1500 by 2015. Analysts are also extremely optimistic about this expansion. “At least for the foreseeable investment horizon, these are very doable numbers,” said Keith Siegner, an analyst for Credit Suisse (Hing 2012). Starbucks is now introducing these new products within its pre-­‐ existing market, which is a low risk diversification strategy. Starbucks coffee is considered the leader in quality in the coffee industry, due to the firm’s quality product, genuine customer service, and strategic marketing.

Starbucks last quarter revenue growth of 13% year over year clearly attests to its effectiveness as a company, compared to competitors Dunkin Donuts growth of 10%, and McDonalds 0% growth. Year over year earnings growth for Starbucks was a remarkable 19.3%, Dunkin Donuts saw in increase of 7.8%, and McDonalds saw a decrease of 4.5% (Hing 2012). These numbers indicate that Starbucks is, and will continue to be, a sound investment for stakeholders against its peers. These numbers also indicate a clear advantage for Starbucks, leaving no question about

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the company’s effectiveness. With such high earnings, and growth Starbucks has a clear competitive advantage. The entirety of the Starbucks culture, innovation, strategic intent, and products pushes Starbucks ahead of the competition. Starbucks has provided immense satisfaction for its stakeholders this past year as its balance sheet has never been stronger, and its recorded profits have never been higher (FY11 Annual Report). Starbucks is a forerunner in the coffee and food industry, and is preparing to expand its strong brand name further.

Conclusion/Recommendations From its humble beginning 41 years ago in Seattle, Washington, Starbucks has grown significantly, faced turbulent times where it struggled, and not only recovered, but are extremely profitable and successful. In 2000, when CEO Howard Schultz stepped down things were looking delightful for Starbucks, but by 2007 it was in real trouble and needed to readjust its strategies and go back to its roots. Starbucks had expanded beyond its core capabilities into areas like music, books, and film. The pressure to increase profits by at least 20% a quarter were very high and the company lost vision of the its true values, quality coffee and an experience that just can’t be duplicated in other coffee shops. Starbucks needed to go back to focusing on the customer experience, and that’s just what it did.

Starbucks focused on changing its culture back to an open, organic, and adaptive culture that fostered innovation and things began to turn around in 2011. The results show clearly in Starbucks financials, with a 10-­‐13% growth in revenues and 15-­‐20% growth in EPS for the year 2011. It is leveraging fundamentals that have driven the company’s growth, and Starbucks is a strong performer in major markets and has a strong cash position (Canto, 2012). As Starbucks moves forward innovation will continue to fuel success and will foster growth within Starbucks. Vast opportunities await Starbucks, such as buying a food company, creating a new way to provide cold drinks, and continuing to improve food products (Canto, 2012). In 2011, Howard Schultz cast further vision for the company by stating, “As we look forward, we’re excited by ongoing innovation, new channels of distribution, expansion into new markets, and how these opportunities will allow us to make a difference in even more communities around the world” (Annual Report, 2011).

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Appendix A – SWOT Matrix

Strengths

• Company culture

• Brand recognition

• Motivated employees • Company operated stores • Good relationship with suppliers • Widespread • Strong financial record

Weaknesses • Declining share in market

• Product pricing

• Self-­‐cannibalization

• Too much outward focus

Opportunities • Emerging markets (international) • Technological advances

• New products

• Distribution agreements

• Brand extension

Threats • Intense competition • Supply of high quality coffee beans

• Product saturation in US market • Negative publicity

• Consumer trends

• Political issues internationally

• Corporate giant image

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Appendix B – Expanded Mission Statement Our Coffee It has always been, and will always be, about quality. We’re passionate about ethically sourcing the finest coffee beans, roasting them with great care and improving the lives of people who grow them. We care deeply about all of this; our work is never done.

Our Partners We’re called partners, because it’s not just a job, it’s our passion. Together, we embrace diversity to create a place where each of us can be ourselves. We always treat each other with respect and dignity. And we hold each other to that standard.

Our Customers When we are fully engaged, we connect with, laugh with and uplift the lives of our customers – even if just for a few moments. Sure, it starts with the promise of a perfectly made beverage, but our work goes far beyond that. It’s really about human connection.

Our Stores When our customers feel this sense of belonging, our stores become a haven, a break from the worries outside, a place where you can meet with friends. It’s about enjoyment at the speed of life – sometimes slow and savored, sometimes faster. Always full of humanity.

Our Neighborhood Every store is part of a community, and we take our responsibility to be good neighbors seriously. We want to be invited in wherever we do business. We can be a force for positive action – bringing together our partners, customers and the community to contribute every day. Now we see that our responsibility – and our potential for good – is even larger. The world is looking to Starbucks to set the new standard, yet again. We will lead.

Our Shareholders We know that as we deliver in each of these areas, we enjoy the kind of success that rewards our shareholders. We are fully accountable to get each of these elements right so that Starbucks – and everyone it touches – can endure and thrive.

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Appendix C – Fiscal 2011 Financial Highlights

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