Marketing Assignment Topic:
Star Bucks Analysis
Marketing Assignment Solution Online:
Porter’s five Forces of analysis Starbucks Company and its industry
| Number | Name of Force | LevelHigh or Medium or Low | Your AnalysisReason of your level |
| 1 | Rivalry Among Existing firms | High | 1. Rivalry from other competitive coffee chains like Tea Leaf, coffee bean, San Francisco coffee house etc.2. Other smaller privately owned coffee shops.
3. Secondary provides of coffee like McDonalds, Dunkin Donuts, Burger kind etc (Strehle and Cruickshank 2004). 4. Other competitors selling similar kind of products like High quality foods, speciality coffee. 5. Other products like cold drinks and other beverages etc (Strehle and Cruickshank 2004).
|
| 2 | Threat of New Entrants | Medium |
|
| 3 | Threat of Substitute Products | Moderate |
|
| 4 | Bargaining Power Of Supplier | Low |
|
| 5 | Bargaining Power Of Buyers | Moderate |
|
Profitability & Company’s competitive strategies
The company adopts the cost leadership and product differentiation as its main strategy for beating competition. The company has a high cost leadership in the market place due to its large production and operations. The company is the cost leader in the industry. The company has achieved the economies of scale and face competition by the way of its reasonable prices for the high quality products and services. The company also faces competition by the way of product and its service differentiation (Boyes 2011). The company provides several products and services which are not provided by other competitors. The company offers large range of products and services differentiated from its competitors which provides the company an advantage over the competition. The company provides speciality coffee which is also divided into several flavours (Lussier 2011). The company flavoured coffee is flavoured with large types of essences like amaretto, hazelnut, raspberry etc.
| Success Factors | Competitive Advantage | Risk Factors |
| The success factors for the company includes the large retail chain of stores of the company, the company success factors is also includes:The first mover advantage: In the period when Shultz purchased the assets of the company, the company targeted the unique customers base and attracted the speciality coffee industry.
Expansion in the east was also one of the success factors for the company (Burks 2009). Use of Catalog: The company success factor also includes providing the customers with the opportunity to buy packed star buck coffee and order in whole sale (Boyes 2011). Employee satisfaction: This is also the company major success factor as the company has a good HR policies and providing higher satisfaction to its employees. High quality Arabic beans management(Boyes 2011). |
Star buck competitive advantage is maintained by constantly managing its products and originating new ideas and products (Boyes 2011). The company also has the competitive advantage of providing best environment to the customers at their stores with adding their unique products in providing best experience to the customers visiting the place. | The risk factor for star bucks is the entry of the other retail fast food chains in the coffee industry and providing coffee related products (Boyes 2011). The large retail fast food giants like McDonalds, burger king, have entered into the coffee market and are providing coffee products. This seems to be the biggest risk factor for the company in long term. |
Analysis of company’s accounting Areas
The major factors influencing the accounting quality of the company is the changes in the accounting policies and procedures over the period of time and the choices made by the company manager for entering of the transaction of the business. The accounting policies related to inventory, unusual cost transactions like cost of research and development are mainly affecting the accounting quality (Burks 2009). Changes in the treatment of inventory also affect the accounting quality of the company.
Using Du-Pont to get return on equity of company using ratio and cash flow analysis
Calculation of return on equity = net income / total equity
|
1994 |
1995 |
1996 |
1997 |
1998 |
1999 |
||
| Return on equity | net income / total equity |
0.11 |
0.10 |
0.12 |
0.11 |
0.14 |
0.16 |
| Return on assets | net income/ total assets |
0.04 |
0.06 |
0.06 |
0.07 |
0.09 |
0.10 |
Multiplying ROE by Sales = Return on equity = (net income / sales) * (sales / total equity)
or
ROE = net profit margin * return on equity
|
1994 |
1995 |
1996 |
1997 |
1998 |
1999 |
|||
| Return on equity | (net income / sales) * (sales / total equity) |
0.1136 |
0.0982 |
0.1166 |
0.1111 |
0.14049 |
0.157557 |
|
Forecast key Ratios
|
1994 |
1995 |
1996 |
1997 |
1998 |
1999 |
||
| Return on equity | net income / total equity |
0.11 |
0.10 |
0.12 |
0.11 |
0.14 |
0.16 |
| Return on assets | net income/ total assets |
0.04 |
0.06 |
0.06 |
0.07 |
0.09 |
0.10 |
| Price earnings ratio | Market price per share / EPS |
148 |
42 |
51 |
51 |
36 |
28 |
| Net profit ratio | PAIT/Sales*100 |
3.6% |
5.6% |
6.0% |
6.0% |
6.9% |
7.5% |
| Operating profit margin | Profit before interest and tax/sales*100 |
6.2% |
9.3% |
9.8% |
9.8% |
11.2% |
12.2% |
| Sales growth | (Previous year sales – current year sales)/ previous year sales |
0 |
0.6328 |
0.4971 |
0.3775 |
0.28018 |
0.221625 |
Different approaches can be used to compare the company with its competitors. The company can effectively use the valuation approach in order to make a reasonable comparison with respect to the company overall assets and liabilities. The company can also use different multiple approach. The company can also make comparison bases on the overall sales figures. The comparison can also be done based on the number of stores each company acquires and the over all revenue the company has generated from these stores. From the comparison based on the valuation approach the company has the highest percentage of net margin. From the table below it can also be said that the company earns the highest revenue when compared to both the US companies and the Canadian companies (Burks 2009).
Reasons for mergers and acquisitions
The decision related to the merger and acquisition has been made in order to expand and gain the advantage of economies of scale. The decision related to merger is taken in order to generate the advantage of combined operations and expansion of the operations to take the benefits in terms of the competitiveness into the other market areas. The decision to merge was taken to take the benefits of greater value generation, and gain the cost efficiency. This was also done in order to gain the advantage of competitiveness in the new market. And the company also want to new products in the new market through the joint efforts of both the companies (Ulijn 2010).
Economic merits for Merger and Acquisition
There are several merits of mergers and acquisition, as they provide the competitive advantage to the organization. It helps the organizations n gaining the cost efficiency, and also gaining the competitive advantage of cost over the competitors and gain the market potential and market share. The advantage also includes the overcoming from the financial difficulty and captures a larger part of the market. The merit also include the increase in the productivity and potential of the company in terms of the extended operations and extra potential work force. This also provides the company the synergizing effect and also increases the revenues of companies. These also have the advantage of cross selling and economies of scale. The merger also provides the tax advantage and geographical expansion along with several resources transfers (Ulijn 2010).
MB75
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