In more stores and also changing the way

Topics: BusinessIndustry


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Last updated: March 28, 2019

In the last few years, Starbucks has successfully developed a strategy that is helping the corporation to be the leader in the restaurant industry. But, what is the key to success of Starbucks so far? As we know, Starbucks has constantly targeted markets that will help the corporation grow.

Opening more stores and also changing the way they serve their product such as drive-thrus has made Starbucks to be the customers choice as it’s customer friendly, offers high-quality coffee, fast service,  and variety of products. China and Europe are Starbucks main markets after the US and expanding more in the international market keep the company growing as they are reaching more customers and expanding the brand name. One of the major competitive advantage that Starbucks have compared to its other competitors in the market is that it operates in a huge market space at around 75 countries and its growing extremely fast in China which is considered to be Starbucks most growing market in the future and as of now China is just behind the US regarding the growing potential. Moreover, some additional competitive advantages of Starbuck is that this corporation constantly innovates the products, have convenient location (in the shopping malls, library, work ), high rated service (free wifi, friendly environment),  its adaptable with customer preferences, innovative technology which purpose is to make the connection between the employees and customers easier and quick and customers know Starbucks (brand awareness) . The market share of the company shows that it is the leader in the coffee industry compared to its competitors such as Dunkin Donuts, McDonalds’s etc. Most of their sales are still domestic but in the last five years, we can see a drastic change in the foreign market. The increasing trend in the international market probably will shift in the near future as Starbucks is expanding in the international market and the statistics show that the worldwide stores are almost doubling year by year. The industry has shown to be affected by economic changes and it can be sensitive to the macroeconomic factors  such as income per household which affects consumer spending; health awareness, price of the coffee or coffee consumption, overseas exchange effects (strengthen or weakness of the dollar).

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Economic crises, political changes and unemployment levels can also have an impact in the revenue and the profitability margins of the industry. There was a slow down in the China’s economy where they devaluated their currency; political factors such as Brexit, Greek collapse are some of the reasons that might have affected the company’s growth. Starbucks is considered to be a cyclical company, thus it should move with consumer behaviors. There are some dynamic changes that are happening in the Food and Beverage industry which can have an effect in the future of the Starbucks. Nowadays, consumers are tending to be more health conscious such as being more careful with issues of obesity, diabetes, weight gain etc and this is a threat for the industry which means that they constantly should restructure the menu and this is an expense for the business. Consumer spending, wage growth, unemployment rate, coffee prices, overseas exchange effects( strengthen or weakness of the dollar ), political factors (Brexit, Greek, China devalued its own currency), crisis climate change and health awareness are some of the factors that can affect the company’s growth.

Starbucks is now a publicly traded company which is financed by the debt instruments and revenues. When we analyze the ratios and the financial statements such as balance sheet, income statement and cash flow statement we can notice that Starbucks has been increasing each year.Overall, Starbucks has been generating much better revenue compared to its competitors and has been able to remain competitive in market. Computing the ratios of Starbuck and comparing it with Dunkin Donuts  we can see that there is an increasing trend in the Starbuck financial statements compared to its competitor. What can be easily noticed between two companies is that they have extremely different money in their expenses due to the fact that Starbucks is much bigger compared to DDKN. Based on the information given in the financial statement we can see that Starbucks has the prosperity (tendency) to be more equity financed than having creditors on boards which is an important element as it maximizes and generates more wealth to the shareholders and this is crucial for a company’s like Starbucks.

Some of the top three risks to Starbucks future success can be the risks that different markets can bring to the company. Entering new market can be considered also a risk as there is no guarantee how customers will react towards your product. There might be a commodity price change which can result in potential slow down for the company. Since, Starbucks aim is to operate outside of the United States the company might face issues consumer confidence to buy the product and the rate of consumption to the GDP of the country they are operating in.

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