Big Exam

In: Business and Management

Submitted By mulsh44
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Starbucks Coffee Company – February 2007 [i]

A case originally written for JUAS2006 Seminar, November 2006, Pittsburgh, PA
Latest major revision – July, 2008; minor revision in January, June & Dec 2010
Written by Robert S. Atkin
© 2006-2013 Robert S. Atkin

General Background

Starbucks is a phenomenon – in just under three decades it has become an internationally visible brand literally defining an industry not only in the US, but in selected countries in the EU, the Middle East and Asia (Please see Exhibit 1. For additional information, please see the firm’s website or its SEC financial 10-K filings). For example, in the decade ending 2005, worldwide revenue increased about 15-fold to nearly 6.9B USD, while net income increased about 19 times to 494M USD. Most of this growth can be attributed to a dramatic increase in stores (both domestic and international), various product development and product mix changes (including improved food and music production [ii]), and price increases (two in US company-owned stores in the past year averaging 5 and 9 cents/drink in October 2006 and July 2007). A Starbucks affinity card was a significant growth driver in the past few years, but is not expected to be a major driver in the next few years. [iii]

Begun as a local coffee shop in 1971, the company grew modestly in the Seattle area until the mid-1980’s when Howard Schultz joined the firm. Convinced by a trip to Italy in 1983 that coffee could become the center of a social experience, he left Starbucks and began his own retail coffee firm, “Il Giornale.” In 1987, Il Giornale purchased all of the assets of Starbucks for less than $4M, and Mr. Schultz became CEO. At the time, the firm had approximately 100 employees, retail operations in the Seattle and Vancouver areas, and a roasting plant. [iv]

Although the firm has incurred its share of business…...

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