Introduction The first Starbucks opened in 1971 by three partners: Jerry Baldwin, Gordon Bowker and Zev Siegl. The whole company was back then only a single store in Seattle’s historic Pike Place Market. Under the leadership of Howard Schultz, President and CEO, the company has not only grown in the United States but world-wide expansion has been spectacular (Forbes 2013). Today, Starbucks is the largest coffeehouse company in the world with more than 18,000 stores in over 60 countries. Starbucks serve hot and cold beverages, whole bean and microground instant coffee, full-leaf teas, pastries and snacks.
Starbucks verifies the social and environmental performance of all manufactured products that end up in their stores. By the end of fiscal 2009, Starbucks had assessed the performance of over 114 factories around the world and assisted in over 37 performance improvement programmes (Starbucks). 3. 0 Current Marketing Situation Starbucks continues to expand overseas and most of the new additions will be in Asia Pacific and China’s regions. China will be a key part of its global expansion as the company looks to grow the store count in the nation to 1,500 by the end of 2015 (Forbes 2013).
Starbucks utilises license agreements, strategic partnerships, and many other business activities and agreements. Starbucks’ latest acquisition of La Boulange and Evolution Fresh play some role in the company’s growth as there is more food for breakfast and lunch including more baked goods coming soon. Starbucks also agreed to purchase tea retailer Teavana Holdings Inc. for $620 million. It is its largest acquisition to date. When it comes to buying, Starbucks is well known for its commitment to quality products.
The company increased their purchases to 40 million pounds, making it the largest purchaser of the Fair Trade Certified coffee in the world (Starbucks Corporation). 3. 1 Starbucks’ current position in the world market A recent survey by American Express/SAP ranks Starbucks 49th among the Top 100 global retailers (Forbes 2013). Starbucks Corp. raised its profit forecast for the current fiscal year after sales in its top market U. S. topped expectations. The company set its new earnings per share forecast for fiscal 2013 at $2. 06 to $2. 15, up from $2. 04 to $2.
14 per share, previously. It also raised its target for global net new stores to 1,300 from 1,200 on accelerated expansion plans for China. 3. 2 Starbucks and its main competitors Starbucks’ primary competitors are quick-service restaurants and specialty coffee shop. Starbucks’ major competitors are Dunkin Donuts and McDonald’s. McDonald’s recently introduced McCafe campaign in which it sells coffee beverages at a slight discount to Starbucks. McDonald’s priced their drinks between $1. 99 and $3. 29. By comparison, Starbucks’ comparable drink versions were priced between $2.
65 and $4. 15, a premium of approximately one-third. Dunkin Donuts uses its donuts and the rest of their menu as the attraction. By 2006, Dunkin Donuts was the top selling retailer of coffee-by-the-cup in America at 2. 7 million cups a day, close to one billion cups a year (Dunkin Donuts, Press Release 2006). 4. 0 Environmental factors 4. 1 Micro environment The following section of this deals with some of the main factors within the Starbucks companies’ micro environment. More specifically, the following headings will be explored: 1. Main Competitors 2. Customers 3. Suppliers
4. 1. 1 Main Competitors The field of coffee market is strongly competitive, including with respect to product quality, service, suitability, and price. Although Starbucks faces significant competition in the markets, it is still ahead of its competitors. 4. 1. 2 Customers Starbucks’ main target market is men and women aged 25 to 40. They account for just about half (49%) of its total business. Starbucks attract this particular age group through hip, contemporary design that is compliant in its advertising and decor and working to keep its products current as status symbols.
Customers are likely to be urbanites with moderately high income and professional careers. Another 40% of Starbucks’ sales are creating young adults, aged 18 to 24. To appeal to this age group, Starbucks positions itself in colleges where students can hang out, and also appeals to them through technology focusing on social networking where it is actively producing a ‘cool’ image. 4. 1. 3 Suppliers “Aside from extraordinary coffee, Starbucks has made a business out of human connections, community involvement and the celebration of cultures. ” (Starbucks) Starbucks is seeking for diverse-owned businesses to purchase from.
In addition to their buying practices, they support supplier diversity outreach projects sponsored by various organizations such as: The National Minority Supplier Development Council and the Women’s Business Enterprise National Council. These projects include opportunity fairs, business development roundtables and supplier development projects. The Supplier Diversity helps to identify and deliver high-quality products and services. Starbucks is committed in creating a workplace that values and respects workers from diverse backgrounds. The company works with overseas suppliers to maintain a workplace that does not abuse workers.
Therefore African farm groups selling coffee beans are getting more valued, they are paid better wages including benefits and are provided with resources that help to lower the cost of production, reduce fungus infections and increase the production of premium coffee. 4. 2 Macro Environement This section will examine some of the key Macro Environmental factors that face Heineken. More specifically, the following subjects will be discussed: 1. Economic Factors 2. Technological Factors 3. Political Factors 4. 2. 1 Economic Factors 4. 2. 2 Technological Factors
As stated by Kotler and Armstrong (2010, p. 106), technological advances are possibly the strongest forces affecting current marketing strategies. The explosion of social media and the emergence of innovative technology in the last decade has seen new marketing and promotional media develop, and has given new opportunities to companies. Some of Starbucks’ uses of technology to market its’ product are as follows: 1. Starbucks continuously uploads pictures and statuses on sites such as facebook, instagram, twitter and pinterest, where most of the people in today’s world have daily access to.
2. The introduction of Starbucks card had improved customer service. 3. Starbucks launched a free nationwide mobile payment app. 4. The free, unlimited Wi-Fi in the stores serves as makeshift office and a meeting place. 5. Starbucks has its own official website, where you can see the menu, purchase gifts, read about all the information of their products and Starbucks contribution to the environement as well as the ethical sourcing. You can also top up your Starbucks card online. There have also been technological developments in agriculture.
Agricultural technology has been a primary factor contributing to increases in farm productivity in developing countries. Although there is still widespread food insecurity, the situation without current technology development would have been inconceivable. Food prices are lower because of technology, but the benefits between consumers and producers depend on the nature of the local economy and trade patterns. 4. 2. 3 Political Factors Political factors that affect Starbucks include the level of stability within the countries in which Starbucks buy its coffee from.
They get their coffee beans from countries all around the world in which some countries have a lot of natural disasters like earthquakes, tsunamis and wars. These natural disasters can affect Starbucks’ business because the countries will not be able to supply them with any of the coffee beans and they will have no coffee to sell. Starbucks also claims to be environmentally friendly, so they have to consider how to protect the brand aspect in everything they do. Another very important factor is the relationships between the countries between which the exchange of products is taking place.
5. 0 SWOT Analysis 5. 1 Strengths 1. Commitment to quality 2. Large expansion worldwide 3. Ethical sourcing 4. Largest coffeehouse chain in the world 5. Supporting farmers and their communities 5. 2 Weakness 1. Product pricing 2. Negative publicity 3. Coffee beans price is the major influence over firm’s profits 5. 3 Opportunities 1. Increase in product variety 2. International expansion of retail operations 3. Technological advancements 4. Joint ventures 5. 4 Threats 1. Competitors with similar offerings at lower cost 2. Rising prices in coffee beans and dairy products
3. Trademark infringement 4. Emergence of new competitors 6. 0 Products and branding strategy According to Louis E. Boone and David L. Kurtz (2010, p. 379) marketers recognize the powerful influence products and product lines have on customer behaviour and they work to create strong identities for their product and protect them. Branding is the process of creating that identity. 7. 0 Pricing Strategy Starbucks is the leader of the coffee market. As a distinct company, it controls a number of times more market share than any of its competitors.
Starbucks sets its costs on a simple idea: high value at moderate cost. When people feel like they are getting a good deal for their money, they are more likely to pay a higher cost. Quality is the key. Sometimes when Starbucks introduces new products at higher cost, the costumers are willing to pay the extra money because they relate the Starbucks name with high quality. Although the risk still exists that more customers will prefer the lower-priced items, by presenting higher-priced items alongside lower-cost substitutes, Starbucks is mitigating the higher price through comparison.
8. 0 Promotional Strategies Starbucks has a strong presence on a number of social networks. When it comes to engaging its customers, Starbucks has definitely set a high bar. Instead of only focusing their effort on new costumers, it cultivates its current ones. Whenever Starbucks takes a photo, it shares it on instagram, twitter, facebook or pinterest. Promotion through networking is more valuable, as the world becomes more digitally concentrated. A proof its success can be seen on Facebook, where Starbucks has already over 35,5 million ‘likes’ and the numbers are keep going up.
Starbucks also increased their advertising in radios, televisions and billboards from 1. 4% to 3% by 2009. Starbucks uses push-pull strategy : Push tactics are taking the product to the costumer. Pull tactics are getting the costumer to come to you. 9. 0 Distribution Channels Kotler and Armstrong (2013) describe a distribution channel to be ‘a set of interdepended organisations that help make a product or service available for use or consumption by the consumer or business user’.
Moon and Quelch (2004) outline that Starbucks sold coffee products through non-company operated retail channels. These “Specialty Operations” accounted for 15% of net revenues. About 27% of these revenues came from North America food-service accounts, that is sales of whole-bean and ground coffees to hotels, airlines and restaurants. Another 18% came from domestic retail store licences. The remaining 55% of specialty revenues came from a variety of sources, including international licensed stores, grocery stores and warehouses clubs, online and mail-order sales.
Starbucks also had a joint venture with Pepsi-Cola to distribute Frappuccino beverages, as well as partnership with Dreyer’s Grand Ice Cream to develop and distribute a line of premium ice creams. 10. 0 Summary This report has looked at Starbucks, both as a brand and as an international manufacturer. It has investigated the methods of marketing that Starbucks uses to develop and promote, and also to distribute and sell its’ brands. Through comparisons with Starbucks’ main competitors, the companies’ standing in the market place has been explained.
How would you advise the management of the company to classify the securities?
How would you advise the management of the company to classify the securities?.
PART 1: a) Maddow and Wells, Inc. purchased equity securities in 2018. The management of the company has decided that the securities will not be sold immediately, but will be held for at least three years. This will allow MW to maximize the potential gains from holding the securities. The new accountant at the company wants to classify the securities as held-to-maturity because they will be held for three years; the company has never held securities for this long before. How would you advise the management of the company to classify the securities?
At the end of each reporting year, how will the securities be recognized on the company’s books? Support your response with an appropriate ASC reference (ASC xxx-xx-xx-x) or ASU (accounting standard update). Ideally, this part should not exceed one page. (75 points)
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