Starbucks & The International Crisis:

a.USStarbucks, which long considered itself virtually immune to economic swings, has admitted in recent months that some consumers have avoided its relatively expensive coffee as the economy soared.

According to recent US news reports, the coffee shop chain slashed its quarterly and 2008 profit forecast below Wall Street targets and said it faced the "weakest economic environment" in its history.

b. Egypt

While its coffee aroma seems to be waning in its homegrown market on the heels of the US mortgage meltdown, Starbucks is robust on Egyptian market operations. “As a new market for Starbucks, Egypt’s [sales] figures are better than those of other countries,” said Omar Abdelhay, operations manager at Starbucks Egypt.

“On average, some 150,000 people enter Starbucks Egypt stores per month.”

SWOTStrength

S1 High Brand Equity

S2 Satisfied Employees

S3 The best coffee beans in the world“ our buyers walk the farms in 28 countries to find the best 3% of the world’s coffee beans ”

Weakness

W1 High Prices

W2 Over dependency on Coffee related Products

Opportunities

O1 Coffee plays an important role in the life of Egyptians. O2 New market with Low investment.( reduce cost to reduce prices in low investmentmarket & get benefits from the growing market )

Threats

T1 Boycotting for political reasons(Middle East & Arab).

T2 Increase in domestic competition.

T3 Many Competitors.

T3 Financial Crises & recession.

Suggested strategies to push the sales up:

Starbucks is considered to be a famous coffeehouse targeting a special ‘skimmed’ segment. It is obvious that lowering prices would affect it negatively and cause it to lose much of its image.

Promotional Mix

Advertising- Starbucks 1.4% of revenue (Coke spends 11% of revenue)

- Our recommendation to Increase it from 1.4% to 3% by the

next years.

Personal Selling- Starbucks employees must continue to be the very best

- Starbucks must create an incentive to retain and reward them

Public Relations Public Relation is the Key player to promote Starbucks

in Egypt specially for facing the political factors.

Continue: -Green initiatives -Philanthropic endeavors

Starbucks Charity

function at Causeway Bay

Change: Run promotions in conjunction with contributions

Sales promotion Tools

1. free samples for un-aware customers.

2. Provide special offer discounts and coupons for aware customers whom are regular users either switchers or loyal to other brand. 3. Loyalty Program Thru breakfast offers, holiday promotion and cards for repeated customers, ….etc

4. Premiums giveaways for the customers who will visit Starbucks new branches.

other alternative strategies may be more successful, ex:

5. Offer new dishes, new flavors( like chocolate mint For people who don’t like coffee)

6. Set a suitable minimum charge

7. Take part in social activities

Starbucks Commercials: You can hardly notice a Starbucks commercial, a thing that highlights the company’s unique advertising strategy – don’t advertise.

Thus, company executives feel that improving the in-store customer experience is a much more effective means of advertising than via Starbucks commercials. Starbucks encourages the promotion of their stores as a ‘third home’, providing comfortable chairs for customersto relax and spend time in, playing music and providing outlets for people to plug their laptops into……..etc.

Factor influencing Sales

Advertisement

Happily serving you for more than 30 years…..

More than 14,000 branches all over the world..

Great variety of food and beverages specially made for you..

One of Fortune’s 100 Best Companies to work for, 2009

We share you your best moments,,

Share us our success,,

Be part of it…

your third home….

Advertising 1.Product life cycle

As a new market for Starbucks in Egypt, so our product will be

in introduction stage to attract new customers.

2. Advertising Objectives

Awareness with the benefits & create feelings of interest.

3. Message Strategy

The Big Idea _____The unique selling proposition

4. Evaluating Advertising

Is the ad increasing sales?

Setting the Promotion Budget

Starbucks Income Statement

2008 2007 2006

Revenue ($ mil.) 10,383.0 9,411.5 7,786.9

Gross Profit ($ mil.) 5,737.7 5,412.4 4,608.2

Operating Income ($ mil.) 512.9 - -

Total Net Income ($ mil.) 315.5 672.6 581.5

Diluted EPS (Net Income )

0.43 0,87 0.71

Starbucks' revenue, was $10.4 billion in its 2007-2008 fiscal year.

Method 1: Percentage of Sales 2008 Total Sales $10.4 billion

Sales at 10% $10.4 mil

2009 Promotion Mix Budget $10.4 mil

Method 2: Percentage of Unit CostCost per cup $5

Unit cost allocated to $1

Promotion mix

forecasted sales 500000 cups/per month

Promotion mix Budget $ 500000 /per month

Allocation of Promotional Budget