Case Starbucks
Case Starbucks
-week 1-
1. How well is Starbucks performing?
Starbucks: the world’s biggest supplier of coffee drinks; but as any thing in life, Starbucks had its ups and downs. There’s an old saying that it is not about how you fall, it is about how you get up, and Starbucks has not disappointed when it came to getting back on its horse. The particular down began in 2000, when founder Howard Schultz stepped down from the CEO position and the company took a wrong turn. In numbers, Starbucks shares closed in March 2009 at $10; Schultz’s return in 2008 led to a formidable growth, currently a share being transacted at $71.
The shares have got 7 times more valuable in 4 years, that should put nothing but a smile on the shareholders’ face, but that is not the only way of seeing how well a company is performing. From a financial point of view, I have used the McKinsey valuation framework to identify the enterprise value:
Rate of Invested Capital (ROIC) = Operating income / (Equity (average) + Debt) = 1728.5 / [(3674.7+4384) / 2 + 549.5] = 37.74%
Net margin = Net income / Sales = 1245.7 / 11700.4 = 10.64%
These numbers show us that the enterprise’s value is growing, and taking into account the economic situation, the company scored a good profit. After all, there is more to business than making money, and Starbucks learned this the hard way.
2. What is Starbucks’ strategy? From the beginning, Starbucks was selling very good coffee. But was that enough? The answer was no, in Howard Schultz’s opinion, who saw a lot more potential and saw more in a coffeehouse than meets the eye. He realized that a coffeehouse is not just about drinking good coffee and saw the whole idea at a new level: he wanted to create an experience.
“To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”, this is how he saw Starbucks’ mission and this is the idea on which the strategy would be
-week 1-
1. How well is Starbucks performing?
Starbucks: the world’s biggest supplier of coffee drinks; but as any thing in life, Starbucks had its ups and downs. There’s an old saying that it is not about how you fall, it is about how you get up, and Starbucks has not disappointed when it came to getting back on its horse. The particular down began in 2000, when founder Howard Schultz stepped down from the CEO position and the company took a wrong turn. In numbers, Starbucks shares closed in March 2009 at $10; Schultz’s return in 2008 led to a formidable growth, currently a share being transacted at $71.
The shares have got 7 times more valuable in 4 years, that should put nothing but a smile on the shareholders’ face, but that is not the only way of seeing how well a company is performing. From a financial point of view, I have used the McKinsey valuation framework to identify the enterprise value:
Rate of Invested Capital (ROIC) = Operating income / (Equity (average) + Debt) = 1728.5 / [(3674.7+4384) / 2 + 549.5] = 37.74%
Net margin = Net income / Sales = 1245.7 / 11700.4 = 10.64%
These numbers show us that the enterprise’s value is growing, and taking into account the economic situation, the company scored a good profit. After all, there is more to business than making money, and Starbucks learned this the hard way.
2. What is Starbucks’ strategy? From the beginning, Starbucks was selling very good coffee. But was that enough? The answer was no, in Howard Schultz’s opinion, who saw a lot more potential and saw more in a coffeehouse than meets the eye. He realized that a coffeehouse is not just about drinking good coffee and saw the whole idea at a new level: he wanted to create an experience.
“To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”, this is how he saw Starbucks’ mission and this is the idea on which the strategy would be