Question

Starbucks Becomes a Public Company Starbucks' initial public offering (IPO) of common stock in June 1992 turned into one of the most successful IPOs of the year. With the capital afforded it by being a public company, Starbucks accelerated the expansion of its store network. Starbucks' success helped specialty coffee products begin to catch on across the United States. Competitors, some imitating the Starbucks model, began to spring up in many locations. The Specialty Coffee Association of America predicted that the number of coffee cafés in the United States would rise from 500 in 1992 to 10,000 by 1999. The Store Expansion Strategy In 1992 and 1993 Starbucks developed a three-year geographic expansion strategy that targeted areas which not only had favourable demographic profiles but which also could be serviced and supported by the company's operations infrastructure. For each targeted region, Starbucks selected a large city to serve as a "hub"; teams of professionals were located in hub cities to support the goal of opening 20 or more stores in the hub in the first two years. Once stores blanketed the hub, then additional stores were opened in smaller, surrounding "spoke" areas in the region. To oversee the expansion process, Starbucks created zone vice presidents to direct the development of each region and to implant the Starbucks culture in the newly opened stores. The entire new zone vice presidents Starbucks recruited came with extensive operating and marketing experience in chain-store retailing. Starbucks' store launches grew steadily more successful. In 1995, new stores generated an average of $700,000 in revenue in their first year, far more than the average of $427,000 in 1990. This was partly due to the growing reputation of the Starbucks brand. In more and more instances, Starbucks' reputation reached new markets even before stores opened. Moreover, existing stores continued to post year-to-year gains in sales. Starbucks had notable success in identifying top retailing sites for its stores. The company had the best real estate team in the coffee-bar industry and a sophisticated system that enabled it to identify not only the most attractive individual city blocks but also the exact store location that was best. The company's site location track record was so good that as of 1997 it had closed only 2 of the 1,500 sites it had opened. Real Estate, Store Design, Store Planning, and Construction Schultz formed a headquarters group to create a store development process based on a six- month opening schedule. Starting in 1991, the company began to create its own in-house team of architects and designers to ensure that each store would convey the right image and character. Stores had to be custom-designed because the company didn't buy real estate and build its own freestanding structures like McDonald's or Wal-Mart did; rather, each space was leased in an existing structure and thus each store differed in size and shape. Most stores ranged in size from 1,000 to 1,500 square feet and were located in office buildings, downtown and suburban retail centres, airport terminals, university campus Contd..

Answer 1

1) It can be mentioned that Starbucks is one of the famous coffee icons which is established in the year 1971. One has to understand that Starbucks has created an owned market for itself especially regarding coffee where it added a whole new service thought to it as a result of which people started to like ok and again the huge customer base and now it has been a global company with its presence in all the parts of the world where its target market is the upper income segment where the demographics particularly suit the price structure and the service levels on the whole. The main part of the case that are to be studied here include the facts that Starbucks is essentially one of the most reliable companies to invest in and therefore it is looking for an expansion strategy from the investors as well as from the debt component. With the help of various capital budgeting techniques it understood the importance of the optimal amount of method in which it can actually go for it component as well as equity component so that people can actually invest in the Starbucks company on the whole. the revenues are continuously increasing where it is listed in the New York stock exchange which is famously known as Nasdaq. In the expansion path their main focus is towards the design of the the store where they decided to build up standardized model so that it would cater the needs of all the people coming to the store so that they might not be dissatisfied going to any of the Starbucks store across the planet and that is the way in which the problem has been arrived on the investment and the standardization part. 2) Store ambience is nothing but the design of the store which can create a dominant sensory effects and the sensory effects could include all the factors such as smell colour etcetera. Here interiors and the design play a major part where in Starbucks smell is identified as one of the major component when the company decided to spread the Aroma of its coffee all over and that is the reason why it has taken many precautionary measures suggest not asking the employees to wear perfumes and closing the food so that the Aroma of coffee only remains outside etc. The main intention of it is to portray as a premium coffee place. the essentials are the sensory aspects such as visuals including interior design, fragrance etc. 3) The case facts are highly regarding the expansion of Starbucks and their strategy which includes their favourism to more equity rather than debt however they had that offerings as well in the form of debentures and they are trying to find the optimal way in which it can increase the profitability through both the financing schemes namely the equity and debt. 4) The inference from the case is understood regarding the Starbucks way of business and the way it increased the profitability and market segmentation played a major role in understanding why Starbucks at been so successful where similar companies have resulted in fail. The main part of the case that are to be studied here include the facts that Starbucks is essentially one of the most reliable companies to invest in and therefore it is looking for an expansion strategy from the investors as well as from the debt component. With the help of various capital budgeting techniques it understood the importance of the optimal amount of method in which it can actually go for it component as well as equity component so that people can actually invest in the Starbucks company on the whole the revenues are continuously increasing where it is listed in the New York stock exchange which is famously known as Nasdaq