Starbucks Corporation

1. Starbucks Corporation's rise seems to be out of a storybook for Howard Schultz. Starbucks began selling whole bean coffee in 1971 under Jerry Baldwin, Zev Siegl, and Gordon Bowker. Business grew at a slow and steady pace until Schulz joined the company as manager of retail sales and marketing. After a visit to Milan, Italy, Schultz was inspired by a vision. He saw how important coffee was to the romantic culture of Italy. He believed that if Americans had such places to socialize over a cup of coffee, espresso, cappuccino, etc., that they would pay good money for his quality product. The owners of the Starbucks Corporation were not as excited and did not want to operate in the restaurant business. Schultz filmed these coffee bars and began to pitch his ideas to investors. By April of 1985, his first coffee bar had opened and by 1987 he had bought the Starbucks name. Although the first few years of the company were less than profitable, Schultz looked at the long-term opportunities and never let his idea die. Within a few years sales shot up 84%. This left room for expansion. By 1995 there were almost 200 stores opened across the U.S. and Starbucks was already looking international at this point and began operations to look to Asia. Starbucks now has opened bars all over the world and is one of the most successful businesses in the world.

2. The topics we have been looking at include the external environments of businesses and deciding on what a company is to do in the future to adjust to these environments to succeed. This summary speaks of how Starbucks wants to turn their company loose on the international coffee bar scene. Upon looking at whether or not they should, they must focus on the trends that are developing in these countries. Together with Sazaby (a company known for bringing goods to Japan), Starbucks was able to combine the lifestyles of the Japanese people with the Starbucks product. One important favorable trend that was key in the development of bringing Starbucks to Japan rather than Europe and South America was the fact that Japan has been the third largest coffee consumer in the world and the other regions were more of a risk for Schultz. There are, however, unfavorable trends in bringing Starbucks over such as the fact that the Japanese have not developed the taste for espresso or caffe latte drinks, but they rather prefer instant and ready-to-drink coffee that is offered in vending machines owned by Coca-Cola, which is a highly respected American company in Japan. Another unfavorable trend is the fact that since 1982 there has been a 30% decrease in coffee bars.

3. Financial Ratio Analysis

1996 1995 1994

Ratio 1: Debt to Equity 167,980/451,660= 81,773/312,231 80,500/109,898

37.2% 26.2% 73.2%

A low Debt to Equity means less risk of losing profit. Over 3 years, this percentage has decreased and increased most likely due to the international expansion. It may seem like an unfavorable trend, but in this companies case, it is favorable due to their past success.

1996 1995 1994

Ratio 2:Total Debt to Tot. Assets 167,980/726,613 81,733/468,178 80,500/231,421

23.1% 17.4%