Annual Report Review Aspen Newton Centenary College Business Policy & Strategy GBA 690 10/17/2011

Annual reports give shareholders and interested people information about a companys activities and financial performance. An annual report will contain financial highlights, a letter to the shareholders, managements discussion and analysis, financial highlights, notes to financial statements, auditors report, summary of financial data, and corporate information. An analysis of Starbucks Corporation 2009 Annual Report should reveal if they are meeting their financial and strategic objectives or if they have altered any strategies. Starbucks financial ratios and make recommendations as to how the company can improve on their strategies in order to be more profitable. Starbucks Corporation (SBUX) mission is to inspire and nurture the human spirit by providing quality coffee and being ethically responsible in improving the lives of the people who grow the coffee beans they use. Their strategies support In the opening paragraph in the Letter to Shareholders Chairman, President, and Chief Executive Officer, Howard Schultz articulated that for the first time he was beginning to see traffic slow down in US stores. Starbucks has always been nimble and forward-thinking in its decision making and execution, but now they were being threatened by competitors and new entrants to the market. The new strategy for Starbucks needed to be a full-fledged transformation if they wanted to become profitable again. The 2009 economic cataclysm presented most companies with the challenge of how do we stay in business and how do we remain profitable. Starbucks was no exception. With the focus being on sustainability and profitability Starbucks blueprint was designed around improving the state of their business through better training, tools and products; renewing their attention to store-level economics and operating efficiency;

reigniting emotional attachment with customers; and realigning Starbucks organization for the long term (Starbucks Corporation Fiscal 2009 Annual Report, 2009). These tools will support their strategies which include rationalizing the global company operated store portfolio, right-sizing the non-retail support organization, and reducing the companys cost structure, while renewing the focus on service excellence in the stores and delivering relevant innovation. In order to make these strategies happen sharp focus had to be on operations, marketing, technology, cost structure, and the consumer. Starbucks put more initiative towards their backend IT systems to store operation; having stronger creative execution to reach their customers and more effective channels to reach their customers, Starbucks has been able to make better informed decisions and successful in bringing initiatives and products to the market faster and more cost effectively. The result of having effective strategies was a $580 million cost reduction in fiscal 2009. These targeted cost reductions and associated operational efficiency efforts, along with a more profitable Company-operated store base, have moved Starbucks toward a more sustainable business model, while preserving the fundamental strengths and values of the brand. The operational efficiency efforts are primarily focused on store level execution and include improved staffing models and better management of waste in coffee, dairy and food. Starbucks has also latched on and embraced the social and digital media wave and revolutionize the way they communicate with consumers. Starbucks has been named the most engaged consumer brand, using communities such as Facebook, Twitter and My Starbucks Idea to connect with their customers outside the store environment (Starbucks Corporation Fiscal 2009 Annual Report, 2009).

In the wake of the economic downward spiral Starbucks had to alter their approach to customer experience. With their operations and marketing strategies identified and solidly in place Starbucks switched its attention to customer focus. It became apparent that investment in their customers was necessary and in order for them to continue to meet the customers satisfaction with the market conditions as they were. Economic conditions have altered discretionary spending in the US and internationally which in turn has impacted company revenues, comparable store sales, operating income and operating margins environment (Starbucks Corporation Fiscal 2009 Annual Report, 2009). It was necessary to alter their current strategy and create new strategic thrusts. A quick and speedy response to the external environment was in order. Starbucks needed to rely on its reputation and market position to leverage against their already significant customer loyalty. They used this situation to their advantage by introducing a number of new innovations such as additional values to their loyalty card program, innovative food pairings, adding measurable improvements in their service, beverage quality and store conditions. As consumer trends continued to change in the face of a weakening economy Starbucks has remained steadfast in its efforts to meet anticipated and prevalent expectations. The result is an underlying business model that is less reliant on high revenue growth to drive profitability, and that still preserves the fundamental strengths and values of the Starbucks brand. The validation of their redirected focus has been shown in their results. Sales of Starbucks Anniversary Blend coffee exceeded those of any year since it launched in 1996 (Starbucks Corporation Fiscal 2009 Annual Report, 2009). Their partnership with (RED) continues to outperform expectations, generating

enough money during its first year to buy more than seven million daily doses of medicine to help fight AIDS in Africa (Starbucks Corporation Fiscal 2009 Annual Report, 2009). Like many others in the food and beverage industry Starbucks consumers began an increasing demand for healthier food choices and Starbucks answered the call. The Company continues to maintain a solid financial foundation, with no short term debt outstanding at the end of fiscal 2009 and with cash and liquid investments totaling more than $650 million. This solid financial position and continued strong cash flow generation have provided Starbucks with the financial flexibility to implement its restructuring efforts as well as make ongoing investments in its core business.