Each company faces problems and obstacles, even successful ones like Starbucks. One of the main challenges that Starbucks is facing is dealing with competitors. Coffee retailers are scattered all over the world in huge numbers. By involving thousands of shops operating in the coffee field, and as the competition increases, it makes the task more difficult for Starbucks to maintain its place. Also, the most obvious challenge that Starbucks is dealing with is the current financial crisis in America.
Compared to other cafes prices, Starbucks is one of the most expensive café shops in the world, and a number of consumers find the prices are exaggerated (Fellner 2010). A recent research made by a team of mystery coffee researchers shows that, the rates in Starbucks compared to Costa Café and Café Nero is the highest (Burks 2009).
As seen on the graph above, Starbucks has experienced fluctuations in profit, starting from 2005 with a steady increase in the net income, and then it dropped down in 2008, decreasing the net profit from more than $600 million to less than $400 million. On the other hand, sales grew in 2010 getting the highest net income over the earlier 5 years. In 2010, Starbucks turned about 11% of its revenue into free cash flow (FCF). The company earned more than £600 million cash on net income (Nadine 2008). Also, there has been a surprising increase in the company’s net income in the last year. In the third quarter of 2011, the income rose up to 33%, earning more than $880 million net income.
Howard Shultz stated on July 11, 2006, "First and foremost I want to thank you for making Starbucks the $6.4 billion global company it is today, with more than 90,000 employees, 9,700 stores, and 33 million weekly customers." Taking the 33,000,000 weekly customers and dividing it by 7 you will get 4.7 million customers per day. Since that time Starbucks has added many, many new stores so ...Show more