Industry and Strategy Analysis
A
Porter’s Five Forces:
1. Intensity of rivalry among the competitors, -high
2. Risk of entry of new competitors, -high
3. Bargaining power of buyers, -low
4. Bargaining power of suppliers and-low
5. Threat of substitute products and services.-high
Rivalry among existing competitors is high within the coffee industry, the major competitors are Costa, McDonald’s, Caribou Coffee, and Dunkin Donuts and thousands of small local coffee shops and cafes.
Starbucks customers possess large amount of bargaining power because there is no and minimal switching cost for customers, and there is an abundance of offers available for them.
The threat of substitute products and services for Starbucks is substantial. Specifically, substitutes for Starbucks Coffee include tea, juices, soft drinks, water and energy drinks, whereas pubs and bars can be highlighted as substitute places for customers to meet someone and spend their times outside of home and work environments.
Starbucks suppliers have high bargaining power due to the fact that the demand for coffee is high in global level and coffee beans can be produced only in certain geographical areas. Moreover, the issues associated with African coffee producers being treated unfairly by multinational companies are being resolved with the efforts of various non-government organizations, and this is contributing to the increasing bargaining power of suppliers.
However, the threat of new entrants to the industry to compete with Starbucks is low, because the market is highly saturated and substantial amount of financial resources associated with buildings and properties are required in order to enter into the industry.

B
The core strategy of Starbucks is to maintain high customer loyalty to win steady and increasing growth for earnings. Starbucks increases its value to its customers by providing them with unique Starbucks services and experience. i.e. bakery food, wifi, music, comfortable environment (seats), sell coffee beans in grocery stores. Its critical risk is the relatively intense competition in the coffee industry; it can be hard to maintain high customer loyalty. However, on the other hand, Starbucks create a success brand image among customers around the world.
Balance Sheet:
C
Cash equivalents (maturity less than three months = 90days) are assets that are readily convertible into cash, such as money market holdings, short-term government bonds or Treasury bills, marketable securities and commercial paper. However, cash equivalents are still not pure cash, they still take time to convert to cash. Thus, cash equivalents are less liquid than cash. Short-term investment- 3-12 months
D
There short-term and long-term investments. The former take less a year to be reinvested or sold, the latter lasts more than a year.
E
AR are net of allowance for uncollectible accounts, because uncollectible accounts are bad debts that cannot be collected back in the future, thus they must be removed. AR is increased when customers bought products or services without paying right away but promising to pay the money latter. It decreases when the promised customers finally pay back the money. As for bad debts, it increases when customer companies are in brokerage or the probability for them to pay back is nearly zero. Allowance increases for bad debts occurance, decreases when uncollectibles are written off.
F
Accumulated depreciation on BS is the total of depreciation expenses happened in all the past years.
G
Deferred tax assets are created due to taxes paid or carried forward but not yet recognized in the income statement. Its value is calculated by taking into account financial reporting standards for book income and the jurisdictional tax authority's rules for taxable income. For example, deferred tax assets can be created due to the tax authority recognizing revenue or expenses at different times than that of an accounting standard. This asset helps in reducing