Question 1 Overall, Starbucks’ performance has been mixed over the past six months. On April 13, 2012, its stock price reached a high of $61.67 per share and closed at $57.37 per share. Since April, the price of Starbucks’ stock fell on average in the following closing months of May and June before reaching a low of $43.16 in the opening days of August. The fall was correlated with the release of Starbucks’ third quarter annual report, which showed a less-than-expected performance for that quarter; the earnings per share were $0.43 compared to a market expectation of $0.45 (Baertlein). Since then, the price of Starbucks’ stock has gradually increased. Although market risk factors like decreased consumer spending may have impacted Clearly, there were significant changes to Starbucks’ capital structure, so the Free Cash Flow To Equity (FCFE) approaches are not because the returns on equity are more sensitive to changes in financial leverage than WACC (the weighted average cost of capital). Furthermore, Starbucks’ has been a consistent leader in the foodservices/special eateries industry; valuing Starbucks under the exponential model may overstate or understate its value. Therefore, the FCFF approach based on linear decline, although conservative, best describes the value of Starbucks. The intrinsic value of Starbucks under this method is $55.59, but Starbucks, as of September 21, 2012, has been trading at $51.07. Therefore, Starbucks is undervalued, and investors should buy its shares.
Question 5 The estimated invested capital does not affect the valuation of the firm in the discounted EVA valuation model. Under the EVA valuation model, the total enterprise value of a firm is separated into invested capital plus the present value of forecasted future economic profits. It is illustrated as follows:
Invested capital, IC0, increases the overall value of the firm, but a subsequent decrease in total economic value offsets the effects of invested capital. In the numerator of the equation, economic profit is NOPAT minus the capital charge (WACC x ICt-1). Invested capital is included in the capital charge, so as invested capital increases, the capital charge increases, and
Starbucks case study Everyday thousands of people wake up early in the morning usually with the same routine day after day and usually with the thought of coffee on their minds. For most people find it far more convenient to swing by their favorite coffee shop or closest convenient store on their way to work. Lucky enough there is a Starbucks on just about every corner, as the saying goes. Starbucks is one the most popular coffee shops around the world, and has been ever since the early 1980’s.…
Starbucks case Starbucks is a household name when it comes to coffee. It seems there’s one on every corner. In the early morning, practically the whole city commutes to work with a Starbucks coffee in hand. Why is Starbucks basically the only game in town? Some, including myself, would say it is because of their convenience and customer service. In the early 1990s, Starbucks really rocketed to the top. In the 1980s, Howard Schultz bought the company from the original founders. He had a vision…
Starbucks Case Study After creating a name for themselves and undergoing vast expansion in the past 20 years, Starbucks has hit somewhat of a standstill. At the turn of a global recession, they must find a way to still successfully supply coffee at over $3.00 a cup. The strategic issue in this case is Starbucks ability to maintain a high level of demand and innovation in a world where so many close and valuable alternatives exist. A Porter’s five forces analysis was utilized to interpret Coke’s…
Case Write Up 1) General Calculate common-size income statements for Starbucks’ fiscal years 2011, 2012 and 2013. Describe any tr major revenue streams. $ FY2012 FY2013 FY2011 Net revenues: Company-operated stores Licensed stores CPG, foodservice and other Total net revenues $11,793 $1,361 $1,739 $14,892 $10,535 $1,210 $1,555 $13,300 $9,632 $1,008 $1,061 $11,700 COGS (incl. Occupancy Costs) Store operating expenses Other operating expenses D&A Expenses G&A Expenses Litigation charge Total…
Continuing Case: Starbucks – Introduction Discussion Questions 1. What management skills do you think would be most important for Howard Schultz to have? Why? What skills do you think would be most important for a Starbucks store manager to have? Why? 2. How might the following management theories/approaches be useful to Starbucks: scientific management, organizational behavior, quantitative approach, systems approach? 3. Choose three of the current trends and issues facing managers and…
Starbucks Coffee Company: Transformation and Renewal - Case Study Analysis 1. Starbucks’ decline was highly attributed to its rapid growth in the early 2000s. The accelerated number of stores being built created a number of problems including the saturation the Starbucks Experience it so highly valued as well as a drop in sales due to competition with existing Starbucks stores in any given area. This same-store sales being taken from one another gave Starbucks the feeling of “cannibalism” from…
Final Case Study and Strategic Plan: Starbucks’ Global Quest BUS 402 Strategic Management & Business Policy Executive Summary Here at Starbucks, we have had a very rewarding year thus far, and have been very successful since the beginning of our journey. As a matter of fact when you mention the name, Starbucks, people quickly think about that wonderful aroma and taste that is associated with the Starbucks’ name. This is truly what we are trying to create, a partnership…
STARBUCKS A venti issue: blending together a solution to satisfy the needs of customers, new and old.” Customer satisfaction is a key component to any successful business, especially one in the coffee industry. Starbucks started as a small coffee shop in Seattle in 1971. Howard Schultz, the chairman and chief global strategist, joined the marketing team in 1982 with a vision—a vision to capture “the live coffee mantra.”[1] Until the early 2000s, before Starbucks took…
Element Huynh Mai My Dung Is Starbucks having a good impact on the Vietnamese Coffee Industry? After finished our project, I would like to demonstrate in this element on what is commendable and what is needed to improve. Since we decided to pick Starbuck as a topic for our group. We have been in so many struggles in first couples of days. But after getting to know each other and starting to collaborate synchronizing together. We have learnt so many things, like how Starbucks make company in Vietnam,…
Starbucks 1. I feel that Starbucks’ mission is to provide a comfortable atmosphere for both employee and customer. Whilst being true to their ethical values by aiming to improve the lives of coffee growers. At the same time rewarding their shareholders with substantial sustainable growth and dividends. 2. Starbucks want to continue to provide a high quality service and experience to the customer to build upon their already impressive customer loyalty. It is important for Starbucks to have customers…
