Starbucks Coffee Company report
The trio founders of Starbucks company shared two familiar interest. They all loved coffee, as well as tea and came from academia. Currently, the firm is now the largest coffeehouse chain in the world. The company is composed of an estimated 20,891 stores which are located in sixty-two countries. The company`s logo, as well as packaging, contain a unique model which is eye-catching to its consumers. In 1987, he became the leader of a group of investors who took over Starbucks and since then, the company has remained the primary roaster, as well as specialty coffee retailer worldwide (Nancy and William 30). Besides retiling high quality coffee beans, the company offers a variety of particular coffee drinks, chocolate, tea, as well as merchandise.
Starbucks Competitors Starbucks competitors can be categorized into two groups. Direct and Indirect Competitors. Direct Competitors Direct rival companies of the Starbucks firm include; • Costa Coffee • Dunkin Donuts • Café Coffee Day and • McDonalds McCafe The companies which fall under the category of Indirect competitors for the Starbucks company include; • McDonald's • Kentucky Fried Chicken • Independent Fast Food Chains and Bakeries Also, another category of competitors for Starbucks company entails the indirect competitors in the tea section (Nancy and William 30). This is the opinion of George Whalin, the co-initiator of Retail Management Consultants of Carlsbad. Consumers are interested in premium coffee, as well as great consumer service which is offered by Starbucks company, unlike Dunkin` Donuts consumers who are interested in value for their money, as well as wide alternatives of food items.
In addition, Starbucks brand contributes significantly to the position of the company in the market due to its popularity and uniqueness (Koehn et al. Recent Developments within the Company/Industry Starbucks is one of the mammoth business firms in the world, the use of the modern technological invention is paramount to the growth and development of the company. In 2012, Starbucks partnered with Square to facilitate payment through Square`s Wallet smartphone app. Currently, as the coffee industry welcomes the “Third Wave” a massive emphasis is going to be placed on how consumers think, as well as drink coffee. Direct trade is going to have a significant impact on the middle man since the massive emphasis is going to be placed on sustainability, experimentation, as well as quality in the brew method (Lynch and Jerald 30).
Therefore, the consumers will purchase these products at a premium price. Future Directions As Starbucks company continues to maintain their development in the global market, much of their production will be determined by the effectiveness of their working condition and relationship with their corporate shareholders and partners. This is because over half of their international stores are managed by their business partners, hence, enabling the company to save money. Culture is very crucial. This is because a negative culture has the ability to jeopardize company performance (Lynch and Jerald 30). Starbucks company not only position itself as retailers of coffee but also as a more experienced provider, thus generating a “third place” for friendliness beyond the home, as well as the workplace.
Starbucks company coffeehouses worldwide offer a consistently comfortable, as well as welcoming ambiance. The company has a powerful culture which is tightly connected to the firm`s distinct abilities. " Harvard Business School, Case Study (2008): 9-808. Lynch, Richard L. , and Jerald R. Smith. Corporate strategy. 89 ROA= Net Income/ Average Total Assets = 471,600,000/ 162,294,000 = 524,300,000/ 171,960,000 = 2. 05 Financial Leverage= Average Total Assets/ Average Equity =162,294,000/ 5,673,850 = 171,960,000/ 5,855,250 =28. 37 ROE= Net income/ Average Stockholders’ Equity =471,600,000/5,667,050 = 524,300,000/5,851,000 =83. 61 C. Evaluation of the ratio trends Debt ratio- the debt ratio trend for the company is stronger in 2017 than in 2016. 6206 and 0. 5889 respectively which lead to a variance of 0. The debt ratio was more in 2017 than 2016 thus showing that the company is more leveraged (Delen et al. As a result of this, the company is at a greater financial risk if it continues to rely more upon the debt from the external sources of finance.
However, when the company the suitable uses the debt, there would be a reduction of the financial risks which might result in the increase in the revenue generation. The free cash flow for the years 2017 and 2016 are 2,654,000 and 3,140,000 respectively (Fayers et al. The variance in the free cash flow is 486,000 thus showing that the level of cash that is available to the net investors of the company of all the required investments in the current capital besides the fixed assets of the company. The fixed assets are also known as the capital expenditure. The company free capital flow of the company depicts clearly that there is the high level of cash that is available to the investors of the company. As a result of this, the company goes for the opportunities which necessarily enhances on the shareholders' value.
As a result of this, the company builds confidence among the lending institutions which enables them in running efficiently and effectively the operations of the company. Accounts receivables turnover. The accounts receivables turnover for the year 2017 and 2016 are 0. 72 and 0. 71 respectively. "Measuring firm performance using financial ratios: A decision tree approach. " Expert Systems with Applications 40. Fayers, Peter M. , and David Machin. Quality of life: the assessment, analysis, and interpretation of patient-reported outcomes. Financial accounting: an introduction to concepts, methods, and uses. Cengage Learning, 2013. Weygandt, Jerry J. , Paul D. Kimmel, and Donald E. The current ratio computation is efficiently calculated through taking the quotient of the current assets over the current liabilities. In 2017 and 2016, the current ratio of the company is 1. 25 and 1. 05 respectively.
The Starbucks company current ratio for the two respective years is above 1 which shows that the company is in a better position in settling the its current debts (Fayers et al. As a result of this, the company would be in a better position of satisfying and meeting the customers demand in the market hence high returns which would automatically reduce the debt ratio level. Gross profit margin. The gross profit margin is fundamental to investors and analysts when they analyze the performance and the ability of the company in making a profit that will enable the company to efficiently run its operations. In this scenario, the gross profit margin of the company increased by 2. 32% (Fayers et al. Starbucks' company accounts receivable turnover in 2017 and 2016 is 0.
72 and 0. 71 respectively (Paradi et al. The account receivables turnover is used in measuring the used and quantify the effectiveness of the firm in extending and collecting the outstanding debts from the creditors within the agreed time frame. It shows that the company has maximized fully on the available assets in maximizing the existing market opportunities. The company return on sales is exemplary good and it shows how effective the company is in the market. It competes efficiently and effectively in the market which allows them to generate more revenue. In relation to the industrial averages, the company has positioned itself well in the company and there must be some of the attached reasons behind such as meeting and satisfying the customer needs in the market.
Asset turnover. The asset turnover is used in measuring the ability and efficiency of the company in using the assets in generating the sales revenue to the firm. 05 respectively. The industrial average return on asset ratio is 1. 5 which shows that the company is efficient in using its assets in generating revenue (Weil et al. Most of the investors would be attracted to doing businesses with the company because of its reputable financial performance in the market. basically, the higher the return on the asset, the higher the company is earning more revenue from the fewer investments in the market. The Starbucks company has recorded the high return on equity ratio of 83. 22 and 89. 61 for the years 2017 and 2016 respectively (Weygandt et al. Therefore, the company has put itself in a safer and better position in the market and competes efficiently in the market hence more profit realization.
The Starbucks company is more effective since it turns the cash set aside for the business into greater gains besides the growth of a company and the interests of the investors. " Expert Systems with Applications 40. Fayers, Peter M. , and David Machin. Quality of life: the assessment, analysis, and interpretation of patient-reported outcomes. John Wiley & Sons, 2013. Cengage Learning, 2013. Weygandt, Jerry J. , Paul D. Kimmel, and Donald E. Kieso. Therefore, this indicates the level of cash which is accessible to the net investors of the firm of all the needed investments in the existing capital other than the fixed assets of the firm (Paradis and Haiyan 65). The free cash flow of the Starbucks company indicates that there is the maximum level of cash which is available and accessible to the investors of the Starbucks company.
Therefore, the company is in a position to invest in opportunities that promote and facilitate the shareholders` value. In addition, the extra cash that the company generates can be utilized in developing new and latest products, expanding the production standard of the firm, making a suitable acquisition, as well as paying the outstanding debt of the company. The free cash flow of the Starbucks company has increased steadily, therefore, increasing the strength, as well as the health of the balance sheet. Therefore, one who is interested in investing in a firm must critically analyse the gross profit margin of the company to be familiar with how the firm is more effective and efficient and how it offers stiff competition in the market, therefore, maximizing fully on the easily available business opportunities in the market (Paradis and Haiyan 65).
It is crucial to research the gross profit margin of the firm since it enables investors to understand how the company is efficient in its production phase. In addition, it provides an insight into how the company conducts its pricing power. Firms which have high gross profit margin such as Starbucks company have the potential to price its goods high and also, maintain consumer appeal. Therefore, the Starbucks company has a high gross profit margin which offers it a channel to settle other expenses, as well as still sustain a sizeable profit in the long run. In addition, Starbucks high times interest earned is important since it implies that the firm offers less of a risk for creditors, as well as investors based on solvency.
The time's interest earned is a debt ratio that determines the long-term solvency of the company. The time's interest earned of Starbucks company reveals that the company has a great potential to meet its debts obligations. Therefore, any individual who is interested to invest in Starbucks company will be willing and able to invest in the company since the company offers a safer investment channel for debt providers. The time's interest earned is also important to evaluate debt parameters, as well as quantify the firm`s chance of default. This is because the company has been able to maximize its available resources fully (Fayers and David 45). Investors are always willing and able to sacrifice their resources in companies that are certain to generate returns or profits on a daily basis.
In addition, investors are interested in firms that are able to offer stiff competition to rival companies in the market. This is because the company shows that it is more productive and is able to generate more income hence has security to encourage investors to put their resources in the company. Since Starbucks Company witnessed a high return on equity in 2016 and 2017 financial year, this shows that the firm is in a position to offer investors with significant returns hence it will attract the majority of investors. Conclusion In summary, individuals that are interested in investing in a company need to understand the financial ratios and what they represent. Investors need to research on the financial ratios to be knowledgeable and familiar with the actual financial performance of the firm.
From $10 to earn access
Only on Studyloop