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Individual Reflection on Team Effectiveness
You will write a three to five page paper reflecting on your experience in your team project, the effectiveness
of the team, and your performance as a team member. You will provide a two part report. In the first part, you
will detail how effectively your team worked together, how tasks were divided, and who collaborated on what
tasks. You will describe your team’s process for identifying strengths and weaknesses of individual team
members, and how the results of that process affected your team’s strategy for executing the project. Focus
about a third of the paper on these questions.
The balance of your paper will reflect on your team work capabilities. Based on your experience, assess your
strengths and areas where you could improve your ability to function on a team. Detail any instances where
there was conflict, and your response to that conflict. Did you respond in a way that maximized team results?
If not, what will you do differently next time? Also detail any instances where you had an opportunity to
leverage your experience and knowledge for the good of the team. Did contribute or decide to abstain, and
why. Most organizations require their employees to work on a team at some level. You are expected to use
this reflective process to identify ways you can work more effectively in a team environment.
Here is some info on the team project, we were 5 people and communicated only on whats up,
we all voted on Starbucks and opening a store in Gilbert,AZ. All were assigned some parts of the
paper and every one participated. I will attached the team project instructions and final project.
We also did a power point with media presentation.
Running head: NEW BUSINESS INVESTMENT
Starbucks New Business Investment
Adrien Aquino, Natascha Bain, Michelle Bryant, Ryan Chindavong & So Ha
City University of Seattle
MBA 540 – Winter Quarter 2019
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NEW BUSINESS INVESTMENT
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Abstract
The purpose of this paper is to explore a new business investment for Starbucks. First, the
students provide a brief over view of the Starbucks company and its rich history. After that, a
detailed review of the business investment and the chosen location for this business investment is
provided. Next, the students give a comprehensive financial analysis regarding the new business
investment and a comparison of Starbuck’s financials to their competitors. Following that, a
breakdown of the non-financial benefits of the new investment is documented. Lastly, a final
recommendation and conclusion is provided to summarize the paper.
NEW BUSINESS INVESTMENT
3
Starbucks New Business Investment
Starbucks Corporation (NASDAQ: SBUX) is the most well-known coffee brand in the
world. Today, the company focus on accelerating long-term growth especially in the U.S. and
China market. Starbucks commits towards a positive way in the community and cultural and
environmental events. Additionally, the company aims to establish to build a digital relationship
with current and new customers. The company already has more than 24,000 stores in 75
countries, and foreign revenue is still growing fast globally. Starbucks’ stays competitive, and
relevant in the market, and it is good news for the investors.
Starbucks Company Information
In March 1971, Jerry Baldwin, Zev Siegal, and Gordon Bowker founded Starbucks. The
first store opened in Seattle’s Pike Place Market. Howard Schultz joined Starbucks as director of
retail operations and marketing and developed the quality coffeehouse culture in Seattle. The
figure 1.1. states, there are 14,606 Starbucks stores in the U.S. in 2018. The global Starbucks
stores have almost doubled in the decade between 2008 and 2018.
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NEW BUSINESS INVESTMENT
Figure 1.1. Number of International and the U.S. Starbucks store from 2005 to 2018. Source from Starbucks (n.d.).
Starbucks company’s mission statement is “To inspire and nurture the human spirit – one
person, one cup and one neighborhood at a time (Starbucks, 2016).” It reflects what the
business does for its target customers and the strategic direction of the business.
As the demand is high for sustainability in business nowadays, Starbucks commits to
move towards environmentally and more sustainable operations for 10,000 stores by 2025. The
company announced they will eliminate plastic straws in all stores globally by 2020. Starbucks
CEO at The Global Climate Action Summit in San Francisco stated, “simply put, sustainable
coffee, served sustainably is our aspiration (Snider, 2018).”
The biggest challenges the coffee industry faces are the supply chain issues due to
climate changes, and its significant effects on coffee plants. Without ongoing investment from
coffee companies, the problems will not be solved in the future. Starbucks raised funds for
helping farmers overcome the challenges, and the company issued a $500 million U.S. corporate
sustainability bond. The bond is 2.45% rate to enhance the company’s sustainability programs
for the coffee supply chain management. The bond also supports $50 million Global Farmer
Fund that the company finance for coffee farmers (Foote, 2016).
Company Investment
The company investment that Starbucks is looking to make is to open a new store in a
new location. Unlike a lot of other fast food type companies, Starbucks does not franchise out
their stores, which means they need to invest in new stores themselves. In 2003, then CEO
Howard Schultz was asked about not allowing Starbucks to be franchised and his response was
“we believed very early on that people’s interaction with the Starbucks experience was going to
determine the success of the brand…and we though the best way to have those kinds of universal
values was to build around company-owned stores” (as cited in McCreary, 2018). Howard
NEW BUSINESS INVESTMENT
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Schultz went onto state “I always viewed franchising as a way to get access to capital, because
you’re using other people’s money to grow, essentially….it would have been hard to provide the
level of sensitivity to customers and the knowledge of the product needed to create those
Starbucks values if we franchised” (as cited in McCreary, 2018).
According to Wiener-Bronner (2018), Starbucks is planning to open 2,100 new stores in
the year 2019. CEO Kevin Johnson was quoted as saying “In 2019, the company will focus on
our long-term growth markets of the U.S. and China” (as cited in Wiener-Bronner, 2018). The
United States and China are the two biggest markets for Starbucks in 2019. The chosen location
for this new expansion store is Gilbert, Arizona. Gilbert was chosen for a few different reasons:
1) There is not a lot of existing Starbucks stores in Gilbert and the ones that do exist are often
inside of a grocery store. There is minimal stand-alone Starbucks store in the city of Gilbert. 2)
Starbucks will be able to compete and take business away from Dunkin’ Donuts and Dutch
Brothers in the Gilbert area that exists today. 3) Gilbert is an up and coming city that has
received national recognition over the last several years. As an example, in 2017, Gilbert was
ranked 12th on USA Today’s “America’s 50 best cities to live in” (Stebbins, 2017).
The investment will include a full Starbucks brick and mortar café store that includes a
sit-down area (with the iconic comfortable chairs) in the store and free WiFi, which has become
a Starbucks staple. In addition, because the store will be in Gilbert, Arizona the store will
include ample outdoor seating that is trendy, casual and comfortable. With the 300+ days per
year of sun in Arizona, the outdoor seating will be almost as important as the indoor seating.
And, of course, there will need to be shaded areas in the outside seating for those days when the
temperatures really soar. In addition, the store will include a drive-thru which will be extremely
important. According to Wiener-Bronner (2018), in the United States, more than 80% of new
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NEW BUSINESS INVESTMENT
Starbucks stores include drive-thrus and those stores out performed the stores that did not have a
drive-thru. Having a drive-thru will also be of vital importance for competition because both
Dutch Brothers and Dunkin’ Donuts have drive-thrus and those two companies will be the main
competitors in the area.
Opening a new store in Gilbert, Arizona will reap benefits for not only Starbucks, but
also for the city of Gilbert. First, opening the new store will bring more jobs to the smaller city
of Gilbert and help boost the local area. Gilbert will be a new neighborhood that Starbucks can
start to inspire and nurture the human spirit in and bring a new “vibe” to the city, as that is part of
their mission. Starbucks is seen as a relaxed and cool environment for people of all ages to
frequent from college students working on essays to parents trying to take a quick break to
retired people relaxing in the afternoon with a good book.
Starbucks will also help the housing market to increase around the area that the Starbucks
store is located. According to Rascoff (2015), houses that are located within a ½ mile of
Starbucks stores appreciate at a faster rate than US housing as a whole, and they also recover
much faster from the housing bust. Rascoff (2015) also looked at homes near Dunkin’ Donuts
and although those houses also appreciated faster than the national average, they did not
appreciate as fast as properties located within a quarter-mile of a Starbucks. Therefore, putting
in a new Starbucks store will help the housing market in Gilbert around the Starbucks location,
which will help to boost the local economy.
Financial Analysis
According to Bplans (2019), Starbucks spends approximately $380,000 to build a new
store location. Based on the company’s consistent financial growth and success, we believe that
opening a new store in Gilbert, Arizona would be a good investment.
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NEW BUSINESS INVESTMENT
Revenue. Figure 2.1 illustrates Starbucks’ strong financial performance, particularly a
consistent growth in revenue each year from 2010 through 2018, with a current revenue of $22.4
billion (Li, 2018). The company experienced a 5 percent revenue growth in 2017 and a 10
percent growth in 2018. In addition, the company ended fiscal 2018 on a strong note with 2
percent sales increase globally (Sparks, 2018). In terms of revenue, Starbucks is far more
superior than Dunkin’ Donuts and Dutch Bros Coffee. The company is more widely known in
the United States and across the globe, and has a market share of 30.3% in the U.S. retail market
for coffee (IBIS World, 2019).
Revenue of Starbucks worldwide from 2003 to 2018 (in billion U.S. dollars)
Figure 2.1. Revenue of Starbucks worldwide from 2003 to 2018. (Li, 2018).
Revenue (2018)
Starbucks
Dunkin’ Donuts
Dutch Bros Coffee
$22.4B
$1.32B
$494M
Figure 2.2. Starbucks revenue in comparison to Dunkin’ Donuts and Dutch Bros Coffee. (Li, 2018); (MarketWatch, 2019); (Wikipedia, 2019).
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NEW BUSINESS INVESTMENT
Ratio Analysis. A ratio analysis is used to evaluate a company’s financial performance
including its liquidity, solvency, and profitability. This portion will analyze Starbucks’ financial
health by using liquidity, solvency ratios, and profitability ratios.
Liquidity Ratios
2018
Median (Past 13 years)
Current ratio
1.41
1.58
Quick ratio
1.16
1.14
(Guru Focus, 2019)
Liquidity is a company’s ability to pay its current liabilities using its current assets. To
calculate Starbucks’ liquidity, two ratios are used: current and quick. Current ratios between 1.5
and 3 are generally acceptable and indicates good short-time financial health (Lumen, n.d.). For
most industries, the quick ratio should exceed 1.0. If it is lower, this generally means that the
company is not able to pay back its current liabilities (Ready Ratios, n.d.). Based on Starbucks’
current and quick ratios for 2018, the company is in good standing. In addition, the company’s
median for these ratios over the past 13 years are acceptable, which is an indication that the
company hasn’t had any problems paying its current liabilities.
Solvency Ratio
2018
Median (Past 13 years)
Debt to Equity Ratio
7.73
0.6
(Macrotrends, 2019); (Guru Focus, 2019)
Solvency ratios are used to measure the ability of a company to meet its long-term
debts. To help determine Starbucks’ solvency, the debt to equity ratio is used. For most
companies, an acceptable debt-to-equity ratio is below 2.0. However, according to Investopedia
(2019), some very large companies that generate massive cash flows have a debt-to-equity ratio
NEW BUSINESS INVESTMENT
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much higher than 2.0. The chart below illustrates that Starbucks’ cash flow from its business is
comparably high in comparison to its debt capital invested. This means that the company has
enough money in a year through its operations to pay off its debt and thus, debt is not a
significant risk for the company (Simply Wall St, 2017).
Starbucks’ Debt and Net Worth
Figure 2.3. Starbucks’ debt and net worth. (Simply Wall St, 2017).
Profitability. Profitability ratios are used to determine the ability of a business to create
earnings. In this portion, the Return on Capital Employed (ROCE), will be explored. The
ROCE is a financial ratio that measures a company’s profitability and how a company is using its
capital to generate profits. The calculation for ROCE is Earnings Before Interest and Tax
(EBIT) ÷ (Total Assets – Current Liabilities). Based on financial information from September
2018, the ROCE calculation for Starbucks is US$3.8b ÷ (US$24b – US$5.7b), which gives the
company a ROCE of 0.21 or 21%. According to Simply Wall St (2018), “Starbucks’ ROCE is
NEW BUSINESS INVESTMENT
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meaningfully better than the industry average of 10%… this implies that the company is doing
better than other companies at making the most of its capital.”
Based on this information, and in addition to the company’s strong brand image, it is
evident that a new Starbucks store in Gilbert, Arizona will succeed.
Non-Financial Considerations of Investment
Starbucks is one of the corporations that focus on the competitiveness that exists in the
market. It focuses on the strategies that are important in increasing the value for the investors.
The understanding of the different returns creates the need to focus on the opportunities that help
in improving the profits of the company in different markets.
Gilbert Arizona is one of the markets that is growing tremendously, and this creates the
need to explore the various opportunities presented in the market. The establishment of
Starbucks is to focus on the recognition of the demand for the product in the market, and this
increases the consistency in the provision of the services. Gilbert Arizona is rated as one of the
safest cities, and this has led to the need to explore the changes in the market and the consistency
that is required in increasing the returns for the investors.
Starbucks was founded in 1971, and it developed the interests of the customers as a
beverage. It led to the expansion of the company in the different states enabling the financial and
non-financial growth of the company. The concept that the company uses includes the use of
technology in helping to increase the superiority of the services offered to the consumers
(Morsing & Schultz, 2006). The financial performance of the company shows increased
revenues, and this helps in encouraging the attraction of the investors in the market.
NEW BUSINESS INVESTMENT
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The investments that Starbucks is looking at involves focusing on the role of the farmers
in the coffee industry. There is an analysis of the funding in the replacement of the trees and the
commitment to providing the farmers with the resources required in the coffee industry. The
investment benefits the company as they access new markets such as Gilbert, Arizona.
The sustainability of the company in the market enables the specialization of the coffee
markets and the strengthening of the strategies through the offering of the best products
(Soederberg, 2007). The location is vital for the company as there is an increase in
familiarization with the quality of the products given the favorable business environment. The
nonfinancial aspects are essential as there is a focus on the contribution of Starbucks in
increasing the growth of the partners.
The need to create internal processes that increase the efficiency of operations in Gilbert,
AZ is vital as this enables the forecasting of the demand for coffee in the market. There is an
assessment of the training that should be given to the employees, and in the case, it guides the
growth of the company and the increase in the market share. Starbucks embraces the need to
protect the relationship with the employees, and this helps in improvement of the satisfaction
rates and the reduction of the customer complaints in the services (Soederberg, 2007). In this
case, there is a reduction in the turnover of the employees and the increase of market share of the
company and the introduction of the products that are superior in the market.
The evaluation of the needs of the customers in the new market is essential as the services
are observed from the customer’s point of view. There is the management of effective rates and
the evaluation of the expectations of the customers. The continued education of the employees
helps in increasing the satisfaction rates of the consumers and the introduction of the strategies
that increase company growth.
NEW BUSINESS INVESTMENT
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Recommendation and Conclusion
The recommended course of action would be for Starbucks to open a retail store location
in Gilbert Arizona. This would be beneficial for Starbucks because it is a good move for the
company’s economic health, in line with recent priority shifts within the company, and
ultimately supports the company’s mission.
Opening a new storefront would be considered in an increase in actively employed assets
but would also possibly increase current liabilities. Considering the company’s current positive
ROCE, opening a new store front would improve on the company’s already strong ROCE.
Holding all things consistent, increasing the value of capital employed will provide an
opportunity for the company to increase its revenue. This increase in revenue will bolster the
ROCE.
As part of recent adjustments to slowing growth in sales, CEO Kevin Johnson announced
plans for, “a renewed focus on rural and suburban areas-not over-caffeinated urban
neighborhoods where locals already joke that the next Starbucks will open inside an existing
store.” (Patton, 2018) Opening a new store the Starbucks-sparse Gilbert, AZ is exactly in line
with this action as it is a more rural/suburban area, different from its larger sistering district of
Phoenix.
Finally, this move is another small, but important step towards the company’s overall
mission. For the brand to continue to inspire the human spirit one person and neighborhood at a
time, it must be accessible to all persons and neighborhoods that it wishes to inspire. Since the
face of Starbucks are it’s store fronts, opening an additional one in Gilbert, where there
Starbucks density ratio is lower, is a forward step towards the company’s mission.
NEW BUSINESS INVESTMENT
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In order to make this investment a success, Starbucks would need to provide funding of
real-estate, material, and staffing. As mentioned in the financial analysis, opening a storefront
typically has an up-front cost of just under $400K. This would include all assets necessary such
as the real estate, construction of physical infrastructure, tools used to make coffee. These will be
contrasted by the closure of multiple stores in the highly saturated coffee markets, an effort that
is accompanied by Starbuck’s intent to …
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