Introduction

     The U.S-Based Starbucks coffee shop company opened its first venture at United Arab Emirates in 1999.  Throughout years, it had experienced problems and favorable conditions along the way just like any other firms in any economy. This case study was between 2014 up to 2017. The case focuses on aspects that affect both its micro and macro environments. Starbuck can control elements like sales, revenue, and general and administration expenses thus they are micro while inflation level, unemployment, gross domestic product (G.D.P) and government policies cannot be controlled so the fall under macro. The study has also directed attention on those factors that hinder the firm’s short-term and long-term decisions. Factors such as consumer awareness, consumer experience, pricing strategy and consumer behavior are some of the short-term goals while company restructuring, expansion policy, market strategy and diversification of resources are among long-term goals. Coffee is the primary revenue, and therefore it had been given more attention although other substitute’s products like tea, milk, pastries, beverages, and sandwiches have also given consideration. Revenue data is collected for over a span of four years. Revenues are trending upward. Sales are trending down downward due to high number of competitors entering the economy such as Costa Coffee and Dunkin’ Donut. All costs are classified by their function, time or behavioral aspect. Functional costs are administrative and sale and distribution costs, Historical cost is sunk cost and behavioral cost is fixed and variable costs. Fixed cost comprises of depreciation. It’s company’s policy to calculate depreciation on a straight line basis. Methods of Computing intangible assets amortization such as copyrights and the patent was provided. Impairment of goodwill on store assets is estimated on fair value basis. There is restructuring costs emanating from the segmentation of the company in 2017. This business segmentation causes some of the store to close down. Finance cost increased due to rise interest expense attracted by long-term credit facility. Administration expenses rises because of increase in remuneration and digital implementation costs. Advertising cost is recognized when it is incurred. The study also pays attention on core market indicators such as competition, substitute’s goods, demand and supply. Demand forces that affect the firms’ include consumer awareness, pricing strategy, consumer experience, consumer preferences and behaviors. New entrants to the industry and economy stiffen the competition for the firm. The study also focuses on the level of inflation between 2017 and early 2018 and how it affects the company running within the economy. Introduction of VAT at 5% is also a factor been highlighted as one factor that affect the firm. The level of unemployment and how it affects the business operation is highlighted. Although UAE have experienced a healthy gross domestic product, the report has tried to put emphasis on its advantages toward the firm. One cannot ignore government policies such as new regulation on federal law no. 15 of 2009 on tobacco control that have made the UAE economy favorable making the firm to find it smooth to carry on its operations.

 

Conclusion

From this case, we can conclude that Starbuck coffee company have been doing on well despite having some challenges. The core firm goals of being in operation are profit maximization, shareholders satisfaction, and cost minimization just like any other.  An analysis of the combined comparative income statement (2014 to 2017), we can see that Starbuck Coffee Company is a going concern. This is because revenues rise by 6.24 billion USD while the cost of sale is decreasing by 4.42 billion USD leading to an increment in operating income by 2.52 billion USD. The net income has been increasing over the years by 0.81 billion USD although the administration, tax, and other expenses are rising by 0.71 billion USD over the years. The profit margins have been fluctuating year by year due to other factors involved. The gap is not significant indicating that the company is doing well.  The company is well established by the time its’ biggest rivals (Costa Coffee and Dunkin’ Donuts) are having an interest of venturing in the UAE economy thus Starbuck Coffee company well controls the level of competition. It makes it easier for Starbuck to control market prices.  Business segmentation plan by Starbuck Coffee Company makes it easier to eliminate extra cost such as the closure of some stores and this leads to cost minimization and thus increment of profit. The expansion and diversification programmes will enable the Starbuck Coffee Company to capture larger market share and thus gain a bigger customer base. This makes the company harness good customer relations, satisfy the customer’s needs and enlarge its territory.  Classification of costs incurred in different classes will enable the company to minimize cost since management can allocate resources according to how they are required and therefore the wastage will be minimal. Also, the company’s auditors will be able to give a detailed report to the fair view of the company. The UAE government has also provided a favorable environment since it had provided political stability and invested in technology. This aids the company in improving its operation. The government had also maintained a healthy Gross Domestic Product level and the firm would take advantage of this because it builds up the confidence of a healthy economy that cannot collapse.  The company is not affected much by the current level of inflation since it had already established its base well and was above average on previous periods of 2017. The company has also come up with a plan to outsource some of its supply of coffee beans which is the primary raw material for the company. This helps the company to meet up with the shortage when there is volatility and thus keep the firm operating smoothly. The research program such as proportion of coffee per person and anticipation of Arabica coffee beans will help the company to make long-term goals and come up suitable strategy to counter any problem that may arise in future.  This have also improve its corporate image UAE economy and to the outside world.