Starbucks is a multinational coffee and coffee house chain company founded in 1971 and based in Seattle, Washington. Starbucks is the largest coffeehouse company in the world, with 15,011 stores in 42 countries. Starbucks sells drip brewed coffee, espresso-based hot drinks, snacks and items such as mugs, and of course their well renowned coffee beans. This analysis will provide an overview of Starbucks and its industry; examine the current market and future market conditions and suggestions for maximizing the organization’s future profits and growth. Starbucks takes pride in delivering the highest quality of fresh roasted great tasting coffee. They believe in making sure the customer is satisfied every time. Starbucks purchases the highest quality of coffee beans and roast them on location to provide the finest coffee in the world. However, one area of personal finance that rightfully gets a lot of attention is budgeting, the art of directing how company money should be used. I think there were only few ways to budget, but I can now name at least six, here are the various types of budgets:
1.Line item budget: This is the typical spreadsheet budget that most of us started out on. Each estimated item gets a line and an amount, with the total hopefully adding up to less than your planned income. This is an example of a “passive” budget, where actual expenditures might be compared to budgeted amounts weekly or monthly, but always after the expense already occurs. However Starbucks can use this type of budgeting method to evaluate their income and planned how to estimate the total amount of money that will be spend yearly on their business, so that they will not overspend on their budget. More also, the company can cut down on their expenses by hiring small amount of employee.
Beauty is only skin deep, companies must look within to secure longevity. Before a company can successfully bring a mission statement and vision to fruition, they must take a good hard look at their business plan. A company must reflect upon internal strengths and weaknesses, external opportunities and threats, and consider the trends associated with each. The fundamental process of strategic ...
2.Envelope (zero-sum) budget: My personal choice, envelope budgeting is an “active” process that works by assigning income to various virtual “containers.” Money is spent from these containers with a theoretical $0 limit, which makes it difficult to go over-budget in any particular category. Saving for irregular expenses and short-term goals is also easier to grasp with this kind of budget. For this type of budget Starbucks can assign how money will be spend on each department and also the amount they have to spend on each product. For examples are the amount they have to spend on coffee, milk, sweetener, sugar. It will also help Starbucks to reach their goal.
3.Percentage budget: A favorite among those who enjoy rules of thumb, the percentage budget assigns amounts for expenses based on a percentage of income. One example of such a budget might call for: 50% “needs,” 30% “wants,” and 20% “savings.” Another type might call out specific spending categories, for example: 35% “housing,” 15% “transportation,” etc. These types of budget will help Starbucks to divide the amount they have to spend on what the need to get to make the business running and also what they need for the business to make it more profitable and also the amount of percentage the need to saving for the business.
4.Cash budget: A lot of people still like using cash for most purchases for the direct connection it provides to spending actual money on something. One of the problems with a cash-rich system is how easy it is to lose track of what amounts should to be allotted to what needs. Whether it’s in your head or on paper, somehow all that cash should be budgeted and accounted for. This type of budget might work for Starbucks because some of their distributor might want to collect cash before the delivery of their order. Also in some cases they might prefer to use cash for their purchase in other to afford debt.
BUDGETS AND BUDGETORY CONTROL 1. INTRODUCTION: The first important task in front of the management is to have clearly defined objectives. Objectives are short term as well as long term and they should be defined in clear terms. It is necessary to prepare a comprehensive plan to transform these objectives into reality and planning without controlling will not be effective and hence there is a need ...
5.Capital budget: This is something that companies often use to plan their long-term investments and expenses. On the home front, one of my suggestions is to make most often to other people is about having a wish list for everything you “want” to buy. This is a great example of long-term “capital” planning. This type of budget will help Starbucks to have a long term investment and expenses on how to plan their business and it is going to help the company on how to save and also improve the business.
6.Starbucks should invest $40 million annually in the company’s 4574 stores to increase labor hour per week by another 20 hours. This investment will increase their income and it will also help to make more profit.
7.I will recommend that Starbucks should be serving fresh brewed coffee, espresso and cappuccino in addition to the product they are serving all their customers that will increase the number of people that will be coming to their stores.
8.Also I will recommend varieties of breakfast along with their coffee, so that all their customers will have different option of what to take for their breakfast. Meaning doing that it will increase their income and also make more profit.
9.Operating budget- an operating budget is a budget covering operating expenses (OPEX) for normal operations. Operating expenses can be budgeted and accounted for on a monthly, quarterly, and/or annual basis. Operating budgets are usually fixed through a process different from that used on capital budgets (in some companies, all management above a certain level participate in the process).
Operating budgets, once fixed, are usually not changed during the period except maybe for emergency reductions following unexpectedly poor sales results or other disasters. In other words, operating budgets are more often treated as static budgets, rather than flexible budgets. For this type of budget it will help Starbucks to check how the business is improving and also can be view monthly, quarterly or annual basis.
Berjaya Starbucks Coffee Company Sdn Bhd is an authorized licensee of Starbucks Coffee International, Inc. It is wholly owned subsidiary of Berjaya Group Berhad which holds 51% share and Starbuck Coffee International, Inc has 49% share capital of the company. As a Starbucks franchisee in Malaysia, currently it is holding more that 45% share of the local gourmet coffee market. It operates Starbucks ...
In summary, I will recommend capital and operating budget for Starbucks because is going to help the company to know how to stand on their budget not go over it but they can work it out and go below the budget that was planned for the year. Also is very important for the company to list out their expense so that they will not go over their budget at the end of the year.
Operating budget, http://www.solutionmatrix.com/budget.htm
Starbucks, www. starbucks.com