Starbucks Expense Analysis

Expenses Analysis

Starbucks has been a reputable company over the last several years. In making sure they are a profitable company they had to encounter a few expenses in order to keep their business going. As stated above, Starbucks is one of the top coffee companies in the world. In 2011, the company remained in operation with more than 17,000 stores in 55 countries which all offered a variety of coffee, tea products, and fresh food items,

Starbucks total operating expenses has increased from 2010 to 2011 with a $68,000 difference. In exhibit 1A, it shows that the General and Administrative Expenses have also increased by $66,000 since 2010 and also that other store operating expenses have increased. Reasons for these changes could be because:

• Starbucks opened its 500th store within the Latin America Region located in Santiago, Chile. Incurred costs may have been salaries for employees, equipment and machinery to run the store, also the purchasing or renting of a building for the new business

http://news.starbucks.com/article_display.cfm?article_id=592

• Another reason why the total operating expenses may have been higher in 2011 compared to other fiscal periods, is because Starbucks had introduced mobile transactions to its customers. Customers in the United States were introduced to a smartphone application, which has a Starbucks Card stored within the application, it provides the most convenient and faster way for customers to pay for any Starbucks purchases.

http://news.starbucks.com/article_display.cfm?article_id=598

Also in 2010, Starbucks bought 269 million pounds of coffee in. They paid an average price of $1.56 per pound for our premium green (unroasted) coffee in 2010, up from our $1.47 per pound in 2009. Also the store operating expenses may have increase in 2011 as they opened an additional store and needed more resources to operate in Latin America

http://www.starbucks.ca/responsibility/sourcing/coffee

Also, looking on the quarterly expenses for Starbucks, we see that from January to June the deprecation and amortization expense stayed relatively the same and was the highest within the third quarter then was reduced in the last quarter of 2011. This may be because within the first two quarters the machinery was performing relatively good and then started to malfunction. Also, Starbucks have been around for a while and maybe some of the equipment was getting fairly old, and it was time to upgrade.

Challenges and Opportunities

Challenges

There are many companies in today’s society that sell coffee. Some of them are, Second Cup, Tim Horton’s, McDonalds and Starbucks are the most well known. These companies are potential threats