The Diagnosis II

Slowing growth is a problem for Wall Street but is a natural state in the development of any noncancerous entity.

In 2008, Starbucks was experiencing flat or declining same-store traffic growth and lower profit margins, its return on assets having fallen from a generous 14 percent to about 5.5 percent.  An immediate question arose:  How serious was the situation?  Any rapidly growing company must, sooner or later, saturate its market and have to clamp down on its expansion momentum.   Slowing growth is a problem for Wall Street but is a natural state in the development of any noncancerous entity.

Or were there more serious problems? Was overbuilding outlets a sign of poor management?  Were consumers' tastes changing once again?  As competitors improved their coffee offerings, was Starbucks' differentiation vanishing?  In fact, how important for Starbucks was the coffee-shop setting it provided versus the coffee itself?   Was Starbucks a coffee restaurant, or was it actually an urban oasis?  Could it brand be stretched to other types of products and even other types of restaurants?

ACTION POINT: Tune in tomorrow to find out more.