ASU Starbucks & Dunkin Brands Strategic Managment Financial Analysis

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ynheragenivf28

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Arkansas State University

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PAPER 1-STRATEGIC MANAGEMENT-FINANCIAL ANALYSIS-SUMMER 2019 Select one pair of companies from the following list: • • • • • Wal-Mart (WMT) and Dollar General DG) Papa John’s (PZZA) and Domino’s (DPZ) Starbucks (SBUX) and Dunkin Brands (DNKN) Charles Schwab ((SCHW) and TD Ameritrade (AMTD) GM (GM) and Toyota (TM) Review the most recent annual reports for each of the two companies to gain an understanding of each company’s products and services, the markets they serve, their strategies, strategic goals, key strategic actions, and financial performance. Complete a financial analysis to determine which of the two companies has better overall financial performance by looking at the most recent full-year financial reports (USE ONLY ANNUAL REPORT DATA), and compare a the financial performance metrics of the two companies (see sample below). A well- performing company is one whose overall financial performance is better than the industry average over a long period of time, and is generally measured by ROIC (return on invested capital). A company that achieves superior financial performance generally has consistent annual revenue and profit growth; higher than industry average profit margins; high inventory turns; positive cash flows; and a strong balance sheet, when compared to other firms in their industry. Superior financial performance is the result a good business strategy that is executed well and often includes investments in appropriate technology; visionary leadership; talented and dedicated employees; a customer focus; having and maintaining a competitive advantage, and a strong operational focus on strategic goals. Based on your analysis, explain which of the two companies has the better overall financial performance and why. What does the company do well to achieve the superior financial performance? What is the strategy of the better performing company (cost leadership, differentiation, focus, or a combination of several)? How does their strategy compare with their competitor? EXAMPLE OF FINANCIAL ANALYSIS: 1|Page Financial Comparisons Financial Metric Current Year Total Revenues Current Year Net Profit (income) Net Profit Margin Return on Assets Return on Equity Debt to Equity Return on Invested Capital Earnings Growth (3yr.) Revenue Growth (3 yr.) Inventory Turns Sales/Square Foot Sales/Employee Net Income/Employee Free Cash Flow Company 1 $12.3bn $0.54bn 4.39% 8.57% 23.0% 0.71 18.6% -1.7% 4.2% 8.3 $437 $218,400 $6,876 $0.20 bn Company 2 $6.7bn $0.23bn 3.45% 6.22% 36.6% 2.11 21.7% +15.4% 2.7% 15.0 161 $277,328 $7,243 $0.16 bn ANALYSIS: Company 2 has better overall financial performance, as its Return on Invested Capital is 21.7% compared to 18.6% for Company 1. Company 2 is faster growing in earnings (15.4% per year), and does a much better job with inventory turns (15.0 vs. 8.3); but its revenue growth is slower that Company 1. This suggests that Company 2 does a better job in managing their costs and investment to which results in better financial performance with slower growth than their competitor. Best on an analysis of their annual report and strategic actions, there strategy is one of being the low cost provider in the industry which well positions them for future growth and further increases in profitability. Format and Content of Paper: Each paper should have: a cover page, an abstract, an introduction, an analysis section, conclusions based on the analysis, recommended actions, and a brief summary of the paper’s key points, and a reference page. Include table of financial comparisons in body of paper. Paper to follow APA format. All the Guidelines for Written Assignments apply to this paper including a minimum of four credible outside sources. All data should come from each company’s most recent annual report and use only full year figures. Annual reports are found on each company’s website or on www.sec.gov. 2|Page Below are the sources and calculations of the metrics: • • • • • • • • • • • Current year Total Revenues comes from the Income Statement Current year Net Profit (or Income) comes from the Income Statement Net Profit Margin is calculated by dividing the Net Income by the Total Revenues Return on Assets is calculated by dividing the Net Income (from Income Statement) by the by the Total Assets (from the Balance Sheet) Return on Equity is calculated by dividing the Net Income (from the Income Statement) by the Total Stockholder’s Equity (from the Balance Sheet) Debt to Equity is calculated by taking the sum of the short-term debt and the long-term debt (from the Balance Sheet) and divide by the Total Shareholders Equity (from Balance Sheet). Return on Invested Capital (ROIC) is calculated by dividing the Net Income (from the Income Statement) by the total of the Long-term Debt (from the Balance Sheet) plus the Shareholders Equity (from the Balance Sheet) Earnings Growth (3 year) is calculated by subtracting the current year’s Net Income (from Income Statement) from the Net Income of three years ago (from the Income Statement) and dividing this difference by the Net Income from 3 years ago. If the current year’s Net Income is lower than 3 years ago, then the growth is negative. Revenue Growth (3 year) is calculated by subtracting the current year’s Total Revenues (from Income Statement) from the Total Revenues from 3 years ago and dividing the difference by the Total Revenues from 3 years ago. If the Total Revenues for the current year is less than 3 years ago, then the growth is negative. Inventory Turns is calculated by dividing the Total Cost of Goods (from the Income Statement) by the total inventory (from the Balance Sheet). Cash Flow comes from the Statement of Cash Flows and is the Cash and Cash Equivalents at End of Year. C Vogus Arkansas State University College of Business Strategic Management updated 5/2019 3|Page
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Running head: STARBUCKS (SBUX) AND DUNKIN BRANDS (DNKN)

Starbucks (SBUX) and Dunkin Brands (DNKN)
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STARBUCKS (SBUX) AND DUNKIN BRANDS (DNKN)

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Starbucks (SBUX) and Dunkin Brands (DNKN)
Abstract
Both Starbucks Corporation and Dunkin’ Brands Group, Inc. are multinational companies
that operating in the fast food business. A comprehensive financial analysis of the 2018 annual
reports and the strategic actions indicate that Starbucks Corporation is well off in terms of
financial and general performance compared to Dunkin’ Brands Group, Inc. For Dunkin’ Brands
Group, Inc. to realize growth, integrating and implementing best strategies such as business
diversification, expanding to other markets and strategic focus are just but some of the best
interventions of attaining a unique competitive advantage. Even though general business strategy
of Starbucks is superior, continuous business improvement processes is very necessary.
Introduction
Starbucks Corporation is a multinational American coffee company operating in more
than thirty thousand locations across the world. Having been focused in the industry that is
highly competitive, Starbucks has managed to attain a unique competitive advantage and this is
attributed to a number of success factors which include but not limited to: transformational
leadership style of the senior management, effective management of the diversified
organizat...


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