10/10/2011

Starbucks Case Study

J B, C C,
T K, A K,
E P, A W

Background and History

Gerald Baldwin, Gordon Bowker, and Ziev Siegl opened a small

coffee shop in Seattles Pike Place Market in 1971

Howard Schultz Joined the Starbucks marketing team

Traveled to Italy and became interested in the espresso bars and

tried to bring it to America

Founders sold the company to Shultz

Began to open new stores and had 140 stores by 1992

Decided to take the company public and succeeded by opening

more stores

Shultz continued to take the position as chairman and chief global

strategist and hired CEO Orin Smith in 2002

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Mission/Vision of Starbucks
To satisfy customers and to create a third

place environment
Three components to branding strategy : the
coffee itself, service, and atmosphere

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Overview as of 2002
5,886 stores(4574 National, 1312 International)
Customers(20 million total, 570 per week per

store)
Net Income of 215 million $
Customer Demographic (Traditional vs. New)
Menu (Average price of drink $3.85, 30 drinks,
and 23 whole bean coffee blends)
Partners 360 total labor hours and an average
pay rate of $9.00 per hour
Partnerships (Pepsi Bottling Co., Kraft Foods, and
Dreyers Ice cream)
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2002E - $21.5 Billion (total sales)

Specialty
Coffee, 31%
Specialty Coffee
Traditional Coffee
Traditional
Coffee, 69%

Starbucks Share of Specialty Coffee Market 42%

(estimate) 13% Total Market Share
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2005E - $22 Billion

Specialty
Coffee, 41%
Traditional
Coffee, 59%

Specialty Coffee
Traditional Coffee

Starbucks Share of Specialty Coffee Market 50% (estimate)

20.5% Total Market Share

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Strengths
Well developed and established brand

strategy: live coffee

Locations
Product Mix
Partners
Customization of Drinks

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Weaknesses
Customization of Drinks
Caused tension between product quality and
customer focus
Increased menu size
Lacked a strategic marketing group

Very little image & product differentiation

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Opportunities
Increase Customer Satisfaction
Customer Quota

Increase the number of stores

Domestically/Internationally

Create New Products & Services

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Threats

Competition
Donut & Bagel Chains
Small scale specialty coffee chains

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Problem
Key Problem: Maintaining a customer

focused brand image while continuing

expansion
Customer Satisfaction
Lost sight of the consumer
Lost connection between customers and
growing business
Service gap
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Existing Plan
Investment Plan
$40 million annually
Add 20 labor hours a week
Maintain 3 minute service time goal
Increase customer satisfaction

Goal: All stores achieve $20,000 increase

in weekly sales
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Reinvigorating a Customer
Focused Image
New Incentives for customer
Ideas: Drink of the day, membership cards,
serve at your seat
Incentives for Partners
Adding 20 hours during peak hours to maintain
3 minute time
More authority to regional retail managers
Install a rolling menu policy
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Maintaining Expansion
Moving into new domestic and international

markets
Not saturating existing markets
Instead: move into untapped domestic markets
and increase through put at current stores
through added hours
Advantages: Will appear more customer
focused locally, faster
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Recap

customer service
inovations
brand image
Marketing plan
Expansion
Domestic
International

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