Beruflich Dokumente
Kultur Dokumente
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Assistant Professor
Department of AIS
University of Barisal
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Date of submission
16 April, 2018
Starbucks Corporation - 2009
Syarynn Tomlin
1. Case Abstract
Starbucks was founded in 1971 by Gordon Bowker, Jerry Baldwin, and Zev Siegl, who joined
forces to open a coffee shop in Seattle, Washington. By 1972, with the success of the first store,
they opened a second store in University Village, Washington. Its wholesale business, which
sold coffee primarily to local restaurants, changed its name to Caravali out of concern that the
Starbucks‟ name would become tarnished by retailers who sold the coffee after its shelf life has
expired. In the next 10 years, the business expanded to five stores and hired Howard Schultz to
manage retail sales and marketing.
By 1993 the company ventured into the East Coast market in Washington, D.C., and entered into
a venture with Barnes & Noble to sell its coffee at the bookseller‟s stores. At this point, the
company had licensed 12 stores and were operating 260 company-owned facilities with revenues
reaching $176.5 million and net earnings at $8.3 million.
Starbucks opened 200 new stores outside of the United States during 2000, 150 of which were in
the Asia-Pacific region, and opened its first stores in Dubai and Hong Kong, and its 100th stores
in both Japan and the United Kingdom. The following year, Starbucks opened a store in Zurich,
Switzerland, marking its first venture into continental Europe.
Starbucks experienced its first setback in 2002 when its Japanese operation posted a $3.9 million
loss, despite a 15 percent increase in revenues and 108 new store openings, and the first low
performance locations were closed. But not discouraged by this, international expansion
continued as Starbucks opened its first store in Turkey and acquired 129 Seattle‟s Best Coffee
coffeehouses, as well as certain wholesale distribution rights. In the following two years, its
long-term U.S. expansion goal was set at 50 percent and Starbucks announced it will eventually
open 15,000 domestic outlets, and 30,000 worldwide. However, then the worldwide economic
recession hit in 2007 and simultaneously McDonald‟s entered the coffee business big time.
Starbucks closed 600 underperforming stores in the United States in 2008 and plans to open only
about 200 new stores in 2009.
Core Values • With our partners, our • Our commitment • Making quality
coffee and our customers to our guests food
at our core, we live these • Our commitment • practicing
values: to our sustainable
• Creating a culture of community sourcing, and
warmth and belonging, • Our commitment • Committing to
where everyone is to our team a healthier
welcome. members planet.
• Acting with courage, • Delivered with
challenging the status quo our unique
and finding new ways to personality
grow our company and
each other.
• Being present, connecting
with transparency, dignity
and respect.
• Delivering our very best
in all we do, holding
ourselves accountable for
results.
• We are performance
driven, through the lens of
humanity.
6.Operatin (EBIT/ Total Sales .049 .043 .262 .112 .012 .156
g Profit or Revenue)
Ratios
7.Return (Net profit after .126 (.37) .322 .29 (.517) .156
on tax/Net worth)
Equity(RO
E)
8.Earnings (Net profit after .43 -0.84 3.828 .90 -1.59 2.015
Per Share tax/ No. Ordinary
(EPS) Share)
Starbucks primarily operates and competes in the retail coffee and snacks store industry. This
industry experienced a major slowdown in 2008 due to the operation cost is high, with the
industry net profit decline to 316 million from 673 million. Before this, the industry had a decade
of growth consistent. Due to the economic slump, consumers spent less on luxuries like eating
out, choosing to purchase low-price items instead of high-priced coffee drinks due to shrinking
budgets. The industry is now forecasted to grow at an annualized rate of 3.9% over the next five
years, with a potential to reach $35.1 billion revenues in the US. This growth would be mainly
driven by an improving economy, increase in consumer confidence and expanding menu
offerings within the industry. Starbucks dominates the industry with a market share of 36.7%,
other competitors like McDonalds, Caribou Coffee, Costa Coffee, Tim Horton‟s etc. taking the
rest.
Introduction Stage - the product is introduced to the market through a focused and
intense marketing effort designed to establish a clear identity and promote maximum
awareness.
Growth Stage - this stage is distinguished by increasing sales and the emergence of
competitors. It is characterized by sustaining marketing activities on the vendor's side,
with customers engaged in repeat purchase behavior patterns.
Looking at the Porters five forces analysis, we can get an aggregate industry analysis that the
strength of forces and the profitability in the retail coffee and snacks industry are Moderate.
5. Major Competitors
• Caribou Coffee
• McDonald's
• 7-Eleven
• Dunkin Donuts
• Costa Coffee
The core competence of Starbucks has been its ability to effectively leverage their cornerstone
product differentiation strategies by offering a premium product mix of high quality beverages
and snacks. Starbuck‟s brand equity is built on selling the finest quality coffee and related
products, and by providing each customer a unique “Starbucks Experience”, which is derived
from supreme customer service, clean and well-maintained stores that reflect the culture of the
communities in which they operate, thereby building a high degree of customer loyalty with a
cult following. Its other core competence is its human resource management's values based
approach for building very strong internal and external relationships with suppliers, which drives
the successful deployment of its business strategy of organic expansion into international
markets, horizontal integration through smart acquisitions and alliances that maintains their long-
term strategic objective being the most recognized and respected brands in the world.
Strengths:
Strong Market Position and Global Brand Recognition: Starbucks has a significant
geographical presence across the globe and maintain a 36.7% market share in the United
States and has operations in over 60 countries. Starbucks is also the most recognized
brand in the coffeehouse segment and is ranked 91st in the best global brands of 2013.
Starbucks effectively leverages its rich brand equity by merchandizing products,
licensing its brand logo out. Such strong market position and brand recognition allows the
company to gain significant competitive advantage in further expanding into international
markets and also help register higher growth in both domestic and international markets.
Over the years, they have achieved significant economies of scale with superior
distribution channels and supplier relationships.
Products of the Highest Quality: They give the highest importance to the quality of their
products and avoid standardization of their quality even for higher production output.
Location and Aesthetic appeal of its Stores: Starbucks has stores in some of the most
prime and strategic location across the globe. They target premium, high-traffic, high-
visibility locations near a variety of settings, including downtown and suburban retail
centers, office buildings, university campuses, and in select rural and off-highway
locations across the world.This has earned them a significant competence and advantage
to be able to penetrate prime markets and tap into customers convince factor. Their stores
are visually appealing and have a „cool‟ factor attached to it with being designed to
Human Resource Management: Starbucks is know for its highly knowledge base
employees. They are the main assets of the company and they are provided with great
benefits like stock option, retirement accounts and a healthy culture. This effective
human capital management translates into great customer services. It was rated 91st in
the 100 best places to work for by Fortune Magazine.
Goodwill among consumers due to Social Responsibly Initiatives: Their stores are
community friendly, focused on recycling and reducing waste. They build goodwill
among communities where they operate.
Diverse Product Mix: Starbuck portfolio of products given in Appendix 8, that caters to
all age groups demographic factors.
Use of Technology and Mobile Outlets: Starbucks efficiently leverages technology with
its mobile application “Starbucks App‟ in both apple and android software‟s. They make
significant investments in technology to support their growth every year.
Customer base loyalty: Starbucks has cult following status among consumers and they
have also implemented loyalty-based programs to drive loyalty with the Starbucks
Rewards programs and Starbucks Card. The Starbucks Card is a value card programs that
provides convenience, support gifting, and increase the frequency of store visits by
cardholders and integrated with their mobile application.
Weaknesses:
Expensive Products: While Starbucks does differentiate their products with being highly
quality couple with the whole „Starbucks Experience‟, in times of economic sluggishness,
consumers to have so switching costs to competitor‟s products with lower prices and
forgo paying a premium. These premium prices could also pose some weakness for it to
succeed in developing countries.
Self-Cannibalization through overcrowding: By aggressive expansion and high
saturation due to overcrowding in the market leads to self-cannibalization and diminishes
Opportunities:
Threats:
Increased Competition: This is by far the biggest threat that Starbucks faces with the
market being at a mature stage, there is increased pressure on Starbucks from its
competitors like McDonalds, Caribou Coffee, Costa Coffee, Pete‟s Coffee, mom and pop
specialty coffee stores
Price Volatility in the Global Coffee Market: There has been a significant fluctuation in
the market prices of high quality coffee beans, which Starbucks can‟t control.
Developed Countries Market Saturation: Starbucks derives a significant amount of its
revenue from the development markets and there is increased market saturation currently.
Developed Countries Economy: In an increasingly economically integrated world, an
economic crisis like the one in 2008 could have a trickledown effect from the developed
markets to the developing markets. This threat would hurt revenues for Starbucks as
consumers shift away from premium product mix to stay in limited budgets during
economic hardships.
Changing Consumer tastes and lifestyle choices: The shift of consumers toward more
healthy products and the risk of coffee culture being just a fad represent a threat for
Starbucks going into the future.
7. Product Diversification
Sometimes it‟s good to be known for doing one thing well. But it‟s also a dangerous proposition,
putting your bottom line at the mercy of consumer trends. But when you‟re a billion dollar global
brand, with your livelihood – not to mention the livelihoods of tens of thousands of employees
and suppliers – riding on your bottom line, you don‟t want to leave yourself susceptible to
consumers suddenly deciding en masse that the product you‟re selling is “over.”
As a breakfast staple since time immemorial, it isn‟t likely that coffee will ever go out of style;
meanwhile, with an outpost on practically every block in every major city in the world,
Starbucks has seemingly defied any and all conventions about oversaturation killing consumer
interest. But while there will always be a stream of consumers ordering a cup of black coffee for
their morning commute, one thing Starbucks CEO Howard Schultz is predicting is an inevitable
downturn of consumers maintaining their excitement for frothy premium coffee drinks like
Frappuccino‟s and Pumpkin Spice Lattes – in other words, Starbucks‟ bread and butter. If
Starbucks is going to continue to thrive at its current capacity, it‟s going to have to offer up some
new flavor profiles and keep audiences interested.
But how do you diversify when you‟re a massive brand known for selling one thing? That‟s what
Starbucks is trying to find out, utilizing partnerships and acquisitions along the way to see what
sticks.
Starbucks made a major move toward diversification by finalizing its acquisition of the Atlanta-
based retail chain Teavana for $620 million. Starbucks has taken this acquisition to heart,
throwing itself into the expansion of the specialty tea brand – in October of 2013, Starbucks
brought Teavana from a strictly retail space into the foodservice world with the launch of the
first Teavana tea bar in New York City. Betting on the success of this test location, Schultz
expressed to the media that he hoped to build out the brand‟s existing retail locations and open a
thousand new full service Teavana tea bars within the next five years.
Starbucks has always sold Italian sodas, lightly flavored with a shot of any syrup they have on
tap, but they were never specifically branded or capitalized on before. But as Starbucks continues
its plans to diversify its offerings, the brand has turned to soft drinks by launching its new
Fizzio™ Handcraftted Sodas line alongside its Teavana iced teas as the centerpiece of its
Summer 2014 season.
Starbucks isn‟t serving its Fizzio™ drinks out of regular soda fountain taps – to underscore the
line‟s “handcrafted” nature, the brand has launched a special Fizzio™ machine at its stores,
offering what the brand calls “a breakthrough in carbonation technology with the ability to
deliver an unmatched soda experience.” It seems reasonable to expect that a Verismo-like home
version will be released once consumer interest in the soda line has been sufficiently piqued,
Acquiring a smaller brand like Teavana makes plenty of financial and strategic sense for
Starbucks, but acquiring a giant like Groupe Danone would be another story – and even if
Starbucks could acquire Groupe Danone, chances are slim that it would have much use for most
of the European dairy titan‟s operations. But what would make sense is a partnership for
compatible products, and that‟s exactly what has happened.
It‟s also smart because it‟s a launch that is targeting a totally different demographic compared to
its soda line, hoping to capture health-conscious consumers looking for a light and protein-
packed option for lunch. These are still in test mode, only currently available at a few select
locations – but if they test well and take off, they hold the potential to bring in a new consumer
base that might not have been interested in the sugary coffee drinks at Starbucks‟ core.
Starbucks has been testing beer and wine at various locations for a while now, but the concept
started really ramping up in March as the chain announced the rollout of its “Starbucks
Evenings” campaign at thousands of locations nationwide.
While the concept feels like the last frontier in beverage diversification and the least likely to
stick permanently, it‟s perhaps the best way to court customers during the evening day part. Still,
it seems at odds with the important younger demographic of students getting together at
Starbucks for a relatively quiet and relaxed atmosphere to study. It also brings in further
complications like licenses and distribution that aren‟t present with the brand‟s new non-
alcoholic offers. It‟s hard to imagine beer and wine rolling out at all Starbucks locations
worldwide any time soon – but if they are able to figure out a way to pull it off, their
diversification plan will be about as complete as it can get.
1. Inbound logistics – Sourcing coffee from diverse coffee beans producers with whom they
have great relationships and built up efficient supply chain management system.
2. Operations – They have operation in 60 countries with their stores being modeled on
company operated stores and licensed stores.
3. Outbound logistics – Most of its product mix are sold in-store and some through large
box retailers. Payment around source through point of sale, prepaid Starbucks Cards and
mobile payments.
4. Marketing and Sales – Traditionally, investment in marketing activities have not be
significant and relied mainly on the growing reputation of premium quality product mix
and superior customer services to give the „Starbucks Experience‟ to drive customers to
their stores and products.
5. Service - Starbucks has a reputation for providing supreme level of customer services to
their consumers.
1. Firm Infrastructure. They have well designed, aesthetically pleasing stores. They have
efficient level of finance, accounting and legal departments to support the firm‟s
infrastructure.
2. Human Resource Management – Great benefits, employee empowerment and amazing
corporate culture makes Starbucks drive efficient management of human capital.
4. Procurement – Starbucks procures its products from a diverse group of supplier and has
fixed contracts with some of the suppliers.
One of the key strategy that Starbucks followed since its inception is that of product
differentiation offering differentiators such as premium product mix, locations, coffee beverages
reputation and supreme customer service that translated to building a premium valued brand
which is costly to imitate for competitors. Starbucks has also followed a shrewd strategy of
strategic alliance and making smart acquisitions. Starbucks didn‟t follow franchising model and
operated company oriented stores and joint ventures in international markets. Starbucks has
made some key acquisitions such as Teavana (Tea products), Bay Breads (premium bread
products), Evolution Fresh (fresh juice products) etc. to use the product diversification strategy.
Starbucks acquisition strategy has been horizontal, product and market extensions acquisitions.
Starbucks Coffee Company‟s marketing mix (4Ps) supports the company‟s industry position as
the leading coffeehouse chain in the world. The marketing mix identifies the main components
of the firm‟s marketing plan. Starbucks uses its marketing mix as a way of developing its brand
image and popularity. With the strongest brand in the industry, the company shows how an
effective marketing mix supports brand development and business growth. Starbucks also
changes its marketing mix over time, thereby emphasizing the need for the business to evolve its
various aspects to maintain competitiveness.
Starbucks Coffee‟s marketing mix (4Ps) indicates the importance of this marketing tool as a way
of ensuring that the firm promotes the right products at the right prices and places.
Starbucks continues to innovate its product mix to capture more of the market. This component
of the marketing mix focuses on what the business offers to customers. At present, the following
are the main categories of Starbucks products:
Coffee
Tea
Pastries
Starbucks Corporation - 2009 22
Frappuccino beverages
Smoothies
Merchandise (mugs, instant coffee, etc.)
This product mix is a result of years of business innovation. For instance, Starbucks added the
Frappuccino line after it acquired The Coffee Connection in 1994. The company also has an
ongoing product innovation process that aims to offer new products to attract and keep more
customers. Thus, this part of Starbucks‟ marketing mix involves beverages, food, and
merchandise.
The company offers most of its products through Starbucks cafés. This component of the
marketing mix determines the venues at which customers can access the products. In Starbucks
Coffee‟s case, the following are the main places used for the distribution of products:
Cafés
Online Store
Starbucks App
Retailers
Originally, the firm sold its products through Starbucks cafés. Through the Internet, the company
now offers some of its products through the online Starbucks Store. Also, the firm now sells
some merchandise through retailers. In addition, the company uses the Starbucks App to allow
customers to place their orders. This part of Starbucks‟ marketing mix shows how the firm
adapts to changing times, technologies, and market conditions.
Starbucks promotes its products mainly through advertising. This component of the marketing
mix refers to the communication strategies used to disseminate information about the firm and its
products. Starbucks‟ promotional mix is as follows:
Advertising
Public relations
Sales promotions
The company advertises its products through television, print media and the Internet. The
company infrequently uses public relations, which has not always been successful for the
business. For example, Starbucks‟ Race Together public relations campaign was widely
criticized. In addition, the firm uses sales promotions, such as the Starbucks Card that customers
Starbucks uses a premium pricing strategy. This pricing strategy takes advantage of the
behavioral tendency of people to purchase more expensive products on the basis of the perceived
correlation between high price and high value. The company‟s coffee products are more
expensive than most competing products, such as McDonald‟s Premium Roast. Through this
pricing strategy, the company maintains its high-end specialty image. This part of Starbucks
Coffee‟s marketing mix directly relates with the firm‟s generic strategy, thereby helping the
business maintain its premium brand image
Market Penetration
Starbucks Coffee‟s main intensive growth strategy is market penetration. This intensive strategy
supports the firm‟s growth by maximizing revenues from existing markets. Starbucks already has
presence in 65 countries around the world. To maximize revenues and growth in these current
markets, the company applies the market penetration intensive strategy by opening more
company-owned stores. Starbucks also applies this intensive strategy for growth through
licensing for merchandise and franchising in some countries, such as the Dominican Republic.
Market Development
Starbucks Coffee uses market development as its secondary intensive growth strategy. This
intensive strategy supports the company‟s growth by generating revenues in new markets or
market segments. For example, Starbucks Coffee plans to enter more countries. These countries
are mostly in Africa and the Middle East. In this intensive strategy, Starbucks grows by
expanding its global reach.
Product Development
Starbucks Coffee also uses product development as a secondary intensive growth strategy. This
intensive strategy involves creating new products to gain more revenues. Starbucks continues
innovating its product mix. For example, after the firm acquired The Coffee Connection, it
started offering Frappuccino at Starbucks cafés. Through such new products, Starbucks grows
through this intensive strategy.
Political
Political factors include government policies, legislation and foreign influences. The political
factor influencing Starbucks are as follows:
The political condition of Starbucks is not good as it should be. They are being blamed for the
violation of wage and hour laws. Starbucks has two pending class-action lawsuits filed by
Starbucks, California, employees for being improperly denied overtime pay. Starbucks‟s is
denying all liabilities in these cases, however; the company has agreed to the settlement in order
to take care of all of the plaintiffs‟ claims without having to get involved in any protracted
litigation. Now Starbucks is paying $18 million for the settling of the lawsuit case.
Again Starbucks is in news for it‟s within termination of the 12-year contract with Kraft. In 1998
Kraft and Starbucks entered into a retail grocery coffee business, which at the time was
generating less than $50 million in annual revenues. Since then, the business has grown to
approximately $500 million. This joint venture has marked a major shift for Starbucks'
consumer-packed business, a key building block in Chief Executive Howard Schultz's strategy to
drive future growth for the nation's largest coffee-shop chain. For the violation of the contract
again Starbucks would have to payout large amount as compensation.
Economic
The economic factors which affect the Starbucks could be inflation rate, import laws, exchange
rates, and interest rates.
As Starbucks Imports coffee from various countries so they really have to be aware of changing
imports laws which could hinder the importing. On the same way increasing and decreasing
inflation rate affects a lot of buying power of consumers
The Demand –price curve for the consumption of coffee commodity shows that with the increase
in demand of coffee, the price of coffee increases whereas with the decrease in price of coffee,
the demand decreases. So Starbucks has to be very careful while pricing looking at the
consumption rate of market.
This increase in demand of coffee increases when the coffee substitutes such as cold drink,
water, juice, tea, shake prices increases and if there is increase in the income of the consumers.
On the other hand the demand decreases if the price of substitute decreases, there is decrease in
the income of the consumers, and increase in the price of compliment.
Starbucks called them as “Starbucks Shared Planet” which commits them to do best for the
people and the planet both. For this they are using reusable cups and Starbucks is so responsible
about the community development that they made their goal as
We’d like Starbucks partners (employees) and customers to contribute more than one million
hours of community service each year.
Starbucks is trying their best to minimize the environmental impact, tackling of climate changes
and inspiring others as well to do the same and joining of non-governmental organizations.
Working with the NGO‟s has helped them a lot to do more of community involvement, ethical
sourcing and environmental stewardship.
Technological
As technology factors shape appropriate organizational forms (McKelvey, 1982). Use of various
new and innovative technology leads to improvement in services at the cafe. There are various
agricultural and biotech development which has led to fast growing of coffee plants. Various
technologies are being used to minimize the labor cost and save time. They are trying to find the
new technologies to better serve the customer. Starbucks has introduced its card which has
attracted customers a lot and has made them to visit quicker. As discussed in environmental
factors Starbucks are trying to use in every store new fuel-efficient equipment for reducing the
emission of the gas. They are using more of the bio degradable material for recycling. They are
making their best efforts to advertise them through various means to reach to the people‟s mind
easily. Starbucks has made online shop locator to make the process easier for the customers to
reach to the store. Starbucks is also doing online delivery of their produced coffee. If customer
wants to use the coffee of their choice and want to use the brand of Starbucks they have better
option of buying the whole coffee packets from the Starbucks Coffee shop as well as online
coffee store.
Under Starbucks international strategy, it should transfer its core competencies and
capabilities country to country and then gradually build profit drivers in several countries
as it continues its global expansion in an organic way.
Starbucks has great growth opportunities in Tea and Fresh Juice products mix. They
should build up these products along the same line of their core coffee products.
Coffee beans are a significant input into Starbucks value chain and there have been wide
fluctuations in the market prices of high quality coffee beans. Starbucks could mitigate
this price volatility risky by implementing an effective hedging strategy like future
contracts to lock in their estimated quantity inputs at a low swing price so that the future
costs can be managed to a greater extent.
Starbucks growth strategy in the saturated U.S. market should focus on getting additional
penetration into untapped rural markets.
Another growth sector is its packaged coffee packets and iced beverage products.
Starbucks should build better relationships with big box retailers to get premium shelf
space and increase the efficiency of this distribution channel.
Further build and retain customer loyalty, by building on beta concept of on-the-go home
delivery.