Starbucks Case Study
————————————————- ————————————————- ————————————————- ————————————————- ————————————————- ————————————————- ————————————————- Starbucks COFFEE COMPANY Case Study History of Starbucks in the Philippines December 4, 1997, the Philippines had its first taste of the Starbucks Experience with its very first branch at the 6750 Ayala Building in Makati City. Starbucks has since won the hearts of the Filipinos.The opening of the 6750 Ayala store marked an important milestone in our history – the Philippines became the third market to open outside North America.
The tradition of warm hospitality, constant need for connection, and love for coffee – these are the qualities that make Starbucks Coffee and the Filipino people a great culture fit. History of Starbucks in U. S. * 1970s The first Starbucks opens. The name comes from Herman Melville’s Moby Dick, a classic American novel about the 19th century whaling industry. The seafaring name seems appropriate for a store that imports the world’s finest coffees to the cold, thirsty people of Seattle.
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1980s Howard Schultz joins Starbucks in 1982. While on a business trip in Italy, he visits Milan’s famous espresso bars. Impressed with their popularity and culture, he sees their potential in Seattle. He’s right – after trying lattes and mochas, Seattle quickly becomes coffee-crazy. * 1990s Starbucks expands beyond Seattle, first to the rest of the United States, then the entire world. After becoming one of the first companies to offer stock options to its part-time employees, Starbucks becomes a publicly traded company.
* 2000s The Starbucks phenomenon continues.As of this writing, Starbucks has more than 15,000 locations in over 40 countries. In addition to our excellent coffees and espresso drinks, people now enjoy for Tazo® tea and Frappuccino® blended beverages. Business Logic of business: to provide different brew coffee for different taste of people. * Coffee Chain * Starbucks Corporation is an international coffee company and coffeehouse chain based in Seattle, Washington.
Starbucks is the largest coffeehouse company in the world, with more than 17,000 stores in 55 countries, including over 12,500 in the United States, over 1,200 in Canada and over 700 in the United Kingdom, 54 in Russia. Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, coffee beans, salads, hot and cold sandwiches and panini, pastries, snacks, and items such as mugs and tumblers. Through the Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film. Many of the company’s products are seasonal or specific to the locality of the store. Starbucks-brand ice cream and coffee are also offered at grocery stores. Products and Services Starbucks is a customer oriented company that strives to offer Filipinos a combination of great tasting, quality coffee products with excellent services.
* The most loved products of Starbucks are its bottled drinks, brewed coffee, espresso and chocolate beverages, Frappuccino, smoothies, cupcakes, doughnuts, and cookies. Starbucks ensures high standard in all aspects of operations, promising their customers only the best brewed coffee in every restaurants at any time. * Starbucks offer good services like nice ambiance, hospitable crew and staff, cleanliness, and friendly services.They also provide Free Wi-Fi, Gift certificate, gift cads, Mobile Application, and you can also purchase their coffee bean and brewed it at your homes. * Apart from the product and services that Starbucks offer they also give back to the community like if you purchase a bottle of ethos, you`re providing clean water for the developing countries. Starbucks also have foundation that will help young people to contribute to their communities and giving them opportunities to make a difference by supporting their efforts to make the world a better place.
They also support farmers of cocoa and tea from different countries by giving them education and agricultural training. Mission-Vision of Starbucks “Our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time. ” To accomplish its mission, Starbucks has principles that guide all of its employees as they go about their daily business: * Our Coffee – It has always been, and will always be, about quality. * Our Partners – We always treat each other with respect and dignity. And we hold each other to that standard.
Our Customers – When we are fully engaged, we connect with, laugh with, and uplift the lives of our customers – even if just for a few moments. * Our Stores – It’s about enjoyment at the speed of life – sometimes slow and savored, sometimes faster. Always full of humanity. * Our Neighborhood – We can be a force for positive action – bringing together our partners, customers, and the community to contribute every day. * Our Shareholders – We are fully accountable to get each of these elements right so that Starbucks – and everyone it touches – can endure and thrive. Starbucks SWOT Analysis * •Strengths * o It is a global coffee brand built upon a reputation for fine products and services o It has almost 17,000 stores in 55 countries.
o The organization has strong ethical values, commitment to the environment, and community activists. * •Weaknesses * o The organization has a strong presence in the United States of America with more than three quarters of its cafes located in the domestic market. In order to reduce business risk, expansion is needed. o Starbucks has a reputation for new product development and creativity.However, they remain vulnerable to the possibility that their innovation may falter over time, and product acceptance will come to a halt eventually slowing growth.
* •Opportunity * o The company has the opportunity to expand its global operations. New markets for coffee such as India and the Pacific Rim nations are beginning to emerge. o Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential. * •Threats * o Starbucks’ success has lead to the market entry of many competitors and copycat brands that could pose potential threats.How they combat these threats will determine their future.
* o Starbucks is exposed to rises in the cost of coffee and dairy products. * Starbucks is a large company with a competitive advantage that is shrinking because of its huge success. This is because Starbucks model has been copied successfully by its competitors and this poses a serious threat to the company. If Starbucks cannot retain its differentiator strategy, it is doomed to fall out of popularity, as it would end up being a store that is selling nothing more than a cup of coffee.With majority of its stores concentrated in United States, Starbucks is also limiting its growth and exposing itself to risk. Any negative changes in the domestic market could severely hurt Starbucks viability as a firm.
If Starbucks can retain its strengths and build on opportunities, while suppressing weaknesses and extinguishing threats, it will be able to grow throughout the world market. * The SWOT analysis also gives a starting point for a discussion on what Starbucks can do to reduce its weaknesses. Due to its large size, Starbucks sets trends for the industry that can be backed up by the volume of their delivery.Exactly how long Starbucks can dominate the market depends on Starbucks itself. Starbucks has a large number of stores for coffee outlets, all of which are owned outright by the corporation and no franchisees.
Minimal revenue requirements have been placed on each store, and those that fall short are closed. The company closed down over 600 stores that fell short of its revenue requirements (“Fiscal 2008 Annual Report”). The large number of stores is a huge asset or a liability, depending on how one assesses the situation.If there is a strong economy and people have disposable income, then there is a benefit on having so many stores to generate revenues. On the other hand, during economic downturns, the vast number of stores will become a huge financial liability. By consistently enforcing revenue requirements for each store, Starbucks will able to maintain or increase its same store sales, and while at the same reducing one of the weaknesses of being so large.
* The company has managed to maintain the competitive advantage because it has offered conveniences and an atmosphere customers can enjoy.As long as Starbucks fulfills its customer’s wants and needs, Starbucks will continue to be a leading force in the market. Starbucks should continue to create more value at its stores. Starbucks has created a perception that it is focused not just on profits, but also on societal agendas. The company’s stores have become a medium for people and communities to come together and promote a better place to live in an environmentally conscious society. Starbucks found a niche market where it identified what makes its customers happy, and has delivered it to them.
Continuing to accomplish this will allow Starbucks to maintain its competitive advantage for years to come. Plans and strategies * Global Business * Competitors * Starbucks is competing in an industry where marketing principles has to follow the differentiator strategy, or it risks losing market share. The company must create value to its customers, or the customers will find another place to spend their money. The marketing principles of Starbucks, can be argued, are the basis of the company’s competitive advantage within the industry. Starbucks products are associated with quality, and the ompany has differentiated itself during the years as being committed to producing high quality products. Because of this association with quality, Starbucks has been able to charge a premium for its product.
* Starbucks, though its promotions was able to create a perception of a premium gourmet coffee. Originally, this was what gave Starbucks a huge advantage over any potential competitors. The place or location of each outlet is also in line with the company’s differentiator strategy. With 17,000 outlets worldwide, Starbucks individualized each outlet based on the surrounding communities. Starbucks also prides itself on innovation of new products, which further differentiates it from other competitors.
* Starbucks has established a strong brand and a moderate amount of brand loyalty. The company should focused on its increasing profitability and return of investments. * Strategy of acquisition – First, Starbucks can merge administrative costs of both organizations into one. – Second, since there is low R ; D in the beverage industry, Starbucks can merge that operation in addition to their distribution system. Analysis Starbucks historically positioned itself as an upscale brand.
Due to the economic downturn and increased competition from large quick-service restaurant chains and specialty retailers, the company saw its profits being eroded. The company introduced new products that would appeal to price-skittish customers and implemented techniques that would standardize its stores and reduce costs. The new strategy carries with it its own risks. Starbucks has been known as the “anti-fast food” chain, and any perception that it is now competing with McDonald’s in bare-bone products and services could risk brand devaluation.Starbucks’s most loyal customers might start to see its stores as being no different than any other McDonald’s store, and move to rival coffee specialty stores or independent coffee shops.
The new standardization techniques could also face resistance from Starbucks employees or “partners”. Starbucks “partners” might see the new standardization techniques including time saving measures and material cost reduction measures as a way of turning them into robots or factory workers. Since Starbucks enjoyed such a rapid growth in its business, the company expanded anywhere it saw profitability for its stores.This has meant that Starbucks stores are as readily available as McDonald’s and as such the Starbucks “experience” the company asserts it provides, might be seen as no different than the experience of McDonald’s. As in the case of appealing to mass market with bottomless coffee, Starbucks’s core customer might move to other stores where they perceive the “experience” is still being provided. If Starbucks continues its store closing measures and implementation of its various cost cutting initiatives, Starbucks is likely to see increased profitability.
The firm has closed over 800 company-operated stores in the United States and approximately 100 stores overseas (“Starbucks Posts Strong Fourth Quarter and Fiscal 2009 Results”). Closures of these less profitable stores will likely increase company’s same store sales and profitability. The company is also introducing 100 new stores in US, and 200 new stores in International markets, which might positively affect the company provided they are successful. Aggressive adoption of “no-frills” products to bring in new customers could also affect Starbucks’s profitability.Until now, any increase in commodity prices are more or less offset by company’s high prices, but a “no-frills” products would put downward pressure on company’s profitability, and possibly even damage Starbucks image as an upscale brand.
Conclusion In order to maximize their brand awareness and establish themselves as the most recognized and respected brand in the world and within their target market, Starbucks implemented a well-integrated marketing program that would utilize a marketing mix (product, price, place, and promotion) that would satisfy the needs and wants of its target market.The four elements of marketing mix that Starbucks utilized are as follows: Product: Starbucks product-mix expanded from 30 varieties of whole bean coffees to eco-friendly cappuccino, coffee makers, and other Starbuck paraphernalia. Its product offerings have also expanded beyond pastries and coffee to oatmeal, smoothies, and wraps to keep up with the competition and satisfy more customer needs. The company has also been constantly introducing new products, such as “Instant via Ready” and “Full Leaf Tazo Tea Lattes” and “Tazo Tea Infusions”.The Instant via Ready is an instant coffee that the company claims is indistinguishable from its regular brewed coffee (Jargon). Full Leaf Tazo Tea Lattes and Tazo Tea Infusions are the company’s new tea offerings through which it hopes to attract tea drinkers (Edwards).
The company also offers Starbucks coffee and cappuccino makers for consumers who wish to replace their existing home coffee makers. Price: Starbucks products are priced higher due to perceived upscale image attached to its brand. The company also began to offer $1 bottomless 8 oz. up of coffee, with unlimited refills that cost approximately 50 cents less than any other Starbucks products. The company is also implementing “value strategies” that would emphasize more on inexpensive coffee products rather being perceived as unaffordable to price-skittish consumers. For example, the company introduced $3.
95 “breakfast pairings,” including popular breakfast items paired with a coffee, and highlights $2 brewed coffees instead of the more expensive specialty drinks (Jennings). Place: As stated earlier, Starbucks can be found in any neighborhood where there is a perceived high traffic for its stores.Starbucks outlets can also be found in-store of various large chains including Barnes ; Noble and Target. Their locations are extremely conducive for individuals that are on the go and for those who enjoy reading or listening to music. Starbucks has also been recently testing “stealth outlets”, where the store is named after the street it is located on. The new stores attempt to “localize” Starbucks stores with no Starbucks logo on any of the products being offered there, and instead have the specific street address as the brand name (Allison).
Promotion: Starbucks has implemented numerous promotions to reach its target markets.Promotions are listed as follows: • One of the promotions that Starbucks has used is the Starbucks Card. Starbucks Card is an initiative that offers customers the opportunity to promote company’s products through a referral system. When a customer purchases a gift card, it not only shows brand loyalty, but it also provides the company with free advertising, and brings in new customers. Starbucks also provides a card for corporate sales, which are used for extrinsic rewards to show employee appreciation for a job well done, or a gift to client or a vendor. • Coffee services delivered to offices without coffee size restrictions.
Appealing to a diverse customer base by offering international teas and coffees to accommodate those customers that want a taste from home or for locals that enjoy tea. • Using philanthropy as a means for promotion – Starbucks contributes to several non-profit organizations as a way to improve brand image and awareness in local communities. Recommendation Our recommendations attempt to address each one of the four P’s. Regarding the product, we recognize and would continue the practice of carrying an extensive line of coffee and coffee beans. We recommend extending the line of food that is offered at the retail stores.
The focus should concentrate on fresh baked goods, sandwiches and pastries with natural ingredients such as blueberries and nuts. New and different combinations should be introduced in limited markets and the products that deliver the best results should be retained and added to the permanent menu. The line of personal equipment products by Starbucks can be extended and offered at the retail level or on the company’s web site. We recommend that Starbucks introduce a line of premium fruit drinks. New flavors of energy drinks should be introduced and marketed towards teens.