Economy

Nihat Canak

Starbucks Business Case Study

Scholarly Research Paper

Western Carolina University Cullowhee.

Starbucks Coffee Company

Assignment 1

Marketing Management & Mature Consumers

Nihat Canak
07/13/2006

Index of contents

1 What is Starbucks product?.........................................................................................1

2 What changes in society have helped Starbucks be successful?.................................1
3 What strategic factors account for Starbucks success in developing
brand equity? ..................................................................................................................2
4 What opportunities and threats face Starbucks? ........................................................3
5 What are the advantages of the Starbucks Card to the company and to
customers?.......................................................................................................................4
6 What should Starbucks do to continue growing its revenues and
earnings?..........................................................................................................................4
7 Evaluate Starbucks mission statement and guiding principles. What do
they suggest about the company?..................................................................................5
Bibliography..........................................................................................................................6

II

What is Starbucks product?

Starbucks purchases and roasts high-quality whole bean coffees and sells them, along
with fresh, rich-brewed coffees, Italian-style espresso beverages, cold blended
beverages, a variety of complementary food items, coffee-related accessories and
equipment, a selection of premium teas and a line of compact discs, primarily through
company-operated retail stores. Starbucks also sells coffee and tea products and licenses
its trademark through other channels and the company produces and sells bottled
Frappuccino coffee drinks and Starbucks DoubleShot espresso drink and a line of ice
creams.

Concluding, Starbucks is able to sell in some respects emotions and experiences. This is
basically what every marketing try to realize and to measure. By providing a unique
atmosphere, the customers enjoy the time they spend in the stores. The interior design
and the smell of coffee are the most important aspects that support the companys storeconcept.

What changes in society have helped Starbucks be

successful?

There are several changes in society that helped Starbucks getting succesful. In my
opinion, the most important change of the last two, three decades (time of operation of
Starbucks) is the change of economics. Starbucks strategy comprises to locate its stores
at special places such as urban areas, the first floor of blocks of offices, and entrances of
the underground. These places, of course, get the more crowded the better the economic
situation is.

In addition, the development of information technology and related media is another

aspect. On the one hand, it helps the company to reach new customers and on the other
hand the company encompasses multiple music and technology based initiatives
designed to appeal to new and existing Starbucks customers.

Among these initiatives are strategic marketing and co-branding arrangements, such as
the 24-hour Starbucks Hear Music TM digital music channel 75 available to all Satellite
Radio subscribers,

and the availability of wireless broadband Internet service in company-operated retail

stores located in the United States and Canada. Additionally, the entertainment business
includes Starbucks Hear Music's innovative partnerships with other music labels for the
production, marketing and distribution of both exclusive and nonexclusive music, music
programming for Starbucks stores worldwide, and CD sales through the company's
website.
Furthermore, a more abstract change is the way of life in the modern world. People
are more often outside having their day by day issues. Because of this hecticness a to
go coffee seems to be beneficial for busy people.

What strategic factors account for Starbucks success in

developing brand equity?

Specialty

Operations

strive

to

develop

the

company's

brand

outside

the

company-operated retail store environment through a number of channels. Starbucks

strategy is to reach customers where they work, travel, shop and dine by establishing
relationships with prominent third parties that share the company's values and
commitment to quality. These relationships take various forms, including licensing
arrangements, foodservice accounts and other initiatives related to the company's core
businesses. The company plans to continue rapid expansion of its retail operations to
grow its Specialty Operations and to selectively pursue other opportunities to leverage
the Starbucks brand through the introduction of new products and the development of
new channels of distribution. The company also locates retail stores in select rural and
off- highway locations to serve a broader array of customers outside major metropolitan
markets and to expand brand awareness.

What opportunities and threats face Starbucks?

Starbucks most important opportunity for expanding its retail business is to increase its
market share in existing markets primarily by opening additional stores and to open
stores in new markets where the opportunity exists to become the leading specialty
coffee retailer. There are still multiple markets in countries with metropolitan areas that
Starbucks has to enter. The company still has the chance to take advantage of the first
mover in these locations.

There are several threats that face Starbucks. The company's financial performance is
highly dependent on its United States operating segment, which comprised 84% of
consolidated total net revenues in fiscal 2005. Any substantial or sustained decline in
these operations could materially adversely affect the company's business and financial
results.

Furthermore, Starbucks believes it has built an excellent reputation globally for the
quality of its products, for delivery of a consistently positive consumer experience and
for its corporate social responsibility programs. Consumer demand for the company's
products and its brand equity could diminish significantly if Starbucks fails to preserve
the quality of its products, is perceived to act in an unethical or socially irresponsible
manner or fails to deliver a consistently positive consumer experience in each of its
markets.

What are the advantages of the Starbucks Card to the

company and to customers?

The Starbucks card program has been widely accepted by millions of consumers
throughout the United States for its convenience and speed of transactions, and, like
other Starbucks merchandise, makes a great gift. Starbucks fully-integrated card system
allows consumers to make purchases and reload funds on existing cards at any of the
company's locations throughout the country.

The advantage for Stabucks is obvious. First, it is a great tool to generate customer
loyalty. Second, The company requests or requires customers seeking the issuance of
the card to provide a usually minimal amount of identifying or demographic data, such
as name and address. Application forms entail agreements by Starbucks concerning
customer privacy, typically non-disclosure of non-aggregate data about customers. The
company uses aggregate data internally as part of its marketing research.

What should Starbucks do to continue growing its

revenues and earnings?

The company's long-term goal is to open approximately 15,000 Starbucks stores in the
United States and at least 15,000 stores in International markets. Starbucks expects
annual total net revenue growth of approximately 20% and annual earnings per share
growth of approximately 20-25% for the next three to five year period. Effectively
managing growth on this scale is challenging, particularly as Starbucks expands into
new markets internationally. The company needs to ensure a consistent supply of high
quality raw materials, to hire sufficient numbers of key employees to meet the
company's growth targets, to maintain an effective system of internal controls for a
globally dispersed enterprise and to train employees worldwide to deliver a consistently
high quality product and customer experience. Achieving the company's growth targets
is also dependent on its ability to open more new stores in the current year as well as
future years than it opened in prior years.

Evaluate Starbucks mission statement and guiding

principles. What do they suggest about the company?

Starbucks mission is to be the premier purveyor of the finest coffee in the world. Coffee is a
semi-luxury and that is why the company wants to ensure a high quality of the products it
offers.

For Starbucks, the quality aspect seems to be one of the most important and crucial factors for
its success. Therefore, the company tries to communicate this philosophy to all levels of its
hierarchy, from high-end managers to cashiers. The company trains its employees worldwide

to deliver a consistently high quality product and customer experience. The company
knows that to deliver an enjoyable time in the stores it has to provide premiumproducts through friendly employees. The companys mission statement, guiding
principles, and philosophy make me suggest that Starbucks wants to position itself as a
"third place'' between home and work where people can gather together for human
connection.

Bibliography
1. Marketing Management: Knowledge and Skills by J. Paul Peter, Jr, James H
Donnelly, and Jr, James Donnelly
2. http://www.starbucks.com/default.asp
3. Annual Report 2005
4. http://en.wikipedia.org/wiki/Main_Page