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Submitted by:
Formeloza, Elyssa Earl M.
I. Title of the case
Starbucks in 2015
III. Summary/Abstract
The first Starbucks store was opened in Seattle on March 30, 1971 by three
partners and the name of the store originated from the novel Moby Dick. The firm
believes in supplying and serving the best coffee possible by using the highest
standards of quality whilst adhering to ethical trading and responsible growing
practices at the same time. In 1987 the first stores were opened outside of
Seattle, in Vancouver and Chicago and in the subsequent years stores followed
the expansion were much more extensive across North America.
Starbucks sells a variety of products which include high-quality whole bean
coffees along with fresh rich-brewed coffees, Italian-style espresso beverages
and cold blended beverages, a collection of complementary food items and also
a selection of premium teas and beverage-related accessories and equipment.
There are conflicting reports on the overall market segment that Starbucks
possesses, although according to Mintel a global consumer research firm,
Starbucks had a 73% market share of U.S. coffeehouse sales in 2005, and this is
significant because the majority of its revenue comes from their home market
which is 2.1 billion compared to an overseas share of just 640 million.
Amongst Starbucks’ many achievements is its spot of being 1 best coffee in the
fast food and quick refreshment categories and one of the “world’s most ethical
companies”. Its performance as a multinational firm has increased over time and
as such led to expansion in global operations. The recession was a major factor
that impacted the company’s position because prior to that, Starbucks was
known for having a café around every street corner. However prioi to the
recession in 2007, their share price traded at 38.41 and a mere two years later
the price had fallen to a measly 9.91, “profits were down for the last three months
of the year from an astronomical 158.5 million to 5.4 million.”
The turnaround for Starbucks started with the restructuring of management
where the former chief executive Howard Schultz took back the role and set the
company’s focus on core markets and utilizing technological breakthrough to
introduce Starbucks coffee in an instant form. Starbucks went back to its roots by
focusing on customer service that was neglected during rapid expansion. All
these decisions helped contribute to the sales flourishing and “profits rising’ to
high levels once again.
Vision
“Establish Starbucks as the most recognized and respected brand in the world.”
Mission
“To inspire and nurture the human spirit – One person, One cup, and One
Neighborhood at a time.”
Core principles
1. Provide a great work environment and treat each others with respect and
dignity.
2. Embrace diversity as an essential component in the way they do business.
3. Apply the highest standards of excellence to the purchasing, roasting and
fresh delivery of their coffee.
4. Develop enthusiastically satisfied customers all of the time.
5. Contribute positively to their communities and their environment.
6. Recognize that profitability is essential to their future success.
V. Central Problem
Consumer preferences could shift from coffee to other beverages while there is a
fluctuation in the market prices of high quality coffee beans.
Weaknesses
1. High product price. Some customers switch to competitor’s products with
lower prices.
2. Over saturation of Starbucks in some areas because they expand quickly.
3. Too many products By constantly adding products, some products have lost
value, Seattle’s Best for example, and they are risky endeavors.
Opportunities
1. Expanding product mix and offerings like healthy drinks, organic drinks,
energy drinks and kid focused drinks.
2. Brand extensions. They have a powerful image and it can leverage it to
extend into horizontal lines of its business and also venture into product
diversification with keeping brand dilution risk in check.
3. Technological advances like use of mobile applications.
4. On-the-Go Lifestyle, an instant coffee and other products to be in groceries
and convenience stores.
Threats
1. Changing customer’s taste and preferences.
2. The shift of consumers toward more healthy products.
3. Increased competitions from other sectors such as restaurants and other big
coffee shops.
4. Significant fluctuations in the market prices of high quality coffee beans which
they cannot control.
X. Potential Problems
1. What if the prices of the product increase?
3. What if new competitors will enter the business and have much more to offer?
2. Create new “digital order managers” (DOMs), tablet-based systems that let
baristas track and manage all incoming orders.
3. Think of another strategy in a way that it can maintain their track in the
business world and have a strong advertisement.