CASE STUDY REPORT:

REAL CHOICES AT STARBUCKS

SUBMITTED BY Toufiq Khan Majlis ID 1191744 tmajlis1@ashland.edu

Initial Study
Starbucks Corporation, the largest coffeehouse company in the world, with 19,435 stores in 58 countries, including 12,781 in the United States, 1,241 in Canada, 1,062 in Japan, 976 in Great Britain and 645 in China, started it's journey as a local coffee bean roaster and retailer of whole bean and ground coffee, tea, and spices in Seattle, Washington. The first Starbucks opened in Seattle, Washington, on March 30, 1971 by three partners: English teacher Jerry Baldwin, history teacher Zev Siegl, and writer Gordon Bowker. From 1971, a single store in Seattles Pike Place Market it has become the world renowned brand we know today. Its wide range of product selection includes 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 tumbler. Although the company has many stories of successes some of its actions have also faced a great deal of criticisms. At the dawn of the new century it faced sales slowdown of its one of the most well-known brand the Frappucchino. The original Frappuccino beverage was developed, named, trademarked and sold by George Howell's Eastern Massachusetts coffee shop chain, The Coffee Connection. When Starbucks purchased The Coffee Connection in 1994, they also gained the rights to use, make, market, and sell the Frappuccino beverage, and soon after began to sell the beverage across all Starbucks outlets. Frappuccinos consist of coffee blended with ice and various other ingredients, usually topped with whipped cream. Frappuccinos are also sold as bottled coffee beverages in stores and from vending machines. At this products peak, it was expected to be sold on more than $2 billion per year, but that didnt happen because rivals to Starbucks such as Dunkin Donuts, McDonalds, along with numerous other smoothie chains introduced many good alternatives to this product. Thus after facing very tough competitions, the Starbucks used a variety of strategies to extend this brand like introduction of Frappuccino flavored ice creams, introductions of new blends of Frappuccino targeted only for certain specific regions of the world. The chain also looked for options to implement however-you-want-it-Frappuccino customizations at a quality price, the target market of these are 18 to 24 year old females who looks for low calorie product. In order to implement these customizations the company must deal with problems such as longer production time, complicated employee training, customer service time managements etc.

Important Factors Analysis

Strengths With 19,435 stores in 58 countries Starbucks Corporation earns a great amount of money each year close to $11 billion. The company has a huge number of regular followers and they will likely to follow new offerings by the company.

Weaknesses Issues like handling long lines of customers, longer times to prepare and serve snacks and drinks, complicated employee trainings exposes that the company has some operating policy problems which are very much expected from a large coffee chain like Starbucks. The company can overcome these issues.

Opportunities The company offers a wide variety of products suited to customers of specific regions of the world, such as Saseme Frappuccino in China, Red Bean Frappuccino in other Asian countries. Furthermore the product depth and width of the company is very satisfactory. The company seems to be very much dedicated to always enhance and

Threats Dunkin Donuts, McDonalds etc rival companies along with many small companies around the world are offering newer services nearly every week. Besides these companies retail chains like Walmart, Kmart, Targets often have their own coffee corners which also provides cheaper alternatives to Frappuccino. With a every single bad product lunch or promotion the Starbucks may lose some if not all potential or existing customer.

Proposed Decision Alternatives

Further Cost Reduction The company can reduce its operating cost to maximize its profit by many different ways automating certain processes like handling long line of customers by intelligent drive by system like Taco Bell or using more vending machines which may help to reduce some workforce, reducing the number of outlets, getting rid of less popular products from the product line and minimizing the cost of product preparations. More Product Promotion The company can actually promote targeted product promotion for different age groups, ethnicity, and nationality more aggressively. Adapted products for parents of young kids who seek healthy foods for their children or senior citizens who seek healthy foods provide great opportunities for the company for new product lunch. Additional Investments in Research & Development Additional investments to design, develop, and implement new products and also newer methods to prepare and serve these products or the existing once is crucial for the maximization of companys annual revenue. Inclusions of newer mixing, blending, freezing, coffee making and vending machines, newer ways to deliver products that are economically and technologically viable will obviously be welcomed to achieve the goal of maximization of companys annual revenue.

Recommendation of Marketing Strategy

The most crucial priority for the company should be to minimize the product delivery delay. All the decisions to improve the service quality of Starbucks discussed so far has to be implemented without putting unnecessary pressures to existing outlets gradually. To implement anything new the company must consider answering some questions regarding issues such as pricing of products, stuff trainings and the regular actions of the competitors.