Starbucks Coffee

A Case Study

GAURAV MOMTWANI 045

HIBA SHAKEEL 013
AAMIR ZAIDI 048
ANISHA BALWANI 003
GURTEJ BINDRA 072
OSHIN JANGALWA 025
ISHITA CHATURWEDI 046
NITESH KUNDNANI 036
1
 STARBUCKS HISTORY
0
3
1971 Starbucks opens first
store in
Seattles Pike Place Market.
Three friends, Jerry Baldwin, Zev Siegl,
and Gordon Bowker, who all had a
passion for fresh coffee.

The name was inspired by Herman

Melvilles classic novel Moby Dicks
first mate.

This name and the mermaid logo were

inspired by the love of the sea, from
Starbucks original location in Seattle
Washington in the heart of Pike Place
Market.
 History 0
4
1982 Howard Schultz joins Starbucks as director of retail
operations and marketing. Starbucks begins providing coffee to fine
restaurants and espresso bars.
1983 Howard travels to Italy, where hes impressed with the
popularity of espresso bars in Milan. He sees the potential to develop a
similar coffeehouse culture in Seattle.
1984 Howard convinces the founders of Starbucks to test
the coffeehouse concept in downtown Seattle, where the first
Starbucks Caff Latte is served. This successful experiment is the genesis for
a company that Schultz founds in 1985.
1985 Howard founds Il Giornale, offering brewed coffee and
espresso beverages made from Starbucks coffee beans.
1987 Il Giornale acquires Starbucks assets with the backing of
local investors and changes its name to Starbucks Corporation. Opens in
Chicago and Vancouver, Canada.
Total stores*: 17
 History 0
5
1991 Becomes the first privately owned U.S. company to offer a
stock option program
that includes part-time employees.
Opens first licensed airport store at Seattles Sea-Tac International Airport.
Total stores: 116

1992 Completes initial public offering (IPO), with common stock being
traded on the NASDAQ National Market under the trading symbol SBUX.
Total stores: 165

1993 Opens roasting plant in Kent, Wash.

Announces first two-for-one stock split.
Total stores: 272

1996 Begins selling bottled Frappuccino coffee drink through North

American Coffee Partnership (Starbucks and Pepsi-Cola North America).
Opens stores in: Japan (first store outside of North America) and Singapore.
Total stores: 1,015
 History 0
6

1997 Establishes The Starbucks Foundation, benefiting local literacy

programs.
Opens stores in: the Philippines.
Total stores: 1,412

1998 Acquires Tazo, a tea company based in Portland, Ore. Extends the
Starbucks brand into grocery channels across the U.S. Launches
Starbucks.com.
Opens stores in: Malaysia, New Zealand, Taiwan, Thailand and U.K.
Total stores: 1,886

1999 Partners with Conservation International to promote sustainable

coffee-growing practices.
Acquires Hear Music, a San Franciscobased music company.
Announces third two-for-one stock split.
Opens stores in: China, Kuwait, Lebanon and South Korea. Total stores:
2,498
 Starbucks Six Principles 0
9
Provide a great work environment and treat each others with
respect and dignity.
Embrace diversity as an essential component in the way they do
business.
Apply the highest standards of excellence to the purchasing,
roasting and fresh delivery of their coffee.
Develop enthusiastically satisfied customers all of the time.
Contribute positively to their communities and their
environment.
Recognize that profitability is essential to their future success.
 Starbucks Unconventional Marketing Strategy 0
1
0
Starbucks chose an unconventional marketing strategy that may be
unique and seldom-tried, that will most perfectly match the concept
that the company wants to portray.

Perfect Cup of Coffee- Emphasis on product quality. Their coffee, even

though priced slightly more expensive than expected, is notorious for satisfying
customers with its rich, delicious taste and aroma.

Third Place- Creating this unique and relaxing experience and atmosphere
for people to go to between home and work has been very important for the
company as they realized that this is one of the strongest concepts attached to the
company, to which customers have been strongly attracted.
Starbucks Unconventional Marketing Strategy 0
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1
Customer Satisfaction From the entrance to the store to
the very last drop of their coffees, it is a must that customers feel
the uniqueness of enjoying their Starbucks coffee experience.

Creating a Starbucks Community- The Starbucks

marketing strategy has even expanded to create a community
around their brand. On their website, individuals are encouraged to
express their experiences with Starbucks history, and the company
strives to personally join in the discussions.

Smart Partnerships-Starbucks Coffee Company has been

known to create strategic partnerships that demonstrate the fact
that another way to grow your business is to partner smart.
 Starbucks Unconventional Marketing Strategy 0
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2

Innovation- Through the years, theyve added different

flavors to their coffee, more food on their menu, and even
became one of the first to offer internet capability in their
stores.

Brand Marketing- The Starbucks marketing strategy

has always focused on word-of-mouth advertising and
letting the high quality of their products and services
speak for themselves.
 Starbucks Expansion Strategy 0
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Establish hubs in large major cities

Ensure city is able to support 20 or more locations in the

hub within the first two years

Once hub is blanketed, open more stores in smaller city

areas around the region

Implement zone managers to oversee the development

process of each hub
 STARBUCKS MARKET ANALYSIS 0
1
SWOT 4
analysis
 Strengths 0
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6

Global recognition

Quality products

Profitable organization

Strong financial foundation

Visionary leader

Its goal is to become a third place within its

consumers lives.

Offers free wifi connection

Comfortable ambiance
 Brand Image 0
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Focuses on consistency in delivering positive consumer experience stresses the point about
consumer visits to its cafes being an experience

Four store designsone for each of the four stages of coffee making: growing, roasting, brewing,
and aromaeach with its own color combinations, lighting scheme, and component materials

They create a consistent, inviting, stimulating environment that evokes the passion for coffee

Every barista hired for a retail job in a Starbucks store received at least 24 hours training in the first
two to four weeks. The training included classes on coffee history, drink preparation, coffee
knowledge (four hours), customer service (four hours), and retail skills, plus a four-hour workshop
called "Brewing the Perfect Cup.

Quality and keeping all aspects consist is of main concern

EX: Customers who order one pound of beans must be given exactly thatnot .995 pounds or 1.1 pounds;
never let coffee sit in the pot more than 20 minutes; always compensate dissatisfied customers with a
Starbucks coupon that entitles them to a free drink.
 Weaknesses 0
1
High price 8

Importing roasted coffee

Known only for coffee

Excessive focus

Employees report to two division heads

Increasing shareholders dilutes their interest

They have expanded too quickly, and have already saturated the US
market

They do not allow smoking in their stores, alienating some of their

customers
 Opportunities 0
1
New Market Opportunities Internationally, especially in 9
European and Latin American markets

New Products:
Health drinks
Organic drinks
Energy drinks
Kid focused drinks

More bottled drinks sold in stores- Expand on distribution

Form partnerships with other coffee companies- widen

market

U.S. job creation-

Accept donations at CreateJobsforUSA.org and Starbucks cafes
in
the United States
 Threats 0
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0

The coffee market is saturated

Cost of coffee beans is expected to rise in the near

future

Supermarkets threaten whole bean sales

Farmers might switch from coffee to vegetable crops

High competition from Japanese competitors

Consumers trend toward more healthful fare

 Threats 0
2
1
The Threat of New Entry :

McDonald's came into direct competition with Starbucks when

it
upgraded its coffee in 2006
As a result, the average number of customers visiting a Starbucks
store declined from an estimated 460 in 2005 to just above 400
in 2007
With the launch of McCafe in 2008, the competition between the
two chains intensified further.

Smaller privately owned coffee houses

Other coffee shops like Dunkin Donut, Figarro and Coffee

Bean
 Threats 0
2
2

Bargaining Power of Buyers:

Force of the buyers bargaining power is proportional to the ability of
buyers
to force down prices
differentiation involved in the specialty coffee industry and the lack of
differentiation in the basic coffee industry

Image Threat:

Anti-Starbucks Groups:
National Gun Victims Action Council (NGAC)

Unions
Petition for Good Jobs at Starbucks
Increased pay
 Unique Strategy 0
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to capture key locations and open stores in close proximity to each other is
unique strategy for Starbucks

ensures that licensed store that dont meet set achievements are closed
down

Clustering its stores in one area helped Starbucks quickly achieve market
dominance. With over 20 million regular customers per week

Spends less than 1% of its annual revenues on advertising- Starbucks

strategy relies on word of mouth advertising.

Engaging in smart joint ventures with the right companies:

-Pepsi-Cola Co.

- New products: Hot sandwiches, new drinks, coffee liqueurs, instant coffee
 Industry PEST Analysis 0
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4
Political Influences
State & Local government controls

Economic Influences
Changes in disposable income could influence purchase
levels

Social Influences
Consumer preferences could shift from coffee to other
beverages

Technological Influences
Use of technology canimprove operational efficiencies
 Competitors 0
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5

7-Eleven
Dunkin Donuts
McDonald's
Green Mountain Coffee Roasters
Coffee Bean and Tea Leaf
Costa Coffee
Peet's Coffee and Tea
Caribou Coffee
Second Cup
Kraft
Procter & Gamble
Nestl
 Competitive Advantage 0
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8

The above is Porters Generic Competitive strategy. Shown is Starbucks as a whole in

the differentiation strategy as they provide a high quality coffee and unique experience
in the convenience of a large volume of locations, which separates them from their
competition. VIA, the new instant coffee line is straddling differentiation and low cost-
leadership. While it will be a low cost and convenient alternative to Starbucks regular
coffee, it is still unique from other products in the market. The in-store gifts and
brewing utensils are in the focused differentiation category as they cater to the coffee
lover, and are unique items found only in the Starbucks stores.
 0
Porters 5 Forces
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9
 Porters 5 Forces 0
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0

Above are Porters 5 Forces and their level of threat to Starbucks. The bargaining power
of suppliers is high because of the natural resources needed to create their ingredients
and Starbucks believes in finding fair-trade and high quality beans, often from other
countries These specifications limit the number of suppliers. The threat of new entrants
is medium in that the coffee market is changing. The need for ambiance and a place to
share is losing edge to the on-the-go alternatives, and should a new entrant comes
along with a different business model there is room for threat. However, Starbucks is the
household name. Industry competitors is on the rise because of McDonalds creating the
McCafe line. Peets have increased presence as well. Threat of substitutes is low, because
coffee is always going to be a desired drink and pastime of choice.
 Alternative Action 0
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1

There are alternative actions Starbucks can take to secure its competitive
advantage it has upheld for so long. Below is the current value curve for
Starbucks and its most relevant competitors Peets, and the McCafe Line.
Alternative Action 0
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 Alternative Action 0
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MC Donalds shows a similar curve, but lower in all levels. The one item that
truly separates the two is the reputation Starbucks has in the coffee
industry unlike McDonalds. The rest is similar, which shows a threat to
Starbucks becoming part of a red ocean.Peets have an opposing curve,
which could be a threat but their lack of volume, and brand recognition
limits them from competition. My suggestions for the Four Action
framework would be to create more customization by al- lowing users
create new flavors and drinks above and beyond the options they have
now. This would incorporate with the other creation of online user
experience. Users could go on to the online Starbucks interface and have
complete control to create their own drink, order online, find the nearest
Starbucks and receive directions. Users could post their favorite drink
combination and others could vote on it. Also involved in user experience
could be mobile apps, putting in drink orders, finder etc. to enhance the
Starbucks brand in the new digital era and to create a blue ocean for the
coffee experience.
DEMOGRAPHICS 0
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 Starbucks
Today
$15 billion chain coffee business

Total net revenues increased 10% to 2.8 billion

EPS increased 21% to $0.34 in Q2 FY11 compared to $0.28 in

Q210 s 16,706 Starbucks stores in the world located in more
than 50 countries

Starbucks around the Globe

Number of Starbucks stores world wide
3
STARBUCKS EXPERIENCE - 4
Ps
 0
Product What Starbucks can provide for
3
me? 8
Tangible Product
Coffee, coffee bean, tea, food, cold
drinks (milk, water, juice), tea, bottle ,
mug , music and seasonal products

Core Product: services

provided in store Coffee,
considerable service, relieved
atmosphere, decoration , Wi-Fi
connection
Augmented Product:
intangible service
Interaction with customers
 Tangible
Product

Tangible Product
Coffee, coffee bean, tea, food, cold
drinks (milk, water, juice), tea,
bottle , mug , music and
seasonal products
 Core
product

Core Product:
services
provided in
store
Coffee, considerable
service, relieved
atmosphere,
decoration , Wi-Fi
connection
 Augmented
Product

Augmented
Product:
intangible
service
Interaction with
customers
 Placement

Coffee store

Supermarket, restaurants
and bakeries

Online store
 Price Price
High price and high quality

Price = cost + profit

1+1>2

Perceived-value pricing strategy

 Sales
Changing prices

Free coffee in determinate period

Receipt as coupon

Online coupon

Cards

Special offer in website (buy 2 and get 1 free / special discounts)

 Corporate Social
Responsibility(CSR)
Green Stores: Building
greener stores

Purchased renewable
energy

Greener Cups: The

quest for the 100%
recyclable cup
 CONCLUSIO
N
Starbucks success is achieved through a few factors.
Outstanding Quality of the coffee brewed
Excellent service provided at the stores
Fast growth of new stores all around the world

These factors not only have increased the sales but also the reputation among the
coffee lovers. Starbucks encounters aggressive competition in all areas of its
business activity. The market for each of their business segments are
characterised by vigorous competition among major corporations with long
established positions and a large number of new and rapidly growing firms.

Anyway, as Starbucks have a good financial capacity with good strategies; it can
overcome all the competitors to shine high as the first class coffee.