Synopsis In 2003, Starbucks was listed as one of the Fortune 500. Despite the ongoing recession, the company had managed a 31% increase in net revenues for the year. This was reasonable, considering they only spent about 1% of total sales on marketing. All of this, coupled with the fact that they were popular with customers and employees, was a sure recipe for success. While their domestic figures were rosy, the international operations were losing ground. The once profitable Japanese market was declining, and the European and Middle Eastern ventures failed to gain momentum. Unfortunately, the U.S. market was experiencing saturation and the only way to grow seemed to be the overseas markets. They achieved entry through the use of wholly owned subsidiaries, licensing deals, or joint ventures. Starbucks did not escape the common practice of adapting and integrating the business to different geographic regions, but they did stick to their guns when it came to their standard product line-up and their no-smoking policy. Surprisingly, these conditions were met with wide acceptance. Analysts felt the real challenge would be in the European marketplace, what with coffeehouses on every corner to compete with. Again, the stores did very well, mainly because of the newer, cleaner environment they provided compared to the older locations of established houses. Business was good, but it was not without its problems. There was the political upheaval in the Middle East, followed by further tension after then CEO Howard Schultz commented on growing anti-Semitism in the region. Their integrity came under fire when certain Non-Governmental Organizations (NGO's) accused them of purchasing coffee beans under questionable social and economic conditions. These situations, together with difficult economic times globally, meant that Starbucks was likely going to take a hit somewhere. Eventually, they shut down their Israeli operations altogether. There is speculation that the company was pouring too much capital into its complex system of joint ventures and licensing agreements, and could not get a hold of its operational costs. They decided to source some of their merchandise and disposables to less expensive suppliers as an immediate cost-cutting measure. They also decided to cut back on the number of new stores and shut down unprofitable ones. Starbucks has had to learn the hard way that external forces go far beyond a society's taste in coffee, and that too much growth can have negative effects. Internal Analysis Strengths: · Strong commitment to quality and community · Popular with their employees
t. The dollar amount for cash & cash equivalents increased between 2011 and 2012, yet the percentage of total assets comprising these assets declined. Explain.
Starbucks primarily operates in the retail coffee shop market. The UK coffee shop market alone is estimated at over 16,000 outlets and showed a strong growth of 6.4% in sales during 2013 (FDIN, 2014). The branded coffee chain segment recorded a turnover of £2.6 billion, delivering a higher than market sales growth of 9.3% (FDIN, 2014). The coffee shop sector has seen a considerable growth in the past 15 years and Allegra Strategies (as cited in FDIN, 2014) forecasts that UK’s branded coffee shop market will grow at 10% compound over the next five years.
I would like to proceed with my analyses of the global market place, with examination the young but already well recognized brand world wide ? Starbucks. In my research I will explore on changes in the product, operations, and strategies at Starbucks influenced by the changes in the global marketplace. Due to word limitation on the essay, please refer to Appendixes for more detailed information.
In the case of Starbucks, the domestic market in the USA and Canada were reaching its saturation point in the mid 1990s, where they began to cannibalize the sales of existing cafes with the introduction of new ones. The company operated more than 10,000 cafes across USA and Canada, which along with coffee offered high-speed internet access at 1200 of their cafes. Starbucks had successfully turned coffee into premium commodity (Vishwanath & Harding, 2000) with its $3 lattes. With regards to the down turn in economy, people started to cut back. With saturated markets and the slow economy, the company wanted to increase their revenues by expanding into the European markets.
The Starbucks Story Our story started in 1971. In those days we were a roaster and retailer of entire bean and ground espresso, tea and flavours with a solitary store in Seattle's Pike Place Market. Today, we are favoured to welcome a large number of clients through our entryways consistently, in more than 17,000 areas in more than 50 nations.
Throughout the global market place, countless examples of success and failure exist, but rarely can one turn to a single entity that demonstrates not only success and failure, but also a phoenix-like return to greatness from the ashes of its own demise. Starbucks offers the world that precise opportunity, an examination which reveals the guiding principles that formed the basis of the company’s high and low points over the last several decades. The clear contrast between those principles offers a compelling tale that clearly illustrates Starbuck’s success is the direct result of its organizational culture, effective management decisions, a key core-competency of its managers, and perhaps most importantly, the impact of the company’s chief executive officer, Howard Schultz (Ostdick, 2011).
Schultz has had a lot of success with Starbucks, not only in revenue but he has continued to expand the brands in their portfolio, increase store locations and reach all new highs. Starbucks is now an international company with more than 21,000 stores in over 65 countries (Starbucks Coffee International, n.d.). Starbucks believes their global success has a lot to do with their international partners. Schultz explained it nicely when he said, “We remain highly respectful of the culture and traditions of the countries in which we do business. We recognize that our success is not an entitlement, and we must continue to earn the trust and respect of customers every day” (Starbucks Coffee International, n.d.). Schultz continually sees opportunity and the ability for growth, with an increase in locations across the globe every year and the ability to keep up with the latest in technology (websites, online shopping, a Starbucks application with the ability to pay and reload loyalty cards on your smart phone), etc.
There is a great differentiation between Starbucks and the independent coffee houses, inconsistent with the desired one wrong positioning. We can trace the causes of these problems, by looking at the strategy of Starbucks. Since a strategic marketing group is lacking anyway. This was a major flaw in the strategy, and it is believed to be the most important cause for the wrong positioning and brand image.
Starbucks started out as a small company that only sold coffee grounds. Not all of the different style of beverages that they do today. Starbucks has progressively become better and better. The reason for this is that Howard Schultz has constantly changed the company as the world has changed. For example on December 06, 2011 Starbucks released an app that customers could use on a mobile phone to pay for their drinks at starbucks. Technology in the world is constantly advancing and Starbucks knew that so they adapted to the new changes and made this app. Another example is the new line of drinks Starbucks has come out with, Starbuck 's refreshers beverages, that are not a roasted coffee like every other dark coffee, but it still has the caffeine and other natural qualities that comes from a coffee bean. By doing this it has opened up Starbucks to even more customers because some people hate the taste of
With clear core values towards providing quality coffee, the best service, and atmosphere, Starbucks has enjoyed great success since it was founded 30 years ago. The company has being doing very well for last 11 years with 5% or more store sales increase, even with the rest economy still reeling from the post-9/11 recession. However recent research, conducted to Starbucks, have showed some concerns regarding company’s problem meeting customers’ expectations.
In March of 1971, Starbucks opened its first location in Seattle Washington’s Pike Place Market. The owners Jerry Baldwin, Zev Siegel, and Gordon Bowker had no intentions of serving coffee but a place to sell coffee beans and coffee machine equipment. After ten years of selling beans and machines, Howard Schultz was hired as Director of Retail Operations. He decided it was best to start selling and serving coffee. The owners had not been convinced on selling and serving coffee, so Howard decided to leave and start his own business called II Giornale (a chain of coffee bars) in 1986 (Coffee, n.d.).
Great quality products, customized, served in clean, convenient placed stores for everyday coffee, friendly and fast serving, everything in a pleasant atmosphere - these were just few factors that lead to the great success of Starbucks during the nineties. Their USP was a place where every American could escape from home or work, for a coffee drinking ritual; high quality coffee, according to each customer's taste, served in a special, intimate ambience. Their image was supposed to appeal to anyone, being based on the idea of community, "exploiting" the need of people to interact with each other, in a "third place", away from home or work.
While some believe the company is growing too rapidly and repeat the mistake McDonald’s made by opening too many stores of offsetting its own profits, Starbucks still continues to remain strong. It has also been able to achieve growth in other ways by developing new products, such as the much-anticipated Starbucks Liqueur.
In addition to being best-known supplier of the finest coffee and promising only the highest quality products, Starbucks emphasizes firm values, provides guidelines to enhance employee self-esteem. This is to ensure continued customer satisfaction. Moreover, diversity has become a priority to providing an inviting environment to all consumers. Starbucks continues to abide by a strict, slow growth policy in which they set out to dominate a market before moving on to expand, thus history has shown this strategy to be successful for Starbucks, making them one the fastest growing companies nationwide.
Usually that revenue growth is in line with the growth of the economy”. I believe there are thousands of students contributing to Starbucks 's growth today. “As a result, mature companies tend to engage more in inorganic growth to fuel innovation. That means acquiring start-ups or middle-sized companies”. Not all products have been a home run for Starbucks. A lot of their flavored lattes, recipe process, technology endeavors have been part of the declining stage as well. However, Starbucks does have product extension for some items and they tend to return them ever so often due to holiday or