Starbucks

Starbucks

Introduction

"Rewarding everyday moments". The Starbucks Mantra clearly implies that they are not selling just coffee. They claim to be selling the coffee experience. Their coffee bars that sell specialty coffee also gives customers an ambience where they can be themselves. Starbucks advertises themselves as the third place between home and office, where you can escape, reflect, read, chat or listen. They have become the largest player in the coffee industry and is still looking for avenues to expand themselves.

Problem Statement

The two questions that arose in Mr.Schultz's mind captures the problem faced by Starbucks.

"Was Starbucks growing in the best way possible?"

"Was Starbucks overextending in its quest for growth?"

Options in front of Starbucks

The dilemma of Howard Schultz right now is what next?. Where does starbucks go from here? The available options in front of them are the following

1. New Specialty Sales partners: The option currently in front of starbucks is to collaborate with McDonalds who has been approaching them for this joint venture.

2. Expansion of Domestic and International retail markets: With the target of 2000 stores by year 2000, Starbucks is on an expansion mode. They are expanding into the international markets and simultaneously they are diversifying in the domestic markets also. Initiatives like Frappuccino and the Doppio cart are part of this.

3. New Products: Right now, Starbucks is not targeting the younger generation well because the youth are not avid coffee drinkers. For this purpose they could launch a range of new products like flavoured coffee which the youth prefers.

Analysis of Options

While thinking in terms of collaborating with new speciality partners, we have to take care that the brand does not get diluted. Taking the case of McDonald's specifically, there are many factors that need to be considered. Looking at the pros of the proposal, we can see that you can potentially increase the customer base through this collaboration and the brand awareness may increase among the people that come to McDonalds . It might help us in targeting the youth segment that has been proving elusive in the other campaigns. But seeing the other side of the coin, there is a possibility of brand dilution when collaborating with McDonalds because there starbucks coffee might become a secondary product. The association of coffee with burger is not a popular one as burger with coke. So there the starbucks brand will not get the desired visibility. Another point being that the type of consumers who come to McDonalds is different from those who come to Starbucks coffee bars.