Starbucks Case Analysis

Starbucks Case Analysis

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Starbucks Case Analysis

Table of Contents

I. Executive Summary
II. Company Profile
III. Marketing Analysis
IV. Competition
V. Company Product and Services
VI. Recommendations/Conclusion

I. Executive Summary
In 1971, three young entrepreneurs began the Starbucks Corporation in Seattle Washington. Their key goal was to sell whole coffee beans. Soon after, Starbucks began experiencing huge growth, opening five stores all of which had roasting facilities, sold coffee beans and room for local restaurants. In 1987, Howard Schultz bought Starbucks from its original owners for $4 million after expanding Starbucks by opening three coffee bars. These coffee bars were based on an idea that was originally proposed to the owner who recruited him into the corporation as manager of retail and marketing. Overall, Schultz strategy for Starbucks was to grow slow. Starbucks went on to suffer financial losses and overhead operating expenses rose as Starbucks continued its slow expansion process. Despite the initial financial troubles, Starbucks went on to expand to 870 stores by 1996. Sales increased 84%, which brought the corporation out of debt. With the growing success, Starbucks planned to open 2000 stores by year 2000.

II. Company Profile
Starbucks recognizes its employees for much of its success. This is due mostly to maintenance of a great and proven work environment for all employees. The company does not have a formal organizational chart; sot employees are permitted by management to make decisions without a management referral. Moreover, management trust and stands behind the decision of the employees and it is this that allows for employees to thinks for themselves as a part of the business, so as to make them feel as a true asset and not as just another employee.
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.

III. Marketing Analysis
As we know, Starbucks has made a name for itself making and selling coffee and specialty coffee drinks. It has made its biggest impression by becoming the espresso expert and public educator of how to make the perfect espresso; "Roasters" of the company are trained for one year.

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So as it can be said, Starbucks has been one of the only companies to recognize that there is money to be made in making coffee beverages and selling coffee products. They have shown their superiority in purchasing a select crop of coffee beans, which is known to brew the world best coffee in the world and outbidding top European buyers. In addition, Starbucks has expanded its product line to include packaged and prepared tea as to cater to additional consumers who may not be "coffee drinkers", also, flavored decaffeinated coffees, other specialty flavor drinks (i.e. Smoothies), and light lunches. However not only has the menu expanded, but also Starbucks has moved to expand internationally and pursue opportunities in to joint ventures with other corporations, such as Borders which have grown to be successful.
Currently, more and more consumers are growing more health conscious; people are cutting back on their consumption of caffeine intake. However, there has not been a noticeable rise in decaffeinated coffee consumption. Coffee beans prices are expected to rise due to the low supply. The end result, higher cost affects the markets and can heighten competition. However, Starbucks major competitors are regional coffee houses.

IV. Starbucks SWOTS Analysis
Strengths:
Starbucks has much strength, although it can't be said that they have a monopoly, they certainly lack competition on a national level and enjoy the lions share of the market. Regionally, they have experienced competition from coffeehouses such as Millstone Coffee, Caribou Coffee and recently Borders Coffee.
One of Starbucks key strengths is found in its Marketing strategy and the product and services that it offers. The coffeehouse in itself was not a novel concept in the United States; coffeehouses were always popular in college and university towns. Starbucks took the concept, refined and duplicated that concept and sold it to the masses.
Weaknesses:
Starbucks largely rely on countries located in remote areas of Asia for its products – Ceylon, India, Sumatra etc. Countries in that region have been experiencing a wave of natural disasters over the past year, from Tsunamis to earthquakes and floods and it appears that there is no end in sight.
Such natural events are affecting production and price; this poses a problem for the bottom line. In addition, Starbucks does not seem to have suppliers in other regions; this is a major weakness that needs to be addressed immediately.
Opportunities:
There are many opportunities for growth for Starbucks. The brand is a domestic behemoth, there exists partnership opportunities for growth in the international markets, especially in Europe where the populace spend a good deal of their time in coffeehouses.
Traditionally, Starbucks do not franchise, recently they established a partnership and licensing with Magic Johnson and his company and have experienced wild success. More opportunities lay ahead, if the Magic Johnson deal can be replicated.
Threats:
Whenever and wherever there exist a number one, in the wings there is always a number two lurking, plotting and preparing to knock off number one. The rise in the popularity of the coffeehouse has helped regional coffeehouses build their brands.
There is health and fitness craze taking the country by storm. In an effort to become slim, fit and trim, Americans are decreasing their caffeine intake and that often times mean decreasing the intake of coffee.

V. Company Products and Services:
When a customer enters a Starbucks coffeehouse, the customer is not merely purchasing a cup of "Java"; the consumer is paying $3.60 for the ambience, the feel, the experience and the privilege of being a member of the elite coffee connoisseurs club. "Culture" is the transparent product in the more than fifteen-product line up that is on the menu and that realization is a strength that can't be easily identified or duplicated.
The Starbucks product line up range from, but are not limited to roasted coffee beans, ground coffee, prepackaged tea and most notably an extensive menu of freshly brewed coffees and teas.
The savvy coffee connoisseur has the ability to modify and manipulate his coffee to order. One can sit in the opulent atmosphere of living room style coffeehouse and enjoy a fine cup of tea or coffee based beverage served in fine ceramic and stoneware. For the hurried, a quality signature Starbucks beverage can be procured at the drive-though lane in a variety of small, grande or venti size.
Coffee and espresso-making equipment and accessories are also made available to its clientele at the Starbucks retails stores. For those who reside long distances away from a local Starbucks, Kraft Foods through a long term licensing deal has made Starbucks products available to you at your local grocery chains. The Pepsi-Cola Company has also made ready-brewed and bottled Starbucks drinks available to those want the convenience of Starbuck in the comforts of home.

VI. Conclusion and Recommendations:
Starbucks has been a very successful company, though innovative ideas and persistent slow-growth it has gained a competitive advantage. The challenge now is continue to grow and increase its market share. Expansion into the international market will especially prove challenging.
If Starbucks is to remain a stellar success, they need to implement a plan to explore alternate sources for product procurement and find solid partners in the international marketplace.
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