Starbucks Case

Starbucks Case

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Starbucks Corporation is a multinational coffee and coffeehouse chain company based in the United States. Starbucks is the largest coffeehouse company in the world, with 8,505 company-owned and 6,506 licensed stores in 42 countries, making a total of 15,011 stores worldwide. Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, snacks and items such as mugs and coffee beans. Through its Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film. Many of these products are seasonal or specific to the locality of the store. Starbucks brand ice cream and coffees are also sold at grocery stores.
From its founding in Seattle, Washington, by Gordon Bowker, Jerry Baldwin, and Zev Siegl as a local coffee bean roaster and retailer, Starbucks has expanded rapidly. In the 1990s, the company was opening a new store every workday, a pace that continued into the 2000s. Domestic growth has since slowed down, though the company continues to expand in foreign markets and is opening 7 stores a day worldwide. The first location outside of the U.S. and Canada was established in 1996, and they now constitute almost one third of Starbucks' stores.
As of November 2007, Starbucks had 8,505 company-owned outlets worldwide: 6,793 of them in the United States and 1,712 in other countries and U.S. territories. In addition, the company has 6,506 joint-venture and licensed outlets, 3,891 of them in the United States and 2,615 in other countries and U.S. territories. This brings the total locations (as of November 2007) to 15,011 worldwide. Starbucks can be found in many popular grocery chains in the U.S. and Canada, as well as in many airports.
You may be wondering what contributed to the success of this company. The answer is simple; Starbucks understood the importance in building the brand. In my opinion, most people think that the only keys to success in building a brand is to have a genius marketing strategy combined with a great advertising campaign with mass appeal to worldwide markets. While I do believe that is all true, I also understand the importance of research relative to opening any business. What good is carrying a product if its not moving of the shelves, so to speak, or if its not living up to the expectations of your customers because it lacks quality. It does nothing but hurt the product brand which means declining sales for your company.

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Its important to understand your customer and what he or she deems as value. I think that
Starbuck’s had an excellent way of doing this, which is what assisted them in building the brand. It understood that building the brand was more about the customer’s experience inside the stores, which was one of the keys to the customer’s attachment. In building the brand, it also understood how to be a large company, yet it still manages to maintain a level of intimacy for its customers. It was the overall Starbucks experience: the customer’s reaction to the coffee, the staff who prepared it, and the store’s atmosphere that built their brand and their sense of community is what contributed to building their brand values. Its a social experience and I believe that is a major contribution to the brand value!
In my belief, this is true because whenever I patronize a store I like to have a relationship with the staff or at least feel a sense of comfort inside the store. You know its simple, you go to your favorite Starbucks and you have a cozy extension of your home where you can meet and chill with friends or co-workers and also interact with your buddy behind the counter. Initially, the company that was established in Seattle in early 1971 didn’t sell coffee by the cup. Even still, the reputation of the company spread rapidly because of the brand value. The company sold freshly roasted gourmet beans which produced high quality coffee. That was their keys to building both the brand and the brand values for the company.
Howard Schultz, joined Starbucks as director of retail operations and marketing in 1982. Schultz traveled to Italy in 1984 on business and was impressed with the coffee bar culture and returned to the U.S. determined to transplant it to America. He left Starbucks when the founders decided not to expand the business to include coffee bars. In 1985, he raised money and opened a successful coffee bar in downtown Seattle which ultimately led to the opening of two more bars. In early 1987, Schultz saw an opportunity to expand his business even faster, acquired equity in Starbucks, and became Chairman by purchasing the Seattle assets of Starbucks, including its name, for $3.8 million dollars. In taste, smell, preparation, and overall appeal, Starbucks was markedly different which meant they could sell coffee at a premium price. This was also a source of their equity.
Starbuck’s growth strategy is interesting to me. It is obvious that the company erects new locations at an alarming rate. If you are a resident of Manhattan then you will tend to agree with me. You can practically see a Starbucks on every other city block. I understand that Starbuck’s growth strategy was to develop and cement a strong presence in terms of market entry, increase sales, expand brand awareness, and preempt potential competitors. However, I’m not sure that expanding at such an extreme rate was beneficial. If I had to do anything differently, the only thing I wouldn’t have done was to establish so many locations throughout one particular area. Why? Rapid expansion of cafes could dilute the Starbucks experience. However, an increase in store locations could also mean an increase in profit as well as brand recognition. Why? Millions of people reside in NY and need easy access to store locations. This is just my observation.
I believe that leveraging the brand was essential to the growth of the company. I think that creating partnerships with companies such as Pepsi Cola, Dryer’s Grand Ice Cream Company, Barnes & Nobles, Nordstrom, and United Airlines was an excellent idea. They would be able to evaluate their decision to partner by monitoring sales. In my opinion, it was also a great idea because it gave the company an opportunity to be innovative and to build brand awareness to consumers who may have never frequented a Starbucks location. It was a great distribution alternative, but I also think that diversifying products is good for both the organization and the consumer.
To make a world class global brand such as Starbucks, I believe the organization would have to thoroughly research the global market to determine if there is a market and a need for a particular idea, product or service. I’m sure that there were a lot of factors Starbucks considered while developing their global strategy. For example, do we have enough capital to finance any overseas ventures, do we have enough human resources with international business experience to spearhead these projects, are we prepared to contend with any unforeseen occurrences that we will encounter in a foreign country, should we be proactive or reactive, etc. All of these things, and more, must be taken into consideration when any company desires to create a world class global brand in the global environment. They would also need to keep these factors current in order to face any future hurdles in global markets. Other global hurdles they could potentially face are high startup costs, stiff competition, and resistance to the Starbucks experience.
In addition, they need to do an appraisal of their goals, strengths, and limitations in order to remain successful. Right now I believe that in the American market Starbuck’s biggest challenge is retaining business due to the premium pricing of their company. That is a major hurdle to face because the last thing they want to do is lose market share. I think that diluting the meaning of the brand by undermining what the brand stands for is another challenge they face. Overall, however, I believe that Starbucks is a success story and has definitely redefined the coffee shop experience.
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