Case Starbucks Returns to its Roots Essay

Starbucks is dominant coffee brand in North America, which also is well-known worldwide. Established in 1971 as coffee shop oriented to a niche of coffee purists, in late 1980’s it turned to be a constantly growing chain of stores that sold whole-beans and premium-priced coffee to mostly affluent, well-educated customers. In years 1992-2002 company was showing at least 5% annual growth. And by 2002 Starbucks was serving already 20M customers in 5886 stores (both operated and licensed) around the globe, had $3.3 billion net revenues and was opening 3 new stores a day in average.

Starbucks was bought out by current CEO Howard Schultz in 1987. Since then, Andrew Harrer (2012) reports the company has grown to operate over “17,244 stores worldwide” (para. 1). Fortune (n.d.) reports in its yearly 100 Best Companies to Work for that Starbucks employs “some 95,000 employees”. From only a handful of stores in 1987 to a billion dollar franchise today, the success of Starbucks is due in great deal to their corporate culture, specifically how employees, or as Starbucks calls them, partners are treated. Joseph Michelli (2007) echoes this sentiment, “A great cup of coffee is only part of the Starbucks success equation” (p. 767).

starbucks Corp., an international coffee and coffeehouse chain based in Seattle, Washington, has expanded rapidly since its opening in 1971. These outrageous success was due to its well-developed strategy vision which lay out the company's strategic course in developing and strengthening its business. Starbucks is a global corporation that sells authentic coffee in 30 countries, reporting revenues of nearly $5.1 billion in 2006. The main goal of Starbucks is to embrace diversity by applying the highest standards of excellence. Starbucks strives to perfect the relationship with the working class by making the service as fast as possible because they believe that every customer has their own personal rate. One

2) Garthwiate, Craig; Busse, Meghan; Brown, Jennifer; Merkley, Greg “Starbucks: A Story of Growth” Harvard Business Publishing, July 2012.

How is Starbucks attempting to re-create its uniqueness? Do you think it will be successful? Why or Why not?

The original idea for the Starbucks format came from the 1980´s when the company´s director if marketing, Howard Schultz, came back from a trip to Italy enchanted with the Italian coffeehouse experience, the idea was to sell the company´s own premium roasted coffee and freshly brewed espresso-style coffee beverages, along with a variety of pastries, coffee accessories, teas, and other products in a tastefully designed coffeehouse setting. The focus was to sell a “third place experience”.

As a well-established coffee retailer and over 35 years of success, Starbucks is at the maturity stage in the product life cycle. It is in this stage that Starbucks needs to shift gears and focus on marketing program modifications by increasing the number of customers and customer visits (Kotler, 2009, pg. 185). While improving service will attract first-time customers and retain current ones, further marketing modifications will need to be made if it wants to continue to grow. More advertising, distribution, sales promotions, and personal selling are a few of the ways to modify the marketing program.

I've chosen the Starbucks Corporation on which to do my case assignment for the session. I first became interested in Starbucks while working on a paper for a previous marketing class. I became intrigued at the entrepreneurial spirit that such a large corporation had managed to maintain throughout its massive expansion. Starbucks corporation, unlike many of its now-defunct rivals, has done an outstanding job since its meager beginnings in 1970 with the execution of its strategic process; resulting in it currently owning 40% of the specialty coffee market and boosting annual sales exceeding $7 billion according to Burt Helm. Historic successes and recent turmoil within the company, including a near 40% decline in 2007 in profits (Sullivan

business model may seem, there is plenty of hard work invested and financial risks taken to grow

In general the coffeehouse industry in the United States was experiencing an increase in coffee consumption per capita due to the “Starbucks effect”. At this time Starbucks was operating approximately 20,000 stores in the United States and was living a fast expansion strategy worldwide.

Starbuck’s strategy focused on three components; high-quality coffee, intimate service, and ambient atmosphere. Starbucks worked closely with growers in Africa, South and Central America, and Asia-Pacific regions to insure the quality of its product. Starbucks called all employees' "partners" and worked hard to train them with the skills necessary to best serve the customer. The atmosphere at Starbucks was crafted after the European-style espresso bar. The company goal was to create ambience through the Starbucks "experience" and by making the area comfortable, yet upscale.

The company has a focus on innovation through an emphasis of introducing new products and coffees such as “instant coffee” Via which generated a large sales growth of over 200 million. These new products consistently help Starbucks evolve as a

The CEO (Chief Executive Officer), Howard Schultz pointed that the main reason from the decline of “Starbucks Experience” was that the number of Starbucks shops increased sharply from only 1,000 to 13,000 within ten years. Other people considered their brand has been commercialized, and the customers hadn’t had enough enthusiasms to appreciate every moment of their coffee any longer. He suggested that Starbucks should re-find its origin. Nevertheless, his advice apparently was opposite to the

Following its success in the United States, Starbucks ventured overseas and quickly became a globalization icon. With its rapid globalization strategy, Starbucks expanded from about 5000 stores to an estimated 15,000 stores in 2000 (Groth, 2011). By mid-2000s, Starbucks’ supply chain faced many issues, resulting with challenges of having to fulfill expansion strategies yet minimizing escalating operation expenses. By 2008, Starbucks’ stocks fell by 42% (Schultz, 2011). The rapid expansion took a toll on the sales growth and stretched the limits of the existing supply chain, which then rippled down to erode the customer-valued ‘Starbucks experience’ (Gibbons, 2011).

1. What factors in the global environment provide opportunities or threats for Starbucks? How do Starbuck’s strengths and weaknesses match up to its opportunities and threats?