Case Study : Starbucks Coffee Company

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.

Starbucks dates back from 1971 and is based in Seattle, Washington. The company was founded by Gordon Bowker, Jerry Baldwin and Zev Siegl and it

#1) Identify the controllable and uncontrollable elements that Starbucks has encountered in entering global markets:

Starbucks was founded in 1971 in Seattle’s: Pike Place Market, by Jerry Baldwin, Zev Siegel, and Gordon Bowker, each sharing a love for fine coffee and exotic teas. In 1981, Howard Schultz was first introduced to Starbuck’s, and became hooked after three sips. Throughout the year Schultz had meetings with Baldwin and Bowker and in 1982 Howard Schultz joined Starbuck’s as the head of retail and marketing operations. During a trip to Milan, Italy Schultz discovered a market for freshly

Starbucks is one of the leading coffee retailers in the world; according to their company profile they are operating nearly 18,000 retail stores in 60 countries. They serve millions of customers daily; our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time. (STARBUCKS COFFEE COMPANY, 2012) Starbucks has become much more than just a place to get coffee, it has become a brand.

Starbucks is an international coffee company that was established in Seattle, Washington DC, USA. The world's largest coffee company was founded on 30 March, 1971 by three partners that went to University of San Francisco. They are a writer named Gordon Bowker, Zev Siegl as history teacher, and Jerry Baldwin as English teacher, with the tavern has 20 336 in 61 countries. Alfred Peet was the one inspiring them selling high-quality coffee beans and equipment after he taught them his style of roasting beans. At first, they were about naming Starbucks with Pequod but that was refused by some of the co-founders so they changed it onto Pequod Starbuck.

Starbucks went public in 1993 and has done extremely well in turning an everyday beverage into a premium product. The green and white mermaid logo is widely recognized; the brand is defined by not only its products, but also by attitude. Business Week’s most recent survey (2002) of the top global brands reported Starbucks as one of the fastest growing brands. It is all about the Starbucks experience, the atmosphere and the place that is a refuge for most people to get away from everyday stresses. The average customer visits a Starbucks eighteen times in a month and about 10 percent of all customers visit twice a day. They have created an affinity

Throughout the United States and Asia, Starbucks is renounced for their expertly crafted coffee, so much so that an immensely large portion of the nation at least recognizes the logo and the name. This success to this day keeps producing higher returns for investors especially over this last third quarter of 2016. The third quarter had set many new records with Starbucks for both the American markets as well as the Asian markets causing a big boom for the company and sparking excitement within the investors. This record increase “was primarily driven by the opening of 1,876 net new stores over the past 12 months” (Doraisamy 2016). As far as the growth due to the other stores open for more than 13 months, those stores had also seen a hefty revenue increase due to the increased memberships for Starbucks Rewards which “increased 18% year-over-year to 12.3 million active loyalty members in the U.S.” (Doraisamy 2016). This increase in memberships had proven strong towards the likelihood that customers will return at a higher frequency. Recently there has been an increase of 9% profitability in the third quarter which has noticeably been due to the consolidation of their operating margins “due to sales leverage and lower commodity costs” (Doraisamy 2016). This recent success throughout America and Asia along with the mass quantity of stores being opened, has been the main direct cause that lead to the major EPS jump this third quarter. Among the astounding

Starbucks has been very successful in implementing the “Starbucks Experience” both in the United States and in Turkey. Inspired by his visit to Italy, Howard Schultz CEO, was charmed by the social glamour of drinking coffee by the cup. Schultz sough to differentiate Starbucks from the rest of specialty coffee stores and pitched his inspiration to the three original owners, Jerry Baldwin, Zev Siegel and Gordon Bowker. The owners of Starbucks were not fond of expanding the business to what they considered was restaurant business. As such, Schultz ventured on his own to launch his new idea of innovating coffee with success. In 1987, the owners folded their business pursuits with Starbucks and sold all assets and name brand to the visionary Schultz. Starbuck grew rapidly after Schultz purchased it, it went form 11 stores in 1987, to over 900 stores in 1996, and to 6,793 stores by 2007 in North American only. Starbucks Turkey opened in 2003. It was located in one of the busiest and prominent streets in Istanbul where the most affluent citizens roamed. Within five years they were the most rapidly expanding coffeehouse chain in Turkey. By 2008 there were 105 stores in 8 cities serving approximately 30,000 customers per week. Starbucks Turkey was successful due to its consumer, marketing and entry strategies for growth it implemented.

This is a proposal based on the case study “Starbucks – going global fast” (Cateora and Graham, 2007), further research has been undertaken and analysis and recommendation will be based on these sources of information.

Starbucks was founded by Gordon Bowker, Jerry Baldwin and Zev Siegl in Seattle, Washington on March 30, 1971. To help build their shop, Seigl went to California to learn from a coffee legend Alfred Peet, his “approach to coffee beans became the cornerstone for Starbucks 's reputation: high-grade arabica beans, roasted to a dark extreme by a trained perfectionist roaster” (Business Insights)

Starbucks put up some very interesting numbers for the years 2014 and 2013. Specifically, their profit margin both years seems to be extremely low (most businesses want to operate around 20%). 2013 showed a mere 8.8 million in earnings. I believe Starbucks was undergoing massive expansion during this time period, however, as the year following put up numbers more in line with the norm. Their profit margin seemed relatively low due to such expansion, as their outflow of cash was very close to their inflow.

In recent occurrence for Starbucks, the company business has gained exceptional growth. Howard Schultz who is the chairman and CEO of Starbucks stated that “Starbucks Q3 fiscal 2015 stands as among the strongest and most remarkable quarters in our over 23 years as a public company.” (Starbucks Corporation 2015, 1) Starbucks “net revenue $4.9 billion in Q3 FY15, which is an increase of 18% over Q3 FY14.” (Starbucks Corporation 2015, 1) Part of the increase revenue for the company was due to global expansion in the China/Asia Pacific area. Within a year time frame, Japan opened “1,592 new stores.” The impact sales from Japan help “increase the company income about 22% to $938.6 million in Q3 FY15.” (Starbucks Corporation 2015, 1) Safe to

Starbucks Corporation is an international coffeehouse chain based in Seattle, Washington. Starbucks is the largest coffeehouse company in the world. Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, snacks, and items such as mugs and coffee beans. Many of the company's products are seasonal or specific to the locality of the store. Starbucks-brand ice cream and coffee are also offered at grocery stores. Starbucks’ Italian style coffee, espresso beverages, teas, pastries and confections had made Starbucks one of the greatest retailing stories of recent history and world’s biggest specialty coffee chain.

When the announcement was made in mid 2008 that Starbucks would be closing nearly three-quarters of its 84 Australian stores there was mixed reaction. Some people were shocked, others were triumphant. Journalists used every pun in the book to create a sensational headline, and it seemed everyone had a theory as to what went wrong. This case outlines the astounding growth and expansion of the Starbucks brand worldwide, including to Australia. It then shifts focus to describe the extent of the store closures in Australia, before offering several reasons for the failure and lessons that others might learn from the case.