Starbucks : A Global Consumer Brand

With time the small industry of coffee has modernized into a multibillion dollar industry that surrounds the world. With the growth of the industry there has been many world wide changes. Over the past 30 years coffee shops have jumped to the front of the public culture. New coffee shops have changes the face of American cities along with British, German, Colombian, Kenyan and Indonesia towns to name few. (Coffee a comprehensive guide to the bean, the beverage, and the industry) Around the world coffee has become part of the daily culture and coffee shops have grown to accommodate the massive demand that people ask for. Without the growth of the industry there would be a shortage of the product and many would have to go without their beloved beverage. In the United States alone there has been a massive increase in the number of coffee shops. In 1980 the number of coffee shops was a year 2,000 and by 2008 there was an astonishing 27,715. (Coffee a comprehensive guide to the bean, the beverage, and the industry) This was an increase of over ten times in the short time. 11,000 of those stores, almost half, were Starbucks one of the biggest coffee brands in the worlds. The growth of Starbucks is due to the work of Howard Schultz a worker for the company before they became as massive as they are today. Starbucks started very small in Seattle, Washington in the mid 1970’s. Howard bought out the owners and then went on to turn the small company into a massive corporation. (Coffee a

Within the coffee industry Starbucks Corporations has grown from a small shop to a leading coffee distributor, proving to have financial strength and determination to continue growth. With the weakening economy the continued success of Starbucks

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 is no doubt a phenomenon in the United States, but the brand wants to expand globally. Opening chains in various global locations such as Japan, Vienna, England; Starbucks wants to reach out to the coffee loving fans everywhere. Nevertheless opening chains globally is not that simple. There are many uncontrollable factors Starbucks need to focus on to make sure they are making profit as well has abiding by the country’s laws and regulations. Going global takes a lot of market research to make sure that the brand will be successful even with uncontrollable factors. Controllable factors can be tailored to fit the needs of each country. Starbucks has to find the happy medium so they don’t lose their identity overseas.

Starbucks is known for their Frappuccino’s; unfortunately they are on a downward spiral in sales due to competitors such as McDonalds. In 2008 Starbucks admits to its losses due to their competitors. “Company executives now freely admit that such thinking is largely to blame for the woes that led to Tuesday’s announcement that Starbucks will close 600 U.S. stores and eliminate thousands of jobs. The coffee giant’s missteps have come at a spectacularly bad time, hitting as the economic slump deepens and consumers are seeing their discretionary spending eaten up by rising gas prices and grocery bills (Linn).”

Nonetheless, Starbucks is big enough that they have created an oligopoly. But like any other company they face the increasingly large task of not only serve their clientele, but be able to still make a profit. In order to stay competitive and still be profitable they need to reconsider their current business plan and focus on the demand for the quality instead of the quantity. The basis of this rationale would be to modify its business plan in order to respond to the needs of it clientele and be able to deliver on their wants. There is no such thing as an ideal profitability methodology, but if the product keeps its value and it is able to withhold its product differentiation as well as brand identification, the profit margin and its ROI would speak for itself.

Starbucks strategies have successfully made them one of the biggest names in the coffee market globally. Starbucks has been able to survive the high competitive market and to differentiate themselves from other coffee shops by producing high quality coffee. Also, Starbucks successfully create a huge numbers of loyal customers worldwide by providing great services and high quality products. Starbucks was able to survive 2008 financial crisis successfully. In 2008, Starbucks net income was -53% that means Starbucks was losing so much many yet, 2009 Starbucks was able to not only stop their losses but also to gain a profit of 24%. However, Starbucks should be worry from the possibility of another financial

Starbucks’ shares have grown more than 1500% over the past decade. Financially, it has been an oak tree in an ever changing economy with customers that have ever changing demands. However, there has been increased concern for the financial viability of the coffee shop a recently announced plan to close down over 600 stores that were said to be underperforming domestically. That means that more than 1,000 jobs will be eliminated. As scary as that is on the local front to top management, the executive staff feels that it is the only way to recover from it’s shocking $108.7M loss for the 2nd quarter this fiscal year.

Starbucks can face threats of new competition by two types of competitors. Small high street cafes whose startup cost is very low, but they require some time to stabilize. Another is Mc Donald’s entering in the competition by bringing in a wide range of coffee products.

While there are many discrete tasks that must be performed to implement the strategic plan, the good news is that Howard Shultz, Starbucks’ chairman, has already built an organization that has proven the organization can carry out the strategic alternatives focusing on growth. Both the organizational culture and organizational capability for executing strategy are in place. The key will be in choosing an excellent team that includes all levels of management, assigning the right roles, and letting the team make the right strategic moves. Kathleen Eisenhardt, professor of strategy and organization at Stanford University, believes that “if you begin with the right people, you can more easily adapt to a fast-changing world because the right people already are adaptable and self-motivated” (Fuller & Green, 2005).

The threats to the Starbucks Corporation are associated with competitive rivalries in the coffee market, rise in price of raw materials, cultural and political factors related international business.

Starbucks Corporation is an American company that specializes in coffee and is also a coffee house chain. Products include coffees, teas, cold drinks, and pastries. The establishments are very popular to drink coffee, socialize, and work. Starbucks has been the most popular coffee chain in the United States, it now has over 20,000 stores around the world. Starbucks’ history starts in 1971 in Seattle, Washington when three colleagues decided to sell high quality coffee beans. The company only sold coffee beans until 1983 when they added an espresso bar to their store after their CEO went to Italy to explore the coffee industry (Company Information). In 1992, the company went public and Starbucks started expanding all over the United States. The staffing structure of Starbucks is a very basic structure consisted of a board who makes policies and then executives who enforce policies and oversee the company. District managers oversee stores in specific regions who report to executives. In each store, there are managers who run the store and underneath them other managers who supervise employees who make the coffee, baristas.

The greatest threat of them all at this particular moment for Starbucks, or any other company for that matter, is the global economy crisis. In particular the source of the crisis, this lays in its home country the U.S. So if more than ¾ of the companies growth is depended on the U.S. then the

Factors in the global environment provide both opportunities and strengths for Starbucks. Opportunities such as increased revenues, further expansions, and achieving their goal of becoming the most respected brand worldwide. Starbucks also faced threats. These threats include dealing with growing antiglobalization overseas and their huge risk of less return on each overseas store, this deriving from overseas operations being run by local partners instead of Starbucks

Starbucks’ retail entry model in the United States does not have the same strategy as their international model. In the states Starbucks holds great control as a corporation, but in international territory, country partnerships, cultural, government laws and politics play a very important role in Starbucks’ entry strategy. Starbucks has set it sights globally since the coffee market has come close to saturation in the U.S. which will give them the opportunity to continue to expand without fierce competition. Starbucks has looked to countries like India and other emerging markets with great growth potential to set down new roots. Starbucks recognizes India as a great choice to expand business internationally but also recognizes the complexity in the same market after several attempts to enter without success.