Starbucks Case Study

Starbucks is a worldwide coffee company that produces world-class coffee, pastries and beverages. They are known as one of the most productive global coffee companies. Starbucks began as a small coffee and was founded by Jerry Baldwin, Zev Siegl and Gordon Bowker in Seattle, Washington in 1971. It is now headquartered in Seattle, Washington and incorporated in Olympia, Washington. The company’s fiscal year end date is September 27th. Although Starbucks has its own audit and compliance committee, that puts together their financial statements and reviews all accounting and financial processes pertaining to the financial status of Starbucks Company, KPMG also audits their financial statements.

Starbucks Corporation is one of the world’s largest coffee roaster, marketer, and retailer of coffee. Some people call Starbucks as one the most success stories in the American history. In 1971, three entrepreneurs, Jordan Bowker, Zev Siegel, and Jerry Baldwin came together with $8000 and opened first Starbucks store in Seattle, WA. They were inspired by the style of roasting beans of Alfred Peet, founder of the Peet’s Coffee & Tea. They started the company with a dream of selling high-quality coffee beans and coffee machines. During their first year of operation, Starbucks used to buy the green coffee beans from Peet’s Coffee but later they started buying the coffee from coffee planters.

Starbucks founded in 1987 as a modest nine-store operation in Seattle, Washington and quickly became the premier roaster and retailer of specialty coffees in the world with over 17,400 store locations in more than 55 countries (Thompson, Peteraf, Gamble, & Strickland, 2014). The company first got its start in 1971 when three academics all decided upon opening a coffee store in touristy Pikes Place Market in Seattle. The three academics; Jerry Baldwin an English teacher, Zev Siegel a History teacher and Gordon Bowker a writer were all coffee aficionados (Thompson, Peteraf, Gamble, &

The objective of this case study is to analyze why Starbucks was not meeting expectations in terms of customer satisfaction thereby losing customer loyalty. Whether or not to invest millions of dollars ($ 40 million) in each store to enhance the labor. How will it impact the sales and profitability if invested? Product mix and marketing approach will also be recommended in this paper.

There are many companies in the coffee industry, but there is nothing like Starbucks. Starbucks Corporation is an international company of coffee founded in Seattle, Washington in 1971 by Jerry Baldwin, Zev Siegl, and Gordon Bowker. Starbucks has taken a coffee bean and turned it into beverages that people around the world crave. They are the leading competitor in the coffee industry, and our well known for their quality and customer service. Starbucks has changed the world with their products, their pricing, their customer service, and their expansion around the world.

Customers rated product innovation as being much lower in importance than customer service, yet Starbucks placed high importance on developing them.

The large product range including Coffee, Coffee beans, hot and cold sandwiches and wraps, pastries and items like mugs and souvenir. Customers are able to read, work, enjoy music and socialise while drinking coffee or having snacks. Starbucks strategically aims in maintaining a similar interior in its entire stores, which helps to create a unique atmosphere.

However, there are so many potentials of Starbucks but also there are many threats that probably will happen and destroy Starbucks Company. We can’t deny the fact that if a company has gone so far and already being a successful company, there will be so many issues that has to be solved. Starbucks also had some issues and this company could have solved them. Once, Starbucks ever shut down and reformed. It happened in 2007, when almost all the people in the USA addicted to Starbucks, when people needed their Starbucks every morning, Starbucks decided to shut down their company. It happened everywhere. Every single Starbucks across the world closed the door to anyone and everyone. This phenomenon continued for an entire week. Since Starbucks shut down, people shut down as well because they needed their

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

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 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 has also peaked consumer’s interests by offering a variety of ways to upgrade your coffee, espresso, latte, etc. According to Cathleen Caleda, an employee at the Moanalua Shopping Center 's Starbucks, “Every season, we (Starbucks) offer several unique seasonal drinks.” The expansion of these new products are not only increasing sales, but are unfortunately placing more time between when customers enter the store and actually leave with a drink in their hand. With this increasing time gap, it is more unlikely for that customer to, indeed, leave completely satisfied with their Starbucks experience.

A venti issue: blending together a solution to satisfy the needs of customers, new and old.”

“Starbucks is the leading specialty coffee retailer in the nation, with over 5,000 locations in 22 international markets. Starbucks positions their products on a relatively simple plane. They focus on quality and experience, rather than price. A comparison of specialty drinks with its competitors reveals very minor differences. Starbucks’ image is one of the key elements to their success. The company has realized that people don’t only come for the coffee; they come for the atmosphere. People socialize, read, study, or just enjoy the music while drinking their coffee.” (Kembell, Hawks, Kembell, Perry, & Olsen, 2002)