Starbucks Critical Analysis

Since Starbucks entered the coffee retail business, the company has made many trade-off business decisions. The first major trade-off was made when Howard Schultz wanted to acquire present day Starbucks from three entrepreneurs Baldwin, Siegel and Bowker. Therefore, Schultz prior to the acquisition made the trade-off to open his own coffee bar in 1986 instead of staying at Starbucks as the manager of retail sales and marketing. A bold feat, Schultz was able to replicate success and was offered to buy Starbucks for $4 million. At the time of the acquisition, many investors, including the former Starbucks owners, would not expect that the American consumer would pay a premium for coffee products. Schultz, after calculating the opportunity cost, was convinced that Starbucks would become a large coffee chain not only in the United States but internationally too. Reflecting this approach, Schultz’s trade-off worked. Starbucks, according to our book has revenue exceeding $13 billion and nearly 200,000 employees. The company has also expanded to 40 countries with 17,000 stores (Hill et al., 2015).

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).

1. In the beginning, how was Starbucks different from other coffee options for coffee drinkers in the United States? What activities and assets did Starbucks leverage to differentiate itself from competitors?

Imaging if there was no more coffee in this world, how would you feel? Nowadays, coffee becomes an important part of people’s life. People who often work overtime, they drink coffee because caffeine can make you awake; people who have to wake up early in the morning, they drink coffee because instead of making breakfast, coffee is more convenient; people drink coffee during the free time, because it also tastes good.

Starbucks is undoubtedly an international brand. The history of coffee traces back to Ethiopia, Africa, India, Arabia, and Europe, and has been traded abroad since the 11th century. Understanding the demand and widespread market for coffee, Starbucks has triumphantly capitalized both the domestic market, and the varied international markets as well. Possessing about 6,500 retail sites worldwide, Starbucks’ net is spread across thirty countries and has been found as one of the most recognized brands all over the globe in equality to McDonalds and Toyota. This organization’s ability to build an international brand has been unprecedented- particularly since it represents a specialty

Starbucks has always taken exceptional care in keeping its brand value.  In fact, Starbucks prides itself in its brand, particularly the power it has to keep its customer base strong. Before analyzing this loyal customer base it is best to consider the particular characteristics of the brand that has led to Starbucks having such devoted patrons.

The three major stakeholders for Starbucks are their suppliers, employees, and customers. The external stakeholders of Starbucks are the suppliers and customers, while employees are internal stakeholders. Starbucks Company follows valuable practices and good citizenship in order to motivate its stakeholders. The company is motivated to help create a better future for coffee, communities and the farmers. This is established based on a shared interest to endure the making of high quality coffee.

Starbucks’ strives on expanding its name and reputation globally. It has opened outlets internationally, but with poor management and understanding of its global market, expectations were not achieved and resulted in outlet closures. Stores closures of most of Australia’s outlets and some US outlets resulted in “almost 6,000 job losses; n addition 700 positions were cute in corporate and support positions”. (Grant, 2012)

The context change in form that Starbucks found itself competing with smaller chains that resembled its former pre-expansion model with competitors focusing in creating symbolic-expressive value and fast food restaurants that had started to offer specialty coffee with more aggressive advertisement at a lower cost. The competitive context changed for Starbucks because it’s focus in mass distribution channels and its retail footprint strategy stated its product within a standard performance product value; this affected the value perception of the product.

National culture is a strong shaper of a people´s values, attitudes, customs, beliefs, and communication. However, culture often forces companies to adjust their business policies and practices. Howard Schultz, who is the chief executive officer and chairman of Starbucks keep respect for every local culture. He summed it up when he said, “We remain highly respectful of the culture and traditions of the countries in which we do business. We recognize that our success is not an entitlement, and we must continue to earn the trust and respect of customers every day.” Starbucks could not have predicted the enormous change it was about to go through almost 20 years ago. There are more than 24,000 stores in 70 countries, and it is clear that their passion for great coffee, genuine service and community connection transcends language and culture. With expansion and growth, come several challenges. Therefore, Starbucks stores in China, India, Russia, Mexico, South Africa or Italy have certain unique characteristics such as environment, prices,

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.

Starbucks is one the most successful companies in the United States, which is evident by the fact that it is among the FORTUNE 500 Companies. However, over the last few years its profitability has declined owing to decline in Starbucks international sales and increased operational costs. The Chairman of Starbucks is a man who made this company what it is today so there seems to be a one-person decision making in the international expansion of the company.

Starbucks’ considered variables such as “economic indicators, size of the population, and ... joint venture opportunities” (Kotabe and Helsen 2008, p.284) to determine its market entry strategy. Singapore was preferred for its middle class’ value perception which suited Starbucks concept and coffee culture. In China, where

This case assignment discusses the history of Starbuck’s accomplishments as they entered the American coffee culture heritage. In 1983, The chairman and CEO Howard Schultz traveled to Italy and had a dream to carry the Italy coffeehouse ritual back to the United States. Schultz was focused on creating an environment meeting company that makes good coffee but also be a social experiment. Starbucks today opened more than 19,000 stores functioning in 62 countries. Starbucks has numerous rewards that globalization has offered and they have significantly benefited from it, while in the coffee industry. Starbucks has a wide-range in marketing strategies to benefit the customers. During the different obstacles that Starbucks has encountered, they must stay reliable in quality and uphold to adjust to different customer values.

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).