Starbucks : Innovation For Success

As the world’s number one specialty coffee retailer, Starbucks sells coffee drinks, food items, coffee beans, and coffee-related accessories and equipment. In addition, Starbucks sells whole-bean coffees through a specialty sales group and grocery stores. Starbucks has grown beyond coffee into related businesses such as coffee-flavoured ice cream and ready-to-drink coffee beverages. The purpose of this paper is to analyze Starbucks business strategy, customer value proposition, company’s operations and the risks to financial results and reporting in the short term.

Jerry Baldwin, Gordon Bowker, and Zev Siegl founded Starbucks in 1971 in Pike Place Market in Seattle, Washington. They were inspired to pursue this company by coffee roasting entrepreneur Alfred Peet after he taught them his style of roasting beans. Since then, Starbucks has grown into the largest coffee chain in the world, with over 23,000 locations worldwide.

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.

Several key success factors exist for Starbucks, a leader in the coffee industry. They include

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Starbucks has a number of different strengths on which it can draw in order to see its vision come to fruition. The company has a great brand, and this brand allows it to enter new markets and to add new products to its lineup. For example, the power of the Starbucks brand allowed the company to enter into a worldwide deal with Pepsi for bottled drinks in the supermarket. Also, when Starbucks enters new markets, its brand value usually precedes it. It can attract expats immediately and will pique the curiosity of the locals. Considering the value of the brand in high growth Asian markets like China, Starbucks has tremendous potential to bring its vision to reality.

a) The nature of Starbucks’ business is to generate income based on operating activities. When referencing the Statement of Cash Flows and looking at their operating activities, you can see that Starbucks generates $2,908.3M in net cash provided by operating activities. Investment is a significant item in this statement as well. The company spent $785.9M in investments in the year ending September 29th, 2013. Strong investment activities show that Starbucks is investing through buying and selling (Sales, maturities, and calls of investments $1,040.2M) and using their spare cash to invigorate future growth and fund future obligations.

After many years in the coffee industry, Starbucks is well on their way to achieving their vision, “a place that offers interesting coffee-related drinks in a theatrical atmosphere, pivoted around the espresso machine and become most recognized and respected brand of coffee in the world.” However, in order to maintain their position as the leader in the specialty coffee industry several obstacles have been identified. This report identifies three major issues in relation to financing, sales, and expenses and provides the most optimal strategy to surmount each issue.

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.

The company competes with other sellers, like Dunkin Donuts and McDonalds, in the coffee market, but ultimately is overwhelmingly dominant. In the monopoly, Starbucks has had to create a unique identity and brand image for itself in order to succeed amongst competitors. Starbucks has been able to successfully differentiate itself from its competition by priding itself in quality assurance to its customers as well as its distinctive brand marketing strategy, which includes a large number of stores and little to no paid advertising; the company feels their high quality products speak for themselves and a high presence of storefronts allows customers to purchase their products at their own

The company competes with other sellers, like Dunkin Donuts and McDonalds, in the coffee market, but ultimately is overwhelmingly dominant. In the monopoly, Starbucks has had to create a unique identity and brand image for itself in order to succeed amongst competitors. Starbucks has been able to successfully differentiate itself from its competition by priding itself in quality assurance to its customers as well as its distinctive brand marketing strategy, which includes a large number of stores and little to no paid advertising; the company feels their high quality products speak for themselves and a high presence of storefronts allows customers to purchase their products at their own

Starbucks is a well-known coffee purveyor with a global presence. All companies face opportunities and external threats that must be evaluated when analyzing the operations of the business. This paper will focus on the on nine major opportunities that are apparent for Starbucks as well as eight threats that could impact the company. The opportunities will be analyzed and discussed initially in the paper followed by the external threats.

Starbucks Corporation is a well-recognized franchise known for their high-quality coffee and sustainable culture, established in Seattle in 1971. The store was located in “Seattle’s historic Pike Place Market” (Starbucks, 2016) where they delivered the world’s premium fresh-roasted Arabic bean coffees. With Starbucks rich history, they opened New Zealand’s first store in 1998 along with other countries. Since the introduction, Starbucks has determined to be a unique brand and differentiation from the other fast food companies that operate in this particular industry. Instead of marked as a burger chain, Starbucks is distinguished as providers of rich traditional coffee with a strong connection with their consumers in the fast food industry. Besides coffee, Starbucks presents a variety of “tea, fine pastries…” (Starbucks, 2016), in accordance with customer preference. The Starbucks brand operates around humanity, for example, dedication to the “highest quality coffee in the world” (Starbucks, 2016). The main competition for Starbucks is Nestle, McDonalds, Dunkin’s Donuts and local coffeehouse/cafes.

- An unusual coffee encounter – 3 3 3 3 4 4 4 5 6 6 6 7 8 9 9 10 11 12 12 13 17 17 18 19 19 20 21 23 23 25 26 27 28

What factors accounted for the extraordinary success of Starbucks in the early 1990s? What was so compelling about the Starbucks value proposition? What brand image did Starbucks develop during this period?