Starbucks Marketing Strategy For Starbucks

The Starbucks former strategy was centered in offering a high quality product to a narrow consumer segment (coffee lovers), therefore, a

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 expanded to pursue sales of products in a variety of distribution channels and market segments. Products were marketed to restaurants, airlines, hotels, universities, hospitals, business offices, country clubs, and select retailers. In the airline industry, Starbucks coffee was served in flights United Airlines and United Airlines. Packets of Starbucks coffee along with coffee making equipment were made available in each room in Hyatt, Hilton, Sheraton, Radisson and Westin Hotels. Coffee service was also provided in several Wells Fargo banks in California. Foodservice distributors such as Sysco

The CEO, Howard Schultz, has developed a mission and guiding principles of how the corporation should handle their day

1. Where did the original idea for the Starbucks format come from? What lesson for international business can be drawn from this?

The extraordinary success Starbucks experienced during the early 1990s resulted from Howard Schultz’s passion and vision to create a coffee culture in the United States similar to the coffee culture he experienced while traveling to Italy. Schultz’s vision of the Starbucks brand evolved around providing a quality product while delivering exceptional customer service in an inviting atmosphere. Starbucks’ success can be attributable to the following factors:

When Howard Schultz launched Starbucks, its main targets were the competitors and the customers. Schultz’s brand aimed at gaining dominance in the coffee industry in addition creating a Italian coffee shop feel in the United States (Buchanan & Simmons, 2009). The strategy of Starbucks was based on new products, listening to customers wants and ensure future expansion (Buchanan & Simmons, 2009). In creating convenience for customers, Starbucks created stores almost on top of eachother. They hinged on the idea that, they did not want to lose out on a sale if a line was too long. This action, of placing stores in heavy populated areas, basing need on projected growth of an area caused some decline in sales during economic trouble with the economy. The 2007 recession, failure of subprime mortgages, increased competition from McDonald 's McCafe brand, and Dunkin Doughnuts all led to a decline in sales for Starbucks in the fourth quarter of 2007 (Buchanan & Simmons, 2009). To attempt to regain market share and recover after the

First of all, Howard Schultz had a clear vision about his company. It is important for a great leader to have a clear vision about what to achieve. The emphasis on importance of employees is the outstanding point in his vision. This is why Starbucks has been investing in their

RESUME INTERNALIZATION AT STARBUCKS ? Index Starbucks Journey Porter’s five forces model for Starbucks Starbucks - SWOT Performance Analysis and Learning Next Steps Starbucks Journey 1996 - 1999  First outlets outside North America, in the Far East Japan and other countries in the region  Starbucks introduced espresso drinks for the grocery channel in partnership with Pepsi-Cola  Starbucks introduced a home espresso machine in 1997  Starbucks signed a licensing agreement with Kraft Foods to market & distribute the Starbucks specialty coffee beans more than 25,000 American grocery sector 1987 Howard Schultz Bought Starbucks Store and renamed the II Giornale store as Starbucks 2010 • The world

To realize this ideal, Schultz needed to attract the right employees and engage his staff to behave so that “customers (had) a very positive experience in its stores.” (Thompson & Shah, 2010) He did this by a variety of methods, sourced from the six guiding principles the employee team came up with. He was able to achieve the 4th principle –“develop enthusiastically satisfied customers all of the time” – by having happy employees (1st principle), commitment to sourcing the best beans and standards to make the ‘perfect cup’ (3rd principle), and creating an emotional connection to his customers. “Schultz firmly believed that Starbucks had to be a great place to work in order to provide the atmosphere and service that he envisioned.” (Brown, 2011) He realized that in order for his employees to be happy, he needed them to trust and feel they could communicate without retribution, and to feel valued. One of the ways he demonstrated their value to the company was to provide health care to even his part time baristas. Employees, now called ‘partners,’ were supported by extensive training in coffee knowledge, brewing, and how to “go out of their way … to make sure customers were fully satisfied.” (Thompson & Shah, 2010) Furthermore, they were rewarded by a recognition program which acknowledged excellence in brewing, customer service, leadership,

When Schultz returned to the States he presented his new-found discoveries, of what he believes a coffee shop should be like. However, his bosses didn’t share the same belief, that creating a coffee shop with “artistic and joyful experiences” was less as important as making coffee that sells well. So, Schultz quit and he went on to raise money to fund his own coffee shop establishment , “Il Giornale.” The store started very small, with only two, or three employees, to keep labor costs down. Only sixteen months into his new founded company, Schultz found himself in the position to buy his former employers’ small scale coffee shop. To Schultz it was a no brainer to buy the company which first sparked his love for coffee, so he did. And at only thirty-four years old Schultz had one-hundred employees, several locations throughout the city of Seattle, and a dream to create a nationally recognized brand of “Starbucks Coffee.”

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.

Concerned with the disconnect between growing into a large corporation and what they once were, a small entrepreneurial company, the chairman, president and chief executive officer of Starbucks, Howard Schultz, launched a transformation plan, which included focusing on the customer while still achieving value for the shareholders. In January 2008, Starbucks released a statement regarding the strategic initiatives planned to accomplish just that (Starbucks announces strategic initiatives to increase shareholder value; chairman Howard Shultz returns as CEO, 2008). In the announcement Schultz shared that his plan would include refocusing on the customer with new products and store designs, slowing down the pace of new store openings and closing underperforming stores, reestablishing customers attachment and connection with Starbucks, rearranging the organization, reallocating resources and restructuring management, as well as global expansion (Starbucks, 2008). Shultz’s goal was, by 2012, to have tripled annual sales and increase the number of worldwide stores by more than half the current number of 13,500 (Helm, 2007).

Starbucks CEO Howard Schultz faced a great amount of criticism when an internal memo was leaked to the public. He felt betrayed, humiliated and hurt. However, the company was never the same after that memo. You see, in this memo, Schultz explained that the company had lost its way. No matter how bad the financial crisis got, there were certain components he wasn’t willing to trade in to save a dollar such as healthcare for all employees. In the memo, he was very clear about mistakes the company made in the past and how things needed an entire reset. For a company CEO to admit failure and

Question 1:When Howard Schultz launched Starbucks, who was the target market and how was Starbucks positioned to appeal to this target market?