Starbucks: the Future of Coffee. Essay

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 has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter over time.

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 Corp., an international coffee and coffeehouse chain based in Seattle, Washington, has expanded rapidly since its opening in 1971. These outrageous success was due to its well-developed strategy vision which lay out the company's strategic course in developing and strengthening its business. Starbucks is a global corporation that sells authentic coffee in 30 countries, reporting revenues of nearly $5.1 billion in 2006. The main goal of Starbucks is to embrace diversity by applying the highest standards of excellence. Starbucks strives to perfect the relationship with the working class by making the service as fast as possible because they believe that every customer has their own personal rate. One

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 utilizes a differentiation business model by offering an overall unique and high quality experience for the consumer. From the high-quality food and drink options, to the uniquely roasted coffee and supreme customer service, Starbucks aims to provide an experience unobtainable anywhere else. Starbucks also focuses heavily on rapid expansion by seeking out profitable geographical areas and overcrowding those areas with stores in order to exploit profits and slow down competitors. Starbucks’ compliments this with its horizontal acquisition strategy, extending their product line through acquisition of competitors. This provides Starbucks with a differentiation strategy focused on providing a diversified product mix

Due to the expansion of social media, Lots of opportunities has been arose for Starbucks. Online networking focused on building customer associations with the company are more viable than a promoting it in a traditional way. In order to reduce their prices and compete with their competitors, Starbucks have a great opportunity to expand their range of suppliers. In this case, when they have lots of suppliers, they can actually negotiate with them and cut down their coffee beans price. So instead of charging the premium price, Starbucks can offer medium price and challenge their competitors. They can expand its branches in those countries where they have potential customers. With a billion customers ready to join those who want instant coffee and breakfast in China and India, Starbucks have a massive potential to expands in these countries, which represent profitable opportunities. Starbucks likewise has the chance to grow its item offerings to tackle the full range sustenance and drink retailers like McDonald’s and Burger King as the shopper

Starbucks’ opportunities to expand into new markets in order to develop its global market revenues and profit shares.

Starbucks is a strong competitor in the service sector and a leader in the gourmet coffee industry. With a continued growth rate in store openings and maintaining successful profitability of its operations, Starbucks has demonstrated its ability to sustain a reliable and steady growth. Starbucks’ ability to contend with the vulnerability to current financial threats such as economic recession, higher interest rates, and global competition, is constantly proven by its incomparable brand image, its continual product innovations, and its exceptional customer service. This

The company, which ranks amongst the world’s top 100 global brands (Interbrand 2006)2, has an impressive record of sales and profit growth In FY2006 Starbucks achieved a sales turnover of $7.8bn, an increase of 22% on 2005, and operating margin of 11.4%.. Since 2002, incomes have dramatically multiplied, followed by rapid extension in the quantity of domestic and universal outlets.. The organization has driven arrangements for future development and throughout the following 4-5 years plans to twofold the extent of its business and open a further 10,000 stores. . Its long haul aspiration is to secure by most accounts 40,000 stores around the world

Generally, Starbucks is viewed in an in a positive light, however they have made a few decisions that were unethical behind the eyes of public. One of the faulty decisions that Starbucks made was when they implemented a policy of “keeping a tap running non-stop.” (Balakrishnan) Because of this policy, they wasted over 6 million gallons of water every day. This amount of water could have helped millions of people in third world countries as having access to clean drinking water is a major concern. Additionally, many countries were facing drought, and Starbucks was just wasting the water down the drain. When questioned about this practice, Starbucks response was that they leave the water on for hygienic reason, however this was illogical because the tap water that was left on was primarily used for washing utensils, so they would have to use dish soap anyways. On the other hand, if it was used for only a quick wash of the utensils, they could have implemented a motion sensor tap so it turns on only when the employees needed it. This decision was extremely neglectful, however after public outcry, they implemented steps to decrease water usage. Since this practice was exposed in 2008, they have reduced their consumption by 17.6 percent in 2011. The reduction is due to implementation of “hand-metered water system” and “low-use water faucet[s].” (Starbucks)

The business has the runway for further growth opportunities and is breaking into new markets. Consumer tastes and lifestyles continue to shift towards more snacks and beverage options. With small modifications with the menus and implementation of healthier product offerings, they can increase revenue. Another option is for the company to pursue more juice products and possibility break into the alcohol market. By targeting these products, the potential to parallel their coffee products can garner success. Like Dunkin Donuts, Starbucks could strengthen shelf space and increase the efficiency in some of their distribution channels. There has been a wide fluctuation in the market with prices of high quality coffee beans and the price of coffee overseas. Starbucks could mitigate the problem by working with suppliers to lock in prices with long term contracts.

All around the globe people have either purchased a coffee or have heard of the coffee chain Starbucks. As the #1 coffee house chain in the world, with just over 19,700 stores, Starbucks has managed to stay at the top of their game with reinventing themselves and how they do business. Whether that is due to the change in leadership, structure or cultural change, this chain has surpassed the market place by overpowering the second place Dunkin Donuts by almost 8,000 stores worldwide. Nothing seems to slow down this powerhouse and they have the numbers to prove just that. The company has spent decades growing only the best for their franchise. Starbucks has included “Our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” (Jurevivius, “Mission Statement of Starbucks”). How is it that one chain can take the world by storm?

As a consultant for Starbucks, it was interesting to review a multinational company that operates in 62 countries and has 19,000 stores (Starbucks Corporation, 2013). It is apparent that success lives within the offerings of high quality coffee with a 3 billion base of customers enjoying the products. The company has a strong commitment to buying and serving high-quality coffee and consumers have savored the coffee and the prestigious brand. Starbucks arsenal not only consists of the signature Starbucks brand but also goods and services under names such as Teavana, Tazo, Seattle’s Best Coffee, Starbucks VIA, Starbucks Refreshers, Evolution Fresh, La Boulange and Verismo. All of the intricacies that make Starbucks a big success also offer challenges to the company that puts more weight on an effective strategic management process.

Since starting its business operations in 1971 Starbucks has worked its way up to becoming the global leader within the specialty coffee industry and has revolutionized not only this sector, but the entire coffee culture. However, through rising competition and increasing criticism within the media and public, Starbucks has to re-think its position and further growth. The corporation still has various opportunities to expand and improve its business, and should take actions in order to defend its position.