Understanding Situational Factors Impacting Starbucks

With time the small industry of coffee has modernized into a multibillion dollar industry that surrounds the world. With the growth of the industry there has been many world wide changes. Over the past 30 years coffee shops have jumped to the front of the public culture. New coffee shops have changes the face of American cities along with British, German, Colombian, Kenyan and Indonesia towns to name few. (Coffee a comprehensive guide to the bean, the beverage, and the industry) Around the world coffee has become part of the daily culture and coffee shops have grown to accommodate the massive demand that people ask for. Without the growth of the industry there would be a shortage of the product and many would have to go without their beloved beverage. In the United States alone there has been a massive increase in the number of coffee shops. In 1980 the number of coffee shops was a year 2,000 and by 2008 there was an astonishing 27,715. (Coffee a comprehensive guide to the bean, the beverage, and the industry) This was an increase of over ten times in the short time. 11,000 of those stores, almost half, were Starbucks one of the biggest coffee brands in the worlds. The growth of Starbucks is due to the work of Howard Schultz a worker for the company before they became as massive as they are today. Starbucks started very small in Seattle, Washington in the mid 1970’s. Howard bought out the owners and then went on to turn the small company into a massive corporation. (Coffee 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).

Founded in 1985, Starbucks is one of the largest coffeehouse companies in the world with over 16,000 stores in 50 countries. This report evaluates major internal and external factors affecting Starbucks using various analytical techniques. Based on the Starbucks brand in UK, it identifies suitable marketing strategies for Starbucks to expand its business in the UK market within the next two years. In line with the chosen marketing strategies, recommendations for the marketing mix are discussed.

Starbucks has made a success offering the consumers something different than nice store bought brands of coffee. Howard Schultz acquired Starbucks in 1987 he wanted to copy the idea of espresso bars that he saw on his visit to Milan. His idea was to provide the consumer a place where they could relax and socialize with coworkers or friends that he called the third place. (Ferrell & Hartline, 2013).

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

Starbucks initially was a small structure, run by three partners in a small shop in Seattle. The company then was restricted to selling only whole bean and ground coffee. It was typically a top down structure were the three people in the top management were the decision makers. In 1984, when Schultz suggested the idea of selling coffee and expresso drinks, the directors of Starbucks rejected the idea, in spite of the fact that the move would have made more profit for the company. This displayed the rigidity of the management towards any changes in the business.

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

In 1971, Starbucks started as a small coffee shop which targeted a specialized market of coffee purists. Howard Schultz, who later owned the company and initiated the high growth period, joined Starbucks’ marketing team in 1982. Main concept of Schultz marketing strategy was too make Starbucks “America’s third place” considering home and work the two other places where Americans spend most of their time. In 1992, Schultz acquired Starbucks and made an initial public offering. Despite Wall Street’s doubts about the IPO, $25 million was raised by Starbucks.

Howard Schultz didn’t just build a company, he built an empire. Starbucks’ Coffee is a benchmark in the coffee trade, for coffee drinkers and, even non-coffee drinkers. He nursed a small company in the big city of Seattle, to a global

“To inspire and nurture the human spirit one person, one cup and one neighborhood at a time” (Starbucks, 2017). In 1971, Starbucks Coffee Company (SBUX) was founded by three students; Jerry Baldwin, Zev Siegl, and Gordon Bowler in Seattle, Washington (Orta, Feigenblatt, Lemus and Rivero, 2015). The goal has been to serve the best coffee with delicious flavors of coffee beans, treating employees as partners, and serving an inviting atmosphere to their customers. The new owner, Howard Schultz generated a culture of high values where people are treated like family. He has worked to produce a modernized structure where employees can grow by working in a teamwork environment. The key to his success has been communication in which it

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.

When Howard Schultz began to notice a decline in the Starbucks brand he built from a single coffee house into a multinational chain of over 15,000 locations employing over 172,000 people, he decided to begin 2008 with new direction. He reassumed the role as CEO and proposed a set of new initiatives to reenergize the company as a whole. These initiatives started at the front lines of Starbucks by changing some of the current machinery used to create espresso and coffee. Next he launched new roasted coffee blends that were set to revolutionize overall taste and perception of coffee. Additionally, due to perceived loss of customers, he introduced a revamped rewards program as well as an online forum to allow anyone from

Howard Schlutz- CEO and Chairman of Starbucks proved that dreams do come true. Starbucks Coffee Company is the textbook example proving that passion and drive are enough to start an effective business project. Starbucks bred progressively from one little homegrown business in Seattle to an international coffee giant. From the beginning, the company had a different aura to it. It is not a traditional entrepreneurship, in the sense that Howard got the idea from the owners of the original Starbucks in Seattle. But Howard’s vision to bring the romance of coffee is what made him prosper. It was not about the profits for him, it was about celebrating coffee and its rich tradition. He’s the man who globalized coffee. A defining moment, in the early history of Starbucks was when Howard bought Starbucks from his previous employers in 1987. Here, he was faced with problems of merging two companies and transforming them into one successful business. Starbucks is not only about the positives. From 1987 to 1989 Starbucks had a losing streak. Schultz never strayed from his original purpose and battled through the storm, laying a strong foundation for his company. The crossroads in Schultz’s life is his capability to foretell the future and trust in fate. One of the greatest lessons learned from his story is that, as a strategic component in entrepreneurship, pursuing an opportunity fused with desire can yield magnificent products. The key principle that Schultz conveys is that employees

Howard Schultz asked Bowker and Baldwin to allow him to partner with them. Although the pair was leery of him, and questioned his dedication, they eventually gave in. The two initially denied his request, but Schultz was able to convince Baldwin that he could do it. Baldwin agreed to hire Schultz. Schultz became the head of marketing and appointed the task of overseeing all of the retail stores in 1982. He quickly became knowledgeable about the day-to-day operations of Starbucks. His dedication and love for coffee was no longer in question. He brought new ideas to streamline the ordering process and make for a smoother in-store experience.