STARBUCKS COFFEE We’re not in the coffee business serving people… We’re in the people business serving coffee. -Howard Behar, Director of Retail Operations
Agenda History and Business growth strategy Problem Identification Starbucks and Market research SWOT analysis Recommendation Future prospect and conclusion
STARBUCKS: THE HISTORY The original Starbucks store was started by ZeivSiegl, Jerry Baldwin and Gordon Bowker in 1971 It was opened as a store that sold whole beans and premium-priced coffee beverages Howard Schultz’s joined with Starbucks in 1982 and his idea was to create a chain of coffee houses with a product differentiation of specialty “live coffee”, service or customer intimacy with an “experience”, and an atmosphere of a “third place” to add to their work and home alternatives. The stores targeted selling their coffee primarily to affluent, well educated, white-collar patrons between the ages of 25 and 44. In 1992 Howard Schultz , after opening Starbucks 140 stores, took the company public and by the end of 2002 Starbucks had opened more than 5000 stores across the globe.
PRODUCT MIX The company spent minimal dollars on advertising to promote a brand concept , still achieving phenomenal sales figures The majority of sales came from coffee based and other beverages and the rest from food items and whole bean coffee sales. Other- 15% Revenue Source Product Mix with % sales
STARBUCKS: THE SUCCESS ‘Live Coffee’ Mantra Highest quality coffee offered Control the supply chain- Work with the growers, oversee the roasting and control the distribution Continuous product innovation
Starbucks was not meeting expectations in terms of Customer Satisfaction and there was a direct link between Satisfaction and Customer Loyalty
Though Starbucks is still a dominating chain but its hold on coffee has loosened.
Facing Competition not from newcomers but from older coffee chains that have increasing customer loyalty.
Another threat are the established food chains that have altered their focus to incorporate the rising trend of coffee.
Increasing Competition Dunkin Donuts: Complementary pairing of Coffee & Donuts. 2. Peet’s Coffee & Tea: Focus on Quality Coffee & Strategic Positioning of Stores nearby to Starbucks locations. 3. Caribou Coffee: Differentiate themselves on the basis of Store Environment.
STARBUCKS and Market Research Strong Proactive culture @ STARBUCKS
Strengths The Brand Starbucks Strong Financial Base Large number of locations 3rd Party Tie-Ups Growth through Innovation Respected employer
Weaknesses Undisciplined Marketing Inflexible Pricing Does not tailor its branches according to location
Opportunities Tie-ups with other established businesses Developing international business Diversification into other drinks
Threats New Entrants Competitive rivalry Substitution Bargaining power of Customers
Recommendations Strategies to Renew Starbucks Brand Name (a) Advertising and Promotion: Market there brand more aggressively in order to convince people that Starbucks serves coffee that is superior to other coffee and beverages. (b) Product Differentiation: Starbucks should work on differentiating its coffee. They should invest in extensive research and development efforts to develop new flavors, blends or even roast fusions. (c) Coffee Variety and Quality Control: In catering to different consumer preferences, Starbucks needs to increase its variety of coffee offered. Starbucks needs to ensure that the coffee offered is of the highest quality.
2) Strategies to Build and Retain Customer Loyalty a) Privilege Card and Rewards Program: Having a non‐distinct rewards program provides no incentive for coffee drinkers to choose Starbucks over other its competitors. b) Starbucks Drive‐Through:
Although Starbucks’ strategy has been to open as many stores as possible, most of its stores are mid‐sized. As a result Starbucks loses potential customers.
Starbucks has already started implementing drive ‐ throughsaround the country, and there is potential for them to expand.
Recommendations Strategies towards Cost Efficiency Effective Store Expansion Decisions Restrict its expansion in US Explore and Expand in new markets
Development Growth Maturity Decline Europe USA Asia Life-cycle model of coffee consumption Latin America Latin America
Strategies towards Future Growth Expansion into the Corporate Market