The document provides a comprehensive analysis of Starbucks' transformation from its founding in 1971 to its recovery under Howard Schultz during the recession period. It covers the company's expansion, competitive landscape, key issues like commoditization and operational challenges, and strategic recommendations for future growth. The analysis highlights the importance of maintaining core values and adapting to consumer demands while navigating intense competition in the specialty coffee market.

1. STARBUCKS COFFEE COMPANY
TRANSFORMATION & RENEWAL
GROUP MEMBERS:
Fredrick Oyekanmi
Luke Obi
Peace Ike
Bunuzi Kameja
Sutapa Sarker

2. Table of contents
Class Poll
Case Synopsis
History of Starbucks
Industry Overview(Coffee chain market)
Key Issues Starbucks was facing
Competitive Landscape
SWOT Analysis
PEST Analysis

3. Case Synopsis
Starbucks history: pre-recession and post- recession
period
Examines the cost and profitability effect of the
proposed strategic marketing recommendation to
meet customer satisfaction

4. Case Synopsis
Starbucks built its brand as a premium quality coffee
provider and also created the idea of “the third place”
between work and home, giving its customers a sense
of community and human connection in every
Starbucks store
Examine how Starbucks was able to turn around their
downtrend with the re-introduction of Schultz as CEO

5. Introduction
Starbucks Introduction Video
History of Starbucks
Bags of Beans 1971-
1987
Found in Seattle,
Washington by Gerald
Baldwin and Gordon
Bowker as a premium
bean retailer. Howard
Schultz was hired in
1982 and kept in
charge of marketing. He
later bought over the
company and started
building the brand as a
coffee retailer
The Growth Age
1988-1995
Starbucks became
popular, focused on
employees satisfaction
by giving both full and
part time employees
benefits and stock
options. they went
publlic as SBUX on the
New York Exchange
market
The Expansion Age
1996-2006
They expanded their
product line, products
which includes
Frappuccino, Ice cream
and Tazo tea. Store
opening also increase
exponentially both local
and internation. Their
first Outlet outside
North America was in
Tokyo, Japan.
The Recession
Period 2007-2008
These was Starbucks
crisis period, losing
customers to
competitors, drop in
share price, staff cut
and closing down of
stores around the
globe
Schultz returned as
CEO of Starbucks and
turned around their
misfortune, rebuild the
brand core values,
trained stars and
invested in starbucks
media image

7. First Starbucks Commercial
This commercial aired during SNL in the heat of the Fall 2008 Presidential
election season, advertising that Starbucks would give out free coffee
Nov. 4
According to Business Insider, it got 70 million media impressions
First Starbucks Commercial

8. Industry Analysis- About Coffee
Origins of Coffee
Most popular beverage in the world
Grown in over 60 countries
Arabica and Robusta - (Types of Coffee beans)
2.25 billion cups consumed per day
More than half of Western World consumes coffee
Over 80% of sale of restaurants and beverage stores
Specialty Coffee

9. Brewing Coffee:
● Espresso or Coffee
● Espresso, Cappuccino, Latte or Ice/Cold
Coffee around the world
Blending and Roasting
Types of coffee roast:
- Light roast
- Medium roast
- Medium dark roast
- Dark roast
Industry Analysis - About Coffee cont'd

10. 23,187 outlets in over 64 countries
2014 revenue figure - over $16.4billion
Founded in 1971, Seattle USA
2,861
outlets in over 30 countries
2014
revenue – over $1.21billion
Founded in
1971, London U.K
11,000 outlets in over 33 countries
2014 revenue – over $9billion
Opened in 1950 in Massachusetts USA
1,300
outlets in over 30 countries
Introduced into USA in 2001
Founded in 1993 in Australia
Industry Analysis - Top Global Coffee Chains

11. Industry Analysis - Market Share In Key Locations

12. Customer Satisfaction Survey
Can You Identify Your Brand?

15. Key Issues
Commoditization Of The Starbucks Experience
No relationship between customer and baristas
Customers no longer have the in-store experience
Loss of coffee aroma
Loss of warm feeling in the store

16. Key Issues cont’d
Increasing Competition
● Rapid increase of other specialty coffee retailers
McDonalds
Dunkin Donuts
Caribou Coffee
Poor Operations
Mismanagement of supply chain and lack of discipline

17. Key Issues Cont’d
Rapid Expansion
Lack of control over store increase
Inexperienced Baristas
Poor store locations
Loss of focus on core values
Economic Decline
Recession

18. Competitive Landscape
Sector: Specialty Coffee retailer
Major players:
Specialty coffee retailers(Caribou Coffee and Peet’s Coffee & Tea)
Established food and beverage companies(Dunkin’ Donuts & McDonalds)

19. Starbucks vs. Caribou coffee
Founded in 1992
500 stores in 2007
Powerful competitor in the Midwest
Like Starbucks emphasised premium coffee beverages and a relaxed in-
store experience(Alaskan lodge vs pseudo-European atmosphere)

20. Founded in 1966 by Dutch-born coffee merchant Alfred Peet in Berkley,
California
136 stores in 6 states by early 2007
Specializes in dark-roasted arabica coffee
Maintained a fiercely loyal following
Like Starbucks emphasised premium coffee beverages and a relaxed in-
Starbucks vs. Peet’s Coffee & Tea

21. Starbucks vs. Dunkin’ Donuts
New England-based company
Coffee-to-go model as opposed to “third place” after work and home model
In a host of regional markets, upgraded its drip coffee, raised prices on coffee
beverages and installed espresso machines in many locations(per Starbucks)
Offered coffee in range of flavours (caramel,toasted almond)- revolt against
“espresso oppression and the tyranny of long waits, high prices and confusing
sizes”
2006: Introduced coffee house aesthetic into its new stores as it took major

22. Starbucks vs Dunkin’ Donuts
● Advertisement taking aim
at Starbucks brand
identification with the
Italian origins of specialty
coffee drinks such as
espresso, cafe latte and
cappuccino.

23. Starbucks vs. McDonalds
Had muscle, leverage and resources to rival Starbucks
1993: Introduced gourmet espresso bars-called McCafes-in its Australian
markets.
By 2001: expanded these coffee outlets to 300 global markets, including
its 1st US Cafe in Chicago, Illinois
2007: Introduced its version of espresso-based coffees, also called
McCafes, in select stores-intensified competition
2007: In Consumer Reports test , McDonald’s coffee was very well-
received by consumers, beating out Starbucks and Dunkin’ Donuts

24. Starbucks vs McDonalds cont.
Early 2008: To promote the launch of espresso drinks in the Seattle
market, McDonald's started unsnobbycoffee.com
● 2008: Seattle-area McDonald’s
franchisees raised billboards
that declared:

25. SWOT,PEST & PORTER’S 5 FORCES

28. Porter’s Five Forces
1. Rivalry Among Competitors
Intense competition amongst big competitors and local
shops to gain market share
Competitors offering different customer service to lure
customers in
Different coffee flavours are coming into the market
Meeting “on the go” customer demand (late hours closing
times and drive throughs)

29. Porter Five Forces - cont’d
2. High Potential of New Entrants
Low start up capital
Customers switching behaviour is high
3. Potential Development of Substitute Product
Water is a substitute, free and healthy
Tea bags with different flavours ( Tim Hortons) and other
tea beverages are inexpensive compared to coffee

30. Porter’s Five Forces - cont’d
4. Bargaining Power of Buyers
● Lower bargaining power as compared to premium coffee like
Starbucks and big competitors but not the same for small and
local stores
● High switching customer behaviour
5. Bargaining power of Suppliers
Low bargaining power for suppliers of coffee beans
High bargaining power for suppliers of coffee equipment,
espresso, latte etc

31. Recommendations
Bring back the soul, the passion, the magic by story telling again with
innovation and reinvention
Meet the demand of “on the go” customers by having a drive through
attached to the store
Cater to the new type of consumer who is more conscientious and less
vain, so as to steal as much of the coffee share as possible
Emphasizing more on advertising and promotions activities, especially
those that promote social responsibility
Consider the option of Franchising

32. Potential Risks of Recommendation
Providing more personalised attention and being narrative may slow down
the service process
Advertisement medium might not reach the appropriate target market and
might be passing on the wrong message to consumers
Company expenditure may rise due to concentrating more on advertising
and promotions
Risk on quality maintenance and conserving the key concept of the
business

33. Minimizing Risks
Hiring and training more partners can be the solution to make the service
faster with personalization/customization
Very specific information to pass through advertising and promotions
expressing one same feeling to reach target customers and remind
them of the Starbucks story and the “Starbucks Experience”
Considering the advertising and promotion expenditure more as
investment to step towards becoming more customer oriented as
opposed to profit orientation

34. Starbucks In 2015
Starbucks has evolved from a mere seller of coffee products to a full-
fledged chain “restaurant”, offering not only coffee products but also
other beverages, foods, and merchandise.
Starbucks is still a global leader in the coffee shop chain business
Introduced an online app making it more convenient for customers to
locate stores and place orders
Starbucks slogan of “Uniquely Starbucks” continues to play a huge role in
company’s success.

35. Lessons Learnt
The key concept of the success of a business has to be maintained and
improvised irrespective of how large the business expands.
You forget, you start losing!!!
Change is inevitable
Consistency is key
Can’t be complacent
Be observant

37. THANK YOU