STARBUCKS COFFEETo inspire and nurture the human spirit— one person, one cup, and one neighborhood at a time.

Introduction

Starbucks Corporation is an international coffeehouse chain based in Seattle, Washington.

Starbucks is the largest coffeehouse in the world, with 17009 stores in 55 countries.

Starbucks sells drip brew coffee, expresso-based drinks and other hot and cold drinks, hot and cold sandwiches, panini, pastries and snacks as well as mugs and tumblers.

Starbucks, in 2009, has released a Corporate Responsibility Report in line with international policies to expand.

Discussion Questions

What has suddenly made people across the world willing to pay three to four times more for a cup of coffee than they used to?

Is Starbucks another McDonald’s? How similar and different are the two companies?

Evaluate the strengths, weaknesses, opportunities and threats of Starbucks. How are the trends of health concerns, the ageing population and anti-globalisation likely to affect the continued growth of the company?

What factors accounted for Starbucks’ success in the early 1990s and what was so compelling about its value proposition? What brand image did Starbucks develop during this period?

How has Starbucks changed since its early days?

What has suddenly made people pay three or four time more for a cup of coffee than they used to?

THE STARBUCKS EXPERIENCE

High Quality Coffee

Third Place Between Work and Home

Selling Community

Is Starbucks another McDonalds?

NO

How similar and different are the 2 companies?

DIFFERENCEStarbucks McDonalds

Price 6 3.7

Niche High to middle-class people Families

Purpose of Going Business/Leisure Modern MamakEnvironmental Responsibility

Offers RM2 off any beverage if customer brings Starbucks

tumblerN/A

Quality of Employee Friendly, more interactive Lesser compared to Starbucks

Ambiance Jazzy, higher class Fast food joint

Key Selling Point Frappuccinoes/Coffee French Fries

How similar and different are the 2 companies?

DIFFERENCEStarbucks McDonalds

Discounts & Promotions

Discount if paid with credit card/ Jusco Card McValue Meal

Loyalty Programs Starbucks Loyalty Card N/A

Mode of Payment Cash & Credit Card Cash only

Opening Hours 10am - 1am 24 HoursAdvertising Minimal 5% of net profits goes to

advertising

Age Group 15-55 6 - 55

How similar and different are the 2 companies?

SimilaritiesStarbucks McDonalds

Ownership Owned by Berjaya Group, franchised

Incorporation In the United States of America

Similar Services WiFi

Certified Halal? Yes Yes

Delivery/Drive through Yes Yes

Able to attract students to study there.

Evaluate the SWOT of Starbucks.

STRENGTHS- Its a brand built on fine reputation- A respected employer- Strong ethical values and missions- Has specially designed decor for all outlets- Uses local architecture to connect to local community

WEAKNESS- Innovation may falter over time- Strong presence in the US, need to open more outlets internationally to spread business risk.- Lack of focus- concentrating on expansion- Product pricing (expensive)

OPPORTUNITIES- Created a CD Burning service- Has new products and services that can be retailed in outlets such as fair trade products- New markets for coffee in other countries- Co-branding with other high potential products

THREATS- Do not know if the popularity of coffee will last/ replaced with other products - Exposed to rising costs of diary and coffee products- Many copycat brands.

How are trends of health concerns, aging population and anti globalisation likely to affect the growth of the company?

Increasing health concerns of dairy milk has drove the company to introduce soy milk, cream free and offer less sugar for drinks.

The aging population takes coffee as a time of relaxation hence, boost Starbucks growth.

Starbucks franchise in other countries has been given a franchise manual and standard operating procedures before outlet is opened hence, can increase growth due to more autonomy given to individual outlets.

These trends will most likely boost the popularity of Starbucks both in the US and internationally.

What Factors accounted for Starbucks success in the early 1990s and what was so compelling about its value proposition?

Store Expansion Strategy

Starbucks developed a 3 year expansion plan

A large city is selected as a focus point

Starbucks had the benefit of selecting top retailing sites for its stores.

Product Line

Starbucks stores offered a wide choice of coffee.

Introduction of Starbucks Barista home espresso machine

Starbucks sales mix was roughly 61% coffee beverage, 15% whole bean coffee, 16% food items and 8% coffee-related products

What Factors accounted for Starbucks success in the early 1990s and what was so compelling about its value proposition?

Build top management team.

Starbucks’ management team is strengthen by hiring people with extensive experience.

The 4 key executives- Howard Schultz, Dave Olsen, Howard Behar, and Orin Smith- contributed the most to defining and shaping the company’s values, principles and culture.

Joint Ventures

In 1994, PepsiCo and Starbucks entered a JV to create new coffee related products.

In 1995, Starbucks partnered with Dreyer’s Grand Ice Cream to supply coffee for the new coffee Ice Cream.

Starbucks also worked with Seattle’s Redhook Ale Brwery to create Double Black Stout, a stout beer with a shot of Starbucks coffee in it.

What brand image did Starbucks develop during this period?

The brand strategy during the 1990’s was to sell their coffee as a “life coffee”.   To sell not only coffee, but the “everyday life experience” that drinking coffee promotes.

The 3 elements of branding strategy were:

 High-quality coffee from Central and South America, Africa, and Asia-Pacific regions Service: Recognizing loyal customers and knowing their drinks   Atmosphere: Comfortable place to stay for a while

How has Starbucks changed since its early days?

Brand is more accessible

Starbucks has expanded from local to international.

Starbucks’ products are available everywhere.

Partnerships with other brands and service value.

Customer based service innovation

Introduction of store value card that acts as a swipeable smartcard.

Provide HotSpot Wireless services that offer internet in 2000 stores.

How has Starbucks changed since its early days?

Change in customer preference

In 2002, beverages accounted for 77% of revenue compared to 6% of whole bean sales. 10 years ago; whole-bean coffee contributed half of total revenue.

Channels of distribution

Starbucks was popular from the conventional coffeehouse only before they move into other channels such as:

Hotels, airlines, restaurantsGrocery stores and warehouse clubsOnline and mail order.

How has Starbucks changed since its early days

Increase in product diversity

Expanded with product from coffee into other varieties.

With product proliferation, there are hundreds of combinations available.

Partnership with Dreyer’s Grand Ice Cream, developed a line of premium ice creams.

How has Starbucks changed since its early days?

1971Starbucks first opened in Seattle1984Howard Schultz, Retail operations director test coffehouse concept in Seattle, serving Caffe Latte1987Starbucks opened first stores in Chicago and Vancouver1992Completes Initial Public Offering trading with symbol ‘SBUX’1996Joins Pepsi-Cola to begin selling bottled Frappuccioes. Opened first stores outside North America 1997 Establishes The Starbucks Foundation, benefiting local communities. 2002 Starbucks enters into licensing agreements to sell Fair Trade Certified™ coffee 2004 Introduces Starbucks Coffee Master Program to provide Starbucks partners with an opportunity to learn more about the world of coffee 2009 Launches innovative VIA™ Ready Brew coffee. Becomes the world’s largest buyer of Fair Trade Certified™coffee.