Starbucks Case Study

Takeaway:

To redirect Starbucks on a good path, come back to the main goal: offer to the customer the unique café experience that drove Starbucks’ past success. Starbucks wants to go back to the previous vision: passion for the business, for the customer & employees.

Table of Contents

Beginning of the Company

Founders: Jerry Baldwin/ Gordon Bowker. Open the first Starbucks in Seattle 1971.

Goals: wanted people to have access to the best, educating its customers about the coffee

Values: offer the warmth of a European coffee (want to implement in USA what he has experienced in Italy) – turn coffee from a commodity into an experience: Unique and personal    

Vision: “To become an enduring, great company with one of the most recognized and respected brands in the world, known for providing the best quality coffee“

  • 1982 – Howard Schultz, the visionary of Starbucks, became the director of retail operations and marketing of Starbucks 1982
  • 1985 – At first, Starbucks used to sell only coffee beans, and Schultz wanted to open stores to serve But owners decided to not expand the concept – Schultz left the company and start his own business “Il Giornale”

What Schultz wanted?

Bring the romance of Italian coffee to America – Opened his own coffee bar Il Giornale and joined Dave Olsen who had a successful coffee bar in Seattle, Café Allegro.

  • 1987- Schultz & Olsen started to expand the Il Giornale chain by opening a second store in Seattle + one in Vancouver
  • Starbucks’s Owner wanted to sell the firm – Schultz and Olsen purchased it (for 8 million) & changed the names Il Giornale to Starbucks because the name of the brand was stronger

Expansion time for Starbucks

Their strategy: customer loyalty and saturate the market

Their mission: Establish Starbuck as the first purveyor of the finest coffee in the world while maintaining the aim of Starbucks “the warmest place to appreciate coffee”

Creating the starbucks experience (thanks to the store design, focus on the customer, creating partnerships & alliances with social organizations), the passion and leadership of Howard Schultz brought success to the company.

Employees’ empowerment = Employees can participate in the development and decisions of the company. Schultz really works with its whole staff. He builds respect & confidence with employees.

-He explains the strategy of the firm to employees so they are involved and motivate at work.

The planned number of store openings has been exceeded (165 instead of 125 in 5 years) (they focus on the US market)

1992 – company went public = to raise capital in order to accelerate growth.

Schultz became the new CEO of the company & focus on hiring only managers who have experience in growing businesses.

To increase sales, they started selling both food and drinks (Launched the Frappucino = hit of Starbucks)

They formed partnerships with different companies to be present in many sectors (grocery stores, ice cream industry, music industry and tea industry)

Social Responsibility and Economic Times

The principle of contributing to communities & the environment is very important for Starbucks.

They work together with partners & suppliers to define sustainable methods for coffee production.

Made a partnership with The Center of Environmental Leadership in Business in order to:

  • reduce its environmental footprints
  • Respect social conditions with producers of coffee
  • Benefit rural communities
  • Sustainable methods with partners and suppliers = acceptable living conditions, avoid child labor.

Starbucks Challenges

Even if difficult economic times in 2007, Starbucks is still increasing its profits over years.

  • Number of customers decreasing (less frequentation) – Schultz became again the chairman of Starbucks – Goals = Customer is a priority, exceed their expectations. Refocus on customer experiences – new CEO= Jim Donald to replace Schultz
  • Increasing competition (McDo for ex or other fast food who started selling coffee in their stores) – VIDEO Starbucks cup size is too confusing (weakness compared to McDo whose cup size is more logical) – to overcome new competitors, should make more advertisement, focus on non coffee drinkers (offer smoothies, fruit cups etc..), offer substitutes to competitors products, focus on customer’s experience (what used to make starbucks a real success). McDo is not a real threat because not same concept as Starbucks and totally not the same customer experience
  • Some social organizations accused Starbucks on not being as sustainable as they praise.
  • Jim Donald fired because opened too much stores in the US (wrong strategy that he made) & because loss on innovation (wise decision because boost creativity, change of strategy, new objectives… But not wise because might destabilize the company and create internal conflicts)

But finally, Starbucks adapts itself to all these situations and is keeping its competitive advantage (customer oriented service). They succeed in making good decisions and understand that their unique concept was their strength – Starbucks planned to expand to the number of stores internationally and limit the ones in US because of a saturation of the market.

Starbucks hasn’t lost its competitive advantage because the brand belonging is still very strong and the company is really customer-oriented since the beginning. Starbucks stores have a real identity and design which is also an added value for the brand and permits them to make their competitive advantage sustainable.

Transformation of the company

To redirect the company on a good path, come back to the main goal: offer to the customer the unique café experience that drove Starbucks past success. They want to go back to the previous vision: passion for the business, for the customer & employees.

For that, transformation agenda:

  • Improving the current state of the U.S. business: better training and tools & launch new products.
  • Rediscover of the Starbucks Experience: Create a renewed level of meaningful differentiation and separation in the market.
  • Spread the Starbucks spirit around the world: Building a profitable business outside the U.S. Growth to the international business.  

 

Want to focus on expanding on international markets:

  • Stop the expansion strategy in the US to consolidate the quality in the existing shops.
  • Keep the expansion strategy in other country where coffee is a tradition.
  • Reconquering the Japanese market.
  • Finally settle down in France and Great Britain where the original dark coffee is part of the culture by putting in place new product (as stronger coffee).
  • Opening in China

 

– Taking advantage of the actual and volatile popularity of the brand to attract new customers (also in Africa, Asia, South America).

Conclusion

Starbucks Coffee announced the introducing of coffee delivery in 2015. The actual CEO Howard Schultz said that the coffee giant is “finalizing plans for two distinct delivery models, one of which utilizes our own people and the other of which leverages the capabilities of a third-party service”. The delivery system is expected to increase sales and generate more customer loyalty. Moreover customer will be able to use their mobile phones to order and pay in Starbucks ‘stores nationwide by the end of the year. Customers could plan their order and go to the store they select to pay and pick up their order.

Customers are already able to pay using the Starbucks app, but the ordering feature will be a new addition.

The Seattle coffee company also plans to introduce new “express” locations in New York City as part of a pilot project. The locations will offer a streamlined assortment of food and beverage options and integrate Starbucks’ mobile payment, mobile order and pay options.

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