Starbucks’ CEO, Howard Schultz, asks an interesting question: “What would happen if one takes the high-quality coffee from Starbucks and connects it with the charm and atmosphere of European cafés? Starting from this idea, the company developed in a unique way. Starbucks is now the world leader in the premium coffee market with 128,898 employees in more than 17,000 locations and a revenue of US $ 9.77 billion. Starbucks has revolutionized the coffee business. Its main marketing strategy is to present the Starbucks store as a “third place” between work and home. Starbucks has expended rapidly abroad, but there were and are some cultural differences through which Starbucks has problems. I will try to analyze these problems and demonstrate solutions.
Introduction
Starbucks’ CEO, Howard Schultz, asks an interesting question: “What would happen if one takes the high-quality coffee from Starbucks and connects it with the charm and atmosphere of European cafés? Starting from this idea, the company developed in a unique way. Starbucks is now the world leader in the premium coffee market with 128,898 employees in more than 17,000 locations and a revenue of US $ 9.77 billion. Starbucks has revolutionized the coffee business. Its main marketing strategy is to present the Starbucks store as a “third place” between work and home. Starbucks has expended rapidly abroad, but there were and are some cultural differences through which Starbucks has problems. I will try to analyze these problems and demonstrate solutions.
History
Starbucks was founded in 1971 by two university friends in Seattle. The founders named their coffee, tea and spice business “Starbucks Coffee, Tea and Spice,” in reference to the helmsman in the novel “Moby Dick”. By 1981, three more stores had opened in Seattle. At that time, the New Yorker Howard Schultz was aware of the company. He was impressed by the quality of Starbucks’ coffees and developed the idea of selling premium coffee nationwide. In 1982 Schultz was employed by the company and became head of retail and marketing at Starbucks. A dispute between Schulz and the owners about the further expansion of Starbucks led to a break. Schulz resigned from Starbucks and in 1985 he opened his own coffee bar.
Acquisition and Expansion
Howard Schultz kept an eye on his goal of national coverage with premium coffee. He argued 15 investors into his idea. In 1987 he bought out Starbucks for $3.8 million and began his expansion with 11 shops and 100 staff. In 1992 Starbucks was transformed into a public company and Schultz took it to the U.S. stock market. With the new money raised he was able to expand even more rapidly (into 272 locations).
Expansion abroad began in 1996. The first stores were opened in Japan, Singapore and the Philippines and by 2000 Starbucks had opened in 3500 locations worldwide, including Britain, China, Thailand, The United Arab Emirates and Australia.
In 2001/2002 branches were added in Switzerland and Austria. In Germany Starbucks founded a joint venture with KarstadtQuelle, the Karstadt Coffee Ltd. However, in 2004 Karstadt got into financial difficulties and Starbucks took over Karstadt Coffee Ltd. completely. In 2007 there were first falling numbers in the American branches of Starbucks, following which Starbucks closed 600 locations and cut up to 12,000 part- and full-time jobs. On January 8 2008 Schulz returned as CEO and began to take a radical new approach to the company: he slowed the pace of expansion in the U.S. and changed the range in the shops. Employees in the American branches were also given training, because negligence had crept into the preparation of cappuccinos and lattes.
Strategy
What Is Starbucks’ Product?
Starbucks purchases and roasts high-quality whole bean coffees and sells them, along
with fresh, richly brewed coffees, Italian-style espresso beverages, cold blended
beverages, a variety of complementary food items, coffee-related accessories and
equipment, a selection of premium teas and a line of compact discs, primarily through
company-operated retail stores. Starbucks also sells coffee and tea products and licenses
its trademark through other channels and produces and sells bottled
Frappuccino coffee drinks, Starbucks DoubleShot espresso drink and a line of ice
creams.
Further, in some respects Starbucks is able to sell emotions and experiences. This is basically what every marketing strategy tries to realize and to measure. By providing a unique atmosphere, the customers enjoy the time they spend in the stores. The interior design and the smell of coffee are the most important aspects that support the company’s store concept.
Changes in Society
There are several changes in society that have contributed to Starbucks’ success. In my opinion, the most important change of the last decades is the economic change. Starbucks’ strategy involves locating its stores at special places such as urban areas, the first floor of office blocks and entrances to underground stations. These places, of course, become more crowded the better the economic situation is.
The development of information technology and media is another aspect. On the one hand, it helps the company to reach new customers and on the other hand the company embraces multiple music and technology-based initiatives designed to appeal to new and existing Starbucks customers.
Strategy in General
An important question is how Starbucks has succeeded in opening three new stores daily.
The decisive factor in this rapid expansion and the resulting success is the choice of optimally located sites, which must have a high frequency of customers.
Starbucks tries to reach people where they work, travel, shop and dine, to make coffee to an component of their daily lives. Many shops are integrated into large office complexes, airports, shopping centers or supermarkets. The company enters these closed markets usually by means of cooperation with well-known regional societies, e.g. in Germany the joint venture with the Karstadt Quelle AG, in which Starbucks holds 20% of the shares, the Karstadt Quelle AG 80%, or in the form of alliances, Examples include: the business relation created in 1993 with America’s largest bookseller, Barnes & Noble, Inc., for the sale of coffee products in the book shops; a strategic alliance with PepsiCo in 1994; the joint venture between “Starbucks Coffee International” and the Japanese corporation SAZABY Inc. in 1996, to develop the Japanese market, as well as numerous contracts with hotel chains (Marriott) and airlines (United Airlines), to name but a few.
One can say that Starbucks moves into markets that already exist, i.e. where there are already different coffee houses. Starbucks then expands very quickly, according to the clustering model. This can then realize economies of scale and the name Starbucks is the epitome of the coffee houses.
[...]
- Citation du texte
- Christian Mangold (Auteur), 2010, The Starbucks Company. Success Strategy And Expansion Problems, Munich, GRIN Verlag, https://www.grin.com/document/159596