Starbucks Case Analysis

Table Content

Starbucks History and Overview -------------------------------------------------------------------------- 1

External Environment -------------------------------------------------------------------------------------- 2

Internal Strengths and Weaknesses ------------------------------------------------------------------- 2 - 3

SWOT Analysis and Recommendations ------------------------------------------------------------- 3 - 4

Corporate-level Strategy ----------------------------------------------------------------------------------- 4

Business-level Strategy ------------------------------------------------------------------------------------- 4

Starbucks Structure and Control System ----------------------------------------------------------------- 5

Starbucks History and Overview

Two teachers, Jerry Baldwin and Zev Siegel, and a writer, Gordon Bowker, believed they could form a strong client base in Seattle for the fine coffee market. They each invested $6,350 and opened the doors of Starbucks Coffee, Tea, and Spice in Pikes Place Market in Seattle servicing local restaurants and bars. With the desire to change marketing, they teamed up with Howard Schultz. Howard Schultz was hired for retail sales and marketing. Schultz geared the marketing towards appealing to patrons both culturally and socially. This concept derived from Howard Schultz European travels and seeing how coffee shops there were successful. With resistance, the trio went along with Schultz, but eventually the union split because Schultz had different views. He then opened his own line of fine coffee shops with much success. Soon after he paired with II Giornale they bought Starbucks for $3.84 million. The acquisition included the name, roasting plant, stores and more. This would the first of many.

The Starbuck Corporation had a goal of opening 125 stores in five years. By 1990 there were 84 Starbucks locations that included locations in Chicago, Portland, and Vancouver, as well as a mail order catalogs for roasted coffee and high quality equipment. Entering the California market in 1991 really boosted them into the big league. Also, at this time Starbucks becomes the first private company to offer a stock options program to employees. By 1992 Starbucks had 150 locations; 25 more than the original goal. In the next coming years, the marketing strategy changed again and geared toward Starbucks becoming a leading global company. There were 3,500 stores opened by 2003, making Starbucks as recognizable as companies like McDonalds and Coca-Cola. The success of the global marketing was enormous. Now visible in 22 countries ranging from England to Australia, Starbucks is one of the worlds leading specialty coffee retailers.

External Environment

Starbucks has been very successful so far with taking advantage of opportunities when they present themselves. There are still many opportunities on the horizon that Starbucks can take advantage of. There is the opportunity to push their global expansion in existing markets and venture out into newer markets. They can also develop new products and services to be sold at the cafes. By using the brand loyalty that they already created through their coffee, it would make it easier to launch a new product or service at the cafes.

Starbucks has done a good job in limiting its threats, but no matter what, threats will continue to exist. The threats of entry by new competitors, due to minimum barriers, the risks of entry are high. Substitutions pose another threat to Starbucks; consumers could switch to alternative drinks to consume in their leisure time. The potential of rising prices of coffee and dairy pose another threat. Due to Starbucks dedication to using the finest coffee beans, it limits its bargaining power with suppliers.

Internal Strengths and Weaknesses

Over the years, Starbucks has develop many strengths. In the area of human resources, Starbucks has been a leader by offering benefits to both its full and part-time employees. They have also implemented programs like the Bean Stock program, which give employees that participate in the program a free pound of coffee each week. They are also offered them the opportunity to purchase Starbucks' stocks below market price a couple of times throughout the year. By offering these benefits and fostering a good working environment, they have lowered their training time and cost. Another strength is the brand loyalty that Starbucks has built with its customers. They achieved this by supplying superior customer service and by providing a pleasant and comfortable environment. Lastly, the ability to expand nationally without franchising allows them to maintain control over the quality of their products and services.

Despite all of Starbucks success, the company does possess some weaknesses. The weakness that draws the greatest concerns is its dependency on the retail of its coffee. Focusing too heavily on the main competitive advantage of retailing coffee can adversely affect the development of new products. Starbucks need to move into the direction of developing a diversified product line. Also the reliance on the U.S. market is another concern, because 75 percent of Starbucks cafes are located in the United States. Lastly, the failure to maintain expansion in existing international markets, coupled with the inability to establish itself in new international markets pose another weakness. Starbucks has not been able to generate the same type of success internationally as it did in the U.S.

SWOT