HISTORY OF STARBUCKS:

The history and origin of Starbucks dates back to 1971, when three friends, Jerry Baldwin, Zev
Siegl and Gordon Bowker opened a small shop, as all of them had a passion for fresh coffee.
They started by selling fresh-roasted, gourmet coffee beans and brewing and roasting
accessories. The company began to do well. In fact, at that time, Starbucks was the largest
roaster in Washington, with six retail outlets. However, things gradually began to change and in
1980, Zev Siegl sold out.

In 1981, a plastics salesman Howard Schultz noticed the number of plastic drip-brewing
thermoses used by Starbucks, from his manufacturer, the Hammarplast. Howard Schultz
eventually became a supporting salesman, of the company, seeing the potential in the product
and the opportunity. In 1982, he gave a new life to the company. With his experience of the
espresso and coffeehouse culture of Italy, he planned to start a similar coffeehouse culture in the
United States.

This was opposed by the original partners, as for them coffee was meant to be brewed and
enjoyed at home. In effect, they parted ways and Schultz opened Il Giornale, the first true United
States-grown coffee bar chain. On the other hand, the original partners bought Peet's Coffee &
Tea, where Jerry Baldwin works to this day, as "Roast master Emeritus". In 1987, the original
partners finally sold Starbucks to Schultz. He merged it with Il Giornale to produce the Starbucks
Corporation.

During that time, it had 17 stores in total, with its expansion plan in action. Starbucks started
opening outlets outside Seattle and even opened one in Vancouver, Canada. In 1992, Starbucks
became a publicly traded company, with 165 outlets. In 1996, it opened its first non-North-
American store in Tokyo. In 1998, it extended within the boundaries of Great Britain, purchasing
the 60 stores of Seattle Coffee Company and rebranding them as Starbucks. Apart from this, it
took over Seattle's Best Coffee, Torrefazione Italia and Diedrich Coffee.

Another interesting fact about Starbucks is that there were no stores in San Francisco till late.
This is because Baldwin had negotiated a non-competition deal with Schultz to keep Starbucks
out of San Francisco for ten years after the 1987 sale. The effect is still seen today as Peet's
Coffee & Tea is more popular than Starbucks in the San Francisco region. Starbucks opened
stores in Beijing and even inside the Forbidden Palace. It has recently opened two outlets in
Bucharest, penetrating the Romanian market.

Since 2000, the free trade of the coffee has shown an increasing percentage of Starbucks sales.
The current free trade of coffee accounts for 3.7 percent of the total Starbucks coffee sales. Last
year, Starbucks was ranked as the 16th best company to work for in the United States. It is said
that Starbucks' success is largely entitled to word of mouth advertising and this has significantly
helped in making it a household name the world over.

STARBUCKS MARKETING STRATEGY:

Every business can learn from another, especially if a particular business is one that has
displayed tremendous success over the years. The Starbucks Corporation and its successful
marketing strategies are definitely something that anyone interested in business can learn about.
What sort of techniques did the company use, and how were these able to reach out and attract
millions of people worldwide? Some of their best strategies are outlined below.

Perfect Cup of Coffee Starbucks history has shown that they place a huge emphasis
on product quality. Their coffee, even if priced slightly more expensive than expected, is
notorious for satisfying customers with its rich, delicious taste and aroma.

Third Place From the very beginning, the Starbucks marketing strategy has focused
on creating the third place for everyone to go to between home and work. Creating this
unique and relaxing experience and atmosphere for people has been very important
for the company as they have realized that this is one of the strongest concepts attached to
the company, to which customers have been strongly attracted.

Customer Satisfaction Customer satisfaction is a very important issue with

Starbucks. From entrance to the store to the very last drop of their coffees, it is a must
that customers feel the uniqueness of enjoying their Starbucks coffee experience. Without
a doubt, Starbucks Coffee Company knows the answer to the question, "Why is customer
service important."

Creating a Starbucks Community The Starbucks marketing strategy has even

expanded to create a community around their brand. On their website, individuals are
encouraged to express their experiences with Starbucks history, and the company strives
to personally join in the discussions. This technique was cleverly pointed out by
Webolutions: The Strategic Marketing Agency in their Starbucks Marketing
Observations article.

Smart Partnerships Starbucks Coffee Company has been known to create strategic
partnerships that demonstrate the fact that another way to grow your business is to partner
smart. Over the years, the Starbucks Corporation has greatly increased sales just by using
this strategy.

Innovation Through the years, the Starbucks Coffee Company has been known to
think up creative and innovative ideas to add to their products or services. Theyve added
different flavors to their coffee, more food on their menu, and even became one of the
firsts to offer internet capability in their stores.
 Brand Marketing The Starbucks marketing strategy has always focused on word-
of-mouth advertising and letting the high quality of their products and services speak for
themselves. For years, this has been uniquely Starbucks, and it has played a huge part in
making Starbucks Coffee Company a success. The definition of viral marketing speaks to
this new word of mouth that Starbucks has run with, and made their own.

PUBLIC POLICY & INTERNAL STANDARDS

We think its important to take a stand on issues to support our business and because its who we
are and how we operate.

Thats why we believe we have a responsibility to advocate both internal and public policies that
support the health of our business, our partners (employees) and the communities we serve.

The policies and positions below demonstrate our commitment to being a responsible business.
They range from global ethical business standards to our own guidelines for doing business.
From how we buy our coffee to how we ensure the best possible workplace for our partners, we
believe it is important to operate consistent with our mission: to inspire and nurture the human
spirit one person, one cup and one neighborhood at a time.

Social Responsibility

Standards of Business Conduct our commitment to ethical business practices

Corporate Political Contributions and Expenditures how we engage policymakers

on issues that impact our business, our people and our communities

Global Anti-Bribery Standard

UN Global Compact supporting international principles of ethical business practices

Menu Labeling Position giving customers access to information to make informed

decisions

Our workplace

Global Human Rights our commitment to basic human rights as a core component of
the way we do business and how we engage our partners

Equal Employment Opportunity our non-discrimination policy

Health Care our support for healthcare reform that allows us to continue to offer
affordable coverage to our partners
Ethical sourcing

Supplier Code of Conduct our expectations for suppliers to operate in a responsible

and ethical manner

o Coffee and Farmer Equity (C.A.F.E.) Practices our sustainable coffee

guidelines for producers

o Cocoa Practices our sustainable cocoa guidelines for producers

o Starbucks Social Responsibility Standards for Manufactured Goods and

Services our sustainable manufactured goods and services guidelines for
producers

Supplier Diversity Standard U.S.

Animal Welfare our preference for animal welfare-friendly practices and ingredients

Deforestation our commitment to pursuing zero net deforestation across our supply
chain

Sustainable Palm Oil our commitment to using 100% RSPO certified palm oil in our
company-operated stores

California Transparency in Supply Chains Act our zero tolerance policy for the use
of forced labor and human trafficking

Conflict Minerals Disclosure

Conflict Minerals Policy Statement

POLITICAL, SOCIAL & LEGAL FACTORS AFFECTING BUSINESS

Businesses have many factors which can impact upon success in the marketplace. Political,
Legal and social being three of the most important factors, which of course businesses must
adhere to. A consequence of not adhering to these expectations can result in imprisonment and
penalties for owners of the business. Accordingly, this means that putting these three factors on
top priority is crucial to not only Starbucks but applied to any firm. Thorough market
investigation will be essential to the market research process which subsequently can be used to
aid the decision making process. Doing so be may be beneficial to a firm such as Starbucks in
terms of increased competitiveness in the long term.
Starbucks holds around 33 percent of the market share for coffee in the U.S. It sells almost as
much coffee as do fast food and convenience stores combined, even though the bulk of its
consumers are in cities or upscale suburban areas. Starbucks has been able to gain such a large
share of the market by catering specifically to a well-defined target audience.

POLITICAL FACTORS:
Degree of political stability: Political stability is defined as the degree to which a
countrys governments able to make decisions based on the best interests of the people.

One of the first questions Starbucks will need to ask themselves is whether the country is
politically stable. Given that Starbucks currently operates in over 50 countries with 5,500 coffee
houses. Political factors have huge effect on Starbucks not only because of its strategic ethical
trading policy, but more importantly the stability of which the coffee houses source their raw
goods (coffee, chocolate, vanillas etc..), which can affect Starbucks supply of products should
any disruption occur from the location at which the materials are being sourced. This may be due
to environmental factors such as a hurricane, tsunami or earthquake.
LEGAL FACTORS:

Not only does Starbucks sell coffee, it also sell hot food, pastries sandwiches and different
merchandise, which means that there are unmourns regulations and flaws regarding health and
safety standards. In the USA the food and drug administration (FDA) are in charge of monitoring
and inspecting Starbucks food items to ensure that they are safe and fit for purpose.
However regulations often differ depending on the location which means that different standards
are set.

Each year it is compulsory for each of the Starbucks coffee houses to apply for a permit from the
health board to remain in business. Compliance with the regulations is key to obtaining this
permit, which may include ensuring that the coffee house is of a high standard of cleanliness,
staff is given appropriate tools to conduct jobs safely and the quality of the food and drinks reach
the set guidelines.

Further to this, Starbucks receives 4 inspections each year in order to achieve the permit. The
inspections involve a 100 point scale. Achieving 85+ on the scale is considered a pass, and
anything below is a fail. If a coffee house hypothetically was to fail, they have 60 days to
improve and is then retested. If it fails again they will be refused the permit.

Employee Protection: Starbucks Mission includes the commitment to treat its employees with
respect and dignity, and to be a force for positive action in the community in which it does
business. To this end, Starbucks is committed to support and uphold the provision of basic
human rights and to eliminate discriminatory practices. Starbucks respects the inherent dignity
of all persons, and seeks to enable all employees to do their best work by embracing and valuing
the unique combination of talents, experiences and perspectives of each employee.

SOCIAL FACTORS:

Demographics are constantly changing which means that it is often difficult to predict changes in
the market dynamics, which may become problematic to a business such as Starbucks. For
example Starbucks target market will be affected by different population structures. Starbucks
target market is aimed at women and men of 20-40 years old, which is achieved through good
differentiation methods and unique interiors of the coffee houses. A sudden change in the
demographics of this age group could have subsequent effect on the companies revenues in the
long term. Migration is another key factor which is core to demographic change which is of
course always changing. An increased in migration may result in a decrease in demand in the
original country, however Starbucks may still be in operation in the country the customer
migrates to given that it operate in over 50 different countries.

The service that Starbucks provide most likely appeal to those with high incomes, given its high
pricing strategy. Starbucks is most likely to be subject to income elastic demand which means
that a change in standard of living/quality of life may affect the demand of Starbucks coffee
significantly. A perceived improvement in the standard of living may result in an increase in
demand. On the other hand a decrease in standard of living which may be an effect of a recession
may result in a decline in demand.

STARBUCKS SWOT ANALYSIS

Starbucks Coffee Company stands as the biggest coffeehouse business in the world. The firms
competitive advantage is based on its strengths, as shown in this SWOT analysis. In SWOT
analysis, business strengths are evaluated to determine the ability to address weaknesses,
opportunities and threats. This SWOT analysis of Starbucks Coffee presents the internal factors
and external factors significant to the firm. Even though Starbucks is already a strong global
brand, various factors threaten the business. As such, the firm must innovate its approaches to
overcome these threats. The result of this SWOT analysis shows that Starbucks is strong, but it
constantly faces major threats in various markets around the world.

Starbucks Coffees Strengths (Internal Strategic Factors)

This component of the SWOT analysis model deals with the internal factor of business or
organizational strengths. Starbucks Coffees main strengths are:

1. Strong brand image

2. Extensive global supply chain

3. Diversified business through subsidiaries

Starbucks Coffees Weaknesses (Internal Strategic Factors)

This dimension of the SWOT analysis model indicates internal factors like inadequacies that
present challenges to business development. Starbucks Coffees main weaknesses are:

1. Higher price points

2. Generalized standards for most products

3. Imitable products

Opportunities for Starbucks (External Strategic Factors)

This component of the SWOT analysis model focuses on external factors that a firm can use to
grow its business. Starbucks Coffees main opportunities are:

1. Expansion in Asia, the Middle East, and Africa

2. Diversification of product mix

3. Partnerships or alliances with other firms

Threats Facing Starbucks (External Strategic Factors)

In this aspect of the SWOT analysis model, the focus is on external factors that could reduce
business performance. The main threats to Starbucks Coffees business are:

1. Competition from low-cost coffee sellers

2. Imitation

3. Independent coffeehouse movements

STARBUCKS GLOBAL STRATEGY

Although globalization has allowed large multinationals to expand across the globe increasing
their popularity and profits, this phenomenon has been widely criticized and Starbucks was also
the victim of anti-consumerism and anti-globalization movements (Klein, 2009). The growth
experience by the company and its current world dominance has generated many negative
discourses, primarily criticizing Starbucks ascendancy at the expense of local coffee shops.

As a multinational brand that aspires to be a recognized global leader, Starbucks marketing

strategy requires a degree of standardization. To start with, the company hardly advertises in the
traditional sense via TV, radio and print adverts, instead relying on their ubiquitous cafs to do
the talking (Kiley, 2006, p. 56). In addition to this, the company has developed and perfected
their social media marketing strategy, using Facebook, Twitter, Instagram, Pinterest, and other
platforms for competitions and promotional offers for their customers (Moth, 2013). It can be
argued that Starbucks success in the social media sphere is also highly dependent on the anti-
Starbucks movement, as this generates increased coverage of the brand name, allowing the
company to counteract the accusations and promote their ethical behavior even more (Holden,
2012). The involvement of consumers in product development and range (i.e.: new drink flavors)
as well as the encouragements to share personal experiences are now an integral part of
Starbucks international marketing strategy (Shayon, 2013). The company often prides itself on
the fact that it creates a community sense amongst individuals from distinct countries through the
recognisable brand name Starbucks (Batchelor & Krister, 2012). The company uses social media
to encourage its consumers to create a sense of belonging to a community and rewards its loyal
customers through My Starbucks Reward, using polls to ensure a maximum potential of crowd
sourcing (Schoultz, 2013). Through this, the company demonstrates loyalty on its own part to its
customers, focusing on transforming their consumers in brand ambassadors, rather than investing
time and large budget shares in aggressive marketing tactics aimed at accumulating large shares
of new consumers.

Levitt (1983) sustains that standardization of a marketing program needs to have a positive
impact on the performance of the organization. Being able to maintain a consistency across the
marketing strategy and tactics in operations that span across the globe can have a positive impact
on a companys financial performance, as the budget for developing the marketing program is
significantly lower (Samiee & Roth, 1992). However, the cultural differences between different
geographical markets make it difficult to distinguish the profitability and impact on performance
of standardized marketing plans (Porter, 2011). Studies suggest that, irrespective of general traits
of global marketing for brand recognition purposes, multinational corporations need to take into
account any cultural aspects of the countries where their subsidiaries are. As such, Starbucks
adapts their food and beverage offerings in their cafs in order to suit their customers taste
(Bussing-Burks, 2009). Below (Figure 4) is a list of products that are exclusively available in
specific geographical areas as evidence of adaptation tactics used by the company.

STARBUCKS DETAILS STRATEGY FOR PROFITABLE GROWTH

Operational and Brand Initiatives Gaining Traction

SEATTLE--(BUSINESS WIRE)--Mar. 18, 2009-- Starbucks Coffee Company

(NASDAQ:SBUX) today held its Annual Meeting of Shareholders in Seattle where Howard
Schultz, chairman, president and ceo, outlined the companys strategy to grow for the long term.
Despite the challenging economic environment, Starbucks is profitable, has a strong balance
sheet and generates solid cash from operations, said Schultz. Our customers connection with,
and trust in the Starbucks brand remains at a high level. We are laser-focused on delivering the
finest quality coffee and getting the customer experience right every time.

Weve also been putting our feet into the shoes of our customers and are responding directly to
their needs, said Schultz. Our customers are telling us they want value and quality and we will
deliver that in a way that is both meaningful to them and authentic to Starbucks.

During the Annual Meeting, Troy Alstead, executive vice president, chief financial officer and
chief administrative officer, underscored the companys strong financial position and outlined a
two-fold growth strategy for the company.

Starbucks has focused its attention on increasing profits in existing stores by:

Aligning the companys cost structure to its current business strategy with a planned $500
million structural expense reduction in fiscal 2009;

Improving operational efficiencies and making technology investments;

Meeting customers needs for value and quality; and

Investing in the tools and training store managers need.

The company is also making strategic investments in key initiatives by:

Entering the $17 billion instant coffee market earlier this month with the launch of
Starbucks VIA Ready Brew instant coffee;

Growing its consumer products, licensed stores and foodservice channels; and

Focusing on disciplined global store expansion in key markets.

Our customers like the changes weve been making, even as the economic environment is
impacting the way customers interact with companies and brands, said Schultz. The health of
the company, the continued relevance of the brand and our disciplined go-forward plan make us
optimistic about Starbucks future.
As part of the meeting, shareholders re-elected the current board members as well as two new
board members, Kevin R. Johnson, chief executive officer of Juniper Networks, Inc.; and Sheryl
Sandberg, chief operating officer of Facebook, Inc. to the Starbucks Board of Directors. Both
individuals have strong technology backgrounds and bring extensive business strategy and
operational execution experience, as well as expertise in managing a high-performance business
with a diverse and global workforce.

Shareholders also approved a proposal to allow for a one-time stock option exchange program,
which would give eligible partners (employees) a one-time opportunity to exchange certain
outstanding underwater stock options for a lesser amount of new options that will be granted
with lower exercise prices. The program would be approximately expense-neutral to the
company from an accounting perspective.

In 1991, Starbucks adopted a broad-based stock option program that provides annual grants to
eligible partners from baristas to top management encouraging its partners to act like owners
of the business. Members of the companys board of directors and senior leadership would be
excluded from participating in the option exchange program.