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STARBUCKS INTRODUCTION STARBUCKS STRATEGY ANALYSIS HOLISTIC MARKETING OF STARBUCKS SERVICE QUALITY MANAGEMENT STARBUCKS SERVICE DIFFERENTIATION STARBUCKS CHALLENGE QUESTION AND DISCUSSION CONCLUSION RECOMMENDATION
Introduction Starbucks
To establish Starbucks as the premier purveyor of the finest coffee in the world, while maintaining our uncompromising principles while we grow. Ensuring the extraordinary potential of coffee is discovered ,revealed and delivered- helping to bring great pleasure to millions of people each day
STARBUCKS AT A GLANCE
12,440 stores in 37 countries. 2,199 stores opened in 2006 (6 stores a day). 145,000 baristas (waiters). Net revenue $7.8 billion, making an annual profit of $564 million.
Source: Starbucks 2006 Annual Report
Starbucks Timeline
Howard Schultz joins Starbucks as Dir. of Retail 1982 1971 1st Starbucks location in Seattle
Schultz founded II Giomale offering brewed coffee & espresso beverages 84 w/ Starbucks coffee Starbucks beans locations
1990
676 Starbucks 2,292 locations & Starbucks Intl Starbucks locations formed 1995 2000
1998 2003 6,604 Starbucks locations Acquired Seattles Best Coffee Co.
1993
272 1,886 Starbucks Starbucks locations locations Joint venture w/ Magic Johnson Launch Starbucks .com
Starbucks Timeline
Jim Donald hold President and Chief Executive Officer . 2005 2004
The operating profit of the company during fiscal 2004 was $610 million, an increase of 43.7% over fiscal 2003.
Launches Starbucks Bottled Frappuccino Coffee Drinks in China through International Coffee Partnership with PepsiCo
2007 2006 2008 Chairman Howard Schultz resumed his roles as President and Chief Executive Officer
Rival Diedrich Coffee announced that it would sell most of its company-owned retail stores to Starbucks
Branding Strategy
o Live coffees mantra - to keeping the national coffee culture alive. o Creating an experience around the consumption of coffee Three components to this experiencing branding strategy: First, coffee itself offering the highest-quality coffee in the world, coffee standards by controlling the supply chain as possible and the distribution to retail stores Second, service customer intimacy Third, atmosphere. To make customers want to stay. Based on human spirit, a sense of community, the need for people to come together. Channels - Broad distribution strategy Want to reach customers where they work, travel, shop, and dine Good Location: Company-operated stores located in high-traffic, high-visibility settings Product mixed tended to vary depending on a stores size and location non-company-operated retail channels, food-service accounts, domestic retail store licenses
Good Starbucks Partners All Starbucks employees were called partners -Most hourly-wage employees o Generous policy of giving health insurance and stock options o High partner satisfaction rate (80% to 90%), well above the industry norm. o Lowest employee turnover rates in the industry (just 70%, compared with fast-food industry averages as high as 300%) o Lower managers turnover rates & encouraged promotion from within its own ranks Delivering on Service and good measuring service performance o Training: hard skills and soft skills o Treated as a valuable customer (75%), friendly staff (73%) and highest quality coffee (67%). o A variety of metrics, including monthly status reports and self-reported checklists. o Customer Snapshot measurement tool Less competition o A variety of small-scale specialty coffee chains (regionally concentrated). o independent specialty coffee shops & Donut and bagel chains
Increased consumer participationStarbucks does a nice job of encouraging this through its integrated marketing communications efforts. For example
has questionnaires in its stores urging customers to send in feedback about their experiences.
Facilities for future expansion The company's efforts to greatly increase its sphere of strategic interest by its joint ventures with Pepsi and Dreyer's, its move to sell coffee in supermarkets, and the possibility of marketing fruit-juice drinks and candy under the Starbucks label represented In order to sustain the company's growth and make Starbucks a strong global brand, that the company had to challenge the status quo, be innovative, take risks, and alter its vision of who it was, what it did, and where it was headed.
Holistic Marketing
Internal marketing Every partner/barista hired for a retail job in a Starbucks store received at least 24 hours training in the first two to four weeks. Management trainees attended classes for 8 to 12 weeks. Their training went much deeper, covering not only the information imparted to baristas but also the details of store operations, practices and procedures as set forth in the company's operating manual, information systems, and the basics of managing people. One of their major objectives was to ingrain the company's values, principles, and culture and to impart their knowledge about coffee and their passion about Starbucks.
External marketing Promotion- Starbucks usually picks one or two charities or event that reach the community it serves. For example - Free tall cup of brewed coffee to anyone who votes on election day. Price- Starbucks represents an attractive combination of price features, high quality, good service and other attributes customers find attractive.
HIGH STANDARD
High service quality standard Better and faster delivery system Innovative
INNOVATIVE PRODUCT
Event Products : Coffee beverages
Non-coffee beverages Cakes and pastry Sandwich Salad Etc.
MONITORING SERVICE
Customer service : Voice of customer
SERVICE DIFFERENTIATION
INNOVATIVE FEATURE : STARBUCKS EXPRESS Customer can pre-ordder and prepay for beverages and pastries via phone or on website. STARBUCKS CARD Prepaid card, priced from $5 to $500, that offered to cuts transaction times. HIGH SPEED WIRELESS INTERNET SERVICE
STARBUCKSS CHALLENGES
Going Global focuses on the risks and rewards of expanding into new geographic and cultural markets
STARBUCKSS CHALLENGES
How to maintain growth and keep growing
Cannibalizations: one challenge lies on its own dominance with Starbucks in every corner of a street there is likelihood of cannibalization of sales from existing locations. Starbucks closed 600 underperforming locations in 2008. This seems to be an admission that cannibalization seems to be a major challenge. Quality :premium coffee quality with local taste, theres some specific coffee drinking market that Starbucks still left open.
STARBUCKSS CHALLENGES
Prices: as a high-end coffee, Starbuck has a substantial price premium, should have a more reasonable price strategy to face with harsh competition of others like Mc coffee. Economic situation: The company relies on consumer discretionary spending to drive sales. Consequently, a major economic change can have a large impact on revenues. Eg: With the global economic recession of 2008-2009, potential customers have less money and are more likely to forgo a $4 specialty coffee in favor of a cheaper alternative. Target demographics-yuppie, teens: Starbucks targets a higherincome crowd of the young and college-educated, a group that tends toward higher luxury-consumption levels. Although this focus allows the company to maintain high profit margins, it also puts Starbucks at greater risk from a shift in consumer spending habit.
STARBUCKSS CHALLENGES
Being a Global responsibility corporation: Environment: In October 2008, Starbucks was report wasting 23.4 million litres of water a day by leaving a tap constantly running for rinsing utensils, 10% used cup in the US is not recycle, what about hundred million cups served over the world? Health Concerns: Consumers awareness of their health rise the concern of obesity with dairy, sugar and caffeine product, may caused some would-be Starbucks customers to turn to their health options. Labor relation: should improve working conditions and others benefits for employee
Questions
1. Identify the controllable and uncontrollable elements that Starbucks has encountered in entering Global Market. 2. What are the majors sources of risk facing the company and discuss potential solutions. 3. Critique Starbucks overall corporate strategy. 4. How might Starbucks improve profitability in Japan.
The controllable and uncontrollable elements that Starbucks has encountered in different markets
Country Japan France Controllable Elements Controllable Elements Competition among rival shops in Japan. Political and legal bindings. (Frances arcane regulations and generous labor benefits). Price (Italian coffee bars prosper by serving food as well as coffee, an area where Starbucks still struggles. Also Italian coffee is cheaper than Americans pay about $1.5 for an espresso, on the other hand northern Italy the price is 67 cents, in the south just 55 cents. Culture (young are always enthusiastic about new and they embrace the new. So, Starbucks will get positive advantages in expanding their business in Vienna compared to existing coffee shops there).
Italy
Vienna
What are the major sources of risk facing the company and discuss the potential solutions?
Three major risks at domestic region Saturated market condition in USA. Loosing customers, customers that grow annoyed because fewer options are available. The young generation (Generation X) feels about Starbucks
What are the major sources of risk facing the company and discuss the potential solutions?
Base on the risks faced by Starbucks, the solutions we suggest are: One of the risks that they faced in USA-the risks of market saturation can be over come in focusing on international or global marketing. They may focus on to increase the quality of service and coffee for which they are well known. As they were facing ominously hostile reception from its future consumer (Generation X), they should reposition their product according to customers need, so that they find can the $3 they are paying for a cup of coffee is reasonable. They can also change their pricing strategy. As coffee is the core product of them to serve they should give more focus on improving the quality of coffee. They may make arrangement for some other items beside coffee as well. As Starbucks is going abroad to expand it business with local partners of that region there risk of Self Reference Criterion (SRC) and ethnocentrism. It can be over come through proper adjustment keeping SRC and ethnocentrism away in decision making.
So, for attracting the Japanese market in addition to coffee, arrangement of internet facility and other amenities should also be provided.
CONCLUSION
FACTORS CAN LEAD TO SUCCESS OF STRABUCKS IN THE FUTURE
INNOVATION BUY, SELL AND USE ENVIRONMENTALLY FRIENDLY PRODUCTS MEET SATISFY OF CUSTOMER WITH FASTER AND CONVINIENT IMPROVE FACILITIES OF STALL
CONCLUSION (Contd)
Since the Company has been concentrating on developing more blends of coffee drinks, Starbucks may have over looked the potential market of different healthy tea drinks. Although Starbucks maintains a top-notch management team, the Company does not seem to have a well organized consumer relations department.
4. Pricing Strategy
Starbucks should consider the general demand and work a price reduction strategy into the Company's overall pricing strategies. Price reduction strategies may include a rebate or coupon promotion program as the increase in sales will offset the costs of these price reduction programs.