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Starbucks Case Study

Starbucks Case Study

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Published by Johnny Page

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Published by: Johnny Page on Feb 07, 2011
Copyright:Attribution Non-commercial


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Starbucks Corporation (NASDAQ: SBUX)
176,000 in 2008
Revenue for 2008:
US$10.383 billion
Howard Schultz (Founder of Starbucks coffeehouse)Starbucks Corporation is an internationalcoffeehouse chainbased inSeattle, Washington,United States. Starbucks is the largestcoffeehousecompany in the world, with 16,120 stores in 49 countries, including around 11,000 in the UnitedStates, followed by nearly 1,000 inCanadaand more than 800 inJapan. Starbucks sellsdrip brewed coffee,espresso-based hot drinks, other hot and cold drinks, snacks, and items such as mugs and coffee beans. Through theStarbucks Entertainment division andHear Musicbrand, the company alsomarkets books,music, and film. Many of the company's products are seasonal or specific to the locality of the store. Starbucks-brandice creamand coffee arealso offered at grocery stores. StarbucksItalian style coffee, espressobeverages, teas, pastries and confections had made Starbucks one of thegreatest retailing stories of recent history and world’s biggest specialty coffeechain. In 2003, Starbucks made the fortune 500.
Strategic Management PMS 3393
1.1.1Era before Howard Schultz
In 1971, three academics, English Teacher Jerry Baldwin, History Teacher ZelSiegel and writer Gordon Bowker opened Starbucks Coffee, Tea and Spice inTouristy Pikes Place Market in Seattle. The three were inspired by entrepreneur Alfred Peet(whom they knew personally) to sell high-quality coffee beans andequipment. The store did not offer fresh brewed coffee by the cup, but tastingsamples were sometimes available. Siegel will wore a grocers apron, scoopedout beans for customers while the other two kept their day jobs but came by atlunch or after work to help out. The store was an immediate success, with salesexceeding expectations, partly because of interest stirred by the favorable articlein Seattle Times. Starbucks ordered its coffee-bean from Alfred Peet but later onthe three partners bought their own used roaster setting up roasting operations ina nearby ramshackle building and developed their own blends and flavors. By theyear 1980s the company had four Starbucks Stores in Seattle area and had beenprofitable every year. Later on, Siegel left the company and Jerry Baldwin tookover day-to-day management of the company. Gordon Bowker remained as anowner but devoted most of his time in his Design Firm. In 1981, Howard Schultz,the vice president of U.S operations for Swedish Maker of stylish kitchenequipment and coffeemakers decided to pay Starbucks a visit. He was curiousabout why Starbucks was selling so many of his company products. He wasimpressed with the company management and the quality products the make.Schultz asked Baldwin whether there was any way he could fit into Starbucksand it took long time to decide his request. He tried many times till one day hewas given a job of heading marketing and overseeing the retail stores.
Strategic Management PMS 3393
1.1.2Era with Howard Schultz
Howard Schultz spent most of his working hours in the four stores learning theretail aspects of the company business; Schultz was overflowing with ideas for the company. His biggest inspiration and vision for Starbucks future came during1983 when the company sent him for an international house wares show toMilan, Italy. There he spotted an espresso bar and went to take a coffee. He wasimpressed with the coffeehouse services and decided to stay at Milan for a weekto explore all coffee bars and learned as much as he could about the Italianpassion for coffee drinks. He made a decision to serve fresh brewed coffee,espressos, and cappuccinos in its stores and try to create an American version of Italian coffee bar culture. He shared his idea with Baldwin and it took nearly ayear to convince Jerry Baldwin to let him test an espresso bar. In April 1984, thefirst espresso bar was opened and it was a successful too. Yet Baldwin feltsomething is wrong. After Schultz failed to convince Baldwin for the expansion of business, he left Starbucks in 1985. Schultz started the “Il Giornale” coffee bar chain in 1985 and the coffeehouse was very successful. In 1987 Starbucksowner Jerry Baldwin and Bowker decide to sell the whole Starbucks chain toSchultz's Il Giornale, which rebranded the Il Giornale outlets as Starbucks andquickly began to expand. Starbucks opened it’s first locations outside Seattle atWaterfront StationinVancouver ,British Columbia,andChicago,Illinois, that same year. At the time of itsinitial public offeringon the stock market in 1992,Starbucks had grown to 165 outlets.
In 2009 The Company plans to open a net of 900 new stores outside of the United States.
Strategic Management PMS 3393

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