ADVERTISING AND

MARKETING RESEARCH
PROJECT
RESEARCH REPORT ON:
STARBUCKS COFFEE

Conducted By:
Shraddha Poojari (78), Aneri Shah (86), Shwetal Shah (100),
Foram Soni (103), Chainali Vyas (116), Avani Parikh (119).

- TYBMM B
USHA PRAVIN GANDHI COLLEGE OF
MANAGEMENT

Acknowledgments

This research project would not have been possible without the support of
our Supervisor, Prof. Rubina Khan who was abundantly helpful and
offered invaluable assistance, support and guidance.
Deepest gratitude are also due to all the people who helped us in conducting
our surveys and served as our respondents.
Special thanks to our Principal Dr. Mrs. Geetha Mohan for providing us with
an opportunity to conduct a research report.

Title
This paper investigates the perceptions and attitudes pertaining to the
Starbucks Coffee brand and to figure out why is it considered the best in the
world.

Sub-title:
The paper further carries out an in-depth research study about the globally
renowned brand Starbucks by targeting prospect buyers, loyal customers
and a few competitors by focusing on the strategies it implements to get a
top of the mind position in the minds of the coffee consumers all over the
globe making itself the best in the world.

INDEX
SRSr. No. NO.
1
2
3
4
5
6
7
8
9
10
11
12

Contents
Introduction
Statement of the
Problem
Data Collection
Techniques
The Data Gathered
Research Design and
Sampling
Product testing
Major Findings
Recommendations
Literature review
Conclusion
Bibliography
Appendix

Page No.
4
8
9
14
31
33
47
53
55
56
57
58

INTRODUCTION
Starbucks Corporation is an American global coffee company and coffeehouse chain based
in Seattle, Washington. Starbucks is the largest coffeehouse company in the world, with 20,366
stores in 61 countries, including 13,123 in the United States, 1,299 in Canada, 977 in Japan, 793 in
the United Kingdom, 732 in China, 473 in South Korea, 363 in Mexico, 282 in Taiwan, 204 in the
Philippines, and 164 in Thailand.
A brief history:
The first Starbucks opened in Seattle, Washington, on March 30, 1971 by three partners: English
teacher Jerry Baldwin, history teacher Zev Siegl, and writer Gordon Bowker. The three were inspired
by coffee roasting entrepreneur Alfred Peet, whom they knew personally, to sell high-quality coffee
beans and equipment. Originally the company was to be called Pequod, after a whaling
ship from Moby-Dick, but this name was rejected by some of the co-founders. The company was
instead named after the chief mate on the Pequod, Starbuck. They opened a store called Starbucks
Coffee, Tea, and Spice in the touristy Pikes Place Market in Seattle.
The three partners shared a love of fine coffees and exotic teas and believed they could build a
clientele in Seattle much like that which had already emerged in the San Francisco Bay area. Each
invested $1,350 and borrowed another $5,000 from a bank to open the Pikes Place store. Baldwin,
Siegel, and Bowker chose the name Starbucks in honour of Starbuck, the coffee-loving first mate in
Herman Melville's Moby Dick(so company legend has it), and because they thought the name
evoked the romance of the high seas and the seafaring tradition of the early coffee traders. The new
company's logo, designed by an artist friend, was a two-tailed mermaid encircled by the store's
name.
The inspiration for the Starbucks enterprise was a Dutch immigrant, Alfred Peet, who had begun
importing fine arabica coffees into the United States during the 1950s. Peet viewed coffee as a fine
winemaker views grapes, appraising it in terms of country of origin, estates, and harvests. Peet had
opened a small store, Peet's Coffee and Tea, in Berkeley, California, in 1966 and had cultivated a
loyal clientele. Peet's store specialized in importing fine coffees and teas, dark-roasting its own
beans the European way to bring out their full flavor, and teaching customers how to grind the
beans and make freshly brewed coffee at home. Baldwin, Siegel, and Bowker were well acquainted
with Peet's expertise, having visited his store on numerous occasions and spent many hours listening
to Peet expound on quality coffees and the importance of proper bean-roasting techniques. All three
were devoted fans of Peet and his dark-roasted coffees, going so far as to order their personal coffee
supplies by mail from Peet's.
The Pikes Place store featured modest, hand-built nautical fixtures. One wall was devoted to wholebean coffees; another had shelves of coffee products. The store did not offer fresh-brewed coffee by
the cup, but samples were sometimes available for tasting. Initially, Siegel was the only paid
employee. He wore a grocer's apron, scooped out beans for customers, extolled the virtues of fine,
dark-roasted coffees, and functioned as the partnership's retail expert. The other two partners kept
their day jobs but came by at lunch or after work to help out. During the start-up period, Baldwin
kept the books and developed a growing knowledge of coffee; Bowker served as the "magic,
mystery, and romance man."
4

The store was an immediate success, with sales exceeding expectations, partly because of a
favorable article in the Seattle Times. In the early months, each of the founders traveled to Berkeley
to learn more about coffee roasting from their mentor, Alfred Peet, who urged them to keep
deepening their knowledge of coffees and teas. For most of the first year, Starbucks ordered its
coffee beans from Peet's, but then the partners purchased a used roaster from Holland and set up
roasting operations in a nearby ramshackle building. Baldwin and Bowker experimented with Alfred
Peet's roasting procedures and came up with their own blends and flavors. A second Starbucks store
was opened in 1972.
By the early 1980s, the company had four Starbucks stores in the Seattle area and could boast of
having been profitable every year since opening its doors. But the roles and responsibilities of the
cofounders underwent change. Zev Siegel experienced burnout and left the company to pursue
other interests. Jerry Baldwin took over day-to-day management of the company and functioned as
chief executive officer; Gordon Bowker remained involved as an owner but devoted most of his time
to his advertising and design firm, a weekly newspaper he had founded, and a microbrewery he was
launching (the Redhook Ale).

The Current Scenario:

What was once a small coffee shop opened by Gerald Baldwin, Gordon Bowker, and ZievSiegl in
1971, Starbucks Coffee Company has grown into the number one specialty coffee retailer. With over
10,000 coffee shops in more than 30 countries, of which 4,200 are licensed and franchised and 6,000
are owned, the company's main objective is to establish Starbucks as the "most recognized and
respected brand in the world."
Moving beyond beverages and coffee mugs and makers, Starbucks has started an entertainment
division that features the Hear Music brand. Selling books, music and film, the brand is developing
into something much larger than a Venti Frappucino.
Starbucks Coffeehouses began to give consumers a different kind of feeling about drinking coffee.
Even employees, called partners, get a different kind of experience than one a regular barista would
expect. Between two and six partners are working at any given time.
Coffee Masters are partners that have gone through extensive training in tasting, roasting,
purchasing and growing regions. Starbucks Coffee offers full benefits to partners, including vision,
health and dental insurance.
In the beginning Starbucks only sold coffee beans and brewing equipment, with the view that coffee
was a drink that consumers wanted to make at home. Even as late as 1982 when entrepreneur
Howard Schultz joined the company (as Director of Marketing and Retail Operations) they still only
sold beans and equipment. As his role of marketing director, Howard Schultz tried to persuade the
three founders that there was plenty of money to be used for selling pre-made coffee.

Starbucks in India:
In January 2011, Starbucks Corporation and Tata Coffee, Asia's largest coffee plantation company,
announced plans for a strategic alliance to bring Starbucks to India and also to source and roast
coffee beans at Tata Coffee's Kodagu facility. Despite a false start in 2007, in January 2012 Starbucks
finally announced a 50:50 joint venture with Tata Global Beverages, called Tata Starbucks Ltd., which
will own and operate outlets as Starbucks Coffee "A Tata Alliance". Starbucks had previously
attempted to enter the Indian market, in 2007, with a joint venture involving its Indonesian franchise
and Kishore Biyani of the Future Group. However, the joint venture withdrew its foreign investment
proposal with the Indian government. Starbucks did not cite any reason for the withdrawal.
On 19 October 2012, Starbucks opened its first store in India measuring 4500 sq feet in Elphinstone
Building, Horniman Circle, Mumbai. Starbucks expanded its presence to Delhi on 24 January 2013 by
opening 2 outlets at Terminal III of the Indira Gandhi International Airport.
Starbucks opened its doors for the first time in India on Friday, attempting to gain a toehold in a
burgeoning consumer market.
The Mumbai store puts the coffee house operator in its 61st country, and many here are asking why
Starbucks waited so long to come. It has had operations for 13 years in China, another on-the-rise
economic power where tea is the established beverage.
Most Indians still begin their day with a steaming cup of milky, sweet chai tea. But the appetite for
coffee is growing -- a report from consultancy Technopak estimates the market could double in the
next five years to more than $500 million.
The International Coffee Organization, a trade group, estimates the average Indian consumer buys
less than three ounces of coffee per year. The average American uses around nine pounds.

A few facts about the Chairman:

Howard Schultz, chairman, president and chief executive officer of Starbucks Coffee
Company, first walked into Starbucks as a consumer in Seattles Pike Place Market in 1981.
He moved from his native New York and joined Starbucks in 1982 as director of operations
and marketing when Starbucks had four stores.

In 1983, Schultz travelled to Italy and was captivated by Italian coffee bars and the romance
of the coffee experience. He had a vision to bring the Italian coffee house tradition back to
Seattle, creating a third place between work and home

To pursue this dream, he left Starbucks to start his own coffee company called Il Giornale
and returned in August 1987 to purchase Starbucks with the help of local investors at a time
when the coffee business in America had been in serious decline for decades

In his first tenure as CEO, Schultz turned a tiny company into an international giant but gave
up the CEO title in 2000, remaining in the headquarters offices as a highly active chairman

Howard Schultz returned to Starbucks in 2008 and helped turn around the troubled
enterprise by ending its over-emphasis on growing rapidly at all costs

Fortune magazine picked Schultz as Business Leader of the Year for 2011.

STATEMENT OF THE PROBLEM

With the advent of industrial development, the international trade and commerce has led to the
vast expansion of business and trade, as a result of which a variety of consumer goods have
appeared in the market to cater to the needs of the consumers and a host of services have been
made available to the consumers like insurance, transport, electricity, housing, entertainment,
fabrics, attires, jewellery, finance and banking, food and beverage, etc. The fact that the concept of
globalization has led to rigorous competition in the food and beverage industry also, considering
that in the ancient times food was viewed as a basic means of survival is the irony of today's world.
Starbucks Corporation has arguably been the most successful coffee chain in the past few decades,
using their aggressive expansion strategies to push out much of its competition. By leading the retail
coffee market, Starbucks is able to sell its coffee for a premium price and increase their profitability.
Its success can be seen in the gradual rise of its stock pricesfrom1992 2007,reaching almost 6000%
of their initial public offering.
Today's consumer not only barge in for packaged food, 5 star and 7 star restaurants but also strive
for branded coffee. Cafes like Starbucks, Gloria Jeans, Cafe Coffee Day, Costa Coffee etc. are a few
epic coffee houses which clearly exemplify the mind set of every individual. India being a developing
economy has also been a home to such cafes in the purview of development and globalization. The
day Starbucks launched its first cafe in India, it got bombarded by a huge crowd, in which most
individuals stood outside the cafe in a que for hours, completely tossing the names and locations of
the previously coexisting cafes, gives us enough evidence of the consumer mindsets and mentalities
today.
The problem here therefore is to have an expounded analysis of the attitudes of such
consumers and to find out what makes this brand name achieve the highest brand recall and
recognition in the food and beverage industry without publishing any huge advertisements
pertaining to their product and how does it manage to still run successfully all over the
globe.

DATA COLLECTION TECHNIQUES

PRIMARY DATA

QUALITATIVE DATA

SURVEY

Telephonic Interview

Personal Interview

Mail Interview

The above mentioned details summarize the methods of collecting the data for our Research
Report. Since our topic involves a fresh study, we have started our research from square one,
and hence Primary data is apt for our research. Under Primary data, our research objective is
to analyse the consumer attitudes and responses towards Starbucks coffee, we have used
qualitative methods to analyse our data. And finally, by incorporating the Survey method,
we adapted the telephonic, personal and mail interviews modes to get access and reach out
to our target markets and sample.

Questionnaire: In order to get a deep and thorough insight of what the consumers perceive of this
brand and to get into the peak of the competitor's strategies we designed a questionnaire meant
for the consumers. The following is a copy of the questionnaire that were given out to our target
segment:
STARBUCKS- the best coffee in the world?
Target Audience: Consumers
Segmentation of the Target Audience:
Demographic profile:
Age: 18-60
Sex: Male/Female
Education: SSC, HSC, Graduates, Post Graduates and the Working Class
Occupation: Students, Businessmen, Entrepreneurs, Working women, Traders
Income group: 50,000 and above per month
Location: Urban areas, metropolitan cities, tier 2 and tier 3 citiies
(Since the cafe is located and has started up primarily in Mumbai, the focus would
be on consumers from Mumbai city)
Psychographics: Those who are coffee lovers, who dont mind splurging over a coffee of
their choice, people who are work oriented and dont find the time to make coffee, people
who like to experiment and demand or prefer the best quality products.
Research Objective: To know that Starbucks appeal lies not in the product it sells but in the
easily consumed identity it offers
1.

I usually visit cafes [Simple Attitude Scale]

a) Agree b) Disagree

2. How often? [Comparative rating scale]

a) Sometimes
b) often
c) rarely
d) never
3. How satisfied are you with the cafe you visit? [Monadic Rating Scale]
a) very satisfied
b) satisfied
c) neutral
d) dissatisfied

4. What is the name of the cafe that first comes to your mind when you hear the word
coffee?
[Projective techniques- Word Association Test]
10

5. Associate the colours of the coffee mugs given below with the coffee brands you know:[Thematic Apperception Test]

6. Categorize the following attributes on the basis of their importance in terms of what does
the brand need to enjoy top of the mind position in a competitive market: [Category Scale]
a) Very Important b) Somewhat Important c) Not too Important

Location

_____

_____

_____

Service

_____

_____

_____

Add on services/entertainment
Variety
Price

_____
_____
_____

_____
_____
_____

_____
_____
_____

Ambience
Constant ads

_____
_____

_____
_____

_____
_____

7. Identify the logo given below:______________ [Projective techniques- Picture Response

Test]

8. How did you hear about Starbucks opening in India? [Multiple Choice question]
a) Social media
b) Newspaper
c) Friends

11

9. Have you been to Starbucks before? [Dichotomous question]

a) Yes b) No
10. Why not? [Guttman Scale]
a) Its too expensive [ ]
b) I prefer other coffee houses [ ]
c) I dont like Starbucks [ ]
d) I dont drink coffee [ ]
e) Others. [Please Specify __________________]
11. If yes, rate the following in terms of your preferences as to why do you go to Starbucks with
1 indicating the highest preference and 5 the lowest. [Numerical Scale]
a) For the coffee
1 2
3
4
5
b) For the other beverages
1 2
3
4
5
c) For the food
1 2
3
4
5
d) For chatting with friends
1 2
3
4
5
e) For doing business or meetings
1
2
3
4
5
f) For experiencing the American Culture
1
2
3
4
5
g) Because its near my house/office/shopping mall
1
2
3
4
5
h) Because its a symbolic brand name
1
2
3
4
5
i) Because it is fashionable
1
2
3
4
5
12. Complete the sentence: [Projective Techniques- Sentence Completion test]
The following things come to my mind when I think about a high end cafe____________

13. I would like to / have visited Starbucks [Hidden issue-Depth Interview]

a) to experiment
b) Im a foodie
c) Because ,my friends frequently go to such places
d) status symbol
14. What makes Starbucks, Starbucks? [Likert Scale]
Strongly Agree Agree Not Sure Disagree Strongly Disagree
a) Brand name
b) Exceptional service
c) Quality
d) Ambience
e) Entertainment

12

15. How was your overall experience at Starbucks? [Graphic Rating Scale stressing pictorial
communications]

Very Good

Neutral

Very Poor

16. Give your suggestions on how coffee shops can survive and retain loyalty [Cartoon TestsProjective Techniques]

[Please fill your

comments in this
bracket].

17. Kindly fill the following data:

Name:
Age:
Gender:
Occupation:

13

THE DATA GATHERED

In light of the research conducted, we also gathered a few articles that not only showed relevance
and synergy with our research topic, but also proved to be extremely vital to our core findings about
the entry of Starbucks in the Indian markets. The following articles were taken up to dive into the
pool of the competitor's and their strategies taken up in order to face the challenge of Starbucks
entering into Indian markets.

A welcome sign in six languagesHindi, Marathi, Tamil, Gujarati, French and Englishgreets
customers at the entrance to Indias first Starbucks store.
Starbucks India Entry has been the most talked about business venture in the last few years, with
people queuing up to get a taste and experience of what makes Starbucks, Starbucks?
Our main research is to know why do customers stand in queues for a simple product category of
coffee, knowing that its expensive, and that India has been home to the very famous filter coffee
from down south, yet it is not the product but the brand itself that has been a magnet to Indias
growing experimenters, and what are the competitors making of all this?
Given below are excerpts from two competitors to know how they are gearing towards Starbucks
India entry and what are the customers who are spoilt for choice going to do?
To begin with, we found an Interview of Mr. Howard Schultz, the chairman and Director of
Starbucks in Business Standard- November 5, 2012:
How important is customer experience for a brands survival?
Creating a unique and relevant experience for customers in our stores has been the foundation of
Starbucks since I first experienced the power of community in Italys traditional espresso bars.
Therefore, creating and maintaining a fantastic customer experience is critical not just for a
companys survival, but to its sustainable growth.

14

Yes, Starbucks is a coffee company, but we are also a company committed to fostering and
honouring communities, in our stores and in the neighbourhoods where we serve. The moments of
connection that our baristas create with our customers, day after day, and the connections our
customers create among themselves in our stores and now online differentiate our brand and
experience, making us so much more than just a coffee company.
Because of the change in consumer behaviour, the challenge for any company is to continue to
create relevant customer experiences online while staying true to the companys values. How
Starbucks shows up on Facebook, for example, contributes to the overall experience of being a
Starbucks customer.
A brands experience is not just about the medium a store or a website. It is also about something
less tangible values. Shifts in consumer behaviour include an increased desire to support
companies that reflect peoples heightened values. Ethically sourcing our coffee, our Create Jobs
programme in the US, and our support of local communities such as developing a cultural hub in
Horniman Circle in Mumbai, India, where local artists can come together, is part of the overall
experience that, we believe, our customers want and deserve, in addition to great coffee.
What surprises you about the Indian consumer?
The strong pent-up demand for Starbucks coffee in India surprises me. The surprise is that
consumers from all walks of life have been visiting our store young, old, couples, families,
singles. The coffee we serve here is the same as that in the US.
Your pricing is significantly lower from the way you price a cup of coffee in the US. Starbucks has a
policy of not bending their pricing too much. Given that, why did you break the rules for India?
I do not know if we broke the rules. We want to create a value proposition and as much accessibility
as possible. We are sourcing and roasting coffee in India. This is the first time we have ever done
that anywhere outside of North America for store opening. This gives us a competitive advantage as
well, but we want to win here and we have created a pricing strategy that will be very competitive
and put us in a position to succeed.
Research suggests that 72% of coffee drinkers who hang out at coffee shops are predominantly
students and young professionals whose disposable income is not as high as your target group.
Given that, what kind of share of wallet are you looking at?
Unlike any of the existing competitors, the stores that we will open and design will create a
destination because of the elegance and the style of the store and its size. Everyone who has seen
the store has been stunned and spellbound. Starbucks has had a long history of broadening and
expanding the market and we believe that we will do that here as well.

15

How will you ensure that the Starbucks expansion in India will be both sustainable and profitable
given that a lot of premium players who entered the market, to name a few such as Costa Coffee,
Gloria Jean's, Coffee Beans, are all struggling and have not yet been able to make a dent in the
Indian market?
Yes. We have heard this many-many times in Japan, in China, in Europe, in Mexico that Starbucks is
not going to succeed here, no one else has, you are an outsider, etc. We are going to take the long
view. This is not a sprint, it is a marathon. We are going to bring a quality product that does not
exist. The experience will be so significantly different. Our people will be passionately committed to
service and are highly trained and the experience of the store will be significantly different. You
cannot compare the Starbucks brand and reputation what we are going to bring to this market to
what exists here. What we are bringing is going to be new and exciting and completely different.
What is your purpose in the Indian market considering we are populated with restaurants,
roadside eateries, etc?
We want to create a coffee experience that is a stunning experience in terms of quality. We want to
create a physical environment that does not exist and when people see it, it will become the third
place (third most popular place after home and work). From a reputation standpoint, we also want
to create the kind of company that is steeped in humanity and gives back to the community and we
will do that here as well.
What would you tell marketing professionals who one day want to have a brand like yours?
Brands today and going forward are about building an emotional connection with the customer. I do
not believe that traditional methods - marketing, PR - are really going to be an enduring quality to
build a brand. Companies must significantly invest in new channels of distribution for brand building,
which is social and digital media and mobile commerce. Any company that denies that is going to be
left behind. The second thing I would say is that we are a people business and most consumer
brands have to understand that. What I mean by that specifically is you must bring as much
innovation to the employee as you are bringing to the consumer because the brand in our case is
built by the person who is wearing the green apron, not through advertising or traditional
marketing.

16

Lets meet the Competitors:

CAFE COFFEE DAY an established brand image in India:

Caf Coffee Day pioneered the caf concept in India in 1996 by opening its first outlet on
Brigade Road in Bangalore. It was a coffee shop-cum-cyber cafe.
From a handful of cafs across six cities in the first 5 years, CCD has today become not only
Indias but Asias (by number of outlets) largest retail chain of cafes with over 1,420 cafes in
185 cities. Caf Coffee Day has four cafes in Vienna, Austria.
The chain has also acquired a Czech Republic-based coffee chain with 11 outlets spread
across Prague, Brno and Olomouc.
Caf Coffee Day grows the coffee it serves across its cafes. It also offers its consumers the
option of purchasing packaged coffees.
The range of merchandise now also extends to coffee makers, including the recently
launched Coffee Day WakeCup machine.
It recently announced Lounge Journals, an innovation that allows customers to interact with
photographers, writers, musicians, dancers and other creative professionals.

Cafe Coffee Day (CCD) has an established brand image in India and ranks No 2 in the Brand Equitys
Most Trusted Brands 2008 survey in the food services category. Rival Barista is at No 5. CCD has
been able to make a connection with the Indian consumers, predominantly among the youth. CCD is
the market leader in India and was awarded the Exclusive Brand Retailer of the Year by ICICI Bank
in its Retail Excellence Awards 2005 for the organized retail sector.

17

CCD today has become the largest youth aggregator, and from a marketing stand point, the success
has come by focusing on the 3As: Accessibility, Affordability and Acceptability.- Bidisha Nagaraj,
the Marketing president of Cafe Coffee Day.

Although demographically, a typical consumer would be male or female between 15-29 years of
age, belonging to middle or upper middle class, we call our consumers young or young at heart. We
are about juke boxes, good and affordable coffee and food. The brand fit is with youth or the young
at heart. So we often look out for brands that are aspirational in nature. Sudipta Sen Gupta,
Marketing head, Caf Coffee Day.
CCDs wide network the anytime, anywhere cafe:
CCD has been able to make its brand presence felt through the sheer number of stores.
CCD has 620 cafes at present and it has ambitious plans to launch more than 900 cafes by the end of
the current financial year. This means launching one store every other day which is not surprising
from a company which launched a cafe (in 2005) in Vienna, the coffee capital of the world. CCD also
has three cafes in Vienna, and two in Karachi, Pakistan. Lagging behind CCD in the Indian market,
Barista has about 200 cafs, Java Green (around 75 cafs) and Mocha (around 25 cafs). The Indian
organized sector has potential for around 5,000 cafs but fewer than 1,000 cafs exist currently.

CCDs vision: To be the only office for dialogue over a cup of coffee
CCDs Expansion Strategy: By Jan 2012, CCD had approx 1,200 cafes and 900 Express outlets.
In October 2009, CCD announced that it will increase its international presence from the
current six outlets in Vienna and Pakistan to a total of 50 stores across Europe and Middle
East in two years time.
Operating Formats Caf Coffee Day operates in both regular (Coffee Day Square) and
premium formats (Lounge).
CCDs new brand identity: In October 2009, CCD unveiled a new brand logo, a Dialogue Box,
to weave the concept of Power of Dialogue. In accordance with this new brand identity,
CCD planned to give all its existing outlets a new look by the end of 2009.
Cafs would be redesigned to suit different environments such as book, music garden and
cyber cafes suitable for corporate offices, university campus or neighbourhood. The change
plan included new smart menu, furniture design, among others.
CCDs International Expansion Strategy In June, 2010 Cafe Coffee Day chain acquired
Emporio for Rs 15 crores. Emporio is a Czech Republic-based caf chain present at 11
locations. CCD plans to co-brand the chain as Caf Coffee Day Emporio and later transition it
to Caf Coffee Day. CCD is also present in Vienna. The company wants to expand in the East
European region, West Asia and the Asia-Pacific region.
Coffee Day Wake cup: In January 2012, CCD launched its own brand of coffee maker called
Coffee Day Wake cup targeting all coffee lovers. The product will be marketed at its 1125
cafes and 900 Express outlets. Competitor Lavazza had launched its own portable coffee
machines (Lavazza Blue 850) already but targeted the premium segment with the price being
higher than CCDs machines.
In February 2012, Caf Coffee Day announced plans to install interactive touch screen
tablets in 500 cafes across the country.

18

From a cyber caf that also served coffee to the countrys largest caf chain, it is innovation that
has driven Caf Coffee Days growth, K. Ramakrishnan tells Abhilasha Ojha- Business Standard
January 28,2013:
When one is a leader, others just follow. How do leaders go back to the storyboard and constantly
innovate? At Caf Coffee Day, for instance, you are expanding services and offerings and selling
even coffee machines and not just a cup of coffee.
See, whatever has been your strength, whatever has taken you from point A to point B, need not
necessarily take you to point C. Never stop being a student, keep learning, that is the key. Then, its
also essential for companies (and not just leaders in the category) to have a back-up plan. At Caf
Coffee Day, at any given point of time, we have lots of pilot projects that, if successful, can go
national easily. But, what it fundamentally means is that our brand is always experimenting. For
example, most of our cafs were table service models. We realised that at any given point of time,
our team member was making 14 visits to one table (going with the menu, returning back to take
the order, returning back with the order, bill, cash). We figured it was not good either for the team
member or for the customer. We eliminated the process and now our cafes are semi-table service
model in that the consumer places the order on her own but we deliver it to her at the table.
We are considered a youth brand but we address every segment. We look at ourselves as a mass
brand that is addressing students, corporate employees, offices and homes. Wherever there is a
need for a beverage, there should be a need for Caf Coffee Day. Thats how I see it. Our lounge
concept, for instance, is totally different. Its a caf which is a hangout zone with a purpose. We have
other models targeting hospitals and offices. We give vending machines for coffee delivery within
offices.
The key to leaders being successful (or going back to the storyboard) is to constantly experiment,
keep learning and be happy to support failures. Failure is the process of experimentation and
learning. If you dont fail, you dont learn. So many drinks we launched, we had to pull back, drop
from the menu list because they didnt work. So many locations we had to pull out from because
they didnt work. But let the experimentation happen, believe in it.
Achieving stickiness towards a brand is tough, especially for youth-centric brands. How can brands
then create and grow a loyal base of consumers?
We need to constantly maintain quality standards and not just look at consumer growth but also
consumer connect. So, for a youth centric-brand like ours, our focus on digital media and social
media becomes very important. Actually, it is what keeps us on our toes all the time. We already
have 3.2 million likes on Facebook and, through this engagement, we are in constant touch with a
huge base of people who are our valued consumers. Given that we are a growing brand, slip-ups are
inevitable but through the social media, we ensure that we rectify errors and mistakes. One of our
consumers, for instance, put up a picture of sofa sets and chairs in our caf in Udaipur, remarking
unhappily that they were not in the best shape, and were old and worn out. We got proactive and
within a few days, we replaced them with brand new sofa sets. A few days later, a picture was
uploaded by the same consumer, with a comment: CCD heard me. So, yes, the target age-group
consumers on the social media may be unsparing but to be fair, they are also willing to give a chance
to the brands. And through such endeavours, connect with brands happen.

19

From fumigating flies in one caf within minutes to making sandwiches available at another caf, as
a result of social media, as a connection with our core consumer, the bond with the brand is only
getting strengthened.
Co-creation is also critical for youth-centric brands. In fact, on our social media pages, we are clear
that we are happy to see people conversing. We only moderate when we feel we really have to. We
provide sparks for conversations and get a sense of subjects that our core consumer may be
interested in. Our music playlist, food menu, and many other things have been co-created with Caf
Coffee Day fans. When we changed our food menu last year, it was based on feedback on the social
media. We invited people to test our offerings offline and then share their views online. So, the
constant mix of online and offline initiatives can help strengthen the bond, particularly with the
youth-centric brands.
You have employed many differently-abled people at your cafs. How can companies make CSR
relevant rather than just be a token exercise for the benefit of the companys image?
We at Caf Coffee Day do CSR from the heart. There are three broad spokes of corporate
responsibility for us employability, education and hunger. In all these aspects, we do relevant
work. We are proud of our silent brew masters. They may be differently abled but their sense of
smell is so heightened that they genuinely are fantastic brew masters, they make very good coffee.
We have identified that strength. We have a vocational training college in Chikmagalur where we
train youth who are in tough circumstances (children from broken homes, or of parents who might
be offenders and are in jails). We provide them with free training, accommodation and food to make
them employable in the hospitality industry. We also award scholarships to children in need. We
have tie-ups to provide food on a daily basis through money gathered at different cafs. So, yes, we
continue on this path because there is need to train and employ people.
Coffee consumption is growing year- on-year, according to the Coffee Board of India, so is the
competition among cafs. How are you, as the largest coffee chain in India, gearing up for the
challenge?
We started as a cyber caf in 1996. At that time, the assumption was that internet would not be too
easily available for retail customers in India. So, we let internet be the centre of our business and
surrounded it with beverages. In two-three years, however, internet became freely available and the
model (of internet with beverage at a caf) was replicated. Thats when we tweaked and said, okay,
coffee will now be the centre of our business and everything else will surround that. From 20002005, we stuck to this and also ended up expanding to different parts of India. However, we found
that we needed to change that approach too. So, we became beverage agnostic, in that
conversation became the centre of our business and we surrounded it with the beverage, which was
coffee.So, what was happening throughout was reinvention and being relevant with the consumers.
I think, brands always need to experiment and reinvent themselves.
We were successful as a cyber caf but we took the initiative and simply decided to make a flip and
do something else. Coffee is in our genes anyway, flips just happened. While Caf Coffe Day in its
over a decade existence has never advertised, before, 2012 saw the emergence of a huge Integrated
marketing communications campaign , besides increasing in store entertainment- touch screen
tables to play games while waiting, Wi-Fi and music. Some might believe its an answer to Starbucks
entry in India, others might think of it as revitalizing the brand.
20

Advertising Strategies :
1. Print Ads:

Cafe Coffee Day released its first print ad on Friday, 28 September, 2012 as a false cover in
The Times Of India. With the headline, "You'll never run out of reasons to hang out", the ad
showcases the combo deals introduced by the coffee shop chain on the front page, and
some fun takeaways from when Cafe Coffee Day first began on the flip side.

The front of the ad

The flip side of the ad

21

Holi

The Print Ad titled HOLI was done by Creativeland Asia advertising agency for product: Cafe Coffee
Day Coffee Shop (brand: Cafe Coffee Day) in India. It was released in the Mar 2009.

Sit-Down(Combo Meals)

22

2. Discount cards

3. Mobile App :
Caf Coffee Days mobile application enables you to check out their menu, get exclusive offers and
discounts and can even get step-by-step directions to any of their outlets.

23

4. CCD Letters(Blog)

5. Caf Chronicle

24

6. Project Soul

Project Soul (Smoking Or Ur Life) .The objective of project SOUL is to keep the Chennai youth free of
smoking.

7. TVC
CCD has a brand new idea - Sit down-ism. The idea of getting people to sit down and talk instead of
creating a scene for everything, seems very appropriate for the times we are in.

25

COSTA COFFEE:
To Costa Coffee, a high customer experience includes a great coffee, served quickly, with a
smile, Andy Harrison tells Rajarshi Bhattacharjee Business Standard February 11, 2013.
You have set milestones for 2016: at least 65,000 Premier Inn rooms in the UK; 3,500 Costa stores
worldwide and 3,000 Costa Express machines. What's India's share likely to be in this pie?
We are very ambitious in India. However, we haven't set public goals because the business is now
growing from a very small base. But we hope to sign five to eight new hotel agreements every year,
which is a very rapid grow trajectory. And as we grow, we will consider more public milestones. We
aim to invest $50 million per annum in the development of Premier Inn International, which includes
India, West Asia and Asia Pacific.
Will it work in India in the long run? How confident are you about this offering?
People once thought that it might not work in the UK. But we were always confident in our product.
In the UK only a tiny percentage of people actually ask their money back about 0.2 per cent. In India,
I am sure, it is going to be even less. The key point is, we deliver a great product at great value to our
customers. We have confidence in our product and in our people. So we can guarantee
How important do you think is customer experience for a brand's survival?
Its essential to track guest satisfaction. We do so through a very exhaustive questionnaire, which
maps the guests journey from the time of booking to checking out of the hotel.
The questionnaire gets mailed to every guest within 24 hours/5 days/10 days of their departure (if
not answered). All the responses are collated on the website (managed by a 3rd party ORC in this
case) and net recommend scores are measured. These scores are all tracked and form a part of our
balance scorecard.
India has always been a country of tea-lovers. Now with international cafe chains looking to
expand here, how optimistic are you about the Indian market?
There was a time in England when the English were known for drinking tea. And we now have 1,500
Costa Coffee shops in the UK. The Chinese are also famous for their teas. And we have now 200
Costa Coffee stores in China. Down to the south of India, in Bangalore, we see coffee is picking up. I
think tea and coffee will co-exist in India and other international markets. We see that the English
drink their tea and love Costa Coffee too.
How do you position your brand as opposed to a behemoth like Starbucks? What is your
differentiator?
Costa Coffee has been quick to generate 25 per cent growth in revenue per annum. We have done
this by simply offering a consistently great coffee experience. Our baristas are really important.
When one walks into a Costa store, the baristas not just makes the coffee but also the customer
connection they look at you, serve you, create and maintain the desired ambience of the store.
To us, a high customer experience includes a great coffee, served quickly, with a smile, in a warm
hospitable environment. In the UK, we have as many stores as Starbucks. And we have done that by
just focusing on customer experience. If you offer a great experience, customers come back again
and they recommend their friends and family and you get more customers. Our brand has been built
on consistent delivery of great customer experience, and thats our differentiator as well.
26

Why all that Brewhaha Over Coffee?

The cafe market in India is turning both febrile and frothy as big guns like Starbucks
prepare to move in for their operational launch and existing players position themselves for a
landgrab market opportunity.

Mumbai Mirror- letters to the editor column- I have heard about some brilliant coffee being served
at a swish, new SoBo joint. All those who had queued up for a mile on the day of its opening had said
so. So I went to claim my share of the delighting jolt after work one day and thought I had got into a
place warp. I began to think of it as the passport office. There was a serpentine queue that was
barely moving and three harried guys at three terminals taking orders. Finally, when we were about
to condemn coffee drinking as a seriously time-wasting (de)vice, we reached the terminal after a
cool (Im talking about the efficient air-conditioning) half hour.
There was a little technical snag with the cash box and we offered a choice of short, medium and
other options of coffee. Once we placed our order, we were directed to yet another queue to collect
it. We waited there for the guys at the counter to call us. This counter sounded like a small time
Sunday market. short caf mocha with no cream Yogesh. tall caf latte with milk and extra sugar,
Mukesh. By the time (add another 10 minutes to the early half hour) he called out my name, I did
so want to change it.
But yet success at last. Coffee cups in hand-not the pretty mugs that were displayed on the counters,
but paper cups (and to save on paper on the other hand, no paper napkins)- and plastic forks and
knives to saw the chocolate clair with. We looked for a place to sit, there was none. Too many
people were enjoying exclusively priced coffee, too many people were waiting for their turn to do
the same. By the time we got a place to sit the coffee was no longer piping hot, certainly not hot
enough to match out tempers. The next time I want a quick coffee and chat, I think Ill drive down to
my favourite place at Lonawala, that would be quicker!
27

Barista Lavazza:

Italy's Luigi Lavazza Spa is looking for a strategic partner or even an outright buyer for
its Indian coffee chain Barista five years after acquiring it, and has begun preliminary talks with
potential partners and buyers, said a person with direct knowledge of the situation.
In the early 2000s, Barista Coffee pioneered the sale of coffee through espresso bars at
tony locations and emerged as a strong brand that was touted as the future Starbucks of India.
However, the coffee subsequently lost its sheen as its ownership changed hands three times and
rivals such as Cafe Coffee Day and Costa Coffee consolidated their presence. The recent arrival of
Starbucks and Dunkin Donuts in India is likely to further alter the market's dynamics.

Gloria Jeans

After serving that strong cup of coffee in the country for the past four years, Australias premium
brand Gloria Jeans Coffees India numbers are perking up. The India operation has managed to
break even.
Citymax Hospitality, the master franchisee for Gloria Jeans, now plansto add 30-40 cafes every year
and is mulling a sub-franchisee model.

28

Starbucks effect? CCD, Barista souping up:

Its difficult for rival coffee retailers not to be worried about the extremely long queues outside
Starbucks.
They graciously say the markets big enough for one more chain. But behind the stoicism lies hectic
marketing activities.
Industry sources said all cafe chains are cranking out plans to revamp menu and offer better
experience to consumers.
To wit, Barista has introduced new items on the menu, changed the store interiors, and roped in a
new brand ambassador in the last one month.
The chain has also tied up with publishing house Penguin for book launches.
Cafe Coffee Day (CCD), the market leader in India, is also believed to be going through a similar
exercise. Sources said it will soon have a new menu and is stepping up advertising and marketing
campaign.
CCD, which is positioned in the affordable segment, is now also changing interiors in an attempt to
cater to the premium segment, which is where Starbucks is positioned. Similar activities are ongoing
at Aussie chain Gloria Jeans, too.
All of them, to top it, are betting big on brand merchandising a strength that only Starbucks can
boast of in the coffee market in India right now. Not surprisingly, experts suggest the coffee chains
would soon be slugging out for a larger share of that brew. This at a time when even Starbucks has
acquired Teavana, and is changing its positioning from being a coffee chain primarily.

Starbucks' operations in India is bound to raise the coffee temperature in the Indian market and
could nibble away the business of another premium player in the market.

29

Costa Coffee: 76 baristas - cum-actors serenade us about their coffee passion

(International Ad)

Costa Coffee, which currently runs 95 cafs spread over Delhi-NCR, Jaipur, Agra, Mumbai, Bangalore
and Pune.
Sensing the effervescence in the coffee market, two of the biggest and most-entrenched players
Caf Coffee Day and Lavazza India have started expanding besides going for a more focused
targeting of young consumers, even as they take their branded caf experience to the next level. The
idea is to become complete coffee solutions company with both organised caf and coffee retailing
arms. The strategy devolves around catering to the complete ecosystem of the coffee market and
reaching out to both in-home and out-of-home (like office vending machines) consumption needs.
In line with this thinking, Barista Lavazza, India's second-largest coffee chain, and part of
Italy's Lavazza Group, has embarked on a plan to open a new line of coffee outlets to reach out to
the coffee connoisseurs. Lavazza Espression is a new premium caf chain that was launched
internationally in 2007 and is now making its way to India. The company plans to open 10-15
Espression stores in the next 2-3 years. At the same time Lavazza is also ramping up the number of
its Barista outlets, from roughly around 250 currently to 500 by 2014. In a re-jigged strategy,
Espression will find a place on premium high streets while a majority of the new Baristas will be
located on highways, to tap into various consumer profiles.

30

RESEARCH DESIGN AND SAMPLING

The Problem: The earning hype of Starbucks identity has raised the bars of the consumer's
expectations. While most people argue that Starbucks Corporation has been the most successful
coffee chain by leading the coffee retail market, in a country like India where people calculate their
daily expenses and spend accordingly, it may pose as a tough challenge for Starbucks to survive in
the market.
Research Objective: To find out whether the Indian consumers would accept the ideology of paying
a premium price for a mere beverage?
Type of Research: Causal Research. From what we have discussed above, it is evident that the price
and number of outlets/ franchisees are the two most significant causes for Starbucks to be
successful in India. And as mentioned in the Business Standard article, where in, Howard Schultz said
that Starbucks has reduced their prices mildly for the Indian market segments, huge mobs of crowds
are already barging in the cafe, and there is a possibility that if the Company comes out with more
expansions of their outlets they may be reach peak standards in the Indian market as well.
Where conducted? In various parts of the metropolitan city of Mumbai.
The Hypotheses: If Starbucks has an already established brand name leading the coffee industry all
over the globe since so many decades, then despite being charged at a premium price, the Indian
market would accept it as a luxury product.
Sampling methodology:
Usually, the population is too large for the
researcher to attempt to survey all of its
members. A small, but carefully chosen
sample can be used to represent the
population. The sample reflects the
characteristics of the population from
which it is drawn.

SAMPLING

PROBABILITY

NONPROBABILITY

SIMPLE RANDOM SAMPLING

SYSTEMATIC SAMPLING
STRATIFIED SAMPLING
CLUSTER SAMPLING
MULTI STAGE SAMPLING

CONVENIENCE SAMPLING
JUDGEMENT SAMPLING
QUOTA SAMPLING
SNOWBALL SAMPLING

Our Pick:- Simple Random Sampling- It is the purest form of probability sampling. Each member of
the population has an equal and known chance of being selected. When there are very large
populations, it is often difficult or impossible to identify every member of the population, so the pool
of available subjects becomes biased. Therefore, we chose simple random sampling as our method
to reach out to a wider target audience and to gather an array of opinions from them.
31

Sample size: 65
Sample Break up: 60- Consumers+ 5 Competitors
Sampling Unit: City blocks (Areas). 10 units from 6 blocks namely Santacruz, Vile Parle, Wadala,
Lokhandwala, Malad,
Sampling Frame: Bulk mails, telephone contacts, social networking websites, etc.
Method of data collection: Primary data collected through qualitative methods of data collection
namely surveys, and questionnaires.
Questionnaire: Structured with attitude management scales using Qualitative data.
Type of Interview: Telephonic, Mail, and Personal Interview.
How the work will be supervised: A team of six will be split into groups of two people each. Each
group would two blocks mentioned above respectively.
Editing of Questionnaire: A simple, precise questionnaire has been designed using all types of
structured and attitude scale measurements to analyse various responses given by the respondents.
Time for Completion: 2 months.
Cost: Printing expenses, Stationery expenses and Travelling expenses.

32

PRODUCT TESTING
Product research is a component of market research whereby the characteristics of good/service,
that will satisfy a recognized need or want of the consumers, are identified. Product research is
generally done to test the prototype of the product and to measure its success or failure in the
market.

1) New Product Research:

NEW PRODUCT

EXISTING PRODUCT

NEW
MARKET

OUR
PRODUCT
CATEGORY

EXISTING
MARKET

Existing Product->New Market:

Definition: This involves conducting a research of a product or sevice when it is entering into a new
geographical area or to capture a new market segment.
Explanation: As mentioned in the history, the existence of Starbucks dates backs to the early days of
1970s. However, its entry in India is as fresh as a couple of months before this day. Considering,
these two vital facts we say that although Starbucks is a pre-existing brand, it has launched itself in
the new market of India, targeting Indian consumers.

33

2) Branding Research:
Brand Character:
Definition: A brands character/personality is a shorthand way to convey a brands belief
system. Marketers should create a list of brand personality traits to serve as a guide to help
them design marketing materials and programs that are on-brand in spirit and in the
marketplace. The surest way a brand will form emotional connections with customers is
through its unique personality.
Explanation:

This list of personality attributes actually comes from an exercise Starbucks marketers did many
years ago. Starbucks listed all the personality traits they believed the Starbucks brand should convey
to customers and ended up with a list that consumers gave which mirrors the traits they seek in a
best friend. Gracious. Encouraging. Respectful. Warm. Genuine. Quick-Witted.
Every brand has a personality. And every ENDEARING brand seeks to stand for something beyond
being faster, cheaper, better.
Brand Logo Research:
Definition: A brand logo is arguably the most important weapon in the company arsenal. Get it right
and it can transform the fortunes of the business; get it wrong and it could seriously damage them.
The logo is the first impression, of not just who a company is, but how trustworthy it is and in turn,
how much a consumer will open up. The main purpose of creating a logo for a brand is to Give an
identity a name and then giving the name a face.
Explanation: In Greek mythology, the Sirens were three dangerous seductresses that were half-bird
and half-woman and lived on an island surrounded by cliffs and rocks. They would attract mariners
with their enchanting music and song luring them to shipwreck on the rocky coast of their island
home. In later European folklore, the Sirens were portrayed as mermaid-likehalf-fish and halfwoman with the same penchant for killing sailors.
34

Terry Heckler pored over old marine books until he came up with a logo based on an old sixteenthcentury Norse woodcut: a two-tailed mermaid, or siren, encircled by the stores original name,
Starbucks Coffee, Tea, and Spice.

After failing to convince the original owners of Starbucks to serve espresso beverages, Schultz raised
the seed capital to open his own espresso caf, Il Giornale in 1986. Their logo reflected the emphasis
on speed. The Il Giornale name was inscribed in a green circle that surrounded a head of Mercury,
the swift messenger god.

In August 1987, the two remaining original owners of Starbucks sold their six stores, roasting plant
and Starbucks name to Schultz. To symbolize the melding of the two companies and two cultures,
Terry came up with a design that merged the two logos. They kept the Starbucks siren with her
starred crown, but made her more contemporary. They dropped the tradition-bound brown, and
changed the logos color to Il Giornales more affirming green.

The hybrid logo also became more modest with her wavy hair covering up her bare body, but the
split-tailed mermaid was still a little too risqu for some folks. So in 1992, Terry revisited the design
with Doug Fast and created the logo we see today. They cropped the siren so that only a hint of her
tails was visible.

35

 Brand Association Research:

Definition: Brand associations are the attributes of brand which come into consumers mind
when the brand is talked about. It is related with the implicit and explicit meanings which a
consumer relates/associates with a specific brand name. Brand association can also be
defined as the degree to which a specific product/service is recognized within its product/
service category.
Explanation: Starbucks is very well known for the quality of coffee it offers, and hence for
the premium price it charges for the quality product to its consumers. Hence, consumers
often associate with it for its high end services and products offered.
Brand Loyalty Research:
Definition: Brand loyalty is the extent to which a consumer constantly buys the same brand
within a product category. It is a scenario where the consumer fears purchasing and
consuming product from another brand which he does not trust. Brand loyal consumers are
the foundation of an organization. Greater loyalty levels lead to less marketing expenditure
because the brand loyal customers promote the brand positively
Explanation: Considering the fact that Brand loyalty can be developed through various
measures such as quick service, ensuring quality products, continuous improvement, wide
distribution network, etc., Starbucks retains its retains and continues to develop more and
more brand loyalty on the part of its customers on the basis of all the above mentioned
ways in order to ensure maximum loyalty from its target audiences.
Brand Awareness Research:

Definition: Building brand awareness is essential for building brand equity. Brand
awareness is the probability that consumers are familiar about the life and availability of the
product. Brand awareness includes both brand recognition as well as brand recall. Brand
recognition is the ability of consumers to recognize prior knowledge of brand when they are
asked questions about that brand or when they are shown that specific brand. While brand
recall is the potential of customer to recover a brand from his memory when given the
product class/category as a signal.
Aided Recall- This type of awareness is generated in a consumer. When asked about a
product category, if the consumer is aided with a list of company names and he recognizes
the company from the given set it is categorized as aided awareness.
Unaided/Top of the mind Recall- When the name of the company is automatically
recollected because the consumer very promptly associates the brand with the product
category, it is called a top of the mind awareness of the product.
Explanation: Based on our research findings, we observed that Starbucks enjoys the largest
Top of the mind awareness in minds of the consumers worldwide, amongst its competing
coffee chain houses.
36

Swot Analysis: Looking into Starbucks specifically, we need to analyze how it performs as a company
and whether or not it will continue to perform equally well in the forth coming years. In order to
gauge this performance we look at both the companys characteristics and those of the surrounding
market and see what needs to be done for the future. An excellent tool for gauging these qualities is
Strengths, Weaknesses, Opportunities, and Threats analysis, also known as SWOT analysis.
Considering the strengths of Starbucks:
Strengths:
Pretty much everyone, knows the name Starbucks and associates it with highend coffees. In
addition, people see Starbucks as the biggest and best in the business. This is a significant strength
because Starbucks has a natural edge over its lesserknown competitors in that people already
associate it with a high quality and popular experience. The enormous number of Starbucks locations
allows them to reach almost every domestic as well as international markets. This allows them to
implement new products quickly across a large demographic and ensures a large exposure of
clientele to prevent new entrants from gaining market share.
While their business isnt as well established internationally as a company like McDonalds, there is
an extremely large benefit to having a globalized business.
Starbucks has a wellknown practice to make efforts to preserve the environment and be ethical in
its dealings. This gives the company a good public image, which serves to counter some criticism that
its sheer size creates. Its size also helps its position in the market. Being ahead of all its competitors
in the industry in terms of size and volume allows them to set the prices and prevent the growth of
other companies.
Starbucks successfully changed the public opinion of coffee products from a commodity to a luxury
good, and in doing so, enabled an increase in price for these goods to a much higher level than
would have been possible before.
Starbucks mission to make its stores a third place for people to go besides work and home comes
by offering services like free internet and comfortable chairs. This goal gives Starbucks the ambiance
to go along with its product. While Starbucks has an exceptional edge in the coffee industry, it has
some weaknesses that may leave it vulnerable to changes in the market.
Weaknesses:
While most people consider Starbucks coffee a luxury good and would pay whatever price is set for
it, there is an increasing opinion that Starbucks charges too much. They are also very inflexible in
terms of location. For example, Starbucks charges the same price for their products whether youre
in LA or Beijing. Basically, the main problem for Starbucks is that its entire business rests on the
coffee industry.. In general, Starbucks keeps its business plan formulaic and centralized and does not
tailor its branches to the locations they are being placed in.
Moreover, Starbucks offers only one flavour of coffee. This lack of selection makes Starbucks an
unappealing choice for many coffee drinkers.

37

Opportunities:
By purchasing companies such as Seattles Best, XM Caf, and Tazo Tea, Starbucks used a different
brand name to get business in a different market niche. Starbucks also offers a range of products
that it sells to other companies such as its bottled Frappuccinos and other specialty goods, which
expand its market at a lower cost than opening full branches.
They used their vast resources to develop an international business. This generated even more
revenue for Starbucks and really helped to develop their brand image. One of their biggest
opportunities continues to be in expanding and diversifying their business with their vast wealth.
Threats:
Recently, serious competition has presented itself. Several companies are developing coffee
products that rival those of Starbucks. Companies such as Coffee Bean have grown large enough to
seriously compete with Starbucks. Another potential threat is that coffee is just a fad and eventually
people will grow out of it. If this is the case, Starbucks only hope is to diversify its business into
other industries to potentially give it some security from fluctuations in the coffee market. Because
of the specialization of their industry, Starbucks is very dependent on supply factors such as the
price of coffee beans, which could hurt their business.

STRENGTH

WEAKNESS

OPPORTUNITIES

THREATS

38

3) Pricing Strategy:
Pricing is one of the more technical areas of market research. The aim is not to find what customers
like, but what they are willing to pay and so what the optimum price point is to maximise profit or
revenue or market share.
Starbucks Pricing Strategy:
Starbucks is the leader of the coffee market. As an individual company, it controls several times
more market share than any of its competitors. More than just a high-priced coffee shop, Starbucks
offers a combination of quality, authority and relative value.
Quality:
Starbucks sets its prices on a simple idea: high value at moderate cost. When people feel like they
are getting a good deal for their money, they are more likely to pay a higher cost. Quality is the key.
Starbucks has to maintain strict quality controls in its coffee sourcing as well as in its customer
service and peripheral products to justify its costs.
Differentiation:
Starbucks also spends a lot of time and energy differentiating itself from the competition. One can
see this in the design of its coffee shops, the music played there and the types of products it sells,
such as coffee-brewing equipment and jazz CDs. Starbucks makes sure to keep current on the latest
technology, often times being the first to introduce the newest advancements to its customers. For
example, Starbucks was one of the first companies to adopt location-based promotions and mobile
payments.
The Value of Authority:
Starbucks' pricing strategy has a lot to do with how it positions itself as an authority on coffee,
allowing the company to charge premium prices. Thus, when Starbucks introduces new products at
higher prices, consumers are willing to pay extra without even having tried the products because
they associate the Starbucks name with high quality.
Relative Value:
Starbucks also uses relative pricing. It offers premium items, like its espresso drinks or its Starbucks
brand whole-bean coffees sold in grocery stores, alongside lower-cost items, like its drip coffees or
its Seattles Best line. While the risk exists that more customers will choose the lower-priced items,
by offering higher-priced items alongside lower-cost alternatives, Starbucks is justifying the higher
price through comparison.
Starbucks Corp raised prices by an average of about 1 percent in the U.S. Northeast and Sunbelt on
Tuesday, making coffee-drinkers spend more in New York, Boston, Washington, Atlanta, Dallas,
Albuquerque and other cities.

39

 Worldwide strategy for basic coffee:

Starbucks has three sizes: tall, grande and venti. They are increasing prices on their tall while leaving
the grande untouched. This is classic case of second degree price discrimination. After the price
increase on tall, some customers may find they get more value with grande (higher consumer
surplus) than they get from higher priced tall and will instead choose grande. Since the marginal cost
of additional coffee in grande is almost negligible this is still an upside for Starbucks. They are able to
capture higher consumer surplus without alienating their customers.
Star Bucks caters to a somewhat higher-income customer they have continuously placed their
products based on customer willingness to pay.
India is a price sensitive market. How does Starbucks plan to address that?
We decided early on that we have to be highly accessible and approachable from a price
value proposition. Ill leave it at that. Youll see the pricing once we open the store. We
recognize in the pricing architecture of opening a market and we did not want to price
Starbucks in a manner that would be off-putting or intimidating. Some of that leverage
comes from the fact that we are doing local sourcing but we would have not come to this
market and used price as a barrier. We want to appeal to a broad base of people.
The Starbucks stores are built in many different ways the quality of the coffee, the quality of the
people, the third place, the sense of design and community and the non-verbal cues that exist. All
the stores will have a sense of style and elegance.

Starbucks v/s CCD:

Starbucks has been following a low pricing strategy across all its forthcoming outlets, including the
next one at the premium Taj Hotel in India.
Starbucks, with Tatas as partner, has opted for competitive pricing that is nearly half the coffee
chain's charges elsewhere in the world - with a cup of coffee costing about Rs 80 for a small offering
and Rs 165 for a large one.
In spite of being a high-end premium brand Starbucks is following the value proposition i.e. value for
money strategy for the Indian market.
Cafe Coffee Day (CCD), which runs 1,350 stores, continues to follow a different pricing strategy
which includes the rental. It has come up with very reasonable combo offers which start at a
minimal cost of Rs. 49 only.
"It is different for different outlets. Our pricing depends on consumer potential and what are the
input costs that go into running that store, including rentals. We would have different pricing across
different retail points," CCD Marketing President Ramakrishnan K said.

40

4) Packaging Research:

Starbucks Mumbai- cool relaxed ambience, double-levelled seating

At Starbucks Mumbai, the American employees go about boisterously greeting

customers: "How're you doing?" .Starbucks coffee mugs (Made in Thailand) and coffee pouches are
stacked neatly near the counters.

1971

1987

1992

2011

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"The Way I See It"

Quotes by artists, writers, scientists and others have appeared on Starbucks cups since 2005 in a
campaign called "The Way I See It".

Environmental impact

Grounds for your Garden

In 1999, Starbucks started "Grounds for your Garden" to make their
business environmentally friendlier. This gives leftover coffee grounds to anyone requesting it for
composting. Although not all stores and regions participate, customers can request and lobby their
local store to begin the practice.

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Recycling
Greener Cups

Over the years Starbucks has launched several initiatives to decrease the environmental
impact of their disposable cups.
In 1997, Starbucks developed their recycled-content cup sleeve as a way to protect
customers from hot beverages and avoid the waste of double cupping.

43

In 2006, they launched the industrys first hot beverage paper cup with 10% post-consumer
recycled fiber.
In 2008, they rolled out a new plastic cup that has less of an environmental impact than their
original plastic cups.

Reusable Cups

Starbucks offers a 10-cent discount when customers use their own reusable mugs or tumblers for
their beverages in company-operated stores in the U.S. and Canada. Customers enjoying their
beverage in-store can also request that it be served in a ceramic mug where available.

Starbucks Mugs @ its Indian Outlet

44

Copy Research:
Copy testing and/or advertising research is a general class of tests that evaluate and diagnose the
communication power of an advertisement either broadcast (television, radio), print (newspapers,
magazines), or more recently, the Internet. and/or advertising research is a general class of tests
that evaluate and diagnose the communication power of an advertisement either broadcast
(television, radio), print (newspapers, magazines), or more recently, the Internet.
When Used
Copy tests are an integral part of the creative development process, and (of necessity) always follow
the development of one or more advertising alternatives. These alternatives attempt to embody an
advertising strategy that has been identified through previous phases of research. Copy tests are
usually conducted (1) after a strategic/positioning study indicated an opportunity for the brand that,
in turn, feed copy development; (2) after qualitative research (focus groups, in-depths) has been
used in the creative development process; or (3) after tracking research has indicated that the
current campaign is no longer building awareness or image. Practically speaking, copy tests can be
conducted at any time there is new advertising that needs to be evaluated.
Copy Test Designs
There are two basic copy testing approaches for TV off-air, and on-air. Off-air tests focus on
whether the copy effectively communicated its intended strategy, and provides more diagnostic
information on specific copy elements than on-air tests. Off-air approaches are "forced exposure"
tests (usually in a mall or theatre environment), in which respondents view a clutter reel of
competitive ads, with the test ad in the middle. Because a lower state-of-finish is acceptable, off-air
stimuli are less costly, and these tests are more often used at an earlier stage of the copy
development process.
On-air tests are executed on an unused cable TV channel among people who have been recruited to
view a fictitious -hour pilot TV show. Respondents see ads for other categories, but see only one
test ad. On-air tests excel at evaluating copy performance in a real-world setting, and whether the
advertisement "broke through" (i.e., was recalled).
Measures typically include:

Recall of ad ('day after recall' or DAR)

Main point communication
Proven recall (correct playback of copy elements)
Total copy and situational/visual playback
Purchase intent, or a pre-post persuasion score
Brand likes, dislikes
Imagery/personality ratings
Attribute/brand performance ratings
Classification and demographics

45

Types of Copy Research: There are three main types of Copy Research, viz.:Concept testing
Name testing
Slogan testing
Copy research data for Starbuck: As Starbucks never advertises itself in the print or
broadcast medium, the only relevant means of researching its copy would be its concept
and name testing.
Concept testing:

Concept testing (or market testing) is the process of using quantitative methods and qualitative
methods to evaluate consumer response to a product idea prior to the introduction of a product to
the market. It can also be used to generate communication designed to alter consumer attitudes
toward existing products.
Starbucks Concept Store: Starbucks Concept Store Is A Lab For Reinventing The Brand. These are
unique environments created by Starbucks' designers to explore innovations within the coffeehouse.
They call them their design sandboxes. That sense of exploration is extended to everyone who visits,
through daily coffee and tea cuppings, artistic events and community gatherings. Starbucks is
therefore, known for its unwavering consistency, from its inoffensively homey store dcor to its
burnt-coffee smell. Such stores are a place to feel inspired, creative and connected to each other
through the simple goodness of a favourite drink and the easygoing feel of a comfortable
neighbourhood atmosphere.

Name testing:
Whether testing a single name or a set of potential names, we can identify which names possess the
greatest overall appeal, connection to the consumer and fit to your brand, including using monadic
presentation of the names when feasible. The brand name is a bucket that you hope to fill with
goodwill and positive feelings about your product over time. The brand name is memory linkage to
your product and is an identifier that distinguishes your brand from all other brands. Needless to
say, the brand name is a critical marketing variable in virtually all product categories. It is most
important to avoid a bad brand name, such as a name no one can remember, or a name that does
not fit the product, or a name that reminds consumers of some other product. Thats why research
is so vital.
The logic and Intelligentia behind its name:
Baldwin, Siegel, and Bowker chose the name Starbucks in honor of Starbuck, the coffee-loving first
mate in Herman Melville's Moby Dick(so company legend has it), and because they thought the
name evoked the romance of the high seas and the seafaring tradition of the early coffee traders.

46

MAJOR FINDINGS
A General Overview:
Starbucks marketing From only one store more than 30 years ago in Seattle to its still growing
empire today with thousands of outlets in the United States and in foreign countries, the Starbucks
Coffee Company is no doubt a well-known success story all over the world.
Starbucks currently operates in over 50 countries across the six continents of Africa, Asia, North
America, South America, Oceania and Europe. Its headquarters is still in Seattle at the Starbucks
Centre which is a former Sears, Roebuck and Co. catalogue distribution building.
Currently, Starbucks is relying on retail expansion, product innovation, and service innovation to
achieve a long-term goal. "The idea was to create a chain of coffeehouses t." At the time, most
Americans had two places in their lives home and work. But I believed that people needed another
place, a place where they could go to relax and enjoy others, or just be by themselves. I envisioned a
place that would be separate from home or work, a place that would mean different things to
different people. By working toward this goal, Starbucks wants to open new stores in both new and
existing markets, expand their product development process, and cater to customers needs to
eventually improve their financial position and dominate market share.
The fact that it started as a small business enterprise that was able to continuously multiply over the
years can be a huge motivation for small businesses anywhere in the world. Many business schools
have studied the Starbucks marketing strategy and the business, itself, and have tried to detail why
such techniques have worked for this company.
Many points can be attributed to the success of this innovative company from the holistically slanted
Starbucks Mission Statement to the environmentally conscious Starbucks Corporate Social
Responsibility statement. But one thing is certain, if Starbucks comes up with a new viral marketing
campaign - others companies should start taking notes.
Customer and Marketing Strategies:
Starbucks is very successful with drawing customers into the stores; the marketing strategy is simple,
offers high quality products and a great atmosphere, that will draw consumers in. The founders of
Starbucks realized that the public would be willing to pay a premium price for a premium product.
Starbucks is a customer friendly firm; this is where the top notch reputation came from. A
reputation that Starbucks must flawlessly maintain, if this is not maintained Starbucks takes the risk
of possibly loosing a part of their overwhelming share of the market. Starbucks atmosphere and
quality is the major marketing strategy that Starbucks employs. The ability of Starbucks to make the
public feel as if they are right at home in their own living room has been a huge success. This
strategy is apparently working, there are very few television and radio advertisements for Starbucks
coffee, it does well selling itself. Consumers feel right at home to be with friends, to socialize in a
comfortable atmosphere, this is what brings back customers again and again. Starbucks has also
done a very good job of branding and making mind space.
So when a consumer wants coffee or thinks about going out to a buy a cup of coffee, what is the first
thing that probably comes to the consumers mind: Starbucks.
47

Target Markets:
Starbucks is a large corporation; with a lot of offer a diverse group of people. They dont only offer
coffee like many people might think. Starbucks has an outstanding reputation; they dont cater to
one group over the other. They like to say that they serve a very diverse group of people. Many of
the large Starbucks are located in big cities, which would be a reason why the crowd is so diverse.
Everyone knows the brand name. Starbucks coffee has. Some people wont drink anything but
Starbucks coffee. This makes for brand loyalty, which would occur when you have the same people
coming in all the time and buying your product. Since Starbucks franchises are so well known for the
best coffee many people go there. Most Starbucks are located in big cities, shopping malls, or out in
the open where there is a lot going on. Business people might go there before work to get coffee
instead of making it at their home. They dont just offer coffee; they also offer a social aspect. They
have comfortable furniture, and up to date books and magazines. It could be a place for people to
go and just hang out. Its not only for business people, or even the working class. Students could go
there for a place to go hang out or a quiet place to study. Everyone knows that coffee is an essential
to a college student especially when they are studying. It could be the perfect atmosphere to get
things done.

Customer Service:
Starbucks is the leader in coffee shop retailing. They have accomplished this through superb
products and priding themselves on customer service. By creating positive customer service,
Starbucks has created a large base of loyal customers. Mr. Schultz, owner of Starbucks stated, We
arent in the coffee business, serving people. We are in the people business serving coffee. Directly
alongside product quality is customer satisfaction. Starbucks wants to encourage purpose,
commitment, and enthusiasm among employees. Starbucks has found that in order to accomplish
this, they must have the best front line workers. Creating strong customer service begins with the
employee. If the employee does not take pride in his/her work, it will be reflected in their service to
the customer. One of Starbucks key concepts is, employees should be fully versed in how to make
them[drinks] and how to market them as well. They should be able to describe contents and,
especially if its part of the job description, spell the item correctly on a chalkboard or a menu. To
keep bad service at a minimum, Starbucks has implemented many concepts for their employees.
This is done in an effort to stop bad habits and prevent foul-ups on the front line. Once completed,
the employee is given a position on the front line making drinks. (Business Media) Starbucks wish is
for employees to learn before actually working, so they wont be learning at the customers expense.
While this might seem intense for a person making coffee, it does come with many benefits.
Starbucks employees are not called employees, rather partners. This gives employees a sense that
what they do truly makes a difference in the company. To help with this, employees who work at
least twenty hours a week are offered stock options and health-care benefits. By owning stock in
the company youre working for, almost all employees will strive to make the company better
because they know the stock will rise resulting in more money for the stockholders.

48

Also employees are encouraged to make their own rational decisions when dealing with customer
problems. Starbucks likes to see the employee fix the problem instead of running to the manager
for assistance.
Some people might be apprehensive to this, but Starbucks wants you to use your best judgment to
create satisfied customers, and it will stand behind the decision you make. By giving front line
employees this control, the employees feel more like their own manager instead of just a worker
bee. The employees positive attitude is reflected on their work and relationships with customers.
Starbucks wants employees and customers to interact on a personal level. In some stores, when a
regular customer pulls up, they begin making the drink and have it ready by the time the customer
has parked and reached the counter. This goes a long way in customer satisfaction. If the product
desired is not exactly on the menu, it will be altered to the customers preference. These concepts
would not be attainable if the employees didnt truly love their job. Also by knowing the entire
menu inside and out, drinks can be produced at a very fast rate leaving customers standing for a
short time. This also helps with lines in the morning when everyone wants coffee before work. By
creating a positive atmosphere, customers are immediately drawn in. Schultz stated, Its a place to
feel comfortable. A place to feel safe. A place to feel like you belong here. He goes on to say when
speaking of a foreign caf he experienced.

Starbucks Coffee Company and Marketing:

It is clear that the company has created greatly individualized marketing techniques to fit the
promotion of the Starbucks brand as it applies to the unique concept it was built on. But Adelino de
Almeida wrote a blog article named, Starbucks New Marketing Strategy: Advertising Like Everyone
Else, where he discusses how the Starbucks marketing strategy may try to finally follow everyone
elses marketing. Read his article and the discussion it has created to find out what this might mean
for the company.
Nevertheless, the Starbucks marketing strategy has led the company to its current success. This fact
is enough to realize that there can be much to learn from what this company has achieved to the
benefit of many small businesses. Isabel Isidro, managing editor of PowerHomeBiz.com, has written
an excellent article that outlines what small businesses can learn from Starbucks. The article is
entitled, Learning from Starbucks: 10 Lessons for Small Businesses.

49

Consumer's say:
I usually visit cafes
b) YES b) NO

Yes
NO

Identify the logo given below:______________

Star bucks
Clueless

50

How did you hear about Starbucks opening in India?

a) Social media
b) Newspaper
c) Friends

Social Media
Newspaper
Friends

Why not?
f)
g)
h)
i)
j)

Its too expensive [ ]

I prefer other coffee houses [ ]
I dont like Starbucks [ ]
I dont drink coffee [ ]
Others. [Please Specify __________________]

Too expensive
Prefer other coffee houses

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I would like to / have visited Starbucks

a) To experiment
b) Im a foodie
c) Because ,my friends frequently go to such places
d) Status symbol

To Experiment
I'm a Foodie
Because my friends frequently
go to such places
Status symbol

How was your overall experience at Starbucks? [Graphic Rating Scale stressing pictorial
communications]

Very Good

Neutral

Very Poor

Very Good
Neutral
Very poor

52

RECOMMENDATIONS
Our Analysis:
Been a leader in their industry and how it is trying to balance between maximized profits without
losing the Starbucks experience having in mind first on how to please the shareholder with high
numbers and not letting the customers forget how good and pleasant is to come to a Starbucks
romantic coffee shop.
By strategically analyzing the method of operational side of the business, adopting new technologies
in services and innovation, and another way the company can overcome their method of doing
business is using the analytical five forces of Porters that can help it to critically see what are the
areas where there is a need to create a balance to maintain the originality of the Company.
The recommended corporate strategies that can be implemented, can count with a very aggressive
Marketing campaign that will maximize market penetration, provide a relaxing environment, and
offer high quality products and great customer service in order to achieve profitability. As a result,
the company sought to create a third place experience away from the home and work place known
as the Starbucks Experience. That can increase brand image, build back the old customer service and
environment, cleaned and well maintained stores that reflect the communities of which they
operate in.
What should Starbucks further do?
One strategy Starbucks can adopt that would allow them to continue their growth would be to
enter the corporate market and begin directly selling brewed coffee to corporate offices, hotels,
and other similar professional businesses. This is a beneficial business arrangement for both
Starbucks and the customer. The businesses receive readytoserve deliveries of freshly brewed
coffee of the same high quality that Starbucks provides at their retail locations, also at a discount.
This allow for more convenient distribution of coffee to its employees and its customers, a
beverage that is typically in extremely high demand at business offices. Starbucks can expand its
brand recognition to all of the employees and customers of the companies it serves, and also can
better maintain the value of the Starbucks brand by preserving the quality of its products.
One benefit of this approach is that Starbucks already has a dense network of retail stores which
can be utilized as an auxiliary production and distribution network for this strategy. The coffee can
be brewed on location at various retail stores, possibly during nonpeak hours when foot traffic
is low. This allows Starbucks to oversee the quality control of the coffee and ensures a high quality
product that will not damage the Starbucks brand. Also, there is a high demand for coffee in many
businesses, both from their employees (e.g. law firms, IT businesses) and from their customers
(e.g. hotels, airline executive lounges), something that Starbucks should take advantage of in order
to become a prominent player in this market.

Starbucks should focus mainly on advertising its core business, its coffee. Of late, theyve
concentrated too much in marketing their music, films, books and other businesses that
supplement the coffee business. As a result, theyve deviated and neglected the product
that really defines Starbucks. By doing so, customers might think that the music/film
marketing strategy was implemented to compensate Starbucks mediocre coffee. In terms
53

of marketing specially for their coffee, Starbucks should diversify their advertising
channels. Instead of relying mainly on employee- customer relationship, they should also
venture more assertively into advertisements via the internet, print and visual media.
Starbucks should also consider strategies that would reduce cost, as well as strategies that
would promote growth and profit. In recent years, Starbucks has started venturing into
other businesses apart from coffee. Examples include the music, film, and book marketing
business. In doing so, not only are they diluting the value of their coffee, but they are also
incurring a large cost. One way to reduce cost would be to specialize and focus on
marketing their coffee. By being involved in fewer businesses, cost is reduced, and all the
resources can then be channelled towards improving their core product.
A few Suggestions from our Respondents:
Based on the last question where our target audiences were asked to give a comment as to how
can the cafe survive and maintain brand loyalty for itself, our respondents gave the following
feedback:

The cafe must always serve and maintain good quality food and beverages, and also
Indianize their products to suit the taste buds of the Indian consumers.
It must offer pocket friendly items
Excellent services are of vital importance to survive in today's competing world
Bigger space
More outlets/ franchisees
Should not have the 'silver service' policy instead of the 'self service' rule
Keeping a good ambience
Clean and hygienic cafeterias
Improving customer service by enhancing on the 'feel good' factor
Kind and warm welcoming at the reception department
Soft classic music or any other form of entertainment
It must provide Wi-Fi services as in today's contemporary world consumers want to work
and relax at the same time.
By giving special discounts or offers to loyal customers, and coming with attractive offers
for its prospect buyers and by advertising effectively.
By keeping a reasonable price. For any business to work, the price of the product/service
they sell is utmost importance not just to its entrepreneurs, but also to its customers. If
the product/service is charged too high, there are great chances that the product/service
may fail to survive in the mass market, ultimately failing to cater to the huge segments of
our Indian market.

54

LITERATURE REVIEW

Introduction:
A study on the effect of the brand that is Starbucks and the consequent reactions from
competitors and customers alike and the phenomena it is today in the caf chain industry. Thus
making it a significant area of study in terms of its business practices and to get an insight into how
one builds brand loyalty, awareness without much advertising and hardly ever suffering a downfall
in business be it in terms of balance sheet or goodwill.

Summary of articles:
The purpose of the study is to find out what exactly makes Starbucks, Starbucks, the research has
been conducted over a period of 2 months with the help of quantitative data which formed our
primary data as well as secondary data with studying various newspaper articles to support our
study Business Standard November 5, 2012- Interview with Howard Schultz, Business Standard
January 28, 2013- Interview with K. Ramakrishnan, Business Standard February 11, 2013- Interview
with Andy Harrison.
The major findings of this study are that in todays world when brands are struggling to retain
customers or create awareness and recognition for their brand, how this brand in a tough category
of caf chains has been able to conquer a strong brand recall a strong association with premiumness which is what it positions itself as and whether this is because of the hype its India entry
generated or if it actually will be long-term, based on the findings it sure does seem long-term, afterall Starbucks did have to tweak its business operations to suit the Indian style and whether the
competitors will give it a strong competition based on their aggressive marketing and pricing
strategy as gauged from interviews with two other competitors in this report.

55

CONCLUSION
Starbucks, a company which is the leader worldwide in coffee shop, has a goal today to maximize
profit, but with the fast pace growth and focus on ROI. The problems that relies currently on the
company are the fear of going after maximizing the profit and end up losing the Starbucks
Experience which is their mission.
The company's current situation on managing this fast pace growth includes, managing employees
retention and one way the company does that is by making sure that the employees see the
company as their partners not just an employer. However, still Starbucks faces stiff competition

from all sides. Its mass marketing leaves it unable to gain the consumer loyalty that smaller
coffee shops have, and fast food conglomerates are far more established than Starbucks is.
While Starbucks has strategically opened its stores nearby small, privatelyowned coffee
shops in attempts to drive them out of business, in many cases the effort to drive away the
smaller mom and pop shops has backfired. Starbucks marketing for their newly opened
stores only drew more customers for the independent coffee places in the vicinity.
Independent coffee shops have even gone so far as to open up more coffee shops next to
Starbucks, similar to Peets strategy of chasing Starbucks locations. And the smaller
independent shops have the upper hand in terms of customizing their coffee shop to appeal
to small towns, such as endorsing hometown football teams.
As stated in their annual report, Starbucks is committed to selling only the finest whole bean
coffees and coffee beverages. To ensure compliance with its rigorous coffee standards, Starbucks
controls its coffee purchasing, roasting and packaging, and the distribution of coffee used in its
operations. Currently, Starbucks only sells its brewed coffee in its retail stores, where baristas
trained by Starbucks prepare coffee for customers. It also provides Foodservice by selling whole
bean and ground coffees to companies that service business, industry, education and healthcare
accounts, office coffee distributors, hotels, restaurants, airlines and other retailers. However, the
products are delivered, per contractual agreements, through SYSCO Corporations and US
Foodservices distribution networks. As a result, these products are part of the Starbucks brand only
in name. This represents a distancing of the product from the Starbucks brand name, and poses a
risk to the Starbucks brand if the quality of coffee brewed by these customers is not at par with the
standards set by Starbucks by its retail stores.

56

BIBLIOGRAPHY
Business Standard Magazine

http://news.bbc.co.uk/2/hi/business/4712012.stm

Starbucks 10Q filed 8/10/2007 (SEC Website)

Starbucks 10Q Filed 2/8/2008 (SEC Website)

Starbucks 10K Filed 11/29/2007 (SEC Website)

www.starbucks.com/in

Excerpts from the interview answered by Howard Schultz in the magazine, Forbes India

www.managementstudy.com

57

APPENDIX

Starbucks Margin Analysis

Number of retail stores open by Starbucks between years 20022006

58