Mission

Starbucks’ mission is to inspire and nurture the human spirit – one person, one cup, and one
neighborhood at a time.

Business segments
Starbucks is a roaster, marketer, and retailer of specialty coffee. The company operates four
reportable business segments:

 Americas, which consists of the U.S., Canada, and Latin America; it accounts for 69% of total
sales

 China/Asia Pacific (CAP), which accounts for 13% of total sales

 Europe, Middle East, and Africa (EMEA), which accounts for 6% of total sales

 Channel Development, which includes roasted whole bean and ground coffees, premium Tazo
teas, Starbucks- and Tazo-branded single-serve products, a variety of ready-to-drink
beverages (e.g., Frappuccino, Starbucks Doubleshot, and Starbucks Refreshers beverages), and
other branded products sold worldwide; it accounts for 9% of total sales

History
In the late 1960s, Seattle, WA resident Gordon Bowker was so unimpressed by the quality of
coffee in his city that he made trips to Vancouver, British Columbia to buy beans. When he lost
his job as a journalist at Seattle magazine, he decided to start his own coffee shop. He joined
with two old college buddies and entrepreneurs, Jerry Baldwin and Zev Siegl, to build the store
by hand in 1971.

The three wanted a name that started with “St”, which they felt sounded punchy. They settled
on Starbucks, which is also the name of a first mate in “Moby Dick” who loves coffee. Siegl
visited Berkeley, CA to learn more about the beverage from Alfred Peet, owner of Peet’s
Coffee. Peet’s approach – high-grade Arabica beans roasted to a dark extreme – influenced
Starbucks’ direction.

Starbucks bought Pete’s coffee for its first nine months, giving free samples to its customers.
Demand grew, and by 1972 it launched its second store. A decade later it had five stores, a
toasting facility, and a wholesale operation that sold largely to restaurants. The company
believed coffee’s shelf life did not last long after roasting, and so donated all coffee to charity
after eight days.
In 1982 the chain hired Howard Schultz to manage its retail sales. However, he traveled to Italy
and grew obsessed with the coffee culture there -- and returned wanting the retailer to open
coffee bars. His bosses disagreed, so he left to launch his own chain in 1986, Il Giornale. At this
time, while the specialty coffee market was growing, Starbucks was hurting due to its refusal
to sell flavored coffees.

In 1987 Schulz, with his business thriving, made a deal to buy Starbucks’ six stores for $4
million. It merged with Il Giornale and kept the Starbucks name. It then prepared to go
national, starting by launching stores in Chicago. The company’s reputation for quality grew
through word of mouth, leading to popularity. It went public in 1992, and achieved significant
expansion afterwards.

Business model of Starbucks

Customer Segments
Starbucks has a mass market business model, with no significant differentiation between
customer segments. The company targets its offerings at anyone who wants to drink specialty
coffee.

Value Proposition
Starbucks offers four primary value propositions: innovation, accessibility, convenience, and
brand/status.

The company embraced innovation from the very beginning, using only high-grade beans
roasted to a dark extreme by a trained roaster. This helped to popularize darkly roasted coffee.

The company creates accessibility by making its offerings easily available. It has a large
number of stores in numerous locations – 24,395. This is because it expanded significantly in
the 1990s and 2000s, opening an average of two new locations per day. Between September
2014 and September 2015 alone, it grew from 10,713 to 12,235 stores. The company also
increases access by providing a wide variety of options. Its selection includes over 30 blends of
coffee, as well as tea, smoothies, and fresh foods such as sandwiches, pastries, salads, yogurt
parfaits, and fruit cups.

The company offers convenience by making life easier for customers. Customers can order
products on their phones using the Starbucks app, then avoid lines at a store by going to a
“pickup” area.

The company has established a powerful brand as a result of its success. It maintains over
24,395 locations in 74 countries. Its name has become synonymous with premium coffee.
Lastly, it has won many honors, including recognition as one of the “World’s Most Ethical
Companies“ by the Ethisphere Institute for 10 years in a row (2007 – 2016), as of the “Most
Admired Companies in America” by Fortune for 13 years in a row (2003–2015), as “Retailer of
the Year” by Visual Merchandising and Store Design (2013), and as one of the “World’s 50 Most
Innovative Companies”
by Fast Company (2012).

Channels
Starbucks’ main channel is its network of company-operated stores. It also sells its products
through licensed stores, grocery stores, warehouse clubs, specialty retailers, convenience
stores, U.S. foodservice accounts, and its website.

The company promotes its offering through its social media pages, advertising, its “Starbucks
Rewards” loyalty program, and participation in conferences.

Customer Relationships
Starbucks’ customer relationship is primarily of a personal assistance nature. Company
employees make and serve coffee and other products for customers, and answer any questions
they may have.

Key Activities
Starbucks’ business model entails designing and developing its products and serving them to
customers.

Key Partners
Starbucks’s main partners are the suppliers it relies on worldwide to provide its coffee – namely
coffee producers, outside trading companies, and exporters.

It depends on specialty suppliers to provide non-coffee products, typically under long-term

contracts. It utilizes national, regional and local sources for food products.

Key Resources
Starbucks’ main resources are its human resources, particularly the product innovation staff
that design and develop its offerings and the store associates (called “Partners”) who serve the
items.

An important physical resource is its network of seven farmer support centers it maintains to
ensure a supply of high-quality green coffee; they are staffed with agronomists and
sustainability experts.

Cost Structure
Starbucks has a value-driven structure, aiming to provide a premium proposition through
significant personal service and frequent product enhancements.
Its biggest cost driver is cost of sales, a variable expense that includes occupancy costs. Other
major drivers are in the areas of store operation and administration, both fixed expenses.

Revenue Stream
Starbucks has one revenue stream: the revenues it generates through sales of its products,
which include fresh beverages and foods and packaged coffee and teas.