Introduction

Starbucks was established in 1971 by three local businessmen to sell high quality whole
beans coffee. In 1981 when Howard Schultz visited the store he plan to build a strong
company and expand high quality coffee business with the name of Starbucks. Starbucks air
is to provide high quality of coffee to its consumer and aim to achieve product innovation,
retail expansion and provide service quality for long term. Starbucks open its first coffee
store in Seattle, Washington. In 1990 Starbucks expand its headquarters in Seattle and also
build a new roasting plant. In 1990s Starbucks opens 60 retails shops in United Kingdom. At
the end of 2000s Starbucks total branches was 3500. Coffee is one of the rapidly growing
industry in this world due to its business strategy. According to national coffee association,
USA 49% of American age 18 and more drink coffee beverage every day. Coffee industry
was in peak of its success at the end of 1990s.

Target market means to select one or more market segment and product position. Starbucks
also focus on consumer habits and share its speciality of coffee with the buyers. In the end of
20th century there are many changes in market that helped Starbucks getting successful. The
most important change of the last twenty, thirty years is the changes of economic policies
over the world. Starbucks target market was 18 years to 24 years young professional because
they are not yet been loyal with coffee industry. Starbucks strategy comprises to locate its
stores at picky places such as the first floor of blocks of offices, underground main entrance
and urban areas. Starbucks sales totally depends on company operate retail stores and
certified retail operations, Starbucks sells coffee and tea products through many others
channels like distribution targeting restaurants, hotels, colleges and universities and other
work places. According to Fleisher & Bensoussan (2002) Starbucks target market was
wealthy, upper class and educated who are agree to pay high prices of Starbucks due to its
high quality and customer service.

Starbucks locations serve hot and cold drinks, whole-bean coffee, microground instant coffee
known as VIA, espresso, caffe latte, full- and loose-leaf teas including Teavana tea
products, Evolution Fresh juices, Frappuccino beverages, La Boulange pastries, and snacks
including items such as chips and crackers; some offerings (including their annual fall launch
of the Pumpkin Spice Latte) are seasonal or specific to the locality of the store. Many stores
sell pre-packaged food items, hot and cold sandwiches, and drinkware including mugs
and tumblers; select "Starbucks Evenings" locations offer beer, wine, and
appetizers. Starbucks-brand coffee, ice cream, and bottled cold coffee drinks are also sold
at grocery stores.

To say Starbucks purchases and roasts high-quality whole bean coffees is very true. That’s
the essence of what we do – but it hardly tells the whole story.

Our coffeehouses have become a beacon for coffee lovers everywhere. Why do they insist on
Starbucks? Because they know they can count on genuine service, an inviting atmosphere and
a superb cup of expertly roasted and richly brewed coffee every time.

Expect More Than Coffee

Starbucks is passionate purveyors of coffee and everything else that goes with a rewarding
coffeehouse experience. We also offer a selection of premium Tazo® teas, fine pastries and
other delectable treats to please the taste buds. And the music you hear in store is chosen for
its artistry and appeal. People come to Starbucks to chat, meet up or work. Starbucks is a
neighborhood gathering place, a part of the daily routine – and we couldn’t be happier about
it. Get to know us and you’ll see: we are so much more than what we brew. We are
passionate purveyors of coffee and everything else that goes with a rewarding coffeehouse
experience. Establish Starbucks as the premier purveyor of the finest coffee in the world
while maintaining our uncompromising principles while we grow.
The following six guiding principles will help us measure the appropriateness of our
decisions: Provide a great work environment and treat each other with respect and dignity.
Embrace diversity as an essential component in the way we do business. Apply the highest
standards of excellence to the purchasing, roasting and fresh delivery of our coffee. Develop
enthusiastically satisfied customers all of the time. Contribute positively to our communities
and our environment. Recognize that profitability is essential to our future success. Starbucks
was founded in Seattle, Washington, a haven for coffee aficionados. The city was noted for
its coffee before World War II, but the quality of its coffee had declined so much by the late
1960s that resident Gordon Bowker made pilgrimages to Vancouver, British Columbia, to
buy his beans there. His point of reference for the beverage was dark, delicious coffee he had
discovered in Italy. Soon Bowker, then a writer for Seattle magazine, was making runs for
friends as well. When Seattlefolded, two of Bowker's friends, Jerry Baldwin, an English
teacher, and Zev Siegl, a history teacher, also happened to be seeking new ventures; the three
banded together and literally built their first store, located in Seattle's Pike Place Market, by
hand. They raised $1,350 apiece, borrowed another $5,000, picked the name Starbucks, for
the punchy "st" sound and its reference to the coffee-loving first mate in Moby Dick, then
designed a two-tailed siren for a logo and set out to learn about coffee.

Siegl went to Berkeley, California, to learn from a Dutchman, Alfred Peet, who ran Peet's
Coffee, which had been a legend among local coffee drinkers since 1966. Peet's approach to
coffee beans became the cornerstone for Starbucks' reputation: high-grade arabica beans,
roasted to a dark extreme by a trained perfectionist roaster. Starbucks bought its coffee from
Peet's for its first nine months, giving away cups of coffee to hook customers. The plan
worked. By 1972 the three founders had opened a second store in University Village and
invested in a Probat roaster. Baldwin became the young company's first roaster.

Within its first decade, Starbucks had opened stores in Bellevue, Capitol Hill, and University
Way. By 1982 the original entrepreneurs had a solid retail business of five stores, a small
roasting facility, and a wholesale business that sold coffee primarily to local restaurants. The
first of the company's growth-versus-ethos challenges came at this stage: how does one
maintain a near fanatical dedication to freshness in wholesale? Starbucks insisted that the
shelf life of coffee is less than 14 days after roasting. As a result, they donated all eight-day-
old coffee to charity.
In 1982 Starbucks hired Howard Schultz to manage the company's retail sales and marketing.
While vice-president of U.S. operations for Hammarplast, a Swedish housewares company,
and working out of New York, Schultz met the Starbucks trio and considered their coffee a
revelation. (He had grown up on instant.) He and his wife packed up and drove 3,000 miles
west to Seattle to join Starbucks.

There were other changes taking place at Starbucks at the same time. Siegl had decided to
leave in 1980. The name of the wholesale division was changed to Caravali, out of fear of
sullying the Starbucks name with less than absolute freshness. Blue Anchor, a line of whole-
bean coffees being prepackaged for supermarkets, was relinquished. Starbucks learned two
lessons from their brief time in business with supermarkets: first, supermarkets and their
narrow profit margins were not the best outlet for a coffee roaster who refused to compromise
on quality in order to lower prices, and second, Starbucks needed to sell directly to
consumers who were educated enough to know why the coffee they were buying was
superior.

Mid-1980s: The Shift to Coffee Bars

In 1983 Starbucks bought Peet's Coffee, which had by then become a five-store operation
itself. That same year, Schultz took a buying trip to Italy, where another coffee revelation
took place. Wandering the piazzas of Milan, Schultz was captivated by the culture of coffee
and the romance of Italian coffee bars. Milan had about 1,700 espresso bars, which were a
third center for Italians, after work and home. Schultz returned home determined to bring
Italian coffee bars to the United States, but found his bosses reluctant, being still more
dedicated to retailing coffee. As a result, Schultz left the company to write a business plan of
his own. His parting with Starbucks was so amicable that the founders invested in Schultz's
vision. Schultz returned to Italy to do research, visiting hundreds of espresso and coffee bars.

In the spring of 1986, he opened his first coffee bar in the Columbia Seafirst Center, the
tallest building west of Chicago. Faithful to its inspiration, the bar had a stately espresso
machine as its centerpiece. Called Il Giornale, the bar served Starbucks coffee and was an
instant hit. A second was soon opened in Seattle, and a third in Vancouver. Schultz hired
Dave Olsen, the proprietor of one of the first bohemian espresso bars in Seattle, as a coffee
consultant and employee trainer.
A year later, Schultz was thriving while Starbucks was encountering frustration. The
wholesale market had been reconfigured by the popularity of flavored coffees, which
Starbucks resolutely refused to produce. The company's managers were also increasingly
aggravated by the lack of wholesale quality control, so they sold their wholesale line,
Caravali, to Seattle businessman Bart Wilson and a group of investors. In addition, Bowker
was interested in leaving the company to concentrate on a new project, Red Hook Ale.
Schultz approached his old colleagues with an attractive offer: how about $4 million for the
six-unit Starbucks chain? They sold, with Olsen remaining as Starbucks' coffee buyer and
roaster; the Starbucks stores were merged into Il Giornale. Baldwin remained president of the
now separately operated Peet's Coffee and Tea. In 1987 the Il Giornale shops changed their
names to Starbucks, and the company became Starbucks Corporation and prepared to go
national.

In August 1987 Starbucks Corporation had 11 stores and fewer than 100 employees. In
October of that year it opened its first store in Chicago, and by 1989 there were nine Chicago
Starbucks, where employees trained by Seattle managers served coffee roasted in the Seattle
plant.

Their methods were costly, using high-grade arabica beans and expensive dark roasting,
while suffering the financial consequences of snubbing the supermarket and wholesale
markets. Nevertheless, Starbucks' market was growing rapidly: sales of specialty coffee in the
United States grew from $50 million in 1983 to $500 million five years later.

In 1988 Starbucks introduced a mail-order catalog, and by the end of that year, the company
was serving mail-order customers in every state and operating a total of 33 stores. Because
the company's reputation grew steadily by word of mouth, it spent little on ads. Schultz's
management philosophy, "hire people smarter than you are and get out of their way," fed his
aggressive expansion plans. Industry experts were brought in to manage Starbucks' finances,
human resources, marketing, and mail-order divisions. The company's middle ranks were
filled with experienced managers from such giants as Taco Bell, Wendy's, and Blockbuster.
Schultz was willing to lose money while preparing Starbucks for explosive growth. By 1990
he had hired two star executives: Howard Behar, previously president of a leading developer
of outdoor resorts, Thousand Trails, Inc.; and Orin Smith, chief financial and administrative
officer for Danzas, USA, a freight forwarder.
Starbucks installed a costly computer network and hired a specialist in information
technology from McDonald's Corporation to design a point-of-sale system via PCs for store
managers to use. Every night, stores passed their sales information to Seattle headquarters,
which allowed planners to spot regional buying trends almost instantly. Starbucks lost money
while preparing for its planned expansion, including more than $1 million in 1989 alone. In
1990 the headquarters expanded and a new roasting plant was built. Nevertheless, Schultz
resisted both the temptation to franchise and to flavor the beans. Slowly, the chain developed
near-cult status.

Financial Overview

Through Company-operated retail stores, the Starbucks United States operating store sells
coffee and other beverages, whole bean coffees, complementary food, and coffee brewing
equipment and merchandise primarily. Within the United States specialty operations include
licensed retail stores, food service accounts and other initiatives related to the company’s core
business.

Management Overview

Starbucks management has overseen one of the business phenomena of the millennium.
Starbucks strategic management has grown the organization into a global concern which is
influenced by Italian style espresso outlets. In the first two to four weeks, every Starbucks
partner and barista at least needs to attend 24 hours training. They have to learn about the
coffee history, drink preparation, coffee knowledge, and customer service and retail skills in
the training. Starbucks’ trainers were all store managers and district managers with on-site
experience. One of their major objectives was to ingrain the company’s values, principles,
and culture and to impart their knowledge about coffee and their passion about Starbucks.
Each time Starbucks opened stores in a new market, it undertook a major recruiting effort.
The company placed ads to hire baristas and begin their training before opening eight to ten
weeks.

Mission Statement

Starbucks mission is “To inspire and nurture the human spirit- one person, one cup, and one
neighborhood at a time.” and “to establish Starbucks as the premier purveyor of the finest
coffee in the world while maintaining our uncompromising principles as we grow.”
Starbucks’s main mission is to be a global company. In order to achieve this it needs, the
development strategy that Starbucks implemented to adapt with variety market and local need
are: joint ventures, licenses and company owned operation.

Their guiding principles are:

 Provide a great work environment and treat each other with respect and dignity.

 Embrace diversity as an essential component in the way we do business.

 Apply the highest standards of excellence to the purchasing, roasting and fresh
delivery of our coffee.

 Develop enthusiastically satisfied customers all of the time.

 Contribute positively to our communities and our environment.

 Recognize that profitability is essential to our future success.

Starbucks’ Value

 To create an “experience” around the consumption of coffee, an experience that

people would weave into their lives

 To create an uplifting experience in “customer intimacy”

 To create an “ambience” based on human spirit, sense of community, and the need for
people to come together

Target Marketing

Starbucks are more focusing on the niche market which is gourmet coffee drinkers because
Starbucks coffees are unique and different and make their coffee stand out compared to
others.

Starbucks targeted on office workers with middle to high incomes, who had a desire to
purchase premium products. Starbucks CEO, Schultz wanted Starbucks to become the ‘Third
Place’, the place where people can gather, relax and interact with one another besides home
and work. So they were alert about their quality control to meet the high expectations.

Brand Positioning
After deciding its target markets, the company must decide what position it wants to occupy
in their target market. A product’s position is the way the product is defined by consumers on
important attributes such as price, quality, competitor, product class, application and so on
Companies tried to position their products in such a way as to distinguish themselves from
the competitors and give them the greatest strategic advantage in the target market. By the
time Schultz acquired Starbucks in 1987; transactional marketing was being replaced by
relationship marketing. Profit from retained long term customer relationship became the key
of marketing and business. Relationship marketing aims at delight rather than satisfaction of
customers. And Starbucks realized public opinion, even though it takes longer to cultivate,
when energized can help pull the company into the market

LIST OF PRODUCTS MARKETED

The main aim of Starbucks is to become the leading brand and retailer of finest coffee in each
of its target markets nationally and internationally by selling the best quality coffee and
related products, and by providing high class customer service. Starbucks purchases and
roasts a high quality whole bean coffees to sell them with fresh, rich-brewed espresso
beverages, different varieties of pastries and coffee related accessories and equipments
Moreover Starbucks also sells coffee and tea products strategically through other channels
such as supermarkets and non traditional retail channels such as United Airlines, Marriott
International, Barnes & Noble bookstores and Department stores.

More than quality coffee, Starbucks features a variety of hand-crafted beverages, pastries and
in some markets, a selection of sandwiches and salads. Starbucks merchandise includes
exclusive espresso machines and coffee brewers, unique confections and other items related
to coffee and tea. Some of the Starbucks products are as follows;

Tea
A Starbucks food truck in a rest area on the New Jersey Turnpike.

Starbucks entered the tea business in 1999 when it acquired the Tazo brand

for US$8,100,000. In late 2012, Starbucks paid US$620 million to buy Teavana. As of
November 2012, there is no intention of marketing Starbucks' products in Teavana stores,
though the acquisition will allow the expansion of Teavana beyond its current main footprint
in shopping malls. In January 2015, Starbucks began to roll out Teavana teas into Starbucks
stores, both in to-go beverage and retail formats.

Beverages: Brewed coffees, Italian-style espresso, cold blended beverages, roasted whole

bean coffees, tea products, fruit juice, sodas, and coffee liqueur.

Food: Sandwich, Salads, pastries and ice creams

Non food items: Mugs, Travel tumblers, coffeemakers, coffee grinders, storage containers,
compact discs, games, seasonal novelty items, Starbucks card, media bar.

The main aim of Starbucks is to become the leading brand and retailer of finest coffee in each
of its target markets nationally and internationally by selling the best quality coffee and
related products, and by providing high class customer service. Starbucks purchases and
roasts a high quality whole bean coffees to sell them with fresh, rich-brewed espresso
beverages, different varieties of pastries and coffee related accessories and equipments
Moreover Starbucks also sells coffee and tea products strategically through other channels
such as supermarkets and non traditional retail channels such as United Airlines, Marriott
International, Barnes & Noble bookstores and Department stores.

More than quality coffee, Starbucks features a variety of hand-crafted beverages, pastries and
in some markets, a selection of sandwiches and salads. Starbucks merchandise includes
exclusive espresso machines and coffee brewers, unique confections and other items related
to coffee and tea. Some of the Starbucks products are as follows;

Sale and expansion

In 1984, the original owners of Starbucks, led by Jerry Baldwin, purchased Peet's. During the
1980s, total sales of coffee in the US were falling, but sales of specialty coffee increased,
forming 10% of the market in 1989, compared with 3% in 1983. By 1986, the company
operated six stores in Seattle and had only just begun to sell espresso coffee.

In 1987, the original owners sold the Starbucks chain to former manage Howard Schultz, who
rebranded his Il Giornale coffee outlets as Starbucks and quickly began to expand. In the
same year, Starbucks opened its first locations outside Seattle at Waterfront
Station in Vancouver, British Columbia, and Chicago, Illinois. By 1989, 46 stores existed
across the Northwest and Midwest, and annually Starbucks was roasting over 2,000,000
pounds (907,185 kg) of coffee.

At the time of its initial public offering (IPO) on the stock market in June 1992, Starbucks
had 140 outlets, with a revenue of US$73.5 million, up from US$1.3 million in 1987. The
company's market value was US$271 million by this time. The 12% portion of the company
that was sold raised around US$25 million for the company, which facilitated a doubling of
the number of stores over the next two years. By September 1992, Starbucks' share price had
risen by 70% to over 100 times the earnings per share of the previous year.

In July 2013, over 10% of in-store purchases were made on customer's mobile devices using
the Starbucks app. The company once again utilized the mobile platform when it launched
the "Tweet-a-Coffee" promotion in October 2013. On this occasion, the promotion also
involved Twitter and customers were able to purchase a US$5 gift card for a friend by
entering both "@tweetacoffee" and the friend's handle in a tweet. Research firm Keyhole
monitored the progress of the campaign and a December 6, 2013, media article reported that
the firm had found that 27,000 people had participated and US$180,000 of purchases were
made to date. As of 2018, Starbucks is ranked 132nd on the Fortune 500 list of the largest
United States corporations by revenue.

Development since 2005[35]

 Revenue Net income Total Assets Price per Share
Year Employees
in mil. USD$ in mil. USD$ in mil. USD$ in USD$

2005 6,369 494 3,514 11.70

2006 7,787 564 4,429 15.39

2007 9,412 673 5,344 12.32

2008 10,383 316 5,673 6.64

2009 9,775 391 5,577 6.87

2010 10,707 946 6,386 11.49

2011 11,700 1,246 7,360 16.89

2012 13,277 1,384 8,219 23.21

2013 14,867 8 11,517 30.99 182,000

2014 16,448 2,068 10,753 35.19 191,000

2015 19,163 2,757 12,416 50.33 238,000

2016 21,316 2,818 14,313 54.17 254,000

2017 22,387 2,885 14,366 55.75 277,000

Expansion to new markets and products

The first Starbucks location outside North America opened in Tokyo, Japan, in 1996. On
December 4, 1997, the Philippines became the third market to open outside North America
with its first branch in the country located at 6750 Ayala Building in Makati
City, Philippines. Starbucks entered the U.K. market in 1998 with the $83 million USD
acquisition of the then 56-outlet, UK-based Seattle Coffee Company, re-branding all the
stores as Starbucks.

In September 2002, Starbucks opened its first store in Latin America, at Mexico City.
Currently, there are over 500 locations in Mexico and there are plans for the opening of up to
850 by 2018.

In 1999, Starbucks experimented with eateries in the San Francisco Bay area through a
restaurant chain called Circadia. These restaurants were soon "outed" as Starbucks
establishments and converted to Starbucks cafes.

In October 2002, Starbucks established a coffee trading company in Lausanne, Switzerland to

handle purchases of green coffee. All other coffee-related business continued to be managed
from Seattle.

In April 2003, Starbucks completed the purchase of Seattle's Best Coffee and Torrefazione

Italia from AFC Enterprises for $72m. The deal only gained 150 stores for Starbucks, but
according to the Seattle Post-Intelligencer, the wholesale business was more significant. In
September 2006, rival Diedrich Coffee announced that it would sell most of its company-
owned retail stores to Starbucks. This sale included the company-owned locations of the
Oregon-based Coffee People chain. Starbucks converted the Diedrich Coffee and Coffee
People locations to Starbucks, although the Portland International Airport Coffee People
locations were excluded from the sale.

In August 2003, Starbucks opened its first store in South America in Lima, Peru.

In 2007, the company opened its first store in Russia, ten years after first registering a
trademark there.

In 2008, they purchased the manufacturer of the Clover Brewing System. They began testing
the "fresh-pressed" coffee system at several Starbucks locations in Seattle, California, New
York, and Boston.
In early 2008, Starbucks started a community website, My Starbucks Idea, designed to collect
suggestions and feedback from customers. Other users comment and vote on suggestions.
Journalist Jack Schofield noted that "My Starbucks seems to be all sweetness and light at the
moment, which I don't think is possible without quite a lot of censorship". The website is
powered by Salesforce.com software.

In May 2008, a loyalty program was introduced for registered users of the Starbucks Card
offering perks such as free Wi-Fi Internet access, no charge for soy milk and flavored syrups,
and free refills on brewed drip coffee, iced coffee, or tea. In 2009, Starbucks began beta
testing its mobile app for the Starbucks card, a stored value system in which consumers
access pre-paid funds to purchase products at Starbucks. Starbucks released its complete
mobile platform on January 11, 2011.

On November 14, 2012, Starbucks announced the purchase of Teavana for US$620 million in
cash  and the deal was formally closed on December 31, 2012.

On February 1, 2013, Starbucks opened its first store in Ho Chi Minh City, Vietnam, and this
was followed by an announcement in late August 2013 that the retailer will be opening its
inaugural store in Colombia. The Colombian announcement was delivered at a press
conference in Bogota, where the company's CEO explained, "Starbucks has always admired
and respected Colombia's distinguished coffee tradition."

In May 2014, the Starbucks operations in South Korea launched a mobile ordering system
named Siren Order, which is accessible through a local version of Starbucks smartphone
application. Starbucks in the U.S. later launched a similar system named Mobile Order &
Pay, starting with Portland, Oregon in December 2015. The service have since expanded
nationwide, and in late March 2018, the company opened the system (previously available to
Starbucks Rewards members only) to all customers.

In August 2014, Starbucks opened their first store in Williamsburg, Brooklyn. This location
will be one of 30 Starbucks stores that will serve beer and wine.

In September 2014, it was revealed that Starbucks would acquire the remaining 60.5 percent
stake in Starbuck Coffee Japan that it does not already own, at a price of $913.5 million.

In August 2015, Starbucks announced that it will enter Cambodia, its 16th market in the
China/Asia Pacific region. The first location will open in the capital city of Phnom Penh by
the end of 2015.
In February 2016, Starbucks announced that it will enter Italy, its 24th market in Europe. The
first location will open in Milan by 2018. In August, startup company FluxPort
introduced Qi inductive charging pads at select locations in Germany.

In September 2016, Starbucks announced a debut of its first-ever original content series
called "Upstanders" which aims to inspire Americans with stories of compassion, citizenship,
and civility. The series features podcasts, written word, and video, and will be distributed via
the Starbucks mobile app, online, and through the company's in-store digital network.

On July 27, 2017, Starbucks acquired the remaining 50% stake in their Chinese venture from
long-term joint venture partners Uni-President Enterprises Corporation (UPEC) and President
Chain Store Corporation (PCSC).

On March 21, 2018, Starbucks announced that it is considering the use

of blockchain technology with an idea to connect coffee drinkers with coffee farmers who
eventually can take advantage of new financial opportunities. The pilot program is going to
start with farmers in Costa Rica, Colombia and Rwanda in order to develop a new way to
track the bean to cup journey.

On June 19, 2018, Starbucks announced the closing of 150 locations in 2019, this is three
times the number the corporation typically closes in a single year. The closings will happen
in urban areas that already have dense clusters of stores.

In 2018, Starbucks expanded its partnership with Uber Eats to bring its beverages to U.S.
customers' doorsteps, as it had already done for some time in China.
Marketing mix of Starbucks Coffee

The aim of Starbucks was to give the customer more than just a cup of great coffee. They
wanted it be a life experience, an experience that customers would like to continue and make
it one of their routine functions. Upon this uniqueness they managed to capitalize as a brand
and establish themselves as one of the world’s most recognized and respected brands.

Product

To be a premium product in the coffee trade, they aim at high standards, introduction of
innovative products and providing excellent service combined with unforgettable experience.
Its product-mix expanded from 8 main categories of drinks types and 7 food categories to
keep up with the momentum and to satisfy more customer needs. They have been constantly
introducing new products, such as four new “VIA flavored coffees”, and trying to attract tea
drinkers by introducing “Tazo Tea”. Identifying customer specific needs they introduce
nonfat milk to their products. They have seasonal offerings such as strawberry, cream
Frappuccino in the summer and gingerbread latte in Christmas. Going little beyond, they also
offers Starbucks coffee and cappuccino makers for customer who wish to purchase them . To
ensure brand richness, besides bringing the best ingredients and quality control, they assure
that all company’s employees are constantly involved and aware of its overall mission and
objectives.

Starbucks specialty is its “specialty” to address particular needs. China is known for its tea
history and well routed traditions, which goes beyond thousand years. Starbucks needed to
address this particular sensitive spot while introducing their lineup to China. Though they
were late in introducing tea in their outlets, they adopted brand localization or “go Local” as
Brand Source would like to state from inception. In China coffee alone would not do – it
must go with food. Launching its “ice zongzi” and planning to release local products such as
Dragon Dumplings with 5 tastes and colors are aimed to ease Starbucks products to the
customers along with a Chinese touch.

Price

Usually price and quality determines the value of the product. Starbucks always tried to
deliver high value to the consumers by buying quality beans, assuring that their staff got
effective & efficient training, and mostly, creating an environment to enjoy coffee. For this,
Starbucks’s customer had to pay more; it was expensive.

To keep the competitive edge, the company also began to offer $1 bottomless cup of coffee,
which can be refilled any number of times and 50 cents less than any other Starbucks
products (Nico, H., 2008). As the Starbucks news site sates, the company is also trying to
implement other value added services like, introducing $3.95 “breakfast pairings,” which
includes breakfast items along with a coffee (2010). This is to target the price conscious
customers.

In China, by local standards, Starbucks is a luxury. They never wanted to decrease their
prices to China when they started. Coffee is not grown in China at large scales – at least not
the Arabica beans. When comparing prices to USA, it varies between products depending
from where the materials were obtained (locally or imported). For example, a “tall latte” sells
for $4.50 in China where it is $3.50 in the US (Dan, 2010). A “grande latte” costs $3.75 in
US and $4.10 in China). Rabinovitch continues saying that these price difference are also
subjected to Yuan being undervalued and US$ fluctuating frequently (2009). All these justify
Starbuck’s high pricing and show how such positioning supported their products to gain and
maintain upscale image attached to its brand.
Place

Mostly Starbucks is in to direct supply channel (producer to consumer). With their line of
vision such practice is important and it helps to keep a personal relationship with the
customer. In US, particularly Starbucks can be found in any neighborhood where there is a
potential high traffic for its stores – especially with “Coffee bar” concepts. Outlets can be
found in various large chains. Their primary goal is to locate them in highly visible locations
and opened them in clusters. It was the ideal place for the individuals who are on the go, who
enjoy music or even looking for a break in a busy lifestyle.

By opening “stealth outlets” – street names instead of Starbucks, they attempt to carry out
their “localize” projects further (McLaughlin, 2010). Along with the growing demand, they
were able to manage the increased traffic and to keep their competitive edge. Starbucks
invested heavily on training their staffs – ensuring and aiming high on customer satisfaction.

In China it was bit difficult task. Though the stores have the same characteristics as in US,
China being a culture oriented and having negative reactions towards coffee, they had to
place their stores in more exposed areas – such as Beijing, where local people would have
being exposed to foreign elements compared to suburbs. As China opens up its economy,
Starbucks strategically tries to expand its chain to suburbs as well.

Promotion

Their main strategy was not to spend money largely on advertising. In 2007 only 16.6 million
compared to McDonald’s 727.7 Million. Instead, they used the extra cash on acquiring the
best spots. Before opening a new store, they organize big community events highlighting
each locations personality. Further such information was imprinted on mugs and t-shirts as
promotion activities.

They also established “smart partnerships” with already known local representatives who
would act as local ‘ambassadors’ to promote their brand (Vote for us)

They introduced Starbucks Cards; aiming their valued customers to promote its products.
While buying a gift card, the customer is not only shows brand loyalty, but it also provides
free advertising, attracting new customers. They do deliver their services to offices without
size restrictions . Expanding their product mix, they ensure that they are appealing to a
diverse customer base. Starbucks also contributes to non-profit organizations as a way to
improve brand image and awareness in local communities.
Apart from the above, Starbucks strategy in China concentrated to capitalize on their
localization methods, Xingbake – the Chinese name given for them Producing items with
local influence, like dragon dumplings with 5 colors and taste signifying 5 blessings, and
introducing Tea was in line with the said strategy. Internet promotion such as “Meet me at
Starbucks” were also introduced.

Strategy on market segmentation targeting and positioning

PESTLE Analysis for Starbucks Coffee Company

Political:

 High taxation imposed on farmers in those countries producing the coffee bean will
usually mean Starbucks pay a higher price for the coffee they purchase. Any
fluctuations in taxation levels in the industry are almost certainly ultimately passed on
to the consumer.

 Trade issues will affect Starbucks predominantly when exporting and importing
goods. When another country’s government imposes a tariff it not only results in an
efficiency loss for Starbucks but large income transfers can become inconsistent with
equity. This extra charge can turn a bargain into a rip-off. Also, since 9/11, trade
relations have been adversely affected between the USA and some other countries.

 Starbucks should thoroughly investigate the political stability of any country they plan
to expand to. Changes in government can lead to changes in taxation and legislation.
The American elections may have an effect on Starbucks as new legislation or new or
existing government may bring in taxes. Also, those countries in political turmoil or
civil war should be approached with great caution when considering new ventures.

 The international economy must be brought into consideration as it can affect

Starbucks’ sales and markets. The aftermath of 9/11 was an example of an economic
downturn that affected the world market.

 A reduction in licensing and permit costs in those countries producing the coffee bean
for Starbucks would lower production costs for farmers. This saving would in turn be
passed on to the purchaser.

Economic:

 A rise in interest rates means investment and expansion plans are put off resulting in
falling sales for Starbucks and their suppliers. Also mortgage repayments rise so
consumers have less disposable income to spend on luxury products such as coffee.
Low interest rates will have the opposite effect of it.
  If growth is low in the nation of location of Starbucks then sales may also fall.
Consumer incomes tend to fall in periods of negative growth leaving less disposable
income. Consumer confidence in products can also fall if the economic situation is
bad.

 Competitive pricing from competitors can start a price war for Starbucks that can
drive down profits and profit margins as they attempt to increase, or at least maintain,
their share of the market.

 Globalization of the coffee market has meant farmers of the bean now earn less
money than they used to. This can result in a decrease of people willing to do it for a
living, which will mean a decrease in coffee produced, resulting in a drop in
Starbucks supply levels and probably profits.

 Starbucks are affected by exchange rates when dealing with international trade. If the
value of the currency falls in the country of a coffee supplier this enables Starbucks to
get more for their $ or £ when importing the goods to their country. This saving can
be passed along to the customer. Exchange rates are forever changing throughout the
world in today’s market.

Social:

 Where income is distributed is another factor that Starbucks should look at as this also
demonstrates the ideal place to aim their marketing or to locate their stores. Coffee is
more of a luxury product so it is those people/places with the most amount of
disposable income to spend that should be targeted the most intensely.

 Starbucks would not want to locate to an area where the local population have a poor
attitude to work. Recruitment would be difficult, training arduous, and staff turnover
would be high. Attitudes to work are important in other ways.

 Transport needs to the premises must be considered for both staff and customers. Easy
access is vital to ensure there is no excuse for staff to arrive late or for customers not
to visit.

 Research shows the average age of the population is getting older and birth rates are
stagnating. Starbucks is presently aiming it’s product at young people but maybe
these views will change in the long-term as the market proportion for young people
 diminishes. The most profitable way forward may be to widen their target market
despite the risk of alienating present customers.

Technological:

 Developments in the technology of coffee making machines and the computers that
Starbucks use to run their cash registers will enable their staff to work more quickly
and efficiently. This will result in customers being served quicker and create the
potential to serve more customers in a day.

 In the short-term, Starbucks must identify the most efficient software upgrades to use
to keep up with the competition. This applies to the improving the accessibility of
their website (www.starbucks.com) and also improving the speed and quality of the
service provided on the shop floor.

 As a multi-national business empire, Starbucks has the budget and the resources to
have a cutting-edge R&D department. The website is very accessible, the facilities are
state of the art but more importantly new ideas are consistently being tried in terms of
a constantly updating menu.

 The rate of technological change in the current world market is high, much higher
than, say, thirty years ago. Much of this is down to the Internet and the speed with
which information can be communicated around the globe. Starbucks will need to
invest heavily just to stand still in their ever expanding and developing market, and
even more so to try to stay ahead of competitors.

Legal:

 Starbucks need to be aware of the trade laws in the various countries they occupy and
do business with. They need to ensure they are not in violation of e.g., religious laws.
Also, certain countries impose a tariff that has to be paid when goods are
imported/exported so this must be taken into account.

 Each country has varying employment laws. Some may have a Sabbath day, some
may have a limit on the number of hours an employee may work per week, and all
will have varying levels of minimum wage. Starbucks should consider these factors
when deciding on relocation.
  Starbucks may have to abide by local planning regulations when building shops or
altering purchased sites, as certain areas of land may be protected or unsuitable. All
matters would be addressed by the local government.

Environmental:

 Starbucks customers create a lot of waste as they often leave the shop with their cup
of coffee and then dispose of it in the street. The packaging for this cup must be
carefully considered to make it as biologically degradable as possible. Certain other
materials can be very harmful to the natural environment.

 Planning permission may not be granted if Starbucks wish to build in an area that
could be harmful to the environment. The land may be protected.

 Starbucks need to carefully consider the methods in which they dispose of their waste
as there are strict laws in most countries to ensure a firm trading in their country
disposes of the waste that is created in their business in a specific and efficient way.

 Starbucks should be aware of the physical and influential power of groups such as
Greenpeace and Friends of the Earth.
SWOT’ Analysis for Starbucks Coffee Company

Strength:

 Strong brand name and image

The reputation of brand name and image of Starbucks allow brand recognition and consumer
retention. Therefore, the expanding of stores to other countries is more proficient and easier.

 Healthy financial performance

The financial performance of company has positive aspects. The revenues of Starbucks in
2007 were $9.411 billion, growing at about 30 percent. The exponential growth in revenue
and profit creates the strong financial statement and reliability to shareholders.

 High-skilled management team

Starbucks has highly skilled and professional Chief executive officers (CEOs), for example,
Howard Schultz, Orin Smith and Howard Behar. These lead to the rapid and stable growth of
Starbucks.

 High technology

Starbucks brings the technology to use in the stores in order to attract more customers. For
instance, there are high-speed internet, website and prepaid Starbucks card. It might be
increase traffic in the stores particularly in new generation group.

 High quality and innovation of products

Starbucks uses high quality of coffee beans and dairy goods. Furthermore, new products are
usually introduced by Starbucks including coffee and beverage line. Both of them enable
Starbucks to be able to maintain level of sales and keep competitors out.

Weakness:

 High price

Starbucks has increased the price due to rising cost of production, including cost of dairy
goods and cost of rent. The increase of price might have an effect on the falling of sales and
customer retention directly
  Clusters of store

Because Starbucks has a lot of stores and also these are located in closed areas, it leads to the
scramble of customers in each store. Clusters of store might cause inefficient performance of
the company.

Opportunities:

 Large consumer group

China has the biggest world’s population. Coffee drinking is more popular among young
generation, especially those who have overseas education, which influences the coffee
consumption. Many of these teenagers have lived in western countries for a long time and
they have familiar with the coffee culture. When returning to China they have carried on
living in this fashion. Chinese teenagers also like to choose western style coffee shops as their
favorite place.

 Lifestyle

Modern lifestyle of Chinese teenagers and adults supports the proliferation of western coffee
shops. Meeting and discussing business in a warm and nicely designed coffee shop have
become more popular in China. Consequently, the teahouse’s domination has been
challenged by the foreign coffee house.

Threats:

 Competitors

The global coffee market is a very competitive sector. Starbucks is facing the increase of
competitions from other foreign players. The latest Starbucks’ competitor is Canadian chain
Blenz Coffee, which plans to open a string of café in China where consumers can smoke,
while Starbucks is non smoke stores.

 Intellectual-property violation

Starbucks filed a lawsuit for trademark infringement against Shanghai Xingbake which signs,
logos and names similar to Starbucks. It would seem that chances of consumer confusion are
high.
Porter’s Five Forces Analysis

Porter’s five forces analysis is an important tool for analyzing an organizations industry
structure in strategic processes. It helps the marketer to contrast a competitive environment. It
tends to focus on the single, stand alone, business or SBU (Strategic Business Unit) rather
than a single product or range of products.

Porter has identified five competitive forces that shape every industry and every market.
These are: The threat of entry, The power of buyers, The power of suppliers, The threat of
substitutes and Competitive rivalry.

The threat of entry:

The threat of entry covers: Economies of scale, The high or low cost of entry, Ease of access
to distribution channels, Cost advantages not related to the size of the company, Whether
competitors will retaliate? Government action and How important differentiation is.

There will always be a continuous pressure for Starbucks to react and adjust to these new
entrants. The easier it is for new entrants to enter the market the more competition there is
within the market. Although this really should not pose too much of a problem
for Starbucks as they have a very large share of the market that will be relatively immune to
the threat of new entrants. Starbucks is a company that have years of experience in roasting
specialized coffee, if a company was to enter the coffee industry it would be extremely
difficult for them to offer the same quality of coffee at a competitive price. As a company’s
volume increases, so does its experience and knowledge which tends to decrease the cost of
their products

The power of buyers:

Buyer power is likely to be high if a number of conditions are in place. There is a

concentration of buyers, particularly if the volumes of purchases of the buyers are high, the
supplying industry comprises a large number of small operators, there are alternative sources
of supply, the component or material cost is a high percentage of total cost, the cost of
switching a supplier is low or involves little risk, there is a threat of backward integration by
the buyer. This is high where there a few, large players in a market If there are a large
number of undifferentiated, small suppliers The cost of switching between suppliers is low
for Starbucks.

The power of suppliers:

If the market is dominated by few large suppliers rather than numerous fragmented sources, a
suppliers bargaining power is likely to be high. Although suppliers do have certain amounts
of power, it is limited. With Starbucks being ‘the most famous specialty coffee shop chain in
the world’ and still expanding they should still be requiring coffee beans for some time. It is
safe to say that the Suppliers need Starbucks, just as much, if not more so than Starbucks
need their supplies. Fortunately for Starbucks they buy their coffee beans directly from
producing countries: Latin America (50%), Pacific Rim (35%) and East Africa (15%).

The threat of substitutes:

This occurs where there is product-for-product substitution, where there is a substitution of

need e.g. a bald head reduces the need for hair gel, where there is generic substitution and
finally the attitude ‘we could always do without’. An example for Starbucks would be if an
alternative to coffee was offered e.g. a customer switching from coffee to tea.

Competitive rivalary:
Numerous factors contribute to intense rivalry between existing competitors in an industry.
This is most likely to be high where entry is likely; there is the threat of substitute products,
and suppliers and buyers in the market attempt to control. This is why it is found in the centre
of the diagram. The extent to which competitors are in balance, this is where competitors are
of an equal size which creates intense competition as one of the competitors tries to gain
dominance over the other, high fixed costs in an industry may result in price wars,
differentiation is important as in a commodity market where products or services are
undifferentiated there is little to stop customers switching between competitors. Starbucks do
not really have any competitive rivals that are of similar size to them so there are not any
rivals in the market that would be considered in balance with them. However, they must
maintain their excellent standards and always be on the lookout for new innovations in order
to stay as the market leader.

Competitor Analysis

Competition is steadily growing against Starbucks each year as the industry grows.
Competitors look to gain an advantage by price cuts, launching a rival product, aggressive
expansion of production to increase market share or inclusion of significant modifications to
a product that other competitors must also undertake to keep up.

Major competitor of Starbucks in India includes

Café Coffee Day

Café Coffee Day is another global company and largest Arabica beans producer and Exporter
in Asia. Started in 1996 CCD is now a world brand with its initial investment capital
estimated to be over160 million dollars. As at mid-2015, Café Coffee Day had over 1,500
outlets across 28 India states. The company is well known for vertically cutting down on
costs; this is from owning Arabica coffee plantations, making furniture for its outlets and also
making coffee machines. Even though it started in Asia, it has expanded to some countries in
Africa, Czech Republic, and Nepal.

Its initial marketing strategy was the change of original Logo with the new Logo showcasing
the chain as a ‘place to hold talks’ leading to total revamp of interiors and addition of
lounges.

Barista Coffee

Coffee

Market Share
The total number of Starbucks stores are 15,011 which are operated and 3,891 are licensed
operation in US which are spread out in 50 states. For the international location, Starbucks’
store can be found in 44 countries outside of the United States and 1,049 stores are company
owned operated in Australia, Canada, China, Germany, Singapore, Thailand and the U.K. and
6,506 are joint ventures and licensed operation. Internationally Starbucks opened their stores

Mc Cafe is operating over 11,000 outlets and Dunkin Donuts with 6400 stores in US 2008.
While Starbucks is still the bigger company with its totals 12,000 stores in US 2008. In
addition, several restaurants were picking up on the growing popularity of specialty coffees
and had installed machines to serve espresso, cappuccino, lattè, and other coffee drinks to
their customers. However there is the threat for Starbucks since the competitors have become
more and increase the number of stores may affect the consumer choices and frequency of
customers visit stores.

Culture Model

The culture of an organisation is the set of values that helps its stakeholders understand what
the organisation stands for, how it does things and what it considers important. Under culture
model, we are going to explain the communication and decision making of Starbucks.

The Organisation & its environment

owner created the company objective for Starbucks and the boarder of directors is going to
lead company to achieve that company objective. Therefore, the boarder of directors has to
choose the suitable organisation culture environment for Starbucks in order to achieve the
company objective.

The Value System

The value system is the inter-organisational links that are vital in the creation of the product
or service of a company. It follows the production of the service/product from raw material
stage right through to the customer purchase. Each instruction for the development of the
product is detailed and explained at each stage of the value system. The ‘firm value chain’ is
the most important to a manager because that is their company, however, a good manager
will understand the whole process and how to manage each individual link and relationship to
maximise customer value. Managers should also need to learn the whole value system
because most of the cost and value creation occurs in the supply and distribution chains.
For Starbucks, the ‘supplier value chain’ deals with where they get the coffee beans from that
they use to create their end product – a cup of coffee. Starbucks buy all their beans direct
from the farmers in the producing countries cutting out any middle-man therefore keeping
prices to a minimum. The countries that supply them can be found in Latin America, East
Africa and on the Pacific Rim. Starbucks fully appreciate the need to oversee all aspects of
the value system and we can see an example of this in their determination to obtain the highly
sought Narino Supremo crop in 1992. This acquisition ensured some of the highest quality
coffee supplies in the world would be reaped by Starbucks. The company has close
relationships with their coffee exporters. They maintain this by working directly with them
and training them. A good relationship here is essential and needs to be maintained.

The ‘firm’s value chain’ consists of:

The Firm’s infrastructure; which is about the ways in which Starbucks want their
organisation to run and how it is best to implement systems of planning, finance, quality
control and information management, it is also where they have made the decision to make
high quality coffee from the best coffee beans as this is involved with the quality control.

Human Resource Management; It is concerned with the activities involved in recruiting,

managing, training, developing and rewarding people within the organisation. For Starbucks
this is where they have made decisions about the fact that all employees are equal, even those
on the shop-floor that are working over 20 hours a week receive bonuses like free coffee and
health care coverage, this was to make sure that the members of staff felt as if they were
valued by the company and would continue to provide a good service. Another implemented
scheme is for all Starbucks store staff to have a comprehensive 24 hour training scheme
before they were allowed on to work directly with customers.

Technology development; Starbucks has a large number of areas where it uses technology

from regulating their stock levels to the cash registers. There is also technology to enable
customers can to order their coffee over the internet and then pick it up from the store when
they get there. Some stores now also contain computers where customers can access the
internet.

Procurement; this refers to the processes for acquiring the various resource inputs to the
primary activities. For instance, the method of obtaining the grade A coffee beans from
suppliers to use in the Starbucks coffee.
Inbound logistics; For Starbucks this means receiving the coffee beans and other products
that they need to make the products in their stores from their suppliers and storing these until
they are used to make the product that they are going to sell.

Operations;  this is the stage where Starbucks make the coffee in the store and package the
other subsidiary products.

Outbound logistics;  this is collection, storage and distribution of coffee. A customer actually
purchasing a cup of Starbucks coffee from the store.

Marketing and Sales; This is how consumers become aware of Starbucks coffee and
purchase it. Starbucks is a worldwide company and their brand is recognised all over the
world, which means that marketing is not as necessary as it once was. Most people now
recognise the name and associate the brand-image with high quality products.

Service; this includes all the activities that enhance or maintain the value of the product, e.g.
installation, repair and training. This area is concerned with the members of staff that deal
with the customers, it focuses on the need to ensure the ‘customer experience’ of visiting a
Starbucks store is all the more enjoyable due to the friendliness and efficiency of staff and
consistently high quality product on offer.