Table of Contents

Company Background……………………………………………………………………………………..2

Starbucks: A Global Power Brand………………………………………………………………………2

The Starbucks Organizational Structure…………………………………………………………….3

Advantages of Starbucks Organizational Structure…………………………………………….3

Disadvantages of Starbucks Organizational Structure……………………………………..3-4

The Leadership Threat……………………………………………………………………………………….4

Starbucks Segmentation, Targeting and Positioning…………………….………………..4-5

BCG Matrix of Starbucks………………………………………………………………………………5-6

Marketing Mix of Starbucks…………………………………………………………………………6-7

Market Research of Starbucks…………………………………………………………………………8

SWOT ANALYSIS of Starbucks………………………………………………………………………8-10

RECCOMENDATIONS AND CONCLUSION……………………………………………………11-12

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Company Background

Key Facts
Name Starbucks Corporation
Founded March 31, 1971
Logo

Industries served Restaurants (Coffeehouses)

Geographic areas Worldwide (27,339 coffeehouses in 75 countries)
served
Headquarters Seattle, Washington, United States
Current CEO Kevin R. Johnson
Revenue (US$) 22.387 billion (2017) 5% increase over 21.316 billion (2016)
Profit (US$) 2.885 billion (2017) 2.4% increase over 2.818 billion (2016)
Employees 277,000 (2017)
Main Competitors McDonald's (McCafe), Pacific Coffee, Specialty coffees sold at retail through
supermarkets (Nestle), Dunkin' Donuts and many other restaurant chains
and coffeehouses.

Starbucks: A Global Power Brand

Starbucks, a very popular American brand that came into being in 1971 and has been serving coffee
at more than 28000 locations. These locations have no geographical limitation. The brand is present
across 75 countries all over the world. Currently, they are selling personalized coffees.
The merchandise that includes books, mugs, bottles, accessories, coffee and tea brewing
equipment and Verismo system by Starbucks.

They also sell fresh food that includes sandwiches, pastries, oatmeal, salads and so on. Starbucks
slogans have also played a big part in brand building.

The Starbucks mission statement is “To inspire and nurture the human spirit – one person, one cup
and one neighborhood at a time. ”

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The Starbucks Organizational Structure
Starbucks organizational structure is a matrix structure and is one of the best successful
organizational structure examples. A matrix structure is the combination of more than one
organizational structures. The authority in matrix structure flows from more than one ways.

The employees answer to more than one managers and transfer of messages takes place in more
than one ways. The other different types of organizational structures that combine to from
Starbucks organizational structure are geographic divisional structure, functional structure, team
structure and product based divisional structure.

In the functional structure part of Starbucks organizational structure, Starbucks has different groups
of employees taking care of different functions. The human resource department, finance
department, marketing department, sales department and so on. This structure is followed at the
top hierarchy of the firm. The policies they make are applicable to all Starbucks cafes.

Advantages of Starbucks Organizational Structure

The matrix structure followed by Starbucks has advantages of all other organizational structures
that come under it. First, the geographic divisions make it possible for the firm to meet the
specialized needs of different customers in different countries.

Secondly, team working makes employees motivated and more productive as they get a sense of
ownership and belonging. Third, the product-based division makes it possible for each division to
focus on their product and work on their development and innovation.

The functional divisions make the working smoother, faster and reliable, as specialists people are
doing the jobs, and the chances of them making errors are minimal. Finally, the matrix structure
allows the firm to utilize its human resources efficiently by hiring them for more than one tasks.

Disadvantages of Starbucks Organizational Structure

Just like the advantages, the matrix structure of Starbucks also accumulates the disadvantages of all
other organizational structures under it. First, the matrix structure creates a situation where an
employee has to answer to two bosses at the same time, functional and geographic heads here.

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This duplication of authority can be harmful and confusing for employees.  As they have to decide
about whose orders to follow and whose work should be given priority. The functional
structure means each department is working for a different function.

A lack of co-ordination amongst them can be harmful to the firm as one would not know what the
other is up to and what the other needs.

The Leadership Threat

The geographic divisional structure can make the heads in divisions so powerful that they might
start making big decisions according to their will. They might start threatening the central control
too, if there exists a conflict between the divisions and central control.

Moreover, the team structure might create unhealthy competition amongst firms. The teams might
want other teams to do bad instead of doing better themselves. The competition amongst teams is
beneficial for the firm till it is healthy, but after that, it can prove to be detrimental for the firm.

Starbucks Segmentation, Targeting and Positioning

Type of Segmentation
Segmentation Criteria Starbucks Target Customer Segment

Region US, Canada, Latin America, Europe, Middle East, Africa, China
and Asia Pacific region
Geographic
Density Urban (specifically in upscale locations, near offices, and near
many college campuses)

  Age Main group : 25-44 (49% of its total business)

Demographic Second target group : 18-24 (40% of its total business)

Gender Males & Females

Life-cycle stage Bachelor Stage young, single people not living at home

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 Newly Married Couples young, no children

Occupation Students, employees, professionals

Degree of loyalty ‘Hard core loyals’

Benefits sought Enjoying quality coffee in a relaxing atmosphere

Behavioral
A place to chat with friends and meet people

A place to work, study and write papers

Personality Easygoing, determined and ambitious

User status Regular users

Social class Middle and upper class

Psychographic
Lifestyle Mainstreamer, Aspirer, Succeeder, Explorer and Reformer

BCG Matrix of Starbucks

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The BCG Matrix was applied in order to explore the growth potential of Starbucks’ four major
product categories. The matrix divides product categories into four segments based on their market
share (x-axis) and market growth (y-axis). Since it was impossible to find accurate and up-to-date
market share figures for Starbucks’ product categories, the matrix was modified according to what
sales growth categories portray (y-axis) and how profitable they are (x-axis). Consequently,
categories were allocated to four distinct portfolio segments:

1. Stars: Contributing more than 25% to the company’s total revenue, Starbuck’s food business
vertical has surely been the STAR for the company. With plans to double its food business by
2021, the company is going full throttle and experimenting with its food offerings and options.
Its hot breakfast sandwiches complemented the brand’s signature coffee offerings so well.

2. Question marks: Starbucks offers Tumblers, Mugs, T-shirts, etc. to its customers, with most of
them being limited edition, seasonal, and often sell out within days. Due to the brand’s exclusive
and premium positioning, customers take pride in owning Starbuck’s merchandise. There’s a
crazy demand for exclusive designs that are especially hard to get, and some e-commerce sites
exist purely for reselling and shipping these rare items to eager buyers overseas . There is still a
long way to go for Starbucks in terms of creating a strong footprint in clothing and general
merchandise industry. For this reason, the best place for Starbuck’s merchandise is in question
mark quadrant.

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3. Cash cows: Without a doubt the CASH COW for Starbuck’s is its coffee business. The bread
winner for the company since its inception, Coffee business has grown leaps and bounds all
these years, helping the company post strong financial numbers.
4. Dogs: Packaged coffee beans is a product with low marketing share as well as operating in a low
growth market. Starbucks' packaged coffee beans do not generate much cash for the company
as customers tend to go to Starbucks for quick and good service for coffee and food.

Marketing Mix of Starbucks

Products of Starbucks

Starbucks offers its customers a very good number of food and drink options. The main categories
of Starbucks products are breakfast, lunch, cakes & cookies, muffins, pastries & doughnuts, fresh
fruit, bottled soft drinks, tea, espresso beverages, filter Coffee, frappuccino blended beverages,
refresha, and cold brew. Starbucks is famous for its expertly roasted and richly brewed coffee. It is
also popular for a selection of premium teas.

Prices and pricing strategy of Starbucks

There are a number of pricing strategies available to organizations. Premium, cost-plus, loss leader,
and going-rate are some of the popular pricing strategies. Starbucks uses a premium pricing
strategy. As mentioned above, the company is famous for its richly brewed coffee and a selection of
premium teas. Many customers often draw a conclusion that quality products come with a high
price. Starbucks has made use of this perception and set premium pricing as the company’s pricing
strategy.

Place/distribution channels of Starbucks

Starbucks offers most of its products through Starbucks cafés. As of December 2019, the company
operates in 76 countries and has over 31,256 stores. Starbucks has introduced ‘Starbucks on the go’
which is a premium self-serve beverage solution providing a selection of great tasting hot drinks.  It
also has developed a number of apps (Starbucks App for iPhone, Starbucks App for Android, and
Starbucks App for Windows) for busy customers who would like to walk in select stores and go
straight to their coffee!

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Promotional strategies of Starbucks
Starbucks did not invest a lot of money on advertisement. While McDonalds spent around 727.7
million dollars on advertisement in 2007, Starbucks only invested 16.6 million dollars. Starbucks
used their extra cash on finding and acquiring the best places for their outlets. They organized a
huge event in the places where they could open new stores. They also had many other promotional
activities, which included printing information on tee shirts and mugs. Apart from this they also
came up with the concept of smart partnerships. This meant appointing local representatives as
their ambassadors to endorse their brand.

Starbucks had gift cards for their customers. This idea promoted their product not only to their
loyal customers but attracted new customers as it helped them with free advertisement. They also
provided coffee to various offices without any size restrictions. Even thought they do not have an
official slogan they do have an official mission, which is “To inspire and nurture the human spirit–
one person, one cup and one neighborhood at a time.”

Starbucks have relied heavily on word of mouth, which provided beneficial for them as it increased
their brand awareness and brand loyalty. Today, Starbucks have above 27 millions of fans
on Facebook and more than 2 million followers on twitter. With its trendiness and creativity
freshness, Starbucks has established itself all over the world.

Market Research of Starbucks

Starbucks has been a successful company over many decades largely because of its stellar business
strategies. The company expertly employs market research to keep its offerings and marketing
messaging in line with consumer sentiment.

Market research can take many different forms, including following cultural trends, monitoring
social media, gathering consumer feedback and in-store product testing. Starbucks does all of these
and more.  

One notable way that Starbucks conducts its own form of market research is through its My
Starbucks Idea platform, which it rolled out in 2008 as part of the company's "Transformation
Agenda" at the time. Since then it has gone through some different iterations, but the basic idea
behind it remains the same: customers, potential customers, and employees can go to the website
to submit any ideas they have for new offerings, changes they’d like to see to anything that already
exists, requests to bring back old products, and more.

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The company also takes advantage of social listening, which involves monitoring digital platforms
such as Facebook, Instagram, Twitter, and Reddit to find out what customers are saying about the
brand and collect feedback that could help the brand improve. As of December 2018, Starbucks had
11.5 million followers on Twitter, 17.3 million followers on Instagram, more than 37 million likes on
Facebook, and nearly 200,000 subscribers on YouTube.

Starbucks regularly tests new products in select stores, which helps the company figure out if it
needs to make any changes before launching them in other markets — or if it will even continue
the launch in other markets. Starbucks also uses data from several market research firms, as well as
data gleaned from its own stores, to shape its new product lines.

SWOT ANALYSIS of Starbucks

STRENGHTS

 Strong brand name

 Large retail distribution system
 Quality product
 Extensive product list
 Good supplier relationships
 Massive capital funding
 Valued and motivated employees
 Operating efficiency and strong growth leading to superior financial performance (see figure
1, 2, 3)
 Fast growing store network in China (see figure 4)

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WEAKNESSES

 Dependence on single source of business/income

 Prices relatively higher than competitors
 Strong dependence on suppliers
 Merchandise sales in stores
 Over reliance on home market

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  Aggressive expansion leading to failure

OPPORTUNITIES

 Overseas business expansion

 Business expansion into untapped China markets
 Extension of brand name to new products and business lines
 Product range diversification to more food items

THREATS

 Strong competitors with massive capital funding capabilities like McDonald’s (McCafe),
Pacific Coffee and Dunkin Donuts
 Economic conditions may make consumers unwilling to pay higher prices
 Political conditions overseas may limit business expansion
 H.K. speciality coffee industry approaching saturation

RECCOMENDATIONS AND CONCLUSION

Starbucks has to effectively pursue a Focus-Based Strategy in conjunction with differentiation and a
cost leadership based strategy. Being a lower cost store will increase the difference between
Starbucks and provide it with a competitive edge. At present, Starbucks competitors are attempting
to specialize in the coffee business, therefore Starbucks must pursue focus strategy to increase its
strength.

Starbucks must reduce their product price by producing a new product of coffee using cheaper
beans or can come out with special discounts and promotions to reduce cost, thus increasing sales
enabling Starbucks to enter new low cost markets and increase profitability. Also needs to focus on
building alliances in new markets/countries to reduce management focus and benefit from the local
and experience curves.

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Should focus on advertising the brand through internet services for users to access, do road shows,
hand out brochures etc. so that consumers become more aware of the brand’s strong international
presence and brand name. Market penetration and market development will help increase the
sales. Access unexplored distribution channels like making available packaged Starbucks coffee for
consumers by displaying it nationwide in various convenience and shopping stores and not only
Starbucks stores.

Starbucks must adopt twin policies of Product Development and Product-Market Diversification to
counter the stiff competition in international markets. It is important to understand this in the
product development phase as they would need to focus solely on making their existing products
better. The company can demonstrate product and market diversification through research and
development coupled with creativity and innovation. Product differentiation has proven an
excellent defence against threats such as bargaining power of buyers. Developing new products will
offset such potential risks.

A strategy should be formulated to tackle the competition by entering into agreements, long-term
contracts, with the food service companies that they are competing against. This way their coffee
would be sold at these outlets and they would gain access to new markets and increase sales while
decreasing competition.

Starbucks should continue to be a first mover into markets with new products and ideas. Being a
first mover of new products into new international markets will be an excellent way for Starbucks
to build customer loyalty and uphold its image as an innovative company.

Starbucks should continue to locate their operations in high traffic areas, high visibility areas. The
company should continue to take excellent care in picking locations. It is extremely important that
Starbucks’ international stores reflect uniqueness in their location and layout. Having locations in a
variety of locations will ensure large market exposure.

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