BENEMERITA UNIVERSIDAD

AUTONOMA DE PUEBLA
Facultad de Administración
Licenciatura en Administración de Empresas

TAREA #3
“STARBUCKS”

Mtra. Valeria Leissel Báez Aguilar

English for Managements & Leadership
Méndez Garrido Rubén Patricio
201864040
01/02/2022
History of Starbucks
In the year 1970 three friends named: Sev Siegl, Jerry Baldwin and Gordon Bowker decided that they
want to open a coffee, but they also wanted it to search a mentor who can teach them about the
business, so they found Alfred Peet, he knew that Alfred was the correct person because he was an
expert in gourmet coffee in all the country, so they choose him. And one year after that they opened
the first store in the pike place market in Seattle in 1971.

Alfred Peet provided the special grains and connected them with other coffee brokers so they can
obtain the specific flavor and roastery they wanted. In the next 10 years they opened 5 more coffee
shops in Seattle, they faced the American culture because in that time there were any coffee bars,
because the people were used to drink coffee just in their homes and that practice finished until
1980. The initial idea was to sell a better-quality coffee that the accustomed from cans or instant,
but that idea changed when they hired a professional marketing CEO named Howard Schultz.

The idea that Howard had was that Starbucks needed to start selling beverages, so with that in mind
he traveled to Italy to see how they prepared coffee in different establishments to translate the idea
of coffee stores to cafes. They opened the first Starbucks in 1984 and just four years later he bought
the company with investors for $3.8 million dollars, the next step was grown in the country and
whet the year 1992 arrived, they had 165 stores in USA and just 4 more years they had already
opened more than 1,000 more locations, including international stores.

The growing rate were so fast that by 1998 they opened the store number 2000. Then 2 years later
Schultz became CEO and opened thousand and thousand stores around the world, averaging 1,500
per year. But suddenly that rapid growth stopped because of the 2008 financial crisis, the stocks fell
by 50% because of customers returned to past habits. Whit this situation the company started
closing stores and started to focus on client experience rather than luxury, with the objective to
retrain more than 130,000 baristas.

The idea worked for the company, because the stocks started to rebound to 143 percent in 2009,
they didn’t open any new stores until 2012. They need some years to recovered, but in 2017 they
had almost 28,000 stores. Nowadays Starbucks possess almost 57 percent of the total coffee market
and has earn more than 80 billion dollars in its 27 years of existence, this number of sells came from
more than 14,000 stores in the USA by alone. But all this brought a new problem that they called
profit cannibalization.
Profit Cannibalization
There are too many examples of this, one that all of us can visualization without major problem is
the cannibalization of OXXO. They are positioned like one biggest chains stores of the country, it is
very similar to circle K or stripes from the USA, but the main difference from its foreign pairs, is that
OXXO own the lands where they build, so they act as a real state. The problem here is that even if
the store doesn't reach the weekly goals, the store leader that usually act as an employee will need
to pay to the company.

The true business of the company is possessing a biggest market share so they can dabble in more
profitable markets like money transfers or service payments. What will happen is that every person
that may be interested in starting a contract with OXXO won´t know that the convenience stores it´s
just a facade of the real business. This will cause biggest demand of people wanting to open a store,
no matter the locations or the real profitability, causing an excessive competition an instability in
the industry. This won´t be a problem for OXXO because they win anyway, the real problem will be
faced by the other participants involved, because with time, they will see a drastically reduction on
their profitability.