Business Strategy

“We aren’t in the coffee business, serving people.

We are in the people business, serving coffee”
Howard Schultz, Starbucks Chairman , Fortune Magazine, Vol. 149 No. 2

Professor : Spyros Lioukas

Presentation: Yiouli Sapouna
Contents

History

Identity

Mission

Objectives

 Strategy

Tactics
 History of Starbucks
1971 Two teachers & a writer open the first Starbucks store in Seattle
Starbucks – minor character in Moby Dick
1987 Howard Schultz joins Starbucks (17 stores)
1992 Completes IPO (165 stores)
1995 Introduces Frappuccino (677 stores)
1996 First stores open outside North America – Japan & Singapore
(2002 in Greece)
2000 Establishes licensing agreement with TransFair USA to sell Fairtrade
certified coffee in US & Canada
2011 Introduces VIA instant coffee
40th Anniversary
2012 Introduces Verismo on-demand system
 Identity - Products

Coffee & Drinkings:

More than 30 blends of coffees

Merchandise:
Assorted home espresso machines, coffee
brewers & Grinders, a line of premium
chocolate, coffee mugs, coffee accessories
and a variety of gift items

Fresh Food:
Baked pastries, sandwiches, salads, fruit
and snack plates and yogurt parfaits
 Identity - Products
Handcrafted Beverages:

Fresh-brewed coffee, hot and iced espresso,

coffee and non-coffee blended beverages
and Tazo® teas

Starbucks Cards:
More than 90 million Starbuck cards (Reward, Gold &
Visa) worldwide

Entertainment Solutions:
A selection of the best music, books and film
Main Competitors

 Second Cup
Caribou Coffee (415 stores)
 McDonalds (14000 stores)
 Dunkin’ Donuts (5000 stores)
 Coffee People
 Costa Coffee
 Local (boutique) chains
 Kraft
 Procter & Gamble
 Nestle
Starbucks – Worldwide Fame
 Starbucks Logo

The new logo

expresses the new
philosophy
The Philosophy – Guiding Principles

Our Coffee Our Partners Our Coffee

It has always been, and

will always be, about
Our quality.
Our Stores
Customers Apply the highest
standards of excellence to
the purchasing, roasting
and fresh delivery of our
Our Our
coffee.
Neighborhood Shareholders
The Philosophy – Guiding Principles

Our Partners
Our Coffee Our Partners
We’re called partners,
because it’s not just a
job, it’s our passion.
Our Together, we embrace
Our Stores
Customers diversity to create a
place where each of us
can be ourselves. We
always treat each other
Our Our
Neighborhood Shareholders with respect and
dignity.
The Philosophy – Guiding Principles

Our Coffee Our Partners Our Customers

When we are fully

engaged, we connect
Our with, laugh with, and
Our Stores uplift the lives of our
Customers
customers – even if just
for a few moments. It’s
really about human
Our Our
connection.
Neighborhood Shareholders
The Philosophy – Guiding Principles

Our Stores
Our Coffee Our Partners
When our customers feel
this sense of belonging,
our stores become a
Our heaven, a break from
Our Stores
Customers the worries outside,
a place where you can
meet with friends. It’s
Our Our about enjoyment at the
Neighborhood Shareholders speed of life. Always full
of humanity.
The Philosophy – Guiding Principles

Our Neighborhood
Our Coffee Our Partners
Every store is part of a
community, and we take
our responsibility to be
Our good neighbors seriously.
Our Stores
Customers We can be a force for
positive action –
bringing together our
Our Our partners, customers, and
Neighborhood Shareholders the community to
contribute every day.
The Philosophy – Guiding Principles

Our Shareholders
Our Coffee Our Partners
We know that as we
deliver in each of these
areas, we enjoy the kind
Our of success that rewards
Our Stores
Customers our shareholders. We are
fully accountable to get
each of these elements
Our Our right so that Starbucks –
Neighborhood Shareholders and everyone it touches
– can endure and thrive.
Corporate Social Responsibility
Commitment to Origins
Investments that benefit coffee producers, their families and
communities, and the natural environment.

Commitment to Environment
Promoting conservation in coffee-growing countries to in-store
“Green Teams” and recycling programs.

Commitment to Communities
Strive to be a responsible neighbor and active contributor in
the communities where their partners and customers live and
work.

Commitment to Partners
Treating people with respect and dignity. This is especially true
of the way we treat the people who work for Starbucks.
Corporate Social Responsibility
Mission Statement
Old Starbucks Mission Statement
"To establish Starbucks as the premier purveyor
of the finest coffees in the world
while maintaining our uncompromising principles
as we grow."

New Starbucks Mission Statement

"To inspire and nurture the human spirit.
One person, One cup, and
One Neighborhood at a time. "
Principles and values

Howard Schultz:
“Care more than others think wise.
Risk more than others think safe.
Dream more than others think practical.
Expect more than others think possible.”
Objectives

“Establish Starbucks as a recognizable,

successful and respectful brand name in
the world”
 Objectives

High satisfaction of
customers

Leadership
Expansion in new
position in targeted
markets markets

Increase Continue the focus

profitability on growth
Strategy

Before
After 2008
2008
Starbucks started with Back to the Starbucks
a differentiation original recipe
strategy and moved to
a “stuck in the middle” “The Starbucks
strategy Experience”
Before 2008…
Stopped offering handmade Espresso – automatic
machines producing coffee by pressing a button
placed to its shops- loss of the "romance" of coffee-
making

Line queues during morning hours

Resembled Fast Food stores instead of Coffee corners

-Starbucks started serving breakfast

Missed its homeliness

High competition
Starbuck’s new strategy after 2008

Starbucks embraced a differentiation focus

strategy tailored to providing high quality products,
focusing in young people.
Diversified into other activities.

Other
Products
activities
The elements of the new strategy

High quality
products
Good
Great working
customer
conditions
service

Adoption of Relaxing,
high Strategy attractive
technology environment
Operational strategies / tactics (1)
Continuous improvements of coffee (new technology,
quality)
A proprietary and revolutionary in-store Clover brewing
system

Next generation espresso machine

New unique coffee blend

Installation of free wireless internet (Wi-Fi) at stores,

rent out meeting space, CD burning

Re-modelling of stores as local coffee houses – a

differentiated environment of ambiance
Operational strategies / tactics (2)
Reward programs instead of cutting coffee prices
Adding rewards to Starbucks card (syrops, flavors, free refills

Increase connection with customer, politeness of

employees
Millions of conversations every day, seek ideas and enable
customers in shaping Starbucks future

Launch of MyStarbucksIdea, first online community

Actions to become more environmentally friendly and

socially responsible (enhanced Fair Trade program
begun in early 2000s).
Leverage the brand into new product categories
Alliances
 Pepsi-Cola Company, Dreyer’s Grand Ice Cream, Kraft
Foods Inc., CARE,
 Horizon Air, HMSHost, Barnes & Noble, United
Airlines, Starwood Hotel,
 Chapters Inc., Safeway Inc., Marriott International
Inc., Hyatt Hotels
 Corporation, Aramark, Compass, Sodexho, TransFair
USA, SYSCO, HP,
 T-Mobile, TransFair Canada, White Wave, Inc., Chase
VISA USA, Royal
 Bank Canada, Hilton, Intrawest, Wyndham, Target,
Kroger, Ahold, Fortune
 Brands, XM Satellite Radio, Borders, Westin and
Radisson
Financial Data
Revenue (mil $)
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0

Operating Income ($ Mil)

2,500

2,000

1,500

1,000

500

0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*
* Forecast
Store Sales
•In July 2008, the company announced the closure of
approximately 600 company-operated stores in the U.S. and 61
company-operated stores in Australia, and reduced 1,000
positions in its leadership structure and non-store organization.
Questions
 On strategy statements
 How do you evaluate mission statement and values
(principles) of Starbucks? Are they realistic or inflated?
 Are they of relevance to the competitive strategy? In what
ways? Do they add value?
 Do you agree with the wider social components of MOST, such
as people and CSR, in relation to performance?
 On competitive strategy
 Why the differentiation advantage of Starbucks had eroded?
 Is “Starbucks’ experience” based on a distinctive elements
which are recognized by consumers and differentiate it from
competitors?
 Do they provide a sustainable competitive advantage?
 Is what ways innovation is important for the new competitive
advantage?