In 1971, three friends with a passion for coffee opened a gourmet shop - Starbucks was born. The coffee shop's name comes from Herman Melville's 19th century novel about the whaling industry, Moby Dick. The seafaring name seemed appropriate for the small shop, which imports the finest coffee. The cold weather and thirsty Seattle community seemed to be a perfect match for this endeavor. Starbucks caught on and, in less than a decade, became Washington's largest coffee roaster.
In 1982, Starbucks coffee changed forever. While traveling in Milan, Italy, head of marketing Howard Schultz was intrigued by the coffee shop atmosphere - patrons sitting, relaxing and chatting over cafÐ¹ latte. Wanting to incorporate what he had experienced into Starbucks, Schultz brought the idea home. Starbucks owners balked at the change, so Schultz opened his own coffee shop, IL Giornale - nearly an overnight success. In 1987, Schultz purchased Starbucks for $3.8 million.
Today, Starbucks has approximately 12,440 locations, consisting of 8,836 stores in the U.S. and 3,604 internationally located in 37 different countries. The future of the corporation looks bright for the 2007 fiscal year; Starbucks plans to add 2,400 new stores in calendar year 2007 this is based on a global basis. The company goal of 30,000 stores has been modified to 40,000 stores worldwide. The plan is to have half the stores in the U.S and the other half internationally. With record net earning of $564 million for fiscal 2006 is this an obtainable goal?
When you charge top price, customer satisfaction is key to maintaining success. Starbucks customer base is very loyal, even to the point of obsession. Originally, Starbucks targeted young professionals, at some point this changed. Keeping the right marketing mix to satisfy their diversifying customer base will be vital for the company's long term success. What drives a customer that makes $7.00 an hour to spend $3.00 on a cup of coffee and not have post purchase dissonance? Is a trip to Starbucks a status symbol for patrons; is the experience that stimulating for customers - does it make them feel better about themselves? Most people I surveyed said the Starbucks experience is worth the three dollars a day - for the atmosphere and a great cup of coffee. I was told you don't have make big money to stand in line and order the best cup of coffee made.
On the international level, adding to your customer base can be difficult. Many people in foreign countries do not have disposable income. Less affluent countries have smaller markets, so target marketing is a valuable tool. Usually, major cities provide customers that value, high quality product and service. One country that could prove difficult to access is, China. Consumers in China are very loyal to traditions and tea has played a part in their country's traditions for centuries. New markets sometime require new marketing concepts. Stockholders and marketing companies will be watching this closely.
The infrastructure they have built gives Starbucks their competitive market edge. Living by their mission statement, the highest standards always apply. Treating employees and customers with respect, embracing diversity and honoring these standards
on a daily basis is part of the culture at Starbucks. No other coffee house comes close to the number of stores or customer base served every day by Starbucks. Making Starbucks an experience - a place to relax and enjoy leisure time, - becoming part of the community makes them stand out among the rest. It's a package deal - cup, lid and the protective wrap - a symbol of the best. With complete customer satisfaction, Starbucks sets the bar high for its competitors. All companies have competition, even the king, but it is limited to small niche markets.
Current consumers have the disposable income for a high priced cup of coffee. World markets doing well has allowed for exponential growth. The international economy is most likely one of the biggest potential threats to Starbucks rapid expansion plans. Foreign cultures with different values and traditions can make expanding a challenge. Having the knowledge to adapt to the needs and desires of different societies allows for success around the world. Respect for the people is still the best selling tool.
Dealing with government regulations is another obstacle to overcome. Investing capitol internationally can pay big dividends, but the risk can be great. Starbucks seems to have mastered this by doing business in 37 countries and planning for half of their growth to be international, slowing down is not on the agenda.
Section II : Market Segmentation
Starbucks has a wide variety of goods and services in order to attract a large portion of the available market. Some examples of the goods that they provide would be brewed coffee, tea, roasted coffee beans, pastries, sandwiches, travel mugs, audio cds, coffee grinders, filters and coffee makers. Because of this wide variety, everyone can find a reason to enter a Starbucks.
It was noted that the original target market for Starbucks coffee was "young,
urban, college-educated adults with above average incomes." Starbucks has taken that original idea and expanded it, realizing that average people will spend the extra money in order to receive an item that they feel is superior.
The market of the United States made up almost 85% of the total revenues in 2004. A major factor in this astounding figure is the self-concept that Americans need to uphold. Americans feel the need to portray themselves as being wealthier than they truly are. For this same reason, the automobile industry manufactures semi-luxury cars for a more affordable price. The vehicle appears much more luxurious on the outside than it truly is. By drinking a cup of Starbucks coffee, a middle-class American feels as though they are rubbing elbows with the truly wealthy of our society.
Not everyone in the world enjoys a nice warm cup of coffee. Starbucks has taken the coffee drinking segment of consumers and further dissected it in order to provide a chilled form of the drink. This further
Show MoreyisStarbucks Case Analysis:
I. Problem Identification and Decision To Be Made Starbuck’s main decision needing to be made is to determine whether they should allocate $40 million to extra labor in order to better satisfy their customers. Starbuck’s believes that they have created a recession proof product; however, recent marketing research determined that is not the case. Customer satisfaction has been steadily declining and their customer’s perceptions on what determines excellent customer service has changed in recent years. This change in customer perceptions is due in part to the fact that their customer base has shifted to a younger, less educated clientele that hold different attitudes toward Starbucks than the previous…show more content…
With this being said, Starbuck’s should consider investing the $40 million in expanding their retail chains internationally. There are currently eight different states and 150 metropolitan areas that currently have no corporate owned Starbucks locations. This does not even account for the vast room for expansion overseas. Investing the money into untapped markets could greatly increase their customer satisfaction by increasing the convenience offered to consumers. This in turn will increase profitability.
Increased profits, address the convenience aspect in many major city hubs, increased brand awareness, expand global market share.
Clustering stores in existing markets, self-cannibalization, potential to exceed allocated costs.
Use the Starbuck’s Store Value Card to better connect with customer. This is an important alternative because currently, Starbuck’s customers feel that they are undervalued and that Starbuck’s is only concerned with making a profit vs. establishing customer relationships.
Using the Starbuck’s Store Value Card, Starbuck’s would be able to track customers and their drink orders, which would help them identify major consumer behavior patterns
Cost of sorting system, the labor it takes to sort and analyze all of the customer information as well as