Starbucks Case Analysis

2326 words - 10 pages

What factors accounted for the extra-ordinary success of Starbucks in the early 1990s?
1. by 1992 Starbucks had 140 stores and was competing against small scale coffee
2. Starbucks went public in 1992 which helped them raise 25 million, allowing expansions to continue.
3. Almost no spending in marketing
4. Controlled supply chain – enforcing standard quality
5. Focused on service and the partners
6. Created ambiences with universal appeal
7. Company operated stores, not franchises which usually lack on quality standards
8. Location location and location!
9. Branched and started serving other products ( sodas, pastries, juices etc…)
10. Distributed through other channels – food ...view middle of the document...

This allowed the Starbucks’ brand to be recognized not only in freestanding Starbucks stores, but also throughout other channels as well increasing their brand awareness. Starbucks worked very had to expand the number of retail stores as well as product innovations and service innovations. New products were launched on a regular basis, such as one new hot beverage every holiday season. The store-value card (SVC) was also introduced which led to reduced transaction times. Due to the innovations and brand equity Starbucks had built Starbucks was able to achieve extra-ordinary success.

What was so compelling about the Starbucks value proposition?
The value proposition of Starbucks focused on a brand strategy that was comprised of three components. The brand strategy was best captured by the phrase “live coffee.” This phrase reflected the importance of keeping the national coffee culture alive. From a retail perspective, this meant creating an “experience” that people would want to incorporate into their everyday lives. There were also three components to the branding strategy. The first component was simply the coffee. Starbucks offered the highest-quality coffee in the world and controlled much of the supply chain as possible to help insure that. Starbucks worked directly with growers to purchase green coffee beans, it oversaw the custom-roasting process, and it controlled distribution to retail stores around the world. The second brand component was service, or what was also referred to as “customer intimacy.” This included simple things such as remembering someone’s name or drink order. The third brand component was atmosphere. Starbucks stated that people came for the coffee but stayed for the atmosphere. Therefore it was important to provide a comfortable atmosphere that allowed a sense of community. All of these things combined led to a compelling value proposition.
What brand image did Starbucks develop during this period?
The brand image that Starbucks developed during this period was not necessarily the best. Starbucks was known for being widely available, their gourmet/specialty coffee, and being trendy. Customers also though that the stores were clean and overall satisfied with the Starbucks product. However, the market research team discovered that Starbucks’ brand image was declining. The number of respondents that agreed with the statement, “Starbucks cares primarily about making money,” was up from 53%to 61%. The number of respondents that agreed with the statement, “Starbucks cares primarily about building more stores,” was up from 48% to 55%. Starbucks brand image was becoming more about the growth plans of Starbucks rather than the value they wanted to provide to their customers.
Why have Starbucks’ customer satisfaction scores declined?
Customer satisfaction declined because there was very little image or product differentiation between starbucks and the smaller coffee chains. The image people had was that the company...

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