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Starbucks Case Study

1499 words - 6 pages

Starbucks is one of the world’s most powerful and recognizable brands. Since its creation in

1987, Starbucks has managed to revolutionize the coffeehouse industry by marketing expensive,

high quality coffee. However, while the company faced significant growth in the early 2000s,

Starbucks has recently started experiencing difficulties, as some of its stores face saturation both

in the domestic and in the international market. The purpose of this paper is to analyze the

reasons that have led to these problems; to identify the key factors that distinguish the company

as an international giant, as well as to explore different options that could be undertaken in ...view middle of the document...

Starbucks’ success is due in large part to the triumph of its coffeehouses as

an informal and convenient "third place" outside of home and work (Starbucks, 2012). Wi-Fi

internet access in all stores also makes it a place where customers can work or relax. Book and

music events also take place at Starbucks, in accordance with the company's goal of making each

location a community center of sorts to garner the loyalty of local customers.

Many factors account for the success of Starbucks in the late 1990’s. Starbucks has

always tried to add more diversity to their product in the coffee shops. In addition to selling

whole-bean coffees, these stores sell rich-brewed coffees, Italian-style espresso drinks, cold-

blended beverages, and premium teas, along with food items and even coffee appliances. Product

mixes vary depending on the stores size and location; however, most stores offer a variety of

pastries, sodas, juices, coffee-related accessories and equipment, CDs, games, and seasonal

novelty items.

Starbucks also sells products through non-company-operated retail stores such as hotels,

airlines, and restaurants. This has 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 has always tried to expand the number of retail stores as well as product

and service innovations. New products are 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, the

company was able to achieve extraordinary growth and success. However, in 2007 Starbucks

started facing the challenges of saturation of both the US market and overseas market.

Furthermore, the company was confronted with a change in customer perception and increased


Causes of Starbucks problems

In February 2007, Starbucks’ founder, Howard Schultz, stated that he recognized the

problem that his own growth strategy had created: “Stores no longer have the soul of the past and

reflect a chain of stores vs. the warm feeling of a neighborhood store.” (Howard Schultz e-mail,

2008). Due to Starbucks rapid growth, the brand has been commoditized and therefore lost its

original romance. Starbucks customers miss the Starbucks “experience” and instead perceive the

stores as “sterile, cookie-cutter and no longer reflecting the passion” (Trouble brewing, 2007).

Also responsible for Starbucks’ image downfall is regularly upcoming negative publicity about

Starbucks supplier treatment and anti-competitive practices (Starbucks-taking on the world,

2004). Regardless the fact that Starbucks purchases Fair Trade Coffee since 2000, these rumors

seem to occur frequently (Harris R., 2004)....

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