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
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)....