Starbucks

PRESENTED TO:

SIR. GHUILAM AHMAD RANA

Group Members

Starbucks

Introduction to Starbucks

Company started in 1971 in Seattle, Washington

Grew from 55 stores in 1989 to over 2,200 stores today

Products sold include:- beverages - pastries- whole coffee beans - coffee-related retail items

Company History 1971- Starbucks founded by Jerry

Baldwin, Zev Siegal as a single store in Seattle’s.

1982- Schultz joins the Starbucks team. 1983- While travelling in Italy, Schultz

experiences Italian Coffee bars and inspires him.

1985- Schultz leaves Starbucks to open II Giornale, a company serving espresso drinks using Starbucks coffee beans.

1987- Schultz purchases Starbucks from the founders and begins to expand throughout the US.

1992- Starbucks Company goes public.

1993- Opens first roasting plant in Washington.

2011- Celebrates 40th anniversary.

Company History

What were the keys for success for Starbucks in building the brand? What were their brand values? What were the sources of equity?

 Keys for Brand Success, the 4 As framework Acceptability:

They filled the gap between family and work by being the 3rdplace. They also educated their customers about quality coffee and build a whole new Starbucks experience Affordability:

They convinced their customers to pay a premium for the Starbucks brand by providing superior quality , experience and service 

Availability:

Cluttering in prime locations to increase market share and increase the service potential to the maximum, that left the competitors with little scope to enter

Awareness:

Word of Mouth, Strategic Alliances, New channels

Constant Innovation:

When they were working on the nationwide expansion strategy, they devised a new vacuum packaging system to make sure the quality of the coffee beans is maintained even while being shipped large distances, these were called Flavor Lock Bags.They had forward bought the machine and equipment to last the next decade.

Commitment to quality:

Starbucks had handpicked suppliers for the beans in the countries like Sumatra, Kenya, Ethiopia. Compromise on the quality was not an option for Starbucks

Customer Experience:

Coffee was prepared by the knowledgeable Starbucks employees, which resulted in the ultimate coffee experience for the customers who loved high quality coffee. They also made their stores to reflect the Italian elegance whilst maintain American informality

Sources of Brand Equity

• Quality & Service• Alliances with other companies• The country wide presence• Restaurants and Cafes

How would you evaluate Starbucks' growth strategy? Are there things you would do differently? How would you evaluate its partnerships (e.g., with United Airlines)? How do you know whether it is a “good” or “bad” partnership?

The growth strategy of Starbucks initially revolved around developing a world-class product, and creating an experienced team of innovative people who in turn established a value chain with partners who were committed to the core values of Starbucks

Starbucks focused on expansion into newer markets based on branches and outlets that were owned by the company. The expansion followed a purposeful model of a hub-and-spoke sort where a branch was set up and in the next two years, 10 – 20 stores were opened up in the same vicinity, followed by towns and cities further along in the distance.

United Airlines; Starbucks Corporation

Starbucks and United Airlines Enter Into Three-Year Supply and Cooperative Marketing Agreement

Glenn Tilton, Chairman, CEO and President of United Air Lines Said

“We are delighted to extend and expand our relationship with Starbucks, the premium coffee retailer in the world,”

“Starbucks coffee and our excellent onboard service are two of the reasons why our customer satisfaction ratings are at historically high levels. It's time for this partnership to fly."

What does it take to make a world class global brand? Can Starbucks become one? What hurdles must it overcome? In terms of the American market, what do you see as Starbucks’ biggest challenges?

a global brand has the following characteristics:“A truly successful brand can be more fully and accurately defined as a product or line of products that:

1)stands for something very specific in consumers’ minds2) establishes a trusted relationship with consumers based on its performance and relevance in their lives.

A global brand has a clear and consistent identity with consumers across geographies.  It is positioned the same from one country to another; it has essentially the same formula; it delivers the same benefit and is presented consistently to the consumer through consistent advertising and packaging.

The idea of a global brand therefore is that it delivers a consistent message, and Starbucks in this regards, with its focus on the coffee experience has been able to become a truly global brand. While Schultz was able to bring the Italian experience to America, to truly successful in the global arena Schultz will have to take the Starbucks brand to all parts of the world and mould it to the specific needs of the customers there, and in doing so also has to maintain its core focus.

Evaluate Starbucks’ move into non-coffee areas like credit cards, music, and film. Are these natural extensions of the Starbucks brand, or has the company gone too far in creating a “lifestyle” brand? Where should Starbucks go next?

Starbucks’ wants to be a third place for its customers, but it is a place for fun and relaxation, music and film are two completely different genres, which can be approached through a different brand. The lifestyle brand that Starbucks wants to create will be too broad and people will lose the clear crisp focus that they have of the Starbucks brand in the present. Therefore they have gone too far.

Brand Expansion

Who represents the biggest threat to Starbucks? Direct competitors in the coffee market, such as Dunkin’ Donuts?

Major Competitors

Dunkin' Donuts McDonald’s Caribou Coffee

Competition

Store Locator

Has 12,500 coffee shops in the United States

McDonald’s Mc Café

Starbucks Dunkin’ Donuts

Has 6,700 coffee shops in the United States

Caribou Coffee Has over 31,000

restaurants World Wide.

Has 415 coffee shops in 16 States in the United States

Starbucks vs. Dunkin’ Donuts

Starbucks vs. Dunkin’ Donuts

Dunkin Donuts providing cheaper

options.

Cost of star bucks products is

oftentimes double then Dunkin Donuts.

Dunkin Donuts give up higher quality specialty

coffee with less expensive options.

Star bucks have jumped in the race to capture the international market.

They are opening up up stores in new locations.

Starbucks vs. McDonald’s

Lines of coffee drinks all while continually rolling out new drinks of both the coffee and non-coffee variety, such as smoothies and frappes, McDonald’s version of the Starbucks Frappuccino's.

Starbucks created their Frappuccino for the summer season while McDonald’s introduced their frozen strawberry lemonade, a non-coffee beverage under McCafé.

Starbucks vs. McDonald’s

McDonald’s promoted its national coffee promotions with special prices.

In 2008, it showed its ice teas in combination with its chicken sandwich and ice coffees over the summer in the buildup to the Olympics.

Starbucks vs. Caribou Coffee

Starbucks vs. Caribou Coffee

Caribou Coffee spent $2 million on U.S. advertising in 2008, compared to the $300,000 it spent in 2007

Analysis of visitor demographics reveals that Caribou Coffee could possibly have more online success if they pull-in some of the same types of online visitors as Starbucks does.

While Caribou Coffee attracts a respectable amount of young adults (32% between the ages of 18 and 34), this does not compare to the 42% that Starbucks attracts. 

How much are customers willing to pay for the Starbucks Experience?

Price cuts are always welcome

High price! Only If the company is fulfilling all desires about the coffee.

The pure coffee atmosphere at star bucks.

willing to pay a premium price to enjoy cup of coffee.

No! Because of this negative impact. Customer didn’t like the new noisy star bucks environment.

The total number of coffee shops in the US is 21, 400 which means only one coffee house for every 14,000 Americans.

So yes there is a market for 400+ coffee makers.

Do you agree with Starbucks’ international expansion? Should the company continue its aggressive expansion plans? Are there markets where Starbucks cannot expand?

The Specialty Coffee Association of America estimates that:

16% of the adult population consumes coffee daily

59% of the adult population consumes coffee occasionally

Market Size=114 million people in the U.S.

In the Americas, Starbucks currently operates 13,493 locations

The China and Asia-Pacific region is home to 3,882 Starbucks locations. The company owns just 906 of these stores and the remaining 2,976 are franchised.

Starbucks has 1,969 locations in Europe, the Middle East, and Africa, with 853 being company-owned and 1,116 being franchises

Do you agree with Starbucks’ international expansion?

YES

The Frappuccinos

“At Starbucks its not just an exchange of coffee over the counter from one hand to another, its making a connection, creating a relation and giving an experience.”

CONCLUSION