STARBUCKS REPORT

Course Code:

SPBP

Submitted to:

Respected Sir Shoib Sajjad

Submitted by:

M. Zia Ullah Khan

(Sp-16-MB1-002)

COMSATS Institute of Information Technology

Sahiwal

Introduction of Starbucks

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Starbucks is a US based company who is working as an internationally and
prepares the coffee at their licensed outlets. Starbucks started its business in
1971 from the DC, USA. Starbucks have 183,000 employees and are
operating in more than 62 countries around the world. Starbucks have
19,770 outlets where they offer tea and coffee with different tastes which
include premium and handcrafted quality. Starbucks have above 10,000
outlets only in USA market and are operating more than 1000 outlets in
China and above 800 outlets are operating in Japan. They are also dealing in
snacks and other beverages like snacks, mug and roosted coffee but their
core business is Coffee products. Starbucks also offer roasted as well as
handcrafted coffee to their customers which distinguish them from their
rivals. In 2013, their annual profit reached at 15 billion USD.

History of Starbucks

Starbucks was not the sole proprietorship business hence it was partnership
business by three academics teachers name Jerry who taught English subject
in the college. Second character was the history teacher who named was
Siegel and a write who named was Bowker. They opened a coffee shop
named Starbucks in 1971 in Pikes place market in Seattle. They were really
inspired by an entrepreneur named was Peet who sell high quality coffee
beans and related equipments. This store did not offer fresh brewed coffee in
their shops but sometimes they offered sample of coffee for testing. These
partners visited Peets coffee store daily at lunch or sometimes at dinner
time. Later on, these three men ordered the coffee beans from the Peet
shops ans started their own business which named was Starbucks. After that

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they used and bought their own roster setting plant and placed in their shops
and started their business and introduced new flavored in coffee shop. They
gained immediate success in this business and attracted a large number of
consumers towards their coffee. Later on, Siegel left the company and all
management controlled by Jerry who ran the business with full of energy.
After sometimes, the vice president of US operation planned to visit the start
bucks store and wanted to know the reason of the success of this business
because Starbucks became as a brand in US and they had been opened
round about four Starbucks stores in US. They really focused on the quality of
the coffee as well as they pay much attention towards the outlet of the
Starbucks. They provided the best and relaxing environment to the
customers and customers really liked to spend most of their time in
Starbucks outlets and enjoyed the coffee. Starbucks provided the best sitting
arrangement in their outlets where the consumer can freely enjoyed the nice
music and beauty of the outlet of Starbucks. In 1987, they first time opened
their store in British Colombia and Chicago and then they moved forward and
never looked back. In 1982, they first time registered the Starbucks in Stock
market and issued their shares for the public. Starbucks current share price
is about 57 USD.

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 Vision and Mission Statement

Vision of Starbucks

To make the star bucks as the leading and respected

coffee around the world and present the quality coffee to
the customers

Mission of Starbucks

To inspire and nature the humans soul, for one person,

one cup and for one neighborhood at on spot time

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 Six QSP Principals of Starbucks Coffee

1. Provide the better environment and work together as a team with

respect and dignity of everyone.
2. Give respect to every individual and considered that everyone
understanding is unique.
3. Provide the best quality coffee to their customers.
4. Customer satisfaction is the main element for Starbucks.
5. Contribute towards the society and community where they operate.
6. Considered that profitability is must for their future success.

Marketing Strategies of Starbucks

Starbucks always aim to provide the premium quality products that maybe
unique from their rivals and make it distinguishes from others. Starbucks
portrays to satisfy all the customers with their quality coffee.

Quality Coffee:

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Starbucks adopted market skimming strategy where they charge little bit
high price from the customers but on the other side, they offer the A-class
quality coffee that cover the high price of Starbucks.

Location Based Strategy:

Starbucks creating the unique and most relaxing atmosphere for the
customers to go to home and offices has been very important element of the
company as it realized that this is one of powerful concepts to the company,
where the people are more attracting towards the Starbucks shops.

Customer Satisfaction:

From the entrance to the last sip of the coffee, Starbucks is core practices to
satisfy the customers with their high premium coffee.

Developed Starbucks Community:

Starbucks have created a freely discussion page on their website where the
people can express their views, history and future improvements discussion
which is really fruitful for the start bucks to develop their future strategies.

Brand Loyalty:

Starbucks always aimed to create a Word of Mouth in the society where

everyone remember only one coffee shop name that is Starbucks.

Innovation of Starbucks:

Starbucks has been introduced different flavors in the coffee related items
which indulge the customers to taste and demand only Starbucks coffee.

Starbucks Expansion Marketing Strategy:

1. To develop the stores in major cities like mostly in metropolitan cities.

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 2. Ensure that cities where they are operating to support more 20 stores
within two years.
3. Once the city is covered at the attractive places than operate in small
cities to gain more market share.
4. Zonal managers of Starbucks to oversee the development process of
each city where they are operating.

SWOT Analysis:

Internal Factors:

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Strength of Starbucks:

Global brand

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 Premium Quality
Profitable firm
Leading organization
Comfortable environment
Attractive location
Free Wi-Fi connection
Roasted, handcrafted coffee
Provide taste till last sip of coffee

Weakness of Starbucks:

High prices of coffee

Imported coffee from Kenya
Known only for coffee rather than beverages and snacks
Do not offer for smoking at their outlets
More focusing on coffee

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External Factor

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ortunity for Starbucks:

New market opportunity in Europe and Latin USA

Healthy drinks
Organic drinks
Kids drinks
Develop partnership with other coffee companies to expand the market
Advertise of snacks and other beverages
Campaign for healthy coffee

Threat for Starbucks:

Coffee market is limited

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 Not suitable in Asian market
Consumers trend move to other healthful care
Cost of coffee is expected to rise in future
High price of coffee

PEST Analysis of Starbucks

Political Interference:

State and local govt. control over the industry that can impact on the sale of
Starbucks which is to be controlled is difficult especially in merging market.
Starbucks has been faced this type of political interference during recession
period which existed in 2008.

Economic Influence:

Change in disposable income and purchasing power of buyers can also

influence the sale of Starbucks which can adversely affect on the sale of
Starbucks due to low buying power of buyers. Economic condition of under
developed countries can really does affect on the stability of the growth of
Starbucks.

Social Intervene:

Consumers preferences change day by day and might be it is possibility that

consumers switch from coffee to other organic beverages so it is also very
essential to develop the taste of consumer by offering different flavor coffees
that make the growth sale of Starbucks.

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Technology Influence:

Use of improve and advance technology can positive impact on the sale of
Starbucks. By using advance technology make it possible for Starbucks for
the operation more affectively.

Competitors Influence:

McDonalds Coffee
KFC Coffee
Costa Coffee
Nestle Coffee
7-Eleven Coffee
Green Mountain Coffee
Kraft Coffee

Porters five Forces

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The Porters five forces represent that there is always a threat of new
entrants in the market with their advance technology and offer low price
coffee and to capture the large market share which is already in Starbuck.
The new entrants with heavy bombardment of different flavor of coffee to the
customers and catch the customers of Starbucks.

The threat of substitute always remains in the market when you launch the
product at internationally. So, Starbucks always faces a threat of substitute
because many MNCS are offering different substitute to the customers
where the organic drinks have already came in the market which is great
threat of Starbucks.

Suppliers are the main source or strength of the organization. Starbucks

imports raw roasted coffee beans from the Kenyans suppliers where they
can increase the prices of coffee beans at near future or could shift towards
another company who provide good profit margin to the suppliers.

There are already many competitors exists in the market which make the
tough competition in coffee industry like McDonalds, KFC, 7-Eleven, Costa,
Nestle are the rivalry firms in the coffee industry.

Starbucks no doubt provides quality coffee to their consumers but it is also

fact that they offer coffee at high price which can become their weakness in
future. Starbucks offer premium quality coffee and handcrafted coffee to the
customers which costs are relatively higher than normal coffee but there is
always bargaining power of consumers remain threat for the Starbucks
because consumers want quality coffee at reasonable price and it make
them possible to switch at low price coffee so it always remain threat for the
Starbucks.

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 Starbucks Products line

Espresso Coffee
Coffee Americano
Coffee Latt
Coffee Cappuccino
Caramel Coffee
Leather Coffee
Skinny Vanilla Coffee
White Chocolate Coffee

4 Ps of Starbucks:

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Types of Starbucks Product

Products of Starbucks are as follow,

1. Tangible Product:
Tangible products of Starbucks are coffee, tea, beans roosted,
beverages, mug, bottles and seasonal products of Starbucks.

2. Core Products of Starbucks:

Attractive outlets, WI-FI, good services, relax atmosphere and adorable
decoration of Starbucks.

3. Augmented Products of Starbucks:

Good interaction with the customers as well as contribution towards
the society.

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Placement of Starbucks:

Coffee outlets
Easy to access
Between job and house places
Online store facilities
Bakeries as well as superstores

Prices of Starbucks:

High prices with premium quality

Perceived value pricing strategy of Starbucks
Handcrafted coffeea
Prices are classifies according to the class of people

Promotion of Starbucks:

Social media like Face book and Tweeter

Sales
Advertisement through print and electronic media
CSR
Bill boards and rotator boards

Sales Strategies of Starbucks

Starbucks offers price changing products to the end users. They offer free
coffee at their shop for a pre-determined period to increase or develop the
taste of consumers. They provide special cards to their loyal customers and
offer special discount to the user who frequently use the Starbucks coffee.
They also give special discount like buy two and get one free offer is
commonly practice in Starbucks which is really affective positively on the
sale of the Starbucks. Starbucks occasionally provides the special mug where
the company logo is embossed. Starbucks also offer toys for kids which really

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attract the customers to their outlet. Despite of this, Starbucks provides
better environment and relaxing atmosphere to the customers which really a
positive impact on the mind of the customers.

Corporate Responsibilities of Starbucks

CSR
Starbucks logo is green lady where they develop different programs of
women empowerment. Starbucks also build green stores to keep the
environment healthy and safer. They introduced the concept of renewable
energy where they consume the sunlight especially. Starbucks introduced
100% recyclable cups as well as bottles to make the environment green.
Despite of this, Starbucks introduced the respected and dignity services at
their outlets. Their belief is that the understanding level of all individuals are
same and to treat them equally.

Success stories of Starbucks Business:

Premium quality of coffee

Roosted as well as handcrafted coffee to the customers
Excellence service providers at their outlets

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 Fast growth of the Starbucks stores across the world
Respect of all class at the coffee shops
Easy to access for everyone

These factors not only increased the revenue of the Starbucks but it also
created a positive impact in the mind of coffee lovers. Starbucks faced a
tough time during recession period in 2008 but they diversified their
business around the world and again they stand out their feet with good
financial position through their better strategies and respected
environment which is towards the customers. It is always remain in a
number one quality coffee due to offering premium quality coffee to the
end users.

Vertical Integration Strategy

Backward integration:

Seeking control over the suppliers who provides the raw material to the firms
for further processes.

Starbucks gets raw coffee beans from the Kenyan suppliers and further
processed and use it in the coffee.

Forward Integration:

Control over the distributors who provides the good/services to the end user
and retailer retailers who display the firm product in their shelves.

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Starbucks not only selling their coffees on their own outlets but also
distributing coffees to the supermarket as well as outlets in different
location.

Horizontal Integration:

Seeking ownership and to tight control over their rivals is called horizontal
integration

Starbucks annual profit has reached above 15 billion USD which clearly
indicate the growth of Starbucks coffee. Starbucks really working hard to
compete its rival on every level due to offering different tastes of coffee and
other beverages.

Intensive Strategies

Market Penetration:

To capture the huge market share by developing the strong market efforts is
called as market penetration.

Starbucks captured a large market through its extensive marketing

campaign and by offering different tastes in coffee product line.

Market Development:
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Market development is defined as to introduce their products and services
into the new geographical areas.

Starbucks seeking new geographical areas like China, Malaysia and other
Asian countries to introduce their coffee with premium quality.

Product Development:

Product development is to increase the firms sale by improving its quality or

to increase the product line.

Starbucks introduced quality coffee, handcrafted coffee, roosted coffee to

their end users by introducing new flavors in order to judge the taste of the
customers.

Diversification Strategies

Concentric diversification:

To add new products in their product line but to add related products in their
product spam.

Starbucks added different qualities of coffee with different taste like

Caramel, Vanilla taste in their product line to capture the market share.

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 Major Problems faced by Starbucks

1. Corporate Level
2. Functional Level

1. Corporate Level Issues:

Starbucks coffee is relatively expensive than other

coffees offering companies which is adversely affect on the sale of the
Starbucks. The reason is that the Starbucks only purchase high quality beans
of coffee from the suppliers which is relatively forced them to sell the coffee
at high price to the customers. It is a positive advantage over the Starbucks
rivals but on the other side the buying power of consumers are relatively low
and they seek towards quality products at low cost which is difficult for the
Starbucks to maintain this. So, Starbucks should look after this that goes to
the next store and ignore the Starbucks due to relatively high prices of the
coffee.

2. Functional Level Issues:

Starbucks does not emphasis on the advertisement.

Today, the world has become a global village and people are much needed to
familiar with their products. Starbucks spent really low budget on the
advertisement of their coffee and it impacted a low sale of Starbucks in 2003
where their growth was relatively low due to low spending income on the
advertisement.

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Secondly, Starbucks focuses on coffee related items rather than snacks and
other beverages so this is also due to keep unaware of the consumers
towards their other products. If they more focus on these products line than
Starbucks whose image is already good in the mind of the users can increase
the growth of their other food items and relatively it could positive impact on
the growth of their financial.

Thirdly, Starbucks does not forcing in distribution of the coffee at the big
shopping store. The reason is that the company did not establish any proper
guideline for the quantity used in coffee so if they set the proper criteria than
it is possible that the packaging bottles taste could not remain same and the
other reason is that the Starbucks always uses fresh beans in their coffee
and if they packed in bottled so it is possibility that the beans could not
remain fresh like before. So, this is also the issue face by Starbucks.

Recommendations
1. Corporate Level
2. Business Level
3. Functional Level

Corporate Level:
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Starbucks should revise the policy about the pricing of their coffee items
because customers move to next store who offer coffee at low price.
Secondly, Starbucks should come out with discount offer to their loyal and
new customers and develop taste to the new customers that could relatively
increase the revenue of the Starbucks. For example, McDonalds and Croatia
offers many discounts vouchers especially breakfast vouchers to promote
their breakfast meal as well as coffee. Starbucks should also reduce their
prices and then automatically their sale would be increased and positively
impact on their financial.

Business Level:

Starbucks are perusing focus based strategy but it should come out of this
and should advertise their other beverages products to increase their
revenue because Starbucks is famous for their brand of coffee but it should
more focusing on their other product line which includes juices, beverages
and organic drinks which relatively impact good on their sale and they can
generate and compete their rivals at large scale.

Functional Level:

Starbucks should more focusing on the advertisement to promote their

products. They should conduct different road shows, free vouchers to the
customers, different gaming programs as well as CSR to capture the mind of
the customers and to get benefit in the future. Starbucks should also focus
on the different flavors according to the taste of the customers in the market
to gain a large market share. These are the strategies that could really
helpful in the near future for the Starbucks.

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