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Starbucks Corporation is the leading roaster, retailer, and marketer of specialty coffee in the world.
Its operations include upwards of 7,300 coffee shops and kiosks in the United States, and nearly
3,000 in 34 other countries, with the largest numbers located in Japan, Canada, the United
Kingdom, China, Taiwan, South Korea, the Philippines, Thailand, Malaysia, Mexico, Australia,
Germany, and New Zealand. In addition to a variety of coffees and coffee drinks, Starbucks shops
also feature Tazo teas; pastries and other food items; espresso machines, coffee brewers, and other
coffee- and tea-related items; and music CDs. The company also sells many of these products via
mail-order and online at starbucks.com. It also wholesales its coffee to restaurants, businesses,
education and healthcare institutions, hotels, and airlines. Through a joint venture with Pepsi-Cola
Company, Starbucks bottles Frappuccino beverages and the Starbucks Double Shot espresso drink
and sells them through supermarkets and convenience and drugstores. Through a partnership with
Kraft Foods, Inc., the company sells Starbucks whole bean and ground coffee into grocery,
warehouse club, and mass merchandise stores. A third joint venture, with Dreyer's Grand Ice
Cream, Inc., develops super premium coffee ice creams and distributes them to U.S. supermarkets.
From a single small store that opened in 1971 to its status as a 21st-century gourmet coffee giant,
Starbucks has led a coffee revolution in the United States and beyond.
Starbucks was founded in Seattle, Washington, a haven for coffee aficionados. The city was noted
for its coffee before World War II, but the quality of its coffee had declined so much by the late
1960s that resident Gordon Bowker made pilgrimages to Vancouver, British Columbia, to buy his
beans there. His point of reference for the beverage was dark, delicious coffee he had discovered
in Italy. Soon Bowker, then a writer for Seattle magazine, was making runs for friends as well.
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When Seattle folded, two of Bowker's friends, Jerry Baldwin, an English teacher, and Zev Siegl,
a history teacher, also happened to be seeking new ventures; the three banded together and literally
built their first store, located in Seattle's Pike Place Market, by hand. They raised $1,350 apiece,
borrowed another $5,000, picked the name Starbucks, for the punchy "st" sound and its reference
to the coffee-loving first mate in Moby Dick, then designed a two-tailed siren for a logo and set
Marketing environment
Target market is mainly adults, men and women, from the ages 25-40. This consists of almost
half of Starbucks' consumers and grows at a rate of 3% annually. Even though this is the majority
of Starbucks' business, the consumer also ranges from young adults 18-24 (40%), which grows at
4.6% annually, and even kids and teens 13-17 (2%), which most products are bought from the
parents. A main reason why Starbucks is so successful today and continues to grow is because the
people of the company takes many factors into account. These include: social, demographic,
economic, technological, political and legal, and competitive factors. The people within
the Starbucks company, management and staff, feel they have a responsibility to give back to the
community. Ever since they opened their first store in 1971, they dedicate themselves to show a
balance between profitability and social conscience (social factors). There is a whole area behind
just the coffeehouse where they offer community service, create jobs for those in need, and youth
action programs to prevent violence among young adults. They are also very involved in keeping
the Earth green and certain environmental factors, such as recycling and reducing waste, energy,
water, and climate change Political/Legal factors, which affects Starbucks as a company, include
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the stability of the countries where Starbucks purchases its coffee and natural resources. They
receive their coffee beans from countries all around the world, even places that have many natural
disasters: tsunamis, earthquakes, and wars. If any of these events occur in a country where they
are expecting their coffee from, Starbucks may not be able to produce coffee and profits will
drop. Also, Starbucks is environmentally friendly, as stated earlier. They have to consider how
to protect the brand aspect in everything they do, from providing a living wage that makes it to
farmers and have production with low pollution rates (Chapter 4: The Marketing Environment
1970).
Starbucks vision statement is;” To establish Starbucks as the most recognized and respected brand
inthe world and become a national company with values and guiding principles that employee
could be proud of “The vision statement clearly describes the dream or the future of the company
that is to be the world’s most well-known coffeehouse and also to be the most appreciated and
positively graded brand by all graded level in the company also focuses its vision to
Starbucks Mission Statement is; “Establish Starbucks as the premier purveyor of the finest coffee
in the world while maintaining our uncompromising principles while we grow. “The six principles
are: Provide a great work environment and treat each other with respect and dignity. Embrace
diversity as an essential component in the way we do business. Apply the highest standards of
excellence to the purchasing, roasting and fresh delivery of our coffee. Develop enthusiastically
satisfied customers all of the time Contribute positively to our communities and our environment.
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Recognize that profitability is essential to our future success Establish Starbucks as the premier
purveyor of the finest coffee in the world and also to be established as the most employee valued
technological advances. The six principles are: Provide a great work environment and treat each
other with respect and dignity. Embrace diversity as an essential component in the way we do
business. Apply the highest standards of excellence to the purchasing, roasting and fresh delivery
of our coffee. Develop enthusiastically satisfied customers all of the time Contribute positively to
our communities and our environment6.Recognize that profitability is essential to our future
Starbucks has a distinct marketing strategy that starts right from its products. It has
differentiated itself from others based on the premium quality of its coffee. From its humble
origins in Seattle, the brand has spread throughout the world to become the number one coffee
retail brand. It’s an international brand and the newest chapter in its growth story is the Asian part.
Starbucks has used the formula of quality-based product differentiation which has resulted in high
level popularity and customer loyalty. However, its marketing strategy is not limited to only
products, but Starbucks is equally unique in other aspects of its marketing and promotions. Product
quality must be considered the central pillar of its marketing efforts. Great quality has several
benefits. First of all, it helps with brand image and reputation. Great taste equals higher recognition
and popularity. As a brand, Starbucks has built great reputation over time for the quality of its
products, their flavor and for unequalled customer service. At Starbucks, the demographic
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segmentation's main group is between 25 and 40 years of age with high incomes, the second target
group is 18 to 24 year of age and belongs to richer families. In general, the customers belong to
the Generation Y born between 1977 and 2000; this is where most profit is made as claimed by
Fromm (2014). Psychographic segmentation indicates that customers belong to the upper-middle
class and generally have college education (Rafii, 2013). When targeting, Starbucks is situated
between mass marketing and segment marketing; they are targeting a broader public; however,
there are some criteria that the customers should have, such as higher incomes or a younger age.
We can illustrate Starbuck's positioning thanks to the graph (Zapolski, 2010) below; it is how the
Starbucks in 1998 entered into a long-term licensing agreement with Kraft Foods, Inc. for the
marketing and distribution of Starbucks whole bean and ground coffee into grocery, warehouse
club, and mass merchandise stores. The company also began experimenting with a full-service
casual restaurant called Café Starbucks. In early 1999 through the purchase of Pasqual Coffee
Co., a chain of coffee and sandwich shops with 56 units in California and New York. Starbucks
had already developed its own in-house tea brand, Infusion, but it was replaced following the
early 1999 acquisition of Tazo Tea Company, a Portland, Oregon-based maker of premium teas
and related products with distribution through 5,000 retail outlets. In early 2000, the company
providing its customers with videos, snacks and other items (UK Essay).
coffeehouse chain, despite their huge worldwide presence comparable to that of most fast food
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chains. Their products are of excellent quality, seemingly environmentally friendly, and
relatively consistent between locations. As a result, they can afford to charge customers high
prices, which most people are willing to pay. Not only does this mean large profits, but also
has them globally recognized as one of the best coffee shop chains. Efficiency and
reinvestment strategy: Most of the profits that this company makes go straight back into
expanding the business. This is evident in the ever-increasing number of locations that
Starbucks boasts [4]. It’s clear that this corporation has a well-planned growth strategy, which
seems to be working well for them. Employee treatment: Starbucks is known for treating its
hundreds of thousands of employees very well and has previously been listed as one
of Fortune’s Top 100 Places to Work For. Weaknesses High price point: While their high
price point was a strength in the previous paragraph, it is also a weakness. The hefty price tags
on some of their products (starting even with their most basic coffee options) deter plenty of
customers who might otherwise make Starbucks a part of their daily lives. While their
premium quality and good ethical values might be attractive, some just don’t have that much
money to spend on a cup of coffee. A lack of overly unique products: While Starbucks might
be known for their Frappuccino’s, pumpkin spice lattes, and big chocolate chip cookies, they
don’t exactly have the most unique market. Plenty of other coffee shops, chains or otherwise,
provide similar products and only lose out to Starbucks’ big name. Opportunities Global
expansion: While Starbucks does have many coffeehouses across the globe, most of them are
located within the US [5]. There are plenty of regions where profitably branching out is a
possibility, including India, Central Europe, and some regions in Africa. Introducing new
products and co-branding: Starbucks products would be welcomed in supermarkets across the
world, something which has already begun. Selling their own branded products in stores other
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than their own would be a great way to maximize the value of their big reputation. They also
have the opportunity to team up with other companies and co-brand — imagine the
possibly never happen)! Threats Fierce competition from cheaper alternatives: Dunkin’
Donuts and McDonald’s are two other huge multinational companies which directly compete
with some of the products that Starbucks sells. While these companies don’t pride themselves
entirely on their coffees and teas, they offer products of a similar quality for a fraction of
Starbucks’ prices. Who can tell what consumer forces will favor in the future? A specific
market: Starbucks’ success can be partially attributed to the popularity of coffees, teas and
convenient snacks in today’s society. If consumers were to shift away from these products
(perhaps one day relying on caffeine pills instead of caffeinated beverages), it would leave
Starbucks struggling to stay afloat. They are also very prone to feeling the effects of rises in
Main competitors
Starbucks has been fighting its competitors – Dunkin' Donuts and McDonald's – for the top
position as coffee king for several years. The company, which began close to 50 years ago with a
single location, has experienced phenomenal growth and success. In Q4 2018 alone, the
company opened 604 new locations, bringing the coffee behemoth's global store count to over
29,000. With a Starbucks on every corner, the company is often considered the go-to coffee
place to work and socialize, a concept that corresponds to the company's marketing approach.
from its humble beginnings as a Seattle-based coffee roaster, Starbucks has strived to create a
"second home" for consumers, where they can stop on their way to and from work. In recent
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years, the company has invested heavily in its brick-and-mortar locations by expanding its food
options, remodeling its restaurants, and revamping its rewards programs. If Q4 2018 earnings
were any indicator, the company's efforts seem to be working. Starbucks shares soared on
November 2, 2018 after the company delivered an upbeat earnings report that beat Wall Street
estimates. The company reported $6.3 billion in revenues that quarter, compared to $5.7 billion
over the same period in 2017. With no end in sight for Starbucks' growth, here's how the
Inbound Logistics
The inbound logistics for Starbucks refers to selecting the finest quality of coffee beans by the
company appointed coffee buyers from coffee producers in Latin America, Africa and Asia. In
the case of Starbucks, the green or unroasted beans are procured directly from the farms by the
Starbucks buyers. These are transported to the storage sites after which the beans are roasted and
packaged. These are now ready to be sent to the distribution centers few of which are company
owned and some are operated by other logistic companies. The company does not outsource its
procurement to ensure high quality standards right from the point of selection of coffee beans.
Operations Starbucks operates in 65 countries either in the form of direct stores operated by the
company or as licensed stores. Starbucks has more than 21,000 stores internationally which
includes Starbucks Coffee, Teavana, Seattle’s Best Coffee and Evolution Fresh retail locations.
According to its annual report, the company generated 79% of the total revenue during fiscal
year 2013 from its company operated stores while the licensed stores accounted for 9% of the
revenue.
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Outbound Logistics
There is very little or no presence of intermediaries in product selling. Majority of the products
are sold in their own or licensed stores only. As a new venture, the company has launched a new
range of single-origin coffees which will be sold through some leading retailers in the U.S.; these
are Guatemala Laguna de Ayarza, Rwanda Rift Valley and Timor Mount Ramelau.
Starbucks invests in superior quality products and high level of customer services than
aggressive marketing. However, need based marketing activities are carried out by the company
during new products launches in the form of sampling in areas around the stores.
Service
Starbucks aims at building customer loyalty through high level of customer service at its stores.
The retail objective of Starbucks is, as it says in its annual report, “to be the leading retailer and
brand of coffee in each of our target markets by selling the finest quality coffee and related
Infrastructure
This includes all departments like management, finance, legal, etc which are required to keep the
company’s stores operational. Starbucks well designed and pleasing stores are complemented
with good customer service provided by the dedicated team of employees in green aprons.
The company’s committed workforce is considered a key attribute in the company’s success and
growth over the years. Starbucks employees are motivated through generous benefits and
incentives. The company is known for taking care of its workforce and this is perhaps the reason
for a low turnover of employees, which indicates great human resource management. There are
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many training programs conducted for employees in a setting of a work culture which keeps its
Technology Development
Starbucks is very well known for use of technology not only for coffee related processes (to
ensure consistency in taste and quality along with cost savings) but to connect to its customers.
Many customers use Starbucks stores as make a shift office or meeting place because of the free
and unlimited wifi availability. The company in the year 2008 also
suggestions and openly express opinions and share experiences. The company has implemented
some of the suggestions given via this forum. Starbucks also uses Apple’s iBeacon
System wherein customers can order their drink through the Starbucks phone app and get a
Procurement
This involves procuring the raw material for the final product. The company agents travel to
Asia, Latin America and Africa for the procurement of high-grade raw material to bring the
finest coffee to its customers. The agents establish strategic relationship and partnership with a
supplier which is built up after reconnaissance and communication about the company standards.
High quality standards are maintained with direct involvement of the company right from the
base level of selecting the finest raw material which is coffee beans in case of Starbucks.
Bottom Line
The concept of value chain helps to understand and segregate the useful (which help in gaining a
competitive edge) and wasteful activities (which hamper market lead) accompanying each step
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It also explains that if value is added during each step, the overall value of the product gets
Works Cited
“Chapter 4: The Marketing Environment.” Chapter 4: The Marketing Environment, 1 Jan. 1970,
cacholajennifermar100.blogspot.com/2012/09/chapter-4-marketing-environment.html.
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Hawley, Julia. “Who Are Starbucks' Main Competitors?” Investopedia, Investopedia, 3 Apr. 2019,
www.investopedia.com/articles/markets/101315/who-are-starbucks-main-
competitors.asp.
Bush, Thomas. “SWOT Analysis of Starbucks, the World's Leading Coffeehouse Chain.” PESTLE
Analysis, 16 June 2016, pestleanalysis.com/swot-analysis-of-starbucks/.
Bajpai, Prableen. “Starbucks as an Example of the Value Chain Model - Supply Chain 24/7.”
Supply Chain 24 7,
www.supplychain247.com/article/starbucks_as_an_example_of_the_value_chain_model.
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