Case: Starbucks Corporation

CASE BACKGROUND
The first Starbucks store was opened in Seattle on March 30 th 1971 by three partners and the name of the store
originated from the novel Moby Dick. The firm believes in supplying and serving the best coffee possible by
using the highest standards of quality whilst adhering to ethical trading and responsible growing practices at
the same time. In 1987 the first stores were opened outside of Seattle, in Vancouver and Chicago and in the
subsequent years stores followed the expansion were much more extensive across North America.
Starbucks sells a variety of products which include high-quality whole bean coffees along with fresh rich-
brewed coffees, Italian-style espresso beverages and cold blended beverages, a collection of complementary
food items and also a selection of premium teas and beverage-related accessories and equipment
(starbucks.com).
There are conflicting reports on the overall market segment that Starbucks possesses, although according to
Mintel a global consumer research firm Starbucks had a 73% market share of U.S. coffeehouse sales in 2005,
and this is significant because the majority of its revenue comes from their home market which is $2.1 Billion
compared to an overseas share of just $640 Million.
The turnaround for Starbucks started with the restructuring of management where the former chief executive
Howard Schultz took back the role and set the company’s focus on core markets and utilizing technological
breakthrough to introduce Starbucks coffee in an instant form (pr-inside.com). Starbucks went back to its roots
by focusing on customer service that was neglected during rapid expansion (Guardian.co.uk). All these
 decisions helped contribute to the sales flourishing and “profits rising” to high levels once again (bbc.co.uk).

The first location outside of north America was in Japan in 1996 which was followed by an impressive $83
million acquisition of the UK based “Seattle coffee company” of which there were 60 outlets at the time, all of
which were then re-branded under the Starbucks name. The global expansion continued into the Latin
American, Asian and European markets which resulted in Starbucks presently being the largest coffee
company in the world with over 16,500 stores in over 50 countries.
An examination of Starbucks’ internal and external environment should provide a good basis for
understanding the company’s turnaround, the foundation of its present successes and what the future might
hold it.

Vision
Starbucks’ vision is: “Starbucks is committed to ethically sourcing and roasting the
highestquality Arabica coffee in the world. With stores around the globe, we are the premier
roaster andretailer of specialty coffee in the world.”

Mission
Starbucks’ mission is: “to inspire and nurture the human spirit—one person, one cup, andone
neighborhood at a time.”

the principles by which Starbucks operates are found in exhibit 1,entitled “Starbucks
Principles.”

SWOT Matrix
STRENGTHS WEAKNESS
1. High Market Share and Market Growth. 1. Expensive Products.
2. Global Brand Recognition. 2. Self-Cannibalization due to Overcrowding.
3. Product of the Highest Quality. 3. Over-dependence on the USA Market.
4. Strong Human Resource Management. 4. Negative Large Corporate Image.
5. Location and Aesthetic Appeal of Stores. 5. American/European Coffee Culture Clash with Other Countries.
6. Diverse Product Portfolio. 6. Inability to show Consistency in Quality across Starbucks Stores Worldwide.
7. Goodwill among Customers due to Social Responsibility Initiatives. 7. Centralized Control.
8. Customer-based Loyalty. 8. High Operating Cost.
9. Use of Technology and Mobile-Outlets. 9. Environmental Issues.
10. Limited Number of Competitors. 10. Increased Financial Debts.
OPPORTUNITIES THREATS
1. Expanding into Emerging Markets. 1. Intense Competition/ Substitutes / Rivalry.
2. Product Diversification. 2. Price Volatility in the Global Expansion Market.
3. Expansion of Retail Operations. 3. Developed Countries Market Saturation.
4. Technology Advances. 4. Changing Customer Taste and Lifestyle Choices.
5. New Distribution Channels. 5. Health Consciousness.
6. Brand Extension. 6. Incompatibility with Foreign Markets.
7. Market Penetration. 7. Brand Detachment.
8. Mergers and Acquisitions. 8. Labor Union Issues.
9. Co-branding with Other Food Manufacturers. 9. Entry Barriers in International Markets.
10. High Growth Rate in Emerging Markets. 10. Security Risks.

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Weight Rating Weighted Score

Strengths
World’s largest coffee company/ Brand identification 0.10 4 0.40

Strategic partnership 0.05 3 0.15

Premium quality products 0.04 4 0.16

Global expansion 0.08 4 0.32

Expanding product line s 0.04 4 0.16

Mobile payment plan 0.04 4 0.16

Customer service 0.05 3 0.15

Work environment and loyal employees 0.04 4 0.16

Helping suppliers to develop 0.03 3 0.09

Financial ratios 0.04 4 0.16

Weaknesses
High Price coffee 0.09 2 0.2

Waste water claim 0.04 1 0.04

Little diversification 0.06 2 0.12

High operating expenses 0.06 1 0.07

 Increasing competition 0.04 2 0.08

Operation difficulty in new countries 0.04 2 0.10

Products not available at supermarkets 0.04 2 0.08

More investment to saturated US market 0.04 1 0.04

Less marketing and advertising efforts 0.05 2 0.10

Inconsistency in Quality 0.03 1 0.03

Total 1.00   2.77

TOWS Matrix

SO
1.High Market Share and Market Growth will be
captured by New Distribution Channels. (S1, O5).
2. Global Brand Recognition will be acquired by
Product Diversification. (S2, O2).
3.Diverse Product Portfolio due to Brand Extensions
(S6,O6).
4.Use of Technology and Mobile Outlets due to
Technology Advancement. (S9,O4).
5.Strong Human Resource Management cause
Expansion of Retail Stores. (S4,O3).
ST
1.Product of the Highest Quality overcome the Changing
Customer Taste and Lifestyle Choices. (S3, T4).
2.Diverse Product Portfolio eliminates Incompatibility
with Foreign Markets. (S6, T6).
3.Strong Human Resource Management overcome
Labor Union Issues (S4,T8).
4.Customer-based Loyalty reduce Brand Detachment
(S8, T7).

WO
1.High Operating Cost can be Overcome by Co-
branding with Other Food Manufacturers. (W8,O9).
2.Over-dependence on the USA Market can be
reduced by Expanding into Emerging Markets (W3,
O1).
3.Environmental Issues can be reduced by
Technological Advancement (W9,O4).
4.American/European Coffee Culture Clash with
Other Countries can be reduced by Mergers and
Acquisitions (W5, O8).
WT
1. Discard Expensive Products to avoid Incompatibility
with Foreign Markets (W1, T6).
2.Avoid Inability to show Consistency in Quality across
Starbucks Stores Worldwide to minimize Changing
Customer Taste and Lifestyle Choices (W6, T4).
3.Eliminate American/European Coffee Culture Clash
with Other Countries to reduce Entry Barriers in
International Markets (W5, T9).
4.Reduce High Operating Cost to avoid Price Volatility
in the Global Expansion Market (W8, T2).
 Recommendations
Increase international expansion: The first & foremost recommendation for Starbucks would be
to increase its existence in international countries (excluding United States of America).
Aggressive marketing strategies shall be followed at Starbucks to expand its operations.
 Technology friendly atmosphere: Starbucks shall try to build a technology friendly atmosphere.
With the rise in internet facilities an increasing shifts have been made from consumer’s work
locations to home offices. 
Become environment friendly: Many efforts have been made by Starbucks to improve their
image as an environment friendly store; still there is scope for further improvements. Some of
the ways which shall be followed by Starbucks to become an environment friendly store would
be to recycle the porcelain cups, encourage the customers not to waste the food products &
recycle the plastic Starbucks cards
Continuous Improvements in the coffee: It would be quite an important task for Starbucks to
continually improve the taste of the coffee. In order to improve the quality of coffee, Starbucks
shall analyze its brewing systems on timely basis and consider renovations. They shall patent &
copyright their way of accomplishing the brewing process. This will add as a competitive
advantage for Starbucks.

conclusion
The background of Starbucks Corporation reveals its presence in the market since 1971. Schultz
brought a transformational leadership style to Starbucks Corporation by keeping a clear path of the
company’s direction by following the vision and mission statement and serving as an organizational role
model. Starbucks Corporation is a solid and sustainable organization in the global coffee market because
the company strives to surpass excellence by meeting the five factors of spirituality at work: (a) strong
leadership position in the market, (b) organizational financial sustainability, (c) suitable work
environment, (d) innovation commitment, and (e) CSR requirements. Throughout the years Starbucks
Corporation has shown a consistent pattern of re-engineering the company. The new growth platform of
Starbucks Corporation is by supporting company’s ethical values and branding organizational demand.
Starbucks is a global company that meets the demand for innovation at a global level. As a result,
Starbucks continues to accelerate its international presence. In essence, it continues to be one of the top
leaders in the coffee industry and a customer oriented organization. Starbucks possesses the intellectual
creativity needed to meet the company’s goals and objectives. For example, its successes rely on
principles and practices by surpassing challenges in the local and global markets. Starbucks has 141 coffee
shops across Malaysia and more than 700 coffee shops around the Southeast Asian region, including the
following countries: Indonesia, the Philippines, Singapore, Thailand, and, most recently, Vietnam