Case Studies Starbucks 1997 Coffe mas the second most traded commodity next to oil.

It was divided into 2 categories, specialty coffee and basic coffee.(1) Coffee comsumption was on the rise in the US (2), reasosns: -Adoption of a helathier lifestyle -coffee bars offering a place to meet -people like affordable luxuries - consumers were becoming more knowledgable about cofee. Coffee image had changed from being purely breakfast drink to a beverage that could be enjoyed any time as a social catalyst. Coffee houses had become community gathering places (4) Maximimum number of coffe stores supportable by market in 1999= 2661, current US stores = 11.000 (5) Long term goal of becoming the most recognized and respected brand of coffee in the world(8) It was felt that current strategic direction would allow to sustain growth by continuing the development of the Starbucks brand image and by increasing its presence in different markets.(21) Starbucks in the 21st century 2008 Starbucks got it start as a Seattle based coffee roaster in 1971 at a time where market was dominated by supermarket brands and coffee comsumption in the US was on decline .Shultz bought Starbuckswith the vision of introducing European-style coffee culture on the American market.The company grew its revenues rom 10$ million in 1988 to 1.3$ billion ten years later. By 2007 the company earned 9.4$ billion on revenues through a network of more than 15000 stores worldwide.(1) In 2006 Starbucks stock fell in relentless descent and Shultz suggested that there had

been decisions made by management that had led to watering down the Starbucks experience and the commodization os the brand. (1) Its not about the economy, or the competition. This is about us.Shultz (3) 1980 the coffee market still in in its infancy but grew radically by the end of the 20th century (3): 1989-1999: number of specialty coffee retailers increased fromm 585 to 12.000 End of 2006:nearly 24.000 Customers believed that the scale of large coffee chains contributed to tjhe commodization of the coffee-drinking experience and a diminution of the baristas art. (4) By 2007 Starbucks had become the largest specialty coffe retailer in the world, with more than 15.000 stores globally and revenues of 9$ billion.(4) United States its largest market.(4) In 2006 announced long-term goal of operating 40.000 stores worldide, 20.000 of them in the US. The imperatives expansion were complicated by seniors management commitment to stay true to the organizations original mission. The close relationships with customers and employees was harder to mantain as the number of stores grew.Could we get big band stay small?, We concluded we could do both Shultz(2003). However, during the ensuing 4 years this began to appear less certain.(5) We have had to make a series of decisions that have led to the watering down os the Starbucks experience and cwhat could be called the commodization of our brand (200/, Shultz. (5) Companys reputation depended on its ability to make its unique way od doing business as well known as its ubiquitous mermaid logo. (6) 2 factors influenced growth(6): -Competition: as the market grew, Starbucks wanted to make sure new customers had

the chance to try the real Starbucks experience. In addition the entrance of new players suggested that there was still room for growth -Wall Street:their stock price had appreciated over 2,500% since the companys IPO in 1992. The objective of enlarging the offering of products was to enrich the brand and to continue to meet investors growth expectations.However some argued that the company was losing sight of its original identity as a coffeehouse and becoming a bland, homogeneous of cultural goods. (11) Starbucks had been built on the coffee experience and by moving so far beyond they where jeopardizing everything else(11) In January 2008 Shultz announced a shift in the companys growth strategy.(11) How could the senior team mantain the small-company feeling and personal ties that had been central to Starbucks success? (13) We are ubiquitoous, and as a result, we are a target Schultz (21) Some of the publicity agains Starbucks social responsability efforts threatened to dilute the companys brand, confusing customers,employees and other stakeholders about a central aspect of Starbucks identity. (22) Managing the demands of Wall Street investors on the once hand and socially conscious partners, consumers, activists and citizens on the other was not always easy (24) A new breed of customers expected that firms would do more than simply generate a profit without regard of the cost.( 25) To accomplish its social goals, Starbucks had to remain financially succesful (25) After 15 years of breackneck growth, increaing stock prices and rewarding work on social and environmental fronts, Starbucks found itself at a crossroads.Going forward the comoany had to reconsider the comoanys very identity.How would it evolve while remaining true to its core values, What kind of company would it become? (26)

A crack in the mug 2008 After 20 years of exceptional expansion the last 6 months of 2007 saw a decline in share price of 50% and a decrease in customer visits to its outlets in the US. (1) In january 2008 it announced the closing of 100 US stores, on July 1 this number was increased to 600(1) Several price increases over the last 4 years wasnt well received and might have harmed the companys brand image. Had the company reached a crisis in branding, where its ubiquity and over-exposure challenged its down-home appeal?Did customers perceive that they were still gettting value for money?(1) The company had been regarded as the complete retailer in the sector.it sold itself as a third place, a location between home and work where people could just relax. This was the Starbucks experience(2) Succeeded in opresenting itself as an ethical and environmentally concerned organization, yet its clean image had been questioned by critical websites.(2) Schultz bought the company in 1987 and enjoyed 20 years of huge expansion. Went public in 1992 and by 2007 had about 115.000 employees and sales of 9.412$ billion but a market capitalization of 13.629 $ billion, a drastic decrease from the previous 25 $ billion.(3) From 1997, Starbucks expandsed by steady increments both at home and abroad. (3) From 2001 to 2008, its net income increased by more than 3 times, from $ 181 million to $673 million, giving it the dominant position in specialty coffee-drink retailing. It marketed itself with its ubiquity and highly recognizable logo, through its customer base, coporate image and espoused philosophy. Its loyalty to employees who were referred as partners, its corporate image of being environmentally friendly and communitarian and socially responsible created a powerful image that needed little further enhacement through the advertising media.

Starbucks was reported to have spent only $10 million on advertising in its first 13 years to 1996 We built our company in a different way. We built it on trust. A trust we have created as the result of the way our partners work together, our relationships with our customers, the respectful way we treat coffee farmers and our contribution to the communities we serve.(4) Global expansion had brought revenue increases. However, the profit growth had slowed down. From 1996 to 200 the growth rates of net revenues were around 30 to 50 %, but after 2001 they sgtayed around 20 %.(4) Risk factors (6): -Highly dependent on the financial performance of its US operating segment -Loss of key personnel and difficulties recruiting and training qualified personnel -Adverse public media Fortunes Top 100 companies to work for (6) Ranked fourth among the worlds moxt influential brands Swot Analysis Strenghts(6): -Brand establishment. What sets them apart from competitors is its high-end atmosphere with an affluent customer base. -Coffe business is lucraqtive. Estimated cost of a cup of coffee is $.10 and .$.50 and provide a 300% ROI. -Strong ethical values. One of the largest purchasers of fair trade-certified coffee in the world. -Customer loyalty -Logo and brand recognition Weaknesses(7): - Market saturation, high prices, long waitsm and consusingly-named sizes

- Its ubiquity challenges the exclusivity of the brand image. Opportunities (7): - More people are drinking coffee, therefore more selling opportunities -Go beyond coffee, due to its favourable brand image. -There is room for domestic/international growth Threats (8): -Emerging Competition -Overexposure can threat the brands exclusivity -Further diversification can affect its point of differentiation and damage de brand -Clean image under attack (in 2006 only 6% of their coffee was obtained through fair trade. Price rises are making people consider how much they spend on their coffee. SWOT= Many opportunities but offset by threats in the down maket and a general perception of Starbucks ubiquity which devalued its exclusivity.(9) Schultz aims to change its focus from store numbers to store quality, We started to loose sight of our focus on the customer an our commitment to continually and creatively enhance the Starbucks experience. The question is what will shareholders think about that?(9) Delivering Customer Service 2006 I think we have demostrated we are close to a recession-proof productSchultz 2002. (1) What made the Starbucks success even moreimpresive is that they had almost spent no money on advertisement. US marketing primarly consisted of point-of-sale materials and local store marketing and was far less than industry average.(1) The brand strategy was creating an experiencearound the consumption of coffee. 3 main components(3):

1st. Cofffe: Starbucks prided itselfon what it believed to be the highest quality coffee2nd Service: Also referred as customer intimacy 3rd Atmosphere: People go for coffee but the ambience is what makes them stay. Partner satisfaction leads to customer satisfaction.(4) Around 50.000 partners in the US(4) Customer Snapshot, store visited by an anonymous mystery shopper three times a quarter to rate the store.(6) Starbucks competed agains a variety of small-scale specialty coffee chains and thousands of independent specialty coffee stores.(7) Companys overall objective to establish as the most recognized and respected brand in the world, which required an agressive growth strategy(7) Goal of eventually achieving 10,000 stores worldwide.(7) Optimistic growth plans based on (7) 1st. Coffe consumption on the rise in the US. More than 109 million people drank coffee ( about of amercian population). 1/3 from it wasconsummed outside the home. 2nd. Still 8 states in the US without a single company operated Starbucks 3rd. Company believed it was far from reaching saturation levels in many existing markets. Strategy for expanding by opening new stores in new areas while geopgraphically clustering stores in existing markets. Although the latter resulted in the cannibalization between stores the company believed this was offset by the incremental sales associated with the increased store concentration. We seldcannibalize at least 1/3 of our stores everyday.(8) Second big driver of company growth was product innovation.(8)

Although considered one of the most succesful marketing companies in the world it lacked an strategic marketing group. This forced staburcks senior executives to assume marketing-related responsabilities. Marketing is everywhere in Starbucks(9) Little differentiation regarding brand image comoared to smaller coffee chains, but significant differentiation witn independent specialty coffeehouses. Negative image of the brand in many people.(10) Customer base evolving. New customer tended to be younger, less well-educated and in a lower income bracket than Starbucks more established customers(11) Starbucks was not meeting expectations in terms of customer satisfaction. They also had evidence of a direct link between satisfaction level and customer loyalty. One of the main complains was the speed of service (12).Wee need to bring service time down to the three minute level, regardless of the time of day We have been operating with the assumption that we do customer service well but the truth is that we have started to loose sight of the customer. We have lost the connection between satisfying our customer and growing the business.