Brand Equity of Starbucks

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STARBUCKS
Company Background
Howard Schultz is the Chairman, and Chief Global Strategist in Control of the Starbucks Company. In 1971, a small coffee shop which specialized in selling whole Arabica beans was opened in Seattle’s Pike Place Market by Gerald Baldwin, Gordon Bowker and Ziev Siegl. In 1982, Schultz joined the Starbucks marketing team and he was inspired by the Milan’s coffee culture to set up an espresso bar in the corner of its only downtown Seattle shop. At that time, he stated, “The idea was to create a chain of coffeehouses that would become America’s ‘third place’. At that time, most Americans had two places in their lives – home and work. But I believed that people needed another place, a place where they could go to relax and enjoy others, or just be by themselves. I envisioned a place that would be separate from home or work, a place that would mean different things to different people”. A few years later, Starbucks’ founder agreed to sell him company and he immediately began opening new stores. In 1992, the company had 140 stores in the Northwest and Chicago which was successfully competing against other small coffee chain. The same year, Schultz had raised $25 million in order to open more new stores across nation. By 2002, Starbucks had established as the dominant specialty-coffee brand in North America. Starbucks is even more impressive when the company spent almost null value in advertising the brand. Starbucks serves more than 20 million unique customers and operates in more than 5000 stores worldwide.

SWOT Analysis
Strengths * Innovation service * Lowest employee turnover rate * Good financial strength and profitability * High visibility of store locations * Practice of eco-friendly environment (Starbucks concerns with the conservation of energy and water, and recycling) * Comfortable atmosphere and good customer service * Product and brand consistency * Excellent customer service * Strong brand image associated with quality coffee lends a competitive edge * Established logo, developed brand, copyrights, trademarks, website and patents * Customer base loyalty * Wide geographic presence| Weaknesses * Small product mix * High price policy * Aggressive expansion of stores (lack of internal focus) * Limited products at different locations * Cross functional management * Availability of stores limits to suburban areas * Prices continually rising, thus risking the loss of customers (prices are higher as opposed to rivals such as Dunkin’ Donuts and MCD) * Size of store : stores can become crowded at time * Lacks of coupons, deals and promotions| Opportunities * More product mix (examples: coffee, food or snack, juice, energy drink, alcoholic drink and ice-cream) * Technological advances (espresso makers and to-go cups) * Third house experience * Creating a coffee house experience in global target market * Expansion into retail operations * New distribution channel (delivery) * Launch of Starbucks via Ready Brew instant coffee * Co-branding with other food manufactures| Threats * Increasing competitors with McDonald, Caribou coffee and Peet’s coffee in the broader market for specialty coffee. They are selling good coffee for better value * Coffee grain relies on international trade (Africa, Central and South America, and Asia-Pacific) * Negative publicity by coffee bean farmers in Africa due to fair trade conflict * Comply with international governments for production and distribution * Has become a luxury brand; thus, it is a brand that cannot be consumed by every consumer on a daily basis * Consumer trends toward more healthy ways and away from caffeine ( increased minimum wages in the US) * Consumer spending adversely impacted by global economic downturn|

Stages of Brand Development

Figure 1: Keller’s Brand Equity Model
1. Brand identity (who are you?)
Howard Schultz, the chairman of Starbucks said, “When...
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