REV: SEPTEMBER 30, 2005
NANCY F. KOEHN
Howard Schultz and Starbucks Coffee Company
Prologue: International Expansion
On August 2, 1996, Starbucks Coffee Company opened its first store outside North America. Like many of its U.S. and Canadian outlets, the new store was located in a busy district of a prominent city—Tokyo. Starbucks managers had devoted much time to selecting the site, designing the store’s layout and fixtures, training its staff, and publicizing its introduction. A series of events, including receptions and public samplings, attracted consumer interest in the new store’s specialty coffee drinks, whole (unground) coffee beans, and pastries. For example, a man with a container of iced coffee in his backpack and a long hose poured shots of the cold beverage for passersby on the sidewalk.1 Chief Executive Officer Howard Schultz flew in from the company’s Seattle headquarters to celebrate the opening and observe consumers’ reactions. The new store was situated at a prime corner in Tokyo’s swank Ginza district. Surrounded by commercial activity, the establishment was bound to attract attention from thousands of pedestrians each day. In keeping with established practice, the company intended to rely on consumer word of mouth rather than on traditional advertising. The Starbucks brand had developed quickly in the United States and Canada, gaining widespread recognition and interest among consumers in these countries. In entering Asia, Schultz and his senior management team were betting that the company’s reputation would have broader appeal. As the store opening approached, however, the CEO could not avoid some last-minute worries about Tokyo customers’ response. “What,” he asked himself, “could the name Starbucks possibly mean to the Japanese?”2 August 2 in Tokyo was a hot day—95 degrees Fahrenheit with almost 100% humidity. “I had no idea Tokyo could be so hot,” Schultz remembered. But Japanese customers, he could see, were not deterred. Customers filled the store from opening to closing, lining up 40 to 50 people deep to try Starbucks coffee. Businessmen in suits came, as did elegantly dressed women and students with books and backpacks. Some customers bought Frappuccino® blended coffee drinks, which Starbucks had invented a year earlier. “We had been warned that, culturally, the Japanese refuse to carry to-go food or beverages on the street,” Schultz recalled. “Yet many customers were walking out the door proudly carrying their Starbucks cups—with the logo showing.”3 Over the following days and weeks, consumers of all ages continued to crowd into the new store and, at lunchtime, overflowed onto the sidewalk. Some came to buy coffee beans. Some came to sample the ambience in the city’s newest coffee bar. Others, who had heard of Starbucks, wanted to ________________________________________________________________________________________________________________ Professor Nancy F. Koehn prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. The case is based on her book Brand New: How Enterpreneurs Earned Consumers’ Trust from Wedgwood to Dell (Boston: Harvard Business School Press, 2001). Copyright © 2001 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.
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