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MarketLine Case Study

Starbucks Corporation
Business revival in recession
Reference Code: ML00007-027 Publication Date: October 2012

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Starbucks Corporation © MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED

ML00007-027/Published 10/2012 Page | 1

OVERVIEW
Catalyst
Starbucks Corporation (Starbucks), established in 1971, was named the “Number One World‟s Most Innovative Food Company” by Fast Company in 2012. This was attributed to the company‟s revival of its business during recession. This case study will examine how Starbucks was affected during the recession, the strategy used to pull the company back into profit, and the effects that this strategy had on the company.

Summary
 When Starbucks was first established it did not sell drinks; it was not until Howard Schultz bought the company in 1987 that it began to operate as a chain of coffee bars. The establishment of Starbucks as a coffee retailing chain marked the beginning of a new consumer trend.  Following the establishment as Starbucks as a coffee bar and the success that followed, rival companies began to emerge with a similar offering.  Prior to 2008, Starbucks had been growing rapidly in terms of store openings, revenues, and operating profit. However, this all changed as the recession hit and the company struggled to cope.  Howard Schultz has described how Starbucks became a victim of its own overexpansion. He stated that using growth as a business strategy as opposed to a tactic was a factor in the company‟s financial difficulties. Furthermore, mass branding became detrimental to the company.  Starbucks embarked on a new strategy to turn the business around. Schultz felt that there was no single solution to the company‟s problems, and that the company should shift its focus from expanding the brand to enhancing the brand.  A range of initiatives were introduced, including closing underperforming stores, expanding internationally, introducing new products and instore initiatives, and debranding Starbucks stores.  The strategy used by Starbucks helped to put the company back in growth and increase its brand value.

Starbucks Corporation © MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED

ML00007-027/Published 10/2012 Page | 2

TABLE OF CONTENTS
Overview ............................................................................................................................................................................. 2 Catalyst............................................................................................................................................................................ 2 Summary ......................................................................................................................................................................... 2 Analysis ............................................................................................................................................................................... 5 Starbucks established the first retail outlets of its kind..................................................................................................... 5 Howard Schultz transformed Starbucks ....................................................................................................................... 5 The new Starbucks format marked the beginning of a new consumer trend ................................................................ 5 The company expanded quickly ................................................................................................................................... 5 Other companies soon followed suit ............................................................................................................................ 5 Starbucks fell into financial difficulty...
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