Starbucks Coffee Company: Retail Successes and Challenges

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| RETAILING CASE ASSIGNMENT |

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CASE ANALYSIS:
STARBUCKS COFFEE COMPANY: RETAIL SUCCESSES & CHALLENGES

STARBUCKS COFFEE COMPANY: RETAIL SUCCESSES & CHALLENGES
Starbucks Corporation is a leading international coffee and coffeehouse retail chain based in Seattle, Washington, USA. Starbucks owns and operates over 6,000 retail stores and is the largest coffeehouse company in the world. Its annual sales in 2006 were $7.8 billion and it employed 140,000 people in 39 countries. Entrepreneur Howard Schultz joined the company in 1982 as Director of Marketing. He went on a buying trip to Milan, Italy. After the trip Howard Schultz advised that the company should sell coffee and espresso drinks as well as beans. The owners rejected this idea, believing that getting into the beverage business would distract the company from its primary focus. To them, coffee was something to be prepared in the home. HOW THIS ASSIGNMENT IS ORGANIZED?

1. What is Starbucks’ retail strategy? What is its target market and how does it try to develop an advantage over its competition? 2. Describe Starbucks’ retail mix: location, merchandise assortment, pricing, store design and visual merchandising, customer service, and the promotional mix – advertising, promotion, and personal selling. How does its retail mix support its strategy? 3. What factors in the environment provided the opportunity for Starbucks to develop a new, successful retail chain? What demand and supply conditions prevailed in the U.S. coffee market when Howard Schultz purchased Starbucks in 1987? What insight did Schultz have that other players in the coffee market did not? 4. What were the principal drivers behind Starbucks’ success in the marketplace? What does the Starbucks brand mean to consumers? How have the growth opportunities that Starbucks has purchased affected the value of its brand name? 5. What are the major challenges facing Starbucks as it goes forward? Is the brand advantage sustainable going forward? Can Starbucks defend its position against other specialty coffee retailers?

1. What is Starbucks’ retail strategy? What is its target market and how does it try to develop an advantage over its competition?

Starbucks retail strategy is simply to maintain customer loyalty and repeat business among its target market. I would say that the target market is upscale coffee drinkers. Starbucks maintains customer loyalty and repeat business by hiring and training new employees through a 24-hour training program that instils a sense of purpose, commitment, and enthusiasm for the job. These employees, called baristas (Italian for bartender), are knowledgeable to educate the customer and provide him/her the opportunity to take a break from his/her busy life to enjoy a warm, relaxing atmosphere.

In addition to its direct retailing activities, Starbucks entered into a strategic partnership with Dreyer’s Grand Ice Cream, Kraft Foods, Barnes & Noble Booksellers, Jim Beam, Unite Airlines, and PepsiCo to increase its brand awareness.

2. Describe Starbucks’ retail mix: location, merchandise assortment, pricing, store design and visual merchandising, customer service, and the promotional mix – advertising and promotion, and personal selling. How does its retail mix support its strategy?

The retail mix is a specialized form of the marketing mix for retailers. Like every retailer, Starbucks’ retail mix does support its strategy. Here’s a brief description of its retail mix: 1) Location – with regards to location, Starbucks conquers one area of a city at a time and then expands in the region, saturating a major market before entering a new market. Individual sites are chosen in visible places. Neighbourhood urban locations that attract customers in the evenings and on weekends are very important because they become part of the path of people’s shopping experience or their route to work. 2)...
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