Principles of Marketing
09 November 2004
I. Company History
Three Seattle entrepreneurs started the Starbucks Corporation in 1971the name comes from Herman Melville's Moby Dick. Their prime product was the selling of whole bean coffee in one Seattle store. By 1982, this business had grown tremendously into five stores selling the coffee beans, a roasting facility, and a wholesale business for local restaurants. Howard Schultz, a marketer, was recruited to be the manager of retail and marketing. He brought new ideas to the owners, but was turned down. Schultz in turn opened his own coffee bar in 1986 based on Italian coffee cafes, selling brewed Starbucks coffee. By 1987, Schultz had expanded to three coffee bars and bought Starbucks from the original owners for $4 million. He changed the name of his coffee bars from Il Giornale to Starbucks. His intention for the company was to grow slowly with a very solid foundation. He wanted to create a top-notch management by wooing top executives from other well-known corporations. For the first two years, Starbucks losses doubled as overhead and operating expenses increased with Starbucks' expansion. Schultz stood his ground and did not sacrifice long-term integrity and values for short-term profit. By 1991, Starbucks' sales increased by 84% and the company was out of debt. Starbucks grew to 26 stores by 1988. By 1996 it grew to 870 stores with plans to open 2000 stores by the year 2000.
II. Situational Analysis
The business strategy of Starbucks' is identical to the corporate level strategy since the company is a single business company, focusing on only coffee-related products and retail stores.
Starbucks corporate strategy has been to establish itself as the premier purveyor of the finest coffee in the world, while maintaining their uncompromised principles as the...