Starbucks--Then and Now

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Starbucks—Then: In 2008, Starbucks was the world’s largest coffee retailer. Starbucks was known as the “third place” between home and work with its comfortable atmosphere. The company was environmentally, socially, and economically responsible, as they donated several dollars and community service hours. They had several training programs to be sure they enhanced their employee loyalty. There were convenient loyalty cards, which helped boost the use of technology.

As for the cooperative environment, this led way to several opportunities for Starbucks. Coffee drinkers were actually increasing in the mid 1990’s. The company picked up an alliance with SYSCO Corporation, as well as several licensing agreements with: Pepsi-Cola Company, Kraft Foods, Inc., Dreyer’s Grand Ice Cream, Inc., and Jim Beam Brands, Inc. This helped Starbucks distribute its products; not only the in-store coffee experience, but the bottled products, packaged products, ice cream, and its premium liqueur products. This helped with profit, and between 1997 and 2007, revenue continued to increase. But as time went on, a few factors caused Starbucks’ stock price to drop.

The political environment is where problems began to occur. Since Starbucks kept expanding its stores, consumers lost recognition towards the company. Previously, if a store was being added in the area, consumers would become excited; however, Starbucks became over-saturated, and its customers lost the excitement of the new stores.

Competition also drove the decrease in stock prices, and it was not exactly because Starbucks was striving for the best coffee. Starbucks was already the largest supplier of coffee in the world; however, the company tried to be more like its competitors and vice versa. The success of Starbucks encouraged competitors to focus on coffee products and new restaurants. This is when McDonald’s began emphasizing on the quality of their coffee and when Panera opened café-style coffeehouses. Starbucks also began competing with McDonald’s by adding hot sandwiches and bakery products, which essentially made it seem more like a fast-food restaurant. Starbucks also traded in its comfy chairs for plastic ones, which gave away the quality of the coffee-drinking experience. Lastly, drive-through windows were added which sped up service and forced consumers to view Starbucks coffee as more of a commodity. This also changed the view of their employees from knowledgeable coffee experts to regular order-takers. Starbucks also did not offer any discounts, sales, or special prices. All of these factors in the competitive environment seemed to have switched the whole meaning of Starbucks.

The target market for Starbucks is the out-of-home coffee consumers. These consumers are looking for a place with a comfortable atmosphere—a “third place” between home and work; however, this is beginning to be taken away by adding drive-throughs, etc. As for the company itself, net revenues and net earnings continue to increase year-to-year, as well as the number of stores in the United States and internationally; however, as mentioned before, stock prices were decreasing. As for the product, Starbucks’ product line offers more than 30 blends of coffee, as well as espresso, tea, and frappuccino. Starbucks—Now: In 2011, Starbucks has a much hoped for turnaround and is beginning to increase its profits. Stores are now international, and underperforming stores in the United States were closed. Starbucks even introduced a $25 Gold Card, which offers customers ten percent off all items (Harrer, 2010). Starbucks still plans to grow business in the U.S., while implementing new store designs, increasing drive-through business, and several new products (Penney, 2010).

Social factors affecting Starbucks is people going green and wanting to preserve the planet. Starbucks has a partnership with Conservation International to focus on their environmental protection, as well as one with Green Teams to...
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