Term Paper for Business Management

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Chapter 1: Introduction
1.1 History of Coffee
Evidence suggests that coffee was first discovered as a hot beverage in Eastern Africa during 11th century, in an area known today as Ethiopia. Today, coffee is a giant global industry employing more than 20 million people. This commodity ranks second only to petroleum in terms of dollars traded worldwide. With over 400 billion cups consumed every year, coffee is the world’s most popular beverage. In the United States, sales of premium speciality coffees have reached the multibillion-dollar level, and are increasing significantly on an annual basis. (Coffee Universe, 2011) 1.2 Formation of Starbucks

In 1985, Starbucks was formed under the direction and leadership of Howard Schultz. Schultz presently serves as the Chairman of the Board as well as leads visionary of the trade. Starbucks purchases, roasts and sells high-quality whole bean coffees primarily through Trade-operated retail stores. (Starbucks website, 2010) In addition, it sells fresh coffees, Italian-style espresso drinks, chilled and blended beverages, a selection of complimentary food items, coffee related accessories and equipment, along with a selection of premium teas and a line of compact discs, 1.3 Company Overview

The original Starbucks was formed in 1971 by three academics– English teacher Jerry Baldwin, history teacher Zev Siegel and writer Gordon Bowker who opened the first store in Seattle that they called “Starbucks Coffee, Tea, and Spice”. These partners named the brand Starbucks after the coffee-loving first mate in Melville’s Classic Novel “Moby Dick”. The name resonated with the romance of the high seas and seafaring coffee traders. The logo of Starbucks Company was based on an old 16th century Norse woodcut: a two tailed mermaid siren encircled by the Store’s original name The Company grew slowly and by the early 1980s had a roasting plant and 4 retail stores that sold whole-bean coffee in the Seattle area. Starbucks has been profitable every year since it commenced trading. In March 1987, Jerry Baldwin and Gordon Bowker decided to sell the whole Starbucks operation in Seattle – the stores, the roasting plant and the Starbucks name. Schultz raised capital and immediately bought the company. The new name of the combined companies was Starbucks Corporation. When Howard Schultz was 34 years old, he became Starbucks’ president and CEO. In 1989, Schultz brought in Howard Behar who was familiar with opening and running multiple units. The following year, Orin Smith joined Starbucks as their Chief Financial and Operations Officer. Both Smith and Behar were 10 years senior to Schultz and brought with them seasoned experience to help build the Company’s infrastructure. By 1991, Starbucks had ventured into the mail-order catalogue business, licensed airport stores, expanded into California and had just over 100 stores. The company went public in 1992. (Case GS-54, 2007) By 2005, Starbucks had more than 10,200 company operated and licensed stores in more than 35 countries. The stores offered coffee drinks, and food items, as well as beans, coffee accessories, teas, and music. Starbucks Corporation operated more than 5,200 stores in 10 countries (80% in the U.S. which were located primarily in shopping centres and airports), while licensed operators more than 2,800 units in 28 countries. . The company also owned and licensed the Seattle’s Best Coffee and Torrefazione Italia chain in the United States with more than 100 shops. In addition Starbucks marketed its coffee through grocery stores and licensed its brand for other food and beverage product. Most recent figures from January 2, 2011 show the total store count for Starbucks Corporation as 17,009; 8,870 owned stores and 8,139 licensed stores. (Starbucks Company Profile, 2011) 1.4 The speciality coffee industry and the Starbucks coffee Supply Chain The speciality coffee industry has grown dramatically, especially in the period between 1980s and 1990s. A...
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