A Crack in the Mug: Can Starbucks Mend It?

Topics: Starbucks, Coffee, Coffeehouse Pages: 11 (3151 words) Published: October 6, 2012

This report was commissioned to find out a solution of Starbuck current losing dominant position in Coffee shop industry. The current issues were brought by 20 years phenomenal expansion, which is also the only way that a company must be passed.

The report draws attention to both of the company’s internal control and external environmental changes. Further analyzed company’s current situation by SWOT analysis and Market Mix analysis. Also, the report make a conclusion of 3 other strong competitor of Starbucks’, from a view of special ability and distribution channel using similarity and difference comparison method.

The report also evaluates Starbucks’ different type of targeted customers, and finding out differential way to promote them.

Products and service quality and licensing issues, which are brought by fast expansion, should be taking concern by partners. In order to solve this problem and reduce financial risk at the same time, this report have provide 3 alternatives, “Make the company franchises growth rate slow down; take control of the quality first. Qualify the licensing retail stores and share operating experience between these stores. Continuing provide variety products” is recommended.

1.Problem Statement
The Starbuck coffee shop has become one of an expending company in Canada. However, current marketing strategy cannot corporate the situation efficiently, the share price was decline sharply, the customer not as satisfied at the products quality as usual. In order to manage the licensing issues caused by the expansion circumstance, Howard Schultz, the CEO of the company is going to amending their marketing strategy especially in Operations.

2. Situation Analysis

2.1 Goals and Objectives
Keep the leadership of Howard Schultz.
Develop the quality of the products and services according to fulfill customer needs and better experiences. Remain the sales and profits retailing in North America, could take the chance of expanding if possible

2.2 Background
The Starbucks Corporation was founded in Seattle, Washington, in 1971 by Gordon Bowker, Jerry Baldwin and Zev Siegl. It was the most famous coffee company in the world initially as a coffee bean marketer. Howard Schultz then expanded the bean sales to restaurants and coffee bars. Carrying the different opinion with the partner, Schultz left the company, starting and expands his own company. After the company went really good, he purchases the Starbucks name from the original owners. During 20 years huge expansion, the company went public in 1992 and by 2007 had the sales of $9.412 billion. Schultz had been replaced as CEO in 2000 but returned to the seat in 2008. Starbucks only operate in US and Canada before 1995, however it was expansion in the 10 years up to 2008. From 2001 to 2008, the net income increased by more than three times, but the fast expansion also brings the company some big issues such as quality and licensing problems. Marco-economy also bring strong competitor in the industry, which should be cause partners concern. In order to adapt the changes inside and outside the company, the marketing strategies and operation model should be adjust by Starbuck.

2.3 SWOT Analysis
2.3.1 Strength
High employee engagement: Starbucks is on the list of “Fortune’s top 100 companies to work for” in 2007 Products varieties: the main product is Italian espresso and cappuccino coffee, but other taste of coffee and snakes are offered in store, such as sandwich, cakes, muffins, and so on. High margin

Own unique products such as “frappuccino” and has its own brand of ice-cream Customer loyalty: Starbucks treat it a good way with the customers which make the customer very loyalty to the brand. Successful advertising and operate strategies: Starbucks spent only $10 million on advertising in its first 13 years to 1996 but the efficiency is high, also its strongly promoted its...
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