Starbucks Case Study

Topics: Coffee, Starbucks, Brand Pages: 17 (5523 words) Published: April 27, 2015

Starbucks Case Study

Katelyn Peyton
GBA 490-008
March 11, 2015

Executive Summary

Industry Analysis

When Starbucks was founded in 1987, the company established its signature—a cross between a retail coffee bean store and an espresso bar/café. Because of this, the company finds itself positioned in many different industries. Due to the wide variety of services the company offers, they are positioned in the retail coffee and snack shop industry as well as the fast food service industry. Starbucks changed the retail coffee industry by developing a strong brand image and changing the way that coffee is sold and enjoyed. They focused their efforts on mirroring the atmosphere of Italian espresso bars. They placed value on the experience customers had through making sure that their employees not only provided outstanding customer service, but also were knowledgeable about the product and the company. By turning coffee drinking into a more full and upscale experience for the customers, they changed the game and established their strong brand equity in the market. There are many parallel industries of coffee consumption. Coffee is mostly consumed in the home, but it is also consumed at the office, in a storefront location, or while traveling. By developing such a strong and unique brand image, Starbucks was able to penetrate all of these industries. Starbucks has positioned themselves in the home and the office through their retail services with not only their coffee shops, but also their direct sales of packaged coffees to supermarkets and warehouse clubs. They entered the market for instant coffee with their VIA Ready Brew products, which were sold in many grocery, mass merchandise, and drug stores. They further penetrated this market through the development of Starbucks branded coffee K-Cup Portion Packs for use with Keurig Single-Cup Brewing systems, and Starbucks branded Vue packs for use with the Keurig Vue Brewer when it was released. When the industry for quick and ready to go products became more necessary and prevalent, Starbucks also entered this by creating ready to drink beverages. They also entered the travel industry through licensing agreements with Marriott Host International in 1995 to operate Starbucks retail stores in airports. Shortly after, they established a new initiative to begin marketing Starbucks coffee to many different airlines and hotels to further penetrate this industry. With their well-established ambiance and customer experience, Starbucks dominates the coffee shop industry, however, the industry fluctuates with the economy and the industry experienced a major decrease during the economic crisis in 2009. Starbucks is positioned in many different industries, and through their innovation and forward thinking, they are able to position themselves in the new and growing industries as they come along, and set the standards for their competition to meet.

Strategic Issues

Like all companies, Starbucks is faced with strategic issues, and like all companies, they have to evaluate their options for solutions and choose the best direction to take. Starbucks has 4 major strategic issues. Their first issue is their inflexible pricing. This is due to their purchasing strategy that includes standards to ensure that suppliers are paid enough to cover their production costs and provide for their families. The second strategic issue that Starbucks faces is oversaturation of new store locations. This causes the cannibalization of sales from existing stores, which in turn negatively affects the average sales per store. A third strategic issue within the company is the inconsistency and inadequate positioning of people in leadership. The constantly changing allocation of leadership causes problems, as well as having the wrong people in the wrong positions at the wrong times. The fourth and final strategic issue is international expansion. International expansion poses...
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