Introduction to Starbucks Coffee (1)

September 8, 2017 | Author: Tushar Aggarwal | Category: Starbucks, Coffee, Strategic Management, Brand, Taxes
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Introduction to starbucks coffee Starbucks café is one of the famous places in London that doesn’t need any introduction. The Starbucks starts in Seattle in 1971.Jerry Baldwin, Zev Siegl, and Gordon Bowker had a passion for fresh coffee. They opened a small shop and began selling fresh-roasted, gourmet coffee beans and brewing and roasting accessories. The company did well, but things began to change in the 80s. In 1980's, Howard Schultz joins Starbucks in 1982. In 1990's, the demand for great coffee allows Starbucks to expand beyond Seattle, first to the rest of the United States, and then further a field. In 2000's, The Starbucks phenomenon continues. Starbucks has more than 6,000 locations in over 30 countries. In addition to the excellent coffees and espresso drinks, people now enjoy Tazo tea and Frappuccino ice blended beverages. The choice also includes organic and fair trade coffee made from a selection of beans sourced across the globe. There is also a fine selection of teas from fruit flavours to Earl Grey and a choice of hot chocolates. Cold drinks include mineral water and fresh fruit juices. The Starbucks experience also includes fresh and tasty snacks such as sandwiches, Paninis, pastries and cakes. Starbucks is the world's leading specialist coffee retailer, priding itself on great coffee and friendly service in familiar surroundings. It opens at 4.30 in the morning and gets closed at 8.30 in the evening. The latest Starbucks Reserve coffee is Rwanda Gakenke Fair trade. The coffees from Rwanda have been winning awards and capturing the attention of coffee enthusiasts around the world. They used many different components, blend them together, a little of this and a little of that. Two things for which they are known are “Aged Sumatra and sun-dried Ethiopian coffees.” Aged Sumatra is the cornerstone of two of the most popular offerings. These offerings are Christmas Blend and Anniversary Blend. Some of the most respected coffees in the past have been the sun-dried Ethiopian coffees from Harrar and Sidamo. They started with these two coffees. After many experiments, they came across two coffees: Colombia and Papua New Guinea. These two coffees added the brighter top notes. In this way, Starbucks Tribute Blend was born. It is also known as Three Region Blend that owns the OTRB (Original Three Region Blend) title from Starbucks. It’s a wonderful blend of coffees from East Africa, Central America and Papua New Guinea with lush floral and herbal notes. Starbucks VIA flavored coffee is an instant coffee with flavorful taste. It is made from the finest ingredient, such as molasses, Arabica beans, Korinji cinnamon. This coffee will become an essential part in breakfast. The down home feeling is a key part of the Starbucks brand in the US. Long before it was a corporate giant, Starbucks was a local hangout. One key brand aspect is the quality of the coffee. This sole aspect can create a hard core. Many coffee drinkers are visiting local

shops not just for the local brand, but for a superior cup of coffee as well. Starbucks may be harming their company by taking the focus off the main product. The Starbucks a natural fusion brings much enjoy emotion of holidays. Especially the aroma of cinnamon in the coffee will make the customers happy.

Marketing strategy “A marketing strategy is a process or model to allow a company or organization to focus limited resources on the best opportunities to increase sales and thereby achieve a sustainable competitive advantage “given by Paul Keetch .The Starbucks marketing strategy is not one commonly seen in many businesses today. Every business can learn from another, especially if a particular business is one that has displayed tremendous success over the years. Howard strongly believes in “Making Starbucks a Great Place to Work”. The Starbucks Corporation and its successful marketing strategies are definitely something that anyone interested in business can learn about. The sort of techniques the company use, and how they were able to reach out and attract millions of people world wide are the things which should be learned. Some of their best strategies are outlined below. •

“Perfect Cup of Coffee” – Starbucks history has shown that they place a huge emphasis on product quality. Their coffee, even if priced slightly more expensive than expected, is notorious for satisfying customers with its rich, delicious taste and aroma.

“Third Place” – From the very beginning, the Starbucks marketing strategy has focused on creating the “third place” for everyone to go to between home and work. Creating this unique and relaxing “experience” and “atmosphere” for people has been very important for the as they have realized that this is one of the strongest concepts attached to the company, to which customers have been strongly attracted.

“Customer Satisfaction” – Customer satisfaction is a very important issue with Starbucks. From entrance to the store to the very last drop of their coffees, it is a must that customers feel the uniqueness of enjoying their Starbucks coffee experience.

“Innovation” – Through the years, the Starbucks Coffee Company has been known to think up creative and innovative ideas to add to their products or services. They’ve added different flavors to their coffee, more food on their menu, and even became one of the firsts to offer internet capability in their stores.

“Brand Marketing” – The Starbucks marketing strategy has always focused on “word-of-mouth” advertising and letting the high quality of their products and

services speak for themselves. For years, this has been uniquely Starbucks, and it has played a huge part in making Starbucks Coffee Company a success. It is clear that the company has created greatly individualized marketing techniques to fit the promotion of the Starbucks brand as it applies to the unique concept it was built on. Nevertheless, the Starbucks’ marketing strategy has led the company to its current success. This fact is enough to realize that there can be much to learn from what this company has achieved to the benefit of many small businesses.

SWOT Analysis

Pest analysis Political / Legal Environmental regulation and protection

Economic Economic growth (overall; by industry sector)

Taxation (corporate; consumer)

Monetary policy (interest rates)

Social Income distribution (change in distribution of disposable income; Demographics (age structure of the population; gender; family size and

Technological Government spending on research Government and industry focus on technological effort

composition; changing nature of occupations) International trade regulation

Government Labour / social spending (overall mobility level; specific spending priorities) Consumer protection Policy towards Lifestyle changes unemployment (e.g. Home working, (minimum wage, single households) unemployment benefits, grants) Employment law Taxation (impact Attitudes to work and on consumer leisure disposable income, incentives to invest in capital equipment, corporation tax rates) Government Exchange rates Education organisation / attitude (effects on demand by overseas customers; effect on cost of imported components) Competition regulation Inflation (effect on Fashions and fads costs and selling prices) Stage of the Health & welfare business cycle (effect on shortterm business performance) Economic "mood" Living conditions - consumer (housing, amenities, confidence pollution)

New discoveries and development Speed of technology transfer

Rates of technological obsolescence

Energy use and costs

Changes in material sciences Impact of changes in Information technology Internet!

Product Starbucks tried to position themselves as a premium product in the coffee industry by creating a high standard, introducing innovative products and providing excellent service. They bought dark-roast, whole bean coffee from places like Sumatra, Kenya, Ethiopia and Costa Rica; roasted them in their own plants; and sold only through company-owned

stores. They used total quality management (TQM) in which all company’s people are constantly involved in improving the quality of products (Kanji, 1996). Usage of nonfat milk and introduction of Frappuccino made a significant presence in the balance sheet of Starbucks. Moreover, they provided seasonal offerings, such as strawberry and cream Frappuccino in the summer and gingerbread latte in Christmas, were introduced. Gradually food items such as cookies, pastries, sandwiches and salads made their way into the stores. Later they went on to develop new products with other companies. This shows how cautious Starbucks was to keep their standard high and maintain their premium quality image.

Promotion All marketing activities that attempt to stimulate buyer action or sales of a product can be considered as promotion (Shimp, 1997). Starbucks used to organize a big community event prior to the opening of its stores (refer case study). Artworks were designed to boast each city’s personality, and it was used on commuter mugs and T-shirts. They also recruited local ‘ambassadors’ from new partners and from customers to promote their brand (ibid.).They didn’t use advertising but they used those funds for acquiring key locations. Starbucks tried to establish a national dominance before other specialty coffee bars comes into the picture.

Customer Service Importance The lifeline of any business is its customers, because without them, the product or service remains unsold, production expenses remain unpaid and the pockets of those who should profit from it remain empty. Need for customer service Everyone has been a customer once in their lifetime. When one is at the receiving end, we always feel like we want to be given the best, to be treated well and with respect, and to get the right value for our money. We have the money that they need, and with that comes the power to be treated and served right. That’s mostly what every customer feels. So when they think that an employee or a business treats them for less than how they should be treated, they know they can easily go and find a better place.

Importance of customer service

According to a Business Case Study published on The Times 100, gaining one new client costs the same as keeping 5 regular and existing customers happy. It is so evident that a business with high quality customer service is more likely to keep up the profits and even increase it, than one without. Instead of spending much on reeling in new customers, use that money to keep regular customers happy and earn 5 times more! We all know how powerful word-of-mouth advertising is. Most people will go to places recommended and will avoid places with bad reputation. The most effective way of gaining that popularity and having those mouths mentioning the business is by excellent customer service. When customers are treated right, they spread the word. In itself it is free and effective advertising. Customer satisfaction is imperative to the success of any business, and the one way road to achieving that is high caliber customer service. In other words "There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else." Customer Services provided by starbucks coffee to meet and consistently exceed the expectations of the customer should be the objective that they set for their customer service. Most customers will not be back if they feel even the slightest bit that they were mistreated. The following are some keys they opt for good customer service. •

Know their Customer. They Develop and cultivate a relationship with their customers. When they and their staff develop rapport and cultivate a relationship with their customer this results in a more personalized service and a more satisfying experience for the patron.

Treat their Customer With Respect. They Deal with their customers honestly. If they lie to a customer and he finds out about it, they can be sure that they will not be seeing him again in their establishment. If a customer seeks their assistance about a product choice, they do not try to sell him a something which makes the best profit for them instead. They offer a product that will best suit his needs.

Train their Staff Well. They Train their personnel to care for their customers. If a customer needs something to which they do not have easy access, they go to extra mile to get him what he needs. This positive attitude will be conveyed to and be appreciated by the customer. This is an attitude which has already decided to do what it can for the customer.

Do Not Promise what they can’t deliver. A promise to a customer should be kept. They don’t promise something unless they can keep that promise. Broken promises will make customers feel betrayed.

When trust is lost it is extremely difficult to regain and sometimes even impossible.

Brand Logo •

In 2006, Valerie O'Neil, a Starbucks spokeswoman, said that the logo is an image of a "twin-tailed siren". The logo has been significantly streamlined over the years. In the first version, which was based on a 17th-century "Norse" woodcut, the Starbucks siren was topless and had a fully visible double fish tail. In the second version, which was used from 1987–92, her breasts were covered by her flowing hair, but her navel was still visible, and the fish tail was cropped slightly. In the third version, used between 1992 and 2011, her navel and breasts are not visible at all, and only vestiges remain of the fish tails. The original "woodcut" logo has been moved to the Starbucks' Headquarters in Seattle.

At the beginning of September 2006 and then again in early 2008, Starbucks temporarily reintroduced its original brown logo on paper hot-drink cups. In January 2011, Starbucks announced that they would make small changes to the company's logo, removing the Starbucks word mark around the siren and enlarging the siren image itself. Current 2011 redesigned logo.

Brand identity and strategy Maintaining an effective brand image is a challenging task, where a company needs to maintain the sense of momentum without losing a sense of continuity. The power of the Starbucks brand is exceptionally strong and has been imitated by numerous related and unrelated products and companies around the world. The expansion of Starbucks from just a small coffee provider into a global brand was swift and effective. Behind this global explosion lay the concept of a Starbucks brand, one which bombarded the customer on all five senses from the smell of the

coffee, the modern artwork on the walls to the contemporary music soundtrack and polished pinewood tables. The decline in sales was not simply due to exogenous factors: it represented the decline in the brand’s effectiveness. For the first time, the Starbucks brand has been forced onto the back foot. The elements added by the customer to the brand or product based upon their own experiences. A company cannot control what the consumer associates with the brand, it can only point them in the right direction. This research will therefore aim to investigate if the Starbucks decline resulted from a failure of strategy that led to negative associations being made with the brand. It is important to see how close the feedback loop is kept in Starbucks, in the extent to which the company tracks and reinforces customer perception of the brand. This research will aim therefore to examine the extent to which what Starbucks wants customers to think of them is matched by what customers really think of them. Though sounding simple, it represents a vital part of the branding exercise that can sometimes be overlooked by some, often very popular and successful, companies.

Network and Relationship marketing The importance of network and relationship marketing as a contribution to a company's sustainable advantage has never passed unnoticed in business. From a purely logical point of view, some come could argue that having a long-lasting relationship with customers is widely recognized for giving a company competitive edge, and therefore not be considered as a new phenomenon. “The relationship orientation is probably as old as the history of trade and commerce”. In the exchange of money for a given service, contact with the customer always occurs. “The customer has always to interact with the service provider in some way”, therefore every aspect of these interactions, in terms of quality output, must be closely audited by marketers in order to have a pleased customer that might eventually repeat business. The concept of relationship marketing has been widely used over the past decades evidence the importance of relationship marketing as a key factor in a company's quest to competitive advantage. Before defining Relationship Marketing, it might be appropriate to define what a relationship is. A relationship between customer and service provider exists when the customer understands that there is a mutual and shared way of thinking between the two parties. Fine-tuning with the customer is therefore of vital importance in a relationship marketing approach aimed at creating competitive edge over the competition. As a consequence to this phenomenon “the major focus of marketing programs has been to make customers buy regardless of whether they are old or new customers”. Only a small part of the marketing budgets were spent on the trial of maintaining solid and florid relationships with the existing customers. In regards to the optimization of such relationships and the consequent competitive edge they bring along, three main strategic and tactical elements for a successful relationship

strategy. These three tactical elements are, “to seek direct contacts with customers, to build a database and to develop a customer centric service system”. On the other hand, the three important strategic requirements in order to build a sustainable relationship strategy are, “to redefine the business as a service business, to look at the organization from a process management perspective and to establish a network to handle the whole service process”. Being ahead of competition requires a company to understand that customers look for a complete holistic service offering delivered in a “friendly, trustworthy and timely manner” Customer loyalty is cultivated by their trust being won on a continual basis by the company differentiating themselves from the competition. It is not the action, but the “intention behind the action that distinguishes a firm’s offerings”.

Total quality management Total quality management is defined as managing the entire organization so that it excels on all dimensions of products and services that are important to the customer. Two fundamental operational goals: Careful design of product or service Ensure consistent production of product or service Starbucks has never made a significant business mistake. If I were to pick one management system Starbucks follows, it would be Total Quality Management due to Starbucks focus on developing quality in its product, employees, and atmosphere. However, Starbucks never identifies real problems because before they can be real problems, management fixes them. It doesn’t deal with segmenting the Starbucks public and researching their likes and dislikes. Instead, everything revolutionary within the company seemingly occurs from one-on-one experiences with customers. If that were true, management would not be necessary. Total Quality Management relies on statistics and provides sufficient numerical analysis to explain the success of Starbucks’ management strategy. Schultz was struck by their knowledge of coffee, their commitment to providing highquality products, and their passion for educating customers about the merits of darkroasted coffees. Baldwin told Schultz, "We don't manage the business to maximize anything other than the quality of the coffee." Starbucks purchased only the finest arabica coffees and put them through a meticulous dark-roasting process to bring out their full flavors. He noted that the makers of supermarket blends prefer lighter roasts because they allow higher yields (the longer a coffee is roasted, the more weight it loses). Schultz was struck by the business philosophy of the two partners. It was clear from their discussions that Starbucks stood not just for good coffee, but rather for the dark-roasted

flavor profiles that the founders were passionate about. Top-quality, fresh-roasted, wholebean coffee was the company's differentiating feature and a bedrock value. It was also clear to Schultz that Starbucks was strongly committed to educating its customers to appreciate the qualities of fine coffees, rather than just kowtowing to mass-market appeal.

Viral and Guerilla marketing The viral marketing or viral advertising is promoting information or products that other customers are compelled to give to other friends, colleagues and family. By definition viral marketing is a way to promote a service or product exponentially. Starbucks Coffee Marketing is relying very heavily on social influence or viral marketing using networking media such as Twitter, Facebook, Linkedin, YouTube and other sites to do give away promotions, to communicate with followers and to influence consumer’s choices. Conversations about brands, products and services are increasingly woven into the interactions of social networks. These networking conversations have great influence even though readers often are not conscious of it. Followers do not always realize how much influencing they are doing and conversely how much they are being influenced when they have a conversation about brands across social platforms. Guerilla Marketing was coined by Jay Conrad Levinson in his 1984 book Guerrilla Advertising, this unique style of alternative Marketing relies heavily on energy and imagination, rather than big budgets and flashy effects. Guerrilla Marketing makes a far more valuable impression over traditional media, and achieves fantastic recall numbers by interacting with consumers on a personal level. The guerrilla-attack of the local coffee chain Auckland Coffee was sympathetic. They transformed public trash cans into coffee jugs. Around was written: `Coffee taste like crap?’ Follow that direction for a good cup or Java. Off course Auckland Coffee only redressed trash cans in front Starbucks-establishments. Or they just placed the jugs there. Some Starbucks-employees try to remove the texts from the trash cans made the guerrilla from this local coffee-thumbling against a worldwide coffee player even more sympathetic.

Porter’s Five Forces

Porter’s generic strategies Michael Porter has described a category scheme consisting of three general types of strategies that are commonly used by businesses to achieve and maintain competitive advantage. These three generic strategies are defined along two dimensions: strategic scope and strategic strength. Strategic scope is a demand-side dimension (Michael E. Porter was originally an engineer, then an economist before he specialized in strategy) and looks at the size and composition of the market you intend to target. Strategic strength is a supply-side dimension and looks at the strength or core competency of the firm. In particular he identified two competencies that he felt were most important: product differentiation and product cost (efficiency).

Effectiveness of e-marketing Starbucks on twitter – Starbucks utilizes eMarketing techniques, talking to customers on twitter, answering questions, retweets, what people are saying about the brand and creates an open communication channel to speak with the public. Twitter is an excellent coffee marketing tool. Starbucks on Facebook – Starbucks use of integrated eMarketing in its coffee marketing has worked very successfully. Starbucks uploads content to their Facebook page such as: Videos, blog posts, photos. The company also invites people to events. Fans have a place to open discussions and comment as many of them do. Starbucks on YouTube – Another Internet marketing tool is YouTube. Over 4800 people subscribe to Starbucks YouTube Channel. They upload videos of commercials as well as informational videos explaining the origins of the different coffee blends and some of their charity work videos. They also upload videos showing their history thus enabling people to relate more to the brand. This video showing the beginnings of Starbucks received over 11, 800 views: Starbucks also allows people to embed its videos anywhere they like on the Web. Many companies don’t allow this because they’re afraid their videos might end up on places they don’t want to be associated with. However, from Starbucks’ experience as well as the experience of other brands (such as Dell), this strategy has proven to only increase the positive exposure of brands that allow embedding and not the opposite. SOS eMarketing is an internet marketing business, specializing in food and coffee marketing utilizing email marketing, integrated eMarketing, internet marketing, and

social marketing tools.

Future In 2010 alone, Starbucks opened 1700 new stores, amounting to a total of over 15000 stores, and aimed to reach 40000 stores in the future. Considering Starbucks’ financial performance as well as the economic climate in the UK, it would be efficient for Starbucks to stop adding stores in the UK and instead work on renewing its brand and customer base. Starbucks is meticulously remaking itself as a coffee shop that does not outwardly appear to be governed by a Corporate Death Star. Furnishings are "salvaged." Lighting is "dimmed." The design is "low key." It "doesn't scream Starbucks." (It only cost several hundred thousand pounds to achieve that effect). And the most important innovation of the future: more dranks to drank. So we'll be able to go to Starbucks for our morning coffee; for our afternoon cheese plate; and for our evening wine, before retiring to our human-pod for some soothing Soma—in the future.

Conclusion Starbucks has been increasing its debt every year, and at a pace that is faster than their assets are growing (which is clearly unhealthy).This is why we chose for the firm to slow down its expansion and to focus more on marketing their products. In such a saturated market as the one that they are in Starbucks needs to focus on increasing consumer awareness and to decrease debt as much as possible. In closing we believe that Starbucks can become even more profitable if they slow down their expansion and concentrate on the stores that they already have open.

Recommendations 1. Revamp the employee reward system 2. Tighten focus on creating the “Third Place” environment 3. Focus profitability measures on profitable sales, not just reduction in staffing Revamp Employee Reward System •

Large percentage of the staff are under the age of twenty

Benefits package focuses on medical, dental, and vision care, as well as the employee stock options

Outside of hourly wage, and semiannual raises, there are few monetary rewards

Improve “Third Place” •

Environment Site has a very high employee turnover rate

Manager “promoted” to a another store in hopes of improving their poor performance

Site has very poor handicapped accessibility

Condition of restroom in each of our visits was poor and had no baby changing area

Focus Profitability Measures on More than Just Staffing •

Store is underperforming on some high margin product segments

Too high a focus on minimizing direct labor as a key to achieve profitability

Focus on high-margin items and profitable add-on sales

By increasing pastry sales by 33%, store would realize a $16K increase in contribution

Summary "Starbucks - Company Overview". Hoovers. Retrieved 2010-12-25, Starbucks is everywhere. The world's #1 specialty coffee retailer, Starbucks has more than 16,850 coffee shops in about 40 countries. The outlets offer coffee drinks and food items, as well as roasted beans, coffee accessories, and teas. Starbucks operates more than 8,800 of its shops, which are located in about 10 countries, while licensees and franchisees operate more than 8,000 units worldwide (primarily in shopping centers and airports). The company also owns the Seattle's Best Coffee and Torrefazione Italia coffee brands. "Company Profile". Starbucks Coffee Company. February 2008. Retrieved 2009-05-13, relates the Starbucks Story, Folklore, Starbucks Mission, Coffee and Stores. Schwaner-Albright, Oliver (2008-03-26). "Tasting the Future of Starbucks Coffee from a New Machine", The chief executive of Starbucks, dropped a bombshell at the annual shareholders meeting when he announced that as part of an effort to concentrate on making better coffee, the corporation had bought the Coffee Equipment Company of

Seattle, maker of the Clover coffee brewer.

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