10/10/2011 1

Starbucks Case StudyJ B, C C,

T K, A K,

E P, A W

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Background and History

Gerald Baldwin, Gordon Bowker, and Ziev Siegl opened a small coffee shop in Seattles Pike Place Market in 1971

Howard Schultz Joined the Starbucks marketing team

Traveled to Italy and became interested in the espresso bars and tried to bring it to America

Founders sold the company to Shultz

Began to open new stores and had 140 stores by 1992

Decided to take the company public and succeeded by opening more stores

Shultz continued to take the position as chairman and chief global strategist and hired CEO Orin Smith in 2002

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Mission/Vision of Starbucks

To satisfy customers and to create a third

place environment

Three components to branding strategy : the

coffee itself, service, and atmosphere

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Overview as of 2002

5,886 stores(4574 National, 1312 International)

Customers(20 million total, 570 per week per store)

Net Income of 215 million $

Customer Demographic (Traditional vs. New)

Menu (Average price of drink $3.85, 30 drinks, and 23 whole bean coffee blends)

Partners 360 total labor hours and an average pay rate of $9.00 per hour

Partnerships (Pepsi Bottling Co., Kraft Foods, and Dreyers Ice cream)

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Starbucks Share of Specialty Coffee Market 42%

(estimate) 13% Total Market Share

2002E - $21.5 Billion (total sales)

Specialty

Coffee, 31%

Traditional

Coffee, 69%

Specialty Coffee

Traditional Coffee

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2005E - $22 Billion

Specialty

Coffee, 41%

Traditional

Coffee, 59%

Specialty Coffee

Traditional Coffee

Starbucks Share of Specialty Coffee Market 50% (estimate)

20.5% Total Market Share

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Strengths

Well developed and established brand

strategy: live coffee

Locations

Product Mix

Partners

Customization of Drinks

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Weaknesses

Customization of Drinks

Caused tension between product quality and

customer focus

Increased menu size

Lacked a strategic marketing group

Very little image & product differentiation

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Opportunities

Increase Customer Satisfaction Customer Quota

Increase the number of stores Domestically/Internationally

Create New Products & Services

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Threats

Competition Donut & Bagel Chains

Small scale specialty coffee chains

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Problem

Key Problem: Maintaining a customer

focused brand image while continuing

expansion

Customer Satisfaction

Lost sight of the consumer

Lost connection between customers and

growing business

Service gap

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Existing Plan

Investment Plan

$40 million annually

Add 20 labor hours a week

Maintain 3 minute service time goal

Increase customer satisfaction

Goal: All stores achieve $20,000 increase

in weekly sales

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Reinvigorating a Customer

Focused Image

New Incentives for customer

Ideas: Drink of the day, membership cards,

serve at your seat

Incentives for Partners

Adding 20 hours during peak hours to maintain

3 minute time

More authority to regional retail managers

Install a rolling menu policy

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Maintaining Expansion

Moving into new domestic and international

markets

Not saturating existing markets

Instead: move into untapped domestic markets

and increase through put at current stores

through added hours

Advantages: Will appear more customer

focused locally, faster

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Recap

customer service

inovations

brand image

Marketing plan

Expansion

Domestic

International