STARBUCKS !SUCCESS IN A CUP

LEE MIN

INTRODUCTION

§  Top Coffee Retailer in the World •  15,000 stores in more than 35 countries •  US$11,411 million in revenue [2007]

•  Sales increase 20% a year

•  30 million customers visiting each week

§  High Returns •  1992: Investment of $10,000 in first public offering

•  2007: Receive $650,000

§  History •  1982: Howard Schutz joined

Starbucks in Seattle, Washington

•  1984: Struck Italian’s concept of “espresso” culture

•  1987: First cafe-concept store of Starbucks in Seattle

•  1992: Listed in Nasdeq [17 to 165 stores in 5 years]

FACTORS ATTRIBUTING TO SUCCESS

1.  Customization & Variety of Drinks

2.  Best Practices in Human Resource

3.  Placing Strategy

§  Handcrafted Drink •  Handcrafted by friendly baristas •  Extensive choice of 30 blends & single-origin coffee

CUSTOMIZATION OF PRODUCTS

§  Personalized Cup

•  Chic and easy Lingo

»  E.g. Iced Venti Java Chip Frappuccino, with whip

•  Customized cup in 7 easy steps

Ordering  a  Drink  in  7  easy  Steps:  1.  Hot  or  Iced  Drink?  2.  Size  3.  Drink  Beverage  4.  Wet  or  Dry  5.  Number  of  Espresso  

Shots  6.  Type  of  Milk  7.  Extra  DirecLons  

•  Within 4 main categories: Beverages [77%]

Food items [15%]

Whole coffee beans [4%]

Coffee making equipment & Others [4%]

77%  

15%  4%  

4%  

Starbucks: Retail Sales Beverages  

Food  items  

Whole  Beans  Coffees  

Coffee  making  equipment  and  others  

§  Product Offerings Available in Retail Stores

WIDE VARIETY OF PRODUCTS

CDs

Books

§  Other Products Available in Retail Stores

•  Joint Ventures with other organizations

-  Pepsi Co Inc

-  Dreyers Grand Ice cream

§  Product Offerings in Convenience Stores

DIVERSE DISTRIBUTION OF PRODUCTS

§  Products and Services Available to both consumer markets & Corporate Organizations:

•  Airlines - Supplies coffee & tea to United Airlines’ 75 million passengers

•  Office Coffee

- Provides coffee to thousands of company in US

§  7th on “Forbes List of 100 Best Companies to Work for, in 2007”

BEST PRACTICES IN HUMAN RESOURCE

§  Wide Range of Benefits •  Privileges included in program:

-  Paid holidays

-  Health care benefits

-  Optional employee stock ownership program

§  Mission Review Committee •  Employees are able to raise concern over issues that are

not in line with mission statement

- Eg: Insufficient paid leaves was brought up, and management responded immediately with extended 2 weeks leave

GENEROUS BENEFITS PROGRAM

§  Competitive advantage for Starbucks •  Employee turnover rate that is 120% less than industry average

•  Employees were encouraged to stay on to maintain service standard

“One of the reasons that Starbucks employees are often so pleasant and helpful is that Starbucks is a great company to work for. It takes cares of employees and treat us with respect… We’re encouraged to have a good time while we are at work, and that makes a huge difference in the atmosphere we create for customers.”

Starbucks partner, Joy Wilson

§  Training programs provided are fully-paid and consisting of:

•  Upon commencement of work

-  Coffee Masters Program – Encouraged to be real coffee experts

-  Re-training provided

TRAINING PROGRAMS PROVIDED

•  Before working in Starbucks

-  “Therapy-like” training program

-  Consist of knowledge and skills of the art of coffee brewing, coffee’s history

-  Known as baristas for upon completion  

§  Materials provided to employees •  Coffee Passport

- Green booklet with 104 pages

- Consist of all information on coffee farming, roasting, product offerings

- Expected to understand all information within first 3 months of work

•  “Find your Favorite Drink” booklet - Consist of coffee brewing lingos and product offerings

- Baristas required to taste the different product offerings offered , and recommend heir favourite customers

•  The Green Apron Book - Consist of the mission statement and core values to remind employees

- It is mainly to encourage employees to practice the 5 ways of being:

1.  Be Welcoming

2.  Be Genuine

3.  Be Knowledgeable

4.  Be Considerate

5.  Be Involved

§  The “Everywhere” strategy

“Blanket an area completely, even if the stores cannibalize one another's business. A new store will often capture about 30% of the sales of a nearby Starbucks, but the company considers that a good thing: The Starbucks-everywhere approach cuts down on delivery and management costs, shortens customer lines at individual stores, and increases foot traffic for all the stores in an area.”

Fortune Magazine

EXPANSION STRATEGY

STRATEGIC LOCATIONS §  Starbucks are strategically located in high traffic

areas with high visibility:

•  Location being the 1st Criteria accessed in Overseas Ventures

-  Locations are accessed by 3 criteria- Demographics, Branding potential's, Financials

-  Sites are ranked from A to D before chosen

•  Vital Success Factor

-  Customers were able to stop at a Starbucks easily

-  Having a Starbucks in an area is an indication that an area has arrived

CONDUCIVE ENVIRONMENT §  Starbucks retail outlets have an inviting atmosphere:

•  Attention to every Detail

-  Management aim to “offer everyone a sense of belonging”

-  Pay special attention to every single detail in store environment

•  Customize Design for Individual Store

-  A team of in-house designer and architects

-  Sites are ranked from A to D before chosen

CONCLUSION §  Starbucks have been successful and will continue to

grow in the future.

•  Aspired Long-term Goal by 2012

-  Tripling annual sales to $2.3 billion

-  Continuous expansion from 15,000 to 40,00 store worldwide

•  Suggestion to Aid Growth

-  More collaborations to produce more convenience food products

-  Increase sales of other products such as CDs, books

-  Continue projecting Starbucks as a way of lifestyle, instead of just “ another” cafe