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Starbucks Case Study

John Baab, Charly Costigan,
Tyler Kleckner, Ashley Kreuer,
Ellen Park, Ashley Wooding
 Outline

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× Gerald Baldwin, Gordon Bowker, and Ziev Siegl ± opened a small
coffee shop in Seattle¶s 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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× To satisfy customers and to create a ³third

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
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× Starbucks Share of Specialty Coffee Market 50% (estimate) ±

20.5% Total Market Share

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 Strengths

× Well developed and established brand

strategy: ³live coffee´
× Locations
× Product Mix
× ³Partners´
× 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

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