CASE 7: STARBUCKS

Submitted by:
SILVANO, MARITES A.
QUILIZADIO, JENEVA COREEN
ESPINOSA, JESSA C.

Submitted to:
GLADYS B. LAPAZ, MBA
Background of the Study
Starbucks Coffee Houses were started in Seattle, Washington, in 1971 when three young
men, Gerald Baldwin, Gordon Bowker and Zev Siegel, decided to try their hand at selling
gourmet coffee. Starbucks initially opened in areas of the country with cooler climates, coffee
homes are now located in most U.S geographic locations. They introduced an entirely new social
dimension to drinking coffee out of the home and a safe place where they can sit down and enjoy
coffee at leisure either alone or with friends. Howard Schultz, chairman and CEO of Starbucks
Corporation, attributes the company’s success to the experience created within the coffee houses
and the unsurpassed quality of Starbucks coffee. In a world filled with people leading busy
stressful lives, he believes that Starbucks has created a “third place” between home and work
where people can go for personal time out or to relax with friends. The coffee company has
opened full-service dining establishments in response to customers who wanted complete lunch
and dinners. The menu offers full meals, breads, pastries, alcohol, tea and of course, coffee.
Starbucks is tying online efforts to its central mission of building customer loyalty around
cappuccinos, lattes and other fancy beverages. Starbucks now runs simple, easy to use Internet
store that sells coffee beans, mugs, brewing machines and not much else.
Starbucks has decided to stick to its knitting, understand its core competencies, know
what the value proposition is for the customer, and do everything possible to get close to the
customer. Starbucks has succeeded in maintaining its competitive advantage by providing an
“experience” to the customer and locating in every nook and corner in major cities. Its strategy
seems to be working.
Starbucks SWOT analysis:
 Strength
1. Strong brand image
2. Extensive global supply chain
3. Moderate diversification through subsidiaries

 Weaknesses
1. High price points
2. Generalized standards for most products
3. Imitability of products

 Opportunity
1. Expansion in developing markets
2. Business diversification
3. Partnerships or alliances with other firms

 Threats
1. Competition involving low-cost coffee sellers
2. Imitation
3. Independent coffeehouse movement
Statement of the Problem

1. What should Starbucks do to continue growing its sales and profits, and evade against
imitation of products despite of many competitors?

Alternative Course of Action

1. Aggressively innovate, especially in the area of product development.

Advantage: Innovation can make the company’s products more difficult to
imitate.

Disadvantage: Riskiness and extra cost.

2. Starbucks should have another alternative for their expensive coffee and other products.
It should be affordable for everyone who loves coffee.
Advantage: Increase in sales because many consumers can afford, and it enable
for the company to get the customers loyalty.

Disadvantage: They will not cater most of the customer there might be complaint.

3. Create new flavors and drinks above and beyond the options they have now.
Advantage: The customer might like the new version of their product; it will
add the popularity of its brand name and it will cause the increase
in sale.

Disadvantage: Costly in terms of their new ingredients in formulating new flavors

or new drinks.

4. Starbucks must invest more in advertising and marketing initiatives.

Advantage: Increase competition in the market and the sale will increase.

Disadvantage: Increase in expenses.

5. Building the concept of on-the-go home delivery.

Advantage: Additional customer and in sale.

Disadvantage: Risky in terms of delivery especially in coffee or juices.

Recommendation:

We recommend all the Alternative Course of Action because in ACA no. 1, which
is aggressively innovate, especially in the area of product development is very important
to avoid imitation and to keep up with the modern product innovation. In ACA no. 2
Starbucks should have another alternative for their expensive coffee and other products.
It should be affordable for everyone who loves coffee. Many people prefer to drink cheap
coffee than expensive because it is the same, its just a waste of money for those people
who save money and through it, their sale will get increased because many people can
afford. In ACA no. 3 Create new flavors and drinks above and beyond the options they
have now. It enables for the company to level up their product and it can attract more
customers for the new invention they have. In ACA no. 4 Starbucks must invest more in
advertising and marketing initiatives, to attract more customers and for their product to be
unforgettable and because of that the sale and the profit of the company will increased. In
ACA no. 5 Building the concept of on-the-go home delivery, for those people who have
no time to go to the store or for those lazy people to go outside, so they can now make a
call and have a delivery through their home or offices. That’s why I recommend all of the
ACA because it’s very useful to continue growing the sales and profits of Starbucks
Company, and evade against imitation of products despite of many competitors.