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Case Study
Case Study
Case Study
Starbucks Coffee Company was founded in 1971, opening its first location in Seattle’s
Pike Place Market. It was named after the first mate in Herman Melville’s Moby Dick, is
the world’s leading retailer, roaster and brand of specialty coffee with coffeehouses in
North America, Europe, Middle East, Latin America and the Pacific Rim. Worldwide,
approximately 35 million customers visit a Starbucks coffeehouse each week.
Starbucks is all about purchases and roasts high-quality whole bean coffees and
sells them along with fresh, rich-brewed, Italian style espresso beverages, a variety of
pastries and confections, and coffee-related accessories and equipment – primarily
through its company-operated retail stores. In addition to sales through their company-
operated retail stores, Starbucks sells whole bean coffees through a specialty sales
group and supermarkets. Furthermore, Starbucks produces and sells bottled
Frappuccino coffee drink and a line of premium ice creams through its joint venture
partnerships and offers a line of innovative premium teas produced by its wholly owned
subsidiary, Tazo Tea Company. The Company’s objective is to establish Starbucks as
the most recognized and respected brand in the world.
In realizing and achieving this goal, the Company plans to continue to rapidly
expand its retail operations, grow its specialty sales and other operations, and
selectively pursue opportunities to leverage the Starbucks brand through the
introduction of new products and the development of new distribution channels.
Organizational Structure
Starbucks used the design of a matrix configuration by combining divisional and
functional structures. However, according to Starbucks Investor Relations, Jenelle
Ubigau, Starbucks does not have a formal organizational chart that is send externally
(as cited in www.qawire.com). In the case of Starbucks, the matrix structure is not
employed for the entire organization.
Marketing Policy
Starbucks customers are people of diverse ethnic, income and age groups with
varying tastes and interests. Starbucks embraces this diversity and strive to provide
excellent customer service to those served by offering products that are relevant to
customer base and their varying interests and tastes, including some products which
may appeal to young people.
Starbucks is marketing on the youth and long been supporting community
activities and events important to customers. Generally, the Company’s marketing,
advertising, and event sponsorship are not directed at children or to the youth.
The following are the new reviewed policies in realizing the company’s
consistency with their marketing principles.
Media Buying: Starbucks has instructed its advertising agency to select media
vehicles whose audience composition is closely aligned with Starbucks adult customer
base when it comes to planning and executing marketing campaigns in which paid
advertising media is used (www.starbucks.com).
Diversification
Starbucks find diversity as a guiding principle that is integral to everything that
they do. The company has a concept of diversity as people are all the ways different
but are the same. This concept includes human differences with regard to race,
ethnicity, gender, culture, and physical ability.
Just as critical to the company’s success as a global company is the idea of
inclusion, defined as a combination of differences and similarities in the pursuit of new
ideas and individual relationships made everyday.
Starbucks creates a place for customers to feel welcome, providing equal
opportunities and benefits to everyone of their employees and working with minority or
women owned businesses.
While Starbucks offers coffee to the world and is globally connected, the
company strives to meet and respect the interests of local communities. The
partnership with Magic Johnson’s Urban Coffee Opportunities helps introduce
Starbucks to ethnically diverse communities throughout the country, providing even
more places for people to connect.
Year 2002
Signed licensing agreement with TransFair Canada to bring Fair Trade Certified
coffee to more than 270 retail locations in Canada.
Reinforced its dedication to coffee producing countries and the farmers who
grow Starbucks coffee through an expanded line of Commitment to Origins coffees.
Tazo and Mercy Corps established collaboration for Hope and Advancement in
India (CHAI), a project to strengthen communities in the tea growing district of
Darjeeling where Tazo purchases some of the finest teas available in the world.
Year 2003
Year 2004
Signed licensing agreement to open Seattle’s Best Coffee cafes in more than
400 existing Borders Books & Music stores over the next several years in the
continental U.S. and Alaska, and within new Borders stores as they open.
Year 2005
Announced that the Board of Directors authorizes the repurchase of up to 5
million shares of the Company’s common stock.
Starbucks Board of Directors approves a two-for-one stock split. This is the fifth
two-for-one split of the Company’s common stock since its initial public offering in 1992.
Purchased 10 million pounds of Fair Trade Certified coffee and became North
America’s largest purchaser of Fair Trade Certified coffee.
Year 2006
Starbucks shares surged nearly 6 percent or $1.82, in late-session trading, after
falling 34 cents or 1.1 percent, to close at $31.36 1st of February on NASDAQ Stock
Market. The company, whose stock has traded between $22.29 and $32.46 over the
past 52 weeks, released its latest earnings after the markets closed (cited in Gillespie
2006).
For the 13 weeks ended January 1, Starbucks earned $174 million or 22 cents
per share, up from $145 million or 17 cents per share in the comparable period a year
earlier. Revenue for the latest quarter increased 22 percent to $1.93 billion, up from
$1.59 billion in the comparable period last year.
At about 560 new stores were opened in the latest quarter, bringing the number
of its stores to 10, 801 in 37 countries. Starbucks expects to open approximately 1,800
new stores globally over the next year, about 1, 300 of them in the United States and
500 internationally. According to Starbucks Chairman Howard Schultz in his conference
with financial analysts that the company has never been more enthused or confident
about the way in which it have been received and the ongoing profitability of the
international business (cited in Gillespie 2006).
Starbucks is not threatened with its competitors like the McDonald’s Corporation
which has been focusing more on premium roast coffee, and the Tim Hortons
Incorporated, a Canadian coffee chain that’s planning a bigger presence in the United
States.
Starbucks was called “a great global brand” by Mike Koskuba, an analyst in New
York-based Victory NewBridge Capital Management and added that the company
appears to be expanding at a prudent pace, especially overseas.
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