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Starbucks Case Study

Members: Zhuldyz Ilyassova, Devendrasinh Adajania,Shubham Rana, Chakrapani

Kurra, Vikas Vipparla, Andrés Castillo, Ashish khari

Students Numbers:T00650013,T00614661,T00602306, T00612902, T00672334,T00670501,

T00692639
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1.Brief Introduction to Starbucks as a Company

Starbucks is an American company that is the largest coffeehouse chain in the world.

Three local merchants founded Starbucks in 1971 to sell high-quality whole bean coffee.

When Howard Schultz visited the restaurant in 1981, he planned to create a strong

corporation and expand the high-quality coffee business under the name Starbucks. Starbucks

aims to give high-quality coffee to its customers while also pursuing product innovation, store

expansion, and long-term service quality. The first Starbucks opened in Seattle. Starbucks

sells coffee and tea goods through other channels, and it also develops and sells bottled

Frappuccino® and Starbucks DoubleShotTM coffee drinks, as well as a line of luxury ice

creams, through some of its equity investors. Starbucks commits to providing the highest

standards of quality and service, while innovating to create new experiences to savor. In

addition, it’s not about the taste of the coffee that puts Starbucks to the top but rather the

quick service, easy ambiance and the culture it brings to people.

Starbucks' retail aim is to become the most popular coffee retailer and brand in each of

its target areas. The Company's retail expansion strategy focuses on increasing market share

in existing markets, particularly through the creation of new locations. Starbucks intends to

expand into new markets as part of this strategy.

Starbucks retail sites are usually in high-traffic, high-visibility areas. Downtown and

suburban retail malls, business complexes, and university campuses are among the locations.

Starbucks is dedicated to only selling the highest-quality whole bean coffees and coffee

beverages. Starbucks oversees coffee purchasing, roasting, and packaging to ensure

compliance with their stringent coffee standards. Green coffee beans are purchased from

coffee-producing countries all over the world by the company.

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2. Facts that contribute to Starbucks Success

Starbucks has achieved success by not only focusing on giving a quality product to its

consumers but also by going further and wanting to make Starbucks a place where people

enjoy the experience of being there either from music, smell, the customer's name misspelled

in their order, all are strategies to make people feel comfortable to be in this place and

consider it their third place “between home and work” (Transilvania University of Braşov,

2011) where they could spend more time to relax. Starbucks is so committed to its mission

that it even has a team that looks for the ideal music to put in its branches so that the customer

remembers the place and even asks for the music playlist. In addition, it has all the amenities

to make people want to spend more time there, such as a good internet connection, connectors

in strategic areas, customized DVDs, and a team dedicated to providing the best possible

service to increase customer’s satisfaction and attract more people (Bikker, 2019). Starbucks

also adopted sustainable practices such as using recyclable cups, paper bags, and systems to

save water and electricity since 2004 to have a positive impact in the world and to search for a

long-term sustainable business by introducing sustainable marketing into the business.

(DocPlayer, 2021) 

Starbucks has a consumer-oriented approach which means that its main priority is to

deliver high-quality value to its consumers because their needs and satisfaction are the

business's main priority as Howard Schultz the founder of Starbucks said “We are not in the

coffee business, serving people. We are in the people business, serving coffee" (Transilvania

University of Braşov, 2011) and that is why Starbucks has risen rapidly over the years with

approximately 30000 stores in 79 countries. Besides, each location that is going to be set up is

previously studied and determine how far the new branch have to be built up through a system

called Atlas, in order to not affect the sales of other close branches by leaving a reasonable
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distance from other locations to make the customer feel that they are always close to

Starbucks, and every time they built a new branch the Frappuccino effect occurs, which is a

real state phenomenon that raises homes prices that are near to a Starbucks.  (Bikker, 2019)

In essence, Starbucks has as their main priority to build a strong relationship with their

consumers through which they want to make them loyal to the brand, and this is attributed to

the consumer-oriented approach, the facilities, and the personalized treat they give to their

consumers. This way, Starbucks is sustainable in the long term due to the factors mentioned

above and the integration of sustainable marketing in the business.

2.1- Market Research questions

Survey
https://forms.gle/uxaWRk7rUkqN37949
Questions for the market research
1. How often do you go to Starbucks?

2. What do you like more about Starbucks?

3. On a scale from 1 to 10, how do you feel about the treatment received from Starbucks

staff?

4. Do you find that going into a Starbucks is a perfect place to relax and enjoy the

environment?

5. On a scale from 1 to 10, how comfortable do you feel in a Starbucks?

6. How would you rate Starbucks products? 

7. What do you think about Starbucks's prices?

8. Do you consider that Starbucks has all the facilities to work, study, and chill? 

9. On a scale from 1 to 10, how much do you like the personalized service that you

receive at Starbucks?

10. How easy was the process of ordering the product through the app?

11. On a scale of 1-10, how professional was the employee in their services rendered?
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12. Was the product received satisfactory?

13.  What can be considered a happy customer experience?

14.  How often do you enjoy our product?

15.  Which quality of the product do you enjoy the most?

16.  How well does our product do and how would you rate them in terms of service with

other competitors?

17.  In which segment would you recommend we could do better? (Can give like choices)

18.  What do you think in terms of quality when somebody mentions Starbucks?

19.  How easily accessible are our services to you?

20.  Which setting do you prefer and feel comfortable the most In-Store experience or

Drive-Thru experience?

21.  How well do you think our policies have adapted in the current Covid Scenario.?

22.  Do you find our safety protocols and measures comfortable and easy to follow?

23.  How would you like your experience in Starbucks to go?

24.  Do you feel that there is something missing in the way Starbucks follows its process?

25.  Would you go back to Starbucks if so why?

26.  How do you think Starbucks can improve your experience?

27. Do you think Starbucks executes orders on time?

28. What comes into mind when you hear the store Starbucks? What characteristics and

feelings does it portray? 

29. If you are a frequent customer to Starbucks Explain why you come back

30. Based on your experience would you recommend Starbucks to a friend or family?

3. SWOT ANALYSIS 

Strengths:

1.     Strong brand image 

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Starbucks is one of the most popular and loved consumer brands in the food and

beverage industry. Starbucks has approximately 33000 stores worldwide. Also, Starbucks

became successful at making coffee a premium product instead of a common everyday thing.

Moreover, it never stops maintaining its strong brand image via marketing and PR efforts. 

2.     Strong financial performance.

Starbucks has demonstrated powerful sales year over year. With annual revenue of

$28.5 billion and profit of $7.54 billion in fiscal year 2021, Starbucks proved a strong position

in the market. 

3.     Global supply chain

Undoubtedly, Starbucks has an extensive global network of suppliers. It sources its

coffee beans from regions across the globe, including countries in South and Central America,

Africa and others. 

5.     Employee treatment

Starbucks is known for treating employees well by respecting them and focusing on

their well-being. It provides a lot of benefits for its employees, such as free mental health

support programs, paid medical insurance and free drinks during a shift.  

6.     Strong loyalty program

Starbucks is also known for having an amazing reward program that makes customers

addicted to Starbucks. For example, for every $1 you spend, you get 3 stars. And after

collecting 150 stars you are eligible for a free drink at Starbucks. 

Weaknesses:

1.     High prices 

Starbucks is more costly than most of its competitors which lead to reduced

affordability for the consumers. Moreover, making coffee at home or office is much cheaper
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for people who see coffee as a commodity rather than a luxury. According to Business

Insider, Starbucks products cost 38% more than products sold by competitors. 

2.     Unhealthy choices

Many Starbucks products contain a lot of calories and sugars. It makes Starbucks

incredibly unhealthy if consumed often. For example, one Frappuccino drink at Starbucks

contains 85 g of sugar.  

3.     Imitability of products

Starbucks doesn’t own its most unique products in the market. Other food companies

and coffee shops offer almost the same products due to the fact that products can be easily

imitated. 

Opportunities 

1.     Expansion in developing markets

Starbucks has a lot of stores in North America and is growing in China. Starbucks can

use these successes as a model to expand to other developing and diverse markets. Expanding

more worldwide can lead to an even stronger worldwide reputation.  

2.     Partnership with other companies and brands

Co-branding and co-promoting other brands in its stores can lead to strengthened

presence and market share. It can also increase sales for both parties. 

3.     Coffee delivery service

Food delivery services have become more popular in recent years, especially after

COVID-19 pandemic. Starbucks should take advantage of that and partner with some delivery

services to deliver its products to homes, offices, etc. 

4.     Price differentiation
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Most products offered by Starbucks are quite high and some customers choose its

competitors since they’re less expensive. Starbucks could also look at more cost-effective

offerings that could appeal to cost-conscious drinkers. 

5. Coffee subscription

A lot of Starbucks competitors already practiced coffee subscription services, such as Panera

bread. Starbucks can also use this model to further expand its customer base and strengthen

customer loyalty.

Threats  

1.     Competition with low-cost coffee shops

The majority of coffee shops offer products at an affordable rate. This can possibly

threaten Starbucks’ future stability. 

2.     Competition with big outlets 

Competition with McDonalds can be a threat to its market position 

3.     COVID-19 pandemic 

Starbucks has temporarily closed a lot of its stores worldwide and 2000 stores in

China, which is half of all the stores in China.  

4.     Small local coffee houses

Small local coffee houses promote a more welcoming atmosphere and this marketing

segment can have even more loyal customers.  

5.     Easily imitated

As discussed earlier, Starbucks has a lot of drink and product options that are easily

imitated. To get rid of that threat, Starbucks needs to have products that can’t be easily

imitated. 

 Starbucks Marketing Mix 

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Products

The main product categories of Starbucks are espresso beverages, hot drinks, cold

drinks, Frappuccino blended beverages, cold brew, teas, muffins, cakes & cookies, breakfast,

lunch. Starbucks is known for its professionally roasted and brewed coffee, as well as its

different selections of cold sweet drinks, such as Frappuccino. 

Price

Starbucks uses a premium pricing strategy. Many customers have a perception that

quality products come with a higher price, and that is why Starbucks successfully uses this

pricing strategy. 

Place

Starbucks offers most of its products through the stores. Starbucks has a lot of stores

in more than 80 countries and has approximately 33000 stores across the globe. 

Moreover, Starbucks has developed a lot of apps that are created for busy customers that can

order online and get their drinks without waiting in the long queue. Starbucks also partnered

with delivery apps, such as Uber Eats to deliver its products.

Promotion

Starbucks uses a variety of promotional strategies. For example, Starbucks has a

reward program for its loyal customers mentioned above. For every $1 spent, you get 3 stars

and after collecting 150 stars you are eligible for a free drink.  Also, Starbucks is socially

responsible and that is also a very powerful promotional strategy. 

      Starbucks mostly invests in and prioritizes Social Media Marketing and consistently

delivers digital campaigns that engage existing and new consumers. Interestingly, Starbucks

does not do a lot in offline marketing, but on the other hand, they care about in-store features

that result in positive customer experience and satisfaction. 

Social Media Marketing

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     Starbucks uses social media platforms, such as Instagram, Facebook, and YouTube to

promote its products by consistently posting organic content. Also, Starbucks invests in social

media campaigns to target particular consumer groups and new audiences. 

Also, Starbucks cleverly makes use of user-generated content. Customers are

encouraged to post Starbucks’ products, merchandise and experience on social media.

Starbucks then shares this content on their official social media pages. Consumers whose

posts were reposted can feel more included in by the company, making them more likely to

buy their products in the future.  Undoubtedly, user created content is perceived as more

authentic than content created by the brand itself, which is a very smart marketing strategy.  

In-store Marketing

           Starbucks uses a lot of advertising efforts in store to promote new products and loyalty

programs to generate demand among existing consumers. Starbucks also uses the data

available from its store locations to conduct market research objectives. 

Competition is another online or in-store promotional strategy where consumers are

encouraged to post online about new store features, campaign banners, seasonal releases etc.

This strategy boosts discussion about the brand and by the hashtag it’s much easier to track

competition entries, digital engagement is easier to analyse. 

Mobile App Marketing

              Customers are encouraged to participate in loyalty programs and download the app to

be aware of all the exclusive deals and offers, sales, discounts, birthday gifts etc.

4. Major Issue

There are a lot of coffee shops throughout the world, so being able to stand out and

attract clients is crucial. Starbucks' key competitors are Dunkin Donuts, McDonald's in the

United States, as well as Costa Coffee and Caffè Nero in the United Kingdom, Starbucks' two
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largest markets. Starbucks must be aware of their competition and what they are doing at the

moment.

Starbucks coffees are also priced much higher than other market competitors and

Starbucks claims that this is only because they purchase the highest quality coffee beans for

their products. This high price difference is giving the competitors a cost advantage over

Starbucks. 

Starbucks' advertising marketing approach is also an impediment to the company's

growth prospects. They prefer to promote the drinks cup by cup with the customers to

establish the brand. The advertisement will run until they have consumed the coffee, which

will reduce the odds of attracting valuable clients. This is one of the reasons why Starbucks

prices are at a higher level than their competitors. Starbucks repeatedly claims that they limit

distribution of their coffee products to supermarkets because of being concerned with the

quality of the coffee resulting in higher prices. 

5. Minor Issues 

Starbucks 2016 Holiday Cup design:

Starbucks generally releases a new design of cups every November. However, in 2016

it came up with a unique design with a "mosaic of more than a hundred people drawn in one

continuous stroke," which created controversy. However, some groups understood this

differently, saying this was a war on Christmas. Even though it is not a colossal mistake

public interpreted it in different ways. 

Starbucks Logo and Nudity: 

  Starbucks name was inspired by the classic tale, “Moby-Dick”, evoking the seafearing

tradition of the early coffee traders. The First logo was of a mermaid in Greek methodology.

This logo is a mermaid of two tails and most of her nude body exposed.    
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Starbucks pollution:

Starbucks distributes over 6 billion throwaway cups and mugs worldwide each year,

the majority of which wind up in landfills or the environment. This shift in focus is a

significant step in reducing the brand's plastic footprint. Starbucks distributes roughly 6

billion throwaway cups and mugs worldwide each year, the majority of which wind up in

landfills or the environment, according to the firm. This shift in strategy is a significant step in

reducing the brand's plastic footprint.

Starbucks Labor Problem:

There are many investigations linked to found slave labor being present. Although

Starbucks states that, it had not purchased coffee from that coffee plantation. In a specific

report it is not the first time that autiros found slave labor at a Starbucks coffee farm. In

august of 2018, Repórter Brasil reported that 18 workers had been found in conditions similar

to slavery at the Córrego das Alma’s farm.  

6. Evaluate Each Course of Action

Evaluating course of action for Major Global Issue:

Major problem Competitors due to high pricing, turnaround time, and food availability:

The major problem with Starbucks in the market is price, as the products of Starbucks

are almost double the price of any other products of competitors. 

To adapt to this situation, Starbucks can follow the below solutions to reduce the cost of

production, which helps in reducing selling price. 

Currently, Starbucks buy their high-quality beans from the farmers. Instead, it can take

the agricultural land for lease and cultivate the coffee beans and maintain with reasonable

wages, reducing the cost of production. 

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On the other hand, it can get into derivatives future agreement with the farmers or distributors

for specific price to get the delivery in future depending on the market rates and fluctuations;

this strategy can reduce the loss for both the parties.

Starbucks has to follow better advertising strategies in this oligopolistic market,

different competitors offer different combinations; some provide meal and a coffee-like Caffe

Nero; some provide snacks and coffee, and some come up with wide verities of fast food like

Mc Donald's. 

So, to adapt to this condition in the market, Starbucks also has to start providing food

and coffee where customers can have a meal and coffee together as most of them prefer to do.

On the other side, Starbucks can collaborate with other brands in the market-leading in

the food industry and get into an agreement of selling their foods in Starbucks or Starbucks

products in their restaurants.

Starbucks has to open its own retail stores to make its products available to customers

more easily, or Starbucks can sell its products in supermarkets, hypermarkets, and retail

stores, making it more convenient for the customers to have their favorite coffee whenever

required. Customer convenience is essential in doing a business; customer or consumer has to

feel easy to gain access to the products they want and save their time.

Evaluating course of action for Minor Global Issue:

Starbucks 2016 Holiday Cup design:

         To address this issue, Starbucks can release plane cups by just changing the colors

every time, which will avoid any kind of assumptions among the public on the design.  

Or else, Starbucks can come up with more subtle designs keeping the different types

of customers in mind. Furthermore, the designs which can be more colorful, not inclusive of

any human characters or messages which provoke violence.

Starbucks Logo and Nudity:

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Starbucks would have immediately removed the logo and planned a different logo on

their cups altogether. And would have disposed of all the cups with the logo, which created

controversy.

Starbucks should have a well-established Research and Development team that can

analyze the local markets and regional differences before designing and releasing a product or

logo. It should have come up with more gender-neutral logos, which can avoid many

controversies due to misinterpretation and regional believes

Starbucks pollution: 

Along with this, Starbucks can request customers to bring their reusable mugs or cups

with them, reducing the usage of paper cups. In other words, Starbucks can also reduce the

thickness of the paper cups further to be easily decomposed in less time.

Starbucks can also use clay pots and cups, which can also be easily disposed of.

Recycling used paper or clay cups is also a good option, which can reduce manufacturing

costs and time, affecting the selling price of the product.

7. Recommend the Best Course of Action

Major Issue:

Coming to the major issue with the high price, Starbucks can get into OTC derivatives

agreements with all legal clauses included and trade on futures or options which are cost-

effective and consist of less risk to either of the parties. 

Starbucks providing both food and coffee is time and cost consuming activity, so it

can just tie up with any third-party food provider who can provide the other food products in

the Starbucks store, which can be sold to the customer along with the coffee.

Starbucks should also sell its products in super, hypermarkets, and retail stores to

efficiently reach customers. It also has to think about expanding business by mergers,

franchisees, and partnerships with famous local businesses.

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Minor Issue:

Starbucks 2016 Holiday Cup design:

Starbucks can come up with more subtle designs keeping the different types of

customers in mind. Furthermore, the designs can be more colorful but not inclusive of any

human characters or messages which provoke violence. 

 Starbucks Logo and Nudity:

Starbucks should have a well-established Research and Development team that can

analyze the local markets and regional differences before designing and releasing a product.

Because disposing and remaking the cups is time consuming and cost ineffective.

Starbucks pollution:

Asking customers to bring their own cups can sometimes leads to the downfall of

business as customers cannot always carry their cups with them. The best course of action to

avoid pollution is to use clay pots and cups, which can also be easily disposed of. Recycling

used paper or clay cups is easy and cost effective.

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