Starbucks: Company Profile

Starbucks Corporation is a Coffee company based on Washington. It buys, roasts, and sells whole bean through an international net of outlets.Starbucks, from its inception as a seller of premium and packaged coffees, is emerged in a firm known for its coffeehouses, people can buy beverages, food items and packaged whole bean and ground coffee.. The credit goes to Starbucks as it has succeeded in altering the way American and other people of the world-sees and consumes coffee, in this way it has attracted world attention.

Globalization:

Starbucks has evolved one of the fastest flourishing companies not only in the United States but throughout the world. Starting from 1992, the company’s net revenue improved with annual growth rate of 20%, to $3.3 billion in fiscal year 2002. Gross earnings have improved at yearly growth rate of 30% to $218 million in fiscal 2002, which is the highest net figure in earning of company’s history .

On Wall Street, Starbucks is last top story in growth. Considering its stock, including four splits, has been increased more than 2,200% over the past ten years, beating IBM,Coca-Cola, PepsiCo, General Electric and Wal-Mart, in aggregated return. Now at $21 in September 2002, it is hovering near its all-time high of $23 in July 2002, before it drops overall market .

Benefits and challenges of globalization strategies and related theories:

To keep fast pace of growth, the senior executives of the company are looking to expand globally. Particularly, they are interested in further expansion to Europe , Asia Pacific, Middle East and Latin America. Expansion to such a limit is really a challenge as well as opportunity to Starbucks. While the opportunity of more revenues from more expansion is quite apparent to the top management of the company, what is unclear is how to cope with the growing sentiments against globalization around the world.

Effectiveness and Efficiency of existing operations:

This case of Starbucks sees at problems that are arising as Starbucks starts to dominate coffee markets around the world and explores the changes which might be required in strategy.­­­­­

The 25-year goal of the company is to achieve an enduring, and the most respected and recognized brand in the globe, recognized for encouraging and nurturing the human sprit. The mission statement of the company is to articulate several guiding principles to gauge the appropriateness of firm’s decision. In describing Starbucks’ genuine approach towards competition.

The strategy is straightforward: Blanket an area altogether, even if the stores cannibalize each other’s business. A new store will often manage to capture approximately thirty percent sales of a adjacent Starbucks, but the company takes this as a good thing: The everywhere approach of the Starbucks cuts down the costs management and delivery, it shortens purchasers lines at individual stores, and augments foot traffic for all the stores in the area.

Last week 20 million people purchased a cup of coffee at a Starbucks. No American retailer has a highest number of customer visits. An average customer stops about 18 times a month; since the company went public, sales have increased to an average of 20% a year. Even in down economy, Starbucks traffics have risen between 6 to 8 percent a year. Perhaps even most noticeable fact that Starbucks has managed to produce those kinds of the numbers with virtually no marketing by giving just one percent of annual income on advertising.

Strategic Alternatives available to Starbucks:

For several Years, Observers have found that US coffee-bar market is being saturated now. They think it market consolidation, as larger players of coffee bar snap up some of the smaller ones. More, they take a note that Starbucks’ store base is also getting mature, and reaching to slowdown in profitability of firm and growth volume unit. In reply of that, some point, Starbucks has changed its direction towards foreign markets for the continued growth. For example Business Week notes:

To compensate the staggering returns of its initial decade, Starbucks has got no option for its concept to be exported aggressively. Infact, some observers give Starbucks 2 years maximum before U.S. market gets saturated. Now 1200 outlets are operating internationally in the chain, from Beijing to Bristol—-Aug 2002,this gives huge room for grow. Infact approximately 400 or its planned 1200 new stores in this year would be constructed overseas, which will represent a 35% rise in its foreign base. Starbucks hopes to double the quantity of its stores globally, to about 10,000 in 3year period.

Consolidation and product market development alternatives for Starbuck:

Starbuck with its more 7500 shops throughout the world from the united states of America to the Asia and middle east is one of the very well known brand which deal is retail business especially famous for its Coffee. Starbuck is not only the retailer of coffee but its sales coffee for drinking with in bottles ( like star bucks Frappuccino and starbucks double shot etc.

We can guess the extend of the starbucks popularity and expansion from the fact that starbucks is opening almost three stores in a single day which is amazing and thats makes it revenue to grow constantly but in order to manage that profitablility starbucks need to implement a policy which is focused on constant and product and market development.

One of the important thing which came to our attention when we study the product and market development strategies employeed by starbuck is shown from the fact that starbuck has till now focus on expansion which is financed through its own cashflow and has not relied on or consider entering into the franchise agreement or retailing stock or any other option which would have affect its strategies financially as well as operationally.

The benefit of this product and market strategy was seen as a result of this strategy starbuck has efficiently manage the effectiveness of operation through less consumer lines at starbuck’s shops and help starbucks attract and increase the foot traffic on its premises while together with all of the se help reduce the delivery as well management expenses and together with all of these factors severs for the starbucks and give it a competitive edge which no other competitor enjoy.

But as star bucks is growing very rapidly, starbuck’s need to enter and launch new products markets which expose starbuck’s to all kinds of the product which meet the consumers requirement and help starbucks maintain its market share.

Starbucks is going quite well to become a global brand. The name and image of Starbucks is associated with millions of people around the world who consume its products. In Business Week survey of the top hindered international brands published in August 5 [2002] It came one of the rapidly growing brands. In a time when successive corporate star collapsed to floor, brought down by executive class greed, earning misstatement or worse, Starbucks hasn’t faltered. But being an international company is not risk free. As Business Week points out,

Global expansion carries threat for Starbucks. For one thing, it earns decreased money on every overseas store as local partners run them in majority. While this makes easier to begin on foreign turf, it decreases only 20 to 50 percent profit of company’s share.

In its aim to continue to grow more and capture market share Starbucks develops a range of new products to satisfy the taste of all kinds of customers.In its early days Starbucks has introduced a kind of wide range of Italian coffee with a topping of fothered milk which they called Frappuccino.Now the starbucks faces a challenge of promoting its frappuccino range coffee from other drink brands,they have to develop marketing strategy so that the customers can easily recognise their new product and easily distinguish them from other brands.which ultimately results in its success.

– The Frappuccino range have been developed by having one aim in mind to satisfy the needs of non coffe drink customers.These customers are very curious about the food quality and standard.As a result of its successful marketing strategy for promoting its Frappuccino range they got a name like summer drink which is a non coffee iced drink.Thus starbucks has develop a new market segment of non coffeed iced drink.

– With the expansion of its non coffee iced drink starbucks faces a fierce challenge from the competators like Jamba Juice, Orange Julius and other local non-coffee iced-drink companies.At this point starbucks start focusing on the methods to reserve its brand equity.

In order to further enhance its non coffee range starbucks has started introducing new flavours in its Frappuccino range like double chocolate chip crème ,strawberries and cream, vanilla bean cream which they named summer drinks which distinguish starbucks summer drinks from other holders in that market segment.

Finally they results are paid in terms of profitability for the high quality drinks.Starbucks become successful in retaining its brand loyality and its been perceived by the customers as a friendly atmosphere place having good customer service, good music and comfortable chairs.further more Starbucks start implementing strategy in its outlets in taking into account the cultural like and dislikes to retain its brand loyality.

As a result of Starbucks Frappuccino range they have succeed to attract customers from all races and background as well as new customers. Two national chains named Dunkin’ Donuts and Krispy Crème are the largest competitors and they compete on aggressive price cutting strategy which is roughly about 20%.Some contestants are local coffee houses and coffee brands like Tully’s and Pete’s Coffee which compete on development of new product lines.

One of the starbucks strategy to retain its customers Starbucks teamed up with bank to propose the Starbucks Card Duetto Visa. Thus beside a coffe spot Starbucks teamed up with a T-Mobile to facilitate its customers which enjoy its products as well as internet free of charge.

Starbucks in its initial years 1-3 years focus on developing products and brands names.The marketing strategy of starbucks is that they heavely invested on their stores because the stores are the largesr source of advertising for them as clearly been shown that the 70% of the stores that the open in their initial years (3) are the biggest brand builders.

Starbucks is now operating globally with 62000 employee and serves roughly about 22 million customers weekely basis outside north American region where as10 years ago they have merely about 125 stores and hired 2000 workers.Their customers come from all back bround and ethinicity.Its been shown in one of their studies that have the 7% share of the amount of the coffee consumed by the customers globally. Therefore it can be said that we have a model which is tested well enough in the markets.

Our attitude towards international expansion is to put focus first on the partnership, and country second. We believe in local connection to acquire everything up and working. Finding the correct local partners is the key to negotiate local regulations and others problems. We search for partners who are common in our values, culture, and motives about community development. We are basically interested in partners who could guide us in the process of initiation in foreign location. We are searching the firms with: (1) the philosophy similar what we have in terms of corporate citizenship, shared values and determination to remain in the business for long haul, (2) experience with multi-unit restaurant, (3) For the prevention of imitators, having resources to expand the Starbucks concept rapidly., (4) To pick prime real estate locations, having strong real-estate experience along with knowledge, (5) Must be having knowledge of retail market, and (6) provision of the people with determination and commitment to our project.

In a global joint venture, partner is the one who chooses store sites, does all the preparatory and selection work, which are then submitted for approval to Starbucks. Cydnie Horwat, VP for International Assets Development Systems and Infrastructure, elaborates the way Starbucks market entry plan initiated brand building, which afterwards makes it easy for further progress in the country: