Business Case Study
Starbucks Corporation is a company and coffeehouse chain based in the United States. The company was established in the year 1971 sin Seattle, Washington. By 2019, Starbucks was reported to operate more than 30000 locations across the world. The CEO of Starbucks, Howard D. Schultz, changed his life from the poor working-class family through the establishment of his company to become the biggest coffeehouse firm across the world. After graduation, Schulz worked with Xerox as a sales manager and later joined a Swedish company known as Hamamaplast, that used to supply multiple appliances that involved selling of coffee machines to Starbucks. It is from this interaction that Starbucks caught his attention, and he decided to meet the founders of the company, Gordon Bowker and Gerald Baldwin. Schultz persuaded the owners to work as the director of retail operations and marketing in the company. During that time, the company had only three stores. Schultz later made a trip to Milan primarily to attend a global housewares show, marking the transformation of Starbucks. As he explored the place, Schultz came across small coffee shops, where the owners of such shops created personal relationships with their customers, where they would eve call the customers by their names as they served them café lattes and cappuccinos.
Schulz quit Starbucks in 1985 as the founders of the company rejected his Italian based coffee experience concept. It was from here when he decided to test his own coffee business named Il Giornale. He spent his first two years in his business replicating the coffee concept he gained from Italy. Starbucks was then purchased by Il Giornale in 1987. In the year 1992, the company became a public company, where, in June, it sold its shares on the New York Stock Exchange. In 2008, Schultz closed more than 7100 Starbucks stores, where he aimed at retraining the baristas, especially on how to produce the perfect espresso. The goal was o retain the quality of their product and provide their customers with the perfect coffee. The following two years saw the organization experience a massive turnaround, where the profits of the company in 2010 tripled from 315 million dollars to 945 million dollars. Starbucks has now experienced tremendous growth, and it now has annual sales of more than 16 billion dollars.
Sales and expansion
The initial founders of Starbucks, including Jerry Baldwin, acquired Peet’s in 1984. The overall sales of coffee in the United States during the 1980s witnessed a downward trend, although the specialty coffee sales found to increase. By the year 1986, Starbucks operates six stores located in Seattle. The company had just started selling espresso coffee. Starbucks was sold to the former manager of the company, Howard Schultz, where he rebranded his II Giornale coffee business as Starbucks, and he quickly started expanding the company. By the year 1989, the company had 46 Starbucks stores through the Midwest and Northwest.
When Starbucks released its initial public offer in 1992, it had 140 outlets. By September the same year, the share price of the company witnessed a 70 percent raise. In 2013, Starbucks made use of the mobile platform, where it initiated a campaign branded ‘Tweet-a-Coffee.’ The campaign also included the Twitter platform, and the company’s customers were allowed to purchase their friends a $5 gift card. The promotion saw an increase in its customer base, and the sales grew significantly.
Markets and products expansion
The initial stores of Starbucks Corporation located in outside North America were launched in 1986, in Tokyo, Japan. The Philippines was the third market where Starbucks opened its stores in 1987, and in the year 1988, the company entered the United Kingdom’s market through the acquisition of Seattle Coffee Company and rebranded it as Starbucks. The company opened its first in Australia in 2000, located in Sydney. The company also opened its first Latin America stores in 2002, and there more than 500 Starbucks locations in Mexico. In 2007, Starbucks also launched its initial Russian stores, which happened ten years after the company registered its trademark in the country.
Starbucks in 2008 began ‘My Starbucks idea’ a community website, whose design was to gather customer proposals and feedback. The company also launched a loyalty program, especially for those the Starbucks card users who are registered with the company, where they were provided with perks. The firm also started to test its mobile app for its compatibility with Starbucks’ card that the consumers of their products would access prepaid funds allowing them to purchase products from the company. The mobile app was ultimately released in 2011. Starbucks also purchased Teavana in 2012. The company entered the Vietnam market in 2013 and later the same year in Columbia. Starbuck also announced its intention to enter the Italian market in 2016.
Over the years, Starbucks has been involved in mergers and acquisitions that serve as a business strategy for growth. The company was aimed at broadening its range of products and services that would see the increase in sales and profitability margins. Besides, when Starbucks entered into mergers or acquired other businesses, it represented a strategy to reduce the expenses or reduce the risks associated with their operation by ensuring that they operate in a wider range of outlets.
The expansion into other markets was and is a key approach applied by the company. The company has since its establishment opened numerous stores across the world, reaching out to markets within other countries. Opening more stores in new market areas allows the company to increase its market base that translates to increased sales and profitability of the company. The growth of Starbucks can be attributed to its expansion approaches into markets outside North America.
Starbucks business situation
Starbucks maintains its position where it is recognized as the biggest coffeehouse company across the globe, which is achieved through innovative approaches that make use of the business strengths to overcome its weakness. Sit also focuses on exploiting the presenting opportunities to offset the threats in the industry. The business situation of Starbucks can be analyzed through the use of SWOT analysis model. The model evaluates the strengths, weaknesses, opportunities, and threats that are relevant to the company and also the external and internal environment.
Starbucks operates in multiple industries that present varied challenges in business growth. The variety of industries has witnessed an increase over the years since the business creates more products to primarily to complement its main coffeehouse business. For instance, the marketing mix of Starbucks corporation shows that the business has expanded its product offerings besides coffee, to include food, tea, as well as merchandise.
Strengths: this aspect involves the internal elements that a business applies as strengths when addressing the weaknesses and to safeguard the firm from competition pressure in the market. Starbucks currently enjoys a number of strengths, including strong brand image, moderate diversification through subsidiaries, and extensive international supply chain.
Weaknesses: Weaknesses describe the internal aspects of a business that reduce or restrict the capabilities of a business. Starbucks is characterized by various weaknesses such as high price points in its products, imitability of its products, and generalized standards for the majority of their products.
Opportunities: Opportunities describe the external aspects of the business that can be used for their growth and development. The primary opportunities of Starbucks include business diversification opportunities, Starbucks has the opportunity to expand into developing markets, and it enters into alliances or partnerships with other organizations.
Threats: Threats include the external elements that reduce or restrict the performance of the business. Currently, the business faces multiple threats in its industry, including imitation of products, increased competition, including low-cost coffee firms and independent coffeehouse movements.
Conclusion
Starbuck has witnessed significant growth over the years, including expansion into new markets and outside the North American market into other countries. Its expansion approach also included the purchase of other firms to increase their market base in the new markets. Starbuck operates in an industry environment that involves diverse challenges. Particularly due to the moderate diversification of the company. The issues faced by the company include imitation, competition, as well as social trends opposing global players in local markets. Nevertheless, the business has several strengths and opportunities that it can use to offset the threats and weaknesses that it faces.
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