Case study of Starbucks coffee

CASE STUDY: STARBUCKS COFFEE
BY: KATHLEEN LEE
GRC 411

CASE STUDY: STARBUCKS
KATHLEEN LEE
1
Brief History:
The first Starbucks location opened in 1971. The name is inspired by Moby Dick’s first mate.
This name and the mermaid logo were inspired by the love of the sea, from Starbucks original lo-
cation in Seattle Washington in the heart of Pike Place Market. Starting as a single shop special-
izing in high quality coffee and brewing products the company grew to be the largest roaster in
Washington with multiple locations until the early 80’s. In 1981, current CEO Howard Schultz,
recognized a great opportunity and began working with the founder Jerry Baldwin. After a trip
to Italy to find new products, Schultz realized an opportunity to bring the café community en-
vironment he found in Italy to the United states and the Starbuck’s brand we know today began
to take form. Selling espresso by the cup was the first test. Schultz left Baldwin to open his own
Italian coffee house Il Giornale which found outrageous success and in 1987 when Starbucks
decided to sell the original 6 locations, Schultz raised the money with investors and purchased
the company and fused them with his Italian bistro locations. The company experienced rapid
growth going public in 1992, and growing tenfold by 1997, with locations around the United
States, Japan and Singapore. Starbucks also began expanding its brand. According to George
Garza in his article The history of Starbucks the following product lines were added:
• Offering Starbucks coffee on United Airlines flights.
• Selling premium teas through Starbucks’ own Tazo Tea Company.
• Using the Internet to offer people the option to purchase Starbucks coffee online.
• Distributing whole bean and ground coffee to supermarkets.
• Producing premium coffee ice cream with Dreyer’s.
• Selling CDs in Starbucks retail stores.
Starbucks uses minimal advertising and has grown on word of mouth and brand recognition.
According to Garza by 2004 Starbucks had reached 1,344 locations.
(Garza)

CASE STUDY: STARBUCKS
KATHLEEN LEE
2
Updated history and Current Status
Today, according to the Starbucks website, they have 16,706 stores (as of Dec. 27, 2009) in 50
countries. In 2009 they made strives socially as they opened the Farmer Support Center in Ki-
gali, Rwanda and became the world’s largest buyer of Fair Trade CertifiedTM coffee.
Their mission statement from the company profile is as follows:
“Our mission is to inspire and nurture the human spirit – one person, one cup, and one
neighborhood at a time.”
Their core competencies can be defined as high quality coffee and products at accessible loca-
tions and affordable prices, provided a community to share in the coffee drinking experience,
and variety of choices. The also value ethics and good business practices and are a leader being
voted one of 2010’s most ethical businesses by Ethisphere magazine for the 4th year running.
(“Starbucks”)
Starbucks is facing its own struggles however as it saw sales start slipping before other com-
panies did in the recent recession. According to Melissa Allison in her article Starbucks has a
new growth strategy — more revenue with lower costs, Starbucks has closed 900 stores and
eliminated 34,000 jobs. Starbucks new strategy is to refocus on some of the areas that decrease
risk and up front investment. This includes expanding foreign stores, with aid of partnerships
that share risk and costs, selling VIA instant coffee and other products in retail and convenience
stores, and reinvigorating the Seattle’s Best Brand coffee.
A statement from CFO Troy Alstead this March paints this picture:
“We clearly hit a wall and didn’t do very well in the 2007/2008 time period. From here
forward, when we grow Via, Seattle’s Best Coffee and consumer products, there’s less
investment for each dollar of revenue.”

CASE STUDY: STARBUCKS
KATHLEEN LEE
3
This new strategy has inspired some optimistic feedback. Morningstar investment research firm
has increased estimate of Starbucks shares from $4 a share to $24 after the statement of revamp-
ing the brand.
Morningstar analyst had this to say R.J. Hottovy.:
“I’m surprised it wasn’t ramped up in earlier years. Product innovations and internation-
al expansion not only make the business potentially more profitable, but defend them
against competition.”
International partnerships increase challenges but also create new ideas in new markets that can
then be translated back to US markets. (Allison)Introduction Growth Maturity DeclineStarbucks Lifecycle
Starbucks in a mature stage of its lifescycle. It was founded over 20 years ago and it has expe-
rienced rapid growth in the last 2 decades. However within the last few years its growth has
slowed and has even had to close locations. They are now focusing efforts on previous endeavors
and international expansion.