Real Choices at Starbucks Starbucks started as small coffee shop in a tourist area called Pikes Place Market in Seattle. The three unknown pioneer of Starbucks wanted to share their passion for brewed coffee and tea. During their first year in the business, they experimented with all sorts of coffee blend until they came up with their own flavor. Their business became an instant success using the word of mouth selling brewed coffee cup by cup. This is what inspired them to open a second store to target the wider market. By the early 1980’s, Starbucks expanded to four new stores in Seattle area.
Since then, they became the largest retail company in the world. This coffee company grew from four Starbucks store to having currently 16,635 stores globally including 11,068 in the United States, 1000 stores in Canada, and more than 800 in Japan (Salomon 271). This amazing expansion can be attributed to Howard Shultz’s dedication to brewing coffee who bought the coffee’s trademark twenty five years ago. The main reason Starbucks has done so well for four decades can be attributed to their commitment to high quality products and passion for educating customers to appreciate the qualities of fine coffees.
Strength Starbucks has become a popular company for selling the best tasting coffee products around the world. As a result, everyone saw Starbucks as the biggest and best in the business (Higbee 6). They acquired a solid brand reputation and have a world renowned company logo. There are no other national coffee bar competitors in the same scale as Starbucks. They are the only competitor in the coffee business that has a recognized brand image. They also own trademarks, copyrights, domain names, patents. The current SEC filing of Starbucks shows that the company is in a positive financial condition.
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The company’s total revenue for the first quarter of fiscal 2012 had increased sixteen percent and the net income was up more than ten percent (Smith, http://wallstcheatsheet. com/). This result was primarily driven by increase revenues from company-operated stores, licensed stores, and CPG foodservice contributing to approximately $3. 44 billion (http://investing. businessweek. com/). The overall areas of Starbucks business, from domestic and international retail operations to the company’s specialty businesses delivered strong financial performance, and innovation was the reason for the success of the company’s operations.
The statement below shows the current financial status of the company as of January 1, 2012. Financial Statements Results of Operations (in millions) Revenues Quarter Ended ___________________________ Jan 1, Jan 2 % 2012 2011 Change _________ ________ ________ Company-operated stores $ 2,731. 8 $ 2,451. 3 11. 4% Licensed stores 306. 6 254. 3 20. 6 CPG, foodservice and other 397. 245. 3 62. 0 Total net revenues $ 3,435. 9 $ 2,950. 8 16. 4% Weakness Even though Starbucks has strength to stay in the business, it also has a few weaknesses. Starbucks must deal with these weaknesses in order to remain as a competitor in the retail market. One of the company’s most prevalent obstacles is the price they charge for a cup of coffee.
While most people consider Starbucks coffee as a luxury and would pay whatever price is set, there is an increasing opinion that Starbucks charges too much (Higbee 7). Sometimes it is difficult for a company to penetrate the mass market with the prices above market averages. While this weakness may not come to reality in the short term, it is possible that this company is somewhat maturing since they have grown so rapidly penetrating the U. S. market. Opportunities Opportunities present themselves when it comes to Starbucks business strategy which provided the options to strengthen its retail market.
Starbucks would not be able to effectively compete with its competitors if it not with these opportunities. They continued their quest by expanding its retail operations and sales. They pursued other opportunities by introducing new products and develop new channels to stay on top. Starbucks is in great position to expand its global business more that they already have. Since they expanded to Europe, Canada, and Japan, they enjoyed much success in these countries and their future plan is to open more Starbucks in Asia, Latin America, and the Far East.
Starbucks also created numerous partnerships that will ensure its longevity for a long time. Formed a partnership with Pepsi Company and created a coffee type bottled drink called Frappucino. These Frappucino bottles were currently being sold in shops, grocery stores, and convenient stores. This drink has grown in popularity in the past that it was labeled by the consumers as “the coffee on the go” (Higbee 6). In addition, Starbucks also partnered with Target that pave the way to opening a coffee shop inside the shopping center. Threats
One of the major threats to Starbucks is their competition with other coffee chain, such as Coffee Bean and Peet’s Coffee. Other companies, such as McDonalds, Dunkin Donuts, and Burger King already have the infrastructure in place and are instead adding quality coffee to their menu to compete with Starbucks (Higbee 8). But for one thing, many people enjoy buying coffee even though it is pricey because of the environment and experience that allow people to enjoy, relax, and mingle while sipping a cup of coffee. Other threats to Starbucks are the gas station and restaurants industry.
Many people are in the habit of buying breakfast and coffee at the local gas stations such as 7 Eleven. This practice is done mostly out of habit, but also for convenience especially for morning paper paired with a cup of coffee before going to work. Many consumers are also attracted by the convenience and the economics of the big mug cup of coffee they can obtain. Other consumer concerns are the trend towards more healthy ways. More and more people are becoming aware of the risk in consumption of caffeine. Too much caffeine can produce restlessness, nausea, headache, tense muscles, sleep disturbances, and irregular heartbeats.
Caffeine can also increase the production of stomach acid that causes acid reflux. And finally, the price of coffee is so volatile that it remained as the biggest complaint by its customers. Recommendation Starbucks has created such a strong corporate culture and strong work values that it allows a company to successfully engage in product diversification. However, amongst the first thing that Starbucks needs to have is to define their brand image by lowering the coffee prices. It needs to be conveyed to the market in a precise manner, so that there would be no confusion amid Starbucks customer complaints.
This is vital if Starbucks wanted to maintain its domestic market share competing with the likes of McDonald, Dunkin Donut, and Burger King. They must resolve all the consumer concerns so that they can embark on another project with smooth transition. Conclusion Overall, as long as Starbucks maintains and promotes a strong quality product without deterring from its corporate-level strategy, it will always have number of opportunities ahead. There is a very strong base for this company which will allow it to pursue desired avenues with aggressiveness and confidence. Works Cited
Salomon M, Marshall G, Stuart E, Marketing: Real People Real Choice 7th Ed. P. cm. Higbee J, Liaw Z, Ting C, Tjho K, Ton M, The Future of Starbucks, http://www. mcafee. cc/Classes/BEM106/Papers/2008/Starbucks. pdf Smith G, Cost of Coffee Could Squeeze Starbucks, http://wallstcheatsheet. com/stocks/cost-of-coffee-could-squeeze-starbucks. html/ United States Securities and Exchange Commission, FORM 10-Q, http://investing. businessweek. com/research/stocks/financials/drawFiling. asp? docKey=137-000119312512032427-56VATRT3JVABGO7FIGIBD5RTCJ&docFormat=HTM&formType=10-Q#D270627D10Q_HTM_TX270627_3
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