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Starbucks, founded in 1971 and transformed by Howard Schultz in the 1980s, shifted from selling coffee beans to creating an immersive coffeehouse experience. The company expanded rapidly, went public in 1992, and faced challenges during the 2008 financial crisis, leading to a strategic turnaround. By 2015, Starbucks had diversified globally and embraced digital transformation, but faced risks related to brand reputation, market saturation, and international complexities.

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14 views5 pages

Background a-WPS Office

Starbucks, founded in 1971 and transformed by Howard Schultz in the 1980s, shifted from selling coffee beans to creating an immersive coffeehouse experience. The company expanded rapidly, went public in 1992, and faced challenges during the 2008 financial crisis, leading to a strategic turnaround. By 2015, Starbucks had diversified globally and embraced digital transformation, but faced risks related to brand reputation, market saturation, and international complexities.

Uploaded by

Honey Denise Cachapero
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

Background and Growth Story

Founding and Inspiratio

Founded in 1971 in Seattle as Starbucks Coffee, Tea, and Spice by Gerald Baldwin and Gordon Bowker.

Howard Schultz joined in 1981 as head of marketing after being inspired by the quality of their coffee.

Inspired by Italian cafés during a trip to Milan, Schultz envisioned Starbucks as a “third place” between
home and work.

Transformation

Schultz opened Il Giornale, an Italian-style coffee bar.

In 1987, Schultz acquired Starbucks (6 stores) and merged it with Il Giornale, rebranding under the
Starbucks name.

Shifted focus from selling beans to providing an immersive coffeehouse experience.

2. The Starbucks Experience

Starbucks aimed to create an emotional connection with customers by:

Offering ethically sourced, high-quality coffee.

Creating a warm and consistent in-store ambiance (use of natural materials, neighborhood-specific
designs).

Treating employees (“partners”) as valuable brand ambassadors:

Provided training, health insurance (even for part-timers), and college tuition (via a partnership with
Arizona State University)

Advocating for social responsibility and community integration.

E.g., environmental programs, clean-up projects, and the controversial “Race Together” campaign.

3. Business Model and Expansion

Growth Model
Went public in 1992 with 165 stores.

Followed a “clustering strategy”—opening multiple stores in a metro area to build local buzz and habits.

International expansion began in:

Japan (1996)

UK (1998)

Later expanded through licensing in over 60 countries.

Diversification

Starbucks broadened its reach via:

Licensed stores in airports, bookstores, and grocery chains.

CPG (Consumer Products Group)—packaged coffee in supermarkets.

Partnerships:

With PepsiCo and Unilever for bottled drinks.

With Bank One for Starbucks-branded credit cards.

Introduced music, books, and curated experiences in-store.

4. Crisis and Turnaround (2007–2009)

Problems

Declining sales and profitability.

Rapid, uncontrolled expansion diluted the Starbucks brand.

The 2008 financial crisis worsened performance.


Schultz’s Return and Actions

Returned as CEO in 2008.

Cut 600 US stores and 6,700 jobs.

Reduced automation in coffee preparation—reintroduced hand-crafted brewing.

Removed revenue-generating but brand-diluting items like breakfast sandwiches.

Invested in social programs and digital tools (e.g., mobile apps and loyalty programs).

5. Strategic Initiatives (2009–2015)

Product Innovations

Via (instant coffee): $200M in sales within 2 years.

K-Cup pods and Starbucks’ own Verismo system.

Acquisitions:

Evolution Fresh (juices)

La Boulange (bakery)

Teavana (tea)

Fizzio sodas and new food offerings (e.g., evening meals).

Retail and Digital Expansion

Expanded mobile app, rewards, and payments.

10 million downloads by 2015, 14% of US transactions via mobile.

“My Starbucks Rewards” linked to both cards and phones.

Channel Development
Starbucks used in-store exposure to push grocery sales:

Customers would first experience new products in cafés before they reached retail shelves.

This model supported launches like Via and Teavana in grocery outlets.

6. International Expansion Focus

Key Markets

China: Over 800 stores by 2015; projected to have thousands.

India: 50 stores by 2014 via JV with Tata Global Beverages.

Other entries: Colombia, Vietnam, Costa Rica, Morocco, and more.

Took full ownership of Starbucks Japan ($915M buyout in 2014).

7. 2015 Strategy: Seven Pillars of Growth

8. Competitive Landscape

US Specialty Coffee Market:

Starbucks led with 10,780 stores.

Rivals: Dunkin’ Donuts, McCafé, Peet’s Coffee.

80% of US coffee is consumed at home

Premium Segment Growth: From $3.5B (2000) to $13B (2013)

Retail Products:

Starbucks dominated single-cup servings and packaged ground coffee.

Global Challenges:

Australia: failure due to strong local café culture.


Europe: established coffee traditions and competition.

UK: Starbucks lagged behind Costa Coffee.

9. Risks and Concerns

Brand & Reputation Risks

Controversial campaigns like “Race Together.”

Potential quality or customer service issues affecting perception.

Market Risks

U.S. market saturation.

Competition from fast-food chains and gourmet brands.

New players in grocery and pod systems (e.g., Nestlé, Keurig).

International Risks

Political, legal, and cultural challenges.

Heavy reliance on China and Asia-Pacific for future growth.

Diversification Risks

Concerns about overextending the brand into too many products and channels.

10. Conclusion

By 2015, Starbucks had rebounded impressively from its 2008 crisis, becoming a diversified global brand.
The company’s core values, customer-centric strategy, and digital transformation were key strengths.
However, its ambitious growth plan faced risks, particularly in maintaining brand identity, managing
international complexity, and fending off growing competition.

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