Case Study
Starbucks
Table of Contents
Introduction
Starbucks was established by Jerry Baldwin, Gordon Bowker, and Zev Siegl in 1971, at Seattle’s Pike Place Market.
During 1980’s they sold the Starbucks company to Howard Schultz who converted the business related to coffee beans store into coffee shop that started serving drinks that are espresso-based (Chang,2020).
With a total of 165 stores situated in four states, it went public in 1922. But the perceptions of the people about coffee never changed and local shops were still leading the market related to the coffee business.
Then Starbucks paid close attention to the community, quality, and real state to become third place. They changed the lives of people, how they reward themselves, and what they do after getting up in the morning(Chang, 2020).
It is one of the most successful brew companies in this world. This is not only the reason for its success but also famous for providing the experience that helped to change the thinking of the world related to coffee shops, and how it encouraged people to drink coffee outside their homes.
And to enter the international market Schultz recognized the importance of partnership with national companies, studied the cultural aspects and tastes of other countries, and expanded itself in other countries in partnership with the local business that belongs to that country (Xin, et al., 2017).
It is one of the world’s largest retailers in the coffee business, making its brand unique by de-commoditizing coffee spaces that were mature. It fashioned a unique image and unique brew that initiated luxury craving aficionados that helped to relish the ritual, prestige, and uniqueness of coffee savouring(Xin, et al., 2017).
Case Summary
The Slogan of Starbucks is “Brewed for those who love coffee”.
There are more than 28,000 outlets of Starbucks around the world. Starbucks provides appreciation to their customers and details the relentless attention. It has become the most valuable and world’s best-known brand in the national and international markets (Hossain& Islam, 2015).
The target audience of Starbucks is middle and upper-class women and men. These are the people who can afford their higher-priced coffee on daily basis. And these are their targeted audience. They generally focus on creating a perfect Third place in the market.
Starbucks is a company that focuses on traditional advertising, they offer their own baristas to act as the evangelists of their brands(Hossain & Islam, 2015).
They help their employees to achieve that end and wish that their employees connect with them. They focus on delighting their customers which helps to make their stakeholders happy.
Their strategies can be classified as product differentiation. They focus on increasing the quality of their coffee chain. And provide such services and products for what customers pay premium prices for their high-quality services (Wang, et al., 2015).
The competitive advantage of Starbucks is classified as product differentiation.
- Mistakes made by Starbucks
But before this success, Starbucks faced a lot of failures due to the wrong decisions made by the key decision makers(Wang, et al., 2015).
Their first mistake was to assume that all the coffee lovers in Australia will like their coffee and add another
The mistake was to assume that Australian people will enjoy the same sugary coffee as enjoyed by American customers.
The main problem with Starbucks was that they added too many stores at a high rate. As per the economic data Starbucks chain has grown its count nearly up to 22%. By doing this Co spread itself into too many markets and became too thin (Cho, et al., 2017).
- The core problems faced by Starbucks are as follows: –
Rising prices of coffee beans affect the prices of coffee whichlead to an increase in its prices and reduce customer satisfaction(Cho, et al., 2017).
Increasing prices of the products served. This is due to higher taxes retained by the government and due to rise in the prices of coffee beans
And some internal factors like the replacement of CEO Schultz.
- There were many challenges faced by Starbucks
for example:
Too many stores in a small radius, This lead to an increase in the competition
The high cost of labour and rent resulted in higher prices of products (Morais, et al., 2014).
Difficulty in managing cultural issues. It became really difficult for Starbucks to understand the food preferences of different countries while expanding Starbucks internationally.
Less control of stores. Due to a huge number of stores, it became difficult to control them accordingly.
Coffee is opposed by tea-obsessed countries, it was very difficult for Starbucks to popularise its production such countries.
When Starbucks decided to expand itself in India then also faced some problems induced by the government(Morais, et al., 2014).
Indian government asked Starbucks to file a revised proposal that explains the ownership structure related to its local ventures.
According to the officials, the proposal of Starbucks did not match the rules that were related to investment rules because that has limited the foreign companies especially single-brand retail ventures up to 51% ownership.
Analysis of the problem
- Entry of Starbucks into India
Starbucks entered the Indian market in around 2012 October in a partnership with Tata global beverages.
John Culver President of Starbucks concluded that India is a very good place for market growth, he persuaded the company and finally came to India (Rajasekaran, 2015).
Now there are more than 100 stores in India found across Delhi NCR, Hyderabad, Mumbai, Chennai, Pune , and Bengaluru.
After a lot of planning, Starbucks decided to launch itself into Indian markets with a joint venture with Tata coffee limited.
According to the key decision makers, they concluded that as per the geographical location India is closer to China than Europe so the taste of Indian people will resemble the test of Chinese and the Asia Pacific(Rajasekaran, 2015).
But this turned wrong when John Culver Concluded that the taste of India resembles much more with Europe than China because in the past Indians were ruled by British empires so, the Synergy Would be better if the expansion of Starbucks in India matched European culture than China and Asia Pacific Starbucks.
In starting years Starbucks faced a lot of problems while settling their company in India some occurred due to government rules and some occurred due to lack of knowledge related to the Indian market and culture (Mahobia& Jain,2015).
Following an internal review, Starbucks announced a new leadership structure and new organizational structure on July 11, 2011. in October 2011 Starbucks us and Starbucks coffee international combined and divided previous distinctions into 3 segments.
- Starbucks coffee EMEA focuses on markets in the United Kingdom, Europe, Russia, Africa,
and the Middle East.
- Starbucks US and America focused on markets within South and North America(Mahobia & Jain, 2015).
- Starbucks coffee China and the Asia Pacific focused on all the markets in the Asia Pacific including China.
Now as per India’s geographical location the key decision makers thought that the Indian venture will suit Starbucks Coffee China and the Asia Pacific because they are much closer to India, But Culver concluded that in India Starbucks coffee EMEA Will be more acceptable because In past India was a part of British Empire and remain as a constituent state of British so somewhere the synergies will be much better if Starbucks in India follows the Starbucks coffee EMEA Rather than the Asia Pacific and Starbucks coffee China (Gupta, et al., 2018).
As India is a growing economy so, according to the research conducted by Starbucks they found that India is a good place where they can expand their business because it is quite easy to enter the market chain and the chances of growth are much more here as compared to other places. So, they decided to enter India in a partnership with Tata Coffee and expanded themselves in different parts of India.
So, the key decision makers decided to enter the market of India without conducting a deep analysis of India’s tradition and culture(Gupta, et al., 2018).
Another difficulty faced by Starbucks was related to understanding the cultural diversion. As India is a tea drinker country so generally the people prefer tea more than coffee.
Another reason for the difficulties faced by Starbucks was the willingness of Indians towards buying an expensive beverage as India is an economically developing country so most people do not prefer buying such expensive beverages.
The Best Course of Action
There were many challenges faced by Starbucks but gradually they are trying to overcome all of them one by one.
There was research conducted that outlined that Starbucks is facing internal and external challenges.
The factors that were responsible for bringing up these challenges were threats due to competition, economic factors, and technological factors these were some external factors that were responsible.
The internal challenges faced by Starbucks were a lack of ingredients in some Starbucks stores, there was a lack of work performance culture, and the values of the company word diminishing day by day.
To solve these problems Starbucks is trying to make a lot of changes so that they can boost their business and increase customer satisfaction levels.
To overcome these factors Starbucks have made an action plan in which they are providing a better atmosphere at their workplace, also focusing on teaching the employees how to treat each other with self-respect and esteem this will help them to overcome their internal challenges.
When it comes to external challenges Starbucks should focus on appreciating diversity and should consider it an important constituent to increase their business.
They should apply principles of best quality Through which they can prepare and deliver fresh products and to increase their quality of procuring.
- Rather than these problems, there are a lot more regarding services provided by Starbucks.
- To improve Starbucks should engage more with digital customers and can drive them into desirable once. And Starbucks should develop an efficient app through which the customers can order beverages and food of their preferences; this will lead to an increased promotion through personalization.
- Starbucks has faced many problems while expanding its business into different countries, especially India.
- Here the main problem was that the Indian population is much more addicted to tea than Coffee. And Starbucks did not conduct sufficient research to understand the cultural preferences in India.
- As India is it developing country so the real income of the consumers isn’t that much that everybody can easily afford their coffee and other beverages.
- To improve their business quality Starbucks should follow some best actions that could change their business and generate huge profits and these actions are:
- They should develop a reinvigoration of just saying yes this will help in exceeding the expectations of their customers and increase their satisfaction, it will also help them in realizing that they’re really important to Starbucks (Honack,& Waikar,2017).
- Starbucks should focus on increasing the time length so that the new baristas Could spend more time in their training so that they can develop more skills and provide quality services to the customers so that the products and services provided by Starbucks become a value for money.
- Starbucks should take time and conduct seminars for educating employees and customers on coffee this will help the employees and customers to understand the relevance and importance of coffee in their life which can help Starbucks to improve their business growth.
- Starbucks should increase the amount of pay to the baristas who are the most tenured ones, for the purpose to motivate them so that they can work with much more efficiency, this will also help an increasing unhealthy competition within the organization.
- Starbucks needs to weed out some partners who possess a bad attitude, do not care about anything, and are regardless of their seniority as it can badly affect the image of the organization (Honack, & Waikar, 2017).
- Starbucks should focus on adding non-coverage time more.
- Starbucks should focus on fixing the refill policy as due to this sometimes the baristas found themselves in a difficult situation and create a bad impact on the thinking perspective of customers to increase its brand value Starbucks should focus on increasing its awareness related to the contribution of great things to local communities.
- Starbucks should bring some kind of secret shopper and include customers’ feedback to increase their business value.
- Starbucks already has many outlets so now they should slow down the rate related to their new licensed stores.
So, to overcome the situation Starbucks decided that they will start focusing on the higher middle class and upper-class society.
In India, the population of youth is quite good than in other countries so Starbucks tried to focus on youths because according to research they noticed that these young people like to visit cafes and like drinking coffee generally at the time when they arrange a meet-up.
So, like this, they expanded themselves in India by focusing on the categories mentioned above.
Conclusion
To take an organization up to an extinct it is really necessary for the organization to understand the role of conducting nice research and evaluate the consequences that are responsible for pulling them back.
If an organization wants to expand globally then it should focus on understanding the importance of studying and analysing the cultural aspects of the other country so, that it could become easy for the company to understand the basic requirements that they need to fulfil.
The company should already set their targeted customers and should focus on keeping their prices as per real income of that economy.
And an organisation should always focus on its management and should always try out various ways to improve themselves.
References
Chang, W. J. (2020). Experiential marketing, brand image and brand loyalty: a case study of Starbucks. British Food Journal.
Cho, J., Yu, J., Oh, S., Ryoo, J., Song, J., & Kim, H. (2017). Wrong siren! a location spoofing attack on indoor positioning systems: The starbucks case study. IEEE communications magazine, 55(3), 132-137.
Gupta, P., Nagpal, A., & Malik, D. (2018). Starbucks: global brand in emerging markets. Emerald Emerging Markets Case Studies.
Honack, R., & Waikar, S. (2017). Growing big while staying small: Starbucks harvests international growth. Kellogg School of Management Cases.
Hossain, M., & Islam, K. Z. (2015). Generating ideas on online platforms: A case study of “My Starbucks Idea”. Arab Economic and Business Journal, 10(2), 102-111.
Mahobia, H., & Jain, T. K. (2015). Starbucks: Adapting in the Indian market. Indian Journal of Marketing, 45(8), 37-47.
Morais, U. P., Pena, J., Shacket, K., Sintilus, L., Ruiz, R., Rivera, Y., & Mujtaba, B. G. (2014). Managing diverse employees at Starbucks: Focusing on ethics and inclusion. International Journal of Learning and Development, 4(3), 35.
Rajasekaran, R. (2015). Starbucks’ Entry into Tea-Drinking India. IUP Journal of Brand Management, 12(3), 45.
Wang, Y., Qiao, F., & Peng, W. (2015). Is the size or the valence of proactive engagement associated with purchase intention? A case study of branded blogs of Starbucks. International Journal of Strategic Communication, 9(3), 197-216.
Xin, O. W., Zuo, L., Iida, H., & Aziz, N. (2017, November). Gamification effect of loyalty program and its assessment using game refinement measure: Case study on Starbucks. In International Conference on Computational Science and Technology (pp. 161-171). Springer, Singapore.
Case Study
Starbucks
Table of Contents
Introduction
Starbucks was established by Jerry Baldwin, Gordon Bowker, and Zev Siegl in 1971, at Seattle’s Pike Place Market.
During 1980’s they sold the Starbucks company to Howard Schultz who converted the business related to coffee beans store into coffee shop that started serving drinks that are espresso-based (Chang,2020).
With a total of 165 stores situated in four states, it went public in 1922. But the perceptions of the people about coffee never changed and local shops were still leading the market related to the coffee business.
Then Starbucks paid close attention to the community, quality, and real state to become third place. They changed the lives of people, how they reward themselves, and what they do after getting up in the morning(Chang, 2020).
It is one of the most successful brew companies in this world. This is not only the reason for its success but also famous for providing the experience that helped to change the thinking of the world related to coffee shops, and how it encouraged people to drink coffee outside their homes.
And to enter the international market Schultz recognized the importance of partnership with national companies, studied the cultural aspects and tastes of other countries, and expanded itself in other countries in partnership with the local business that belongs to that country (Xin, et al., 2017).
It is one of the world’s largest retailers in the coffee business, making its brand unique by de-commoditizing coffee spaces that were mature. It fashioned a unique image and unique brew that initiated luxury craving aficionados that helped to relish the ritual, prestige, and uniqueness of coffee savouring(Xin, et al., 2017).
Case Summary
The Slogan of Starbucks is “Brewed for those who love coffee”.
There are more than 28,000 outlets of Starbucks around the world. Starbucks provides appreciation to their customers and details the relentless attention. It has become the most valuable and world’s best-known brand in the national and international markets (Hossain& Islam, 2015).
The target audience of Starbucks is middle and upper-class women and men. These are the people who can afford their higher-priced coffee on daily basis. And these are their targeted audience. They generally focus on creating a perfect Third place in the market.
Starbucks is a company that focuses on traditional advertising, they offer their own baristas to act as the evangelists of their brands(Hossain & Islam, 2015).
They help their employees to achieve that end and wish that their employees connect with them. They focus on delighting their customers which helps to make their stakeholders happy.
Their strategies can be classified as product differentiation. They focus on increasing the quality of their coffee chain. And provide such services and products for what customers pay premium prices for their high-quality services (Wang, et al., 2015).
The competitive advantage of Starbucks is classified as product differentiation.
- Mistakes made by Starbucks
But before this success, Starbucks faced a lot of failures due to the wrong decisions made by the key decision makers(Wang, et al., 2015).
Their first mistake was to assume that all the coffee lovers in Australia will like their coffee and add another
The mistake was to assume that Australian people will enjoy the same sugary coffee as enjoyed by American customers.
The main problem with Starbucks was that they added too many stores at a high rate. As per the economic data Starbucks chain has grown its count nearly up to 22%. By doing this Co spread itself into too many markets and became too thin (Cho, et al., 2017).
- The core problems faced by Starbucks are as follows: –
Rising prices of coffee beans affect the prices of coffee whichlead to an increase in its prices and reduce customer satisfaction(Cho, et al., 2017).
Increasing prices of the products served. This is due to higher taxes retained by the government and due to rise in the prices of coffee beans
And some internal factors like the replacement of CEO Schultz.
- There were many challenges faced by Starbucks
for example:
Too many stores in a small radius, This lead to an increase in the competition
The high cost of labour and rent resulted in higher prices of products (Morais, et al., 2014).
Difficulty in managing cultural issues. It became really difficult for Starbucks to understand the food preferences of different countries while expanding Starbucks internationally.
Less control of stores. Due to a huge number of stores, it became difficult to control them accordingly.
Coffee is opposed by tea-obsessed countries, it was very difficult for Starbucks to popularise its production such countries.
When Starbucks decided to expand itself in India then also faced some problems induced by the government(Morais, et al., 2014).
Indian government asked Starbucks to file a revised proposal that explains the ownership structure related to its local ventures.
According to the officials, the proposal of Starbucks did not match the rules that were related to investment rules because that has limited the foreign companies especially single-brand retail ventures up to 51% ownership.
Analysis of the problem
- Entry of Starbucks into India
Starbucks entered the Indian market in around 2012 October in a partnership with Tata global beverages.
John Culver President of Starbucks concluded that India is a very good place for market growth, he persuaded the company and finally came to India (Rajasekaran, 2015).
Now there are more than 100 stores in India found across Delhi NCR, Hyderabad, Mumbai, Chennai, Pune , and Bengaluru.
After a lot of planning, Starbucks decided to launch itself into Indian markets with a joint venture with Tata coffee limited.
According to the key decision makers, they concluded that as per the geographical location India is closer to China than Europe so the taste of Indian people will resemble the test of Chinese and the Asia Pacific(Rajasekaran, 2015).
But this turned wrong when John Culver Concluded that the taste of India resembles much more with Europe than China because in the past Indians were ruled by British empires so, the Synergy Would be better if the expansion of Starbucks in India matched European culture than China and Asia Pacific Starbucks.
In starting years Starbucks faced a lot of problems while settling their company in India some occurred due to government rules and some occurred due to lack of knowledge related to the Indian market and culture (Mahobia& Jain,2015).
Following an internal review, Starbucks announced a new leadership structure and new organizational structure on July 11, 2011. in October 2011 Starbucks us and Starbucks coffee international combined and divided previous distinctions into 3 segments.
- Starbucks coffee EMEA focuses on markets in the United Kingdom, Europe, Russia, Africa,
and the Middle East.
- Starbucks US and America focused on markets within South and North America(Mahobia & Jain, 2015).
- Starbucks coffee China and the Asia Pacific focused on all the markets in the Asia Pacific including China.
Now as per India’s geographical location the key decision makers thought that the Indian venture will suit Starbucks Coffee China and the Asia Pacific because they are much closer to India, But Culver concluded that in India Starbucks coffee EMEA Will be more acceptable because In past India was a part of British Empire and remain as a constituent state of British so somewhere the synergies will be much better if Starbucks in India follows the Starbucks coffee EMEA Rather than the Asia Pacific and Starbucks coffee China (Gupta, et al., 2018).
As India is a growing economy so, according to the research conducted by Starbucks they found that India is a good place where they can expand their business because it is quite easy to enter the market chain and the chances of growth are much more here as compared to other places. So, they decided to enter India in a partnership with Tata Coffee and expanded themselves in different parts of India.
So, the key decision makers decided to enter the market of India without conducting a deep analysis of India’s tradition and culture(Gupta, et al., 2018).
Another difficulty faced by Starbucks was related to understanding the cultural diversion. As India is a tea drinker country so generally the people prefer tea more than coffee.
Another reason for the difficulties faced by Starbucks was the willingness of Indians towards buying an expensive beverage as India is an economically developing country so most people do not prefer buying such expensive beverages.
The Best Course of Action
There were many challenges faced by Starbucks but gradually they are trying to overcome all of them one by one.
There was research conducted that outlined that Starbucks is facing internal and external challenges.
The factors that were responsible for bringing up these challenges were threats due to competition, economic factors, and technological factors these were some external factors that were responsible.
The internal challenges faced by Starbucks were a lack of ingredients in some Starbucks stores, there was a lack of work performance culture, and the values of the company word diminishing day by day.
To solve these problems Starbucks is trying to make a lot of changes so that they can boost their business and increase customer satisfaction levels.
To overcome these factors Starbucks have made an action plan in which they are providing a better atmosphere at their workplace, also focusing on teaching the employees how to treat each other with self-respect and esteem this will help them to overcome their internal challenges.
When it comes to external challenges Starbucks should focus on appreciating diversity and should consider it an important constituent to increase their business.
They should apply principles of best quality Through which they can prepare and deliver fresh products and to increase their quality of procuring.
- Rather than these problems, there are a lot more regarding services provided by Starbucks.
- To improve Starbucks should engage more with digital customers and can drive them into desirable once. And Starbucks should develop an efficient app through which the customers can order beverages and food of their preferences; this will lead to an increased promotion through personalization.
- Starbucks has faced many problems while expanding its business into different countries, especially India.
- Here the main problem was that the Indian population is much more addicted to tea than Coffee. And Starbucks did not conduct sufficient research to understand the cultural preferences in India.
- As India is it developing country so the real income of the consumers isn’t that much that everybody can easily afford their coffee and other beverages.
- To improve their business quality Starbucks should follow some best actions that could change their business and generate huge profits and these actions are:
- They should develop a reinvigoration of just saying yes this will help in exceeding the expectations of their customers and increase their satisfaction, it will also help them in realizing that they’re really important to Starbucks (Honack,& Waikar,2017).
- Starbucks should focus on increasing the time length so that the new baristas Could spend more time in their training so that they can develop more skills and provide quality services to the customers so that the products and services provided by Starbucks become a value for money.
- Starbucks should take time and conduct seminars for educating employees and customers on coffee this will help the employees and customers to understand the relevance and importance of coffee in their life which can help Starbucks to improve their business growth.
- Starbucks should increase the amount of pay to the baristas who are the most tenured ones, for the purpose to motivate them so that they can work with much more efficiency, this will also help an increasing unhealthy competition within the organization.
- Starbucks needs to weed out some partners who possess a bad attitude, do not care about anything, and are regardless of their seniority as it can badly affect the image of the organization (Honack, & Waikar, 2017).
- Starbucks should focus on adding non-coverage time more.
- Starbucks should focus on fixing the refill policy as due to this sometimes the baristas found themselves in a difficult situation and create a bad impact on the thinking perspective of customers to increase its brand value Starbucks should focus on increasing its awareness related to the contribution of great things to local communities.
- Starbucks should bring some kind of secret shopper and include customers’ feedback to increase their business value.
- Starbucks already has many outlets so now they should slow down the rate related to their new licensed stores.
So, to overcome the situation Starbucks decided that they will start focusing on the higher middle class and upper-class society.
In India, the population of youth is quite good than in other countries so Starbucks tried to focus on youths because according to research they noticed that these young people like to visit cafes and like drinking coffee generally at the time when they arrange a meet-up.
So, like this, they expanded themselves in India by focusing on the categories mentioned above.
Conclusion
To take an organization up to an extinct it is really necessary for the organization to understand the role of conducting nice research and evaluate the consequences that are responsible for pulling them back.
If an organization wants to expand globally then it should focus on understanding the importance of studying and analysing the cultural aspects of the other country so, that it could become easy for the company to understand the basic requirements that they need to fulfil.
The company should already set their targeted customers and should focus on keeping their prices as per real income of that economy.
And an organisation should always focus on its management and should always try out various ways to improve themselves.
References
Chang, W. J. (2020). Experiential marketing, brand image and brand loyalty: a case study of Starbucks. British Food Journal.
Cho, J., Yu, J., Oh, S., Ryoo, J., Song, J., & Kim, H. (2017). Wrong siren! a location spoofing attack on indoor positioning systems: The starbucks case study. IEEE communications magazine, 55(3), 132-137.
Gupta, P., Nagpal, A., & Malik, D. (2018). Starbucks: global brand in emerging markets. Emerald Emerging Markets Case Studies.
Honack, R., & Waikar, S. (2017). Growing big while staying small: Starbucks harvests international growth. Kellogg School of Management Cases.
Hossain, M., & Islam, K. Z. (2015). Generating ideas on online platforms: A case study of “My Starbucks Idea”. Arab Economic and Business Journal, 10(2), 102-111.
Mahobia, H., & Jain, T. K. (2015). Starbucks: Adapting in the Indian market. Indian Journal of Marketing, 45(8), 37-47.
Morais, U. P., Pena, J., Shacket, K., Sintilus, L., Ruiz, R., Rivera, Y., & Mujtaba, B. G. (2014). Managing diverse employees at Starbucks: Focusing on ethics and inclusion. International Journal of Learning and Development, 4(3), 35.
Rajasekaran, R. (2015). Starbucks’ Entry into Tea-Drinking India. IUP Journal of Brand Management, 12(3), 45.
Wang, Y., Qiao, F., & Peng, W. (2015). Is the size or the valence of proactive engagement associated with purchase intention? A case study of branded blogs of Starbucks. International Journal of Strategic Communication, 9(3), 197-216.
Xin, O. W., Zuo, L., Iida, H., & Aziz, N. (2017, November). Gamification effect of loyalty program and its assessment using game refinement measure: Case study on Starbucks. In International Conference on Computational Science and Technology (pp. 161-171). Springer, Singapore.