Starbucks Case Study

Starbucks Case Study

#1. In the early 1980s, how did Howard Schultz view the possibilities for the fledgling specialty coffee market? What were the most important factors in shaping his perspective?

1. Possibility for the Market

1. Specialty Coffee Market Expansion

• Annual revenue rose from $45 million in 1969 to more than $750 million in 1980.

2. Supply

• There was no clear market leader as there was no widely recognized brand/large nationwide base of loyal customers.
• There was a change in the market.

3. Demand (Potential Demand for Specialty Coffee)

• There were growing numbers of men and women who embraced natural foods, those that they perceived to be less processed and more nutritious.
• Americans, especially urban households, were buying increasing amounts and varieties of ethnic food such as pesto, burritos, hummus.
• It was reasonable to think that coffee drinkers accustomed to traditional blends and percolator brews would like the dark, full taste of specialty coffee and would be willing to pay more for it.

1. Factors in shaping his perspective

1. First experience with Starbucks specialty coffee in 1981

• On his business trip to Seattle, he was impressed in not only the taste and smell of Starbucks coffee, but also with how it was operated.

2. Business trip to Milan

• He was inspired by Italian expresso bars that provided a social experience - one that offered people community, comfort, and sense of extended family.
• He then decided to “recreate the Italian coffee bar culture in the US, using its reputation for fine coffee to serve espresso drinks while providing a comfortable, appealing store experience”, differentiating Seattle roaster from the other specialty coffee suppliers entering the American market

#2. In 1987, Schultz bought Starbucks from its original founders. At the time, the Seattle-based coffee bean retailer had six stores and a roasting plant. By the end of the twentieth century, Starbucks had 3,300 locations in 17 countries and was the leading specialty coffee purveyor in the world. What were the critical drivers of Starbucks`s success?

1. Expansion Strategy

• First mover advantage

-Starbucks went through aggressive expansion in the beginning of market growth for specialty coffee companies

• Gaining a foothold in the individual market before moving to other cities.

-This allowed Schultz to sufficiently prepare for further expansion while maintaining and gaining experience from current markets.

-Starbucks also had partnership with local companies, believing they could never be better than the local (except for Great Britain)

1. Recruiting Leadership
   Management and leadership talent

: Experienced leaders from diverse industries were hired for strategic expansion. Howard Behar, a retail veteran with more than 25 years of experience in operations helped Starbucks to shift from a product focused coffee retailer to a brand that later became famous for the service it offered.