Starbucks’ Investment Proposal & Case Analysis

Starbucks’ Investment Proposal & Case Analysis

        It has been 47 years since Starbucks has emerged its first store location at Seattle’s Pike Place Market.  Christine Day, Starbucks’ Senior vice president of administration in North America one day reflected on the company’s recent performance in 2002 and saw that Starbucks was having 5% or higher comparable store sales growth for eleven years in a row. As much success as Starbucks was having, there were also some areas of opportunity as expected. “We’ve always taken great pride in our retail service, but according to the data, we’re not always meeting our customer’s expectations in the area of customer satisfaction” (Moon, Quelch 2006). It is possible that many companies worldwide experience store and sales growth success while running into customer satisfaction area issue and Starbucks has found itself in the same situation. After Christine Day discussed this concern with her staff members, they decided to come up with the idea to decrease the waiting time hoping to increase customer satisfaction to continue improving as a company. To reach this goal, Starbucks must decide if investing 40 million dollars annually into all stores to add 20 hours of labor per week to each store would be a good idea.

        Howard Schultz, the founder and chairman of Starbucks decided to travel to Italy in 1982 and absolutely fell in love with the country’s coffee experience and quality. Because of his obsession of coffee business inspired from his travel experience to Italy, Schultz decided to take a risk and bought Starbucks a few years down the road. In the early 90’s, Starbucks was having extremely successful business due to offering not only whole beans but also premium coffee beverages. Because of this success, Schultz was able to open up to 140 stores in the Northwest and Chicago while challenging other small coffee chain businesses.

        Besides offering what Starbucks believed to best the highest quality coffee beans in the world, Starbucks also offered the experience never before seen in the coffee business. “At the time, most Americans had two places in their lives – home and work. But I believed that people needed another place, a place where they could go to relax and enjoy others, or just be by themselves” (Moon, Quelch, 2006). Starbucks believe that this is one of the many factors that differentiate themselves from other coffee chains at the time. Schultz was able to get people to pay more than they normally do on a cup of coffee because customers feel it isn’t just coffee that they purchase, it is also the experience of being there to have business meetings, take a break from work or class, a time to do school projects or a place to go spend quality time with friends. Therefore, at the time, people feel as if Starbucks was their third home besides their actual home and workplace.