Starbucks Case Analysis

ANALYSIS

In late 2002, Starbucks, the largest coffeehouse company, faced a dilemma. Starbucks was enjoying its 11th consecutive year of 5% or higher comparable store sales growth, meanwhile its most recent market research had revealed that customer satisfaction has declined. Therefore Starbucks planned to invest an additional $40 million annually in the company's 4,500 stores, which would allow each store to add the equivalent of 20 hours of labor a week. The idea was to improve speed-of-service and thereby increase customer satisfaction. Before made decision on whether adopt the investment or not, we should firstly use GSTIC frame work to do the overall analysis on the brand and company.

Goal

Starbucks' long term vision was to build up a "third place" beside home and office, a place where people could go to relax and enjoy others, or just be by themselves. Meanwhile, the company's overall objective was to establish Starbucks as the "most recognized and respected brand in the world."

Strategy

Starbucks brand strategy was to best captured by its "live coffee" mantra, a phrase that reflected the importance the company attached to keeping the national coffee culture alive. It tried to create an "experience" around the consumption of coffee, which was rapidly accepted by its target consumer, and made the brand grew quickly in the past ten years.

Also the ambitious business goal of the company required an aggressive growth strategy, which attracted a growing number of new customers who were not belonged to the company's original target market.

At beginning, the company was targeted primarily towards the affluent, well-educated, white-collar people. However, as Starbucks kept expanding its business empire, its new customers tended to be younger, less well-educated, and in a lower income bracket than its established customers.

So far Starbucks was still the dominator of the market. It only faced competition from regional, small-scale coffee chains like Caribou Coffee which tried to use unique store decoration to differentiate with Starbucks. However, since coffee consumption was on the rise in the United States, more new competitors also joint in the market. For example, Dunkin Donuts started to provide flavored coffees with lower price.

To further explore its business, Starbucks also cooperated with other companies. For example, it had a joint venture with Pepsi-Cola to distribute bottled Frappuccino, as well as a partnership with Dreyer's Grand Ice Cream to develop and distribute a line of premium ice creams

Tactics

Starbuck