Starbuck's Marketing Analysis

Statement of the Problem

Starbucks Coffee Company is the leading retailer, roaster and brand of specialty

coffee in the world. The goal of Starbucks is to establish the company as the premier purveyor of the finest coffee in the world while maintaining the organization's uncompromising principles. In addition, Starbucks wants to develop its brand beyond being the preferred outlet from which to purchase coffee to becoming the preferred consumer brand.

The coffee company has capitalized on the new found popularity of specialty coffee with its addition of coffee bars globally. Starbucks Common Stock increased from $3.31 per share in 1994 to $10.00 per share by the mid 1990's. Despite the success of Starbucks, the company is faced with many challenges to continue the growth of its business. The key strategic problem that Starbucks faces is maintaining the quality of their brand while leveraging the brand image and going into different sales and distribution channels.

SWOT Analysis

Strengths

1. Is the leader in specialty coffee industry (p7).

2. Its commitment to quality (p7), values (p8), & principles (8).

3. Its policy toward its employees (pgs 8, 17).

4. Its openness to innovation

a. Pepsi-Coal - Frappuccino.

b. Distinct Roasting equipment and process. (longer shelf life; p10)

c. AOL Cafй.

5. Worldwide resources for coffee beans.

a. 50% from Latin America.

b. 35% from Pacific Rim.

c. 15% from E. Africa.

d. SB trains exporters.

6. Supply Chain Operation (SCO)

7. Page 11:

a. Its coffee.

b. Employees.

c. Merchandising.

d. Ownership philosophy.

e. Real estate approach. (Location, building, & cluster strategies)

f. Image.

8. Extensive training for Starbucks' "baristas" (employees).

9. Mall kiosk program.

10. Its Brand image.

11. Key specialty sales partners (p14).

12. Diverse distribution channels. Such as:

a. Grocery chains.

b. Dreyers.

c. Pespi-Cola.

d. Kiosks.

e. Airlines.

13. "Encore" mail order program (p16).

14. The vision and leadership of Howard Schultz (pgs 16 - 17).

15. Its Six Guiding Principles.

Weaknesses

1. Rapid growth is taxing SCOs (p11; also see Strengths #7)

2. The challenge of finding good employees (p12; also see Strengths #8)

3. Consistently merchandising its promotions nationally, with stores dealing with individual suppliers.

4. Lacks capital to expand rapidly (p14). Dependent upon equity & debt financing (p20).

5. Effectively leveraging its brand-name and size (p20).

Opportunities

1. Reinforcing its brand-image (p8).

2. Global expansion.

a. Higher coffee consumption in foreign markets than in the U.S.

b. Already has contact with foreign exporters.

3. Marketing in higher echelon restaurants and day-part chains (p16).

4. "Concretely defining its brand-image" (p20).

Threats -

1. Adequate number of "A" sites in "A" markets nationally (p13).

2. Individual and small chain competitors overshadowing Starbucks' brand in local markets.

Issue Analysis

Starbucks' lead in the specialty coffee industry exemplifies the result of deftly executing a well-planned business strategy. Moreover, Starbucks is well positioned for what is expected to be a continuing rise in the popularity of specialty coffee products. The question before Starbucks' leadership, however, is what avenues will lead to Starbucks' goal of remaining true to its core, the highest quality coffee products while providing a "total coffee experience" for its customers?

A review of the estimated growth in retail sales of coffee over the next four years indicates that while sales of non-specialty coffee products are expected to decline, sales of ground specialty coffee products and whole bean coffee should rise. Further, sales of ready-to-drink products are projected to rise almost 50%. The focus leading Starbucks' production of specialty coffee products and reinforcing its partnership with Pepsi-Cola to market the Frappucino coffee drink products, indicates an astute alignment with the trend.

As leadership at Starbucks looks to the future, they recognize the opportunities that lie in a global marketing strategy, as well as the challenges they face developing distribution channels to accommodate global expansion. Additionally, as strong as the Starbucks brand has become nationally, the company is challenged to hedge against the smaller specialty coffee chains and even the individual local coffee outlets.

The fact that coffee consumption in foreign markets far surpasses that of the United States provides adequate justification for taking Starbucks to the international market. Its rapid growth over the past few years, while notable, has not generated capital sufficient to finance a broad entrance into the international