Starbucks

EMBA 5202 Brand Management Home Work IV

Tuna Taş Executive MBA Student No: 1168106

Starbucks: MANAGING A HIGH GROWTH BRAND

IntroductionIntroduction

(*)http://www.starbucks.com/about-us/company-information/mission-statement

World’s largest coffeehouse company, with more than 17000 stores in morethan 50 countries

Founded in 1971 in Seattle with the name Starbucks Coffee Tea and Spice

Till 1982, (Howard Schultz joined the company in 1982) only recognized as a selling bean coffee and brewing machines company

After Schultz, name has been changed to Starbucks and the companychanged its image from a bean selling company to a coffeehouse company

Mission…to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time(*)

Vertical Expansions with co-marketing and company acquisitions

Brand Salience

ImageryPerformance

FeelingsJudgements

Resonance

1st in mindQuality of service

Comfort

Very High loyaltyStrong personal attachment

Starbucks’ Brand Equity ModelStarbucks’ Brand Equity Model

High Quality Coffee ProductHigh breadth,high depth

ConvenientFlavour

Coffee Experience

TasteQuality

CoolRelaxing EnvironmentSocialization location

Key Success FactorsKey Success Factors


Always High Quality (*)

Starbucks’s mission is followed by six main principles. The first of theseprinciples is:

Our CoffeeIt has always been, and will always be, about quality. We’re passionate about ethically sourcing the finest coffee beans, roasting them with great care, and improving the lives of people who grow them. We care deeply about all of this; our work is never done.

Quality is more important than anything according to Schultz because he believed goodquality will keep the customers loyal to the brand.Worked directly with the best growers to purchase high quality coffee beans. Appliedthe highest standards for operational excellence to roast and brew the beans.



“Third Place” Concept

Starbucks aimed to be a “third place” for its customers as well as theirworkplace and home which should provide a cozy, relaxing environment.

Each Starbucks store is carefully designed with best of class coffee makingequipment,furniture,music and artwork.

Howard Schultz describes this as; “Each Starbucks store is carefully designed to enhance the quality of everything the customers see, touch, hear, smell or taste”.

Starbucks symbolize not just a coffehouse ,but a pleasurable coffee-centeredexperience


Innovation and Talent Management

High innovative products (Frapaccunio with Pepsi)Invented a special vacuum packaging system called FlavorLockStarbucks’s Ice Cream CreationBaristas ManagementInvested much on its employees(Spent more to education of employees than marketing budget)Kept on recruiting talented peopleGood Recognition and Awarding Programs

On time and rightStrategic Partnerships

Kraft,United AirlinesAcqusitions

acquisitions of other coffee chains

Evaluation of the growth strategyEvaluation of the growth strategy

Acquisition of Tazo enabled the brand to expand into tea business and thansupported the idea with snacks and deserts

The launch of Joe Magazine and Internet investments ( living.com-cooking.com-talkcity) were not the best strategies because they were far awayfrom its core competencies.

Acquisition of Ethos Water, Hear Music and local coffeehouse chains madethe company more spread over the states

Strategic Partnership Alliances provide value to company sales (14% of Starbucks customers had their first Starbucks coffee in United Airlines flights,An innovatiove drink creation ())

Opening shops by hub-shop strategy all over the world made the brand a global brand

Because Schults always paid attention to “Top Quality”, he had chosen thecompanies who had the same mantality (United Airlines, Kraft, Pepsi, HostMarriot etc…)

Starbucks..A global brand?Starbucks..A global brand?

Yes because it operates with 19555 stores in 58 countries

http://en.wikipedia.org/wiki/Starbucks

http://en.wikipedia.org/wiki/Starbucks

Starbucks..A global brand?Starbucks..A global brand?

Operates with 19555 stores in 58 countries

Starbucks challenges to stay as a global brand?Starbucks challenges to stay as a global brand?

Keeping the same level of quality in all operating stores is hard

Has to deal with the local competitor drinksTea is also very common in England and in Turkey (Brewed tea is a must for majority f Turks and is the first drink rather than coffee)Turkey has its own private coffee (Turkish coffee)

Starbucks is the first coffeehouse company and now there are many playersin Turkish market (Nero,Kahve Dünyası,Gloria Jeans) but as you may see below Starbucks is far away leading the turkish market

http://www.kahvecini.com/2012/04/en-begenilen-kahve-zincirleri.html

Extension into non-coffee areas?Extension into non-coffee areas?

Starbucks has aimed to become a “lifestyle brand”(3rd place)

Provided Starbucks Card to increase loyalty

Entered entertaintment industry (Film(Akeelah) ) and sold the DVD at stores

I think Starbucks will focus to its core business and extension of its corebusiness keeping the coffee in the centre of its business.

Introduced Coffee Master Certification Programme

Purchased alternative music retailer “Hear Music” and also invested in digitalmusic

Since Starbucks created a relaxing and refreshing atmosphere it can use thisas the places to organize some corporate events

International ExpansionInternational Expansion

Although there should be some local resistance and operational problemssuchas•Anti Americanism in some countries like Cuba•Declining sales in Japan•Shutdown of stores in Israel because of security•High local competitor threats in England•Saturation of Germany market by Starbucks like companies

It should continue to international expansion because it is profitableespecially expanding in the emerging marketsThis is also in line with Schults plan because he plans•To invest in China (6500 locations in Asia)•To open 6000 stores in EMEA•To open1500 stores in Latin America•To double the number of stores in Canada

Threats on competitionThreats on competition

Dunkin’ Donuts is the biggest threat for Starbucks.

The company has more than 10,000 locations in 32 countries worldwide [2], which include more than 6,700 Dunkin’ Donuts locations throughout the United States and more than 3000 international locations(*)

Founded in 1950

The company has a huge product portfolio

In 2010, Dunkin' Donuts' global system-wide sales were $6 billion.(*)

In 2011, Dunkin' Donuts earned the No. 1 ranking for customer loyalty in the coffee category by Brand Keys for the fifth year in a row.(*)

http://en.wikipedia.org/wiki/Dunkin'_Donuts

Coffee Drinking ExperienceCoffee Drinking Experience

Although customers are willing to pay for Starbucks Experience, the price of the coffee is elastic so there has to be a market equal value of Starbucksproducts. (Declining sales in Japan and situation in England clearly shows thatcustomers are sensitive to price changes)

400+ USD is much for a coffee maker while you can find good coffee makersless than 400 USD

Marketing

Starbucks