Reference no: EM132198367
The economy in trouble, the stock market tanking it is important to start your day with a good cup of coffee to take on these challenges. Can Starbuck’s sustain it business model and place in the market?
In 1971, the original Starbucks opened in Pike Place Market in Seattle, Washington by three partners named Jerry Baldwin, Zev Siegal, and Gordon Bowker.Their focus was to sell coffee beans and equipment.They purchased green coffee beans from Peet’s, a specialty coffee roaster and retailer, during their first year of operation.Later, they began buying coffee beans directly from the growers.In 1983, an entrepreneur by the name of Howard Schultz joined the company; Schultz felt that the company should sell coffee and espresso drinks as well as coffee beans.The partners felt that selling coffee and espresso drinks would take away from their primary focus of selling coffee beans.Since the idea did not work, Schultz started his own company called II Giornale coffee bar chain in 1985.In 1987, the original owners of Starbucks sold their chain to Schultz’s II Giornale.Schultz changed II Giornale outlets to Starbucks chains and quickly began to expand.
Starbucks coffee has grown into the largest coffeehouse company in the world with 16,120 stores in 94 countries such as in Australia, Canada, China, Puerto Rico, etc. Starbucks has thirty blends and single origin coffee. Starbucks brand coffee can also be purchased in local stores to brew at home. Starbucks employs over 140,000 employees worldwide with over five million customers a week. At one point they had typical customers coming in on an average of six times a month while loyal customers come in on an average of eighteen times a month spending averaging $50. Starbucks is one of Fortune magazine’s 100 Best Companies to work for in 2008 and is Business Ethics 100 Best Corporate Citizens for the fourth year
Starbucks understands concepts of brand identity and product differentiation. They have tapped in on what the consumer perceives and had managed to identifiable differentiate themselves between other companies’ products or services. Starbucks realizes this success depends significantly on the value of the Starbucks brand while relying on its excellent reputation for their product quality, superior, and consistent customer service.
Starbucks positions itself as a specialty premium coffee retailer and has a strong and well known brand image. As Starbucks is a premium coffee brand, its target market has always been middle and upper class with the disposable income needed to frequent the coffeehouse. One of the main reasons Starbucks has been so successful is because they focus on quality and experience rather than price. The Starbucks’ image and experience has been one of the key elements to their success. Starbucks has succeeded in giving coffee a new cachet and established themselves as a price setter through product differentiation. Consumers have been willing to pay for what they consider an elite lifestyle and many believe that the higher the price, the better the quality. Although premium brand coffee makers have some market power to set prices above the generic value brands, Starbucks operates under monopolistic completion where there are many small firms that sell similar products, therefore they do not exert complete market power in the industry.
Do an environment analysis for world tea and coffee market using the appropriate strategic tools.
What are the unique strategies deployed by Star Bucks to sustain in the market? Discuss.