Table of Contents
Introduction
Starbucks was started in 1971 by three entrepreneurs. In 1987 Howard Schultz bought it and it started growing rapidly. In 1990s they took the decision to expand the business overseas to maintain the rapid growth. In 1991 they became the first privately owned US company to offer a stock option program that includes part time employees. By 1994, there were 425 stores in north America. In 1995, they began serving Frappuccino blended beverages. In 1996, the company opened its café house in japan and Singapore. By 1997, Starbucks had 1,412 stores. In 1998 acquired tazo tea was launched by Starbucks. By 2000 the company had 3,501 stores located all around the world. In 2003, they acquired seattle coffee company. In 2006, they launched the industries first paper beverage cup. In 2009, they became the world’s largest buyer of fair trade certified coffee. Currently there are nearly 32,626 coffee houses in 78 countries.
Problem Statement
The world’s largest café Starbucks has faced many problems and one of the main problem faced by them were due to higher price and because they were not having many variety of products.
Case Analysis
Starbucks started facing problem in 2008, the sales started declining. This was because other stores were charging less price for the similar products. As we know Starbucks is known for its quality experience product it was hard for them to sell the products at less price. To raise the sales Howard Schultz took many steps he closed all the underperforming stores, he personally visited some of the stores as customer and he felt that the taste of coffee was not uniform.
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So, Howard Schultz redesigned the stores so that the customer can feel relax. As they were providing quality products and their main concern was to provide customer world class experience. He should choose locations carefully and he mostly targeted those area where wealthy and highly educated professional worker used to stay because Starbucks was an expensive café and advantage what he got that those people who use to go to other places for business meeting they moved towards Starbucks as they use to feel high class experience. As to maintain growth it opened its branches in many countries overseas.
The first place they entered was Asia pacific rim, and they mostly focused on young aged group people as they were more attracted toward adopting the modern lifestyle. They not only became successful because of the experience they gave but also because they were satisfying customers and they were making changes in the menu as per customers taste in all the countries where there cafés are. The main challenge faced by Starbucks while expanding overseas was the price of their product and the competitors situated in that particular country where they were expanding their business.
They should always see the financial condition of the country and fix the price of products according to it. Their biggest challenge were the competitors as they were already existing and were selling products at cheaper price the competitors attract more customers.in order to overcome all this he had to improve the service and the taste of food and coffee there. By march 2010, the company started recovering and started growing. Now Starbucks in one of the largest café house around the whole world having many stores all over all world due to its quality and experience they provide.
Conclusion
As we know Starbucks sells coffee and other coffee related products in 78 countries all over the world at present. As every business faces problems Starbucks also faced problems in it initial days. In 2008, their sales went down. The problem was due to its higher price and less variety of products sold. As it is difficult to start business in new country and adapt its culture. Also, it was difficult as people preferred other stores as they were selling similar products at low price. Howard Schultz anyhow managed to overcome all the problems by making use of proper management and strategies the company again started gaining profit in 2010 and Maintain this rapid growth they decided to expand their business. While expanding also they faced many problems due to the price and they had to make Many changes in the menu. After making all these changes and all people got more attracted towards the company and started liking it. So, after overcoming all these problems now it’s the world’s largest café house.
Recommendation
As we know Starbucks sells quality products and provides world class experience it charges higher price for its products. So, people whose income is low can’t afford it. So, Starbucks should cut down its price but maintain the same taste so that every group of people can afford it and due to all this they can gain higher profits because if their price is reasonable more customers will get attracted towards it and the sales may rise which in order will lead to higher profits. Starbucks should mainly focus on developed area where people are rich enough to afford the product.
So that its sales may increase in business world as well as business environment. Starbucks should open their store in highly developed area where people rich people stay it helps them to increase their sales as people come to Starbucks for business meetings. Starbucks should open their stores according to the financial condition of the country. The countries who are less developed they can’t charge higher prices. They should also provide variety of products according to the taste and preference of the consumer of that place, because it is important to adapt the culture of that particular country to be successful. They should also choose the locations carefully, they should choose a place where people are more comfortable to come with their family and friends. They should maintain the same taste all over the world as people expect from them.
Implemention
As Starbucks is a quality brand. In order to maximize their brand awareness program should be conducted and to establish themselves as the most recognized and respected brand in the world and within the market territory Starbucks must implement products as the quality product and they should cut the price of the product and maintain the quality of the product same to maintain the market economy of the company. They should start business in highly developed area where rich and high, income people stay to raise their selling. If they implement these things their market economy will rise and they will earn higher profits even if they charge less for their products. By this they will attract more customer and satisfy them all around the world.
References
- http://www.starbucks.com/about-us/company-information
- http://www.priceintelligently.com/blog/bid/184451/how-starbucks-uses-pricing-strategy-for-profit-maximization
- http://www.slideshare.net/heekukstarbucks/starbucks-marketing&next-slideshow=4
