Starbucks is without a doubt the most popular coffeehouse chain in the world. Today, the company has expanded in more than 50 countries and has a huge number of workers. The company offers different types of espresso refreshments, which they serve hot or cold. The purpose of this paper, therefore, is to analyze Starbucks as a corporation based on the following company factors: history, products, services, marketing, and financial profile.
Starbucks is a global café establishment headquartered in Seattle, Washington. The company has more than thirteen thousand stores in the US alone and over twenty-four thousand stores in more than seventy-five countries (Garcia). Starbucks was founded by three scholars, Jerry Baldwin, Zev Siegl, and Gordon Bowker who came together in 1971. Their motivation was to sell high-quality whole beans coffee.
Towards the end of the 1980s, the company had four operational stores in Seattle that beat the rest of the competitors by offering premium fresh-roasted espressos. Siegel chose to seek after different interests and left the company in 1980. Following his departure, Baldwin became the company’s president. During the spring of 1983, the company sent Howard Schultz, the company’s head of marketing to Milan to attend a global housewares show. It is this trip to Italy that influenced Schultz’s desire to transform Starbucks.
Essentially, he was impressed by Italy’s bistros, and he thought of accomplishing something comparable in Starbucks. His idea was, however, not met with enthusiasm by Baldwin and Bowker who were not ready to deviate from Starbucks’ conventional model of business. Upon failing to convince Baldwin and Bowker to buy into the bistro thought, he decided to leave Starbucks in 1985 and started his own espresso chain immediately after. He called it Il Giornale, and it rapidly expanded into different urban communities.
In March 1987, the two remaining owners of Starbucks decided to sell it to Schultz. He joined all his ventures under the brand, Starbucks and embraced his initial idea of starting a bistro. Similarly, he expanded the business by selling roasted beans and hardware among other in various Starbucks stores. By 1992, the organization had reached a transient time thus it went public during the same period. Over the years, Starbucks would grow to become the world’s leading café chain.
Starbucks sells a number of products, which include the following: coffee and tea, fresh food, handmade drinks, bottled water, juices, and various merchandise like coffee machines and coffee accessories. In Starbucks’ cafés, clients can buy fresh food offerings, pastries, sandwiches, muffins, and biscotti (Seaford et al 35). The organization is also licensed to deliver and appropriate its main brands to Pepsi-Cola organization.
In addition, it conveys its forte espresso trademarks via the national foodservice chains, staple goods, and authorized stores. Starbucks is today the market leader in specialty coffee. This explains why they continue to buy more high-quality espresso beans than any other person on the planet and maintain positive relations with the producers so as to ensure they are provided with the best coffee beans.
Starbucks also offers different services that aim to enhance customer experience with the brand. For example, the company offers free Wi-Fi in all its stores in the United States via AT&T. However, the customer’s experience in Starbucks stores is not limited to Web services only. Starbucks also gives them even more reason to enjoy coffee as they sit and browse through multiple online articles, videos, music, and local news and information courtesy of a partnership with Yahoo.
This move was influenced by the stiff competition from both independent specialty coffee shops and huge brands such as McDonald’s, which have been offering such services for a long time. Starbucks also offers music streaming services to its US-based employees following an agreement with Spotify in 2015. With this partnership, employees have access to a Spotify premium membership, hence they can influence the music played in any given store.
Starbucks was additionally provided with its very own customized Spotify playlist, which would be featured on the mobile App version of Spotify. Starbucks customers also have access to paid Websites, similar to those of The Wall Street Journal and Zagat, and free iTunes downloads. At the same time, customers have free access to previews of films and albums that are not yet released to the public.
Recently, Starbucks also announced another policy, which would enable anybody to sit in its bistros or utilize its bathrooms, regardless of whether they do not purchase anything (Retail Industry Snapshot 30). In sum, this variety of services help the company to establish itself as a brand that is focused on meeting the customer’s needs through unforgettable coffee drinking experience.
Company’s Marketing Strategy
In the beginning, Starbucks made progress on establishing the brand through the use of local advertising efforts, Brand involvement and informal correspondences (Arora 90). Merchandising and store environments were also solid focuses for the company in the absence of a solid national marketing. Currently, Starbucks’ marketing strategy starts right from its products and services.
In particular, the company has differentiated itself from others competitive brands like MacDonald’s thanks to the exceptional nature of its espresso. Starbucks applies the method of value-based product separation and as a result has become a household brand. Despite product quality being the central pillar of the company’s marketing efforts, product differentiation is not the company’s only marketing strategy since it has other unique aspects. For example, providing excellent customer service has earned Starbucks strong customer loyalty and improved its positive image.
Unbeatable promotions and offers have also helped the company to acquire new customers in different regions. In recent years, massive investment in various marketing techniques and publicizing has brought about better deals and expanded brand acknowledgment. The company’s marketing communications strategy involves the use of various marketing communication channels. These include social media, sales promotions, print, and media advertising, as well as events and encounters, among others. The company’s marketing mix targets males and females in the middle and high-class category who can afford its rather expensive coffee.
Company’s Financial Profile
The company has a stable financial profile since its establishment in 1971. This is often indicated by its annual growth in revenue. Starbucks has realized a steady financial growth in its revenues in the past several decades. In the last five years, for instance, the company’s revenues have increased significantly. For example, from 2013 through to 2017, Starbucks’ compound annual growth rate (CAGR) increased from 10.8% to 14%. That is, from US$14,800 to US$22,300 million (Starbucks Corporation SWOT Analysis 5).
In short, the company’s revenues grew by 5% in the financial year 2017 from the previous year. The income growth was for the most part ascribed to expanded incomes from organization operated stores (bringing about USD1.6 billion), facilitated by a 5% expansion in similar store sales. Likewise, the increased incomes were as a result of net new authorized store openings alongside expanded La Boulange nourishment deals to the licensees in the United States (Starbucks Corporation SWOT Analysis 5). What is more, all reportable portions of the organization added to the solid income improvement financial year 2017.
In FY2015, the organization’s Americas section’s income grew by 11% that was $13,293.4 million. This was primarily driven by increase in sales from similar stores, improvement in ticket sales, and an increase in the overall number of transactions (Starbucks Corporation SWOT Analysis 6). The development was additionally credited to huge returns from newly opened 612 stores in the US during same the period under survey. Overall, store sales were driven by growth in Starbucks’ main drinks namely coffee and tea, and also by the success of its food offerings. In the same period, incomes of the CAP section expanded from $1,129.6 million in 2014 to $2,395.9 in 2015 (Starbucks Corporation SWOT Analysis 6).
The driving force behind Starbucks’ growth in the CAP segment was attributed to the full consolidation of its operations in Japan. The development was additionally ascribed to expanded deals from more than 700 net new stores opened in 2015 and an increase in equivalent number of store sales mainly determined by an increase in the rates of transactions (Starbucks Corporation SWOT Analysis 6). In this manner, it is certain that enhancing financial performance will give Starbucks monetary adaptability and furthermore help in expansion exercises.
Despite the fact that Starbucks is the world’s leading café chain, it faces stiff competition from noteworthy contenders like McDonald’s who are offering similar products and services at moderately low costs. To better solidify its position as an industry, therefore, Starbucks should consider subsidizing the prices of its product without compromising the quality. Implementing this strategy will allow the organization to accrue more revenue and facilitate its expansion activities to other global markets.
In sum, this analysis proves that Starbucks has strongly established itself as a leader in the industry with little competition from contenders like McDonald’s. This situation is unlikely to change in the foreseeable future.