Starbucks in 2015

Submitted by:
Formeloza, Elyssa Earl M.
I. Title of the case
 Starbucks in 2015

II. Time Context

 2015

III. Summary/Abstract
 The first Starbucks store was opened in Seattle on March 30, 1971 by three
partners and the name of the store originated from the novel Moby Dick. The firm
believes in supplying and serving the best coffee possible by using the highest
standards of quality whilst adhering to ethical trading and responsible growing
practices at the same time. In 1987 the first stores were opened outside of
Seattle, in Vancouver and Chicago and in the subsequent years stores followed
the expansion were much more extensive across North America.
Starbucks sells a variety of products which include high-quality whole bean
coffees along with fresh rich-brewed coffees, Italian-style espresso beverages
and cold blended beverages, a collection of complementary food items and also
a selection of premium teas and beverage-related accessories and equipment.
There are conflicting reports on the overall market segment that Starbucks
possesses, although according to Mintel a global consumer research firm,
Starbucks had a 73% market share of U.S. coffeehouse sales in 2005, and this is
significant because the majority of its revenue comes from their home market
which is 2.1 billion compared to an overseas share of just 640 million.
Amongst Starbucks’ many achievements is its spot of being 1 best coffee in the
fast food and quick refreshment categories and one of the “world’s most ethical
companies”. Its performance as a multinational firm has increased over time and
as such led to expansion in global operations. The recession was a major factor
that impacted the company’s position because prior to that, Starbucks was
known for having a café around every street corner. However prioi to the
recession in 2007, their share price traded at 38.41 and a mere two years later
the price had fallen to a measly 9.91, “profits were down for the last three months
of the year from an astronomical 158.5 million to 5.4 million.”
The turnaround for Starbucks started with the restructuring of management
where the former chief executive Howard Schultz took back the role and set the
company’s focus on core markets and utilizing technological breakthrough to
introduce Starbucks coffee in an instant form. Starbucks went back to its roots by
focusing on customer service that was neglected during rapid expansion. All
 these decisions helped contribute to the sales flourishing and “profits rising’ to
high levels once again.
 Vision
“Establish Starbucks as the most recognized and respected brand in the world.”
 Mission
“To inspire and nurture the human spirit – One person, One cup, and One
Neighborhood at a time.”
 Core principles
1. Provide a great work environment and treat each others with respect and
dignity.
2. Embrace diversity as an essential component in the way they do business.
3. Apply the highest standards of excellence to the purchasing, roasting and
fresh delivery of their coffee.
4. Develop enthusiastically satisfied customers all of the time.
5. Contribute positively to their communities and their environment.
6. Recognize that profitability is essential to their future success.

IV. Statement of the Objectives

 To know and understand the problem and create a solution for Starbucks.

V. Central Problem
 Consumer preferences could shift from coffee to other beverages while there is a
fluctuation in the market prices of high quality coffee beans.

VI. Areas of Consideration

 Strengths
1. Well known brand. Its focus on consistency in delivering positive consumer
experience stresses the point about consumer visits to its cafes being an
“experience” rather than just seeing it as another coffee maker.
2. High quality product offering.
3. Unique strategy that being able to capture key locations and open stores
close proximity to each other.
4. Valued and motivated employees. They promote an environment that
encourages team working and collaboration. It encourages managers to
follow its motto of “hire the personality, train the skill.”
5. Comfortable ambiance, offers free “wifi” connection that is need to every
customer that are staying in the shop.
 6. Recognized for quality and service. They create consistent, inviting,
stimulating environment that evokes the passion for coffee.
7. Profitable organizations.

 Weaknesses
1. High product price. Some customers switch to competitor’s products with
lower prices.
2. Over saturation of Starbucks in some areas because they expand quickly.
3. Too many products By constantly adding products, some products have lost
value, Seattle’s Best for example, and they are risky endeavors.

 Opportunities
1. Expanding product mix and offerings like healthy drinks, organic drinks,
energy drinks and kid focused drinks.
2. Brand extensions. They have a powerful image and it can leverage it to
extend into horizontal lines of its business and also venture into product
diversification with keeping brand dilution risk in check.
3. Technological advances like use of mobile applications.
4. On-the-Go Lifestyle, an instant coffee and other products to be in groceries
and convenience stores.

 Threats
1. Changing customer’s taste and preferences.
2. The shift of consumers toward more healthy products.
3. Increased competitions from other sectors such as restaurants and other big
coffee shops.
4. Significant fluctuations in the market prices of high quality coffee beans which
they cannot control.

VII. Alternative Courses of Action

1. Innovative new products put more snacks and beverages options in their
menu and expand to give healthier product offerings.
Advantage
Attract new customers.
Customer’s loyalty for the products if it has a great taste.
Disadvantage
Hiring or training employees for the new products.
Additional expenses.
 2. Create more customization by allowing users to create new flavors and
drinks above and beyond the options they have now.
Advantage
Online users could decrease the wait time in stores and improve overall
efficiency.
Can avoid competitors such as McDonalds.
Disadvantage
Additional expenses will be conducted.

3. Implementing effective future contracts to lock in their estimated quantity

inputs at a low swing of price.
Advantage
The future costs can be managed to a greater extent.
Disadvantage
Difficulty to find that is willing for the contract.

4. Make significant investments in advertising and marketing initiatives in the

face of increased competition in the market.
Advantage
Attract customers.
Disadvantage
Additional expenses will be conducted to the profit.
It might not reach the appropriate target market and might be passing on the
wrong message to consumers.

5. Joint ventures with local partner

Advantage
Sharing of expertise.
Access to greater resources and needed information.
Disadvantage
It takes time and efforts to establish an effective relationship.

VIII. Strategy Formulation

We therefore conclude that the best solution to the problem is alternative
course of action is number 2. To create more customization by allowing users to
create new flavors and drinks above and beyond the options they have now. This
would incorporate with the other creation of online user experience. Users could
go on to the online Starbucks interface and have complete control to create their
 own drink, order online, find the nearest Starbucks and receive directions. Users
could post their favorite drink combination and others could vote on it. By these, I
think it’s the best solution rather than creating more new products, because one
weakness I mention is about “too many products.”

IX. Plan of Action

1. Formal meeting, discussion and brainstorming about the plan and evaluate it.
Follow the plan to make a safe food.
2. Create a mobile app to be more convenient for the online users and make
sure that it is always available and free of viruses.
3. Make advertisement for this new strategy to attract more customers.
4. Maintain the quality and consistency of the products that is offered.
5. Suggest a best flavors for the customers as they are thinking what flavors to
create.

X. Potential Problems
1. What if the prices of the product increase?

2. What if mobile ordering fail?

3. What if new competitors will enter the business and have much more to offer?

XI. Contingency Plan

1. Make sure that even the prices of the product offered increases, the quality
of the product also increases. That even customers spend a lot of money for
the coffee, they are satisfied because of the great taste.

2. Create new “digital order managers” (DOMs), tablet-based systems that let
baristas track and manage all incoming orders.

3. Think of another strategy in a way that it can maintain their track in the
business world and have a strong advertisement.