EXECUTIVE SUMMARY

Starbucks Corporation (NASDAQ: SBUX) is an international coffee and coffeehouse chain based in Seattle, Washington. It is the largest coffeehouse company in the world, with 17,009 stores in 55 countries, including over 11,000 in the United States, over 1000 in Canada, and over 700 in the UK. Since opening its first store in Pike Place Market, Seattle, Washington (USA) in 1971, Starbucks has established itself as the worlds leading retailer, roaster and brand of specialty coffee. Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, coffee beans, salads, hot and cold sandwiches and pastries, snacks, and items such as mugs and tumblers. Starbucks-branded ice cream and coffee are also offered at grocery stores. Though the first store was established in USA in 1971, it started stores on outside the United States or Canada in the mid-'90s. Its overseas stores now constitute almost one third of Starbucks' stores. The company has opened almost 900 new stores outside of the United States in 2009. Starbucks has been a target of protests on issues such as fairtrade policies, labor relations, environmental impact, political views, and anti-competitive practices. In our case study, we have discussed about the reasons behind Starbucks success and how they have differed from other coffee houses. Then we have talked about how Starbucks can attract non-coffee drinkers, and at last we have discussed about their challenges that they may encounter in the future.

INTRODUCTION
Since opening its first store in Pike Place Market, Seattle, Washington (USA) in 1971, Starbucks has established itself as the worlds leading retailer, roaster and brand of specialty coffee with over with 17,009 stores in 55 countries. The company, which ranks amongst the worlds top 100 global brands according to Interbrand 2006, has an impressive record of sales and profit growth. In FY2006 Starbucks achieved a sales turnover of $7.8 billion, an increase of 22% on 2005, and operating margin of 11.4%. In 2010 the revenue of Starbucks is $ 10.71 billion.

Starbucks Headquarters Seattle

Starbucks has grown from a single coffee shop in Seattle 40 years ago to a $6.38 billion worth of an international company. Its operations include upwards of 13,567 coffee shops and kiosks in the United States and Canada, more than 100 in the United Kingdom, and rest of them are in other countries, including China, Japan, Kuwait,

Lebanon, New Zealand, Malaysia, the Philippines, Singapore, South Korea, Taiwan, and Thailand. In addition to a variety of coffees and coffee drinks, Starbucks shops also feature Tazo teas, pastries and other food items, and espresso machines, coffee brewers, and other assorted items. The company also sells many of these products via mail order and online at starbucks.com. It also wholesales its coffee to restaurants, businesses, education and healthcare institutions, hotels, and airlines. Through a joint venture with Pepsi-Cola Company, Starbucks bottles Frappuccino beverages and sells them through supermarkets and convenience and drugstores. Through a partnership with Kraft Foods, Inc., the company sells Starbucks whole bean and ground coffee into grocery, warehouse club, and mass merchandise stores. In addition, it distributes Starbucks premium coffee ice creams to U.S. supermarkets. From a single small store that opened in 1971 to its status as a gourmet coffee giant at the turn of the millennium, Starbucks has led a coffee revolution in the United States and beyond.

A BRIEF HISTORY OF STARBUCKS IN DECADES

1970's The first Starbucks opens. The name comes from Herman Melvilles Moby Dick, a classic American novel about the 19th century whaling industry. The seafaring name seems appropriate for a store that imports the worlds finest coffees to the cold, thirsty people of Seattle. 1980's Howard Schultz joins Starbucks in 1982. While on a business trip in Italy, he visits Milans famous espresso bars. Impressed with their popularity and culture, he sees their potential in Seattle. Hes right after trying lattes and mochas, Seattle quickly becomes coffee-crazy. 1990's The demand for great coffee allows Starbucks to expand beyond Seattle, first to the rest of the United States, then further a field. After becoming one of the first companies to offer stock options to its part-time employees, Starbucks becomes a publicly traded company. 2000's The Starbucks phenomenon continues. At the time of writing, Starbucks has more than 6,000 locations in over 30 countries. In addition to our excellent coffees and espresso drinks, people now enjoy Tazo tea and Frappuccino ice blended beverages.

KEY DATES OF STARBUCKS

1971: Gordon Bowker, Jerry Baldwin, and Zev Siegl open the first Starbucks in Seattle's Pike Place Market. 1982: Howard Schultz is hired to manage retail sales and marketing.

1983: Peet's Coffee is acquired. 1985: Schultz leaves the company to found Il Giornale, an operator of coffee bars. 1988: A mail-order catalog is introduced. 1992: Company goes public. 1993: First East Coast store opens, in Washington, D.C. 1995: Frappuccino beverages are introduced. 1996: Overseas expansion begins with units in Japan, Hawaii, and Singapore. Partnership with Dreyer's begins selling Starbucks Ice Cream. Partnership with Pepsi-Cola begins selling bottled Frappuccino beverages. 1998: U.K.-based Seattle Coffee Company is acquired. Partnership with Kraft Foods is formed for the distribution of Starbucks coffee into supermarkets. 1999: Pasqua Coffee Co. and Tazo Tea Company are acquired. 2000: Schultz steps aside as CEO to become chief global strategist, while remaining chairman; Orin Smith takes over as CEO. 2001: Mobilestar- This Texas firm, which shared some history with Wayport signed the first contract with Starbucks in January 2001 to build out thousands of locations. 2005: Introduces Starbucks Coffee Liqueur; Acquires Ethos Water. 2007: Feb 14, 2007 was an auspicious day in the history of Starbucks. On that day Schultz sent an e-mail to Donald, copying the other members of the executive team, entitled The Commoditization of the Starbucks Experience. 2008: In early January 2008, Schultz, the company's chairman, again took over the chief executive post as the company reported the worst quarterly same-store sales in its history. In 2008, total international stores became 5113 store & 11567store in United States.

Question No. (1) Why was Starbucks so successful?

The dramatic explanation of Starbucks' prevalence in today's society says their success was due to the creation of a so-called "Third Place" culture. In reality, it was because an entrepreneur who believed in strong operations management and having a central focus for everyone in the company to follow. This was the long-term vision of Howard Schultz. He was well aware that developing this coffee culture successfully involves not only utilizing an impactful marketing strategy but also managing an efficient operating management system as well. The Starbucks business plan, along with its organized functional plan, helped Starbucks to create a near monopoly in the coffee industry especially with quality and service. With the variety and uniqueness of their products, Starbucks had such a commanding lead over its nearest competitor

Local Rwandan Coffee farmer at Dunkendee Kawa Cooperative is taking with Howard Schultz; president, CEO and Chairman of the Starbucks.

The majority of the competitors consisted of small-chain coffeehouses, restaurants/diners, and coffee manufacturers who were picking up on the growing popularity of specialty coffees and had installed machines to serve espresso, cappuccino, latt, and other coffee drinks to their customers. Caribou Coffee is the most prominent among the small-chain coffeehouses while McDonald's and Dunkin' Donuts are established eateries that recognized the trend of higher specialty coffee consumption. Kraft and Nestle are competitors that manufacture and sell their products primarily in grocery and retail stores. What separated Starbucks from those others coffee competitors and drove their revenues was that the corporate strategy was pervasive throughout the entire company whether it is in operations, marketing, or financial management. Setting objectives and charting the path to achieve those objectives are essential in bringing about the kind of growth that Starbucks had. Every corporate strategy begins with a mission statement. Their mission statement was: "Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles where we grow." This mission statement helps executive management and Starbucks' partners to maintain the highest quality with respect to the operations process. But now Starbucks has changed their mission statement which is To inspire and nurture the human spirit one person, one cup and one neighborhood at a time. It allowed for Starbucks to be adaptable to changes in market trends and new regulations. The meaning of the mission statement is the central focus of the organization and helps the operations function at Starbucks to implement business strategy. Upon close examination of exactly how everyday operations at Starbucks compel profitable growth, one can see that the concentration on quality and innovation is a part of every aspect of each step in the Starbucks progression. This has permitted Starbucks to stay ahead of competitors and position itself to take a large market share in the coffee industry. The large market share is clearly evidence of an

overall operating system that is performing at an efficient rate. Starbucks follows six principles in their business. According to them these are: Our Coffee It has always been, and will always be, about quality. Our Partners We always treat each other with respect and dignity. And we hold each other to that standard. Our Customers When we are fully engaged, we connect with, laugh with, and uplift the lives of our customers even if just for a few moments. Our Stores Its about enjoyment at the speed of life sometimes slow and savored, sometimes faster. always full of humanity. Our Neighborhood We can be a force for positive action bringing together our partners, customers, and the community to contribute every day. Our Shareholders - We are fully accountable to get each of these elements right so that Starbucks and everyone it touches can endure and thrive. Application of these principles can be used as a guideline for all employees from managers to workers to aim to achieve the companys goals, while maintaining the best type of standard.

Question No. (2) How does Starbucks differ from other coffee houses?
Starbucks has a very diverse target market. The segments will vary based on the different products that Starbucks offers, but generally speaking, their targets can be described as follows:
1. Coffee drinkers, ranging from people who drink simple, but premium quality

coffee to people who like the various specially beverages developed by Starbucks.
2. Age ranging from 18 to 60. 3. People living in urban areas, specially large cities. 4. University students and faculty members. 5. People working in professional, managerial and executive positions. 6. Socially responsible folks, who care about issues like protection of the

environment and fair trade coffee. These people will associate with and respect Starbucks treatment of its employees, the community and the environment.
7. People with relatively higher incomes, because Starbucks products are more

expensive than other coffee shops such as Coffee Time or Tim Hortons.
8. People for whom customer service is an important part of the value they want

from a brand.

Starbucks offers its customers a total brand experience that extends beyond their products. This experience includes a broad range of premium quality products, excellent customer service, elegant looking stores, unique drink names, the companys ideals and its dedication to social responsibility and exceptional treatment of its employees. As of marketing strategy Starbucks wanted to position its outlets as a place where consumers can spend time other than their home or work. This was done by making each of its stores as comfortable and relaxing as possible. The coffee giant achieved these using creature comforts, such as comfortable furniture and relaxing music. Over the past several years, Starbucks also included offerings such as wireless internet, handicapped access, complimentary books, and common areas for collaboration. While Starbucks stores are positioned as locations where customers can spend time in a comfortable setting, their product lines are positioned at the higher end in regards to prices and quality. Other coffee shops such as Tim Hortons, Second Cup, Coffee Time and Timothys do not have this kind of image and facilities. Some of them focus on providing low-price products, some focus on their sense of community (for example Tim Hortons is considered truly Canadian), and some focus on having extensive distribution. Some of these brands do not offer an extended brand experience like Starbucks. Accordingly, their

target market consists of people who want cheaper coffee, or people who dont care about the social responsibility aspect of the brand or people or whom the ambience of the store isnt as important or people who like the sense of local community (something Tim Hortons represents). They have standardized how the coffee drinks are prepared, and have introduced much efficiency for high volume. Also, as a large company, they have been able to do extensive market research and marketing--much more than most coffee houses.

Question No (3) How could the company attract non-coffee drinkers? Starbucks Corporation, which has said it would "fight to the death" to promote its coffee, is getting in on the energy drink business and the smoothie business. By the end of 2011, Starbucks plans to run 21,500 stores worldwide, the company has said. Starbucks strategic goal is to increase market share of the non-coffee drinkers; they have begun by introducing an extension of a product line targeted to this segment. To ensure market growth, Starbucks has repositioned one of its current products, the Frappuccino line, this product has been extended to include 3 new flavors; Double Chocolate Chip Crme, Vanilla Bean Crme, and Strawberries & Crme, introduced throughout the summer months. Faced with the challenge of entering a new competitive market Starbucks must compete to retain brand recognition of its primary products, yet increase awareness of its new product line. Starbucks offers a variety of non-coffee drinks that are absolutely delicious: 1.Double Chocolate Chip Frappuccino: This delectable and beyond chocolaty fantasy

is like a milkshake but lighter fare as it's made with ice and milk and of course pulverized chocolate chips throughout. 2. Caramel Brulee Frap puccino Blended Crme Light: For those who are calorie conscience, can take the worry out of killing your diet with this drink that takes out a massive percentage of the calorie by using their lower calorie crme blend. 3. Pumpkin or Peppermint Hot Chocolate: During the holidays Starbucks brings to life their yummy pumpkin and peppermint syrups to dazzle a yummy but oh so humbug regular hot chocolate. Non coffee drinkers like the variety and tasty editions bringing that home at holidays in a cup 4. Banana Chocolate Vivanno Smoothie: This reminds drinkers of a banana split every time. Super filling but smooth as a smoothie people will love this treat and won't want to skip breakfast after being satisfied by this tall drink of banana. Regardless if people pass on the caffeine, there is no reason to drive past Starbucks anymore! They can find some great non-coffee options anytime and all the time at their nearby Starbucks. Question No. (4) What other challenges may Starbucks encounter in the future? As Starbucks looks toward the future, it faces the challenge of how to ensure that its brand stays relevant to a changing consumer and how to deal with emerging sources of competition. Another issue to be addressed is whether the company should expand into new product areas (non-coffee drinks, meals, breakfasts) to cater for changing consumer demands and lifestyles or should re-focus its activities on its core coffee business. The potential major challenges facing Starbucks are increased competition from other retailers. Starbucks competitors in the coffee beverage sales include 7-Eleven, Dunkin Donuts, BIGGBY Coffee, Caribou Coffee, McDonald's, Panera Bread, and Einstein Bagels. Competitors such as McDonald's and Dunkin Donuts not only have extensive menus, but also the financial resources and position to leverage their strengths to threaten Starbucks profitability. In terms of perception, 7-Eleven and Dunkin Donuts provide coffee in a "nononsense fashion", which attracts customers who are extremely price sensitive. Caribou Coffee's environment is similar to that of Starbucks because of furniture, free internet,

and cozy surroundings, but their lack of market expansion has prohibited them from gaining the notoriety Starbucks has achieved. Finally, BIGGBY Coffee is in the middle ground where the likes of Dunkin Donuts and Caribou Coffee separate themselves. Again, another foreseeable problem that Starbucks may encounter would be due to overall economic conditions as Starbucks has never had to conduct its business during an extended economic recession. The upscale nature of its retail mix might prove to be too upscale for many of its loyal customers if the economy takes a downturn.

Perceptual Map of Starbucks And It's Competitors (Coffee Shop Market) The graph below illustrates customer perceptions regarding various brands:

By forward thinking and imagining what the future might entail, companies can lay the foundation for tomorrow's success, while competing to win in today's marketplace. Starbucks should have different thinking about the future so they can make better strategic decisions that will succeed in a wide range of possible futures.

RECOMMENDATION
First Starbucks was a Private Company, from its inception in 1971, to its initial public offering in 1992. We believe that there since the beginning, Starbucks strategy has been one of growth. They have demonstrated all dimensions of a growth strategy: Internationalization in expanding into new countries and the global market. It has shown concentration in being creative and relying on its core competency of making high quality coffee and coffee equipment to develop new products and markets. Horizontal Integration has been evident in the many strategic acquisitions, partnerships, and joint ventures. Vertical Integration has been another key success factor as Starbucks Corporation has integrated backwards in opening coffee roasting plants, and forwards in controlling the distribution of its many products. Starbucks can follow some policies at different levels of their business. CORPORATE LEVEL

Reduce their price by producing a new product of coffee with special discounts promotions to increase the sales and can also decrease price of the coffee to face competition from nationwide coffee manufactures. They can also do promotion or promote packages of coffee set to impress customers, such as McDonald promoting their product. If the challenge was met successfully, in all likelihood companys best years lay on the strategic road ahead. BUSINESS LEVEL Large companies like Starbucks can effectively pursue Focus-Based Strategy in conjunction with differentiation or cost leadership based strategy. Being a lower cost store will increase the difference between Starbucks and other stores. At present, Starbucks competitors are attempting to specialize in the coffee business, therefore Starbucks must pursue focus strategy to increase its strength.

FUNCTIONAL LEVEL Advertisement can develop through internet that services convinced for users to access, give the brochures, do road shows, so that public come to know more about Starbucks details. Market penetration and market development will help to increase the sales and reduce the weakness in Starbucks. Distribute packaging of Starbucks instant coffee will definitely increase the sales as it is a demand from customers. Introducing
accurate mixing level of the coffee in a tea bag style will increase the sales at supermarkets. Packing it together with the guidelines on mixing coffee beans and sugars with milk to result same taste of coffee will never reduce the quality of the coffee. Providing proper steps to customer will make a better quality of coffee indeed. Anyway, as Starbucks have a good financial capacity with good strategies; it can overcome all the competitors to shine high as the first class coffee purveyor.

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