Starbucks Case Study

“Starbucks”

Starbucks operates and licenses more than 8,500 coffee shops in more than 30 countries. Starbucks stores offer a choice of regular or decaffeinated beverages, including at least one coffee of the day, along with a selection of Italian-style espresso drinks, cold blended beverages, and a selection of premium teas and packaged roasted high quality whole bean coffees. Starbucks also offers a selection of fresh pastries and confections and other food items, sodas, juices, coffee-making equipment and accessories and a selection of compact discs. Each store varies its product mix depending on its location and the size of the store. Larger stores carry a greater variety of whole coffee beans, gourmet food items, and coffee making equipment and accessories. Approximately 700 stores carry a selection of “grab and go” sandwiches and salads. Starbucks has also sold Oprah’s Book Club selections, in which the profits were donated to a literacy fund supported by the Starbucks Foundation. The company makes constant efforts to develop new ideas, new products, and new experiences for customers that belong exclusively to Starbucks.

Starbucks Specialty Operations strive to develop the Starbucks brand outside their retail store environment through a number of channels. Starbucks strategy is to reach customers where they work, travel, shop and dine by establishing relationships with prominent third parties who share Starbucks value and commitment. These relationships take various forms, including arrangements with food service companies and retail store licensing agreements for North American locations, grocery channel licensing agreements, warehouse club account, international retail store licensing agreements, direct-to-customer market channels, joint ventures and other initiatives related to the Company’s core businesses.

In October 1995, Starbucks partnered with Dryer’s Grand Ice Cream, distributing a new line of coffee ice cream made and distributed by Dreyer’s under the Starbucks brand. The new line featured flavors such as, Dark Roast Espresso swirl, Java Chip, and Cafй Almond Fudge. By July 1996, Starbucks coffee-flavored ice cream was the top-selling super premium brand in the coffee segment.

Starbucks, through its joint venture with Pepsi produces and sells bottled Frappuccino coffee drink. By the end of 2001, the joint venture was distributing its bottled Frappuccino coffee drink to approximately 200,000 supermarkets, convenience and drug stores and other locations throughout the United States and Canada.

The Company’s retail goal is to become the leading retailer and brand of coffee in each of its target markets by selling the finest quality coffee and related products. Starbucks provides superior customer service, thus building a high degree of customer loyalty.

Starbucks retail stores are typically located in high-traffic, highly visible locations. Since the company can vary the size and format of its stores, they are located in a variety of settings, including downtown and suburban retail centers, office buildings and university campuses. The company selectively locates stores in suburban malls, but focuses on stores that have convenient access for pedestrians and drivers.

Starbucks is committed to selling only the finest whole bean coffees and coffee beverages. The company goes to extreme lengths to buy the very finest Arabica coffee beans available on the world market, regardless of price. The supply and price of coffee are subject to significant volatility. The price depends upon the supply and demand at the time of the purchase. Starbucks purchases green coffee beans for its many blends and single origin coffee from coffee-producing regions around the world and custom roasts them to its exacting standards.

Starbucks does everything possible to enhance mood and ambiance in their stores. The company went to great lengths to make sure the store fixtures, the merchandise displays, the colors, the artwork, the banner, the music, and the aromas all blended to create a consistent, inviting, stimulating environment that evoked the romance of coffee, that signaled the company’s passion for coffee, and that rewarded customers with ceremony, stories and surprise. Starbucks banned smoking in their stores and asked employees to refrain from wearing perfumes ore colognes to try and keep the coffee aromas in the stores pure. They kept prepared foods covered, so customers would smell coffee only. To be assured that Starbucks stores were living up to their standards, “mystery shoppers” who posed as customers were sent in to rate each location on a number of criteria.

Starbucks is no cheaper or faster than Dunkin Donuts. Starbucks position is about the experience. Many people go to Starbucks because of the way they make their customers feel.