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Vision :become America's third place ,a place that would be separate from home and work.
Mission : establish Starbucks as the most recognized and respected brand in the world.
In 1971 opened by Gerald Baldwin ,Gordon Bowker & Zıev Sıegl.
In 1982 Howard Schultz joined the marketing team.
Set up an espresso bar at downtown shop.
Schultz took over and began opening new atores
In1992 140 stores in northwest and Chicago
Competed against Gloria Jean’s coffee and Barnie’s coffee &tea
In 2002, sales rose by 40%,earnings by 50% serving 20 million customers in 5,ooo stores around
the glob .Opening 3 new stores a day.
Have you ever wondered where the Starbucks logo came from?
Take a look at it. What do you see?
In 1987, the original Starbucks
Logo which was a UPS brown and
featured a two-tailed mermaid,
also known as a siren. The siren is
a mythical creature whose stories
tell of luring fisherman through
Starbucks is using the lure of
female sexuality to draw
customers attention to the coffee.
Starbuck Corporation: Logo (cont’d)
Kitchen appliance salesman
Hired by Starbucks in 1982
Trip to Milan in 1983
Left the company in 1985
Bought the company in 1987
Starbucks failed to meet customer expectations and
deliver satisfaction thereby losing customer loyalty
Potential to lose loyal customer in the near future due
to the increased of number unsatisfied customers
Rough brand image of primarily making money and building
Insignificant perceived differentiation between Starbucks and
competition coffee chains.
The changing customer leads to the changing of its behavior,
perceptions, and expectations toward brand
Complexity arises due to hundreds of combinations of drinks in its
portfolio:resulted to low speed-ofservice and satisfactory service of
Why Customer Satisfaction Declined?
Declining Customer Satisfaciton
Imperfect tool for measuring customer satisfaction :Customer Snapshot
Mystery shopping program third in a quarter
Rated based on 4 criteria-service,cleanliness,product quality & speed of service
Legendary services-behaviour that created memorable experience for customers
Despite high Customer Snapshot scores,Starbucks was not meeting
expectations in terms of customer satisfaction.
Exhibit 9 Starbucks' Customer Behaviour,by Satisfaction Level
Number of Starbucks visits/Month 3.9 4.3 7.2
Average Ticket Size/Visit $3.88 $4.06 $4.42
Average Customer Life(Years) 1.1 4.4 8.3
The ideal customer from a profitability standpoint is;
The loyal customer who visits the store 18 times a month
Service time in all stores not exceed 3 mins
Improve customer througput
Reach as close to $20.000 level in terms of weekly sales
Ideal Customer & Satisfaction
Core Value Proposition
Highest quality coffee from
the Africa,Central and South
America and Asia-Pacific
regions.«Our goal is to create an
uplifthing experience every
time you walk through our
Encourage lounging and
layouts that were designed to
provide an upscale yet
Exhibit 1 Starbucks' Financials, FY 1998 to FY 2002 ($ in millions)
FY 1998 FY 1999 FY 2000 FY 2001 FY 2002
Co-Owned North American 1.076,8 1.375,0 1.734,9 2.086,4 2.583,8
Co-Owned Int'l (UK, Thailand, Australia) 25,8 48,4 88,7 143,2 209,1
Total Company-Operated Retail 1.102,6 1.423,4 1.823,6 2.229,6 2.792,9
Specialty Operations 206,1 263,4 354 419,4 496
Net Revenues 1.308,7 1.686,8 2.177,6 2.649,0 3.288,9
Cost of Goods Sold 578,5 747,6 961,9 1.112,8 1.350,0
Gross Profit 730,2 939,2 1.215,7 1.536,2 1.938,9
1,0 3,2 20,3 28,6 35,8
Store Operating Expense 418,5 543,6 704,9 875,5 1.121,1
Other Operating Expense 44,5 54,6 78,4 93,3 127,2
Depreciation & Amortization Expense 72,5 97,8 130,2 163,5 205,6
General & Admin Expense 77,6 89,7 110,2 151,4 202,1
Operating Expenses 613,1 785,7 1.023,8 1.283,7 1.656,0
Operating Profit 109,2 156,7 212,3 281,1 310,0
Net Income 68,4 101,7 94,5 181,2 215,1
% Change in Monthly Comparable Store Sales
North America 5% 6% 9% 5% 7%
Consolidated 5% 6% 9% 5% 6%
Net income grew
in 1998 to 215.1
million dollars in
Exhibit 2 Starbucks' Growth Store
FY 1998 FY 1999 FY 2000 FY 2001 FY 2002
Total North America 1,755 2,217 2,976 3,780 4,574
Company-Operated 1,622 2,038 2,446 2,971 3,496
Licences Stores 133 179 530 809 1,078
Total International 131 281 525 929 1,312
Company-Operated 66 97 173 295 384
Licences Store 65 184 352 634 928
Total Stores 1,886 2,498 3,501 4,709 5,886
Total store grew from 1,886in 1998
to 5,886 in 2002 to 4,574 in the US.
Starbucks IPO was offered at
$17.00 a share .
Serving 20 million unique customers in over
5000 stores around the global and opining on
average three new store per day.
Strong market position and global brand
Number one brand in coffee house segment
valued at $4 billion
Products of the highest quality
Largest coffehouse chain in the world
Good employee management
Location and aesthetic appeal of its store
There was very little product differrantiation
between Starbucks and the smaller coffee
chains in the minds of customers.
Self-cannibalization through overcrowding
People think that Starbucks cares primarily
about money and building more
Expansion to emerging economies:international
Expanding product mix and offerings
Expansion of retail operations
New distribution channels
Price volatility in the global coffee market
Saturated markets in the developed
Porter’s Five Forces
. Small scale specialty
.Donut and bagel chains
.Consumer have many
options of where to
. Evolving customer
.Entrance into this
market is low
.shops similar to Starbucks
but also offering food drinks
. Fast food restaurants
offering specialty coffee.
.Individual suppliers of coffee
bean ;paper and plastic
WO Strategies:Better training of partners to
treat customers better
Customer may define «great service»
Maybe decreasing time for preparing
SO Strategies: Set up a real strategic
For better management
Looking big picture and making
WT Strategies:Free cup after x
number of visits
This will be a promotion strategy
It will help to create correct brand image
in the customer’s mind.
ST Strategies: Investing $40 million
annually into more employees
Increasing customer satisfaction
Retention play to keep Starbucks’
best customers happy
Eliminate problems associated with
fast service and treating the customer
When a partner was hired to work in Starbucks he/she had two types
of training.’Hard Skills and Soft Skills’
Hard Skills: Learning how to use cash register and learning how to
mix drinks.Most of the Starbucks beverages are handcrafted so ensure
the quality there is prespecified process associated with each drink.
For example; making an expresso beverage required seven spesific
Soft Skills: Learning connectting with the customers ,establishing eye
contact,smiling and trying to remember of the customer’s name.
Baristas are also encouraged to take conversations with the customers
instead of yes no questions.
TRAINING OF BARISTAS
To improve speed-of-service by investing an additional of
$40 million annually in the company’s 4,500 stores; mostly
used for getting an additional of 20 hours of labor a week.
Whether our customers are telling about what constitutes
‘excellent’ customer service
Whether it will bring a positive impact on sales and
Cater to their needs and match/exceed their
Ensure service as fast as customer wants it to be
Add lounging areas and more comfortable chairs
and tables so that customers feel relaxed
More highly-satisfied customers: more often they
visit us, more money to spend, good higher profit!
Moving Forward: Ensuring the Customer
to be Highly Satisfied
Recommend the Management to make investment;
however suggest to have a pilot project instead of
massive investment in labor
Allocate the money based on size of store, number of
customers, location, and need for additional labor
instead of apportioning the $40 million equally to all
Apart from making the investment, Starbucks need
to look more into their customer base and improve
their brand image and value proposition