Starbucks Coffee: A Case Study (Part 2)

Here is the second part of my case study of Starbucks Coffee. In the last case study, I mentioned about the factors that contributed towards Starbucks’ successful story. In this second part, I tried to evaluate Starbucks’ strengths, weaknesses, opportunities, and threats.

STARBUCKS COFFEE: A CASE STUDY II

Starbucks Coffee has certainly made an impact to the coffee-culture all around the world. They might not be the first, but they have managed to be a leader in this coffee-culture. Now, we want to see what the things that contribute towards Starbucks’ success are. First of all, Starbucks offers great choices to the consumer. A typical coffee drinker can come into any Starbucks store and ask for a coffee from the many choices available. This is certainly an advantage for Starbucks especially at the beginning of 70’s because other coffee stores did not offer as many choices as Starbucks were. Starbucks, being an established company have created a brand for themselves. People are now associate coffee with Starbucks. If they think coffee, they will think Starbucks. And because of this, Starbucks gained loyalty from their customers through products and services that they offered. Customers keep coming back to Starbucks stores because they know that the brand name is reliable in delivering choices of good quality products.

By pioneering the idea of street-café - started by Howard Schultz who was aspired by the success of Milan’s espresso coffee bar – Starbucks got the advantage of capturing consumers’ trend, or rather setting a new trend for consumers. This is very important because any company that can follow or capture or start a new trend of consumers will have a certain advantage in the market. Not only that, Starbucks success story was also because they have good marketing and corporate strategy that allows them for a rapid expansion throughout the market. This means, Starbucks now is readily and easily accessible to consumers all over the world. With that, they also increased their market share to a very significant level. And what is more important is Starbucks are not just selling coffee but also a concept. They are selling the experience of drinking coffee in their stores. And that is very important in the market today because as market became more saturated and diversified, firms have to look for other ways to market their products and Starbucks has certainly done that.

On the other hand, Starbucks might have to overcome some of their weaknesses. Firstly, with its rapid expansion, one cannot stop to wonder whether they might be over expanding themselves. Starbucks first started as a premium coffee brand and they intend to keep it that way for many years to come. However, by making Starbucks available everywhere might contradict the term ‘premium’ itself. Premium means that only some people can get access to it and it is not very easily available. And now, with Starbucks expansion, people can get hold of Starbucks coffee virtually everywhere hence, not being premium. Secondly, is just by being an American company. Ever since the Iraq and Afghanistan war, anti-American sentiment is growing stronger than ever. And while this anti-American attitude did not affect most American company, it could affect Starbucks in some ways or another.

What about opportunities for Starbucks? With the strengths that they have now, there must be something that they can do to be more and more successful. In terms of stores expansion, which contributed 85% towards their sales, Starbucks still have a plenty of market to penetrate within the US boundary itself. Starbucks might have been very successful in the US coastal region, but they have not got any stores in the central US. This includes Alabama, Arkansas, Mississippi and Tennessee. Beyond the US boundary, they can jump in to the region with emerging economies particularly China and South East Asia. With the overall increase in general income level, particularly in Europe and North America, there is a culture called ‘eating-out’ culture. People today have a higher disposable income and they are simply too busy to cook, therefore they tend to have their meals at restaurants and cafés. Starbucks could take an advantage in this trend by offering more and more food products to appeal customers.

Starbucks also have to lookout for threats to their company. First of all are its competitors. Competitors like Caribou Coffee, Costa Coffee, Coffee Republic and The Coffee Bean & the Tea Leaf. Within the Asia market, they have San Francisco Coffee, a Hong Kong based company. These competitors, although it might be argued that they are not offering the same type of products and services, they could still be counted as threats to Starbucks. Another threat for Starbucks is they have to find ways to keep their market leader position in a saturated market place like coastal US and the UK. They have to be innovative to ensure costumers’ loyalty and to make sure that they will deliver good products and services.

BIBLIOGRAPHY

Philips Kotler, Veronica Wong, John Saunders. (2005) Principles of Marketing. 4th European Edition. Pearson Education Limited, Essex.

For more information, please visit Starbucks.com

The reason I conducted the case study is to identify Starbucks’ marketing and corporate strategy in their development to become a market leader in premium coffee provider. Ciao ciao.