UNIT 102-MANAGEMENT PERSPECTIVES

LECTURER NAME:

ALLAN GARDNER

TOPIC NAME:
MANAGEMENT STUDY ON STARBUCKS

Student Name:
Danish Mohammed

Student ID:
876060

Date of Submission: 07th March 2015

EXECUTIVE SUMMARY
This research report relates to the American coffee company and coffee house chain, Starbucks and how
it has entered the caf business and is now one of the largest coffeehouse companies in the world ahead of
its UK rival Costa Coffee. Starbucks serves hot and cold beverages, whole bean coffee, pastries and
snacks. It was founded in the year 1971 by three partners who met while they were students at the
University of San Francisco, English teacher Jerry Baldwin, history teacher Zev Siegl, and writer Gordon
Bowker. The Company has expanded rapidly between 1987-2007.
In this report we have also shown what challenges and problems are being faced by Starbucks such as
new competition, store closures and the absence of centralized marketing. Starbucks being a very
profitable organization and being listed in the Fortune Top 100 companies to work still faces threats from
its competitors and also the employee dissatisfaction due to the odd working hours and less pay. In some
places Starbucks is not being able to provide good customer service because the employees are less
compared to their store size.
Potential solutions to the above said problems are also discussed in this report. Firstly being the
redefining of the market strategies. With proper market strategies, the company can provide what exactly
the customer wants and attend his needs. Steps should also be taken for new store openings in good
locations and the formation of a centralized marketing department.

TABLE OF CONTENTS

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EXECUTIVE SUMMARYPAGE 2
INTRODUCTION..PAGE 4
CHALLENGES & PROBLEMS FACED BY STARBUCKS...PAGE 5
SWOT ANALYSIS ...PAGE 6
POTENTIAL SOLUTIONS.PAGE 8
CONCLUSION & RECOMMENDATIONS.PAGE 9
REFERENCES.PAGE 10

INTRODUCTION
Management in any business or organization is basically a function, which coordinates and brings the
efforts of all the workers to accomplish common goals and objectives by using the available resources in
an efficient and effective manner. Starbucks Corporation, which is also doing business as Starbucks
Coffee, is a well-known American Global coffee company, which is based in Seattle, Washington. It is
one of the largest coffee house companies in the world and ahead of its UK rivals Costa Coffee.
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According to the recent survey Starbucks has around 21,160 stores in 63 countries. At Starbucks they
serve hot and cold beverages, whole bean coffee, pastries and snacks also. In most of the stores you can
also find pre-packaged food items, hot and cold sandwiches and also items such as mugs and tumblers. In
some countries after 4pm, the customers are also served with a variety of beers, wines and other
appetizers.
-Company Overview:
Three partners who met as students studying in the University of San Francisco opened the first Starbucks
coffee shop in Seattle, Washington on March 30th 1971. They were Jerry Baldwin, Zev Siegl and Gordon
Bowker. The 3 partners were very keen on selling high quality coffee beans and equipments by the coffee
roasting entrepreneur Alfred Peet. The first caf was opened at 2000 Western Avenue. During this period
the company only sold roasted whole coffee beans and had not started brewing coffee yet. In the year
1980, the total sales of coffee in the US were falling but the sales of special coffee were increasing. By
1986 Starbucks had opened 6 stores in Seattle and had only begun to sell espresso coffee.
-Expansion:
The very first Starbucks coffee shop outside North America was opened in Tokyo, Japan. Then Starbucks
entered into the UK market in the year 1998. In September 2002, Starbucks had opened its very first store
in Latin America. Now currently there are more than 250 locations in Mexico.
In the year 1999, Starbucks started experimenting with eateries through a restaurant called Circadia.
These restaurants were later converted into Starbucks cafes. On November 14, 2012 Starbucks had
announced the purchase of Teavana for US$620 million in cash. Later on the company started opening its
outlets in various parts of South America, China, Asia and Europe. (www.wikipedia.org, 2015)

www.slideshare.net, 2015
CHALLENGES & PROBLEMS FACED BY STARBUCKS
Every company in this world faces major challenges and this may include Starbucks as well. Even though
they have an out standing reputation, have won many hearts with their quality and taste of coffee and
given back much to their community as well, they still face many challenges just like any other company.
One of the most obvious being the current financial crisis in America. Going through such difficult times,
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Starbucks is know for the professional way they deal with pressure and handling these situations in a
detailed manner.

www.slideshare.net, 2015
Following are a few:
1.) New Competitors: With fresh concepts and many new ideas coming into the market, there has
always been a scope of competition with numerous coffee shops all over the world and being to
satisfy and attract customers is what is important. The main competitors are Dunkin Donuts, Mc
Donalds and Costa Coffee. At this stage it is very important for Starbucks to know about its
competitors and their business strategies. Starbucks should be able to defend its position against
other retailers because of the initiatives it has undertaken to sustain its brand name.
(www.lindsayecameron.wordpress.com, 2008)

2.) Store Closures: Since 2008, there have been many store closures. There were approximately 600
stores closed in July 2008 in the United States cause of the risks related to the finalization of third
party agreements, expected costs savings, income tax and other benefits related to the store
closures in the anticipated time frame.

3.) Global Expansion: This also poses a huge risk for Starbucks as it makes less money on each
overseas store. The reason being most of the overseas stores are being operated with local
partners. It also reduces the companys share of the profits by 20-50 %.
4.) Employment Dissatisfaction: The Company also faces this challenge of its employees not being
satisfied with the odd duty hours and low pay. All this in turn affects the quality of service and the
quality of coffee as well. The employees also feel overburdened and their work also goes unappreciated when such things happen.
5.) Disappearance of Mall Customers: The latest challenge faced by Starbucks is a shift in the
traffic away from mall locations. In January, Schultz clarified that the mall customers were
nowhere to be seen. As Starbucks sells stimulants in the liquid form, their store base is shifting
away from the family based malls and is entering into freestanding locations. Those places are
usually dark and are not easily noticeable. (www.finance.yahoo.com, 2015)
6.) Absence of Centralized Marketing: Starbucks did not have the concept of centralized marketing
program. On a general basis the sales data was accumulated and based on that sales data it was the
responsibility of the management to analyze that data and based on that the required action would
be taken.

SWOT ANALYSIS
Strengths:
1.) Starbucks is a very profitable organization and their earnings are in excess of $600 million
for the year 2004. The company has also generated revenue of more than $5000 million for
the same year.
2.) The menu they are serving is one of the best menus as compared to their competitors. The
menu of Starbucks covers all varieties of Donuts, sandwiches and special coffees.
3.) It is a global coffee brand, which is built upon a reputation for the most fine products and
services. It has almost 9000 cafes in almost 40 countries.
4.) Starbucks was considered among the Fortune Top 100 companies to work for in 2005.
5.) The organization also has very strong ethical values and an ethical mission statement,
which goes as follows, Starbucks is committed to a role of environmental leadership in all
facets of our business.
Weaknesses:
1.) Starbucks has a well-known reputation for development of a new product and its creativity.
But they remain susceptible to the possibility that their innovation may weaken over time.
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2.) The number of employees is less as compared to their store size and increasing number of
customers.
3.) They are emphasizing on expanding their business across the world but lacking customer
service.
4.) The company is very dependable on its main source of advantage that is retail of coffee.
This could be one reason to make them slow to diversify into other sectors should the need
ever arise.
Opportunities:
1.) The increase in the number of stores in the global market will automatically increase its
profitability of total business.
2.) New products and services can be retailed excellently in their cafes.
3.) The company has a very good opportunity in expanding its global operations. New markets
of business such as India and the Pacific Rim nations are emerging.
4.) Starbucks has also started to co-brand with other well-known manufacturers of food and
drink by which their brand franchising has reached completely new heights.
5.) They have a strong quality of bringing ethnic flavors of their current local geographical
area.
Threats:
1.) Competition with already existing major brands such as Costa Coffee & Tim Hortons.
2.) Increase in the initial costing of production and employing more number of employees will
give a negative figure on the overall revenue of the company.
3.) The un-surety of the market for coffee and its products in the future as the customers wants
are ever changing and very dynamic.
4.) Many look alike brands coming into existence and delivering same taste and service.
(www.scribd.com, 2015)

POTENTIAL SOLUTIONS
Based on what we have discussed about the challenges and problems being faced by Starbucks, following
are a few potential solutions to be considered:
a) Redefining Market Strategies: Proper research and evaluation should be carried out by the sales
and marketing team of what the customer wants. They should have a clear picture about what
actually makes the customer happy and satisfied. Accordingly they should innovate and make new
market strategies.

b) Formation of a Centralized Marketing Department: Starbucks should create a centralized

marketing department, which helps in coordinating all the marketing efforts and makes the
analysis bit easier. There is no proper synchronization between the data collected and the
evaluation of the data. Snapshot methodology may not be an effective and universal measure for
customer satisfaction.
c) New Store Openings: Major concentration should be given to opening of new stores and cafes in
famous and crowded areas. Care should also be taken that the new openings should not
cannibalize their existing sales.
d) Facing the Competitors: As it is very evident that competition is always round the corner and as
a leading top brand, Starbucks has to face its competitors and also be much ahead of them. The
company should introduce more new flavors and varieties in their coffee and eatables and should
be exclusively available only in Starbucks. Making it very unique and different from their
competitors and bringing distinctiveness qualities will help them survive and be ahead in the race.
e) Brand Advertisement & Quality Service: Starbucks should invest more in their marketing and
advertising to establish it as a famous and well-known caf. It should be clear via the
advertisements why Starbucks is different from the rest and what makes it special. Proper research
and fine strategies should be implemented before initiating a major advertising campaign.
The quality of service can be improved by adding more working hours with overtime pay and
sufficient number of employees in each caf depending on the size and location of the caf. Quick
and friendly services are the 2 most important factors for good customer satisfaction.
(www.slideshare.net, 2015)

CONCLUSION & RECOMMENDATIONS

To remain strong and competitive in todays market Starbucks has to continuously evolve, make new
strategies and bring effective changes constantly. The employees should be motivated in the work
efficient manner with proper guidance and being a role player as per their experience for an allotted job.
Steps should be taken to improvise the customer satisfaction so that reputation of the company can be
well advertised in the future. Also care should be taken of all the staff and employees regarding their work
timings and all the proper equipments should be available to them during their work hours.
In order to improve its business performance, following should be taken into consideration:
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1) Streamline the raw materials ordering process to include; sourcing, shipment, delivery,
inspection and dispatching to the concerned outlet.
2) Develop an understanding of the broad customer base by expanding their existing product line.
3) Introduce healthy items in their menus, which is good for the customers health, and make it
exclusive to Starbucks.
4) Redefining their market strategies and also the formation of a centralized marketing
department.
5) Considering good locations to open their outlets and effective advertising.

REFERENCES
1.) Wikipedia (2015), Expansion to new markets & products [Online], Available at
http://en.wikipedia.org/wiki/Starbucks, [Accessed on 25th February 2015].
2.) Cameron, L (no date), Top challenges facing Starbucks [Online], Available at
https://lindsayecameron.wordpress.com/2008/12/01/top-challenges-facing-starbucks/,
[Accessed on 28th February 2015].

3.) Macke, J (2014), Starbucks mastermind faces big, new challenge [Online], Available at
http://finance.yahoo.com/blogs/breakout/howard-schultz-wants-to-sell-a-new-drug134057496.html, [Accessed on 2nd March 2015].
4.) Scribd Inc. (2015), What are the major Challenges facing Starbucks as it goes forward
[Online], Available at http://www.scribd.com/doc/44987884/What-Are-the-MajorChallenges-Facing-Starbucks-as-It-Goes-Forward#scribd, [Accessed on 3rd March 2015].
5.) LinkedIn Corporation (2015), Starbucks going Global fast [Online], Available at
http://www.slideshare.net/aasem89/starbucks-going-global-fast-20407290, [Accessed on 5th
March 2015].

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