CASE STUDY: STAR BUCKS COFFEE
Beginning with nine Seattle stores in 1987, Starbucks Chairman Howard Schulz has exported the company`s chic cafes throughout the world. Service is anything but fast, and the price of a cup of coffee could make the Dunkin Donuts crowd faint, but each week millions of people in cities from Atlanta to Tokyo hit Starbucks to sip cappuccinos and double lattes.
Starbucks has pursued rapid expansion both at home and abroad. Today, Starbucks boasts more than 4,600 outlets around the world, and Schulz has no plans to slow the growth. Starbucks has proven so popular in Japan, where sales per store are twice as high as in the United States, that the firm recently opened its 300th store with plans to add nearly 200 more over the next three years.
Starbucks moved into China in 1999 and now has 35 stores, mainly in Beijing and Shangai. A joint venture with Germany`s largest department store company,KarstadtQuelle is helping Starbucks push into Germany. The firms currently has six shops in Switzerland and plans to open a store in Vienna in late 2014, are part of a long-term plan to open at least 650 outlets in continental Europe by the end of 2020. And in Canada, Starbucks has partnered with Interaction Restaurants, which hopes to be running 50 to 70 Starbucks in Quebec within five years.
Starbucks strategies have long been criticized as risky, but there`s no arguing with success. Many analysts think the firm has the flexibility and management strength to continue to grow and prosper.
Many of Starbucks managers have years of experience from such companies as Burger King, Taco Bell, Wendy`s and Blockbuster. Shultz believes a top executive should `hire people smarter than you and get out of their way`. Equally crucial to Starbucks success are the `baristas` who prepare coffee drinks. Starbucks recruits its workers from colleges and universities and gives them 24 hours training in coffee making and lore-a key to creating the firm`s hip image and quality service.
When customers go to Starbucks, they are buying not just a great cup of coffee, but an experience. In a new store in Beijing for instance, customers’ line up daily to have a barista dispense jolts of java from a `mercury machine` strapped to his back. Starbucks also emphasizes listening to customers and giving them what they want. One reason the firm agreed to a deal allowing Interaction to run storefront outlets in Quebec was to ensure that Starbucks adapts to local markets needs, particularly in Montreal, which already has a strong coffee culture and vibrant local competitors.
A computer network links the expanding Starbucks empire and Shultz hired a top information technology specialist from McDonald`s to design a point-of –sale system to enable managers to track sales. Every night, companies from stores around the world send information to head quarters in Seattle so that executives can spot buying trends.
Starbucks` same-store sales in mid-2001 were already the lowest since 1998, and the declining economy following the September 11, 2001, terrorist attacks hurt sales even more. However, this does not worry Shultz and other top managers. To them, meeting such challenges is just part of the job.
1. What is the core business of Starbucks? (1marks)
2. If you were the manager of Starbucks, what could have been your mission statement? (2 marks)
3. Discuss the corporate level strategies pursued by Starbucks, quote specific examples from the case study. (5 marks)
4. What is the source of the competitive advantages of Starbucks? (4 marks)
5. Discuss the business level strategy pursued by Starbucks. (3 marks )
6. What do you think are the critical success factors in this industry? (5 marks)
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