...study the supply and demand mechanism through the case analysis of Starbucks in coffee market. This paper has three main sections. The first two section states the problems in coffee market and its ramifications. The first main problem is that Starbucks being the price maker in the oligopolistic coffee retail market, Starbucks exerts its market power to set its coffee retail price much higher than other coffee sellers. The second problem facing by the coffee retail market is unsteady supply of coffee beans. The third section states the proposed solution to the above two problems. Possible solutions for the first problem include introducing more sellers into the market, branding and product differentiation campaign by other coffee sellers and government intervention. Possible solutions for the second problem include backward integration and product diversification. Case Analysis Problem Definition 1 – Oligopolist Exerts Market Power over Prices Starbucks buys coffee beans at low prices but sells the coffee in retail market at relatively higher prices than other coffee retail sellers. This is what described as “buy low sell high” (Keat; Young, P. 61). Starbucks is able to buy low because of coffee beans prices goes down as a result of overproduction of coffee beans in 2000-2003. Starbucks is able to sell high because of its market position in coffee retail market as being an oligopolist. Starbucks being an Oligopolist in coffee retail market acts as price maker...
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...Position History Starbucks was started in 1971 in Seattle’s Pike Place Market. Today, Starbucks operates in over 50 countries around the world, and they have more than 15,000 stores. Since 1971, Starbucks has continued to build themselves bigger and bigger, and as a result they are the largest and most well-known coffee shop in the world. Starbucks really started to take off after their current CEO, president, and Chairman Howard Schulz bought Starbucks in 1987. He was determined to make Starbucks into a “place for conversation and community”, and he strived to make Starbucks more similar to coffee shops that he visited in Italy, by making there be more of a friendly and inviting atmosphere. (Starbucks.com) Starbucks Today Starbucks, because of one of Schulz’s intiatives, has been doing better than Wall Street expected them to do, and this has mainly been because Starbucks has been cutting its costs where it can and closed 676 stores in the United States. (Steverman) In addition to closing down stores, Schulz has also been striving to get in better touch with Starbucks’s mission. Starbucks’ mission is: “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” (Starbucks.com) Many people felt that Starbucks had begun to lose its personal feel, so Schulz has been working to increase customer satisfaction by improving beverage taste, the speed of service provided, and the friendliness of Starbucks employees. (Steverman) While there...
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...Date of Submission Introduction Starbucks was found by three entrepreneurs Gordon Bowker, Zev Siegal and Jerry Baldwin in 1971. This corporation started as a coffee bean marketer, but then expanded to restaurants as well as coffee bars. Following its success after almost 20 years, Starbucks management decided to make this company public in the year 1992. Starbucks has a number of products including coffee drink (espresso and cappuccino) which reflects Italian preparation style (Herriman, Wanikawa, Ichinose, Darak & Chaivan, 2008). Strategic Problem There are a number of problems that face Starbucks Corporation in terns of its future growth, sales increase as well as market share. However, the central problem in this corporation is the over-dependence of its International operating segments in achieving its target growth. Tactical Problem The main tactical problem in Starbucks is the fact that its food is uniform. Most customers believe that this is not attractive at all, and that Starbucks should try and implement ways of improving the taste of its foods. The main focus should not be on American or Italian taste, it should also diversify the taste of its food, to accommodate other cultures . Issues Analysis • Market saturation – This is one the issues that faces Starbucks because there are new coffee shops that bring about competition. Some of these coffee shops may offer equally the same product at a low price than Starbucks. • High Prices – The high cost of foods...
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...SLIDE 1- Problems/Challenges that Starbucks faces Problem 1: Stuck in the middle of the market segment No clear position- More expensive than competitors like McDonalds but less expensive than xxx. Support Graph: showing the Starbucks pricing compared to competitors. Problem 2: Long term viability of the industry Stagnant market for Coffee? Main business model under threat due to declining/stationary daily coffee consumption. Support graph- Showing the change in trend of coffee consumed SLIDE 2- Recommendations/Solutions Solution to problem 1 Create a Premium Brand -We move upscale by developing a new upmarket brand (photoshop a classy looking logo; show chart similar to Matra with the range of Starbucks-owned brands) Advantages: -Starbucks’ current brand does not get diluted. -Variation in store aesthetics will reinvigorate interest- New upmarket stores should have classier and more stylish/suave renovations & furnishing, older/classic machines, better-trained baristas. (Currently only 4 variations of store designs and lack of depth in barista training) -tap into the higher end/upscale market segment currently ignored. Problem 2 Why is coffee consumption reducing? 1.Greater health consciousness/awareness 2.Customers moving on to substitutes- Tea, Redbull etc. 3.(We discussed it but I cant remember!) 4. Economy downturn (spending on coffee declined- 2008 shows a big decline in consumption) 5. A rise in Coffee beans and dairy products...
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...The solution is that Starbucks should raise the standards of its service by employing a quality-assurance team which would oversee that quality standards are not compromised. The aim of Starbucks should not only be of providing coffee to its customers but it should work to provide a relaxing atmosphere and enriching experience to them. Starbucks needs to turn into a place which can cater to the needs of people who wish to relax, socialize with other people or just enjoy themselves. The team that is assigned the job of improving quality standards must ensure that the retail shops are providing the desired experience to the people and catering to their demands. One of the problems faced by Starbucks is that due to continued expansion and growth it needs to find locations such as to generate 20 to 40 stores per month? Starbucks can cope with the problem by hiring real estate managers who can identify the most ideal locations to set up retail stores. . The target of the managers should be to find the locations that can generate maximum profit for Starbucks by taking into consideration issues such as corners, parking lots,etc. The managers can be paid a fixed amount of commission by Starbucks to cultivate a good relationship with them. Another area of concern for starbucks is to concretely define its brand image and to develop its brand beyond the preferred outlet from which to purchase coffee to becoming the preferred consumer brand.They need to improve their brand...
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...in the U.S and many other countries such as Canada, Japan and China and so on. In this manner, examining Starbuck’s failure in cross cultural factors rather than identifying reasons of prosperity in other countries can be critical for the company. Moreover, finding out the fundamental reasons of its regressive business in Australian market might lead to developing solutions for cultural markets as well. Surely, the Starbuck’s failure in Australian market can be explained by various cultural factors. In this report, however, global strategy will be discussed as a major theoretical principle and finally there will be recommended solutions for the problems. Starbucks Struggling In Australia With the growing trend of globalisation, many companies has been trying to expand their business globally for past decades. In order to be successful in international expansion, setting a good global strategy is a vital process for a company. The definition of global strategy is how businesses compete in the international market, and also it helps determine the performance of a corporation (Shaoming Zou). The first Starbuck opened 1971 in Seattle and today it is the largest coffee franchise in the world...
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...elements that Starbucks has encountered in entering global markets. The controllable elements in the global market are the product, price, place, and promotion. Starbucks is using their products as promotion as high quality. Starbucks is known to have a sweeter taste than the average beverages served at a coffee shop. Starbucks has done research on places they want to reach out to overseas. Starbucks has done studies overseas in Japan, Italy, Spain, Germany, Mexico, and Puerto Rico. For each location, they had to do studies and factor in what their target market is and what they will be doing in those countries. Some problems Starbucks faced were their product. One thing the local coffee shops had over Starbucks is that they served food with their drinks. The uncontrollable elements in the global market are the social factors, legal matters, government, and competitors. As we all know, Starbucks is all over the globe in almost every country. By doing this, they had to face local coffee shops, competitors, and people that were loyal to the local shops. Everyone knows what Starbucks is and what they do, and even so, they had a hard time gaining new customers. There are many regulations and laws they had to face because every country is different and has different regulations and laws that are to be enforced. 2. What are the major sources of risk facing the company? Discuss potential solutions. Global expansion is a huge risk for Starbucks. Starbucks does not generate...
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...uncontrollable elements that Starbucks has encountered in entering global market As far as controllable elements go Product, Price and Promotion are the main factors encountered when entering a global market. For instance, Starbucks offers a variety of products that are not related to coffee in Italy, as Starbucks charges customers 1.5$ for a coffee in the USA in Italy the price is 67 cents. A major controllable element is also the channel of distribution that they have, being the biggest coffeshop worldwide they have approximately 20,891 stores proving that it is indeed a controllable element. When speaking about uncontrollable elements Starbucks has several barriers to overcome. In a foreign environment Competitive, Economic, Cultural and Political/Legal forces all play a role in the uncontrollable area of Starbucks’ expansion. To begin competitive forces such as in the UK Starbucks has faced imitators who are trying to acquire themselves more market share, whereas in Japan the Starbucks local rivals offer a similar product though competition is not limited to only these two countries. The economic conditions vary throughout different countries; thus Starbucks must arrange different strategies in accordance with each’s countries economic condition. 2. What are the major sources of risk facing the company and discuss potential solutions? -The US market is being saturated meaning that the market is flooding with these product i.e : Starbucks coffee. A solution to this could be...
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...Summary Starbucks is one of the largest chains of coffee shops in the world, started their business in the early 80s as a tiny chain of Seattle coffee shops, grew rapidly in the 90s and now owns 5,689 coffee shops in 28 countries. This chain of coffee shops is very well managed by a well seasoned management team popularly known as H2O, because of Howard Schultz (Chairman and Chief Global Strategist), Howard Behar ( Head of North American Operations), and Orion Smith (CEO). Although, the company has expanded enormously, since it went public in 1991 but has also encountered a number of problems. The problem it faced had it mounted in home and abroad. The company had its success through the baby boomers in the 90s, but now the Generation X is not liking the environment of the shop and the young generation feel out of place in the coffee shop, above all the price of coffee seems to be little expensive to them. The Starbucks did not have much competition like Mc Donald’s and the likes in the initial days but now they have competitors such as Tully’s coffee shop. They also had problems of employees’discontentment. The expensive and aggressive marketing strategy has given Starbucks market dominancy. They earn $181.2 million in the year 2000, sales were still growing but it started growing in a decreasing rate, because their aggressive strategy and attitude towards competitors not only they grew rivalry with local business people but they lost customer. It was difficult for...
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...organization is living up to the standard set forth in their core values and resolving conflict through these values as well. Organizational Behavior & Communication Paper Starbucks has created one of the most exceptional models of organizational culture and communication in American business history. Starbuck’s culture is built on the platform of creating the ultimate coffeehouse experience for the consumer. It accomplishes this through offering the highest quality of coffee, hiring a diverse and passionate workforce, and sustaining the environment in which it operates. Starbucks commitment to social awareness has created a strong healthy organizational culture thus aligning their espoused values and enacted values. For example in the coffee bean farming industry, Starbucks became a leading supporter and purchaser of Fair Trade Certified coffee. Through their commitment to the Global Exchange and Fair Trade they are the only company licensed to sell the coffee in 23 countries. This action supported a core value by allowing Starbucks to still purchase their high quality coffee while supporting human rights issues. Another example would be their Ethos water campaign, which donates proceeds of the water sales to non-profit organizations focused on diminishing the water crisis worldwide. Starbucks has been given many awards for their outstanding commitment to their suppliers, employees, customers, and the environment. Such awards include: “The 100 Best Companies to Work...
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...1.)How has McDonald’s concept changed since the 1960s ? What environmental forces were behind these changes? By 1960, the company had more than one hundred restaurants. Kroc and the McDonalds owned some, but most were franchises. In addition to paying a franchise fee and part of their profits, franchisees also paid the company rent on the land where the stores sat. This income eventually earned more money for the McDonald's Corporation than selling food. During the 1960s, McDonald's saw many changes. Kroc became the sole owner in 1961, paying the McDonalds $2.7 million for their share of the business. The same year, the company opened "Hamburger University" at its Oak Brook, Illinois, headquarters to train employees. In 1962, McDonald's golden arches replaced Speedee as the restaurant's main symbol, and ads told customers to "Look for the golden arches." McDONALDS : MACRO ENVIRONMENT Organization’s decision making and performance and strategies are sometimes affected by some external factorsThe most common methods used for macro economic environment analysis is PESTanalysis. PEST anlayis do the environmental analysis from the following points of view:Source: Marketing Model, 2009.: Macro Environment and Marketing Mix3 A. Political factors Political factor mainly refers to government policy. For example, the degree of government’s intervention in an economy is a good example of political factor .According to Oxford University Press political factors mainly deals with...
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...Decisions in Paradise: Part2 Starbucks leading problem that they need to address when doing business in Kava is to address the issue of educating both the citizen of Kava and their employees on the risks of AIDS. In this essay some solutions to the education and awareness of AIDS. By exploring different ideas it will help in the decision making of choosing the right program to implement in the education of AIDS, by doing this it will benefit the citizens of Kava. Since at least half the population is under the age of 15, they are most likely looking to get an education on basics as well the knowledge of the world around them. With the government on Kava wanting to improve the quality of life for the citizens of Kava, Starbucks as a company can help in this task. The first issue is to make sure that all know and understand the seriousness of AIDS. By getting this information out, it will help in reducing the chances of the citizens of Kava, as well as Starbucks own employees of contracting the AIDS virus. An excellent tool to utilize in getting the information out to the citizens is through the schools. Since more than half the population of Kava is under the age of 15, the schools would be a great place to get the information out and spreading through the population. Due to over half the population under the age of 15, Starbucks could start by implementing a program to start education these students in the classroom. By educating the younger generation can benefit the overall...
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...HR Practices Ensure Its Brew Is a Winner Question 1 What HR practices do you believe are most critical for starbucks to maintain the coffee experience and customer service it's known for as the company expands in the United States and abroad? Solution 1.Starbucks believes that the key to company success is its employees, called partners. 2. At starbucks the value-and-treat-employees-right approach is part of the company culture. 3. One of the company’s six guiding principles is “to provide a great work environment and treat each other with respect and dignity.” 4.As a result of the important role of starbucks’ paartners, the company emphasizes selecting the right new employees, training them ,and rewarding and retaining employees with above-minimum salaries. 5.Job fairs,in-store advertisements,a cpmpany Web site,and employee referrals are used to recruit new employees. 6.Managers are provided with interview guidelines that are used to question job candidates to determine whether they have the skills and behaviors necessary for the position. 7.Although 85 percent of its employees are part-time, they are still eligible for full-time benefits if they work 240 hours a quarter. 8.Less than 30 percent of part-time workers in the United States receive health care, paid sick leave, or eligibility for bonuses or stock options. 9. Starbucks provides all employees and their same-sex or opposite-sex partners comprehensive health benefits that include medical...
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...facing the company and Potential solutions………………….…………………….…… .. 3 * Critique Starbucks overall corporate Strategy ..…… 4 * Starbucks improve profitability in Bangladesh………4 * Recommendation and conclusion……………………………………….…………………… 5 * Reference…………………………………………..……………….. 5 Abstract Global market is immensely accumulative now a days, with the vigorous effects of globalization which effecting firms of all breeds to expand the business across the borders. This report is generally bases on the answers to the provided case study of Starbucks growth story and its international expansion plans. Starbucks being the producers of one of finest coffee and premium drink beverages manages its major markets within USA and abroad. The report will accumulate Starbucks potential strategic options with substantial vision of the management to expand business internationally while understanding the escalating aspects of ethical and cultural values which Starbucks owns as an influential organization. Introduction This report is ultimately based on critical analysis and evaluation of the case study provided for one the leading coffee and Beverages Company. With the expanding international business and continued globalization policy of Starbucks, this report will help to comprehend the various International market strategies and options, ethical and cultural values and anticipated problems with the ongoing international expansions of Starbucks Company Identify the controllable...
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...INTERNATIONAL MARKETING Case Study Report How Starbucks Corp. should improve its business Syndicate Group Number 1 24/08/2007 The following group assignment report was prepared for a business unit at Macquarie University, Sydney. The information given does not need to be correct. The suggestions given and conclusions drawn remain (as the whole report in itself does, too) the intellectual property of the authors. Do not use this report for plagiarism. Do not copy this report. Do not print this report. Do not hand this report in as your own! Authors and Copyright: Tanya Shahi Jorge Omar Martin Aufschläger Timo Schmerling Stefan Gassner tanyashahi@gmail.com canogeorge@hotmail.com martinaufschlaeger@gmail.com timo_schmerling@web.de mail@stefan-gassner.de 2 Case Study Report: Starbucks Corp. Table of Contents Table of Contents ....................................................................................................... 2 1. Introduction ............................................................................................................. 3 1.1 Company Profile ................................................................................................ 3 1.2 Case Summary.................................................................................................. 3 1.3 Current Situation .................................................................................................
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