Caso Starbuck

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3 Case Study Report: Starbucks Corp.
1. Introduction
1.1 Company Profile
In 1971, English teacher Jerry Baldwin, History teacher Zev Seigel and writer
Gordon Bowker who shared a love of fine coffee and exotic teas invested US$ 1,350
each and borrowed another US$ 5,000 from a bank to open up a store called
Starbucks Coffee, Tea and Spice in the tourist’s Pikes Place Market in Seattle.Later
the name was changed to Starbucks Coffee Company (Thompson & Strickland, n.d.).
Starbucks is named after coffee-loving first mate in Herman Melville’s Moby
Dick and also because the thought of the name evoked the romance of high seas
and the seas faring tradition of early traders. The Starbucks logo is a two-tailed
mermaid encircled by the store’s name (Thompson & Strickland, n.d.).
Thestore was an immediate success, with sales exceeding expectations.
Stores opened in different parts of the US. Entrepreneur Howard Schultz joined
Starbucks as a marketing executive in the early 1980s and acquired the company in
1987 (Cateora & Graham, 2007, p. 597). Starbucks went public in 1992 and has
done extremely well, turning an everyday beverage into a premium product.
According to thecompany’s mission statement Starbucks sees itself “as the
premier purveyor of the finest coffee in the world while maintaining [its]
uncompromising principles while it grows” (Starbucks, 2007).
1.2 Case Summary1
Starbucks has grown rapidly since the time of its inception: from 17 stores in
Seattle to 5,689 outlets in 28 countries. But now the US market is getting saturated
with only 8states without any Starbucks stores (Cateora & Graham, 2007, p. 596).
1 This part serves as a summary of the Starbucks case study in Cateora’s and Graham’s (2007, 496-99) text book.
4 Case Study Report: Starbucks Corp.
Despite the self-cannibalising effects of a 30% loss in old stores’ revenue,
Starbucks in still opening new stores in order to achieve market dominance and
increase total revenue.Furthermore, by paying above the prevailing market rent
rates, Starbucks successfully tries to keep competitors out of location.
There was a time when Starbucks had the lowest employee turnover but now
its employees face low morale and burnout. The employees are paid better as
compared to other industry workers and are also given stock options and health
insurance but all this, according tothe workers, does not come close to the workload
the job requires.
Starbucks relies on word-of-mouth advertising and therefore saves on
marketing activities. It spends only 1% (US$ 30 million) of revenues on marketing
annually as compared to other firms of the same size, which easily have a marketing
budget of more than US$ 300 million a year.
Starbucks came up with Starbucks Express, a systemwhere customers could
order online or on the phone in advance so when they arrived at the store their
beverage would be waiting for them. To reduce transaction times and speed up
services Starbucks introduced a customer card and installed automatic espresso
machines respectively. It also has wireless Internet access in 1,200 locations in both
North America and Europe.
Starbucks faces thechallenges of saturation of the US market and new
competitors both in the US and overseas market. Furthermore, the company is
confronted with a change in customer perception.
1.3 Current Situation
Sales have increased from US$ 3289 million (2002) to US$ 7787 million
(2006). Till July 2007, Starbucks has already earned revenue of US$ 6,970 million. In
5 Case Study Report: Starbucks Corp.September 2006 the company had 145,800 employees on its payroll (CNN Money,
2007). Starbucks ranks 16th in Fortune’s 100 best Companies to work for (2007),
(Nasdaq, 2007) and 310th in the Fortune 500 ranking of the world’s largest
companies (2007) (CNN Money, 2007).
Starbucks operates in 39 countries outside the US. It has 6,281 companyoperated
stores and 3,533 licensed stores in the US and...