Starbucks Case Study In responding questions, refer case study "Starbucks U.S.: Too Much Coffee Spilling All Over?" 1. Based information provided case, view Starbucks' business model (i.e. feel sound business fundamentals)? Substantiate response referencing (4) examples, ideally case, relevant business concepts.

Starbucks in U.S.: Too much coffee spilling all over?

Starbucks' business model

Starbucks' business model is to offer higher-than-average quality coffee at a relatively high price point. Its coffee is an 'affordable luxury.' It is not the cheapest coffee on the market or the most expensive but is positioned so that middle and upper middle-class consumers feel comfortable making frequent purchases. It offers a 'home away from home' to consumers who want to relax, do some work, and get away from the stresses of the office and home in a relaxed atmosphere (Jain 2009: 3-4). This social aspect of Starbucks was why it focused upon word-of-mouth advertising and used cities as its central hubs for expansion. Urban stores were presumed to be prominent enough to generate a great deal of foot traffic.

At the time, Starbucks was offering a unique product, an Italian coffee shop experience to a nation weaned on Folgers. Having a unique product is essential to survive in a competitive marketplace. The downside of the Starbucks approach, however, was that it was positioned in the 'middle range' of the market, neither high-end nor low-end, and middle income consumers are often very willing to cut out the 'affordable luxury' of a cappuccino...

Starbucks hoped its ethical orientation as a company as well as its quality would generate sustained consumer loyalty, and for a time this worked.
Q2. SWOT

Strengths: A high level of brand recognition; many established stores internationally; a strong company vision and ethos

Weaknesses: Over-saturation of many markets, declining quality of product, perceived high price and poor value for price of product

Opportunities: There are many developing markets full of new, middle class consumers, particularly in the Far and Near East, eager for American food experiences and 'affordable luxury' shopping.

Threats: Other, lower-cost chains in the U.S. are offering Frappuccino knockoffs and cheaper flavored and specialty coffee drinks.

Q3. Starbucks' approach to compensation

Starbucks offered complete health benefits and stock options to both its part and full-time employees from its inception (Jain 2009: 2-3). This was unprecedented in retail but has benefited Starbucks in a number of critical ways. First of all, given that Starbucks does not market its product based upon price but upon quality, it ensures that it can attract higher-quality staff to serve as baristas. Unlike McDonald's, baristas are responsible for the quality of the food, not simply pushing keys on a cash register. Starbucks is selling an 'experience' not merely coffee, and having well-trained and well-educated staff…