Strategic management analysis of Starbucks Corporation

STARBUCKS

Strategic management

Starbuck Corporation: Analysis of its past and future

Today, the name of the Starbucks Corporation is synonymous with a rather corporate version of overpriced coffee. But the company originated with the intention of bringing a customized European coffeehouse experience to the United States. Starbucks began as a small chain of four coffeehouses in Seattle. The business partners asked Howard Shultz to assume the helm of the company as head of marketing as they prepared for expansion. "Schultz was struck by the business philosophy of the two partners. It was clear from their discussions that Starbucks stood not just for good coffee, but rather for the dark-roasted flavor profiles that the founders were passionate about. Top-quality, fresh-roasted, whole-bean coffee was the company's differentiating feature and a bedrock value" (Thompson & Hill 1998: 1). Starbucks focused on offering Americans a high-quality European coffee house experience they had previously been unable to have outside of major cities.

Schultz eventually bought Starbucks and pursued a policy of aggressive expansion. However, Starbucks never franchised its stores, to ensure that it could retain control over the quality of the product. It adapted a unique strategy of expansion called a 'hub and spoke' system, focusing on dominating cities, establishing demand and positive word-of-mouth for its product and then unfurling out into the suburbs (Thompson & Hill 1998: 3). Starbucks supersaturated the market, rationalizing that different consumers would patronize different 'types' of Starbucks, and while each store would have certain core, branded features, different stores would also have slightly different identities. Starbucks also made a commitment to educating its workers about its product and offering health benefits to all employees.

Starbucks has had various internal struggles regarding giving customers what they want vs. its commitment to its product. "A values and principles crisis arose at Starbucks in 1989 when customers started requesting nonfat milk in cappuccinos and lattes" (Thompson & Hill 1998: 2).Schultz refused because it compromised the quality of the product, but eventually consumer demand won out. However, when the company entered the Japanese market, it was demanded that Starbucks allow smoking in stores, which Schultz opposed because it would interfere with the aroma of the coffee. In this instance, Schultz was proven correct. "The policy has attracted young women, who do not smoke nearly as much as Japanese men. Given the choice between smoking or chatting up potential girlfriends, many young men have become regulars at Starbucks, too" (Belson 2001).

After becoming successful in America, in 1996 Starbucks selected Japan as its first venue for international expansion. Japan is a nation known for embracing new ideas and foreign traditions despite the fact that tea-drinking has such traction within Japan vs. coffee drinking. But "among Japanese in the 18-to-59 age group, more than 80% like coffee" (Benson 1996). However, Starbucks was still forced to adapt its coffee shop concept to certain aspects of Japanese life. In general, the Japanese tend to consume savory, meal-type foods rather than sweet foods when they go out. The flavors of the pastries that were offered had to be changed slightly, and a wider array of teas was provided to give friends of coffee drinkers more choices. Starbucks has begun to offer instant coffee in the U.S. But this was partially prompted by the fact that the Japanese (along with much of Europe) are far more enthusiastic instant coffee drinkers when consuming the beverage at home, versus Americans and thus Starbucks needed to make instant beverages part of its empire (Allison 2012).

Starbucks is now an international phenomenon, and this strategy of 'tweaking' its product to suit local tastes is now its most common mode of entry. It has a secure presence in Europe as well as other major global powerhouses, and its currently focusing its attention on China. "The chain plans to more than double locations in China to 1,500 by mid-2015. Long a worldwide status symbol, Starbucks inspires some customers in China to carry their coffee cups with the mermaid intentionally facing out" (Allison 2012).