case study of starbucks

Starbucks Case Study - How Starbucks Conquered The Coffee Industry?

Devashish Shrivastava

Starbucks Corporation is an American coffee chain that was established in 1971 in Seattle, Washington. By mid-2019, the organization had a presence in over 30,000 areas around the world. Starbucks has been depicted as the fundamental delegate of "second wave espresso," a reflectively-named development that advanced high-quality espresso and specially simmered coffee. Starbucks now uses robotized coffee machines for proficiency and well-being.

Starbucks serves hot and cold beverages, entire bean espresso, micro-ground moment espresso known as VIA, coffee, caffe latte, full-and free leaf teas such as Teavana tea products, Evolution Fresh squeezes, Frappuccino refreshments, La Boulange baked goods, and bites (for example, chips and wafers); some offerings such as the Pumpkin Spice Latte are explicit to the territory of the store. Numerous Starbucks outlets sell pre-bundled nourishment items, sweltering and cold sandwiches, and drinkware such as cups and tumblers. Furthermore, there are Select "Starbucks Evenings" areas that offer brew, wine, and appetizers.

Starbucks first ended up productive in Seattle in the mid-1980s. Despite an underlying financial downturn with its venture into the Midwest and British Columbia in the late 1980s, the organization experienced rejuvenated success with its entrance into California in the mid-1990s. Starbucks opened an average of two new stores every day between 1987 and 2007. On December 1, 2016, Howard Schultz reported he would leave his position as the CEO and would be supplanted by Kevin Johnson. Johnson accepted the role of the CEO of Starbucks on April 3, 2017, and Howard Schultz resigned to end up as the 'Chairman Emeritus', effective from June 26, 2018. Kevin Johnson is currently serving as the CEO and President of Starbucks.

Starbucks - Company Highlights

Startup Story Of Starbucks Corporation History Of Starbucks Corporation Starbucks - Name and Logo Starbucks Expansion Journey Starbucks Corporation in India Business Strategy Of Starbucks In India Products Of Starbucks Corporation Business Growth Of Starbucks Corporation Over The Years Future Plans Of Starbucks Corporation

Startup Story Of Starbucks Corporation

If you are wondering how did Starbucks start? Then, the story of Starbucks started back in 1971, when the company was a roaster and retailer of whole bean and ground coffee, tea and spices with a single store in Seattle’s Pike Place Market.

Zev Siegel stated that at that time he knew the coffee industry inside and out, he was well-versed, especially with the gourmet end of the industry. Besides, he was also known as the most educated coffee guy in the country at that time. So, the three college friends - Zev Siegel, Jerry Baldwin and Gordon, started out with their coffee bean shop and roastery at Seattle’s famous Pike Place Market in 1971. Eventually, they found a mentor in Alfred Peet, who was the founder of Peet’s Coffee and the man responsible for bringing custom coffee roasting to the U.S. and started with the coffee business in full swing. Starbucks initially began by selling coffee beans that were roasted by Peet's, a gourmet coffee company in Berkeley, California, and later on, started roasting on their own.

History Of Starbucks Corporation

The first Starbucks store was initiated in 1971 in Washington by 3 individuals who met while they were studying at the University of San Francisco: English educator Hun Baldwin, history educator Zev Siegl, and author Gordon Bowker. The trio was encouraged to sell top-notch espresso beans and hardware after businessman Alfred Peet showed them his style of simmering beans.

During this time, the organization sold simmered, entire espresso beans. During its first year of activity, Starbucks bought green espresso beans from Peet's, and then started purchasing legitimately from producers.

Starbucks - Name and Logo

Bowker reviews that Terry Heckler, with whom Bowker claimed a publicizing office, thought words starting with "st" were ground-breaking. The organizers conceptualized a rundown of words starting with "st" and in the long run arrived on "Strabo," a mining town in the Cascade Range. The team then finalized on "Starbuck," the name of the young chief mate in the book "Moby-Dick".

Starbucks has given too many slogans/taglines already among which the most popular one is - " Brewed for those who love coffee".

Starbucks Expansion Journey

In 1984, the first proprietors of Starbucks, driven by Jerry Baldwin, acquired Peet's. During the 1980s, all-out offers of espresso in the US were falling. However, offers of strength espresso expanded, shaping 10% of the market in 1989; it stood at just 3% in terms of market share in 1983. By 1986, the organization worked six stores in Seattle and had just barely started to sell coffee.

In 1987, the first proprietors sold the Starbucks chain to the previous manager Howard Schultz, who rebranded his II Giornale espresso outlets as Starbucks and immediately extended. Starbucks then launched its outlets outside Seattle at Waterfront Station in Vancouver, British Columbia, and Chicago, Illinois. By 1989, 46 stores existed over the Northwest and Midwest, and every year Starbucks was simmering more than 2,000,000 pounds (907,185 kg) of coffee. At the hour of its first sale of stock (IPO) on the financial exchange in June 1992, Starbucks had 140 outlets with an income of $73.5 million, up from $1.3 million in 1987.

The organization's fairly estimated worth was $271 million at this point. The 12% segment of the organization that was sold raised around $25 million for the organization, which encouraged a multiplying of the number of stores throughout the following two years. By September 1992, Starbucks' offer cost had ascended by 70% to more than multiple times the income per portion of the past year. In July 2013, over 10% of in-store buys were made on the client's cell phones utilizing the Starbucks app.

The organization used the versatile social media stage when it propelled the "Tweet-a-Coffee" campaign in October 2013. People had the option to buy a $5 gift voucher for a companion by entering both "@tweetacoffee" and the companion's handle in a tweet. Research firm Keyhole observed the advancement of the event and a media article from December 2013 detailed that Starbucks had discovered that 27,000 individuals had taken an interest and $180,000 of buys were made to date.

As of 2018, Starbucks is positioned 132nd on the Fortune 500 rundown of the biggest United States organizations by revenue. In July 2019, Starbucks announced a "monetary second from last quarter total compensation of $1.37 billion, or $1.12 per share, up from $852.5 million, or 61 pennies for each offer, a year sooner." The organization's fairly estimated worth of $110.2 billion expanded by 41% in the middle of 2019. The income per share in quarter three was recorded at 78 pennies, considerably more than the estimate of 72 cents.

Starbucks Corporation in India

In January 2011, Starbucks Corporation and Tata Coffee reported designs to start opening Starbucks outlets in India. Despite a bogus beginning in 2007, in January 2012, Starbucks declared a 50:50 joint endeavour with Tata Global Beverages, called Tata Starbucks Ltd. , which would possess and work outlets marked "Starbucks, A Tata Alliance". Starbucks had endeavoured to enter the Indian market in 2007. However, it didn't provide any explanation behind its withdrawal of it.

It was on October 19, 2012 that Starbucks opened its first store, a 4,500 sq ft store in Elphinstone Building, Horniman Circle, Mumbai. Starbucks opened its first cooking and bundling plant in Coorg, Karnataka in 2013 to supply its Indian outlets. The company extended its reach to Delhi on 24 January 2013 by opening 2 outlets. Tata Global Beverages declared in 2013 that they would have 50 areas before the end of the year, with a venture of ₹4 billion ($58 million). The organization did open its 50th store in India on July 8, 2014.

The third city of India to get a Starbucks outlet was Pune, where the organization opened an outlet at Koregaon Park on 8 September 2013. Starbucks opened a 3,000-square-foot lead store at Koramangala, Bangalore on 22 November 2013, making it the fourth city to have an outlet. Starbucks opened the biggest espresso-forward store in the nation at Vittal Mallya Road, Bangalore on 18 March 2019. The store is estimated at 3,000 sq ft and is Starbucks' 140th outlet in India.

Tata Starbucks opened 25 stores between 2017 and 2018, which went up to 30 during 2018-19. On 21 February 2019, CEO Navin Gurnaney reported that Tata Starbucks would use only compostable and recyclable bundling materials over the entirety of its stores from June 2020.

Starbucks reported its entrance in Gujarat on 7 August 2019. The organization opened five stores in Surat and Ahmedabad the following day. Starbucks' leader store in the state is situated at Prahlad Nagar, Ahmedabad, and offers more vegan alternatives than other Indian outlets. CEO Navin Gurnaney expressed that the organization would open more than 30 stores in the 2019-20 financial year, of which 11 have already been opened.

Business Strategy Of Starbucks In India

Starbucks' strategies for business in India seemed rock-solid but the brand wasn't completely immune still. In any case, the world's biggest bistro chain is building its position cautiously via a progression of well-picked steps. Numerous worldwide brands have entered India since the 1990s, being pulled in by its developing and optimistic customer base. Yet, not all have succeeded.

Starbucks isn't the primary contestant in India's composed espresso showcase; so it doesn't have any first-participant advantage. Cafe Coffee Day (CCD) is the market head while Barista Lavazza was the main espresso chain to open for business. Both are valued by the white-collar class. Costa Coffee, Coffee Bean and Tea Leaf (CBTL), and Gloria Jean are valued by the rich group in India.

India is customarily a tea-drinking nation, so espresso chains have concentrated on giving a feel where individuals can unwind and invest energy with one another. This setup implies higher capital expenses. It is different from the US, where the vast majority have a liking for espresso. The Indian buyer base has likewise advanced in the recent decade. What can worldwide brands like Starbucks do to augment their odds of achievement in India? Here are a few thoughts:

Picking a Local Partner

Worldwide brands face the difficult choice of either going solo or tying up with a nearby accomplice. Starbucks' choice to team up with India's TATA Global Beverages demonstrates attention to utilizing different advantages. The TATA Group is one of India's morally determined brands, an observation passed on about Starbucks India too.

Given that India produces espresso beans in just a couple of spots, the other sourcing alternative was bringing in the beans. Be that as it may, this would have raised costs fundamentally.

Tata's espresso plant in Karnataka has been contracted to supply beans to Starbucks' universally, making common cooperative energies. It has contracted to take into account TATA's TAJ SATS, which supplies to TATA's top-notch lodging network – The TAJ. The TATAs are put into the retail part with store brands like Westside, Tanishq, Croma, Star Bazaar, and so forth. Starbucks can use them for information sharing on Indian land, territory points of interest, and handling land administrations. This would enable its very own development to outline. This strategy gives scope for store-in-store deals.

Consistency in Store Arrangements

This keeps up the one-of-a-kind selling purpose of customer experience and allows to pick up economies of scale on CAPEX. Starbucks plans to have a similar store group crosswise over India. However, the size can change depending on financial matters. This is how it works all around. Starbucks wants to provide an agreeable 'café' experience. Having a similar organization gives clients the solace of accepting the equivalent 'Starbucks' vibe any place they go throughout the world.

Keeping the store designs steady means it needs to pick and open new areas stringently, to such an extent that the area can yield a throughput by the venture. Its methodology in-store arrangement is different from CCD, which has picked various configurations to tap the potential interest in any region. CCD has opened a couple of premium outlets dependent on the area's customer profile . It has additionally gone for non-store organizations like takeaway booths and candy machines. Be that as it may, Starbucks may expect that such non-store configurations may weaken its image esteem.

Estimating the Pace of Expansion

India is the place where an inability to screen primary concerns has tossed numerous organizations out of the rigging. So, a top-line just approach doesn't work here. Since Starbucks needs to pick new areas stringently by its equivalent configuration approach, it has decided on a deliberate pace of extension. It is concentrating on the budgetary feasibility of every outlet, as opposed to going for an aggressive development plan which may have brought about rehashed calls for capital.

This operational process is different from its system in the USA and China where it has fabricated scale by opening stores in pretty much every area – being the main port-of-call for espresso by basically being all over the place. CCD's methodology behind adaptable store organizations was to guarantee there is a CCD bistro at a simple reach. It is intriguing to check its normal store gainfulness given its scale.

Guaranteeing Top-Authority Backing and Responsibility

Top initiative responsibility from the two sides of the organization, Tata and Starbucks, has been plentifully clear. Starbucks took as much time as is needed to enter the market (6 years), recognizing that India was a mind-boggling market and required cautious passage arranging. The two sides have spoken finally about their dedication and shared their future plans to give their business a new direction toward growth.

Altering Contributions to Suit Indian Market and Client Needs

Being adjusted to Indian culture, tastes, and inclinations conveyed at a suitable "esteem" guarantees customer importance, construct, and continued utilization. Starbucks mirrors this comprehension – as observed through a blend of western staples, a wide scope of intriguing Indian tidbits similar to confined refreshments on the idea. Since its experience ( and item as well, however to a lesser degree) is its image guarantee, its test lies in conveying an all-around steady, yet locally significant brand experience.

The stores, or the "third spot" as Starbucks calls them, have been altered likewise. The stores don't pursue the worldwide layout and appear to have been planned with consideration, with neighbourhood contacts consolidated. Stores in various urban communities have been structured unexpectedly, mirroring the neighbourhood culture – for e.g., New Delhi's store has ropes and chat on the dividers and henna designs on the floor, though the Pune store has a rich showcase of collectables and copper.

There appears to be sufficient utilization of shading – something missing in the US. The stores have been intended to convey a particular, premium café experience, predictable, and in a state of harmony with the one conveyed over the rest of the world.

Making Inventive and Restricted Plan of Action

Starbucks appears to have made a confined plan of action, planned for conveying a universally reliable item and involvement with locally-focused costs. The Tata group conveys a major sourcing advantage (attributable to its quality over the generation chain, developing, broiling, and exchanging espresso), yet it has just gone past that to develop and support associations with nearby espresso cultivators – putting resources into structure economical cultivating rehearses. All of Starbucks' espresso is sourced locally, a first-ever for the organization.

Scaling up using Arrangements and Organizations

The Tata organization is the genuine overthrow in the Starbucks passage story. Having Tata as an accomplice is gigantically profitable, not due to the validity and strength it offers, or because it coordinates the scale and stature of Starbucks as an organization.

It offers numerous advantages catalyzing pretty much every market section achievement variable - for example, The Tata group has involvement in the retail business , a solid reputation in advancing new pursuits, gives a sourcing advantage through Tata espresso, offers access to high traffic areas using its lodgings and other retail outlets, guarantee excellent nourishment and refreshment supply through its F&B business and so forth.

Furthermore, the potential for an effective organization is amazingly high given Starbucks' and Tata's mutual qualities – the two of them have a solid social inner voice and are resolved to "give back" to the general public and network.

Influencing India for Worldwide Items

Not long after it finished its first year, Starbucks reported that it was serving top-quality Indian Arabica espresso as "Indian coffee" in different markets. Another world-class office for cooking and bundling has just been initiated in Coorg, Karnataka; the results of which are to be analyzed in India and abroad.

Overseeing Discernment and Guidelines

This viewpoint is tied in with structure, a solid positive observation and a picture for the business and brand crosswise over key outer partners and crowds – incorporating the administration, corporate accomplices, networks inside the eco-framework, and customers on the loose. Given what Starbucks has figured out how to accomplish in a year and a half since dispatch, it appears to be genuinely evident that its thought combined with the Tata advantage (critical reach and impact) has helped in developing solid connections and a positive picture with key outside partners and voting demographics.

Engage Nearby Association

Starbucks is by all accounts constructing a nation-explicit activity with nearby individuals in charge and overall unmistakable customer interface focuses, giving them the necessary position to coordinate and work. There is overwhelming interest in enlisting the perfect individuals and giving the essential preparation – to install and instil the organization's culture and administration models.

Along these lines, how has Starbucks fared against the McKinsey spread out variables for long-haul India achievement? Its accomplishments against the scorecard look noteworthy. With thorough vigorous passage arranging and brilliant and quick execution, the multi-month-old endeavour appears to have impressive force, making purchaser and network-driven ventures and focused on sustaining its centre business and brand. It appears to be very much set to "win" in India.

Whether Starbucks will collect a huge piece of the overall industry and accomplish its objective of India being among its best 5 markets over the long haul is not yet clear. It's still early days, yet for the organization, this appears to be an incredible beginning and a great globalization model for multinationals looking for an India section.

Products Of Starbucks Corporation

Aside from the typical items offered globally, Starbucks in India has some Indian-style item contributions, for example, Tandoori Paneer Roll, Chocolate Rossomalai Mousse, Malai Chom Tiramisu, Elaichi Mewa Croissant, Chicken Kathi Roll, and Murg Tikka Panini to suit Indian customers. All coffees sold in Indian outlets are produced using Indian broiled espressos by Tata Coffee. Starbucks additionally sells Himalayan packaged mineral water. Free Wi-Fi is accessible at all Starbucks stores.

In January 2017, Tata Starbucks presented Starbucks' tea image "Teavana". Teavana offers 18 unique assortments of tea in India. One of the assortments called the India Spice Majesty Blend was explicitly created for the Indian market and is just accessible in India. India Spice Majesty Blend is a mix of full leaf Assam dark tea injected with entire cinnamon, cardamom, cloves, pepper, star anise, and ginger. On 15 June 2015, Tata Starbucks reported that it was suspending the utilization of fixings that had not been affirmed by the Food Safety and Standards Authority of India (FSSAI).

The organization didn't indicate what the fixings were or which items they were utilized in. The organization additionally expressed that it was applying for FSSAI endorsement for these ingredients.

As per the Latte Index positioning of the expense of a tall hot latte at Starbucks in 44 nations, India was the fifth most costly nation to buy the drink dependent on January 2016 costs. The record distributed by US-based buyer research firm ValuePenguin found that a tall hot latte cost $7.99 in India, far higher than the $2.75 it costs in the least expensive nation, the United States, yet much lower than the $12.32 in the most costly nation, Russia .

Tata Starbucks propelled the Starbucks Delivers program in mid-2019. The administration offers home conveyance from Starbucks outlets through an organization with Swiggy. The administration was first propelled in Mumbai, with designs to turn it out to other cities.

In its menu, the Tata Starbucks company has launched ice-creams as their new products. The frozen delights are available even in flavours like java chip and caramel macchiato among others and will come in takeaway tubs and single scoops. The ice-creams are now available in 50-60% of the Starbucks stores.

Business Growth Of Starbucks Corporation Over The Years

Tata Starbucks, a 50:50 joint endeavour between Tata Global Beverages and Starbucks Coffee of the US, has announced a 30%  top-line development in financial 2018-19, driven by new store openings and improved execution. Tata Starbucks, which is hoping to make back the initial investment in the current money, has opened 146 stores to date. Tata Starbucks announced "twofold digit top-line development - 30% for the entire year, driven by new stores and improved store execution," Tata Global Beverages Ltd (TGBL) said in a financial specialists' introduction. Tata Starbuck's income for 2018-19 is required to be approximately INR 450 crores.

TGBL said Tata Starbucks opened 30 outlets in the past financial year, out of which 15 new stores were opened during the last quarter of the money-related year. The organization claimed detailed benefits at the store level; all urban areas were likewise productive, and additionally saw an ascend in nourishment share in general deals.

The Starbucks company has added around 40 stores in FY21 but the company had recorded a 33% Y-O-Y  fall in its revenues during the same fiscal. According to the Sushant Dash, CEO of Tata Starbucks, the recovery that the company has seen after the second wave of COVID-19 was better than what it saw after the first wave of the deadly pandemic. The quarterly growth after Q2 FY22 was 120% more than what it saw during the same period in the previous fiscal. The company has hugely focused on home deliveries ever since the pandemic broke out. It has already addressed concerns associated with the spillage and other challenges pertaining to home delivery, which contributed to over 18% of the total sales that the company witnessed this fiscal, as per the reports in November 2021. Furthermore, the company has also added ice-creams to their menu in flavours like java chip and caramel macchiato. The Sanjeev Kapoor menu is another thing that has been freshly launched by Tata Starbucks. Besides, the company also launched a one-litre freshly brewed beverage and at-home coffee.  

Future Plans Of Starbucks Corporation

Tata Starbucks Pvt. Ltd. is looking to forcefully grow its impression in the Indian market with its eyes on the quickly spreading "espresso culture" among the twenty to thirty-year-olds and upwardly versatile customers. Tata Starbucks, a JV between US-based Starbucks Coffee Company and Tata Global Beverages Ltd, hopes to set up altogether more number stores this monetary than it did previously.

Starbucks is hopeful about solid business development in India throughout the following year as it means to leave red in monetary numbers after 2020. "Our proceeded with development in topline and reasonable methodology towards extension will enable us to accomplish make back the initial investment by March 2020," Navin Gurnaney, CEO, Tata Starbucks disclosed to Business Line in the wake of declaring five new stores in Gujarat - three in Ahmedabad and two in Surat. Gurney likewise included, "First time in quite a while, we are opening five stores in any state in one go.

Gujarat is a significant market for us. In the wake of opening these five stores on Thursday, the all outnumber of hides away goes up to 157 in India." Starbucks entered India with its first store opened at Mumbai in 2012. Of the 157, the organization has opened all out 11 stores so far in this financial, as against complete 30 stores opened during 2018-19. It takes into account 270,000 clients each week in India. The organization had announced a turnover of INR 442 crores for the monetary 2018-19.

"Espresso business in India is developing significantly. The espresso culture is being initiated by recent college grads, upwardly versatile, and individuals who travel and get brand. Two years back, we set up 25 stores (in a year). During the last financial 2018-19, we included 30 stores.

This year we will beat that number considerably and by end of March 2020, we will have included a lot a greater number of stores than we included in the past," Gurney said. With per store venture prerequisites being evaluated at INR 1.7-2 crores, the complete CAPEX plan by the organization works out in overabundance of INR 50 crores during current monetary on the off chance that it opens more number of stores than a year ago. Be that as it may, Gurnaney ceased from giving venture figures for 2019-20.

The organization is likewise open to different open doors for development including inorganic development through acquisitions. Be that as it may, when tested about any probability of a venture plan in the espresso chain Cafe Coffe Day (CCD), Gurnaney denied estimating any discussions for securing. "We are very hopeful about India. We will be attentively forceful (to extend). (At present) we are not in discussions with anyone for obtaining.

In any case, we are hoping to develop constantly," he included. With an end goal to upgrade the client experience, Starbucks is presenting new nourishment things, taking into account all client needs including breakfast and lunch. The income share from nourishment things is right now around 25%, even as it keeps on developing with new things to meet the client's needs.

Who founded Starbucks?

Starbucks was started by Hun Baldwin, Zev Siegl, and Gordon Bowker in 1971.

Where was the first Starbucks started?

Starbucks was started in Pike Place Market, Seattle, Washington, United States.

When was Starbucks started in India?

Starbucks was launched in India in 2012.

What is the revenue of Starbucks?

Starbucks revenue was recorded $29.02 billion in 2021.

How many Starbucks stores are there worldwide?

There are 33,830 Starbucks stores in the world as of 2021.

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Case Study Of Starbucks: How Starbucks Became The Coffee King?

Supti Nandi

Updated on: April 25, 2024

Starbucks, a brand that became synonymous with coffee has created a sensation in the world with its coffeehouse culture. Have you wondered how? Well, to answer this question we will delve into the case study of Starbucks.

Stay tuned!

(A) Starbucks: A Brief Overview

Let’s buckle up for a Starbucks journey! Founded back in 1971, this coffee giant now reigns supreme as the world’s largest coffeehouse chain, with its home base in the city of Seattle, Washington.

Before diving deeper into the Starbucks case study, let’s have a look at the company’s profile-

Fast forward to November 2022, and you’ve got Starbucks waving its coffee wand in a staggering 35,711 stores across 80 countries. And when you zoom in on the U.S., you’re looking at a whopping 15,873 Starbucks hotspots. 

Here’s the scoop – over 8,900 are Starbucks-run, and the rest are running under licensed partnerships.

Now, let’s talk coffee vibes. Starbucks is the unsung hero of the second wave of coffee culture, dishing out an array of coffee delights. Think hot espresso, chill Frappuccinos, and a lineup of pastries and snacks that’s strong enough to trigger your taste buds.

Oh, and did you know some Starbucks treats are exclusive to certain locations? How? You may wonder. Well, here’s a bonus – most Starbucks joints worldwide offer free Wi-Fi. Coffee and connectivity – a match made in heaven.

So there you have it – the Starbucks saga! 

(B) Business Overview of Starbucks Case Study

Understanding the business perspective is one of the essential parts of the Starbucks case study. Reason? You will get to know how Starbucks is performing in the market in terms of financials and business.

Go through the table given below-

In today’s date, the coffee giant is flexing a market capitalization of a whopping $105.82 billion – that’s some serious coffee beans.

Now, rewind to 2023, and Starbucks made it rain with a revenue of $35.976 billion. But what about the nitty-gritty? Operating income in 2022 hit $4.62 billion, while net income settled at $3.28 billion. These aren’t just numbers; they’re the financial pillars of Starbucks.

That’s not all!

Hold onto your coffee cups; we’re diving into assets and equity. Total assets in 2022 clocked in at $27.98 billion – that’s like a treasure chest of coffee goodness. But here’s a twist – total equity dipped to -$8.70 billion. It’s like a plot twist in a coffee-fueled drama.

Now, let’s talk about expenses and profits. In 2023, expenses tallied up to $30.584 billion, but here’s the kicker – profits soared to $25.108 billion. 

That’s like balancing a delicate espresso shot with a mountain of whipped cream.

In a nutshell, Starbucks isn’t just brewing coffee; it’s a financial powerhouse, stirring up a caffeinated storm in the business world.

(C) History of Starbucks: Timeline & Key Events

Coming to the third part of the Starbucks case study, let’s delve into the history of Starbucks-

Founded in 1971 by Jerry Baldwin, Zev Siegl, and Gordon Bowker at Seattle’s Pike Place Market, Starbucks underwent pivotal changes in ownership and leadership. In the early 1980s, Howard Schultz acquired the company and transformed it into a coffee shop, introducing espresso-based drinks after being inspired during a business trip to Milan, Italy.

Schultz served as CEO from 1986 to 2000, orchestrating an expansive franchise expansion across the West Coast.

Orin Smith succeeded Schultz, focusing on fair trade coffee and boosting sales to US$5 billion. Jim Donald took the helm from 2005 to 2008, overseeing substantial earnings expansion. Schultz returned during the 2007–08 financial crisis, steering the company towards growth, expanded offerings, and a commitment to corporate social responsibility. Kevin Johnson assumed the CEO role in 2017.

In March 2022, Starbucks announced Schultz’s return as interim CEO in April 2022, with Laxman Narasimhan appointed to succeed him in April 2023. Narasimhan assumed the position earlier, in March 2023.

Beyond beverages and food, Starbucks stores offer official merchandise and select locations to provide “Starbucks Evenings” with beer, wine, and appetizers. The company’s products, including coffee, ice cream, and bottled drinks, are available in grocery stores globally. The Starbucks Reserve program, initiated in 2010 for single-origin coffees and high-end shops, has evolved. Starbucks operates six roasteries with tasting rooms and 43 coffee bars. 

The company faced controversies but maintains substantial brand loyalty, market share, and value. As of 2022, Starbucks ranks 120th on the Fortune 500 and 303rd on the Forbes Global 2000.

(D) Significance of Logo in Starbucks Case Study

Let’s delve into the details of the Starbucks logo evolution. In its inception in 1971, the original Starbucks logo featured a complex design comprising a two-tailed mermaid or siren, encompassed by a wordmark. This design was a visual nod to the brand’s early identity and origins. The mermaid, with its twin tails, was a dual representation of the sea and Seattle, the birthplace of Starbucks.

As the brand progressed, the logo underwent a significant transformation. The evolution saw a shift towards simplicity, as the wordmark surrounding the mermaid was phased out. This marked the beginning of the modern Starbucks logo we recognize today. 

The current emblem showcases a simplified and stylized green siren enclosed within a matching green ring, emphasizing a cleaner and more focused visual identity.

Beyond aesthetics, the modern logo carries symbolic weight. The green mermaid within the circle has become an iconic representation of Starbucks’ commitment to delivering high-quality coffee experiences. 

Additionally, it reflects the brand’s emphasis on creating a sense of community that extends beyond geographical boundaries.

In essence, the evolution of the Starbucks logo is a journey from a detailed and intricate design to a streamlined and symbolic representation. It mirrors the brand’s growth, emphasizing its roots, dedication to quality, and the broader cultural impact it seeks to make through coffee and community.

(E) Market Penetration Strategy: How Starbucks became the coffee king?

In this section, we will look into the key plans and actions that helped Starbucks gain a strong foothold in the beverage and cafe industry.

Starbucks continues to blend innovation and growth, navigating the ever-changing landscape of the coffee industry.

(F) Starbucks Entry in India: Core of Starbucks Case Study

In 2012, Starbucks initiated its venture into India through a significant 50:50 joint venture with Tata Consumer Products Ltd. The inaugural flagship store, which opened its doors on October 19th, 2012, found its home in the historic Elphinstone Building in Mumbai. 

The architectural design of this store ingeniously merged Starbucks’ global coffee legacy with the vibrant local culture, creating a welcoming space for community and connection. Over time, this Mumbai location evolved into India’s first Starbucks Reserve® Store, setting the stage for an elevated coffee experience.

(F.1) The Starbucks Reserve® Store Unveiled: A Coffee Lover’s Haven

The introduction of the Starbucks Reserve® Store marked a milestone in the coffee giant’s presence in India. Spanning an impressive 5,200 square feet, this store greeted customers with the intoxicating aroma of coffee. 

The entrance featured a stunning monolithic terrazzo Reserve bar, a masterpiece crafted by local artisans. Trained black apron coffee masters curated an exceptional coffee experience, showcasing rare and exquisite brews through various brewing methods. 

This Reserve Store was not just a coffee shop; it was a canvas for creating unique moments of connection through the artistry of coffee.

(F.2) Expanding Horizons: Tata Starbucks’ Nationwide Presence

Tata Starbucks established a substantial footprint, operating 350+ stores spread across 36 cities in India. In a significant achievement in 2022, Starbucks executed its largest single-year expansion in India, reaching 14 new cities. The brand’s influence spanned major cities such as Mumbai, Delhi NCR, Hyderabad, Chennai, Bengaluru, Pune, and more.

(F.3) Coffee Blends Celebrating Indian Flavors and Heritage

Starbucks paid homage to India’s rich coffee heritage by introducing special blends. The India Estates Blend, sourced from estates in Coorg and Chikmagalur, the birthplace of coffee in India, made its debut in 2013. Additionally, the Diwali Blend, introduced in 2020, served as a tribute to India’s vibrant culture and longstanding coffee traditions.

(F.4) The Tata Alliance: A Successful Partnership

Starbucks in India proudly bore the branding “Starbucks Coffee – A Tata Alliance,” underscoring the synergy between Starbucks and Tata Global Beverages.

Starbucks’ journey in India was not merely about coffee; it was about brewing connections, transcending cultural boundaries, and crafting unforgettable coffee experiences that resonated with the diverse tapestry of India.

(G) Business and Marketing Strategies of Starbucks in India

Starbucks, despite entering India’s coffee scene with strong strategies, faced challenges in a market dominated by competitors like Cafe Coffee Day and Barista Lavazza. Unlike the U.S., where coffee is a staple, India is traditionally a tea-drinking country. 

Starbucks aimed to create a space for relaxation, blending its global coffee legacy with local culture.

Let’s look at the business and marketing strategies of Starbucks in India-

In short, Starbucks’ journey in India reflects a careful blend of global strategies and localized approaches, aiming to create a unique and sustainable presence in a market with diverse preferences and cultural nuances. The success indicators appear promising, showcasing Starbucks’ commitment to long-term growth and meaningful community integration.

Note: Do you know Starbucks collaborated with Apple during the horizontal marketing in the US? We have covered it thoroughly here- Horizontal Marketing System . You can check it out for detailed information.

(H) Wrapping Up the Case Study of Starbucks

The Case Study of Starbucks unveils a fascinating journey that transformed Starbucks into the reigning coffee king. What started as a local coffee bean store in Seattle’s Pike Place Market in 1971 boomed into a global coffee empire. The strategic moves, like Howard Schultz’s visionary shift to espresso-based drinks, had set the stage for Starbucks’ aggressive expansion.

Throughout its evolution, Starbucks faced challenges, leadership changes, and controversies, but resilience and strategic pivots marked its trajectory. The decision to focus on corporate social responsibility under Schultz’s leadership during the financial crisis showcased Starbucks’ adaptability.

The engagement with local cultures, from the iconic two-tailed mermaid symbol to store designs reflecting regional aesthetics, contributed to Starbucks’ success. Key partnerships, like the one with TATA in India, demonstrated a keen understanding of local markets.

Starbucks’ commitment to quality, community, and sustainability resonated with consumers globally. From unique store experiences to tailored product launches, Starbucks consistently adapted its offerings to cater to diverse tastes.

In essence, the Case Study of Starbucks illuminates a narrative of coffee, community, and corporate strategy, culminating in Starbucks’ reign as the coffee king. 

The journey is a testament to the power of adaptability, brand loyalty, and a steaming cup of coffee that transcends borders, making Starbucks an integral part of daily rituals worldwide!

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Starbucks Global Marketing Strategy 2024: A Case Study

Starbucks, the world’s largest coffeehouse chain, has established itself as a global leader in the coffee industry with its innovative marketing strategies. From targeting specific audience segments to expanding its digital presence, Starbucks has consistently evolved its marketing approach to stay ahead of the competition. In this case study, we will examine Starbucks’ marketing strategy for 2024 and explore how the company has successfully built its brand, engaged with customers, and achieved global recognition.

Key Takeaways:

• Starbucks operates six roasteries with tasting rooms and 43 coffee bars.
• In 2010, Starbucks initiated its Starbucks Reserve program for single-origin coffees and high-end coffee shops.
• Starbucks primarily targets the upper economic segment, upper middle class, and upper class consumers.
• The target audience of Starbucks is mainly in the 25-45 age group, urban, health-conscious, and class-conscious consumers.
• Starbucks has over 248K followers on Instagram, 1.1M likes on Facebook, and 161K followers on Twitter.

With a focus on product innovation and strategic brand positioning, Starbucks has consistently pushed the boundaries of the coffee industry. By opening six roasteries with tasting rooms and 43 coffee bars, Starbucks goes beyond just serving coffee; it provides a unique coffee experience to its customers. Through its Starbucks Reserve program, the company showcases single-origin coffees and creates high-end coffee shops to cater to discerning coffee enthusiasts.

Starbucks has successfully captured the attention of the upper economic segment, upper middle class, and upper class consumers, who are willing to pay a premium for quality and status. By strategically locating its coffeehouses in areas with high pedestrian traffic, Starbucks enhances brand visibility and accessibility, further solidifying its market position .

In addition to its physical presence, Starbucks has also leveraged digital marketing strategies to engage with its target audience. With a strong following on social media platforms like Instagram, Facebook, and Twitter, Starbucks effectively communicates its brand message and creates a sense of community among its customers. The company’s mobile app, which boasts 23.4 million users in the US alone, facilitates easy navigation and purchases, enhancing the overall customer experience.

Starbucks understands the power of word-of-mouth marketing and focuses on providing high-quality customer experiences to generate positive reviews. Additionally, the company invests in advertising, sales promotions, and public relations to improve brand awareness, increase revenue, and gain a larger market share.

Starbucks’ premium pricing strategy has contributed to its success, as consumers perceive high prices to equate to high quality, value, and status within the market. By positioning its products as superior or high-end, Starbucks has successfully created a premium brand image that sets it apart from competitors.

With nearly 30,000 stores globally and a 39.8% share of the coffee market in the US in 2019, Starbucks has firmly cemented its position as a global coffee leader. The company reported revenues of $26.5bn in 2019, demonstrating its financial success. Starbucks’ global marketing budget of around $246m in the fiscal year ending September 2019 highlights its commitment to maintaining a strong presence in the market.

In conclusion, Starbucks’ global marketing strategy for 2024 is built on a strong foundation of product innovation, strategic brand positioning, and customer engagement. By continuously adapting to market trends and consumer expectations, Starbucks has established itself as a powerhouse in the coffee industry, connecting with a diverse range of customers worldwide.

About Starbucks and its Brand Positioning

Starbucks, founded in 1971 by Jerry Baldwin, Zev Siegl, and Gordon Bowker, has become a global sensation with its coffeehouse chain. With almost 16,000 locations in the United States alone and an impressive presence in over 80 countries worldwide, Starbucks has successfully won over the hearts of both coffee enthusiasts and occasional customers.

The company’s brand positioning revolves around offering high-quality coffee and creating a distinct customer experience. Since its inception, Starbucks has been committed to delivering consistency and reliability in its products and services. The iconic logo, featuring a siren with two tails, has remained unchanged and is instantly recognizable.

Recognizing the potential of the coffee industry, Howard Schultz joined Starbucks in 1986, revolutionizing the brand and transforming it into the coffeehouse giant it is today. Starbucks’ mission extends beyond just selling coffee; it aims to inspire and support the human spirit through individual connections and community engagement.

To connect with customers on a deeper level, Starbucks utilizes various marketing campaigns. Examples include the “Red Cup Contest,” which encourages community participation during the holiday season on Instagram, and the “#WhatsYourName” campaign, which promotes inclusivity and respect for diverse customer identities.

Strategic partnerships have also played a significant role in Starbucks’ success. Collaborations such as the promotion of “Taylor’s Latte” with Taylor Swift and alliances with brands like Spotify, Chase, and Lyft have helped broaden Starbucks’ reach and access new markets.

While Starbucks’ marketing efforts have generally been well-received, some campaigns, such as “#SpreadTheCheer” and “Race Together,” faced criticism for not authentically resonating with audiences. However, Starbucks continues to encourage user-generated content through visual aesthetics, engagement initiatives, and user-friendly apps.

As the leader of the coffeehouse industry, Starbucks positions itself as a go-to destination for quality coffee. The brand targets middle- to upper-class workers, offering a premium experience that caters to the demands of the affluent urban consumer segment. Through a customer-centric approach, including open door policies and free Wi-Fi, Starbucks strives to enhance customer satisfaction.

Starbucks’ commitment to excellence is reflected in its continuous growth and the loyalty it has garnered from customers. People are willing to spend more at Starbucks compared to other coffee shops, recognizing the value and experience the brand provides.

The next section will delve into Starbucks’ global expansion strategies, exploring how the brand has established its presence in various countries around the world.

Starbucks’ Global Expansion Strategies

Starbucks, a renowned coffeehouse chain, has established a significant global presence by leveraging effective international growth strategies. With a presence in over 80 countries, Starbucks has successfully expanded its operations worldwide, catering to diverse market preferences while maintaining a consistent core menu globally.

In 1987, Starbucks made its first foray into the international market by opening a store in Vancouver, Canada, just five years after Howard Schultz joined the company. Since then, Starbucks has adopted a localized approach, saturating local markets before expanding into new ones. This strategy has been instrumental in ensuring the brand’s success and acceptance in different regions.

One key aspect of Starbucks’ global expansion strategy is its focus on adapting to local tastes and preferences. The company has successfully localized its offerings in various markets, such as China and Japan, by introducing region-specific items and flavors. By catering to the unique preferences of each market, Starbucks has been able to foster customer loyalty and engagement.

Additionally, Starbucks has created a concept that it calls “third places.” These are welcoming and comfortable spaces where customers can socialize, relax, and work. Starbucks’ commitment to providing these environments has helped drive customer loyalty, making the brand a preferred choice for individuals seeking a community-oriented coffeehouse experience.

Starbucks is renowned for embracing innovation and staying ahead of the curve. The company was among the pioneers in offering free Wi-Fi access to customers, allowing them to stay connected while enjoying their favorite beverages. Furthermore, Starbucks hosts various community events like live music performances, book readings, and art exhibitions, contributing to a vibrant and inclusive atmosphere.

Starbucks has also leveraged its global expansion by forming strategic partnerships and collaborations. In India, Starbucks partnered with Tata companies to gain access to high-quality raw materials, ensuring the delivery of superior products to customers. By aligning with local partners, Starbucks has been able to navigate complex markets efficiently and establish a solid foothold.

To support its global expansion, Starbucks has focused on quality products, high visibility store locations, continuous employee training, and substantial capital investment. These factors contribute to maintaining the brand’s perception as a premium coffeehouse chain, offering customers exceptional experiences wherever they are.

Starbucks Target Market and Market Segmentation

Starbucks, the renowned global coffeehouse chain, strategically targets a wide demographic range and adopts an effective market segmentation approach to reach its desired customer segments. By understanding the diverse needs and preferences of its target audience, Starbucks has successfully positioned itself as a leading player in the coffee industry.

Demographic Segmentation:

Starbucks targets individuals aged 22-60, catering to professionals, employees, and students alike. The brand appeals to both males and females, targeting singles, young married couples, older married couples with children, and children of all ages. With its market penetration spanning across different age groups and household compositions, Starbucks ensures its products are accessible to a broad customer base.

Geographic Segmentation:

Starbucks’ geographic targeting is truly global, with a presence in regions such as Latin America, the US, Canada, the Middle East, Europe, China, Africa, Asia, and the Pacific regions. The company strategically expands its operations to reach coffee enthusiasts in various parts of the world, leveraging the cultural diversity and unique preferences of each market.

Psychographic Segmentation:

Psychographic elements play a crucial role in Starbucks’ market segmentation strategy. The brand appeals to customers from different societal classes and lifestyles, focusing on creating an excellent store ambiance that fosters relaxation, social commitment, and environmental responsibility. Starbucks attracts health-conscious individuals who value sustainability and seek a unique coffee experience.

Through its market segmentation efforts, Starbucks effectively targets its desired customer segments, capturing the attention of urban and suburban centers worldwide. The brand resonates with busy, health-conscious, socially aware consumers who appreciate premium products and exceptional service. Starbucks’ emphasis on quality control and meeting high expectations has garnered ‘hard core’ loyalty from its customers.

As of 2021, Starbucks operates over 33,000 stores globally, with approximately half of its stores located in the US. In the highly competitive cafe sales industry, Starbucks holds a significant 57% market share in the US. The company’s consistent revenue growth over the years, reaching $24.61 billion in 2021, further solidifies its market position.

Starbucks Digital Marketing Approach

Starbucks, known for its global presence and premium brand positioning, has adopted a digital-first approach to enhance its marketing strategies. With a focus on connecting with their target audience effectively, Starbucks leverages various digital platforms, including social media engagement and mobile ordering services, to create meaningful customer experiences.

Starbucks understands the importance of staying connected with its customers in the digital age. Through strategic investments in digital advertising, the company effectively reaches its target audience and capitalizes on the growing trend towards online platforms. By leveraging social media channels such as Facebook, Instagram, and Twitter, Starbucks engages with their millions of followers, generating brand awareness and fostering brand loyalty.

Starbucks’ social media engagement is a testament to its digital marketing success . With over 36 million page likes on Facebook, 17.8 million followers on Instagram, and 11 million followers on Twitter, the brand has effectively built a strong digital community. By posting interactive content, visually appealing images, and engaging with their audience, Starbucks stays top-of-mind and creates meaningful connections with its customers.

In addition, Starbucks has embraced the shift towards mobile technology by offering mobile ordering services. This allows customers to conveniently place their orders through the Starbucks mobile app, reducing wait times and enhancing the overall customer experience. By investing in mobile ordering services, Starbucks caters to the needs of its tech-savvy customers and stays ahead of the competition.

Furthermore, Starbucks understands the power of data in delivering personalized marketing experiences . Through their rewards program and mobile app, Starbucks collects valuable customer data, enabling them to tailor their promotional offers, recommendations, and personalized marketing campaigns. This data-driven approach not only enhances the customer experience but also drives customer loyalty and increases customer lifetime value .

To showcase their commitment to sustainability and social responsibility, Starbucks integrates sustainable initiatives and environmental consciousness into its digital marketing approach. By implementing various sustainability practices and initiatives, Starbucks appeals to socially conscious consumers, enhancing its brand reputation and capturing a wider market share.

With their effective digital marketing approach, Starbucks continues to enhance the customer journey, foster brand loyalty, and stay at the forefront of the coffee industry. By leveraging social media engagement, mobile ordering services, and a data-driven approach, Starbucks delivers personalized experiences to their customers, ultimately driving business growth and brand success.

Starbucks Promotional Strategies

Starbucks, with over 32,000 stores across more than 80 countries, has implemented a range of promotional strategies to not only maintain its premium positioning but also expand its global market reach.

One of the key promotional strategies employed by Starbucks is its focus on product-based campaigns. By promoting unique and fan-favorite beverages, Starbucks creates excitement and drives consumer engagement. These campaigns highlight the craftsmanship and quality of Starbucks’ offerings, enticing customers to explore their diverse menu options. Whether it’s the seasonal Pumpkin Spice Latte or the indulgent Caramel Frappuccino, Starbucks leverages these product-based campaigns to create a buzz and boost sales.

In addition to product-based campaigns, Starbucks is also committed to corporate social responsibility initiatives. By actively supporting social causes, promoting sustainability, and investing in ethical sourcing practices, Starbucks connects with socially conscious consumers. Through community engagement and partnership programs, Starbucks establishes itself as a brand that prioritizes social responsibility. Such initiatives not only strengthen Starbucks’ brand reputation but also foster long-lasting connections with its customers.

Starbucks’ promotional strategies are tailored to different markets, taking into account cultural nuances and consumer preferences. In China, Starbucks markets its stores as gathering places, creating a welcoming atmosphere that encourages customers to linger and socialize. In Japan, Starbucks has successfully incorporated traditional Japanese décor and matcha-infused beverages, resonating with local tastes and preferences.

By combining its product-based campaigns, social responsibility initiatives, and market-specific promotions, Starbucks has been able to effectively reach and engage its target audience. The company’s marketing efforts extend beyond traditional advertising, focusing on delivering high-quality products, exceptional services, and an inviting atmosphere that sets Starbucks apart from its competitors.

Starbucks Competitive Analysis and Market Position

Starbucks Corporation, with its global recognition and market leader status, has established itself as a dominant player in the coffee industry. With a market share of 36.7%, Starbucks easily surpasses its competitors, making it the clear leader in the retail coffee and snacks industry [1] . The company’s success can be attributed to its strong emphasis on quality, innovation, and exceptional customer experience.

Starbucks operates in over 80 countries and territories, showcasing its global reach and market presence [11] . The company’s commitment to specialty coffee products sets it apart from competitors like McDonald’s, Dunkin’, Wendy’s, Subway, and Burger King [11] . By focusing on creating a unique and high-quality product offering, Starbucks effectively differentiates itself from other coffeehouse firms.

One key component of Starbucks’ growth strategy is market penetration. The company aims to maximize revenues from existing markets by opening more stores in weak or limited markets, such as Africa and the Middle East [13] . With its expansive global footprint and diverse customer base, Starbucks has established itself as a top choice for coffee enthusiasts worldwide.

A Competitive Landscape

The coffee industry faces moderate threats from new entrants, with barriers to entry not high enough to discourage new competitors [6] . However, Starbucks’ strong market presence and brand recognition create a competitive advantage that new entrants find difficult to replicate. Despite the industry’s high to moderate intensity of competitive rivalry, Starbucks holds its ground as the market leader with a broad differentiation strategy [10] .

Starbucks’ competitive advantage lies in its focus on making its products unique and of high quality. The brand continually innovates its product mix and supply chain to maintain its position as a market leader. This dedication to excellence, combined with its warm and friendly ambiance, attracts a wide customer base, particularly the younger, more tech-savvy crowd [24] .

The bargaining power of buyers in the industry is moderate to low. Starbucks offers vertically differentiated products, which means that no single buyer can demand significant price concessions. This is due to Starbucks’ ability to meet the diverse preferences and tastes of its customer base [8] .

Starbucks’ bargaining power with suppliers ranges from low to moderate. Standard inputs such as coffee beans pose a moderately low threat, and the company has established strong relationships with premium Arabica coffee growers in select regions [9] .

• Starbucks dominates the industry with a market share of 36.7%
• The company operates in over 80 countries and territories
• Starbucks focuses on specialty coffee products, differentiating itself from competitors
• Market penetration is Starbucks’ primary growth strategy
• The company employs a broad differentiation strategy to maintain its competitive advantage

Through its commitment to quality, innovation, and a strong brand image, Starbucks continues to assert its market leadership in the coffee industry. With its global recognition and a diverse range of offerings, Starbucks remains the go-to destination for coffee lovers worldwide.

Sources: [1] – Statista [6] – Retail Info Systems [8] – Our Daily Cup [9] – Investopedia [10] – Research Gate [11] – Business Wire [13] – The Balance Small Business [24] – HuffPost

Starbucks’ Impact on Indian Market

Since its entry into the Indian market in 2011, Starbucks has made significant strides in establishing a strong presence and influencing the coffee culture in the country. Leveraging its global success and reputation, Starbucks partnered with Tata Global Beverages to tap into the high-growth potential of the under-penetrated Indian market. Through a 50:50 joint venture, Starbucks marked its Indian market entry, setting the stage for exponential growth in the years to come.

India’s economic growth rates consistently outpace global benchmarks, making it the perfect backdrop for Starbucks’ expansion plans. With its remarkable GDP growth and a growing consumer base, India emerged as the second most important emerging market based on GDP. Recognizing this opportunity, Starbucks strategically positioned itself as a premium coffee brand catering to the rising aspirations of the Indian upper-class segment.

Starbucks’ brand reputation and premium image played a vital role in capturing the Indian consumers’ attention. Known for its commitment to quality, service, and an indulgent experience, Starbucks successfully appealed to the aspirational nature of Indian consumers, who were willing to pay premium prices for their favorite cup of coffee.

Upon entering the Indian market, Starbucks faced the challenge of tapping into a diverse and multi-lingual population. In preparation, the company proactively trademarked its brand in ten Indian languages in 2008, safeguarding its competitive advantage and ensuring seamless brand recognition across the country.

Starbucks’ impact on the Indian market goes beyond just a coffee chain. The company’s commitment to its employees, exemplified by its payment of tuition fees, further enhances its reputation among consumers. Starbucks outlets in India pride themselves on offering a local coffee shop atmosphere, providing customers with a cozy and inviting space to enjoy their favorite brew, setting itself apart from traditional fast-food establishments.

The Growth of Starbucks in India

Tata Starbucks, the joint venture between Tata Global Beverages and Starbucks Corporation, has witnessed substantial growth since its inception. In fiscal year 2023, the company reported a robust revenue of Rs 1,087 crore, representing a significant 71% increase from the previous year. The joint venture currently operates 333 stores in India and added 71 new outlets in FY23 alone, including 22 in the fourth quarter.

The expansion of Tata Starbucks across India has been remarkable, with the company venturing into 15 new cities in a year, marking the highest-ever annual store addition in its history. This extensive expansion has solidified Starbucks’ position as a key player in the evolving Indian coffee market, achieving impressive revenue growth and reaching its highest-ever annual store additions.

Looking ahead, Starbucks’ commitment to the Indian market remains strong. With India’s estimated annual growth rate for coffee retailing at 6% and a growth rate for coffee bars at 13%, the potential for further expansion and success in the country is immense. Coffee chains are expected to capture 15% of the current 2000 crore away-from-home beverages market in India, with South and West India projected to be the focal points for coffee retail and bars.

Starbucks’ impact on the Indian market has been substantial, contributing to the growth and evolution of the country’s coffee culture. The expansion efforts, premium positioning, and commitment to quality have resonated with Indian consumers, further solidifying Starbucks’ position as the largest coffeehouse chain in the world.

Starbucks’ success can be attributed to its strong marketing strategies, commitment to quality, and ability to create a unique customer experience. By reaching out to middle and upper-class men and women, Starbucks has tapped into a market with the financial potential for luxury drinks. The company’s digital expansion, social media engagement, and product-based campaigns have helped it maintain a strong global presence. Starbucks’ focus on international growth, market segmentation, and corporate social responsibility initiatives have solidified its brand positioning and success.

Despite challenges and uncertainties in the highly competitive coffee industry, Starbucks has shown consistent growth and innovation. As a result of its efforts, Starbucks holds a dominant market share and has experienced a positive outlook in emerging markets. The company’s pricing strategy and rewards programs have contributed to increased average transaction sizes and customer engagement. By maintaining a consistent brand image and emphasizing quality, Starbucks stands out as a premium coffee franchise.

Looking ahead, Starbucks’ future outlook remains promising. With a strong foundation in place and a track record of adapting to market changes, Starbucks is well-positioned to navigate challenges and continue its growth trajectory. As per industry forecasts, the US retail coffee and snacks industry is projected to see continued growth, providing an opportunity for Starbucks to expand its market share and drive profitability. Overall, Starbucks’ success story showcases the power of effective marketing strategies and the importance of delivering a unique customer experience in the global beverage industry.

What is Starbucks’ global marketing strategy for 2024?

How has starbucks built its brand and achieved global recognition, how has starbucks expanded its presence globally, who is starbucks’ target market, how does starbucks utilize digital marketing, what promotional strategies does starbucks use, how does starbucks position itself in the coffee industry, what impact has starbucks had on the indian market, what has contributed to starbucks’ success, related posts:.

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Nina Sheridan is a seasoned author at Latterly.org, a blog renowned for its insightful exploration of the increasingly interconnected worlds of business, technology, and lifestyle. With a keen eye for the dynamic interplay between these sectors, Nina brings a wealth of knowledge and experience to her writing. Her expertise lies in dissecting complex topics and presenting them in an accessible, engaging manner that resonates with a diverse audience.

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Decoding The Starbucks Marketing Strategy: A Complete Guide

By Aditya Shastri

Quick Read   Discover how Starbucks has perfected its marketing strategy to dominate the coffee industry. This Starbucks case study delves into its innovative marketing techniques, digital strategy, and recent campaigns, showcasing why it remains a market leader.

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About Starbucks

Established in 1971 in Seattle, Washington, Starbucks began as a lone storefront specializing in premium coffee beans and equipment. It has grown into a global coffeehouse chain with over 30,000 locations worldwide. The company’s mission is to uplift and nourish the human spirit—one individual, one cup of coffee, and one community at a time. Known for its commitment to sustainability and ethical sourcing, Starbucks is a pioneer in creating a unique coffee culture.

Source: Google

Relevant Updated Statistics

• As of 2023, Starbucks operates in over 80 countries with 33,833 stores globally【source: Statista】
• Starbucks’ revenue for 2022 reached $29.06 billion, a 24% increase from the previous year【source: Starbucks Annual Report 2022】
• The brand’s loyalty program, Starbucks Rewards, has over 24.8 million active members in the United States【source: Starbucks Investor Relations】.

What’s New With Starbucks

Business news.

Starbucks announced plans to open 1,000 new stores in China by 2025, strengthening its presence in one of its fastest-growing markets.

Product Launch

In 2023, Starbucks introduced the Oleato range, featuring coffee infused with olive oil, a bold new addition to their beverage lineup.

Marketing News

Have you ever been called the wrong name? It might seem like a minor detail, but for transgender and non-binary individuals, it can be a daily experience. Starbucks recognized this in their powerful campaign, “Every Name’s a Story.”  This campaign wasn’t just about selling coffee – it was about celebrating inclusivity and diversity.

Celebrity News

In collaboration with singer Taylor Swift, Starbucks promoted the ‘Red (Taylor’s Version)’ album by featuring her favourite drink, the Caramel Nonfat Latte, in stores worldwide.

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But for now, let us continue with our case study on the marketing strategy of Starbucks.

Starbucks Target Market

Starbucks, a premium coffee brand, strategically positions itself in the market with a keen focus on high-income spenders and health-conscious professionals. The market positioning of Starbucks is evident in its appeal to urban, on-the-go consumers seeking quality coffee and a tranquil environment to unwind.

This market positioning of Starbucks attracts a diverse clientele, including technology early adopters and those flexible to change, primarily aged 25-45. Starbucks’ success is built on a deep understanding of its target audience.

This allows them to constantly adapt their offerings and marketing strategies to meet evolving consumer trends and preferences.  This case study will explore how Starbucks uses this knowledge to stay ahead of the curve.

This approach underscores Starbucks’ commitment to reaching beyond the storefront, offering not just coffee but an experience tailored to its discerning clientele.So summed up, their target audience is-

• High-income spenders
• Technology early adopters
• Health-conscious professionals
• Flexible to change
• Reaching beyond the storefront (Online Sales & Engagement)

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Buyer Persona

To provide a clearer understanding of Starbucks’ target audience, refer to the Buyer Persona outlined in our Starbucks case study blog.

Buyer’s Persona

Profession:

Web-Developer

• Seeking a premium coffee experience
• Interested in sustainable and ethically sourced products
• Value convenience and loyalty rewards

Interest & Hobbies

• Enjoying quality time at coffee shops
• Passionate about environmental causes
• Engaged in social media and digital trends

Pain Points

• High prices compared to local coffee shops
• Limited seating in busy locations
• Preference for non-dairy or alternative milk options

Social Media Presence

Starbucks in india.

In the 2010s, Starbucks’ marketing strategy focused on entering the Indian market to capitalize on the ever-growing coffee culture, particularly targeting the niche upper-class segment. Despite an initial announcement in 2007, Starbucks withdrew its plans without explanation, finally making a grand entry in 2011. To establish a strong foothold, the world’s biggest bistro chain forged a 50-50 joint venture with Asia’s largest coffee grower, Tata Consumer Products Limited, for their Starbucks coffee marketing strategy.

Successfully launching its brand, Starbucks’ next critical move was to meticulously define and engage its target audience in India, ensuring sustainable growth and market presence. This strategic approach, outlined in this Starbucks case study, highlights its methodical entry into the Indian market and the partnership that facilitated its successful establishment in the region.

Now, without further ado, let’s get straight into Starbucks’s marketing tactics, exploring their strategic approaches and methods in the market.

Marketing Strategies of Starbucks

Initially, Starbucks’s marketing tactics in India focused on segmenting consumer markets on a socio-economic basis, targeting working professionals seeking a soothing workspace. They strategically placed stores in locations where this demographic was prevalent.

Like many companies entering new markets, Starbucks started with a single segment and expanded upon achieving initial success. Over time, they diversified their target audience to include teenagers and young adults, bolstering their Starbucks coffee marketing strategy through product range expansion and enhanced social media presence.

The market positioning of Starbucks hinges on delivering a unique, differentiated experience that solidifies its reputation as a highly esteemed brand. Their marketing mix integrates digital technology and social media extensively, engaging the modern, tech-savvy generation for promotions and customer interaction.

This approach has not only fortified their brand identity but also fostered a deep connection with their diverse customer base.

Note: To enhance your expertise, you can explore various courses on digital marketing online that provide in-depth knowledge and the latest industry trends.

Digital Expansion

One of the key priorities of Starbucks’s marketing strategy is expanding its digital interactions with customers. To achieve this goal, it implements several strategies to attract digitally registered customers beyond the rewards program. For example, the coffee chain is offering mobile order services and leveraging Wi-Fi sign-ins at its physical stores.

Starbucks Social Media Strategy

Most people are familiar with Starbucks on social media. The company features several social media accounts that are known for their distinctive branding, interactive posts, and visually pleasing content. The diverse range of content includes recipes, photography, articles, and features. But there’s more than meets the eye. The stream of content can be broken down into a series of campaigns geared at creating a greater sense of Starbucks marketing techniques, enhancing brand awareness, and fostering a sense of community.

Starbucks Product-based Marketing Campaigns

The company focuses on promoting unique and fan-favourite beverages as part of its Starbucks coffee marketing strategy. The brand understands the popularity of its flagship items, particularly the Pumpkin Spiced Latte and Frappuccino, and recognises the demand for this type of content among its audience.

They have even established dedicated social media accounts for these customer favourites, where they actively share relevant and relatable memes to engage their loyal fan base. Additionally, Starbucks leverages user-generated content (UGC), often featuring consumer images of visually appealing products like the Unicorn Frappuccino.

These images are not only reshared across official channels but also incorporated into influencer campaigns, further amplifying their digital marketing efforts.

Starbucks Corporate Social Responsibility-based campaign

Starbucks’ marketing tactics involve leveraging social change as a tool, positioning itself as open-minded and inclusive. One notable example is the #ExtraShotOfPride campaign, which actively supports the LGBT+ community.

Community-based campaigns

#RedCupArt campaign

Another facet of Starbucks’s marketing strategy is its emphasis on highlighting individuals and communities. Take a look at the #RedCupArt campaign, which not only increases engagement but also provides them with a library of UGC content. They use storytelling to showcase acts of courage and kindness in American communities, localizing the content.

Starbucks’s marketing techniques consciously humanize the company by sharing stories on their account, spotlighting employees who play an essential role, especially when consumers are distrustful of big brands.

Just like Starbucks coffeehouses fostered a sense of community in person, their online coffee content creates a similar social experience. This reflects their pioneering role in shaping modern coffee culture.

Festive Marketing

Starbucks has also initiated a new seasonal whole-bean coffee, #StarbucksDiwaliBlend, for its consumers across the country and select global markets. The latest exquisite blend is hand-picked and sourced from Tata Estates in Karnataka and Tamil Nadu.

The Starbucks Diwali Blend was intended as a tribute to the region’s rich and cultural coffee heritage and expertise. They launched the #SketchTheBlend campaign where customers have to share their creativity on the Diwali Blend cup and sleeve and could win 5 free beverages.

Now that you understand the various strategies that comprehensively contribute to their top-notch Starbucks coffee marketing strategy. Let’s dive deeper and analyse their overall digital presence.

Digital Marketing Strategies

Seo (search engine optimization) strategy:.

Starbucks’s marketing tactics involve optimising its online presence by incorporating relevant keywords, high-quality content, and a user-friendly website to improve search engine rankings.

Social Media Marketing  Strategy:

Starbuck’s marketing strategy includes actively engaging with customers on social media platforms, by running targeted ads and interactive content to boost engagement. The brand actively engages with customers on social media platforms, running targeted ads and interactive content to boost engagement.

E-commerce Strategy:

Starbucks’ online store offers a seamless shopping experience, from purchasing coffee beans and equipment to ordering ready-to-drink products.

Mobile App:

The Starbucks mobile app enhances customer convenience with features like mobile ordering, payment, and rewards tracking, showcasing a key aspect of Starbucks’s coffee marketing strategy.

Influencer Marketing Strategy:

Collaborating with influencers and celebrities, Starbucks effectively reaches a broader audience and creates buzz around new product launches and campaigns.

Bonus: Enrolling in a digital marketing course can provide you with the essential skills and knowledge to understand and implement successful strategies, much like those employed by Starbucks.

Starbucks knows its audience is technologically advanced, which makes it imperative for them to have a strong digital marketing strategy. It’s clear how Starbucks prefers marketing on platforms where they have two-way communication instead of platforms like print and television which is more of a one-way communication.

Marketing and Advertising Campaigns

One of Starbucks’ most famous campaigns is “Meet Me at Starbucks,” a global initiative that highlights the diverse ways people connect at their stores. The campaign emphasized the brand’s mission to foster human connection and resulted in increased customer engagement and brand loyalty.

Starbucks launched its social media campaign in 2 phases. The first phase was where they asked their customers to share their ways of reconnecting amidst the pandemic and share their favourite Starbucks memories on their personal Instagram handles with the hashtag Starbucks advertising strategy. In the second phase- ‘Half Cup Full’- they asked their customers to comment on their favourite beverage on the post. They then sent these customers voice notes of baristas hollering the customers’ names along with their favourite beverage to remind them of the famous in-store experience.

This was a great campaign as it not only reminded the people of all the good memories with Starbucks but also made them feel important and valued.

Campaign Analysis:

Starbucks employs a variety of marketing techniques to maintain its market positioning. These include personalised marketing through their rewards program, located store experiences, and a focus on sustainability. Their recent ‘Every Name’s a Story’ campaign is an excellent example of leveraging social issues to build brand loyalty.

Read more about: For skill enhancement, explore our digital marketing courses in ahmedabad and digital marketing courses in south delhi , created to suit your requirements.

Failed Campaigns

#racetogether campaign.

The campaign aimed to spark conversations about race by having baristas write “Race Together” on cups, which was met with widespread criticism.

Customers and employees felt uncomfortable and questioned the appropriateness of discussing such a sensitive topic in a coffee shop setting.

Starbucks quickly scaled back the campaign, focusing instead on internal initiatives to promote diversity and inclusion.

Top Competitors

In this Starbucks case study, we will explore its competitors and how Starbucks consistently rises above them, showcasing its resilient Starbucks marketing strategy.

Dunkin’ Donuts

Renowned for its extensive range of coffee blends and delectable baked goods, Dunkin’ Donuts has established itself as a favourite among coffee enthusiasts and snack lovers alike.

McDonald’s coffeehouse brand offers a budget-friendly assortment of coffee beverages, providing customers with a convenient and affordable coffee experience alongside their meals.

Costa Coffee

A prominent British coffeehouse chain, Costa Coffee is celebrated for its European presence and commitment to delivering quality coffee in a cosy café atmosphere.

Peet’s Coffee

Known for its artisanal approach to coffee roasting, Peet’s Coffee specialises in high-quality, hand-roasted beans that cater to discerning coffee connoisseurs seeking exceptional flavour profiles.

Tim Hortons

A beloved Canadian institution, Tim Hortons is cherished for its signature coffee blends and freshly baked doughnuts, offering a comforting taste of Canadian hospitality to customers nationwide.

Be it Starbucks or any other company, competition is everywhere. So if you are someone who likes doing research on competitor analysis for other companies, let me help you out. Check out these case studies on the marketing strategy of Jollibee , McDonald’s marketing strategy and the marketing strategy of Dunkin Donuts .

In conclusion, Starbucks’ marketing strategy is a testament to its success in the coffee industry. By focusing on high-income spenders, urban professionals, and tech-savvy individuals, Starbucks has effectively positioned itself as a premium brand.

Their innovative campaigns, such as ‘Every Name’s a Story’ and ‘Meet Me at Starbucks,’ highlight their commitment to inclusivity and human connection. The integration of digital strategies, social media engagement, and a robust rewards program further strengthens their market presence.

By continuously adapting to consumer trends and leveraging strategic partnerships, Starbucks remains a leader in the global coffee market.

Additional Information

Want to learn the essentials of digital marketing in no time? Our extensive Online Digital Marketing Course will help you unlock success in this evolving industry.If you have reservations about enrolling, try our Free Digital Marketing Masterclass first! Get a preview of the content and decide if it’s a good match for you.

Alternatively, if you’re interested in the world of social media, our Free Instagram Marketing Course might be the perfect fit.

Lastly, if you enjoyed this blog, we recommend exploring our digital marketing case studies. We’ve covered some of the best companies out there. A few the examples are marketing strategy of Amazon , the marketing strategy of Red Bull and the marketing strategy of LinkedIn .

Don’t forget to check out our digital marketing blogs as well. You might find your perfect course among them!

We appreciate you reading this blog. Comment down below if you want more such case studies.

Frequently Asked Questions- Marketing Strategy Of Starbucks

Starbucks' mission is to inspire and nurture the human spirit – one person, one cup, and one neighbourhood at a time.

Starbucks operates over 32,000 stores worldwide, making it one of the largest coffeehouse chains globally, known for its extensive global presence and accessibility.

Starbucks' latest product launch includes a range of summer-inspired beverages like the Iced Guava Passionfruit Drink and the Nitro Cold Brew with Salted Honey Cold Foam.

Starbucks' main competitors include Dunkin' Donuts, McCafé (McDonald's coffeehouse brand), Costa Coffee, Peet's Coffee, and Tim Hortons, each vying for market share in the coffee and quick-service restaurant industries.

The Starbucks Rewards program is a loyalty program where customers earn points (stars) for purchases, which can be redeemed for free drinks and food items, along with personalised offers and early access to new products.

Through initiatives like ethically sourced coffee, reducing waste, and promoting recycling.

The 'Race Together' campaign was an initiative by Starbucks aimed at sparking conversations about race relations. It encouraged employees to write ‘Race Together’ on cups to prompt dialogue among customers and staff.

Starbucks' digital marketing strategy leverages social media platforms and mobile apps to engage customers with personalised offers, loyalty programs, and interactive content, enhancing brand visibility and customer experience.

Starbucks' target audience is motivated by quality coffee, a cosy ambience, and a sense of community fostered by the brand's commitment to social responsibility and customer-centric experiences.

Starbucks leverages social media to engage customers through creative campaigns, customer interactions, and promotions, enhancing brand visibility and fostering a sense of community among coffee enthusiasts worldwide.

Author's Note: My name is Aditya Shastri and I have written this case study with the help of my students from IIDE's online digital marketing courses in India . Practical assignments, case studies & simulations helped the students from this course present this analysis. Building on this practical approach, we are now introducing a new dimension for our online digital marketing course learners - the Campus Immersion Experience. If you found this case study helpful, please feel free to leave a comment below.

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Aditya Shastri

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Leads the Learning & Development segment at IIDE. He is a Content Marketing Expert and has trained 6000+ students and working professionals on various topics of Digital Marketing. He has been a guest speaker at prominent colleges in India including IIMs...... [Read full bio]

Clicking on the image of the Starbucks cup is my thing too. This blog provides great and deep insights into their strategy.

Starbucks marketing strategy brewed! served! and I’m here for it!

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Starbucks, reinvented: a seven-year study on schultz, strategy and reinventing a brilliant brand.

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BY JULIA HANNA

Harvard Business School Professor and historian Nancy Koehn has studied Starbucks and its leader, Howard Schultz , for close to 20 years. For her, the company represents much more than a phenomenal success story.

In a recently published case, "Starbucks Coffee Company: Transformation and Renewal," (available soon) Koehn and coauthors Kelly McNamara, Nora Khan, and Elizabeth Legris trace the dramatic arc of the company's past seven-plus years—a period that saw Starbucks teeter on the brink of insolvency, dig deep to renew its sense of purpose and direction, and launch itself in new, untested arenas that define the company as it exists today.

"This case distills 20 years of my thinking about the most important lessons of strategy, leadership, and managing in turbulence in the frame of a very relevant company," says Koehn, the James E. Robison Professor of Business Administration. "As a brand, leadership, and entrepreneurship scholar, I've been dogging Starbucks for a long time."

On a 1995 trip to Seattle, Koehn visited a Starbucks store for the first time and was struck by what she saw and felt. The notion of a "third place" between home and work to relax and enjoy the small, affordable luxury of a special coffee beverage seemed to resonate with the social and economic moment, she recalls. Six months later she met Howard Schultz, an entrepreneur who acquired the company in 1987, and was struck by his seriousness of purpose and the breadth of what he wanted to accomplish.

Starbucks Chairman Howard Schultz (Photo credit: Wikipedia)

The case, Koehn's fourth to focus on Starbucks, opens in February 2007. Schultz, no longer Starbucks' CEO but still its chairman, is worried the company is losing its ability to be true to its values while providing a store experience that conveys a sense of comfort, connection, and respect for its product and the communities Starbucks serves.

So Schultz composed a heartfelt, searching memo to senior leadership. In it, he bemoaned decisions (for which he accepted responsibility) that improved efficiency and increased economies of scale but robbed stores of some of their essential magic, such as the smell of roasting coffee and the sights and sounds of traditional Italian espresso machines and baristas at work.

He also cited the company's rapid expansion and the potential "commoditization" of the Starbucks brand. "[W]e desperately need to look into the mirror and realize it's time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks Experience," Schultz wrote.

The scope and richness of Koehn's case gives it the feel of a page-turning novel; in that sense, Schultz's memo is the inciting action for all that follows.

Remaining True To Core Values

The challenge that had confronted Starbucks in the early- and mid-2000s was one common to many organizations: Could the company continue to grow while preserving its culture and values? In some areas, the drive to expand, egged on by Wall Street, was compromising the company's ability to invest in its partners (Starbucks' term for its employees), deliver personalized customer service, and maintain a close connection to the local community.

In addition, McDonald's and Dunkin' Donuts had emerged as serious competitors, offering their own lines of specialty coffee beverages. Even so, Starbucks' financials for 2007, the year Schultz composed his memo, didn't look so bad. But the entrepreneur became concerned as he dug more deeply into the numbers. Sure, revenues were up almost 21% over the previous year, but had slowed by over a third; transactions per store were up 1%, versus 5% the year before. Same-store sales rose only 5%, the smallest increase in five years.

In January 2008, Schultz returned as Starbucks CEO, replacing Jim Donald, the man he and other senior colleagues had chosen to lead the company.

Starbucks Sails Again

The case chronicles the blizzard of decisions and initiatives that follow what could have been the company's death knell as the financial crisis hit home and consumers cinched their belts.

"Schultz understood that you can't lift your foot off the gas pedal when you're attempting to transform a company," Koehn says. "Severe as its financial needs may be, you also have to figure out what you will invest in. Schultz knew that if he waited until the company was out of the woods to invest in new products, communication channels, and ways of doing business it would be too late—Starbucks would no longer be relevant."

From the start, Schultz sent the clear, unwavering message that Starbucks' transformation would represent a return to its roots and an uncompromising commitment to core values, such as health care benefits for any partners working at least 20 hours a week.

At a March 2008 gathering of 200 senior-level company leaders, Schultz unveiled a Transformation Agenda that included seven "Big Moves":

• Be the undisputed coffee authority;
• Engage and inspire our partners;
• Ignite the emotional attachment with our customers;
• Expand our global presence—while making each store the heart of a local neighborhood;
• Be a leader in ethical sourcing and environmental impact;
• Creative innovation growth platforms worthy of our coffee;
• Deliver a sustainable economic model.

The case provides a behind-the-scenes look at how the coffee company moved forward on these goals, including the introduction of the milder Pike Place Roast; the story of its VIA Ready Brew line; the launch of a loyalty program; investment in and engagement with social media; focus on a global expansion strategy; and the extension of social programs. The company closed stores, restructured its manufacturing and supply operations, and, perhaps most significantly, took steps to reengage its partners and store managers. In February 2008, Starbucks closed more than 7,000 of its stores across the country for "Espresso Excellence Training," taking the time to work with approximately 135,000 baristas to ensure they could pour a perfect espresso shot and steam milk properly.

For Schultz, however, that wasn't enough—he wanted to reach the company's store managers, recognizing them as essential to the transformation process.

"I needed an unfiltered venue for expressing my empathy about all that we were asking our partners to do and telling them plainly what was at stake," he wrote in Onward: How Starbucks Fought for Its Life without Losing Its Soul . The answer, in Schultz's mind, was a three-day conference in New Orleans in October 2008, a moment when the global economy happened to be tanking. Starbucks' fourth quarter profits were down 97% from the same time a year earlier; for the fiscal year, net earnings were down 53% to $316 million. The Starbucks board was reluctant to send 10,000 partners to New Orleans at a cost of $30 million, but Schultz stuck to his guns.

In addition to rolling up their sleeves and taking part in community service projects to aid areas of the city still recovering from Hurricane Katrina, partners participated in team-building events that reviewed the company's guiding principles and reminded them of their central role in the customer experience. Schultz also brought in Bono, lead singer of U2, to announce a partnership to channel proceeds from holiday beverage sales to the Global Fund in support of AIDS relief programs in Africa.

The New Orleans conference was a turning point for Starbucks; in the "novel" of Koehn's case, it's the climax.

"Investing in a conference of that size is such an unusual thing to do when faced with a cash crunch," Koehn says. "Schultz understood that what saves and breaks businesses is much more than cash. In the midst of so much turbulence, it's all too easy to pull levers on the low-hanging fruit of cash and logistics. But you don't save a business and turn it around without speaking to, focusing, and calling on the spirit of your people."

Schultz's experience qualifies him for closer study in Koehn's HBS course Power and Glory in Turbulent Times: The History of Leadership from Henry V to Steve Jobs. Not all managers are confronted in their careers with the sort of transformation challenge faced by Starbucks, but Schultz's reflections and actions are instructive for anyone charged with finding sources of strength, innovation, and renewal in today's turbulent business environment, Koehn says.

About the author:  Julia Hanna is associate editor of the HBS Alumni Bulletin .

• Editorial Standards
• Reprints & Permissions

Starbucks Reinvented

Harvard Business School Professor and historian Nancy Koehn has studied Starbucks and its leader, Howard Schultz, for close to 20 years. For her, the company represents much more than a phenomenal success story.

In a recently published case, "Starbucks Coffee Company: Transformation and Renewal," (available soon) Koehn and coauthors Kelly McNamara, Nora Khan, and Elizabeth Legris trace the dramatic arc of the company's past seven-plus years—a period that saw Starbucks teeter on the brink of insolvency, dig deep to renew its sense of purpose and direction, and launch itself in new, untested arenas that define the company as it exists today.

"This case distills 20 years of my thinking about the most important lessons of strategy, leadership, and managing in turbulence in the frame of a very relevant company," says Koehn, the James E. Robison Professor of Business Administration. "As a brand, leadership, and entrepreneurship scholar, I've been dogging Starbucks for a long time."

On a 1995 trip to Seattle, Koehn visited a Starbucks store for the first time and was struck by what she saw and felt. The notion of a "third place" between home and work to relax and enjoy the small, affordable luxury of a special coffee beverage seemed to resonate with the social and economic moment, she recalls. Six months later she met Howard Schultz, an entrepreneur who acquired the company in 1987, and was struck by his seriousness of purpose and the breadth of what he wanted to accomplish.

The case, Koehn's fourth to focus on Starbucks, opens in February 2007. Schultz, no longer Starbucks' CEO but still its chairman, is worried the company is losing its ability to be true to its values while providing a store experience that conveys a sense of comfort, connection, and respect for its product and the communities Starbucks serves.

So Schultz composed a heartfelt, searching memo to senior leadership. In it, he bemoaned decisions (for which he accepted responsibility) that improved efficiency and increased economies of scale but robbed stores of some of their essential magic, such as the smell of roasting coffee and the sights and sounds of traditional Italian espresso machines and baristas at work.

He also cited the company's rapid expansion and the potential "commoditization" of the Starbucks brand. "[W]e desperately need to look into the mirror and realize it's time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks Experience," Schultz wrote.

The scope and richness of Koehn's case gives it the feel of a page-turning novel; in that sense, Schultz's memo is the inciting action for all that follows.

Remaining True To Core Values

The challenge that had confronted Starbucks in the early- and mid-2000s was one common to many organizations: Could the company continue to grow while preserving its culture and values? In some areas, the drive to expand, egged on by Wall Street, was compromising the company's ability to invest in its partners (Starbucks' term for its employees), deliver personalized customer service, and maintain a close connection to the local community.

In addition, McDonald's and Dunkin' Donuts had emerged as serious competitors, offering their own lines of specialty coffee beverages. Even so, Starbucks' financials for 2007, the year Schultz composed his memo, didn't look so bad. But the entrepreneur became concerned as he dug more deeply into the numbers. Sure, revenues were up almost 21 percent over the previous year, but had slowed by over a third; transactions per store were up 1 percent, versus 5 percent the year before. Same-store sales rose only 5 percent, the smallest increase in five years.

In January 2008, Schultz returned as Starbucks CEO, replacing Jim Donald, the man he and other senior colleagues had chosen to lead the company.

Starbucks Sails Again

The case chronicles the blizzard of decisions and initiatives that follow what could have been the company's death knell as the financial crisis hit home and consumers cinched their belts.

"Schultz understood that you can't lift your foot off the gas pedal when you're attempting to transform a company," Koehn says. "Severe as its financial needs may be, you also have to figure out what you will invest in. Schultz knew that if he waited until the company was out of the woods to invest in new products, communication channels, and ways of doing business it would be too late—Starbucks would no longer be relevant."

From the start, Schultz sent the clear, unwavering message that Starbucks' transformation would represent a return to its roots and an uncompromising commitment to core values, such as health care benefits for any partners working at least 20 hours a week.

At a March 2008 gathering of 200 senior-level company leaders, Schultz unveiled a Transformation Agenda that included seven "Big Moves":

• Be the undisputed coffee authority;
• Engage and inspire our partners;
• Ignite the emotional attachment with our customers;
• Expand our global presence—while making each store the heart of a local neighborhood;
• Be a leader in ethical sourcing and environmental impact;
• Creative innovation growth platforms worthy of our coffee;
• Deliver a sustainable economic model.

The case provides a behind-the-scenes look at how the coffee company moved forward on these goals, including the introduction of the milder Pike Place Roast; the story of its VIA Ready Brew line; the launch of a loyalty program; investment in and engagement with social media; focus on a global expansion strategy; and the extension of social programs. The company closed stores, restructured its manufacturing and supply operations, and, perhaps most significantly, took steps to reengage its partners and store managers. In February 2008, Starbucks closed more than 7,000 of its stores across the country for "Espresso Excellence Training," taking the time to work with approximately 135,000 baristas to ensure they could pour a perfect espresso shot and steam milk properly.

For Schultz, however, that wasn't enough—he wanted to reach the company's store managers, recognizing them as essential to the transformation process.

"I needed an unfiltered venue for expressing my empathy about all that we were asking our partners to do and telling them plainly what was at stake," he wrote in Onward: How Starbucks Fought for Its Life without Losing Its Soul . The answer, in Schultz's mind, was a three-day conference in New Orleans in October 2008, a moment when the global economy happened to be tanking. Starbucks' fourth quarter profits were down 97 percent from the same time a year earlier; for the fiscal year, net earnings were down 53 percent to $316 million. The Starbucks board was reluctant to send 10,000 partners to New Orleans at a cost of $30 million, but Schultz stuck to his guns.

In addition to rolling up their sleeves and taking part in community service projects to aid areas of the city still recovering from Hurricane Katrina, partners participated in team-building events that reviewed the company's guiding principles and reminded them of their central role in the customer experience. Schultz also brought in Bono, lead singer of U2, to announce a partnership to channel proceeds from holiday beverage sales to the Global Fund in support of AIDS relief programs in Africa.

The New Orleans conference was a turning point for Starbucks; in the "novel" of Koehn's case, it's the climax.

"Investing in a conference of that size is such an unusual thing to do when faced with a cash crunch," Koehn says. "Schultz understood that what saves and breaks businesses is much more than cash. In the midst of so much turbulence, it's all too easy to pull levers on the low-hanging fruit of cash and logistics. But you don't save a business and turn it around without speaking to, focusing, and calling on the spirit of your people."

Schultz's experience qualifies him for closer study in Koehn's HBS course Power and Glory in Turbulent Times: The History of Leadership from Henry V to Steve Jobs. Not all managers are confronted in their careers with the sort of transformation challenge faced by Starbucks, but Schultz's reflections and actions are instructive for anyone charged with finding sources of strength, innovation, and renewal in today's turbulent business environment, Koehn says.

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Starbucks Coffee Company: Transformation and Renewal

• Format: Print
• | Language: English
• | Pages: 71

Starbucks Coffee Company: Transformation and Renewal analyzes the turnaround and reconstruction of Starbucks Coffee Company from 2008 to 2014 as led by CEO and co-founder Howard Schultz. The case offers executives and students an opportunity to examine in depth how Schultz and his team saved Starbucks from near-collapse, by both executing a deep, comprehensive return to its core values and, at the same time, investing in a range of new products, customer experiences and organizational capabilities designed to make the company fit for enduring success in a turbulent global economy. Set against the backdrop of the Great Recession, the case also considers the impact of unprecedented important shifts in consumer spending and confidence as well as new competitive forces on Starbucks' transformation. The case concludes by examining Schultz's own leadership journey, the lessons he learned personally during Starbucks transformation, and how he is using these lessons—within Starbucks and on the national stage—to redefine the roles and responsibilities of a public corporation in the 21st century.

Based on extensive interviews conducted with Schultz and other Starbucks executives from 2011 to 2014, the case offers a range of vital lessons on leadership, organizational transformation, restructuring, strategy, innovation, entrepreneurial vision, and customer service.

About The Author

Nancy F. Koehn

Related work.

• June 2014 (Revised March 2016)
• Faculty Research
• Starbucks Coffee Company: Transformation and Renewal  By: Nancy F. Koehn

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Case Study: Starbucks’ Success Elevating Customer Experience with Customer Journey Mapping

Customers journey mapping to deliver great customers experiences.

Starbucks, the world-renowned coffee company, is known for its exceptional customer experience and innovative offerings. To stay ahead in the competitive coffee industry and maintain its reputation, Starbucks has consistently prioritized understanding its customers and their needs. One key strategy that Starbucks has used to achieve this is customer journey mapping.

Customer Journey Mapping Strategy

Starbucks embarked on a comprehensive customer journey mapping initiative, aiming to identify pain points in its customers’ experiences and develop solutions to address these issues. The company engaged in a cross-functional approach, involving teams from various departments such as marketing, store operations, and product development, to ensure a holistic understanding of the customer journey.

Understanding the Customer Journey

Starbucks conducted extensive research to gain insights into its customers’ interactions with the brand, both online and offline. The company collected data through customer interviews, surveys, and observations, as well as leveraging digital analytics and transactional data. This information was used to create detailed customer journey maps, highlighting key touchpoints, emotional states, and pain points.

Identifying Pain Points and Opportunities

The customer journey maps revealed several areas where Starbucks could improve its customer experience. Some notable pain points included long wait times, inconsistent product quality, and challenges in navigating the rewards program. The company also identified opportunities to enhance the in-store experience, such as incorporating digital technologies and personalizing customer interactions.

Developing a Customer Experience Roadmap

Armed with these insights, Starbucks developed a customer experience roadmap that outlined the strategic initiatives and improvements needed to address the identified pain points and capitalize on opportunities. Some of the successful implementations based on the roadmap include:

• Mobile Order & Pay: To reduce wait times and streamline the ordering process, Starbucks introduced the Mobile Order & Pay feature in its app. This allowed customers to place orders in advance and pick up their drinks without waiting in line, significantly enhancing the overall customer experience.
• Personalized Rewards: Starbucks revamped its rewards program to make it more accessible and user-friendly, tailoring offers and promotions based on customers’ preferences and purchasing habits. This personalized approach encouraged customer loyalty and increased engagement with the brand.
• Consistent Quality Standards: Starbucks invested in employee training and quality control measures to ensure consistent product quality across all locations. This focus on excellence helped reinforce the brand’s reputation for offering high-quality coffee and beverages.
• Digital Integration: Starbucks introduced digital touchpoints in its stores, such as interactive menu boards and mobile payment options, to create a seamless and engaging customer experience. These innovations helped bridge the gap between the online and offline customer journey.

The company’s attention to the entire journey has been a key factor in the development of the premium coffee category.

According to PeopleMetrics, Starbucks has been able to simplify and operationalize Customer Journey Mapping which has helped them unlock the intersection of convenience and connection by introducing enhancements to the customer experience across retail and digital that meet customers wherever they are, expanding the Third Place experience beyond the physical store.

Initiatives that have been uncovered through journey mapping exercises:

Starbucks is investing in its partners, creating personalized experiences for customers, and innovating its digital and retail strategy.

Investing in Partner Success

Starbucks is placing its partners at the core of its Reinvention plan. The company believes that investing in its partner base is key to delivering high-quality customer experiences, uplifting brand affinity and customer loyalty, and increasing value back to partners through wages, benefits, programming, and tools for continued personal growth. In fiscal 2023, Starbucks has identified a number of near-term solutions that will be implemented to ensure a thriving partner experience:

How to Improve Customer Experience

Wage and Recognition Innovation:

Starbucks is helping partners by giving them the hours they need, expanding digital tipping, and incorporating other opportunities to increase overall pay. The company is committed to paying partners competitively and has raised its starting wage in the U.S. to $15 per hour.

New Well-being Benefits:

Starbucks is offering enhanced sick pay, new savings and student loan management benefits, and additional mental health support to its partners.

Personalized Career Mobility:

Starbucks is introducing a new partner app and the development of personalized career paths to enable its partners to achieve their career goals.

Investments in Store Managers:

Starbucks is providing new leadership trainings, reinventing scheduling and decision-making tools, and creating career journey mapping to improve store manager retention and empower them to focus on core functions of the job that increase satisfaction and overall performance of their store partners.

These investments are aimed at empowering Starbucks partners to thrive at work, thrive as individuals, and thrive together. Stores managed by partners with over three years of tenure have 13% greater weekly sales and higher customer satisfaction, making it clear that investing in partner success is a win-win for both partners and the company.

Creating Personalized Experiences for Customers

Starbucks is committed to unlocking the intersection of convenience and connection by introducing enhancements to the customer experience across retail and digital that meet customers wherever they are, expanding the Third Place experience beyond the physical store. The company is investing in purpose-built store concepts, delivering beverage innovation, and expanding effortless digital convenience to create personalized experiences for its customers.

Investing in Purpose-built Store Concepts:

Starbucks is reimagining the store environment by introducing purpose-built store concepts that meet customers wherever and whenever they want and improve the partner experience. The company is investing an incremental $450M in the existing U.S. store base in fiscal year 2023 with continued investment in fiscal 2024 and 2025. Starbucks expects these investments will create efficiencies, unlock capacity for partners, and enable increased throughput to support increasing customer demand.

Digital and Physical Customer Journey Optimization

Delivering Beverage Innovation:

To improve partner and customer experiences, Starbucks has developed the Siren System, a proprietary new equipment innovation designed to meet the growing demand for customization of hot and cold beverages and warm foods. As part of the Siren System, Starbucks has redesigned its cold beverage station, which significantly reduces the time and number of steps to make cold beverages, unlocking productivity gains and ultimately freeing up time for partners to connect with customers.

In addition, Starbucks is developing a new way of extracting cold coffee and espresso with the Cold Pressed Cold Brew system. This new, proprietary technology delivers cold press coffee in a matter of seconds and in fewer than four steps, a step-change improvement when compared to today’s cold brew which is steeped for 20 hours and takes more than 20 steps to make. The Cold Pressed Cold Brew will begin testing in stores in fiscal 2023.

Expanding effortless digital convenience

Starbucks’ Reinvention Plan aims to create a seamless and personalized experience for customers, making it easier for them to get their favorite Starbucks beverage when and where they want. The company has recognized the increasing importance of digital convenience in providing a better customer experience. The COVID-19 pandemic has also highlighted the need for contactless ordering and payment options. Starbucks has responded by investing in and expanding its digital offerings, such as its mobile ordering platform, Starbucks Rewards program, and Starbucks Delivers.

Growing Starbucks Delivers program with DoorDash and UberEats

One of Starbucks’ major initiatives for expanding digital convenience is growing its Starbucks Delivers program. The company has partnered with DoorDash to expand the program to a national scale alongside UberEats in fiscal 2023. This partnership aims to improve delivery efficiency, expand delivery areas, and offer more delivery options to customers. Starbucks Delivers is expected to be available in over 10,000 stores across the United States by the end of 2022.

Increase Customer Satisfaction with a Digital Customer Experience Platform

Starbucks Rewards program with Starbucks Odyssey

Starbucks is also evolving its Starbucks Rewards program with Starbucks Odyssey, a Web3-enabled experience that will bridge the physical and digital customer experience. Starbucks Odyssey aims to unlock a new generation of experiential benefits for customers. Through Starbucks Odyssey, customers will be able to earn and redeem rewards, access exclusive content, and become part of a digital community built on human connection. Starbucks plans to roll out Starbucks Odyssey to all customers in the United States and Canada by the end of 2022.

The CDO TIMES Bottom Line

Starbucks’ successful application of customer journey mapping demonstrates the value of understanding customers’ experiences for customers, partners and employees and using these insights to drive improvements and innovation. By identifying pain points and opportunities in the customer journey, Starbucks was able to develop a customer experience roadmap that addressed these issues and reinforced its position as a leader in the coffee industry.

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Carsten Krause

I am Carsten Krause, CDO, founder and the driving force behind The CDO TIMES, a premier digital magazine for C-level executives. With a rich background in AI strategy, digital transformation, and cyber security, I bring unparalleled insights and innovative solutions to the forefront. My expertise in data strategy and executive leadership, combined with a commitment to authenticity and continuous learning, positions me as a thought leader dedicated to empowering organizations and individuals to navigate the complexities of the digital age with confidence and agility. The CDO TIMES publishing, events and consulting team also assesses and transforms organizations with actionable roadmaps delivering top line and bottom line improvements. With CDO TIMES consulting, events and learning solutions you can stay future proof leveraging technology thought leadership and executive leadership insights. Contact us at: [email protected] to get in touch.

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How Starbucks Became Everyone's Cup Of Coffee

Table of contents.

Starbucks Coffee Company boasts impressive stats:

• Owns 40% share of US Coffee Market
• Earns $24,72 billion worldwide
• Has 29,324 stores worldwide in 72 countries
• Over 14,000 of total stores in the United States / over 27,000 worldwide
• Conducts over 90 million transactions per week
• So popular in China, a new store opens every 15 hours
• Following McDonald's as the most valuable fast food brand worldwide (valued at $44.5 billion)

It will be very hard to achieve something Starbucks did since 1971 when the company started. There’s a lot of firsts when it comes to the company. First to introduce the new coffee culture, the first privately owned company which offered all their employees health insurance AND the share of the company.

The CEO, Howard Schultz, who might even run for president at some point , achieved something that is almost impossible — appeal to shareholders, employees, and customers at the same time. This is my giant case study on how to achieve world domination in case you want to bring an old product to the new market.

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The Starbucks Idea

The coffee culture in the United States before the 80s was nonexistent. 

Americans were used to huge cans of ground coffee and they couldn’t care less about the flavor. Even if you’d go outside your household to a dinner you would be met with a generic drip coffee or styrofoam cups of foul-tasting joe at the workplace. No one even thought about the flavor, the origin, or anything more sophisticated tied to the drink.

The 70s coffee culture didn’t exist at all.

In 1970 three college friends: Gordon Bowker, Jerry Baldwin, Zev Siegl went into the coffee business together. They set up a shop and sold roasted beans. They received the knowledge from a man named Alfred Peet (if that rings a bell, yes he is the owner of Peet’s Coffee). Alfred was one of the most knowledgeable people in the country about coffee. He knew where to source it, how to roast it. He was the first to introduce dark roasted and french roasted beans.

In 1971, the three friends opened the roastery and bean shop in Pike’s Place, Seattle’s famous tourist destination known for the Pike’s Public Market Center. Peet helped the young entrepreneurs by providing them with beans and connecting them with reliable bean providers.

The name Starbucks stuck because it’s easy to say, impossible to misspell, and has a vaguely British overtone to it. Really, we picked it because our lawyer called and told us we had to submit papers and needed a name. We didn’t know at the time, but Starbuck is the name of the first mate on the Pequod in Moby Dick. That might explain the siren logo. Some might even say it comes from Mount Rainier's Mining company Starbo . According to Gordon Bowker, they were initially going for the name Cargo House Coffee .

The business was successful enough for the trio so they opened 4 more shops in Seattle. However, no coffee drinks were being served. This was still a roasted bean retail shop intended for home use.

At that time Starbucks was competing against instant coffee cans. The quality was stark and thus the business went well. Things were about to change when the founders hired the head of marketing and sales, Howard Schultz in 1982.

The Inclination for Grit and Determination Fix Social Injustice

Howard Schultz was a child raised in poverty. After seeing his father injuring himself doing grueling manual labor, he decided he wanted to get rid of the injustice of the working class. An idea of creating and striving for an environment where employees are fairly compensated and taken care of has been set in.

In Masters of Scale interview with Reid Hoffman, Schultz described seeing his father stretched out on the sofa after suffering an injury. Howard Schultz swore to himself to make a company his father had never worked for.

“I saw my father losing his sense of dignity and self-respect. I am sure that this was caused mostly by the fact that he has been treated as an ordinary working man.” – Howard Schultz, AstrumPeople article

Schultz started working at the age of 12 selling newspapers. Since he was being athletic, Howard earned an athletic scholarship at Northern Michigan University where he received his Bachelor’s degree in Communications in 1975.

After his graduation, Howard Schultz spent three years as a sales manager at Xerox, and then he started working at a Swedish company Hammarplast , where he was selling home appliances, including coffee grinders to businesses like Starbucks.

The Starbucks founder trio took him amidst to grow the company.

In 1983, Howard Schultz gets an epiphany. He travels to Milan, Italy for some sort of conference and what he sees there changes his perception of coffee forever. In certain European countries, especially Italy, coffee was one of the more important things in life. It served as a social lubricant and the third place of dwelling between home and work. Schultz discovered what it means to have a high-quality espresso served in a proper way in a relaxed environment.

He was determined to bring this piece of coffee culture back to the United States. The founders gave in after continuous pressure from Schultz to open an espresso bar. Eventually, they gave him an opportunity to open up a coffee bar inside a store. It was incredibly popular. But the owners didn’t want to turn the coffee retail business into a cafe.

“After Milan I flew back to the United States, excited to share what I experienced. But my bosses, the first founders of Starbucks, for whom I had tremendous respect, did not share my dream of re-creating the coffee bar experience in Seattle. I was crushed, but my belief was so powerful that, in April 1986, I left Starbucks and raised money from local investors to found my own retail coffee company. I named it Il Giornale after Milan’s daily newspaper.

In 1985 Howard Schultz opened his own cafe chain - Il Giornale . He wanted to pursue the dream and went back to Starbucks owners and offered to buy all 6 stores that were operational at that time. With the help of raised venture capital he succeeded and became the CEO after the successful acquisition with $3.6M.

The hyper-growth began.

Key takeaway #1 — change is good

The determination and unrelenting belief to change the current situation is not just a helpful attribute but a prerequisite for cultural change. Staying true to the “one thing” without flinching will be the cause and the driver of change.

“An Old Product in the New Market”

Whenever something works out on an incredible scale in one market, there’s a potential of seeing it succeed in a new one. This is called introducing an old product to a new market.

For example, Uber and Lyft built an incredible business about ride-sharing. Because they have to contain the growth before they are spread too thin, that gives the opportunity to copy-cats in different markets. In the United Arab Emirates, you have Careem ( just recently acquired by Uber ), in Croatia you’ve got have Cammeo and in India, you’ve got sRide .

After something experiences great success, there is only a matter of time before someone else sees the potential and brings it back to the new market, and starts eating out the market share

Coffee was a big opportunity in the United States at that time. Howard Schultz saw with his own eyes how effective and important it is in Italy and he knew he could do something similar in the United States. To perform a similar innovative (for the new market) service you would need to take the entire concept and localize it to the new market.

Even the trends from 2004 to this day shows an upward trend in coffee:

This go-to-market product strategy was first introduced In 1957 by Russian American mathematician and business manager Igor Ansoff. The Ansoff Matrix was published in Harvard Business Review in the article “Strategies for Diversification”. In his opinion, there are only two ways to develop a growth strategy — varying what is sold (product growth) and to whom it is sold (market growth).

Market development — new market, existing product

The Starbucks go-to strategy was to bring the already established product in different cultural and geographical spaces into the new market — the coffee-culture deprived United States.

Howard Schultz’s task was to closely observe how Italians treat the product and figure out a way to bring it home with minor changes. It was impossible to expect that the new market is going to slurp macchiatos from tiny espresso cups but everyone could understand comfort and better quality. That was going to be Starbucks’s trump card.

Market penetration — old market, old product

The most obvious strategy is to sell the existing product to the existing market. With this concept there’s a little risk since the companies don’t have to educate the market with the new product, however, the growth is inhibited by competition or decreasing trends.

Diversification - new market, new product

By far the riskiest approach is introducing a new product in new markets. Not only the product needs to provide clear values, but it also has to educate its use in the new market.

Imagine bringing augmented reality technology to a country where there’s no practical use for it yet. Since there’s a great risk, it can also result in amazing success where you’re the only provider in the blue ocean market.

Most of the startups are banking on this strategy.

Product development - old market, new product

This strategy is most often used by established brands that are already known as leaders in their field. If a washing machine company introduces a new technology that also folds your clothes after washing and drying, that would be much easier to understand and adapt to their existing users.

Key takeaway #2 — do market research

When developing the new market, learn as much as possible about the product itself in the location where it’s mostly used and established. Identify all the major benefits and think of the most significant values that would succeed in the new market

Eco-Conscious, Friendly People, and Profitable — Starbucks’ Triple balancing act

Howard Schultz had an idea to build something that is almost impossible to imagine and can exist only in Utopia. From the start, he wanted to serve with equal importance towards customers and employees.

This is almost impossible to achieve since on one end the business investors want to see money coming in, which in most cases means lean running staff with lower wages and higher-priced products. The staff, or “ partners ” as Howard Schultz calls its employees, are not only compensated a fair wage ( between $10 to $15/hour according to Glassdoor ) but also have healthcare insurance and discounted stock options for company shares.

Howard went even further, offering full tuition coverage through Arizona State University's online degree program .

This idea was most likely outrageous to shareholders. Everyone will get a piece of the company’s pie?

In a Tim Ferriss interview with Jim Collins, the author of Built to Last and Good to Great mentioned the final lesson of his mentor and all-around management superhero Peter Drucker:

“The management isn’t about being more efficient all the time, but it’s also being more humane at the same time.

Striving for workplace quality for the employees was thus one of the main values the CEO implemented in the company.

The interesting analogy is Jordan Peterson’s theory of order and chaos (yin and yang) where one side represents the profit that company must achieve by ruthlessly cutting back the cost in the workforce and the other side where the conscience of doing the right thing for your people brings satisfaction and peace to the workplace which is a proven necessity for customer-facing businesses.

Key takeaway #3 — happy employees make happy clients

Treat your people well. When you’re in the service industry the customer satisfaction and treatment are at times more important than the actual product. And happy employees make happy clients.

The Product

Better coffee.

To coffee drinkers, there are not a lot of things more important than a good coffee in the morning or during the day. By today’s standards, Starbucks drinks aren’t at the level of barista artisans and coffee aficionados. But when the shops started opening in the early 70s, 80s, and 90s, the espressos and lattes were vastly different from all the other stuff people were drinking.

Coffee is generally roasted in three ways: light, medium, or dark, depending on the time dedicated to the coffee beans’ roasting.

In a light roast, you would notice a fruity and acidic taste. Coffee beans are actually considered fruit and are sometimes called cherries. That is the reason you taste light roast as acidic with fruit notes.

In Medium roast, the coffee tastes the sweetest. The glucose levels reach the point where the glucose starts to break. Coffee roasters would say the medium roast is the most balanced since it’s not bitter nor acidic but something in between.

In dark roast, you can taste the bitterness due to burned beans.

Coffee quality comparison

Starbucks predominantly use dark roast coffee which also represents the majority of the coffee that is being consumed in North America. As mentioned, the coffee quality was much better than instant abominations in the early 80s; however, it definitely cannot measure up to artisan roasters.

There are two main reasons:

1— Dark roast is cheaper and can be produced in mass quantities. Similarly to green tea, the light roast-worthy beans are grown in shady, high-altitudes where it produces the most sweetness. High-quality matcha (powdered green tea leaves) is intentionally kept in the shade so it produces more photosynthesis and better taste. Since Starbucks has to supply tens of thousands of shops, they have to bring the mass supply to the cafes. Brian Stoffel from El Toledo roastery in Costa Rica says: “It would be financially stupid for a large chain to buy high-quality coffee beans and use them for dark roast coffee.”

This brings us to…

2— The coffee has to taste the same across the cafes to guarantee uniformity. With dark roast, the flavors of the beans are getting covered up in the same way as overseasoning a dish or overcooking a steak.

But it wasn’t just about the coffee alone. The branding kicks in and people pay for something they want to eventually become. Drinking Starbucks drinks meant they are sophisticated, culturally progressive individuals who enjoyed the premium experience of coffee-drinking culture from fashionable Milano streets.

The slim and elegant takeaway cups proudly wore the green siren logo so the passers-by noticed the person drinking that exact coffee. These cups were different from styrofoam cups in the office or fast food joints.

A similar tactic was used by Apple with the launch of iPods and white earbuds. The iPod was a cool new gadget you had to wear to be relevant in modern society. Apple made it in such a way that people noticed which users had iPods — because they plugged white earbuds into them.

This was a genius idea because the users were immediately differentiated from other less-cool mp3 gadget-using people. Secondly, this was a perfect silent word-of-mouth strategy. If local influencers were seen using white earbuds, everyone else wanted to get on that trend. This strategy is viral in concept and is used by many companies; however, it’s harder to implement it on a distinctive level.

Later on, Starbucks adapted to the marketing with something called “horizontal offer”. It wasn’t just about the dark roast and espresso shots. Young budding students wanted something sweet and mocha just hit the note between coffee and rich chocolate fudge. Why not having both in one product?

Later on, Starbucks started offering teas and snacks. Snack is bringing in a substantial amount of revenue. The shops are using the display of sweet pastry or savory egg sandwiches like any expert pastry shop in Europe. And there are not many people who can resist a croissant, cinnamon roll, or blueberry muffin with their americano or latte.

The food is bringing in more than 20% of all revenue . The pasty was the start, but the company followed up by offering breakfast sandwiches. The adaptation to the market goes even further.

With the recent diet trends in health and fitness, Starbucks has you covered with gluten-free, protein-rich snacks.

With all the addition and expansions to serve a larger audience, it’s inevitable to create resistance groups who blame Starbucks as a commodity coffee provider. And they would be right, it has become that because their system of sourcing beans has to ensure the stock supplies for thousands of shops. But by becoming the main coffee dealer to the masses all the micro-roasters and man-bun wearing, tattoo-sleeved barista artists can fall on their knees and thank the mighty green Siren for creating a market for them.

The need for coffee has increased substantially with the introduction of better coffee, so it created another pocket of niche providers of premium roasted bean roasters.

The price of a cup

Most of the coffee shops live well because they can afford hefty margins. An 80% markup is a standard in the coffee business, especially on the higher-end brews. According to the Small Business Development Center’s 2012 report, food costs take up about 15 percent of revenues on average. The average coffee shop then has a gross margin of 85 percent.

Starbucks margins must be pretty loaded then since they buy tons of coffee from a few sources. According to Coffee Makers USA, the actual coffee in a grande Starbucks cappuccino costs about 31 cents.

For a commodity product such as coffee, Starbucks drinks are quite up there on the more expensive tier ranging from $2.15 for a tall drip to $5.95 for a seasonal frappuccino concoction. But taking into consideration the physical positioning ( Chapter 5 — Coffee Locations ), paying off employees and staff the actual margin per coffee sold are 7% .

Historically, Starbucks has been raising the prices per cup over the years. Since it has poured a lot of equity into maintaining the brand image, it can afford to have a steeper price than its competitors (McDonald's and Dunkin Donuts). Instead of losing the price-sensitive customers, Starbucks differentiates itself from the before-mentioned companies and thus keeping the brand image of a premium java provider.

However, as Tucker Dawson from PriceIntelligently mentions, the prices aren’t increased across the whole product offering . The high-margin items have stayed the same.

Product differentiation

By having a strong and recognizable brand, the company can afford to put out merchandise. Starbucks holiday-themed mugs and localized artwork on them are a big part of the exposure. The merch cabinets and tables are usually near the counters or areas where there’s a longer dwelling time.

The revenue isn’t coming just from the beverages alone. Starbucks did an amazing job of offering non-caffeinated beverages including kids drinks and teas which were introduced after partnerships or acquisitions of Tazo and Teavana.

Starbucks started to diversify its products, pushed them into retail space, and also added teas.

The big drivers are also snacks, wholesale beans, before-mentioned merch, and coffee equipment.

Key takeaway #4 — diversify and expand

While the product is one of the key components of a successful business think about its potential upgrades. Keeping the core you can diversify the offering (and acquire new revenue channels) by expanding into different verticals but staying inside your core company values.

Experience is More Important Than The Product Itself

With a distinctive brand identity, Starbucks shops are easily recognizable anywhere in the World. For a global brand, this is one of the mandatory elements. Each franchise is slightly different than the other — Starbucks in the posh downtown area will have a different feel than the one on the Student campus or at an airport.

But each store follows certain guidelines which are prescribed. In tech and startups, product development follows a concept called minimal acceptance criteria . In other words, what are the lowest common denominators the dev team needs to do before it can be rolled out as a published version.

For Starbucks Cafes, even though the store managers have a certain freedom to run and maintain the facility, they have to ensure to deliver the core Starbucks qualities.

• Indie playing music
• Comfortable (community) tables for remote work
• Reliable wireless connection
• Charging Outlets

These shouldn’t just be taken for granted. People love some sense of predictability in their lives. How many times have you been on the lookout for Starbucks when visiting a new country just to take advantage of their wi-fi connection and use of restroom? From that perspective, Starbucks serves as a transactional facility offering other services which don’t have much to do with coffee.

The main idea is, coffee is not the product that is being sold at Starbucks cafes — the whole thing is a social experiment of creating a meeting place between people. It serves as some sort of oasis for meeting up with friends, having a snack and a cup of coffee in a comfy chair while listening to the latest Indie playlists . Starbucks is less in the coffee business as is in people’s business as well.

“It’s not Starbucks coffee you are getting, it’s the Starbucks experience. “

By calling your name and writing it on the cup, it doesn’t just inform the customer that their drink is ready. It allows a more personalized service since we love hearing and seeing our name.

Smells and sounds

Starbucks Sounds

Chances are when you go to Starbucks you don’t ever hear the music. But it plays an important role nevertheless. Starbucks playlists are carefully curated to help create that ambiance of a neighborhood coffee shop.

It has been a piece of the Starbucks experience for over 40 years already . The songs and tracks are carefully curated way ahead of time. These handcrafted playlists usually consist of indie, feel-good songs, pop, alt-country to season-themed or even classical playlists during holidays.

In 1999, Starbucks even acquired a Bay Area music store to launch its own branded coffeehouse and later on, even a record label. In the early 2000s, Starbucks sold CDs in the store until the format decline. In 2016, Starbucks partnered with Spotify . Through the mobile app integration, Spotify plays music as part of the app. In-store listeners can take a look inside to identify the artists and save the tracks to their playlists.

Holly Hinton and David Legry, the in-house music curators, are responsible for what gets played. What sounds like the best job in the world, actually is. Their sole work is searching for the right tracks and artists that they can see are fit to be played in the coffee shop.

In an interview with Fast Company , Holy Hinton said:

“We want our customers to walk in and have a ‘What’s that song?’ moment. We want them to hear interesting, cool music that they might not hear when they turn the radio on. It’s music that we think is cool and would sound beautiful in the coffee shop. It’s the music that we’d want to hear on Sunday morning when we’re reading the paper and drinking coffee. It’s a friend-to-friend personal. And we’re lucky to be able to be a part of that.”

To localize the experience, every region is slightly customized regarding the music, while still carrying the same vibe Starbucks customers are used to. This way, whenever a customer comes to the cafe, within the first few seconds, they feel accustomed based on the music alone.

The interior design

Every piece of furniture and interior is carefully planned to conform to the standards of the homey coffee place.

To get their store right, Starbucks interviewed hundreds of coffee drinkers to get as much information which they could use to build a perfect coffee shop. The overwhelming consensus actually had nothing to do with coffee; what consumers sought was a place of relaxation, a place of belonging.

If we go back to Howard Schultz’s deciding moment from the Milanese coffee shops, it shows he managed to do just that. Create a community space as a second home. It’s somewhere where people meet, it’s where you can take someone for a first date or even get some work done at the large community table.

In the book Starbucked, freelance journalist Taylor Clark claims, that “The round tables in a Starbucks store were strategically created in an effort to protect self-esteem for those coffee-drinkers flying solo. After all, there are no “empty” seats at a round table.”

If we looked at the interior, the counters, chairs, and wardrobes are built out of natural materials like warm woods and stone. In some stores, you would find cozy armchairs as well. With the Shared Planet initiative , they doubled down with environmental sustainability in mind and employing local craftsmen to do the job. The stores are built from reused and recycled materials wherever possible.

Most of the new stores that are being built are a part of the LEED Certification program (Leadership in Energy and Environmental Design).

Starbucks differentiates from three general looks with the addition of concept designs:

• Heritage coffee houses reflect the history of the place where the store is located. At Pike Place, the coffee shop reflects the merchant trading roots with worn wood, stained concrete or tiled floors, metal stools, and factory-inspired lighting. Even more sophisticated is the New Orleans inspired coffeehouse showing the rich music history.
• A “Louisian merchant in the early 1900s” inspired heritage coffeehouse with vintage trombones light fixtures. Located in French Quarter, New Orleans.
• Artisan stores echo the industrial past of urban markets, taking inspiration from the Modernism of the 1930s. This motif celebrates simple materials like exposed steel beams, masonry walls, factory casement glass, and hand-polished woodwork in a creative gathering place for culture and the arts.

• Regional Modern are localized stylized coffee shops. The interior is spacious. comfortable and welcoming. The bright, loft-like, light-filled spaces punctuated with regionally inspired furniture and culturally relevant fabrics create a calm and contemporary respite from the clamor of the fast-paced world.

• Experimental — with growth and a plethora of locations comes more daring and innovative designs. Unique designs such as the reimagined drive-thru in Colorado , the Swiss Train contemporary mobile coffee space from Geneva Airport to St. Gallen or one of the beautiful Shinto shrine-inspired coffee shops in Japan

‍ Starbucks Reserve

To combat the upscale coffee market which ironically has to thank Starbucks for creating fertile grounds of demand for premium coffee, Starbucks started opening up so-called Starbucks Reserve stores. These are luxurious, beautiful, and magnificent stores where they roast premium, rare beans and experiment with different brewing techniques.

CNN Money described the store concept as "an open, marketplace-style" with a Princi bakery counter, a full liquor bar, and a Reserve coffee bar, with tables, lounge areas, and two fireplaces.

"Our Reserve store takes the best of coffee craft as well as artisan baking and layers in a marketplace-style customer experience creating a space that has both energy and moments of intimacy," — Liz Muller, VP of Creative, Global Design & Innovation at Starbucks

Coffee shop locations

In any high-traffic area in the city where Starbucks is located, you almost have a feeling their shops are everywhere. You would be partially right — Starbucks are strategically located in areas with high appeal. Similarly to Walgreens, Starbucks chose the concept of the convenience store, always located in an area of larger foot-traffic .

Source | A snapshot of Starbucks shops in Seattle

Arthur Rubinfeld who is responsible for Starbucks’ location selection, explained there are about 20 or so analytic experts around the world who are assessing different factors of the appropriate area for the new Starbucks shop .

Key takeaway #5 — spoil your customers

Think beyond the product and identify what else can you do for the customer to add you in their daily, weekly routine. Customer support excellence is mandatory, so think further and in the direction of the place’s ambiance including smells and sounds.

Breaking down the Brand and Messaging

Bill Macaitis, former CMO of Slack said it best - “The brand is the sum of all customer touchpoints your customers have with you at any point”. With the food and beverage category, this is even more important.

By introducing and creating a culture of coffee drinking, Starbucks had a major opportunity to create intimacy with the customer. In Italy, coffee culture is a part of every day and the same culture was slowly getting familiar to the new audience.

Because of the personal nature of coffee and frequency of visits, this relationship-bonding happened much faster than in other fast-food joints, especially since in the early years of Starbucks there was no competition.

Brand and product

The bright white cups with the green siren are the first noticeable brand. But it goes beyond that. You will notice that Starbucks never offers any sort of discounts or actions like buy-one-get-one-free. That’s sort of action dilutes the premium feel of the brand. You can get a free coffee drink for your birthday, but the underlying reason for that is for a customer to develop a positive connection with the brand and company.

The most valuable assets of the regular Starbucks coffee shop can be broken down:

☕Free reliable Wifi - besides oxygen, water, and sleep, the online connection has become a necessity in modern civilization. Whenever you’re in a new place and you need to connect, one of the first options would be a Starbucks shop.

☕Comfortable seats and community tables - whether you’re there to take a breather or putting some hours of online work or organizing an impromptu study group, there’s a Starbucks location that can provide those demands. Most of the Starbucks are generously equipped with charging outlets as well, so you can get another drink after your focus is starting to drop… and then another… And another...

☕Friendly baristas - customer service is ingrained in the retail work description yet rarely done the right way. With L.A.T.T.E. method (Chapter 8 - Disciplined Action) and general training of Starbucks partners , each interaction with the customer is there to provide a positive experience. Calling people by their name, timely service, and the patience of crafting ridiculously complex drink orders .

☕Brand colors and materials — the nature-influenced interior with dark colors and wood finishes are giving a feel of hominess. Sometimes a Starbuck visit is just a pause you take in a day to relax your eyes.

☕Music and smells — coffee and snacks just smell amazing. Let’s take that for granted. The music serves a purpose as well as bringing an ambiance that is great for having a conversation or focusing on work (or your date).

Key takeaway #6 — positive interactions

The brand is the sum of all touchpoints the customer has with the company. This goes beyond the product and customer service. Think about every single interaction customers have with you and make them positive.

Starbucks Master Example of Mobile Retention and App Rewards

Starbucks mastered the mobile game at the right time. Dabbling with mobile technology since 2007, Adam Brotman spearheaded the platform to maximize the effect. The big challenge was to align it with the brand.

“We don't look at mobile in a vacuum. We have an overall digital strategy that's all about building relationships with our customers, and that strategy runs across a number of digital touchpoints. We're looking at mobile, Web and social to think more holistically about how we engage with our customers and tell our story." — Adam Brotman, Chief Digital Officer

In the Manifest survey in 2018, 500 smartphone owners rated their satisfaction using food apps. Starbucks had the most popular and regularly used loyalty rewards app — 48% of users used it on a daily basis.

Four years later, Starbucks remains one of the most popular apps, ranking number 6 on the list of most downloaded Food & Drink apps. 

The mobile switch paid dividends with time. Instead of support and enhancing physical visits to the store, the channel began bringing in 23% of all the revenue.

Ordering ahead of time and user experience

For a food mobile app to be successful, it must bring value to the user, be easy or even fun to use and it should have entertaining, dynamic content.

The design has to adhere to rules of the brand, achieve a consistent visual look and continuity across all touchpoints.

The mobile app design is no different than the rest of the materials Starbucks uses.

Digital Engagement paid tremendous dividends for the company.

Starbucks CFO Scott Maw said almost all of the company’s same-store sales growth has come from customers that have digital relationships with the company and those that are in the Starbucks Rewards program.

User-friendly design

This is the minimal and easiest thing to leverage on. With a strong brand, it should not be hard to create an appealing visual interface and create logic flow and transitions or continuation to the desired action.

Engaging loyalty program

Retention is the name of the game. If a customer trusts you well enough to download your app, you have a unique opportunity to convert him or her to be a regular user.

Starbucks has a similar strategy with the reward system. Every day there’s a slight reward, whether it’s collecting points or showing the current mouth-watering warm drink inside the app. It’s sticky and you can’t help but wish for a warm beverage.

Mobile pay and ordering

The North American market is known for heavy mobile use . By prepaying and using the device to quickly go through the ordering process, the customers feel more efficient and slightly more an advantage than the other poor souls who still buy their coffee with credit cards or cash.

Integration with other platforms and services

Partnerships are ways to get tons of new users with one big swoop. Spotify acquired one million users a few days after partnering with Facebook (Source) and Facebook had one sexy product update from it as well. For similar reasons, Starbucks used Spotify to enrich the experience of the mobile app.

Now playing highlight in Starbucks stores (Music is a big part of the brand and having perennial "Shazam" embedded brings seemingly insignificant, yet positive experience.

UX/UI — breaking down the mobile app design

Out of this world personalized experience.

The app remembers your favorite order. This is ingenious. We’ve mentioned how coffee represents a daily habit - if Starbucks manages to infiltrate itself into your habit loop, they’ve won. They have become a part of your daily routine. Stacy always stops at the same drive-through Starbucks, orders her Grande Latte with Soy Milk at 6:15 am before she checks-in at her job. When that’s her daily or even only a few time per week routine, the LTV for that kind of customer is absolutely amazing!

Every little detail counts. For instance, here’s the customized greeting each time a user opens the app’s Home tab.

Gamification

Most addictive phone games always give you something to do if you’re not using them for a while. From Candy Crush Saga to Supercell’s engineered mobile drugs like Clash of Clans and Boom Beach, the mechanics of engagement are carefully predicted for maximum time and cash spend. These games start with low difficulty. They are fun, colorful, and offer an entertaining introduction to their mechanics. But you can play all day, and after a while (on a free tier) you’re locked out of the game.

To continue playing, you can either (literally) buy your time or increase your chances of success with extra loot, power levels, or something similar.

Starbucks uses a similar principle of gamifying its mobile app. There’s a lot of value upfront (pay with a card, skip the line, earn credits for free drinks) but it serves the company’s profit. You get hooked to those stars (credits) which are stacking in your beautifully designed mobile app.

There are also challenges for extra Starbucks points (who can say no to double credit days?)

With the app, Starbucks gets you to try new products and thus increase the range of products you are consuming AND it gives the company an opportunity to increase the average order revenue per customer.

There’s a thin line between being overbearing and being just enough engaging. And at the same time, they have to be very strategic on the number of features offered. Sean Ellis , the OG Growth hacker said the product is ready to ship once all the unnecessary features are taken away (kind of the same mentality as per good design). Luckily with MILLIONS of users, Starbucks can apply some Data Science magic and figure those timings for every type of person.

Personalization goes even further - it tries to give a similar experience as to visiting the store ( source )

Starbucks Loyalty Program on triple-caffeine nitro power

The Starbucks Rewards are dead simple - the more you spend the more stars you get. Besides the stars, the rewards program offers birthday rewards, phone payments, paying ahead, free in-store refills and special offers and events for members. As expected the experience is personalized for each user.

The Rewards work like gangbusters! More than 14.2 million active members in the U.S. are invested in the loyalty program and the mobile strategy has seen an 11% growth in users in Q2 2018 . The gamification of the program and “spend more, earn more” in some cases represent 39% of the entire chain's sales .

Here’s what’s ingenious about the mobile program. Even though there are people who prefer to have the minimum number of apps on their phone and think twice before opening the doors for the elite club on their smartphone storage, the Starbucks app is a trojan horse of benefits - even if you don’t care about collecting stars, it’s tough to say no to the free birthday drink or the convenient mobile pay.

Online Ordering and easy payments flatten the friction of getting the product. Just like the Amazon 1-click purchase or Slack’s onboarding sequence , the same goes for picking up a mocha and Petite Vanilla Bean Scone. At first, Starbucks had some issues, since the mobile members had to wait in line just like the others, but Starbucks responded by adding dedicated stations for mobile order-ahead customers.

Members can skip the waiting line and enjoy the jealous looks while feeling elite of themselves.

The beauty of the app isn’t giving one big benefit of a quicker caffeine shot to the member, but it serves as an upsell marketing tool. The Starbucks app is a delivery method for presenting new items ahead of time. These generate interest and coupled with email notifications, it gives their customers something to look forward to.

To keep the retention flat, the Rewards program has “punishment” traits tied into it. If you’re not using the stars for visiting the cafes you start losing them. This psychological trick, known as The Endowment Effect , helps to nudge those people who are affected more about losing something they already have.

The Mobile part is one of the main drivers of customer retention and has proven to raise the average order size per customer. Since the frequency of orders and visits is so high, the LTV per customer contributes to that impressive double-digit growth in the first years.

Key takeaway #7 - APP A mobile app for a product that is being used on a daily basis and is in the lifestyle category is not a nice to have, but almost mandatory. If you want to stay a part of your customer's daily lives, bring the entertainment, rewards, and gamification to keep retention and customer satisfaction high. You will be rewarded with increased LTV.

The Success Flywheel of Starbucks

The easiest way to figure out and identify the success of a company is to apply the try-and-true framework. Jim Collins, the author of Good to Great, Built to Last claims all mega-successful companies have to figure out the Flywheel principle .

To become an unstoppable juggernaut in its own field, Starbucks had to align 5-6 different elements in three categories:

• Disciplined People
• Level 5 Leadership
• First Who… Then What
• Disciplined Thought
• Face the Reality
• Hedgehog Concept
• Disciplined Action

Culture of Discipline

• Leveraging the Technology

Imagine the concepts as drivers of one giant flywheel. Let’s say you’d want to move a giant stone wheel that sits on an axle. It would take a lot of effort to get it moving at first. After gaining speed it would need less and less power to keep it going. After gaining momentum, the same wheel would run on its own with little interaction. Just like the extremely simplified quote says; “If it ain’t broke, don’t fix it.”

Disciplined people - Starbucks Level 5 Leadership

Excerpt from Good to Great -> “Level 5 leaders display a powerful mixture of personal humility and indomitable will. They're incredibly ambitious, but their ambition is first and foremost for the cause, for the organization and its purpose, not themselves. While Level 5 leaders can come in many personality packages, they are often self-effacing, quiet, reserved, and even shy. Every good-to-great transition in our research began with a Level 5 leader who motivated the enterprise more with inspired standards than inspiring personality.”

There’s no doubt, Starbucks CEO Howard Schultz possesses the characteristics and personality traits of a Level 5 leader. The ambition alone to introduce a new cultural concept in a new market sounds incredibly daunting, but to play it right with the shareholders, customers and their own people sounds impossible.

But that was the initial idea, a moral standard. The mission statement of Starbucks is:

“to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”

Let’s break this down into two pieces.

Inspire and nurture the human spirit .

The people, customers, and partners (staff) are the most important assets of any company. The first part of the mission statement explains that in a split-second. The relationships within the company have to be nurtured and supported while exuding warmth and friendliness.

Howard Schultz has shown respect for the mission by developing programs for their own people, which include free education, health insurance and even a share in the Starbucks company.

“One person, one cup and one neighborhood at a time .”

The second part stresses the importance of gradual improvement. Each interaction with a customer, each cup of coffee made hold a large amount of responsibility to deliver the right experience. The neighborhood part reminds the staff and the customers that the stores pay special respect and attention to the place where they are located.

In the article Inside Starbucks’s $35 Million Mission , author Sarah Kessler describes how Starbucks runs the “ Leadership Lab ” — part leadership, part training conference for 10,000 store managers.

Disciplined thought

Face the Reality — When stuff gets hard, leaders don’t turn away from the problem or worse, get busy with mundane tasks, deceiving themselves they are working. Closing your eyes to the reality means you’re on a great way to a downward spiral.

In 2008, Howard Schultz got reinstated by the board as CEO. The sales and shares were dropping. The brand and the culture of Starbucks were deteriorating rapidly. The magical experience was a shadow of its former self.

Schultz decided on a radical idea to close all the stores and retrain in order to inflict the importance of the Starbucks vision and mission. Tied into this transition was closing numerous shops and letting go of hundreds of employees. The ordeal cost the company 6 to 7 million dollars .

In 2018, Starbucks closed the doors again in order to put the staff through racial anti-bias training. The temporary closure cost the company between $15 - $20 million dollars

But it was necessary and long needed. The company picked up from the bottom just like in Drake’s song and has been rapidly growing in the world’s map as well as on index stock charts.

The Hedgehog Concept

The term Hedgehog concept introduced by Collins is some sort of a marriage consisting of a Venn diagram and three major ideas. Jim Collins thinks that in order to have a chance to be the best in the world you have to possess all three:

• The Elite Skill - You will have to be the best in your area of expertise. Constant learning, innovating and moving the boundaries are expected from the movers and shakers of the world.
• Deep Passion - Someone who grows a business will eventually (and continuously) encounter major obstacles where the skill isn’t going to be enough. The grit, powered with a deep passion and a reason why is arguably even more important than the knowledge alone.
• Ability to generate revenue - Understanding of what drives the economic engine is the third piece of the puzzle that completes the concept. No business can survive without sustaining itself and its people financially.

Schultz possesses all three: the Stanford education armed him to become shrewd and dangerous in the business world with a deep understanding of the economic machine while he stayed in love with the company and continued to deeply care for its people and the customers.

The second part of the hedgehog concept is the sheer simplicity of your objective. When it comes to specializing and becoming the best in the world, you need one clear statement which completely prevails over all the others.

The hedgehog is the exact opposite of the fox concept. Foxes are cunning, smart and resourceful animals who take any opportunity to get ahead using any tactic they can think off. Yet when they encounter and attack the hedgehog, the hedgehog simply rolls up into a ball and protects itself with its spiky hide.

The hedgehog companies have one major driving goal that is ingrained as the cornerstone of its business. In Starbucks, it’s not the coffee quality, but it’s the deep desire to create an experience for their customers. Everything is tied into this.

Sometimes, achieving massive rapid growth for the growth sake reveals cracks in the system if it’s not solid. In 2008, when the company was on the decline, Schulz looked at the strategy of the past few years and, in a letter penned company-wide, explained that Starbucks had “invested in infrastructure ahead of the growth curve” and it was time to “shift our emphasis back onto customer-facing initiatives.”

Imagine, the Starbucks insane growth pace required to hire 1,500 new employees a week.

Disciplined action

The success of anything in our lives is in the hands of people. It always is the #1 element in any company.

“In determining the right people, the good-to-great companies placed greater weight on character attributes than on specific educational background, practical skills, specialized knowledge, or work experience.”

When the quality of the work started slipping. Schultz had to close down hundreds of shops for a training day. It was a necessary decision to refocus, restructure and boost Starbucks employees to work and deliver on the right things and to deliver the experience as it was intended in the first place.

When faced with a difficult customer or a problem, the Starbucks partners (employees) are taught customer service by using a L.A.T.T.E. system. The acronym helps baristas deal with any situation in the store.

• L isten to the customer
• A cknowledge the problem/situation
• T ake actions and solve the problem
• T hank the customer
• E xplain what you did

The simple system isn’t there just to provide clear guidelines but it also boosts motivation and willpower among employers. In the book, The Power of Habit , Charles Duhigg wrote that the LATTE system prevented the customer service meltdown , and sustained willpower throughout the day.

In the end, customer service is there to deliver and exceed the experience which is tied to the brand. Nothing is as important as delivering the service. 

“[Employees] are the true ambassadors of our brand, the real merchants of romance and theater, and as such the primary catalysts for delighting customers. Give them reasons to believe in their work and that they’re part of a larger mission, the theory goes, and they’ll in turn personally elevate the experience for each customer–something you can hardly accomplish with a billboard or a 30-second spot.” — Excerpt from book Onward, Howard Schultz

Technology Accelerators

For a globally recognizable brand like Starbucks technology plays a major role in the expansion. The Starbucks app and the emails alone played a significant role in the company’s growth.

According to Collins, technology accelerators have to be carefully selected. Companies had to sift through the emerging technology, identify and select the right ones and gradually introduce them in the business model.

The Hedgehog Concept would drive the use of technology, not the other way around — Jim Collins

Companies that jumped the gun burned badly.

In fact, Jim Collins discovered that more than 80% of great companies didn't rank technology as one of the top five ranking factors for success.

“Those that stay true to these fundamentals and maintain their balance, even in times of great change and disruption, will accumulate the momentum that creates breakthrough momentum. — Jim Collins

Down to the core, Starbucks has one secret ingredient to thank for — knowing their customers. Data analytics. According to Starbucks, this function uses “ methodologies ranging from ethnography to big data analytics … that help support Starbucks pricing strategy, real estate development planning, product development, trade promotion optimization, and marketing strategy.”

Starbucks contracts with a location-analytics company called Esri to use its technology platform that helps analyze maps and retail locations. It uses data like population density, average incomes, and traffic patterns to identify target areas for a new store.

The Crawl, Walk, Run Concept

The gradual introduction of technology is a part of the hedgehog concept. Technology is a major proponent of business growth however if it doesn’t tie into the one simple concept , the company has to be disciplined enough to say no to new opportunities.

Eventually, they can adapt the technology in their concept which turns the massive flywheel forward.

In Starbucks sense, they seem like they embrace technology. They started out with gift cards and pay-ahead mobile purchases. The next step was adding the Starbucks Rewards program to cultivate upsells and raise the LTV per customer. And today with big data, AI, and predictable algorithms they maximize the relationship with the customers.

Key takeaway #8 — the flywheel concept

Successful companies that persevered and thrived with time have found and adopted the Flywheel concept. Focusing on the essentials of the business, working with the right people in the right places, and maintaining discipline is the only way for continued sustainable growth.

Starbucks Vs the World

Competitors.

Starbucks enjoyed the blue ocean marketplace as a premium coffee culture experience provider. 

But as soon as competitors noticed Starbucks discovering a new opportunity they had to react quickly. McDonald's and Dunkin’ Donuts were the big ones that introduced their own versions of coffee-to-go. Better than instant coffee and convenient while on the go, the two competitors did enjoy new revenue stream of introducing coffee; however, as companies, they had to keep the focus on what they are good at — McDonald's with their fast food burgers and fries and Dunkin’ Donuts with well… donuts. DD does serve coffee but had no intention to put more emphasis on it until the late 1990s .

Starbucks kept the lead in the coffee concept because of its focus on the coffee culture and holistic concept of their brand, especially customer service. This point can be seen as soon as you look at international markets. Dunkin' Donuts’ international revenue in 2018 contributed less than 4% of total sales, while roughly 30% of Starbucks' consolidated net revenues in the same period were attributed to markets outside America.

When international expansion goes right

When you get it right and you know you have the brand, processes, and culture down, you can move outside. When Starbucks expanded its adopted “Coffee culture” to new markets it could follow its own tracks again. In many countries, especially Asian nations the idea of a coffee culture was new, fresh, and exciting.

To overcome the culture gap, Starbucks sought partnership through direct investments and joint ventures instead of direct franchising . This solved two major problems.

First, they relied on local retailers who already had experience and experience in the local markets. They married the coffee culture idea with market research of the new areas to discover regional customers’ tastes and preferences. After that, they just had to deliver the employee training, workflows, and the product itself.

Secondly, they acquired and absorbed the entire pieces of coffee markets , such as Coffee Partners in Thailand and Bonstar in Singapore. All in one big swoop.

But even today a Starbucks café is opened every 15th hour in China. It already operates more than 3,000 stores in China and plans to add 2,000 more by 2021 . Seoul has the most Starbucks cafes in any city ( 284 ).

Starbucks is present in 6 continents and in more than 72 countries and territories. But it wasn’t always smooth sailing for the old Starbuck.

And when it doesn’t go so well

While Starbucks had amazing success in Asian countries, they hit a snag in Australia.

In 2008, they closed two-thirds of all stores.

The reason?

Australia is already known as one of the hardest markets to get into in the first place and they are very proud of their coffee culture. The flat whites, coffee art in ceramic lattes have been served for dozens of years at beloved local cafes and by baristas who knew what they are doing.

What Starbucks was doing in the United States was introducing the coffee culture in the new market because it was non-existent before. But in Australia, this model didn’t fit in at all.

In 2008, Starbucks closed two-thirds of all the stores. The prices of Starbucks’ relatively common-tasting coffee (compared to established coffee shops) were pricier than the local solutions and managed by young students who didn’t have the level of appreciation of either the coffee culture and/or Starbucks as a brand.

Key takeaway #9 — establish yourself

Follow the winning formula of developing the markets first and turning into a product innovator after you have established yourself. Forcing the innovation where it’s not perceived as such, is waging a losing battle.

Starbucks on Social Media

The website is simply designed with an intention to present the latest seasonal product in the Starbucks shops in the first fold. The focus of the homepage is also on advertising the Starbucks Rewards program.

According to SimilarWeb, it attracts 18.9M visits per month, with an average of 2 minutes and 3.2 page views per session. Starbucks site is the 9th top ranked site for Food and Drink category in the world

The Youtube channel was established at the end of 2005. After 16 years it managed to acquire 335,000 subscribers, which isn't’ that much if we take the size of the company into consideration.

The most successful videos are close to 10 million views; however, they are short, 15-seconds clips of the product. The channel moderators are not participating in the comment sections.

Luckily there’s not much competition on YouTube; however, as a highly visual channel, Starbucks could advertise their mobile app and Starbucks reward program using socially-conscious values, product innovation, or sustainability programs.

On the other hand, Instagram is doing absolutely amazing. Naturally, since the best Starbucks customers are the ones who have been using their mobile devices for ordering and participating in the Starbucks Rewards program

Starbucks Instagram uses a mix of images and video clips mostly displaying their well-designed cups. The posts are mostly re-shared (“regrams”) of other Instagram users. With this tactic, Starbucks incentivizes UGC (user-generated content), since Instagram users have the chance to be regrammed and have their Starbucks shot seen by 17.8 million followers.

Pinterest is another great visual platform where images are split into different categories: from coffee recipes, coffee photography to store designs and world-recognized Starbucks cups.

Pinterest receives 10+ million monthly views and has 443,600 followers.

Even though their daily support is dropping, Facebook is still being used as one of the channels where Starbucks shows its videos and posts.

On Twitter , Starbucks shares its globally conscious ideas, news, and stories about the company and its products. Twitter also serves as a chance to (as in Instagram) retweet other users’ posts.

Starbucks likes to reshare the positive messages of happy users who had a positive experience at one of their stores

Since Starbucks' success mainly lies in their visual branding, they use social media for their brand awareness and in a Facebook sense, pushing the mobile app downloads.

Key takeaway #10 — delegate your resources

When using social media, identify which social media platform brings the best results. If your users are primarily on mobile devices, Instagram would be a smart choice. Delegate your resources to the best-performing channel.

Starbucks Corp. has become a worldwide success by sticking to its hedgehog concept. The realization of being customer-centric in the practical, not just theoretical sense laid the foundation of expansion in North American markets as well as international ones.

When all of the decisions are catered to the concept of serving their customers, including using technology as accelerators, there’s nothing to worry about in their future.

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How Starbucks’s Culture Brings Its Strategy to Life

• Varya Davidson
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They focus on a few positive attributes and amplify them.

In most organizations, culture and strategy tend to be discussed in separate conversations. Executives know that culture is important and that a negative culture can hurt company performance, but they often don’t know what to do about it. Or they attempt to improve the situation by launching a culture initiative to “make the workplace more positive.” What most executive teams typically fail to do is to connect the company’s culture with how the company makes its strategy work.

• Varya Davidson leads the people and organization business for Strategy& in Australia, Southeast Asia, and New Zealand and sits on the Katzenbach Center’s global leadership team. She is a partner with PwC Australia, and has worked with leading public and private sector organizations across Europe, the Middle East, North and South America and Asia-Pacific.
• Paul Leinwand is a principal at PwC U.S., a global managing director at Strategy&, and an adjunct professor at Northwestern’s Kellogg School. He is a coauthor, with Mahadeva Matt Mani, of Beyond Digital: How Great Leaders Transform Their Organizations and Shape the Future (HBR Press, 2022).

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Home » Management Case Studies » Case Study: Corporate Social Responsibility of Starbucks

Case Study: Corporate Social Responsibility of Starbucks

Starbucks is the world’s largest and most popular coffee company. Since the beginning, this premier cafe aimed to deliver the world’s finest fresh-roasted coffee. Today the company dominates the industry and has created a brand that is tantamount with loyalty, integrity and proven longevity. Starbucks is not just a name, but a culture .

It is obvious that Starbucks and their CEO Howard Shultz are aware of the importance of corporate social responsibility . Every company has problems they can work on and improve in and so does Starbucks. As of recent, Starbucks has done a great job showing their employees how important they are to the company. Along with committing to every employee, they have gone to great lengths to improve the environment for everyone. Ethical and unethical behavior is always a hot topic for the media, and Starbucks has to be careful with the decisions they make and how they affect their public persona.

The corporate social responsibility of the Starbucks Corporation address the following issues: Starbucks commitment to the environment, Starbucks commitment to the employees, Starbucks commitment to consumers, discussions of ethical and unethical business behavior, and Starbucks commitment and response to shareholders.

Commitment to the Environment

The first way Starbucks has shown corporate social responsibility is through their commitment to the environment. In order to improve the environment, with a little push from the NGO, Starbucks first main goal was to provide more Fair Trade Coffee. What this means is that Starbucks will aim to only buy 100 percent responsibly grown and traded coffee. Not only does responsibly grown coffee help the environment, it benefits the farmers as well. Responsibly grown coffee means preserving energy and water at the farms. In turn, this costs more for the company overall, but the environmental improvements are worth it. Starbucks and the environment benefits from this decision because it helps continue to portray a clean image.

Another way to improve the environment directly through their stores is by “going green”. Their first attempt to produce a green store was in Manhattan. Starbucks made that decision to renovate a 15 year old store. This renovation included replacing old equipment with more energy efficient ones. To educate the community, they placed plaques throughout the store explaining their new green elements and how they work. This new Manhattan store now conserves energy, water, materials, and uses recycled/recyclable products. Twelve stores total plan to be renovated and Starbucks has promised to make each new store LEED, meaning a Leader in Energy and Environmental Design. LEED improves performance regarding energy savings, water efficiency, and emission reduction. Many people don’t look into environmentally friendly appliances because the upfront cost is always more. According to Starbucks, going green over time outweighs the upfront cost by a long shot. Hopefully, these new design elements will help the environment and get Starbucks ahead of their market.

Commitment to Consumers

The second way Starbucks has shown corporate social responsibility is through their commitment to consumers. The best way to get the customers what they want is to understand their demographic groups. By doing research on Starbucks consumer demographics, they realized that people with disabilities are very important. The company is trying to turn stores into a more adequate environment for customers with disabilities. A few changes include: lowering counter height to improve easy of ordering for people in wheelchairs, adding at least one handicap accessible entrance, adding disability etiquette to employee handbooks, training employees to educate them on disabilities, and by joining the National Business Disability Council. By joining the National Business Disability Council, Starbucks gains access to resumes of people with disabilities.

Another way Starbucks has shown commitment to the consumers is by cutting costs and retaining loyal customers. For frequent, loyal customers, Starbucks decided to provide a loyalty card. Once a customer has obtained this card, they are given incentives and promotions for continuing to frequent their stores. Promotions include discounted drinks and free flavor shots to repeat visitors. Also, with the economy being at an all time low, Starbucks realized that cheaper prices were a necessity. By simplifying their business practices, they were able to provide lower prices for their customers. For example, they use only one recipe for banana bread, rather than eleven!

It doesn’t end there either! Starbucks recognized that health is part of social responsibility. To promote healthier living, they introduced “skinny” versions of most drinks, while keeping the delicious flavor. For example, the skinny vanilla latte has 90 calories compared to the original with 190 calories. Since Starbucks doesn’t just sell beverages now, they introduced low calorie snacks. Along with the snacks and beverages, nutrition facts were available for each item.

Also one big way to cut costs was outsourcing payroll and Human Resources administration . By creating a global platform for their administration system, Starbucks is able to provide more employees with benefits. Plus, they are able to spend more money on pleasing customers, rather than on a benefits system.

Commitment and Response to Shareholders

One way Starbucks has demonstrated their commitment and response to shareholder needs is by giving them large portions. By large portions, Starbucks is implying that they plan pay dividends equal to 35% or higher of net income to. For the shareholders, paying high dividends means certainty about the company’s financial well-being. Along with that, they plan to purchase 15 million more shares of stock, and hopefully this will attract investors who focus on stocks with good results.

Starbucks made their commitment to shareholders obvious by speaking directly to the media about it. In 2004, Starbucks won a great tax break, but unfortunately the media saw them as “money grubbing”. Their CEO, Howard Shultz, made the decision to get into politics and speak to Washington about expanding health care and the importance of this to the company. Not only does he want his shareholders to see his commitment, but he wants all of America to be able to reap this benefits.

In order to compete with McDonalds and keeping payout to their shareholders high, Starbucks needed a serious turnaround . They did decide to halt growth in North America but not in Japan. Shultz found that drinking coffee is becoming extremely popular for the Japanese. To show shareholders there is a silver lining, he announced they plan to open “thousands of stores” in Japan and Vietnamese markets.

Commitment to Employees

The first and biggest way Starbucks shows their commitment to employees is by just taking care of their workers. For example, they know how important health care, stock options, and compensation are to people in this economy. The Starbucks policy states that as long as you work 20 hours a week you get benefits and stock options. These benefits include health insurance and contributions to employee’s 401k plan. Starbucks doesn’t exclude part time workers, because they feel they are just as valuable as full time workers. Since Starbucks doesn’t have typical business hours like an office job, the part time workers help working the odd shifts.

Another way Starbucks shows their commitment to employees is by treating them like individuals, not just number 500 out of 26,000 employees. Howard Shultz, CEO, always tries to keep humanity and compassion in mind. When he first started at Starbucks, he remembered how much he liked it that people cared about him, so he decided to continue this consideration for employees. Shultz feels that a first impression is very important. On an employee’s first day, he lets each new employee know how happy he is to have them as part of their business, whether it is in person or through a video. His theory is that making a good first impression on a new hire is similar to teaching a child good values. Through their growth, he feels each employee will keep in mind that the company does care about them. Shultz wants people to know what he and the company stand for, and what they are trying to accomplish.

Ethical/Unethical Business Behavior

The last way Starbucks demonstrates corporate social responsibility is through ethical behavior and the occasional unethical behavior. The first ethically positive thing Starbucks involves them self in is the NGO and Fair Trade coffee. Even though purchasing mostly Fair Trade coffee seriously affected their profits, Starbucks knew it was the right thing to do. They also knew that if they did it the right way, everyone would benefit, from farmers, to the environment, to their public image.

In the fall of 2010, Starbucks chose to team up with Jumpstart, a program that gives children a head start on their education. By donating to literacy organizations and volunteering with Jumpstart, Starbucks has made an impact on the children in America, in a very positive way.

Of course there are negatives that come along with the positives. Starbucks isn’t the “perfect” company like it may seem. In 2008, Starbucks made the decision to close 616 stores because they were not performing very well. In order for Starbucks to close this many stores in one year, they had to battle many landlords due to the chain breaking lease agreements. Starbucks tried pushing for rent cuts but some stores did have to break their agreements. On top of breaching lease agreements, Starbucks was not able to grow as much as planned, resulting their future landlords were hurting as well. To fix these problems, tenants typically will offer a buyout or find a replacement tenant, but landlords are in no way forced to go with any of these options. These efforts became extremely time consuming and costly, causing Starbucks to give up on many lease agreements.

As for Starbucks ethical behavior is a different story when forced into the media light. In 2008, a big media uproar arose due to them wanting to re-release their old logo for their 35th anniversary. The old coffee cup logo was basically a topless mermaid, which in Starbucks’ opinion is just a mythological creature, not a sex symbol. Media critics fought that someone needed to protect the creature’s modesty. Starbucks found this outrageous. In order to end the drama and please the critics, they chose to make the image more modest by lengthening her hair to cover her body and soften her facial expression. Rather than ignoring the media concerns, Starbucks met in the middle to celebrate their 35th anniversary.

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The Success of Starbucks App: A Case Study

Starbucks has the most regularly used loyalty rewards app among major restaurant chains. But what keeps users coming back for more? This case study will look at the design of the app, its features, and the bold moves that the coffee chain has made to make the app a “must have” for consumers.

Updated May 12, 2023 

A recent study found that Starbucks has the most regularly used loyalty rewards app (48%) among a list of major restaurant chains. Why is the app so popular? What is it that keeps users coming back for more?   The answer is digital engagement .   From ordering and paying ahead of time to creating your own Spotify playlist, the Starbucks app provides a user experience that is both inviting and innovative, much like the coffee chain itself.   That digital engagement has paid tremendous dividends for the company. At a JPMorgan forum in March, Starbucks CFO Scott Maw said almost all of the company’s same-store sales growth has come from customers that have digital relationships with the company and those that are in the Starbucks Rewards program.    This case study will discuss four main reasons why the Starbucks app is a “must have, must use” app for customers:

• Easy Navigation
• Personalization
• Geo-location
• Mobile pay and ordering
• Integration with other platforms and services

1. Easy Navigation

The app's layout is simple, yet elegant, making the app appealing to the user. However, the platform's navigation is what makes it stand out. Navigating through the Starbucks app is quick and easy, making it conventient for users to place an order. 

Five menu options at the bottom of the app page give the user access to the major functions: Home, Scan, Order, Gift, and Offers. Having the menu at the bottom of the screen makes it easier for users to access the most important pages on the screen because it's well within reach of a user's thumb. 

Additionally, the Starbucks app is exceptionally innovative because it provides a similar experience to visiting the store . Many of us have stood in line at Starbucks thinking, “I should get a gift card for (insert person/occasion).” The Gift menu brings up a variety of gift cards for nearly every occasion, and even suggests cards for upcoming holidays.   Starbucks added the convenience functionality despite the risk of placing too many “bells and whistles” in the app. Chief Digital Officer Adam Brotman acknowledged that the company didn’t “ want the app to become too much of a Swiss Army knife .” 

However, the innovative features have been well received and have not overwhelmed users. The Starbucks app provides its users with a personalized experience. 

2. Personalization

Starbucks added personalization elements allowing the app to recall your favorite order, suggest what food items might pair well with that order, and where you’d like to pick it up.  Again, this simplifies the user experience and makes it especially easy to place an order. It keeps track of what you've ordered in the past and your favorite drinks to ensure that it's easy for users to place their order during their morning commute. 

3. Geo-Location

There are Starbucks everywhere, so it's important for users to be able to select which one they wish to visit when they place an order. The app uses geo-location to show where each storefront is located and how close a user is to each one. 

Using the geo-location feature, a user can see where the closest Starbucks locations are, the menu at each location, and even place an order that can be ready upon arrival. 

 If you often order from a specific location, the app will automatically select that location, limiting the number of clicks a user has to make to place an order. 

4. The Starbucks Rewards Loyalty Rewards Program Leads the Competition

The Starbucks Rewards program is a prime example of how to get customers to utilize a mobile app. Simply put, the more you spend at Starbucks, the more rewards points (or “stars”) you earn. Not only is this great for users on the app, but it also helps foster brand loyalty. With the promise of rewards, users are more likely to order from Starbucks in the future. 

The rewards program gives a number of benefits for app users. In addition to earning two stars for every dollar spent, rewards members get other benefits like free in-store refills, special member offers/events, and the ability to pay by phone and order ahead.

The rewards program also offers plenty of customization for users, including a free beverage on the user’s birthday and personalized suggestions based upon past orders.   In return, Starbucks solidifies an instant digital relationship with the 14.2 million active U.S. rewards program members. The loyalty program has seen hefty growth , with an 11% growth in users in Q2 2018. And Starbucks rewards program members in certain places actually spend more, representing 39% of the entire chain’s sales .   However, Starbucks recognizes that not all customers want to join the rewards program. Starbucks is planning to ramp up digital interactions by offering mobile order and pay options to all customers—not just rewards members. The company also will take advantage of Wi-Fi sign-ins at various stores to help drive mobile order and pay options.     The Starbucks rewards program encourages users to utilize the app to track purchases, as well as the stars earned. To facilitate their usage, stars have a limited shelf life—one year for basic (or “Green”) level rewards customers, and six months for upper-tier (or “Gold) members.   The app provides reminders about stars that are expiring, as well as the number of stars needed to maintain Gold status. Gold members also get special double-star days when they earn four stars per $1 spent.

5. Starbucks’ Mobile App Makes Online Ordering and Paying Easy

Since launching the initiatives in 2015, Starbucks has become the standard bearer when it comes to mobile ordering and payments. Mobile Order and Pay is a feature that let customers order via Starbucks’ app and skip the line.   At first, the growth of Mobile Order and Pay caused some congestion issues inside stores for customers while picking up their coffee and/or food. As one customer stated, “Why should I order ahead if I just have to stand in line to retrieve my order?” 

Starbucks responded by adding dedicated stations for mobile order-ahead customers, distinct from existing in-store registers, and giving baristas new tablets.   The mobile ordering system acts as a digital marketing tool, allowing customers to see new items ahead of time. Coupled with notifications from the app or email blasts, Starbucks creates interest in new menu items long before the customer sets foot in the store. Often, these digital tools create a sense of urgency for customers to sample the latest offerings.   Starbucks also enabled orders via Amazon's Alexa, and the feature has also been integrated into Ford vehicles.   The coffee chain also expanded its My Starbucks barista, a feature integrated into the Starbucks app, which allows customers to order via voice command or messaging. The goal was to boost speed and convenience.   In-store payments are also encouraged through the app, which utilizes a Starbucks gift card to process the payments. This creates seamless transactions, as the gift card can be automatically or manually reloaded using a credit card, Apple Pay or Google Pay, or even with the balance from another gift card. The app screen can be scanned at the register to process the payment.   For iOS users, the app integrates with the Apple Watch, producing a bar code that also can be scanned for those on the go.

By offering a wide variety of functionalities, Starbucks’ Mobile Order and Pay allows users to order and pay in the way that is most convenient for them – which encourages greater sales.

Starbucks’ App Exemplifies Loyalty App Success

The Starbucks app is the center of the company’s digital ecosystem, bringing together loyalty, mobile payment, and content partnerships, all seamlessly integrated into one convenient application.    Restaurants can follow Starbucks’ example to create a successful restaurant loyalty rewards app.

David 'DJ' Oragui

Founder & Lead Growth Engineer at Grow Hack Scale, Balanced Narrative and Balanced Life Academy Group., Grow Hack Scale

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Starbucks’ Mission Statement & Vision Statement (An Analysis)

Starbucks’ mission statement and vision statement strategically direct business operations toward leadership in the coffee market and the coffeehouse industry. The corporate mission statement is an indicator of what the business does for its target customers. In this business analysis case of Starbucks, the corporate mission includes the philosophical purpose of the business. On the other hand, the corporate vision statement reflects the strategic direction of the business in terms of what it wants to achieve in the future. In this case, Starbucks’ corporate vision focuses on leadership in the industry. The coffee company’s success in responding to its competitive environment depends on the effectiveness of implementing these corporate statements. This implementation influences Starbucks’ generic competitive strategy and intensive growth strategies . Corresponding strategic objectives enable the coffeehouse business to streamline its operations toward following the corporate mission statement and satisfying the corporate vision statement.

Established in Seattle, Washington, Starbucks continues to grow and expand its business internationally to satisfy its mission, vision, and purpose. This expansion brings the coffee company in competition with various firms. The company competes with Tim Hortons, as well as food-service businesses that offer coffee, food, and other beverages, such as Dunkin’, McDonald’s , Burger King , Subway , and Wendy’s . The Five Forces analysis of Starbucks shows that these competitors and related industry factors and market factors combine to create the strong force of competitive rivalry in the food-service industry environment. The coffeehouse company must strengthen its competitive advantages to continue with the goals of its mission statement and vision statement.

Starbucks’ Mission Statement

Starbucks’ mission statement is “ With every cup, with every conversation, with every community – we nurture the limitless possibilities of human connection. ” This corporate mission depicts the company as a provider of coffee products and food service that facilitate connection among customers. Starbucks’ mission statement has the following components:

• Every cup, every conversation, every community
• Nurture limitless possibilities of human connection

Starbucks’ mission statement indicates a gradual approach. The “every cup, every conversation, every community” component shows that the coffeehouse business ensures meaningful impact on every employee and customer. In parallel, this part of the corporate mission statement means that Starbucks’ business purpose and goals involve continually and gradually growing the business, one place or community at a time.

Starbucks aims to “nurture limitless possibilities of human connection,” starting with its employees. To address this component of its mission statement, the coffeehouse company maintains a small-company culture, where rapport and warmth are important. This social environment relates to Starbucks’ organizational culture (company culture) , which promotes openness and meaningful interactions. The same component of the company’s mission statement extends the small-company culture to customers at the cafés to facilitate positive customer experience. For example, employees’ and customers’ first names are used at Starbucks coffeehouses. Also, the design of these coffeehouses aims for warmth and coziness. These approaches nurture meaningful and warm relations among baristas and consumers to satisfy the goals and requirements of Starbucks’ mission statement.

Starbucks’ Vision Statement

Starbucks’ vision is “ to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow . ” This corporate vision statement reflects leadership in the coffee market and the coffeehouse industry. Starbucks’ vision statement has the following components:

• Premier purveyor status
• Finest coffee in the world
• Uncompromising principles

The goal of being the premier purveyor means that Starbucks Corporation aims to achieve leadership in providing its products, especially coffee of the best quality. The company achieves this objective of its vision statement by continuing its multinational expansion as one of the largest coffee and coffeehouse companies in the world. However, it is not yet clear if Starbucks effectively addresses the “finest coffee in the world” component of its corporate vision. The company competes with many coffeehouses, including local ones, in terms of coffee quality. Nonetheless, the “uncompromising principles” component of Starbucks’ vision statement is addressed in the coffeehouse chain’s operations. The company maintains these principles, such as ethical business conduct and a warm culture, as reinitiated during Howard Schultz’s leadership. Also, the “growth” component of Starbucks’ vision statement is satisfied through continuing global expansion of the business alongside new store locations and product development. The business competitive advantages and capabilities discussed in the SWOT analysis of Starbucks enable this business growth to satisfy the long-term goals of the company’s vision statement.

An Assessment of Starbucks’ Mission and Vision

Starbucks’ mission statement is sufficiently abstract to make it applicable to future business scenarios. However, this corporate mission does not satisfy many of the conventional characteristics of ideal mission statements. For example, Starbucks’ mission statement does not inform about target customers, types of products, and target markets. While the coffee company presents a facet of its business philosophy and business purpose, the resulting mission statement needs improvement to satisfy ideal conventions. It is recommended that Starbucks add such pieces of information into its mission statement to improve it to provide a more holistic representation of the business, its operations, goals, objectives, and targets.

Starbucks’ vision statement is concise, clear, and inspiring, especially in terms of achieving and maintaining the premier status in the coffeehouse and coffee industry. This focus on leadership is a motivator that challenges management and employees, including baristas. Moreover, the corporate vision is stable in terms of applicability to future business scenarios at Starbucks Corporation. The “premier purveyor” component is applicable in the long term, as the business continues to build its food service and merchandise operations. However, the coffeehouse company fails to include new business operations and products in its vision statement. For example, tea, other caffeinated drinks, pastry, and merchandise (consumer goods) are now part of the product mix, as outlined in Starbucks’ marketing mix or 4Ps . These products are not yet included in the company’s vision statement. A recommendation to improve Starbucks’ vision statement is to add these pieces of information regarding the product mix, to make the vision statement more accurate in representing current business operations.

• About Starbucks Coffee Company .
• Bai, J. (2023). The Starbucks Crisis – External and endogenous pressures of coffee market giants. Frontiers in Business, Economics and Management, 8 (1), 272-275.
• Jaworski, B., & Cheung, V. (2023). Getting Started on the Journey: Mission, Vision, and Purpose. In Creating the Organization of the Future (pp. 55-64). Emerald Publishing Limited.
• Starbucks Coffee Company Culture and Values .
• Starbucks Corporation – Form 10-K .
• Copyright by Panmore Institute - All rights reserved.
• This article may not be reproduced, distributed, or mirrored without written permission from Panmore Institute and its author/s.
• Educators, Researchers, and Students: You are permitted to quote or paraphrase parts of this article (not the entire article) for educational or research purposes, as long as the article is properly cited and referenced together with its URL/link.

• Starbucks Coffee (A): A joint venture with Tata Global Beverages? (Overhead case)

In January 2012, Starbucks Coffee was negotiating with Tata Global Beverages, a subsidiary of India’s flagship Tata group, to enter the Indian market through a joint venture. The two case sets the stage for a negotiation between the two parties, giving them an overall context, history and the specific issues each party is particular about. The negotiation is framed around four key issues: (1) What will be the equity distribution between partners? Currently each partner is seeking a majority role; (2) How will the product be branded and what will be the average price in India? Each partner has different visions on this. (3) What should be the pace of retail expansion strategy? Students take on the roles of respective management teams to negotiate an agreement on the key points of the proposed joint venture. Teams complete three surveys before, during, and post agreements, which are used in the debriefing.

1) To build competencies in negotiating a strategic partnership; 2) To understand the strategic logic for partnerships and cost benefit trade-offs in working with partners; 3) To recognize hurdles in deal negotiations, and the varied scenarios one should be prepared for in negotiating deals; 4) To understand the negotiation process and build a process for arriving at win-win agreements in partnership.

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