Starbucks 1996 Case Study
Starbucks 1996
Case Background:
By 1996, Howard Schultz, Chairman and CEO of Starbucks Corporation had firmly established a leadership position in the specialty coffee industry. By the end of fiscal 1996 Starbucks employed more than 20,000 people and encompassed over 1,000 retail locations in 32 markets throughout North America as well as two new stores in Tokyo, Japan.
With such rapid growth and an ongoing evaluation of new opportunities within domestic and international retail markets, new specialty sales partners, penetration into the grocery channel, and the future potential of their mail order business- Starbucks was in a position to attempt developing its brand beyond being the preferred outlet for purchasing coffee to becoming a preferred consumer brand.
Key Questions:
1) Is Starbucks growing in the best way possible?
2) Is Starbucks overextending in its quest for growth?
Analysis:
The coffee industry was highly fragmented with few dominant players. Competitively, Starbucks had a clear stronghold on all facets:
• Sourcing (diversified portfolio of high quality exporters/close relationships with those exporters)
• Packaging (unique vacuum sealed package, ensuring a higher degree of freshness than competition)
• Supply Chain Operations (best transportation rates in the industry/ SCO serving four business units in order to eliminate redundancy and maximize efficiency)
• Retail Sales (primary growth vehicle/adoption of brand essence/experience by customer)
• Employees / Baristas (overall, most highly trained and knowledgeable in the industry)
• Merchandising (only carrying the highest quality coffee-making equipment and accessories)
• Disciplined Real-Estate approach (tremendous flexibility and innovative “store clustering” concept maximizing market share in given areas and building regional reputation)
• Specialty Sales (partnerships existed with many different companies providing Starbucks with revenue growth
Case Background:
By 1996, Howard Schultz, Chairman and CEO of Starbucks Corporation had firmly established a leadership position in the specialty coffee industry. By the end of fiscal 1996 Starbucks employed more than 20,000 people and encompassed over 1,000 retail locations in 32 markets throughout North America as well as two new stores in Tokyo, Japan.
With such rapid growth and an ongoing evaluation of new opportunities within domestic and international retail markets, new specialty sales partners, penetration into the grocery channel, and the future potential of their mail order business- Starbucks was in a position to attempt developing its brand beyond being the preferred outlet for purchasing coffee to becoming a preferred consumer brand.
Key Questions:
1) Is Starbucks growing in the best way possible?
2) Is Starbucks overextending in its quest for growth?
Analysis:
The coffee industry was highly fragmented with few dominant players. Competitively, Starbucks had a clear stronghold on all facets:
• Sourcing (diversified portfolio of high quality exporters/close relationships with those exporters)
• Packaging (unique vacuum sealed package, ensuring a higher degree of freshness than competition)
• Supply Chain Operations (best transportation rates in the industry/ SCO serving four business units in order to eliminate redundancy and maximize efficiency)
• Retail Sales (primary growth vehicle/adoption of brand essence/experience by customer)
• Employees / Baristas (overall, most highly trained and knowledgeable in the industry)
• Merchandising (only carrying the highest quality coffee-making equipment and accessories)
• Disciplined Real-Estate approach (tremendous flexibility and innovative “store clustering” concept maximizing market share in given areas and building regional reputation)
• Specialty Sales (partnerships existed with many different companies providing Starbucks with revenue growth