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The Case Study Of Starbucks Marketing Essay

Paper Type: Free Essay Subject: Marketing
Wordcount: 3148 words Published: 1st Jan 2015

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This paper is an overview on Starbucks organization and theoretical aspects from the Organization and personnel course. We will try to apply some of the theories and theoretical concepts from “Strategy, process, content, context, an international perspective” Fourth edition, Bob De Wit and Ron Meyer, “Organizational Behavior, key concepts, skills & best practices ” Kinicki, Kreitner. This presentation consists of 5 parts : history & organizational development, strategy, human resources, conclusion. Every part will deal with a sum of notions assimilated during the course.

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Starbucks is a well-known organization with international shops, so this paper will look at Starbucks like one single organization but in the same time will deal with aspects derived by its internationalization. Even if was marked by historical changes, Starbucks tried to remain loyal to its initial goal, but how long can it do it like that we don’t know.

Viewed from an organizational perspective, Starbucks deals with diversity management and cultural dimensions. This analysis

History & Organizational Development

1971 – Jerry Baldwin, Zev Siegl and Gordon Bowker opened Starbucks, the first store in Seattle’s Pike Place Market. The goal of the shop was to sell fresh roasted coffee beans and brewing and roasting accessories to customers from that region. At the beginning, it was a real success.

1982 – Howard Schultz had joined the group, as director of marketing and retail operations. Before that, he was just a plastic salesperson, who was providing to the Starbucks plastic drip-brewing thermoses. Starbucks began to provide coffee to the espresso bars and top restaurants.

1983 – Howard Schultz travelled to Italy, where he was impressed by the popularity of espresso bars from Milan. He saw the big potential to develop a quite similar business with coffeehouse culture in Seattle. [1] 

1984 – Howard Scultz convinced the founders of Starbucks to try the coffeehouse concept that he saw in Milan in downtown of Seattle. There, for the first time, a Starbucks® Caffè Latte has been served. That successful experience was the genesis for a new company that Schultz founded in 1985.

1985 – Howard Scultz opened”The Daily”/”Il Giornale”. He tried to recreate his experience, offering to people espresso beverages and brewed coffee on an Italian coffeehouse atmosphere. Everything was made from Starbucks® coffee beans.

1987 -“Il Giornale” acquired the Starbucks assets for $3.7 million with some help from local investors. The name was changed with Starbucks Corporation. There were opened new stores in Chicago and Vancouver, Canada. Numbers of stores: 17.

1988 – There, were offered full health benefits to all eligible full‐/part‐time employees. Number of stores: 33.

1989 – Number of stores: 55.

1990 – Starbucks expanded its headquarters in Seattle. Number of stores: 84.

1991 – Starbucks become the first U.S. Company that offered a stock option program that included also the part-time employees. In the same time was opened the first licensed airport store at Seattle’s Sea‐Tac International Airport. Number of stores: 116.

1992 – It was completed the initial public offering (IPO), that produced more cash for the company and caused the growing of Starbucks in the coffee industry. The common stock was traded on the NASDAQ National Market under the symbol SBUX. Numbers of stores: 165.

1993 – It was opened a roasting plant in Kent, Wash and it was announced the first two‐for‐one stock split. Numbers of stores: 272.

1994 – It was opened the first drive‐thru location. Number of stores: 425.

1995 – It began to serve and introduce new types of products (Frappuccino® and Starbucks® super‐premium ice cream). Also, it was announced the second two‐for‐one stock split and it was opened a new roasting facility in York, Pa. Number of stores: 677.

1996 – Starbucks had the first selling bottled Frappuccino® in partnership with Pepsi-Cola (only in North America). There were opened stores in: Japan (the first store outside of North America) and Singapore. Number of stores: 1,015.

1997 – It was established the Starbucks Foundation. Number of stores: 1,412.

1998 – The Starbucks brand extented into the grocery channels across all over the U.S. Starbucks.com was launched and another stores appeared. Number of stores: 1,886.

1999 – Acquisition of Tazo Tea and partnership with Conservation International to promote lasting coffee‐growing practices. It is acquired, also, Hear Music and it is announced the third two‐for‐one stock split. Number of stores: 2,498.

2000 – Howard Schultz stepped aside from the chairman position to became the chief global strategist and Orin Smith was promoted chief executive officer (CEO). The company established a licensing agreement with TransFair USA to sell Fair-trade certified coffee in U.S. and Canada. Number of stores: 3,501.

2001 – Introducing ethical guidelines, in partnership with Conservation International seemed to be a good idea. In addition, it developed a new strategy, introducing the Starbucks Card and it announced the fourth two‐for‐one stock split. Number of stores: 4,709.

2002 – It was established in Lausanne, Switzerland Starbucks Coffee Trading Company (SCTC), because the increase of the company was unstoppable. Number of stores: 5,886.

2003 – Acquisition of Seattle Coffee Company, included Torrefazione Italia coffee and Seattle’s Best Coffee. Number of stores: 7,225.

2004 – It was open the first Farmer Support Center in San Jose, Costa Rica. In the same year it is also introduced the Starbucks Coffee Master Program. Number of stores: 8,569.

2005 – Jim Donald takes Orin Smith place and becomes president and chief executive officer. Also, in this year is bought Ethos Water and it is announced the fifth two-for-one stock split. Number of stores: 10,241.

2006 – It is launched the first paper beverage cup, that contained post‐consumer recycled fiber. Number of stores: 12,440.

2007 – Number of stores: 15,011.

2008 – Howard Schultz comes back as chief executive officer and he decides to acquire Coffee Equipment Company and its Clover® brewing system. In additionally, it is launched My Starbucks Idea, the first online community where everyone can shares his ideas and it is brought on market the Pike Place RoastTM, which becomes very soon Starbucks top‐selling coffee. Number of stores: 16,680.

2009 – It is opened East Africa Farmer Support Center in Kigali, Rwanda. Personal note: it can be observe that because of the economic crisis there is a small difference in the number of shops between the years 2008-2009. Instead of raising their number like in the others years, surprisingly the number of stores decreased. In the next years, it also can be observe that the raisings are not so big like in the past. Number of stores: 16,635.

2010 – Starbucks expands the digital offerings, giving to the customers, free unlimited Wi-Fi, Starbucks Digital Network. It also reinvents its business strategy to extend brand’s reach, offering ultra‐premium Starbucks Reserveâ„¢ line and Starbucks® Natural Fusions. Number of stores: 16,858.

2011 – Happy 40th anniversary for Starbucks, meaning it is updated the brand identity and the month of global community service. For creating diversity it is acquired Evolution Fresh. (In my opinion that it is not the best idea they could have.) Number of stores: 17,003.

2012 – Starbucks® Blonde Roast is implementing. More than that, Farmer Support Center it is open in Manizales, Colombia and it is acquired La Boulange® bakery brand, diversifying their offer. Number of stores: 17,651 (as of July 1, 2012) [2] 

Organizational Development

When speaking about organizational development, it is worth mentioning that Starbucks is more than a group of people, is a team. This affirmation is based on the fact that even if they have leaders and those are in management positions, even baristas are able to take decisions when is necessarily and resolve problems concerning customers service. Also, the responsibility is individual and both collective, all the members being responsible for the well-being of the company. In addition, they all are committed to solve problems and to transform their actions into effective ones.

With reference to Starbucks organizational structure, we mention the fact that it uses the matrix organizational structure and continually improve and modify it [3] . Even if they put a big price on workers and try to make the company as equal as it can be, in Starbucks existed and still exists a hierarchy.

From FY2011 annual report, those are the executive officers of the registrant: [4] 




Howard Schultz


chairman, president and chief executive officer

Cliff Burrows


president, Starbucks Coffee Americas and US

John Culver


president, Starbucks Coffee China and Asia Pacific

Jeff Hansberry


president, Channel Development and president, Seattle’s Best Coffee

Michelle Gass


president, Starbucks Coffee EMEA

Troy Alstead


chief financial officer and chief administrative officer

Paula E. Boggs


executive vice president, general counsel and secretary

Beside the upper management presented in the previous table, there is the front line management organized as follow : a store manager, an assistant manager, both in charge with supervising of the partners, called baristas or employees. all Starbucks coffee house locations follow this model (Starbucks.com, 2010). [5] 

It worth mentioning the fact that Starbucks started like a tent figurate and practically speaking and still is a tent. Even the company grew quite a lot, remained faithfully to his first mission and changed itself depending on the environment.


3.1.Advantages & Disadvantages

Starting from “nothing”, has its advantages and disadvantages. You have many things to learn on the road and if you know how to use them in your favor, you’ll become a winner. Starbucks shows us exactly how you can become greatest. Knowing Starbucks history, we’ve already have an idea about how the firm became what we can see today. We will start speaking about advantages and disadvantages, pros and cons, since the beginning of the firm.

To start with, the initial form of Starbucks was definitely not designed to become such a big organization, but this wasn’t a problem for them. Even if they hadn’t the proper form, they had the proper behavior and by that we refer to the fact that they tried to be closer to the customers.

Coffee is quite popular nowadays. This is why the coffee industry is growing. Starbucks has the advantage of being on the market for a long time, but this is also a disadvantage because of the mentality. This is why we have to discuss about the leaders.

As we all know, the leader has an important role in the organization. He could bring the organization on top or let it sink until the bottom of the ocean. When we speak about leadership in Starbucks we have to mention Howard Schultz. Why? Because he is responsible for the entire development of the organization. He tried to respect the mission but in the same time to transform the meeting point for young people (as the organization was firstly designed) in something profitable and well known.

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Related to good leadership is always a good communication and the sharing of the same beliefs, because as we know, since Starbucks was founded and until present all the leaders followed the same path and that was to please the customers. Sharing the same idea during the years, Starbucks gained loyal consumers and a specific target of consumers, because they all knew what you can get if you enter in a Starbuck shop. Besides all those advantages, there are also some disadvantages. It is always hard to follow the same path, especially when you are part of a society which is in a continue transition. Also, is hard to find leaders which are able to stick to the mission and not become corrupted or rushing to get more and more money.

Connected to leadership is also Starbucks vertical integration strategy. Like all the strategies, this one was adopted because they were trying to bring payoffs to the organization.

The following scheme shows the steps of this strategy.

If you can control at least one of those steps, then the strategy will be efficient. In the Starbucks organization this vertical strategy was a success because they’ve figure how to do that. But for that they’ve need professionals who can deal the problem, because controlling one or more of those steps conduct to higher cost. And here is the problem. They were trying to maintain the prices on the same level, so they had to find alternatives for cutting the costs.

Being known on the market and controlling the way that coffee beans become a cup of coffee helped Starbucks to develop. By supporting the farmers which deliver the beans, the organization had always the best raw materials. Skipping other steps and going to the baristas which maintain the communication between the organization and customers, we can say that every move that Starbucks make is part of a well-orchestrated play.

But as we know, every good side has a bad one. In a market economy is hard to maintain your position because of the competition. To start our discussion about competition, we will first show the five forces model [6] :

This also brings to problems when referring to suppliers. It’s hard to have loyal suppliers when just around the corner stays your competitor which can always offer more than you and so on you can lose your supplier if you are not willing to pay more or to do something else to keep him on your side.

Buyers have to be kept near the company by offering new products and doing that you also keep in mind the problem of substitutes. Renewing the range of products, Starbucks avoid the threat of substitutes and impress the buyers.

Another problem is about the potential entrants. Everyone knows that McDonald’s offers also coffee, and this is not the only competitor on the market. Every day a new shop can be opened near a Starbucks shop so they have to be aware of the danger and always take position against existing or new firms.

Also, it’s hard to keep your employees in the firm, especially when you’re looking for younger ones. This is why Starbucks had built strong relationships with the suppliers, offers great salaries packages to the employees and always the opportunity to grow. But all of those brought new costs and problems. Because of the training programs and the great salaries, the organization lost some money. Not all the trained employees stick with the firm long enough to bring it profit. On the other side, the ones who did stick with the firm had the opportunity to climb in the hierarchy and become more than baristas.

Concerning the development, the Starbucks organization ended the fiscal year 2011 with more than 17,000 stores opened in 55 countries. They’ve also became known in China with more than 500 stores across 44 Chinese cities and they plan to become even bigger in the next years, conquering the Indian market and some others. They also plan to remodel the old stores.

3.2. Process management

Process management is defined as “administrative activities aimed at (1) defining a process, (2) establishing responsibilities, (3) evaluating process performance, and (4) identifying opportunities for improvement.” [7] 

Referring to process management at Starbucks we can mention Lewis’s model of change. This model has three stages: unfreezing, changing and refreezing. Reflected on Starbucks, those stages can be explained as follow:

unfreezing stage create the motivation to change. Individuals are encourages to replace old behaviors and attitudes with those desired by management. E.g. Howard Schultz as CEO of Starbucks has attempted to create a sense of urgency and motivate a commitment to change through his intense leadership style and frequent trips to meet directly with employees and urge the not to be bystanders. [8] 

changing stage refers to organizational change which can be aimed at improvement or growth, or it can focus on solving a problem such as poor customer service or low productivity. [9] In our case, Starbucks made a change by introducing the machines, which reduced the waiting time and increased the workers performance.

refreezing stage means that the change is stabilized by helping employees to integrate the change behavior or attitude in their normal way of doing things. [10] At Starbucks, this change can be interpreted such as the interest of the technical department on designing the machines to be more useful to the baristas and improving them as the time pass.

Human resources



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