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Corporate Policy of Starbucks Coffee

Paper Type: Free Essay Subject: Marketing
Wordcount: 3506 words Published: 16th Jan 2018

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Starbucks Corporation is a multinational corporation based in the United States and is the most famous and largest coffeehouse company in the world. It boasts of 15,000 stores in 45 countries. Starbucks specializes in coffee in all its forms: brewed, espresso, served hot or cold along with other related snacks and raw coffee beans. This conglomerate started in 1985 as a coffee bean roaster and retailer in Seattle, Washington where it still holds its corporate offices. From the 1900s up to now, a new store is opened every day. As of the last quarter of 2007, Starbucks owns 8,505 stores around the world, and 6,500 stores are franchised. As of last quarter of 2007, Starbucks reported a gross profit of $1.5 billion and a net income of $208 million. According to the financial report for Starbucks that is published in the web, “Revenue and earnings have grown at roughly 25% annually for the past five years, and should continue at an above-average rate given Starbucks’ competitive position and already proven record. Management is expecting 18% top-line annual growth and 20-22% in the bottom-line for the next several years. Domestic same-store sales have been stabilizing at around 4%, with transactions accounting for 1%. Internationally, same-store sales increased 7% for Q3 driven by 5% transaction growth. International comparable sales growth has been north of 5% every quarter.

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It would be wise to invest in shares of stock for Starbucks since it can be seen in their financial statements that since they have expanded their operations, there is a steady increase of revenues and profits. Starbucks have produced a more than average sales and earnings growth in the past years. The company’s very impressive earnings growth projections are a good indicator to go ahead and invest.

Starbucks still focuses on their expansion ventures across the United States and abroad in the company’s owned stores and the franchises. Majority if not all exhibited a solid financial performance. The increase of revenue is caused by the opening of more and more stores across the globe to accomplish its vision to establish the most respected brand in coffeehouses. With 1,288 new stores in 2007 and a planned 2,400 more in the next months, revenues and sales would surely shoot up higher. According to the Starbucks Quarterly Report (Mary 2007), “Global comparable store sales for Company-operated markets increased by 4% for the 13-week period ended April 1, 2007, and increased 5% over the first half of fiscal 2007. Comparable store sales growth for fiscal 2007 is expected to be in the target range of 3% to 7%.

The Company purchased a 90% stake in its previously-licensed operations in Beijing and Tianjin, China.”

Starbucks in the United Kingdom

It was in May 1998 that Starbucks gained foothold in the coffee shop market in Europe by acquiring 65 Seattle Coffee Company establishment in the United Kingdom. Starbucks and Seattle Coffee shared the same culture that centers on the desire to customize coffee. Moreover, they also have almost the same company values of respecting people and the environment. In the UK, the Starbucks store designs and ambiences are meant to be cozy and intimate, at the same giving its coffee drinkers a personal area to stay anytime. Tables, chairs, sofas, armchairs, and stools are specifically designed to make every customer feel important. Anyone who wants serenity apart from the home and solace after the chaos of office work can relax and stay deep in a book or magazine. Some even bring their work along and meet friends and prospects in Starbucks stores. Exclusive Starbucks music is made available in all its coffee shops around the world. In the UK, the head office and support center of Starbucks is located in Chiswick in South West London.

Starbucks Losing in the United Kingdom

Costa Coffee is giving Starbucks a hard time in the UK. According to financial sources, £10 million have been lost by Starbucks since 2009. The figure show a loss before taxes of over £9 million for one year in the middle of this year compared to only £2 million in 2009. This poor performance emphasizes the concerns of CEO Howard Schultz last year when he made an evaluation of the UK economy. He himself gave the reason for the company’s bad financial showing in the UK: unemployment, mortgage crisis, and low consumer confidence.

Value Chain

Starbucks is synonymous to coffee. They are present in 41 countries except in Africa. Its mission statement: “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.” Starbucks created a niche in the “coffee culture”. It has penetrated markets that are not coffee connoisseurs. Schultz envisioned coffee consciousness in his customers hoping that coffee drinkers would take coffee seriously as wine connoisseurs take fine wine. It developed unique coffee taste experiences through coffee blend concept which traditionally is a method done to mask off flavors contributed by mediocre to atrocious beans and to save money. The coffee brand which has penetrated the world sans few places, aimed to deliver high quality and consistent products to keep customers. To achieve this consistency, Starbucks entry to other markets was in the form of licensing its brand and the technology it has developed through the years. This encompasses all areas in the operation of a coffee shop.

Several international coffee shops like Brazilian Coffee Shops, House of Coffees, Seattle Coffee Shops have penetrated many countries through franchising. However, Starbucks opted to licensing agreements for store locations in areas where it did not have the capacity to put up its own outlets. This is handled by Starbucks Coffee International (SCI). It has opened stores in Japan, Singapore, Philippines, South Korea and Taiwan. It has opened its market also in Europe. Starbucks has yet to launch its coffee bars in an African country.

Starbucks has become a byword in the global business. It has become an epitome of a corporation that has reached its zenith in corporate and service endeavors. Franchising styles and its marketing strategies merit the following of many other companies. It is sufficed to say that Starbucks has become one best examples of a corporation that has not only brewed up the world but created a good aroma for other businesses to emulate.

Mission-Vision Statements

In 1998, Starbucks announced its vision: “2000 stores in the year 2000.” Its mission is to “inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time.” Its mission statement: “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.” According to the financial report for Starbucks that is published in the web, there is a significant increase in the revenue and earnings in the last five years of up to 25%. A prediction by economic analysts that this trend will continue at an advantageous rate if the competitive position of the company stays at par. It would be wise to invest in shares of stock for Starbucks since it can be seen in their financial statements that since they have expanded their operations, there is a steady increase of revenues and profits. Starbucks have produced a more than average sales and earnings growth in the past years. The company’s very impressive earnings growth projections are a good indicator to go ahead and invest. Starbucks still focuses on their expansion ventures across the globe in the company’s owned stores and the franchises. Majority if not all exhibited a solid financial performance (Michelli, 2007).

Business Strategy

The technology that Starbucks packaged includes real estate, store design, store planning and construction, product line, store ambiance, building a top management team, employee training, product supply, coffee roasting and its marketing strategies. It is called ‘Starbuck System”. All supplies will come from suppliers approved by Starbucks. These ensure control in all areas of the operation.

Starbucks is an established business and its success in the domestic and global market can be derived from the socially responsible movement that they promote in their corporate behaviors. Business ethics has always been an integral part of Starbucks as management base their principles on the internal stakeholder issues like product quality, customer satisfaction, employee wages and benefits, and local community and environmental responsibilities. The leadership of Starbucks sees to it that all these responsibilities toward their internal stakeholders are taken care of since they are largely responsible for what Starbucks has achieved today. The internal stakeholders of Starbucks has created a collaboration that work closely with the executives and business units to fully incorporate the company’s values into developing and implementing its positions on key legislative and public policy issues.  Furthermore, it develops and maintains an extensive network of internal contacts (senior management, legal, marketing, category, QA, R&D, regulatory, strategy and others) to align strategy, issues and business impact.  Among internal stakeholders, Starbucks sees to it that there is a uniform code of conduct to be followed in all its stores around the world. This is to make sure that the mission-vision of the company is upheld at all times. Internal stakeholders treat each other with professionalism as guided by these uniform codes of conduct.

SWOT Analysis

Strengths of Starbucks lies on their unique and chef-inspired menu and their market position which is remains in the top five, according to surveys. Unlike other big corporations and franchises, Starbucks has an enormous advertising budget that drives the business. Their comprehensive, award-winning training programs provide franchises and employees with the specific tools and skills that can be used for success in the competitive food industry.

Weaknesses of Starbucks lie on some bad-for-the-business lawsuits on their franchising scheme. Another weakness would be the often criticized television advertisements and campaigns that seem to be intended to be funny and outrageous rather than sell their food. Another weakness could be their franchising scheme worldwide where they only allow one franchise holder for a particular country. For example, in China, only one franchise holder owns all the Starbucks stores there. This limits opportunities for other interested franchisers; thus, also limit the full expansion of Starbucks.

Opportunities at Starbucks lie in their staff and crew to further develop and grow in their career at the company since a very comprehensive training and development is made available for store managers and staff.

Threats come in the form of the existing competitions in the food industry.

Problem Areas


With a brand name such as Starbucks, who needs advertisement? Just very recently, Starbucks put on air their television advertisement. Critics say that it is too late for this since a company should start advertising (print and broadcast) when they need it most or when everything is “iron hot.” From a marketing perspective, this television ad came in late. Still, with a global brand that is popular enough that many think the name itself is enough advertisement, Starbucks do need advertisement. One just needs to look around and see how such immense and successful global brands can still be seen on billboards, television, and magazine.

Starbucks advertising campaign continues from word of mouth especially. The logo is enough to persuade patrons and customers to partake of their products. Being the leading retailer and roaster of specialty coffee in the world, Starbucks has been criticized in the past for being very ambitious, expanding throughout the world at a fast speed. But Starbucks has been successful in making a name for itself in record time while achieving a 20% rise in earnings for 2008.

Many articles came out written about how and why Starbucks decided to start a television advertisement when they do not really need one. Management of this conglomerate have their reasons and the prime one is in order to reach across or convince those who have not tried sipping their coffee while lounging in their free WI-FI zone stores to come and see for themselves the difference of being in a Starbucks shop. More reasons are obvious just like what their other competitors would say. For Starbucks, there is no such thing as being late nor is there a set time when to advertise or not. This new ad is not purported to sell but to remind and create more impact to their captured market.


In the United Kingdom, Starbucks’ major rival is Costa, followed by Caffe Nero. The UK coffee shop market is actually being slowly dominated by these three competing brands. Fierce competition aggravated into a bitter fight this year when Starbucks filed a complaint to the Advertising Standards Authority (ASA) that the Costa advertising campaign that says: Starbucks drinkers prefer Costa” and “Seven out of ten coffee lovers prefer Costa.” However, ASA came with a decision that favored Costa, saying that all these claims by the latter were based on blind tasting tests.

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Coffee is the second largest imported product of the United States and specialty coffee market is approximated to be $11 billion a year in worth. To lure coffee drinkers (and other variants of coffee) from Starbucks, competitors of the same product line have come up with all sorts of gimmicks and come-ons as well trying to make a niche in the coffeehouse industry. In a report written by Georgia Flight (2006), the top five competitors of Starbucks show how each is different from the other and identify some salient points in their competitions with the leading brand.

Founded in 1981, Green Mountain Coffee Roasters that originated from Vermont has used the slogan “Be Green” to portray the kind of coffee they serve. Starting as a small cafe, it has stuck to its use of organic roots and organic coffees.

“Keep Innovating” is the slogan of Coffee Bean & Tea Leaf which is headquartered in Los Angeles. It has 400 outlets. The company is famous for the wide choice of coffees and teas and its reputation preceded its brand for its innovation. Furthermore, it has established branches in places/countries where Starbucks is absent – like Israel.

Costa coffee was founded in 1971 in London. Even with Starbucks abounding in that city, Costa is a lead ahead in India where it has adapted its coffee flavors to suit Indian taste. Their strategy? “Head East.”

Having 120 outlets in the country, Peet’s of California uses the strategy: “Go Upscale.” Java connoisseurs love the strength of the taste of its coffee. The special and complicated process of working on the coffee makes the taste unique.

Caribou Coffee coffee business based in Minneapolis was founded in 1992. The strategy to “Sell a Lifestyle” features their cafes and stores in a mountain-lodge-style decoration including the chairs and a fireplace. They have made a deal with some airlines and some other fitness establishments.

Starbucks has got itself many competitors, many of which got their inspiration from it. Since the product is a beverage that many would patronize, it is no wonder that Starbucks as well as other related businesses are rising.

Marketing: Franchising: Expanding in Africa

Putting up a Starbucks coffee bar in South Africa guarantees presence of Starbucks in almost all of the continents in the future. As a gateway to the African continent, the country is convenient path for businesses to expand in the area. Since the first national elections in 1994, government policies have been enacted to encourage foreign investments. Granting a license to a local company or close corporation to operate Starbucks stores in the country would benefit both parties. This would allow transfer of “Starbucks System” technology that would benefit the employment program of the government through its program Broad Based Black Economic Empowerment Act (BEE). The partnership of Starbucks and a local closed corporation can enjoy the economic incentives given to new foreign investments that are brought into the country. While there will plus and minuses for both the licensor and licensee, they will get benefits from the license agreement (Andover, 55.)

However, because of different cultures, Starbucks will have to make adjustments in their marketing and strategies to achieve its growth. Several standards will have to be altered to accommodate the different palate and eating habits of the people. Whatever criteria in its service and product Starbucks has come up, changes have to be made to accommodate the new market.

Starbucks has to consider also an important observation made by the franchise sector of South Africa that 90% of South Africa’s franchise opportunities are based on locally developed concepts which is in contrast to most countries outside the USA where foreign brands trend to dominate the market (Handsenn, 40). This is also true to the restaurant and fast food market where the business Starbucks can be compared. Most food brands (restaurant type) are franchised out in other countries.


On Advertising Problem Area

Starbucks can save their millions by forgetting about putting up television advertisements and commercials. The company is so established that making a commercial now would not have that much impact. Moreover, the company should enjoy its business success by being contented with posters on their stores, occasional promotions and announcements of new products, etc. Business and advertising analysts say that Starbucks can live without such domineering advertisements on television. Actually, they do not need any.

On Marketing/Franchising in Africa Problem Area

This is also true to the restaurant and fast food market where the business Starbucks can be compared. Most food brands (restaurant type) are franchised out in other countries. Also, the following factors are as important from a prospective franchisee’s point of view:

The advantage of operating under a local brand is that the product has been designed from scratch with the local conditions in mind.

Only a professionally managed operation can be relied upon to deliver on the implied promise of franchising.

This is considered a threat to Starbucks. With the experience of the local companies developing its market strategies, most likely, Starbucks will have difficulty in guarding its technology. Penetration in the market is also a challenge. Also, the company had encountered problems in its image, paying low price for coffee beans from another African country. Having a local partner may help to quell the threat and open a huge market. Perhaps it would be wise to brainstorm on these possibilities. If the company wants to grow more and succeed more, then they should review their policies on franchising.

Recommendations on Competition Problem Area

It is a fact that all people eat in order to survive. However, not all people can afford the same food and luxuries that these businesses offer. While Starbucks is known to cater to class A and B market because of the prices of their products, Caribou Coffee grabs the C and D with a lot lower prices of the almost the same products. McDonald’s, being the leader of fast foods and affordable prices, remains to top the market monopoly. People around the world are reported to patronize their products, thanks to the non-stop advertising and maintaining the quality of their food. Dunkin Donuts has a limited list of food, mostly sweet pastries and yes, doughnuts. The taste and type of food offered by this establishment continue to serve as a “come on” to many customers and a specified market.

Starbucks should take seriously the growing number of rivals in the food industry, especially in the same products they are selling. Pricing is a very important aspect to take into consideration. With these hard times, people become practical. If they can have the same taste and quality coffee from another store, why go to Starbucks? Although the company wants to maintain its unique quality brand, it should consider their consumers satisfaction when it comes to expenditures.


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