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Would You Like Some Coffee With That? / Starbucks Case Study

Updated: Aug 29, 2022

  • Was Written on June 13 2020 for MBA 512 Strategic Management Class at Stony Brook University


Discussion Question #1

What are some of the challenges associated with Starbucks’ aggressive international growth strategy?

When I stand in the line of my local Starbucks to get my medium roast Pike Place coffee with almond milk, I know exactly how it is going to taste. I can imagine the first hot sip of coffee right now, the sweetness of the roast, the strong kick-back aftertaste, and also the feeling of awakening after finishing the coffee. From briefly reading Starbucks' history and growth strategy I detect one major problem. Franchise.

According to Parnell (2017): “Today, Starbucks operates over 23,000 stores in over sixty-five countries. More than half of the stores—including those in the United States—are company-owned, while the remaining non-U.S. units are franchised.”

When people walk into a Starbucks chain, they expect Starbucks coffee – “not sort of”, “not similar to”. They expect employees to wear green aprons and green hats, and they expect tall white cups (colorful on Christmas) with their name (misspelled) on it written in black sharpie. They expect a reward program and a free birthday drink. When one walks into Starbucks, he expects Starbucks coffee and Starbucks experience. But how can the chain maintain control over half their international non-English speaking employees and maintain the company's core values and culture? How can Starbucks maintain and regulate the same Starbucks experience with a location in NYC and a location in Paris French? Germany? Japan?

According to Wilson (2019): “Your employees need to reflect the brand and represent the company’s core values ‘Hire slow, fire fast’ are words to live by,”. Based on this statement, how can a foreign manager that is franchising the brand, reflect what the brand represents, and all its small details on an overboard scale?

This is a challenging matter that might jeopardize the reputation of the entire organization.


Discussion Question #2

Could an unanticipated change in coffee consumption patterns disrupt Starbucks in the same way that it paved the way for the company’s growth in the 1980s and 1990s?

Yes, an unanticipated change in coffee consumption patterns disrupts Starbucks' success and earnings.

Starbucks CEO Kevin Johnson confessed to CNN in 2018 that consumers have turned on Frappuccinos, (Wiener-Bronner, 2018).

The reason for that is the rise of health-conscious. “In 2015, Frappuccino sales were up 17% compared to the previous year,” (Wiener-Bronner, 2018). That’s when Starbucks introduced new flavors of Frappuccino such as “Unicorn Frappuccino”, “Crystal Bal Frappuccino”, “Zombie Frappuccino”, “Christmas-Tree Frappuccino” (Kelter, 2018). But then, the consumption for the sugary most-expensive drink in the menu fell 5%, 4%, and 3% in the next following three years,

The decline in Frappuccinos might be one of the reasons the company stayed static in its stock earnings between 2016-2018, in comparison to its rapid growth between 1980-1990. The stock has recovered since the second half of 2018 and reached a high in the summer of 2019 as mobile orders became more popular. (Google Finance, 2020)


Discussion Question #3

To what extent do lower-priced competitors like McDonald’s and Dunkin’ Donuts present a threat to Starbucks’ premium-priced coffee?

Starbucks, Dunkin’, and McDonald's are all large chains with major dominancy in the U.S. and while all three offer coffee in the menu I believe that Starbucks Marketing is much different than the other two. Unlike the others, Starbucks prices are higher, but the focus is on the quality of the coffee as well as a pleasant experience in the store. Starbucks puts a focus on store uniqueness, investment in quality beans, and a high-scale feeling. Starbucks is marketing to wealthier communities of people while offering the experience as well (“the experience” is better explained in the first question). For example, recently Starbucks has started a new concept called Starbucks Reserve. There are five Reserve locations in the world. The Reserve offers specialty crafted drinks, mixology, in-store roasting, and an education lesson for each order. The website of The Starbucks Reserve explains the store as “the rarest, most extraordinary coffees Starbucks has to offer. The ultimate expression of our passion for craft. Immersive spaces that invite you to discover and explore” (2020).

To some degree, McDonald's and Dunkin hurt Starbucks with a specific target market but none of them offer the same service, experience, and specialty as Starbucks.



 

References

  • Parnell, J., 2017. Strategic Management: Theory And Practice. 5th ed. The University of North Carolina at Pembroke: Academic Media Solutions.

  • Google.com. 2020. Starbucks Stock - Google Search. [online] Available at: <https://www.google.com/search?client=firefox-b-1-d&q=starbucks+stock> [Accessed 11 June 2020].

  • Kelter, D., 2020. Starbucks Focuses On Social Media Appeal In Latest Frappuccino - 18Th April 2018. [online] Mintel Reports. Available at: <https://reports-mintel-com.proxy.library.stonybrook.edu/display/892641/?fromSearch=%3Ffreetext%3Dstarbucks> [Accessed 11 June 2020].

  • Starbucksreserve.com. 2020. Visit Starbucks Reserve. [online] Available at: <https://www.starbucksreserve.com/en-us> [Accessed 12 June 2020].

  • Wiener-Bronner, D., 2018. Can Starbucks Be Fixed?. [online] CNN News. Available at: <https://money.cnn.com/2018/06/21/news/companies/starbucks-strategy-johnson/index.html> [Accessed 11 June 2020].

  • Wilson, S., 2020. 7 Biggest Challenges To Growing A Franchise System | Allbusiness.Com. [online] AllBusiness.com. Available at: <https://www.allbusiness.com/7-biggest-challenges-to-growing-a-franchise-system-16647575-1.html> [Accessed 11 June 2020].


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