starbucks case study problem statement

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What Starbucks got wrong — and right — after Philadelphia arrests

Tom Relihan

May 18, 2018

On May 29, Starbucks will close more than 8,000 U.S. stores for an afternoon of racial bias training for 175,000 employees. The move, expected to cost $12 million, comes after an April 12 incident when two black men were arrested after asking to use a Philadelphia Starbucks restroom without making a purchase.

While it’s unlikely the company will be able to eradicate the effects of unconscious racial bias among its employees in a single afternoon, MIT Sloan senior lecturer Roberta Pittore said the decision to close the stores for training was the right call.  As recently as Friday afternoon, the company issued another apology after an employee at a California store wrote a racial slur on a customer's cup.

“Something is better than nothing, more is better than less, and sooner is better than later,” Pittore, who studies communication as it influences decision-making in organizations, said. “I think what it does achieve from Starbucks’ point of view is that it changes the discussion from ‘What did our employee do that was offensive,’ to ‘How can we learn and how can we change?’”

Swift, specific, and sincere

The rise of social media has given people the ability to spread news in milliseconds, and a corporate response needs to match that pace, Pittore said. But, any response also needs to be specific and sincere.

In its initial attempt to address the controversy that day, the company fell flat on at least two of those counts. In releasing a general statement acknowledging the situation and promising a policy review, but failing to mention concerns about racial bias, the company’s response was swift, but it wasn’t specific or sincere enough.

That first statement was followed later in the day by a longer one from CEO Kevin Johnson, who took a more targeted tone, describing the outcome as “reprehensible” and reaffirming the company’s opposition to discrimination and racial profiling. Johnson also released a video in which he took personal ownership for the incident.

Pittore said the revised response indicates Starbucks’ realization that the incident carried more gravity than the company’s leadership had initially thought.

“[A generalized statement] doesn’t seem as sincere — and it isn’t. It isn’t addressing the problem. It’s just saying, ‘We’re good guys … we have good intentions,’” Pittore said. “Well, everyone has good intentions, so what are your good intentions about this very real, very specific, very tangible incident?”

Soon after, Johnson traveled to Pennsylvania to meet with the two men and offer a face-to-face apology. Pittore said that move, too, was appropriate, given the climate surrounding the incident. In May, the company also reached a financial settlement with the pair for an undisclosed amount of money and a promise to help them complete their bachelor’s degrees through the company’s employee tuition assistance program.

“The company appropriately should find out from them, ‘How do we make this up to you?’” Pittore said.

When public access is part of your business model

At the core of Starbucks’ brand is the idea that its coffee shops can serve as a “third place” for meet-ups, studying, or work on the go. With the arrests, a single store manager’s decision saw that carefully-crafted persona of a socially progressive and inclusive community hangout begin to unravel.

“They’re not selling you a cup of coffee. They’re saying, ‘We’re the part of the community that you’re in when you’re not at the office and you’re not at home,’” Pittore said. “When you think about that, you have to think about the larger community and about ‘How do we, as a public, want that third place to be. Bottom line, it should feel safe. It should feel welcoming, and that’s really the crux of the problem.”

That problem isn’t unique to Starbucks, either, Pittore noted — it’s a societal problem that came to a head in a very visual way in Philadelphia.

“The specific actions of that one specific employee uncovered a larger issue of racial bias, frankly, in our culture. If you narrow it down, you have an incident that you can’t sweep under the rug,” she said. “The question for Starbucks is ‘What do we do? We didn’t create this problem, but we’re part of this society where this is happening, and if we’re going to be that third place, what is that third place going to look like?’”

Moving forward, Pittore said Starbucks should review its policies, the composition of its board and leadership, its gender, race, and age demographics among its employees, and its wage structures to determine how socially conscious the company really is and decide where, on that spectrum, it wants to be.

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Starbucks – Case analysis and problem solving

Starbucks Corporation is an international coffee company and coffeehouse chain based in Seattle, Washington. In October 2006, Starbucks was the largest global roaster and retailer of coffee with more than 12,000 retail stores in 60 countries, some 3,000 of which are to be found in forty countries outside the United States. Looking forward, the company expects 50% of all new store opening to be outside the United States.In 2006, Starbucks closed a decade of astounding financial performance with increasing sales from $697 million to 7. 8 billion, net profit from $36 million to 40 million and ROIC was 25.

5%. These superior financial performances resulted from the excellent coffeehouse format with designing stores to create a relaxed, informal, and comfortable atmosphere and selling premium roasted coffee, freshly brewed espresso-style coffee beverages, a variety of pastries, coffee accessories, teas, and other products in a coffeehouse setting.This also resulted from superior customer services through highly trained and progressively compensated employees; the strategy of owning stores rather than making franchising arrangement for the basic formula. Sophisticated location strategy, and successful exploration of foreign opportunities also contributed to the Starbucks financial performance. Case Discussion Question 1: Identify the resources, capabilities, and distinctive competencies of Starbucks ? Answer:- I) Resources: Resources of Starbucks include-Tangible Resources: Starbucks Corporation’s tangible resources include- 1.

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Design of stores: Design of Starbucks coffeehouse store was very much comfortable, relaxed, and an informal third place between Home and Workplace. 2. Premium location: They located their stores in premium location as possible before its competitors could. Intangible Resources: Intangible resources of Starbucks were as follows- 1. Superior brand name, and brand loyalty; 2. Experience and training of employees, 3.

Intellectual property-Basic formula of the product.II) Capabilities: Starbucks Corporation’s capabilities include- 1. Good organizational rules and procedures for managing operation; 2. Better hiring system and training program. 3. Service oriented values of the company; 4.

Progressive compensation policy. 5. Differentiated products and sophisticated demographic analysis. III) Distinctive Competencies: The above said resources and capabilities were strengths of Starbucks that allowed it to differentiate its products from those of rivals and achieve lower costs structures than its competitors.Distinctive competencies of Starbucks helped it achieve superior efficiency, product quality, and customer responsiveness which are the basis of competitive advantage in the Coffee Retailing Business. Starbucks Corporation’s distinctive competencies are given below- ? Establishment and management of Superior Coffeehouse (Coffee Store): Starbucks Corporation used a very sophisticated location strategy and demographic analysis to identify and capture the premium location for stores as possible its competitors could.

The company designed its store to create a relaxed, comfortable, and informal third place between home and work where customers could spend a very good time. ? Superior Management of Employees: Starbucks used employee hiring and training program that were the best in the restaurant industry. It provides progressive compensation policies including stock options and medical benefits which increased the motivation of the employees to provide the best customer services. These various incentive programs and hiring strategy helped them to manage employees effectively. Preference to Owing Stores rather than Making Franchising Arrangements: Starbucks prefer owning stores for their own rather than performing franchise arrangements with other companies for the basic formula that appears to work.

? Ability to Provide Superior Customer Services and Best-Known Brands: Starbucks were able to provide superior customer services in selling its various premium products through highly trained and motivated employees. This superior customer services had resulted in the creation of the best-known brand name and customer loyalty which generated enormous volume of repeat business for the company.Case Discussion Question 2: Answer:- Starbuck took strategy to sell coffee in a unique way of delivering better service. With their strategy they have built some resources such as unique design of their stores, premier location, superior brand name, experience and training of the employees and basic formula of the product and they have also developed some capabilities such as good organizational rules and procedures, better hiring system, training program, service oriented values and progressive compensation policy.The resources coupled with the capabilities developed by the strategy of the company have given Starbucks to develop some distinctive competencies of unique service delivering process, superior management of employees, preference to owing stores and ability to provide superior customer services. These distinctive competencies are giving Starbucks competitive advantage.

As a result, with these competitive advantages, they have developed a unique brand name and efficient service delivery system.Their efficient service delivery system and high employee productivity have given them economies of scale and have lowered their cost structure. Their products and services are high in quality. Their customer responsiveness is also superior as they have developed their products services according to the need of the customers. The benefit of superior efficiency, superior quality, superior process innovation and superior customer responsiveness has been reflected in the sales of the country and their low customer defection rate helped them to retain their customers.They have now captured a large share of the market and have been able to make their customers buy repeatedly.

This is shown in the following. Competitive advantage to Value creation and superior financial performance: Competitive advantage leads to superior profitability which results in superior financial performance. At most basic level, how profitable a company becomes depends on three factors: (1) the value Case Discussion Question 3: How secure is Starbucks competitive advantage? What are the barriers to imitation? Answer:- The extent of security of Starbucks’ competitive advantage: Low |Moderate |High | |Store designing |Employee hiring |Compensation policies | |Customer services |Training program |Product formula quality | |Premium location |Detailed demographic analysis |Exploration of foreign opportunities | | | |Very limited franchising arrangements | Low:- Starbucks’ comfortable and informal design and premium location of stores are tangible resources so rival groups can easily build these by following them. Where identical customer services can be provided by rivals by easily visiting the stores and following them. Moderate:- As hiring and training programs are developed by committed executives so it is rare to be copied by rivals.

Most competitors lack the abilities to assess the market and to choose premium location by making detailed demographic analysis. High:-Compensation policies like medical benefits and stock option even for part time employees are costly that everybody cannot provide these. Product formula and quality are protected by limited franchising and strong observation. Exploring foreign opportunities are not feasible for all. ———————– Design of stores Premium location Superior brand name Experience and training of employees Basic formula of the product Good organizational rules and procedures Better hiring system Training program Service oriented values Progressive compensation policy Unique service delivering process Superior Management of Employees Preference to Owing Stores Ability to Provide Superior Customer Services Strategy Competitive Advantage Superior Financial Performance

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Navigating the Storm: Starbucks Crisis Management Case Study

Is crisis management a make-or-break factor for businesses? 

In this blog post, we delve into a captivating case study: Starbucks crisis management. 

With a reputation for providing quality coffee and fostering a welcoming environment, Starbucks faced a significant crisis that put its brand image at stake. 

The way a company responds to a crisis can have far-reaching consequences, impacting its customer loyalty, shareholder confidence, and overall success. 

Join us as we examine the strategies employed by Starbucks to navigate this crisis, evaluate their effectiveness, and uncover valuable lessons for businesses facing similar challenges.

Let’s further unpack the topic through Starbucks crisis management case study

Background of Starbucks

Aglobally recognized coffeehouse chain, was founded in 1971 in Seattle, Washington. The company initially started as a single store specializing in high-quality coffee beans and equipment. 

However, it was in the 1980s when Howard Schultz, the current chairman emeritus, joined Starbucks and revolutionized its business model. Schultz envisioned Starbucks as a “third place” between home and work, a community gathering spot where people could enjoy premium coffee. 

Under his leadership, Starbucks expanded rapidly, opening stores not only across the United States but also worldwide. 

The company’s growth was fueled by a strong commitment to sourcing and roasting the finest Arabica coffee, ensuring consistency in the customer experience, and embracing innovation in its products and store designs and implementing change initiatives as a part of their continuous improvement approach.

Starbucks’ Reputation and Brand Image

Starbucks has meticulously cultivated a reputation as a purveyor of quality coffee and an immersive, inviting atmosphere. The company’s brand image is associated with expertise in coffee, ethically sourced beans, and a commitment to social and environmental responsibility. 

Starbucks has positioned itself as a “third place” where customers can relax, work, or socialize while enjoying their favorite beverage. The brand’s iconic logo, the green Siren, has become synonymous with Starbucks and is instantly recognizable worldwide. 

The company’s dedication to providing exceptional customer service and its inclusive culture has also contributed to its positive reputation. 

Over the years, Starbucks has become a symbol of premium coffee experiences and a beloved brand embraced by millions of people around the globe.

The crisis that unfolded at Starbucks was centered around an incident in one of its stores that sparked widespread controversy and public outrage. 

In April 2018, a video surfaced on social media showing two black men being arrested at a Starbucks store in Philadelphia. The incident occurred when the men, who were waiting for a friend, were denied access to the store’s restroom. The store manager called the police, alleging that the men were trespassing. 

The video quickly went viral, drawing attention to issues of racial profiling and discrimination.

The events leading up to the crisis can be traced back to a combination of store policies and employee training practices. Starbucks had a policy in place that required non-paying customers to make a purchase before using the store facilities. 

This policy, coupled with the discretion given to store managers, created a situation where individual judgment played a role in determining who was allowed to use the facilities. In this case, the store manager’s decision to call the police escalated the situation, drawing significant public scrutiny.

Impact of the Crisis on Starbucks

The incident had a profound impact on Starbucks as a brand and a company. Immediately following the video’s circulation, there was a widespread public backlash, with accusations of racial bias and calls for a boycott of Starbucks. 

The incident sparked protests, garnered extensive media coverage, and led to a significant reputational hit for the company. Starbucks’ longstanding reputation as an inclusive and welcoming space was severely tarnished. 

Moreover, the incident shed light on broader issues of racial inequality and discrimination within the retail industry, forcing Starbucks to confront these systemic challenges head-on. 

The crisis not only presented an immediate challenge for Starbucks’ public image but also posed a critical test for the company’s crisis management capabilities.

Crisis Management Strategies Used by Starbucks  

Following are the key aspects of crisis management strategies used by Starbucks:

Immediate Actions

Immediate actions Taken by Starbucks Recognizing the urgency of the situation, Starbucks swiftly responded to the crisis. Within 24 hours of the incident, the company’s CEO, Kevin Johnson, publicly apologized to the individuals involved and expressed deep regret for what had transpired.

Starbucks took immediate action by announcing the closure of more than 8,000 company-owned stores across the United States for a half-day of racial bias training. This decision demonstrated a commitment to addressing the underlying issues and implementing tangible measures to prevent similar incidents in the future.

Communication Channels Used 

Starbucks utilized multiple communication channels to address the crisis effectively. The company made extensive use of social media platforms, such as Twitter and Facebook, to disseminate its messages. Starbucks posted public apologies and updates on its official social media accounts, engaging directly with customers and the general public.

Additionally, the CEO and Chairman conducted several media interviews to convey the company’s stance and commitment to resolving the crisis. Starbucks also employed traditional media outlets, press releases, and official statements to ensure a wide reach and consistent messaging across various communication channels. This comprehensive approach aimed to provide timely and transparent information while actively engaging with stakeholders during the crisis.

Employees Training and Policy Changes  

Starbucks recognized the need to address implicit bias and promote inclusivity among its employees. The company implemented a comprehensive training program focused on racial bias awareness and prevention.

This initiative, known as “Starbucks Bias Training,” involved closing over 8,000 company-owned stores across the United States for a half-day to provide racial bias education to 175,000 employees. The training sessions were designed to create awareness of unconscious biases, foster empathy, and equip employees with strategies to ensure an inclusive and welcoming environment for all customers.

Revising Company Policies and Guidelines 

Alongside employee training, Starbucks undertook a thorough review of its policies and guidelines to ensure they aligned with the company’s commitment to diversity and inclusion.

One significant policy change was the revision of the “Third Place Policy,” which governs customer access to Starbucks facilities. The updated policy clarified that customers are welcome to use Starbucks spaces, including restrooms, regardless of whether they make a purchase.

By eliminating potential ambiguity, Starbucks aimed to eliminate situations where individual discretion could lead to discriminatory practices. This policy change aimed to create a more inclusive environment and prevent similar incidents in the future.

Through these employee training initiatives and policy changes, Starbucks sought to address the root causes of the crisis and build a more inclusive and welcoming culture within its stores. By prioritizing education and revising policies, Starbucks aimed to prevent bias and discrimination, demonstrating its commitment to creating a safe and inclusive environment for all customers.

Rebuilding Trust and Reputation 

Rebuilding trust and reputation is a critical process for organizations that have experienced a crisis or faced significant challenges. It involves implementing long-term strategies to regain the trust of stakeholders, rebuild a positive brand image, and restore confidence in the organization’s values and actions.

Starbucks engaged with local communities and various social initiatives to rebuild its brand image. The company actively participated in community events, supported local organizations, and initiated social impact programs. These efforts showcased Starbucks’ commitment to social responsibility and its desire to positively contribute to the communities it serves.

Starbucks maintained consistent communication and brand messaging throughout the crisis and beyond. The company continued to communicate its commitment to diversity, inclusivity, and social responsibility. By consistently reinforcing these values in its messaging and actions, Starbucks aimed to rebuild trust and ensure that its brand image aligned with its core values.

Role of Howard Schultz, Chairman of Starbucks in crisis management 

The role of Howard Schultz, the Chairman of Starbucks was instrumental in navigating the company through the challenging situation. 

Here are key aspects of his involvement:

• Setting the Tone: As a respected and influential figure within the company, Howard Schultz set the tone for Starbucks’ response to the crisis. His leadership and guidance provided a framework for the company’s actions and messaging. Schultz’s reputation as a visionary leader and his deep understanding of Starbucks’ core values and culture helped shape the crisis management strategy.
• Public Apology and Personal Accountability: Howard Schultz took personal accountability for the crisis, publicly apologizing on behalf of Starbucks. His willingness to accept responsibility demonstrated a sense of ownership and commitment to rectifying the situation. By publicly acknowledging the incident and expressing genuine regret, Schultz exemplified the values of transparency and humility. In response to this crisis Howard Schultz said “I’m embarrassed, ashamed. I think what occurred was reprehensible at every single level. I take it very personally, as everyone in our company does, and we’re committed to making it right.”
• Engaging with Stakeholders : Schultz actively engaged with various stakeholders, including customers, employees, and the media, to address concerns and provide reassurance. He participated in media interviews, where he openly discussed the incident, Starbucks’ commitment to diversity and inclusion, and the steps the company was taking to prevent similar incidents. This direct engagement helped rebuild trust and demonstrated Starbucks’ dedication to resolving the crisis.
• Initiating Comprehensive Changes: Schultz played a key role in initiating comprehensive changes within Starbucks to prevent future incidents and promote a more inclusive environment. He championed the decision to close stores for racial bias training, emphasizing the importance of education and awareness. Schultz also supported the revision of company policies and guidelines to eliminate potential biases and ensure equal treatment for all customers.
• Long-Term Vision and Brand Preservation: As the Chairman, Schultz had a deep understanding of the Starbucks brand and its long-term vision. During the crisis, he ensured that the company’s actions aligned with its core values and overarching goals. By prioritizing the preservation of Starbucks’ brand reputation and maintaining its commitment to social responsibility, Schultz played a crucial role in guiding the crisis management strategy.

05 Lessons Learned form Starbuck’s crisis management 

Here are five key lessons learned from Starbucks’ crisis management:

Proactive Crisis Preparedness

Starbucks’ crisis management highlighted the importance of proactive preparedness. Being ready to respond swiftly and effectively to crises requires ongoing risk assessment, scenario planning, and robust crisis management protocols. Businesses should invest in training, communication plans, and policy reviews to anticipate and mitigate potential crises before they occur.

Timely and Transparent Communication

Starbucks’ prompt and transparent communication during the crisis played a vital role in mitigating reputational damage. Openly acknowledging the issue, providing regular updates, and engaging with stakeholders helped maintain trust and demonstrate a commitment to addressing the problem. Clear, consistent, and timely communication is essential in crisis situations to avoid misinformation and public backlash.

Employee Training and Empowerment

Starbucks’ crisis underscored the significance of comprehensive employee training programs. By educating employees about topics like implicit bias and fostering inclusivity, companies can empower their workforce to handle diverse situations and prevent discriminatory incidents. Regular training sessions can equip employees with the skills and knowledge necessary to uphold the company’s values, contributing to a more inclusive and respectful environment.

Policy Review and Adaptation

Starbucks’ crisis led to a review and revision of company policies and guidelines. It highlighted the need for businesses to periodically evaluate their policies to eliminate potential biases and ensure equal treatment for all customers. Regular policy reviews and adaptations based on societal changes and customer expectations can help organizations stay aligned with evolving standards and maintain a positive reputation.

Leadership Accountability and Responsibility

Starbucks’ crisis management emphasized the importance of leadership accountability and responsibility. When leaders take personal accountability, apologize sincerely, and actively participate in resolving the crisis, it demonstrates a commitment to rectifying the situation. Leadership involvement fosters trust, reassures stakeholders, and reinforces the organization’s commitment to its values.

By learning from Starbucks’ crisis management, businesses can better prepare for potential crises, develop effective communication strategies, prioritize employee training, review and adapt policies, and demonstrate leadership accountability. These lessons serve as a valuable guide for businesses aiming to navigate crises successfully and protect their reputation and stakeholders’ trust.

Final Words 

Starbucks crisis management case study provides valuable insights into how a company can effectively handle a challenging situation that threatens its reputation and brand image. The case highlighted the importance of timely response, transparent communication, and proactive measures to address the underlying issues. Starbucks demonstrated leadership accountability, employee training, and policy changes to foster inclusivity and prevent future incidents.

By learning from Starbucks’ crisis management case study, businesses can better prepare themselves to handle crises effectively, protect their reputation, and maintain the trust of their stakeholders. The lessons learned serve as a valuable guide for businesses of all sizes and industries, emphasizing the importance of crisis preparedness, communication, employee training, policy review, and leadership accountability

About The Author

Tahir Abbas

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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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Starbucks – Case Solution

This case study analysis focuses on the identification and examination of the forces in the competitive environment surrounding Starbucks and the company's ability in relation to the coffee industry. It discusses the core competencies of Starbucks and the alternatives and opportunities for growing its retail operations.

​Mary M. Crossan; Ariff Kachra Harvard Business Review ( 98M006-PDF-ENG ) June 18, 1998

Case questions answered:

Case study questions answered in the first solution:

• Section I: Situation Analysis. Write a summary of the situation of the market Starbucks is operating in at the time of the case. The purpose of the Situation Analysis is to frame the environment in which Starbucks is operating and planning to grow. In order to assist in this section, a copy of a well-respected tool entitled the 5Cs. This is a format you can use as a general reference in order to develop a picture of Starbucks’ opportunities and challenges.
• Section II: Starbucks Position. Describe Starbucks’ apparent position in the market. Describe the primary values that Starbucks brings to its target audience(s). Highlight critical features and attributes that make the Starbucks brand “real” and believable in the eyes of consumers.
• Section III: Options. In your analysis of the Market and Starbucks position, develop 3 options you believe Starbucks should consider as they move to expand and grow the business. Cite and briefly explain one primary reward that might be achieved for each option and one primary risk that might cause the option to fail.
• Section IV: Proposal. Develop a set of Guidelines for Starbucks management to follow in making decisions to adopt options and expand the business while staying true to the delivery of market expectations. This section should be reasonably specific as to the things and values Starbucks would want to include in any expansion of its brand, including internal growth and external opportunities (e.g., Frappuccino).

Case study questions answered in the second solution:

• What is your assessment of the impact of each of the five competitive forces on the retail coffee-house industry?
• Based on your assessment of these forces, how attractive is this industry? Explain your answer.

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Starbucks Case Answers

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Problem Statement – Starbucks Case Study

The problem statement, in this case, is trying to figure out where to take Starbucks from here.

Situational Analysis – The Starbucks Company

The market size and growth are consistently expanding, which means consumers are not worried about spending their money on quality drinks. Consumers’ perception of coffee has changed as the lifestyle behind coffee has changed.

If Starbucks tackles the international market, it would only benefit the company as it could be ahead of competitors and have the first mover’s advantage. Making sure they maintain their brand locally and internationally will increase consumers’ brand loyalty as well as their cash flow.

PESTEL Analysis

Political/legal.

Starbucks should keep in mind the  taxation policy. Some countries impose high taxation on farmers, for example. Any sort of fluctuation in taxes on supplies will be apparent in products and will affect consumers.

The company should also keep in mind trade regulations. Some countries like Argentina and Saudi Arabia have stricter laws when it comes to trade. The company needs to make sure, when it goes globally, that it keeps its mission, vision, and product intact while respecting the culture.

Starbucks needs to keep in mind certain aspects, such as the inflation rate, growth in average income, and the growth of the economy .

There are certain risks that come with going internationally. For example, if the economy stops growing as opposed to what the company predicts, then that could affect the business majorly. Consumers will not spend on the company’s products, and it will leave the company with a dent in its profitability.

Porter’s Five Forces: Competitive Rivalry

Starbucks has shown tremendous growth and strength in its brand. However, competitors are able to affect their success. The company’s US competitors are Green Mountain, Brothers, Coffee People, Diedrich, and other products such as juice, soft drinks, and non-coffee-related drinks.

As shown in Exhibit 1, the company seems to be the lead in the industry compared to U.S. and Canadian companies.

The company should keep in mind the consumers in order to beat any incoming competitor, whether it is a coffee drink, place, or a non-coffee drink. The mind of the market is based on consumers’ needs and wants, and based on that, the company should cater to the consumer.

At the same time, they should keep in mind their vision, mission, and environment while catering to their consumer.

Starbucks Position

Starbucks positions itself in the market as a…

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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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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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