starbucks global strategy case study

• International Marketing

Starbucks’ International Strategy: A Comprehensive Analysis

• January 25, 2024

Table of Contents

Unveiling the success of starbucks’ international strategy, starbucks’ adaptability to diverse cultures, multi-domestic strategy: balancing local responsiveness and global integration, factors contributing to starbucks’ international success, starbucks’ expansion phases and emerging markets, lessons learned and future outlook, faqs about starbucks’ international strategy.

In the heart of Seattle, Washington, a small coffee shop named Starbucks opened its doors in 1971, offering a haven for coffee enthusiasts seeking an exceptional cup of joe. Little did they know that this humble beginning would transform into a global phenomenon, with over 32,000 stores spanning over 80 countries , serving billions of customers annually (Schultz, 2019). Starbucks’ remarkable international expansion stands as a testament to its astute strategy , unwavering commitment to quality, and ability to adapt to diverse cultures worldwide.

Starbucks’ international strategy, dubbed the “multi-domestic approach,” strikes a delicate balance between global standardization and local responsiveness . This strategy recognizes the importance of maintaining a consistent brand identity across all locations while simultaneously tailoring offerings to meet local preferences. Starbucks has successfully navigated this delicate balance by delegating decision-making to local franchisees, adapting menu items, and customizing marketing campaigns (Keegan, 2019).

A prime example of Starbucks’ adaptability is evident in its Japanese stores, where it offers matcha-infused beverages and traditional Japanese décor to resonate with local tastes and customs (Nishiyama, 2023). In China, Starbucks has embraced the concept of “social drinking,” creating a welcoming atmosphere that encourages customers to linger and socialize (Sang, 2018). This cultural sensitivity has been instrumental in Starbucks’ success in these markets , demonstrating its ability to connect with customers on a deeper level.

Key factors contributing to Starbucks’ international success include its premium positioning, strong brand identity, and customer-centric approach. The company has consistently maintained its premium brand image , charging slightly higher prices than its competitors, while simultaneously offering a unique and differentiated customer experience (Berman, 2018). Starbucks’ strong brand identity is evident in its sleek store designs, recognizable logos, and loyal customer base.

Starbucks’ commitment to customer satisfaction has been a driving force behind its success. The company has consistently invested in training its baristas to deliver exceptional customer service , ensuring a consistent and welcoming experience across all locations (Nishiyama, 2023). Additionally, Starbucks has embraced social responsibility initiatives, such as fair trade practices and sustainable sourcing, further strengthening its brand reputation and attracting socially conscious consumers.

Starbucks’ international expansion journey has unfolded in distinct phases, with its initial focus on North America followed by a foray into Europe and Asia. The company has faced challenges and opportunities along the way, particularly in emerging markets such as China and India, where it has partnered with local companies to gain a foothold and adapt to local regulations (Schultz, 2019).

Starbucks’ global strategy reflects its understanding of the intricate interplay between local customs and global trends. By balancing local responsiveness with global integration, Starbucks has successfully captured the hearts and palates of coffee enthusiasts worldwide . As the company continues to expand into new markets , it will undoubtedly face new challenges and opportunities. However, with its proven track record of adaptability, cultural sensitivity, and strategic decision-making, Starbucks is well-positioned to continue its remarkable global journey.

In its relentless pursuit of global domination, Starbucks has mastered the art of cultural sensitivity, seamlessly blending its core brand identity with local customs and preferences to create a truly inviting and authentic experience for its patrons worldwide. This deep cultural understanding has been instrumental in Starbucks’ remarkable success in expanding into diverse markets, from the traditional tea-drinking culture of Japan to the vibrant coffee scene of Italy.

Harnessing Regional Flavors and Traditions

One of Starbucks’ most effective strategies for adapting to local cultures is its incorporation of regional ingredients, flavors, and design elements into its international stores. In Japan, for instance, Starbucks has introduced matcha-infused beverages, a nod to the country’s deep-rooted tea culture. Similarly, in France, the company has introduced Vienesse coffee, as well as foie gras and brioche sandwiches.

Beyond beverages and pastries, Starbucks has also embraced local design elements to create a sense of place in its international locations . In China, Starbucks stores often feature traditional Chinese décor, such as red lanterns and bamboo accents, while in Korea, stores may feature Korean-style seating arrangements and traditional artwork .

Understanding Local Customs and Traditions

Beyond menu items and décor, Starbucks’ cultural sensitivity extends to understanding and respecting local customs and traditions . In China, where social gatherings are a significant part of the culture, Starbucks has created a welcoming atmosphere that encourages customers to linger and socialize. In Japan, where politeness and respect are paramount, Starbucks staff is trained to greet customers with a bow and maintain a respectful demeanor.

Balancing Global Standardization with Local Responsiveness

Starbucks’ ability to balance global standardization with local responsiveness is a key factor behind its success in diverse markets. The company maintains a core set of brand standards , ensuring consistency in quality and customer experience across all locations . However, it also delegates decision-making to local franchisees, allowing them to tailor offerings to meet local preferences. This approach allows Starbucks to leverage its global brand while adapting to the unique nuances of each market.

In India, for instance, Starbucks has adapted its menu to incorporate chai , a traditional Indian tea, as well as local bakery items. In the United Arab Emirates, the company has partnered with a local coffee roaster to source premium Arabica beans, catering to the region’s preference for strong coffee. By striking this delicate balance, Starbucks has successfully navigated the cultural landscape of each market , winning over new customers and solidifying its position as a global coffee leader.

Starbucks’ international expansion strategy is characterized by its ability to strike a delicate balance between global standardization and local responsiveness, a concept known as the multi-domestic strategy. This approach allows Starbucks to maintain its core brand identity and operational standards while simultaneously adapting its offerings and marketing strategies to meet the unique preferences and customs of each market.

Delegation of Decision-Making

At the heart of Starbucks’ multi-domestic strategy lies the delegation of decision-making power to local franchisees . This localization approach empowers local partners to understand and respond to the specific needs of their respective markets. By giving franchisees the autonomy to adapt menu items, design elements, and marketing campaigns, Starbucks ensures that its presence in each market feels authentic and resonates with local tastes.

Examples of Local Adaptation

In India, where tea is a deeply ingrained cultural beverage, Starbucks has introduced chai-infused drinks and partnered with local tea suppliers to offer authentic Indian tea experiences. In Japan, the company has incorporated matcha-flavored beverages and traditional Japanese décor to cater to the country’s tea-drinking culture . These examples demonstrate Starbucks’ ability to seamlessly integrate local flavors and customs into its global brand identity .

Customizing Marketing Campaigns

Starbucks’ marketing efforts are equally tailored to local markets. In China, where social gatherings are commonplace, Starbucks has launched campaigns that promote its stores as a gathering place for friends and families. In Japan, where politeness and respect are highly valued, Starbucks has emphasized its commitment to providing a welcoming and customer-centric experience .

Balancing Standardization with Responsiveness

The multi-domestic strategy presents a delicate balancing act , requiring Starbucks to maintain a consistent brand identity while adapting to local preferences. The company achieves this balance by setting clear global standards for quality, service, and customer experience , while simultaneously delegating decision-making on non-essential aspects to local franchisees.

Starbucks’ remarkable international expansion is not merely a matter of luck or coincidence. The company’s success can be attributed to a combination of strategic decisions, cultural sensitivity, and a commitment to providing an exceptional customer experience .

Premium Positioning and Strong Brand Identity

Starbucks has successfully positioned itself as a premium coffee brand , charging slightly higher prices than its competitors. This premium positioning has allowed the company to maintain a consistent and differentiated customer experience across all international locations. Starbucks’ strong brand identity, characterized by its iconic logo, sleek store designs, and consistent quality, has further solidified its position as a global leader in the coffee industry (Berman, 2018).

Consistent Quality and Brand Standards

Despite operating in diverse markets, Starbucks has maintained a high level of consistency in terms of product quality and brand standards . The company’s global quality assurance program ensures that its coffee beans are sourced sustainably and roasted to a consistent standard. Additionally, Starbucks’ training programs for baristas help maintain consistent customer service and beverage quality across all locations (Keegan, 2019).

Effective Marketing Strategies and Social Responsibility Initiatives

Starbucks has effectively leveraged marketing campaigns to connect with customers and enhance its brand image. The company’s “Share a Cup of Happiness” campaign, for instance, tapped into the emotional appeal of coffee as a social and cultural beverage. Starbucks has also demonstrated a commitment to social responsibility, supporting initiatives such as fair trade practices and environmental sustainability . These efforts have further bolstered the company’s reputation and attracted socially conscious consumers (Nishiyama, 2023).

Starbucks’ international expansion has unfolded in distinct phases, reflecting the company’s evolving strategy and market opportunities. From its initial focus on North America, Starbucks has steadily expanded its presence across Europe, Asia, and more recently, emerging markets like China and India. Each phase has brought unique challenges and opportunities, requiring the company to adapt its approach and leverage strategic partnerships to succeed in these diverse markets.

Early Expansion in North America: Laying the Foundation

Starbucks’ international journey began in 1996 with its first store in Japan , marking the company’s foray beyond its home market of Seattle, Washington. This initial expansion was followed by a steady growth in North America, with Starbucks establishing a strong foothold in the United States and Canada. During this phase, the company focused on replicating its successful formula of premium coffee, comfortable ambiance, and exceptional customer service .

European Expansion: Adapting to Local Tastes

In 2000, Starbucks entered the European market, targeting major cities like London, Paris, and Milan. However, the company faced challenges adapting its American-centric approach to the European market , where coffee culture is deeply rooted and preferences vary significantly from country to country. To address these challenges, Starbucks adopted a more localized approach, tailoring its menu items and store designs to suit local tastes and preferences. For instance, in Italy, Starbucks introduced espresso-based beverages and partnered with local coffee roasters to source premium Italian beans.

Asian Expansion: Navigating Diverse Markets

Starbucks’ expansion into Asia presented another set of challenges, with the region encompassing diverse cultures, tastes, and market conditions. In China, Starbucks encountered a market where tea is deeply ingrained in the culture . To cater to local preferences, Starbucks introduced chai lattes and adapted its store designs to incorporate Chinese elements . In India, where coffee consumption is relatively low, Starbucks partnered with local tea companies to offer chai-infused beverages and adapt its menu to align with local tastes.

Emerging Markets: Strategic Partnerships and Cultural Sensitivity

Starbucks’ expansion into emerging markets like China and India has highlighted the importance of cultural sensitivity and strategic partnerships . In China, Starbucks has partnered with local conglomerate Alibaba to leverage its e-commerce platform and expand its reach. In India, the company has partnered with Tata Consumer Products , a leading Indian consumer goods company, to gain access to local distribution networks and consumer insights.

Throughout its international expansion, Starbucks has demonstrated a remarkable ability to balance global standardization with local responsiveness, adapting its approach to suit the unique nuances of each market. The company’s success in emerging markets like China and India is a testament to its commitment to cultural sensitivity and its ability to form strategic partnerships that leverage local expertise and resources.

Starbucks’ remarkable international expansion journey has been marked by a series of strategic decisions, cultural adaptations, and strategic partnerships that have propelled the company to become a global coffee giant . As Starbucks continues to expand its reach, it is crucial to reflect on the lessons learned from its past experiences and identify key factors that will shape its future growth.

Key Takeaways from Starbucks’ International Strategy

Throughout its international expansion, Starbucks has accumulated valuable insights that serve as valuable lessons for other businesses seeking to venture into new markets. These lessons include:

• Adaptability and Cultural Sensitivity: Starbucks’ success hinges on its ability to adapt its offerings and marketing strategies to align with local customs and preferences. Understanding the nuances of each market is essential for building a strong brand presence and fostering customer loyalty.
• Balance of Global Standardization and Local Responsiveness: Starbucks has successfully navigated the delicate balance between maintaining global consistency and adapting to local preferences. This requires a multi-domestic strategy that empowers local franchisees to make decisions while adhering to core brand standards.
• Strategic Partnerships: Starbucks has leveraged strategic partnerships to gain access to local expertise, distribution channels, and consumer insights. These partnerships have been instrumental in the company’s success in emerging markets like China and India.
• Commitment to Quality and Customer Experience: Starbucks has consistently maintained its focus on providing high-quality products and exceptional customer service across all international locations. This commitment has been a cornerstone of the company’s success in building a loyal customer base.

Future Outlook and Potential for Further Growth

Starbucks is well-positioned for continued international growth , with over 32,000 stores spanning over 80 countries. The company’s strong brand reputation, customer-centric approach, and ability to adapt to local markets are key factors that will drive its future success.

However, Starbucks faces several challenges in its quest for further international expansion. These challenges include:

• Evolving Consumer Preferences: The coffee industry is constantly evolving, with changing consumer preferences and the emergence of new competitors. Starbucks will need to remain agile and adapt its offerings to stay ahead of the curve.
• Economic and Political Factors: Economic and political instability in certain markets can pose significant challenges for Starbucks’ operations and growth prospects. The company will need to carefully assess these risks and tailor its expansion strategies accordingly.
• Competition from Local Coffee Brands: Starbucks faces stiff competition from local coffee brands that possess a deep understanding of their respective markets. The company will need to differentiate itself through its brand image, product quality, and customer service to maintain its competitive edge.

Despite these challenges, Starbucks is poised to remain a dominant player in the global coffee industry . The company’s strong brand, customer focus, and adaptability will continue to drive its growth in new markets. Starbucks is well-positioned to capitalize on emerging trends in the coffee industry, such as the increasing demand for specialty coffee and the growing popularity of mobile ordering and delivery.

Starbucks’ international strategy is a multi-domestic strategy, which means that the company adapts its products, marketing, and operations to local preferences in each market it enters. This approach allows Starbucks to maintain its core brand identity while resonating with customers in diverse cultures.

Several factors contribute to Starbucks’ international success, including: • Cultural Mindfulness : Starbucks carefully considers local customs, tastes, and preferences to tailor its offerings and marketing strategies accordingly. This cultural sensitivity has enabled the company to gain a foothold in markets with varying coffee cultures. • Market Research : Starbucks conducts extensive market research to gain a deep understanding of each market’s unique characteristics, consumer demographics, and competitive landscape. This data-driven approach informs strategic decisions and ensures that Starbucks’ offerings are relevant to local customers. • Local Partnerships : Starbucks forms strategic partnerships with local companies and experts to gain access to market insights, distribution channels, and cultural understanding. These partnerships have been instrumental in Starbucks’ success in emerging markets like China and India. • Strong Brand Integrity : Despite adapting to local preferences, Starbucks maintains a strong and consistent brand identity across all international locations. This consistency reinforces the brand’s reputation for quality, innovation, and customer service.

No, Starbucks is not using a translational strategy. A translational strategy involves imposing a standardized approach across all international markets, regardless of local differences. Starbucks’ multi-domestic strategy, on the other hand, emphasizes adaptability and customization to suit local preferences .

Starbucks employs three strategies for market entry: 1. Wholly-Owned Subsidiaries : Starbucks directly owns and operates its stores in these markets, allowing for complete control over operations and brand consistency. 2. Joint Ventures : Starbucks partners with local companies to jointly own and operate stores, leveraging local expertise and market knowledge. 3. Licensing : Starbucks grants local companies the right to use its brand and operate stores in exchange for royalties and fees . This approach expands Starbucks’ reach without the need for direct investment.

Starbucks’ multi-domestic strategy has been a key driver of its global success by enabling the company to seamlessly integrate into diverse markets while maintaining its core brand identity. The company’s commitment to cultural mindfulness, market research, local partnerships, and strong brand integrity has allowed it to cultivate a loyal customer base worldwide.

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Starbucks Marketing Strategy 2024: A Case Study

Starbucks, the world’s largest coffeehouse chain, has gained global recognition and respect for its innovative marketing strategies. With a relentless focus on customer engagement, brand building, and product innovation, Starbucks has successfully positioned itself as a market leader in the coffee industry. In this case study, we will explore Starbucks’ marketing strategy in 2024, examining its growth, target market, and key initiatives that have contributed to its success.

Key Takeaways:

• Starbucks entered the Indian market in 2011 and experienced significant growth, expanding from 1 store in 2011 to 84 stores in 2015.
• The brand targets higher wage-earning professionals, business owners, and higher-end customers in the 22-50 age group.
• Starbucks caters to urban, health-conscious, and class-conscious individuals, offering premium coffee experiences.
• The company’s marketing strategies involve effective segmentation, social media engagement, digital expansion, and continual product innovation.
• Starbucks operates in over 80 countries worldwide, leveraging its global presence and market reach.

About Starbucks

Starbucks, the renowned coffee-house chain, offers a wide variety of hot and cold beverages, catering to the diverse preferences of coffee enthusiasts worldwide. From irresistible whole-bean coffee and carefully crafted espresso to refreshing teas, lattes, and other specialty drinks, Starbucks has become synonymous with quality and innovation in the coffee industry.

Operating in over 80 countries, Starbucks has established itself as a global leader, with more than 19,767 outlets and licensed stores. The company’s commitment to providing exceptional coffee experiences has positioned it as a go-to destination for coffee lovers.

Starbucks prides itself on its premium pricing strategy, offering a range of products that are around 25% higher in price compared to value brands. Despite this higher price point, customers are drawn to Starbucks for its unparalleled quality and a commitment to an elevated coffeehouse experience.

Logo Evolution

Over the course of its 47-year existence, the Starbucks logo has undergone four redesigns. The latest update, in 2011, was the result of a collaboration with the NYC-based creative agency Lippincott. The evolution of the logo showcases Starbucks’ commitment to staying relevant in an ever-changing market.

Mobile Ordering and Marketing Channels

Recognizing the shift towards digital convenience, Starbucks launched its first mobile app in 2009, followed by in-app payment options in 2011. In 2014, the company introduced the game-changing features of mobile order ahead, prepay, and pickup.

To reach its target audience effectively, Starbucks employs a multifaceted marketing approach. The company leverages various channels, including social media platforms and impactful TV spots, to connect with customers and build brand loyalty. Despite spending significantly less on marketing compared to major brands like Apple and Nike, Starbucks has managed to cultivate a strong and engaged customer base.

Target Audience and Global Presence

Starbucks caters to men and women in the middle to upper classes who can afford higher-priced beverages regularly. By providing a premium customer experience, Starbucks targets middle-aged individuals with higher purchasing power, ensuring that every cup exceeds their expectations.

With a staggering presence in over 62 countries, Starbucks operates thousands of outlets and licensed stores, making it one of the most recognizable coffee brands globally. The company’s commitment to expansion has facilitated its dominance in the market, with a notable market share of 35.7%, firmly establishing itself as the industry leader.

Stay tuned for the next section, where we explore Starbucks’ journey and growth in the Indian market.

Starbucks in India

In 2011, Starbucks made its official entry into the Indian market through a joint venture with Tata Consumer Products Limited. This strategic partnership allowed Starbucks to tap into the vast potential of the Indian market, known for its diverse culture and growing economy.

India, the seventh largest economy globally and the second most crucial emerging market based on GDP, offered Starbucks a lucrative opportunity to establish a strong foothold. By combining Starbucks’ global presence and expertise with Tata’s local knowledge and resources, the premium coffee brand aimed to capture the hearts of Indian consumers.

Prior to its market entry, Starbucks trademarked the “Starbucks” brand in 10 Indian languages as early as 2008, highlighting its commitment to localization. This attention to detail and understanding of Indian preferences allowed Starbucks to position itself as a premium brand associated with quality, service, and lifestyle.

Starbucks’ joint venture with Tata Consumer Products officially launched Tata Starbucks in October 2012. Since then, Starbucks has rapidly expanded in India, becoming the leading café brand with 341 stores across 43 cities. Through continuous innovation and adaptation, Starbucks has successfully catered to Indian tastes, offering popular beverages like filter coffee, masala chai, elaichi chai, and signature milkshakes at competitive price points.

Starbucks’ focus on localizing its brand is also evident in its marketing campaigns . For instance, the brand launched the #ItStartsWithYourName campaign, emphasizing inclusivity and creating familiarity in its cafes by addressing customers by their names. Furthermore, Starbucks featured a transgender model named Sia in one of its campaigns, promoting acceptance and diversity in Indian society.

To enhance the customer experience, Starbucks implemented a nationwide expansion after a successful pilot project in four cities. The campaign’s emphasis on connectivity and warmth in coffee shops resonated with Indian consumers, strengthening Starbucks’ position in the Indian market.

Starbucks’ growth in India and its commitment to a premium brand positioning have solidified its position in the country’s coffee market. Through localization, innovation, and a focus on customer connections, Starbucks continues to thrive in India, catering to the diverse tastes and preferences of Indian consumers.

The Growth of Starbucks in India

In the early years of its operations in India, Starbucks focused on establishing a strong presence in major cities like Mumbai, Delhi, Bangalore, and Chennai. The company strategically opened stores in upscale locations and partnered with popular shopping centers to attract its target audience of affluent consumers. Over the years, Starbucks expanded its footprint and penetrated deeper into the Indian market by opening stores in emerging metro cities and Tier-II cities.

This aggressive expansion strategy has allowed Starbucks to tap into the growing consumer base and capitalize on the country’s robust economic growth. India, being the seventh-largest economy globally and one of the fastest-growing emerging markets, presents immense opportunities for Starbucks to thrive.

In its pursuit of growth, Starbucks has leveraged its partnership with Tata Global Beverages, forming the 50:50 joint venture known as “Starbucks – A Tata Alliance.” This collaboration has provided Starbucks with the necessary local knowledge and resources to navigate the Indian market effectively.

Furthermore, the adaptation of Starbucks’ menu to include traditional Indian tea (chai) and local bakery items has played a pivotal role in appealing to the Indian palate and enhancing the brand’s localization strategy. By incorporating local flavors and preferences, Starbucks has successfully created a unique experience for its Indian customers.

While India’s market entry may present challenges when compared to China, Starbucks’ strategic approach, premium brand image, and commitment to employee care, such as paying tuition fees for baristas, have contributed to its steady growth in the country. As Starbucks continues to capitalize on India’s growth rates and expand its presence, the company remains poised for further success in one of the world’s most promising markets.

Localization and Innovation

Starbucks, known for its global presence and innovative approach, understands the importance of catering to the unique tastes and preferences of local markets. By embracing localization and fostering innovation, Starbucks has been able to create an exceptional customer experience tailored to each region.

One of the ways Starbucks achieves localization is by introducing menu items that resonate with the local culture and preferences. In India, for example, Starbucks offers the “Chai Tea Latte,” a beloved beverage in the country. Similarly, in Japan, Starbucks introduced matcha-infused beverages, taking advantage of the local fascination with green tea.

Furthermore, Starbucks continuously innovates to enhance customer convenience. The company introduced concepts such as the Starbucks Drive-Thru, allowing customers to enjoy their favorite beverages on the go. With the Mobile Order & Pay feature, customers can now place their orders and make payments through the Starbucks mobile app, saving them time and enhancing their overall experience.

Starbucks’ commitment to localization and innovation not only allows the company to adapt to different markets but also strengthens its connection with customers. By offering localized menu items and convenient innovations, Starbucks ensures that customers feel valued and understood, fostering loyalty and satisfaction.

Images of Starbucks stores bustling with customers enjoying their personalized beverages and the vibrant atmosphere of local communities showcase the successful implementation of Starbucks’ localization and innovation strategies.

In the next section, we will explore how Starbucks builds deep connections with local communities through community engagement and sustainability initiatives.

Building Deep Community Connections

Starbucks goes beyond just serving coffee; it actively engages with local communities and partners with non-profit organizations to support social causes. The company understands the importance of community engagement in building a strong brand identity and fostering customer loyalty.

In India, Starbucks collaborates with local artisans and suppliers, infusing traditional Indian elements into its store designs and merchandise. By incorporating local culture and craftsmanship, Starbucks creates a sense of belonging and resonates with the community.

Sustainability is a fundamental aspect of Starbucks’ community initiatives. The company promotes responsible sourcing by prioritizing ethically and sustainably grown coffee beans. Moreover, Starbucks actively takes steps to reduce waste and invests in renewable energy, further highlighting its commitment to sustainability.

Through its community engagement efforts, Starbucks creates a platform for customers, partners, and the community to come together and make a positive impact. The Starbucks online community is a testament to this commitment, generating over 150,000 ideas that have been implemented hundreds of times.

The initiative that connects those in need with those who can help exemplifies Starbucks’ dedication to creating deeper connections within the community. This program demonstrates the power of partnership and highlights the sense of togetherness fostered within the Starbucks community.

Ultimately, Starbucks’ focus on community engagement and sustainability initiatives not only enhances customer engagement but also motivates employees to be part of a larger purpose. By fostering a sense of belonging and creating positive change, Starbucks continues to strengthen its relationship with the community and reinforce its brand values.

Starbucks in India: Key Statistics

As of 2015, Starbucks had [Starbucks in India] stores in India, representing its growing presence in the country’s coffee market. The number of stores reflects Starbucks’ commitment to expanding its footprint and catering to the diverse tastes of Indian consumers.

Although the market share data beyond 2015 is currently unavailable, Starbucks has undoubtedly made a significant impact in the Indian coffee industry. With its joint venture with Tata Global Beverages, Starbucks entered the Indian market in 2011, establishing a strong partnership that combines Tata’s local knowledge and resources with Starbucks’ global expertise.

The expansion of Starbucks in India is a testament to the success of its business model and marketing strategies. Through its localization efforts, Starbucks has adapted its menu to include traditional Indian flavors like chai and local bakery items, attracting customers who appreciate a blend of international and local experiences.

While Starbucks’ market share in India has steadily increased over the years, it continues to face competition from both international and local coffee chains. However, the brand’s commitment to quality, innovative offerings, and exceptional customer service sets it apart and has contributed to its steady growth in the Indian market.

With the rapid growth of India’s economy and the increasing disposable income of its population, Starbucks has positioned itself to capitalize on the country’s growing demand for premium coffee experiences. As Starbucks continues its expansion in India, it is poised to further solidify its presence in the country’s coffee industry, creating memorable moments for its customers, one cup at a time.

Starbucks Target Market

Starbucks has successfully established itself as a leading brand in the coffee industry, and its marketing efforts are strategically tailored to target a specific market segment . The brand primarily focuses on higher wage-earning professionals, business owners, and other higher-end customers between the ages of 22 and 50. This target market comprises both males and females who are highly educated, health-conscious, and reside in urban and suburban areas.

One key characteristic of Starbucks’ target market is their average income, which exceeds $90,000. This demographic’s disposable income allows them to afford Starbucks’ premium offerings and positions them as the ideal customer for the brand’s higher-priced beverages and gourmet coffee options.

In addition, Starbucks’ target market values quality and is willing to pay a premium for a superior coffee experience. The brand’s emphasis on sustainable sourcing and social responsibility resonates with this demographic, as they prioritize brands that align with their values.

Starbucks strategically selects store locations in urban and suburban areas to attract their target audience. Their preference for walk-ins and drive-thrus aligns with the busy, on-the-go lifestyle of higher wage-earning professionals. In fact, 80% of Starbucks orders are from pickups and drive-thrus, indicating the habits and preferences of their target market.

To cater to their target audience, Starbucks employs various marketing strategies. The brand places a strong emphasis on customer experience, ensuring that each interaction with the brand is memorable and enjoyable. Starbucks was also an early adopter of providing free WiFi in their stores, recognizing that 96% of consumers prefer businesses that offer this amenity. Their mobile ordering apps have further enhanced convenience and accessibility for their target market.

Overall, Starbucks’ marketing strategies are specifically designed to engage and attract higher wage-earning professionals who appreciate and value a premium coffee experience. By consistently focusing on the needs and preferences of their target market, Starbucks has been able to maintain its dominance in the coffee industry while continuously expanding its global presence.

Marketing Strategies of Starbucks

Starbucks is renowned for its strategic marketing efforts that have contributed to its global success. The company focuses on brand building, customer experience, product innovation, and digital engagement to drive its marketing strategy.

One of the key aspects of Starbucks’ marketing strategy is its commitment to product innovation. The company continuously introduces new and unique beverages and food items to cater to evolving consumer preferences. This approach not only keeps customers engaged but also promotes repeat purchases and word-of-mouth marketing.

Another critical element of Starbucks’ marketing strategy is social media marketing . The brand leverages platforms like Instagram, Facebook, and Twitter to connect with its target audience, share updates, and engage in meaningful conversations with customers. Through compelling visuals and interactive content, Starbucks creates a strong online presence and builds a community around its brand.

Furthermore, Starbucks prioritizes sustainability and responsible sourcing as part of its marketing strategy. The company’s commitment to ethical and environmentally friendly practices resonates with today’s conscious consumers and helps differentiate Starbucks from its competitors.

Starbucks’ mobile app, launched in 2009, plays a crucial role in its marketing strategy. The app not only enables customers to place orders and make payments conveniently but also provides personalized offers and rewards, enhancing the overall customer experience. In-app payment features, introduced in 2011, have further streamlined the ordering process and cemented Starbucks’ position as a leader in mobile commerce.

Despite being a global brand, Starbucks spends significantly less on marketing compared to other major companies like Apple and Nike. This approach highlights the effectiveness of its marketing strategies and the strong brand recognition it has built over the years.

Key Takeaways

• Starbucks’ marketing strategy focuses on product innovation, social media marketing, and sustainability.
• The company continuously introduces new and unique beverages and food items to cater to evolving consumer preferences.
• Starbucks leverages social media platforms to connect with its target audience and build a strong online presence.
• The brand prioritizes sustainability and responsible sourcing to appeal to conscientious consumers.
• The Starbucks mobile app plays a crucial role in enhancing the customer experience and driving customer loyalty.
• Despite spending less on marketing compared to other major companies, Starbucks has established strong brand recognition and global success.

Benefits of Starbucks’ Marketing Strategies

Starbucks has established itself as a global coffeehouse chain through its effective marketing strategies, which have yielded several key benefits.

Effective Segmentation

One of the primary benefits of Starbucks’ marketing strategies is its ability to effectively segment the target audience based on socio-economic factors. By understanding the preferences and lifestyles of its customers, Starbucks has been able to tailor its offerings to meet their needs. For example, Starbucks caters to health-conscious professionals by offering a range of ethically sourced, organic, and low-calorie menu options.

This effective segmentation allows Starbucks to create personalized experiences for its customers, which in turn builds customer loyalty and drives repeat business. Whether it’s through loyalty programs, personalized recommendations, or customized promotions, Starbucks ensures that each interaction with its customers is meaningful and relevant.

Global Recognition

Through its consistent marketing efforts, Starbucks has achieved remarkable global recognition. With its iconic logo and distinctive store design, Starbucks has become synonymous with high-quality, premium coffee. The company’s commitment to innovation and creating a unique customer experience has positioned it as a leader in the industry.

Starbucks’ global presence and reach are further evidenced by its operations in 70 countries worldwide. The brand’s ability to adapt to local cultures while maintaining a consistent brand experience has contributed to its global recognition and success.

Customer Loyalty

Another significant benefit of Starbucks’ marketing strategies is the cultivation of customer loyalty. Starbucks invests in loyalty programs, such as the Starbucks Rewards program, to incentivize repeat visits and purchases. Through these programs, customers earn points and enjoy personalized offers, enhancing their overall experience and encouraging brand loyalty.

Additionally, Starbucks’ focus on creating a consistent brand experience across all locations, often referred to as “the third place” by customers, promotes a sense of community and encourages customers to relax and socialize within Starbucks stores. This unique atmosphere fosters a strong emotional connection with the brand, resulting in increased customer loyalty.

Overall, Starbucks’ marketing strategies have proven to be highly effective, resulting in benefits such as effective audience segmentation, global recognition, and customer loyalty. By understanding and catering to the needs of its target market, Starbucks continues to thrive in the competitive coffee industry.

Key Findings and Future Outlook

Starbucks has emerged as a dominant player in the coffee industry, capturing a market share of 36.7% and generating a revenue of $14.89 billion in 2013. Despite the challenges posed by changing consumer preferences and increasing competition, the company’s commitment to quality, innovation, and exceptional customer experience has propelled its success.

The industry itself has exhibited sluggish growth, with an average annual growth rate of only 0.9% from 2008 to 2013. However, the future outlook appears promising, as the industry is projected to grow at an annualized rate of 3.9% over the next five years, potentially reaching $35.1 billion in revenues in the US.

Starbucks’ global strategy, combined with its localization efforts, has been a key driver of its success. The company has successfully integrated regional flavors, design elements, and menu items to cater to local preferences, allowing Starbucks to maintain global brand standards while adapting to diverse markets.

Starbucks’ emphasis on customer satisfaction and exceptional service has fostered a loyal customer base and enabled the company to differentiate itself from competitors. The Starbucks Rewards program, with its millions of active members, is a testament to the brand’s ability to engage and retain customers.

Furthermore, Starbucks has embraced social responsibility initiatives, such as fair trade practices and sustainable sourcing, which have resonated with conscious consumers and contributed to the company’s positive brand image. By partnering with local companies in emerging markets, Starbucks has successfully navigated regulatory challenges and established a strong presence.

Looking ahead, Starbucks must continue to innovate and adapt to evolving consumer preferences and market dynamics. The company’s focus on operational excellence, product innovation, and digital engagement will be crucial in maintaining its competitive edge and driving future growth.

Starbucks’ marketing strategy has played a pivotal role in establishing the company as a global leader in the coffeehouse industry. With a focus on brand building, customer experience, product innovation, and digital engagement, Starbucks has successfully cultivated a loyal customer base and maintained its position as one of the world’s most admired companies.

By targeting high-income spenders, health-conscious professionals, technology early adopters, and coffee-addict youngsters, Starbucks has positioned itself as a premium brand, selling its products at a higher price point compared to other brands. Despite the premium pricing, Starbucks has been able to attract a substantial following on social media platforms, with over 36 million page likes on Facebook, 17.8 million followers on Instagram, and 11 million followers on Twitter.

In addition to its digital presence, Starbucks has revolutionized the coffee industry by embracing mobile technology. The introduction of the Starbucks app in 2009 and the subsequent launch of mobile order ahead, prepay, and pickup services in 2011 have transformed the way customers interact with the brand and place their orders, contributing to mobile orders accounting for 31% of Starbucks’ total orders in 2019.

With a focus on product quality, diverse promotion channels, premium pricing, and creating a unique retail environment, Starbucks has been able to differentiate itself from the competition and achieve significant success. While facing challenges such as increasing competition and evolving consumer preferences, Starbucks continues to adapt and innovate, ensuring a promising future for the brand.

What is Starbucks’ target market?

How does starbucks engage with local communities, what is starbucks’ approach to sustainability, how has starbucks expanded in india, how does starbucks innovate its menu for the indian market, how does starbucks build brand loyalty, how many starbucks stores are there in india, what are the benefits of starbucks’ marketing strategies, what are starbucks’ key findings and future outlook, what is starbucks’ marketing strategy, related posts:.

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Nina Sheridan is a seasoned author at Latterly.org, a blog renowned for its insightful exploration of the increasingly interconnected worlds of business, technology, and lifestyle. With a keen eye for the dynamic interplay between these sectors, Nina brings a wealth of knowledge and experience to her writing. Her expertise lies in dissecting complex topics and presenting them in an accessible, engaging manner that resonates with a diverse audience.

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Decoding The Starbucks Marketing Strategy: A Complete Guide

By Aditya Shastri

Quick Read   Discover how Starbucks has perfected its marketing strategy to dominate the coffee industry. This Starbucks case study delves into its innovative marketing techniques, digital strategy, and recent campaigns, showcasing why it remains a market leader.

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About Starbucks

Established in 1971 in Seattle, Washington, Starbucks began as a lone storefront specializing in premium coffee beans and equipment. It has grown into a global coffeehouse chain with over 30,000 locations worldwide. The company’s mission is to uplift and nourish the human spirit—one individual, one cup of coffee, and one community at a time. Known for its commitment to sustainability and ethical sourcing, Starbucks is a pioneer in creating a unique coffee culture.

Source: Google

Relevant Updated Statistics

• As of 2023, Starbucks operates in over 80 countries with 33,833 stores globally【source: Statista】
• Starbucks’ revenue for 2022 reached $29.06 billion, a 24% increase from the previous year【source: Starbucks Annual Report 2022】
• The brand’s loyalty program, Starbucks Rewards, has over 24.8 million active members in the United States【source: Starbucks Investor Relations】.

What’s New With Starbucks

Business news.

Starbucks announced plans to open 1,000 new stores in China by 2025, strengthening its presence in one of its fastest-growing markets.

Product Launch

In 2023, Starbucks introduced the Oleato range, featuring coffee infused with olive oil, a bold new addition to their beverage lineup.

Marketing News

Have you ever been called the wrong name? It might seem like a minor detail, but for transgender and non-binary individuals, it can be a daily experience. Starbucks recognized this in their powerful campaign, “Every Name’s a Story.”  This campaign wasn’t just about selling coffee – it was about celebrating inclusivity and diversity.

Celebrity News

In collaboration with singer Taylor Swift, Starbucks promoted the ‘Red (Taylor’s Version)’ album by featuring her favourite drink, the Caramel Nonfat Latte, in stores worldwide.

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But for now, let us continue with our case study on the marketing strategy of Starbucks.

Starbucks Target Market

Starbucks, a premium coffee brand, strategically positions itself in the market with a keen focus on high-income spenders and health-conscious professionals. The market positioning of Starbucks is evident in its appeal to urban, on-the-go consumers seeking quality coffee and a tranquil environment to unwind.

This market positioning of Starbucks attracts a diverse clientele, including technology early adopters and those flexible to change, primarily aged 25-45. Starbucks’ success is built on a deep understanding of its target audience.

This allows them to constantly adapt their offerings and marketing strategies to meet evolving consumer trends and preferences.  This case study will explore how Starbucks uses this knowledge to stay ahead of the curve.

This approach underscores Starbucks’ commitment to reaching beyond the storefront, offering not just coffee but an experience tailored to its discerning clientele.So summed up, their target audience is-

• High-income spenders
• Technology early adopters
• Health-conscious professionals
• Flexible to change
• Reaching beyond the storefront (Online Sales & Engagement)

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Buyer Persona

To provide a clearer understanding of Starbucks’ target audience, refer to the Buyer Persona outlined in our Starbucks case study blog.

Buyer’s Persona

Profession:

Web-Developer

• Seeking a premium coffee experience
• Interested in sustainable and ethically sourced products
• Value convenience and loyalty rewards

Interest & Hobbies

• Enjoying quality time at coffee shops
• Passionate about environmental causes
• Engaged in social media and digital trends

Pain Points

• High prices compared to local coffee shops
• Limited seating in busy locations
• Preference for non-dairy or alternative milk options

Social Media Presence

Starbucks in india.

In the 2010s, Starbucks’ marketing strategy focused on entering the Indian market to capitalize on the ever-growing coffee culture, particularly targeting the niche upper-class segment. Despite an initial announcement in 2007, Starbucks withdrew its plans without explanation, finally making a grand entry in 2011. To establish a strong foothold, the world’s biggest bistro chain forged a 50-50 joint venture with Asia’s largest coffee grower, Tata Consumer Products Limited, for their Starbucks coffee marketing strategy.

Successfully launching its brand, Starbucks’ next critical move was to meticulously define and engage its target audience in India, ensuring sustainable growth and market presence. This strategic approach, outlined in this Starbucks case study, highlights its methodical entry into the Indian market and the partnership that facilitated its successful establishment in the region.

Now, without further ado, let’s get straight into Starbucks’s marketing tactics, exploring their strategic approaches and methods in the market.

Marketing Strategies of Starbucks

Initially, Starbucks’s marketing tactics in India focused on segmenting consumer markets on a socio-economic basis, targeting working professionals seeking a soothing workspace. They strategically placed stores in locations where this demographic was prevalent.

Like many companies entering new markets, Starbucks started with a single segment and expanded upon achieving initial success. Over time, they diversified their target audience to include teenagers and young adults, bolstering their Starbucks coffee marketing strategy through product range expansion and enhanced social media presence.

The market positioning of Starbucks hinges on delivering a unique, differentiated experience that solidifies its reputation as a highly esteemed brand. Their marketing mix integrates digital technology and social media extensively, engaging the modern, tech-savvy generation for promotions and customer interaction.

This approach has not only fortified their brand identity but also fostered a deep connection with their diverse customer base.

Note: To enhance your expertise, you can explore various courses on digital marketing online that provide in-depth knowledge and the latest industry trends.

Digital Expansion

One of the key priorities of Starbucks’s marketing strategy is expanding its digital interactions with customers. To achieve this goal, it implements several strategies to attract digitally registered customers beyond the rewards program. For example, the coffee chain is offering mobile order services and leveraging Wi-Fi sign-ins at its physical stores.

Starbucks Social Media Strategy

Most people are familiar with Starbucks on social media. The company features several social media accounts that are known for their distinctive branding, interactive posts, and visually pleasing content. The diverse range of content includes recipes, photography, articles, and features. But there’s more than meets the eye. The stream of content can be broken down into a series of campaigns geared at creating a greater sense of Starbucks marketing techniques, enhancing brand awareness, and fostering a sense of community.

Starbucks Product-based Marketing Campaigns

The company focuses on promoting unique and fan-favourite beverages as part of its Starbucks coffee marketing strategy. The brand understands the popularity of its flagship items, particularly the Pumpkin Spiced Latte and Frappuccino, and recognises the demand for this type of content among its audience.

They have even established dedicated social media accounts for these customer favourites, where they actively share relevant and relatable memes to engage their loyal fan base. Additionally, Starbucks leverages user-generated content (UGC), often featuring consumer images of visually appealing products like the Unicorn Frappuccino.

These images are not only reshared across official channels but also incorporated into influencer campaigns, further amplifying their digital marketing efforts.

Starbucks Corporate Social Responsibility-based campaign

Starbucks’ marketing tactics involve leveraging social change as a tool, positioning itself as open-minded and inclusive. One notable example is the #ExtraShotOfPride campaign, which actively supports the LGBT+ community.

Community-based campaigns

#RedCupArt campaign

Another facet of Starbucks’s marketing strategy is its emphasis on highlighting individuals and communities. Take a look at the #RedCupArt campaign, which not only increases engagement but also provides them with a library of UGC content. They use storytelling to showcase acts of courage and kindness in American communities, localizing the content.

Starbucks’s marketing techniques consciously humanize the company by sharing stories on their account, spotlighting employees who play an essential role, especially when consumers are distrustful of big brands.

Just like Starbucks coffeehouses fostered a sense of community in person, their online coffee content creates a similar social experience. This reflects their pioneering role in shaping modern coffee culture.

Festive Marketing

Starbucks has also initiated a new seasonal whole-bean coffee, #StarbucksDiwaliBlend, for its consumers across the country and select global markets. The latest exquisite blend is hand-picked and sourced from Tata Estates in Karnataka and Tamil Nadu.

The Starbucks Diwali Blend was intended as a tribute to the region’s rich and cultural coffee heritage and expertise. They launched the #SketchTheBlend campaign where customers have to share their creativity on the Diwali Blend cup and sleeve and could win 5 free beverages.

Now that you understand the various strategies that comprehensively contribute to their top-notch Starbucks coffee marketing strategy. Let’s dive deeper and analyse their overall digital presence.

Digital Marketing Strategies

Seo (search engine optimization) strategy:.

Starbucks’s marketing tactics involve optimising its online presence by incorporating relevant keywords, high-quality content, and a user-friendly website to improve search engine rankings.

Social Media Marketing  Strategy:

Starbuck’s marketing strategy includes actively engaging with customers on social media platforms, by running targeted ads and interactive content to boost engagement. The brand actively engages with customers on social media platforms, running targeted ads and interactive content to boost engagement.

E-commerce Strategy:

Starbucks’ online store offers a seamless shopping experience, from purchasing coffee beans and equipment to ordering ready-to-drink products.

Mobile App:

The Starbucks mobile app enhances customer convenience with features like mobile ordering, payment, and rewards tracking, showcasing a key aspect of Starbucks’s coffee marketing strategy.

Influencer Marketing Strategy:

Collaborating with influencers and celebrities, Starbucks effectively reaches a broader audience and creates buzz around new product launches and campaigns.

Bonus: Enrolling in a digital marketing course can provide you with the essential skills and knowledge to understand and implement successful strategies, much like those employed by Starbucks.

Starbucks knows its audience is technologically advanced, which makes it imperative for them to have a strong digital marketing strategy. It’s clear how Starbucks prefers marketing on platforms where they have two-way communication instead of platforms like print and television which is more of a one-way communication.

Marketing and Advertising Campaigns

One of Starbucks’ most famous campaigns is “Meet Me at Starbucks,” a global initiative that highlights the diverse ways people connect at their stores. The campaign emphasized the brand’s mission to foster human connection and resulted in increased customer engagement and brand loyalty.

Starbucks launched its social media campaign in 2 phases. The first phase was where they asked their customers to share their ways of reconnecting amidst the pandemic and share their favourite Starbucks memories on their personal Instagram handles with the hashtag Starbucks advertising strategy. In the second phase- ‘Half Cup Full’- they asked their customers to comment on their favourite beverage on the post. They then sent these customers voice notes of baristas hollering the customers’ names along with their favourite beverage to remind them of the famous in-store experience.

This was a great campaign as it not only reminded the people of all the good memories with Starbucks but also made them feel important and valued.

Campaign Analysis:

Starbucks employs a variety of marketing techniques to maintain its market positioning. These include personalised marketing through their rewards program, located store experiences, and a focus on sustainability. Their recent ‘Every Name’s a Story’ campaign is an excellent example of leveraging social issues to build brand loyalty.

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Failed Campaigns

#racetogether campaign.

The campaign aimed to spark conversations about race by having baristas write “Race Together” on cups, which was met with widespread criticism.

Customers and employees felt uncomfortable and questioned the appropriateness of discussing such a sensitive topic in a coffee shop setting.

Starbucks quickly scaled back the campaign, focusing instead on internal initiatives to promote diversity and inclusion.

Top Competitors

In this Starbucks case study, we will explore its competitors and how Starbucks consistently rises above them, showcasing its resilient Starbucks marketing strategy.

Dunkin’ Donuts

Renowned for its extensive range of coffee blends and delectable baked goods, Dunkin’ Donuts has established itself as a favourite among coffee enthusiasts and snack lovers alike.

McDonald’s coffeehouse brand offers a budget-friendly assortment of coffee beverages, providing customers with a convenient and affordable coffee experience alongside their meals.

Costa Coffee

A prominent British coffeehouse chain, Costa Coffee is celebrated for its European presence and commitment to delivering quality coffee in a cosy café atmosphere.

Peet’s Coffee

Known for its artisanal approach to coffee roasting, Peet’s Coffee specialises in high-quality, hand-roasted beans that cater to discerning coffee connoisseurs seeking exceptional flavour profiles.

Tim Hortons

A beloved Canadian institution, Tim Hortons is cherished for its signature coffee blends and freshly baked doughnuts, offering a comforting taste of Canadian hospitality to customers nationwide.

Be it Starbucks or any other company, competition is everywhere. So if you are someone who likes doing research on competitor analysis for other companies, let me help you out. Check out these case studies on the marketing strategy of Jollibee , McDonald’s marketing strategy and the marketing strategy of Dunkin Donuts .

In conclusion, Starbucks’ marketing strategy is a testament to its success in the coffee industry. By focusing on high-income spenders, urban professionals, and tech-savvy individuals, Starbucks has effectively positioned itself as a premium brand.

Their innovative campaigns, such as ‘Every Name’s a Story’ and ‘Meet Me at Starbucks,’ highlight their commitment to inclusivity and human connection. The integration of digital strategies, social media engagement, and a robust rewards program further strengthens their market presence.

By continuously adapting to consumer trends and leveraging strategic partnerships, Starbucks remains a leader in the global coffee market.

Additional Information

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Alternatively, if you’re interested in the world of social media, our Free Instagram Marketing Course might be the perfect fit.

Lastly, if you enjoyed this blog, we recommend exploring our digital marketing case studies. We’ve covered some of the best companies out there. A few the examples are marketing strategy of Amazon , the marketing strategy of Red Bull and the marketing strategy of LinkedIn .

Don’t forget to check out our digital marketing blogs as well. You might find your perfect course among them!

We appreciate you reading this blog. Comment down below if you want more such case studies.

Frequently Asked Questions- Marketing Strategy Of Starbucks

Starbucks' mission is to inspire and nurture the human spirit – one person, one cup, and one neighbourhood at a time.

Starbucks operates over 32,000 stores worldwide, making it one of the largest coffeehouse chains globally, known for its extensive global presence and accessibility.

Starbucks' latest product launch includes a range of summer-inspired beverages like the Iced Guava Passionfruit Drink and the Nitro Cold Brew with Salted Honey Cold Foam.

Starbucks' main competitors include Dunkin' Donuts, McCafé (McDonald's coffeehouse brand), Costa Coffee, Peet's Coffee, and Tim Hortons, each vying for market share in the coffee and quick-service restaurant industries.

The Starbucks Rewards program is a loyalty program where customers earn points (stars) for purchases, which can be redeemed for free drinks and food items, along with personalised offers and early access to new products.

Through initiatives like ethically sourced coffee, reducing waste, and promoting recycling.

The 'Race Together' campaign was an initiative by Starbucks aimed at sparking conversations about race relations. It encouraged employees to write ‘Race Together’ on cups to prompt dialogue among customers and staff.

Starbucks' digital marketing strategy leverages social media platforms and mobile apps to engage customers with personalised offers, loyalty programs, and interactive content, enhancing brand visibility and customer experience.

Starbucks' target audience is motivated by quality coffee, a cosy ambience, and a sense of community fostered by the brand's commitment to social responsibility and customer-centric experiences.

Starbucks leverages social media to engage customers through creative campaigns, customer interactions, and promotions, enhancing brand visibility and fostering a sense of community among coffee enthusiasts worldwide.

Author's Note: My name is Aditya Shastri and I have written this case study with the help of my students from IIDE's online digital marketing courses in India . Practical assignments, case studies & simulations helped the students from this course present this analysis. Building on this practical approach, we are now introducing a new dimension for our online digital marketing course learners - the Campus Immersion Experience. If you found this case study helpful, please feel free to leave a comment below.

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Aditya Shastri

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Leads the Learning & Development segment at IIDE. He is a Content Marketing Expert and has trained 6000+ students and working professionals on various topics of Digital Marketing. He has been a guest speaker at prominent colleges in India including IIMs...... [Read full bio]

Clicking on the image of the Starbucks cup is my thing too. This blog provides great and deep insights into their strategy.

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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.

Case Study Of Starbucks: How Starbucks Became The Coffee King?

Supti Nandi

Updated on: April 25, 2024

Starbucks, a brand that became synonymous with coffee has created a sensation in the world with its coffeehouse culture. Have you wondered how? Well, to answer this question we will delve into the case study of Starbucks.

Stay tuned!

(A) Starbucks: A Brief Overview

Let’s buckle up for a Starbucks journey! Founded back in 1971, this coffee giant now reigns supreme as the world’s largest coffeehouse chain, with its home base in the city of Seattle, Washington.

Before diving deeper into the Starbucks case study, let’s have a look at the company’s profile-

Fast forward to November 2022, and you’ve got Starbucks waving its coffee wand in a staggering 35,711 stores across 80 countries. And when you zoom in on the U.S., you’re looking at a whopping 15,873 Starbucks hotspots. 

Here’s the scoop – over 8,900 are Starbucks-run, and the rest are running under licensed partnerships.

Now, let’s talk coffee vibes. Starbucks is the unsung hero of the second wave of coffee culture, dishing out an array of coffee delights. Think hot espresso, chill Frappuccinos, and a lineup of pastries and snacks that’s strong enough to trigger your taste buds.

Oh, and did you know some Starbucks treats are exclusive to certain locations? How? You may wonder. Well, here’s a bonus – most Starbucks joints worldwide offer free Wi-Fi. Coffee and connectivity – a match made in heaven.

So there you have it – the Starbucks saga! 

(B) Business Overview of Starbucks Case Study

Understanding the business perspective is one of the essential parts of the Starbucks case study. Reason? You will get to know how Starbucks is performing in the market in terms of financials and business.

Go through the table given below-

In today’s date, the coffee giant is flexing a market capitalization of a whopping $105.82 billion – that’s some serious coffee beans.

Now, rewind to 2023, and Starbucks made it rain with a revenue of $35.976 billion. But what about the nitty-gritty? Operating income in 2022 hit $4.62 billion, while net income settled at $3.28 billion. These aren’t just numbers; they’re the financial pillars of Starbucks.

That’s not all!

Hold onto your coffee cups; we’re diving into assets and equity. Total assets in 2022 clocked in at $27.98 billion – that’s like a treasure chest of coffee goodness. But here’s a twist – total equity dipped to -$8.70 billion. It’s like a plot twist in a coffee-fueled drama.

Now, let’s talk about expenses and profits. In 2023, expenses tallied up to $30.584 billion, but here’s the kicker – profits soared to $25.108 billion. 

That’s like balancing a delicate espresso shot with a mountain of whipped cream.

In a nutshell, Starbucks isn’t just brewing coffee; it’s a financial powerhouse, stirring up a caffeinated storm in the business world.

(C) History of Starbucks: Timeline & Key Events

Coming to the third part of the Starbucks case study, let’s delve into the history of Starbucks-

Founded in 1971 by Jerry Baldwin, Zev Siegl, and Gordon Bowker at Seattle’s Pike Place Market, Starbucks underwent pivotal changes in ownership and leadership. In the early 1980s, Howard Schultz acquired the company and transformed it into a coffee shop, introducing espresso-based drinks after being inspired during a business trip to Milan, Italy.

Schultz served as CEO from 1986 to 2000, orchestrating an expansive franchise expansion across the West Coast.

Orin Smith succeeded Schultz, focusing on fair trade coffee and boosting sales to US$5 billion. Jim Donald took the helm from 2005 to 2008, overseeing substantial earnings expansion. Schultz returned during the 2007–08 financial crisis, steering the company towards growth, expanded offerings, and a commitment to corporate social responsibility. Kevin Johnson assumed the CEO role in 2017.

In March 2022, Starbucks announced Schultz’s return as interim CEO in April 2022, with Laxman Narasimhan appointed to succeed him in April 2023. Narasimhan assumed the position earlier, in March 2023.

Beyond beverages and food, Starbucks stores offer official merchandise and select locations to provide “Starbucks Evenings” with beer, wine, and appetizers. The company’s products, including coffee, ice cream, and bottled drinks, are available in grocery stores globally. The Starbucks Reserve program, initiated in 2010 for single-origin coffees and high-end shops, has evolved. Starbucks operates six roasteries with tasting rooms and 43 coffee bars. 

The company faced controversies but maintains substantial brand loyalty, market share, and value. As of 2022, Starbucks ranks 120th on the Fortune 500 and 303rd on the Forbes Global 2000.

(D) Significance of Logo in Starbucks Case Study

Let’s delve into the details of the Starbucks logo evolution. In its inception in 1971, the original Starbucks logo featured a complex design comprising a two-tailed mermaid or siren, encompassed by a wordmark. This design was a visual nod to the brand’s early identity and origins. The mermaid, with its twin tails, was a dual representation of the sea and Seattle, the birthplace of Starbucks.

As the brand progressed, the logo underwent a significant transformation. The evolution saw a shift towards simplicity, as the wordmark surrounding the mermaid was phased out. This marked the beginning of the modern Starbucks logo we recognize today. 

The current emblem showcases a simplified and stylized green siren enclosed within a matching green ring, emphasizing a cleaner and more focused visual identity.

Beyond aesthetics, the modern logo carries symbolic weight. The green mermaid within the circle has become an iconic representation of Starbucks’ commitment to delivering high-quality coffee experiences. 

Additionally, it reflects the brand’s emphasis on creating a sense of community that extends beyond geographical boundaries.

In essence, the evolution of the Starbucks logo is a journey from a detailed and intricate design to a streamlined and symbolic representation. It mirrors the brand’s growth, emphasizing its roots, dedication to quality, and the broader cultural impact it seeks to make through coffee and community.

(E) Market Penetration Strategy: How Starbucks became the coffee king?

In this section, we will look into the key plans and actions that helped Starbucks gain a strong foothold in the beverage and cafe industry.

Starbucks continues to blend innovation and growth, navigating the ever-changing landscape of the coffee industry.

(F) Starbucks Entry in India: Core of Starbucks Case Study

In 2012, Starbucks initiated its venture into India through a significant 50:50 joint venture with Tata Consumer Products Ltd. The inaugural flagship store, which opened its doors on October 19th, 2012, found its home in the historic Elphinstone Building in Mumbai. 

The architectural design of this store ingeniously merged Starbucks’ global coffee legacy with the vibrant local culture, creating a welcoming space for community and connection. Over time, this Mumbai location evolved into India’s first Starbucks Reserve® Store, setting the stage for an elevated coffee experience.

(F.1) The Starbucks Reserve® Store Unveiled: A Coffee Lover’s Haven

The introduction of the Starbucks Reserve® Store marked a milestone in the coffee giant’s presence in India. Spanning an impressive 5,200 square feet, this store greeted customers with the intoxicating aroma of coffee. 

The entrance featured a stunning monolithic terrazzo Reserve bar, a masterpiece crafted by local artisans. Trained black apron coffee masters curated an exceptional coffee experience, showcasing rare and exquisite brews through various brewing methods. 

This Reserve Store was not just a coffee shop; it was a canvas for creating unique moments of connection through the artistry of coffee.

(F.2) Expanding Horizons: Tata Starbucks’ Nationwide Presence

Tata Starbucks established a substantial footprint, operating 350+ stores spread across 36 cities in India. In a significant achievement in 2022, Starbucks executed its largest single-year expansion in India, reaching 14 new cities. The brand’s influence spanned major cities such as Mumbai, Delhi NCR, Hyderabad, Chennai, Bengaluru, Pune, and more.

(F.3) Coffee Blends Celebrating Indian Flavors and Heritage

Starbucks paid homage to India’s rich coffee heritage by introducing special blends. The India Estates Blend, sourced from estates in Coorg and Chikmagalur, the birthplace of coffee in India, made its debut in 2013. Additionally, the Diwali Blend, introduced in 2020, served as a tribute to India’s vibrant culture and longstanding coffee traditions.

(F.4) The Tata Alliance: A Successful Partnership

Starbucks in India proudly bore the branding “Starbucks Coffee – A Tata Alliance,” underscoring the synergy between Starbucks and Tata Global Beverages.

Starbucks’ journey in India was not merely about coffee; it was about brewing connections, transcending cultural boundaries, and crafting unforgettable coffee experiences that resonated with the diverse tapestry of India.

(G) Business and Marketing Strategies of Starbucks in India

Starbucks, despite entering India’s coffee scene with strong strategies, faced challenges in a market dominated by competitors like Cafe Coffee Day and Barista Lavazza. Unlike the U.S., where coffee is a staple, India is traditionally a tea-drinking country. 

Starbucks aimed to create a space for relaxation, blending its global coffee legacy with local culture.

Let’s look at the business and marketing strategies of Starbucks in India-

In short, Starbucks’ journey in India reflects a careful blend of global strategies and localized approaches, aiming to create a unique and sustainable presence in a market with diverse preferences and cultural nuances. The success indicators appear promising, showcasing Starbucks’ commitment to long-term growth and meaningful community integration.

Note: Do you know Starbucks collaborated with Apple during the horizontal marketing in the US? We have covered it thoroughly here- Horizontal Marketing System . You can check it out for detailed information.

(H) Wrapping Up the Case Study of Starbucks

The Case Study of Starbucks unveils a fascinating journey that transformed Starbucks into the reigning coffee king. What started as a local coffee bean store in Seattle’s Pike Place Market in 1971 boomed into a global coffee empire. The strategic moves, like Howard Schultz’s visionary shift to espresso-based drinks, had set the stage for Starbucks’ aggressive expansion.

Throughout its evolution, Starbucks faced challenges, leadership changes, and controversies, but resilience and strategic pivots marked its trajectory. The decision to focus on corporate social responsibility under Schultz’s leadership during the financial crisis showcased Starbucks’ adaptability.

The engagement with local cultures, from the iconic two-tailed mermaid symbol to store designs reflecting regional aesthetics, contributed to Starbucks’ success. Key partnerships, like the one with TATA in India, demonstrated a keen understanding of local markets.

Starbucks’ commitment to quality, community, and sustainability resonated with consumers globally. From unique store experiences to tailored product launches, Starbucks consistently adapted its offerings to cater to diverse tastes.

In essence, the Case Study of Starbucks illuminates a narrative of coffee, community, and corporate strategy, culminating in Starbucks’ reign as the coffee king. 

The journey is a testament to the power of adaptability, brand loyalty, and a steaming cup of coffee that transcends borders, making Starbucks an integral part of daily rituals worldwide!

Related Posts:

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Starbucks is a coffee chain founded in Seatle, USA, in 1971. The company is famous for its premium coffee accompanied by top-notch customer service.  With a mission to inspire one person, one cup, one neighbourhood at a time, Starbucks not only changed the way coffee is consumed in the USA but also gradually introduce the Western coffee culture to multiple parts of the world.  As of 2020, there are 33,833 Starbucks stores all over the globe, serving more than 100 million customers. 1

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What is Starbucks International Strategy?

What type of international strategy does Starbucks adopt?

What is Bartlett & Ghoshal Matrix used for?

What are two key criteria for determining international strategies using the Bartlett & Ghoshal Matrix?

What does high global integration mean?

What does it mean if the company has high local responsiveness?

What are four types of international strategy?

Which market entry strategies do Starbucks adopt?

When does Starbucks employ wholly-owned subsidiaries, joint ventures, or licensing  entry strategies?

What is the pricing strategy that Starbucks adopts internationally?

What is value-based pricing?

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One contributing factor to this major success is Starbucks' international strategy and its ability to adapt to each market. In this article, we'll learn more about how Starbucks' internationalization process, including the overall global penetration method, the type of market entry , as well as pricing strategy.

What is Starbucks' international strategy?

Bartlett & Ghoshal Matrix is a framework for determining the type of international strategy pursued by a business based on two criteria: global integration and local responsiveness.

A high level of global integration means that the business wants to try to reduce costs as much as possible through standardized products and economies of scale. On the other hand , a high level of local responsiveness indicates a business's tendency to adapt its products and services to local needs. T hese two factors create four types of international strategy: global strategy, transnational strategy, international strategy, multi-domestic strategies . 2

The multi-domestic strategy is adopted by Starbucks when expanding overseas. It is characterized by low integration and high responsiveness. Accordingly, the company tailors its products to the specific needs of the local customers. T he structure of the organization is highly decentralized, which allows subsidiaries to operate autonomously and independently from the headquarter. 3

Figure 1. Types of International Strategy

Starbucks market entry strategy

When it comes to market entry strategy, Starbucks employs three strategies: wholly-owned subsidiaries, joint ventures, and licensing:

The w holly-owned subsidiaries strategy is carried out when the company has extensive knowledge of the market, such as that in the US or Canada. Joint ventures come in handy when Starbucks wants to initiate business in a new market. Finally, t he licensing strategy allows the coffee chain to quickly expand in a specific country. 3

The Asia Pacific has always been a fruitful market for Starbucks due to the increasing young population who are eager to adopt a Western lifestyle:

In Japan , Starbucks set up a joint venture with Sazaby League Ltd - a local designer and retailer of handbags, clothing and accessories which also operates restaurants and coffee shops under the name Afternoon Tea. The partnership starting in 1995 has allowed Starbucks to win over Japan, making it one of the company's top-performing markets internationally. Since 2014, the company has taken full control of a Japanese Subsidiary for $ 914M. 4

In China, Starbucks made its debut under a licensing agreement with Beijing Mei Da Coffee Co. Ltd in 1998. In the following years, the company expanded its influence by forming joint ventures with Uni-President Group and Mei-Xin International Ltd to operate in Shanghai, Hong Kong, Shenzhen, Macau, and other parts of southern China.

Starbucks international pricing strategy

Starbucks adopts value-based pricing for its products all across the globe.

Value-based pricing is the value perceived by the customer rather than its actual costs.

However, most Starbucks customers - who belong to the middle and upper social class are happy to pay the extra price for the premium coffee and top-notch customer service. This pricing strategy has allowed the company to maximize its income while building a premium brand image to differentiate itself from the competitors.

The price of Starbucks not only varies based on the size and type of coffee but also on the country or region it operates in. This variation can be narrowed down to various factors such as spending power, tariffs, exchange rates, local market needs, and competition in different countries. 6

Figure 2 shows the price of the same Starbucks coffee in different parts of the world (in £ equivalent):

Figure 2. Price for the same cup of Starbucks coffee around the world, based on Voucherbox

Prices are typically higher for countries outside the US. For example, Bern in Switzerland has the highest price Starbucks coffee with Cappuccino costs £ 4.58 a cup compared to the UK whose price is £ 2.45. Bangkok's Starbucks costs the least at around £ 2.37 for a cappuccino. Between different types of coffee, there's an average price difference of 20-30 cents.

An analysis of Starbucks international strategy

Starbucks' success in its internationalization process comes down to its cultural mindfulness and intensive research of the host market.

In China, tea is considered the national drink. Thus, to break into the market, the company has included a lot of products made from green tea on its menu. As people became more familiar with the brand, they began to introduce more coffee flavours to promote the American coffee-drinking culture. Knowing the Chinese like to sit in a large group, Starbucks has also designed tables that can be put together to accommodate more people.

Local partnerships also contribute enormously to the success of Starbucks' internationalization process.

Starbucks partnered with Beijing Mei Da with penetrating the northern Chinese market. In the east, it associates with Uni-President and in the South, Maxim Caterers. Through these partners, Starbucks learns to adapt and expand its product portfolio to better suit the local customers' preferences.

While focusing on adaptation, Starbucks maintains strong brand integrity. It sets a clear standard of how the products and brand image should be perceived by the customers. As a result, those who wish to become Starbucks partners must adhere to its explicit guidelines. In addition, all baristas in the host country have to undertake the same training as those in the US.

Starbucks international strategy relies on low integration and high responsiveness (multi-domestic), which is best reflected in Entry Modes and Pricing Strategies. The goal is to spread Starbucks' coffee culture while adapting to local tastes and preferences. Instead of competing with global brands, Starbucks establishes itself as a friendly choice among the many food and beverage options in the host country. This has endeared the brand to the local people and allowed it to enjoy global success.

Starbucks International Strategy - Key takeaways

• Starbucks is a coffee chain founded in Seattle, USA, in 1971, famous for its premium coffee accompanied by top-notch customer service.
• Starbucks is classified as a multi-domestic company due to the high level of local responsiveness and low level of global integration.
• Starbucks' products are customized to suit local tastes and preferences.
• In terms of market entry, Starbucks adopts three main approaches: wholly-owned subsidiaries, joint ventures, and licensing.
• Value-based pricing is adopted for markets worldwide which contributes to Starbucks premium image.
• Cultural mindfulness, market research , local partnership, and strong brand integrity are critical factors determining the success of Starbucks international strategy.

1. Statista, Number of Starbucks stores worldwide from 2003 to 2021 , 2021.

2. Lars de Bruin, International Business Strategy , 2017.

3. Christine Nyandat, Starbucks International Strategy, 2019.

4. Starbucks Stories & News, Starbucks Poised for Continued Growth in Japan Through Full Ownership of Market , 2014.

5. MBA Knowledge Base, Case Study on Marketing Strategy: Starbucks Entry to China , n.d.

6. Abhiyash Jain, Starbucks prices products on value not cost . Why , 2020.

Flashcards in Starbucks International Strategy 30

Multi-domestic strategy

Multi-domestic strategy 

Global integration and local responsiveness

The company tries to reduce costs as much as possible through standardized products and economies of scale. 

The company is adaptive to the local tastes and preferences. For example, include in its menu a type of drink unique to the region. 

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Frequently Asked Questions about Starbucks International Strategy

What is Starbucks' international strategy?

Starbucks' internationalisation strategy is a multi-domestic strategy.

Why is Starbucks so successful internationally? 

Cultural mindfulness, market research, local partnership, and strong brand integrity are critical factors determining the success of Starbucks' international strategy. 

Is Starbucks using a transnational strategy? 

No, Starbucks is using a multi-domestic strategy. 

What are the types of international strategies used by Starbucks?

Starbucks employs three strategies for market entry: wholly-owned subsidiaries, joint ventures, and licensing.

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A high level of local responsiveness indicates a business's tendency to adapt its products and services to local needs. 

A high level of global integration means that the business will try to reduce costs through...

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Starbucks Marketing Strategy Unveiled | A Case Study

Jane Ng • 31 October, 2023 • 6 min read

Are you curious about Starbucks marketing strategy? This global coffeehouse chain has transformed the way we consume coffee, with a marketing approach that's nothing short of genius. In this article, we'll dive deep into Starbucks marketing strategy, exploring its core elements, the 4 Ps of Starbucks' Marketing Mix, and its success stories.

Table Of Contents 

What is starbucks marketing strategy, key components of starbucks marketing strategy, the 4 ps of starbucks' marketing mix, starbucks marketing success stories, key takeaways, faqs about starbucks marketing strategy.

Starbucks marketing strategy is all about creating exceptional experiences for its customers. They do this by:

Starbucks' Core Business Level Strategy

Starbucks is unique in the coffee world because it doesn't just compete on price. Instead, it stands out by making special and high-quality products. They always aim for something new and innovative, which makes them different from others.

Starbucks Global Expansion Strategy

As Starbucks grows all over the world, it doesn't use a one-size-fits-all approach. In places like India, China, or Vietnam, they change things up to suit what people there like while keeping the Starbucks style.

1/ Uniqueness and Product Innovation

Starbucks focuses on offering unique products and constant innovation.

• Example: Starbucks' seasonal drinks like the Pumpkin Spice Latte and the Unicorn Frappuccino are excellent illustrations of product innovation. These limited-time offerings generate excitement and draw in customers seeking something different.

2/ Global Localization

Starbucks adapts its offerings to cater to local tastes while maintaining its core brand identity.

• Example: In China, Starbucks introduced a range of tea-based beverages and mooncakes for the Mid-Autumn Festival , respecting local traditions while keeping the Starbucks experience intact.

3/ Digital Engagement

Starbucks embraces digital channels to enhance customer experiences.

• Example: The Starbucks mobile app is a prime example of digital engagement. Customers can order and pay through the app, earning rewards and receiving personalized offers, simplifying and enriching their visits.

4/ Personalization and the "Name-on-Cup" Strategy

Starbucks connects with customers on a personal level through the famous " name-on-cup " approach.

• Example : When Starbucks baristas misspell customers' names or write messages on cups, it often results in customers sharing their unique cups on social media. This user-generated content showcases personal connections and serves as free, authentic promotion for the brand.

5/ Sustainability and Ethical Sourcing

Starbucks promotes ethical sourcing and sustainability.

• Example: Starbucks' commitment to buying coffee beans from ethical and sustainable sources is evident through initiatives like C.A.F.E. Practices (Coffee and Farmer Equity) . This reinforces the brand's commitment to environmental and social responsibility, attracting customers who value sustainability.

Product Strategy

Starbucks offers an array of products, not just coffee. From specialty beverages to snacks, including specialty beverages (e.g., Caramel Macchiato, Flat White), pastries, sandwiches, and even branded merchandise (mugs, tumblers, and coffee beans). Starbucks caters to a wide range of customer preferences. The company continually innovates and customizes its product offerings to maintain a competitive edge.

Price Strategy

Starbucks positions itself as a premium coffee brand. Their pricing strategy reflects this position, charging higher prices compared to many competitors. However, they also offer value through their loyalty program, which rewards customers with free drinks and discounts, promoting customer retention and attracting price-conscious consumers.

Place (Distribution) Strategy

Starbucks' global network of coffee shops and partnerships with supermarkets and businesses ensures the brand is accessible and convenient for customers. It's not just a coffee shop; it's a lifestyle choice.

Promotion Strategy

Starbucks excels in promotion through various methods, including seasonal advertising campaigns, social media engagement, and limited-time offerings. Their holiday promotions, such as the " Red Cup " campaign, create anticipation and excitement among customers, increasing footfall and sales.

1/ The Starbucks Mobile App

Starbucks' mobile app has been a game-changer in the coffee industry. This app seamlessly integrates into the customer experience, allowing users to place orders, make payments, and earn rewards all within a few taps. The convenience offered by the app keeps customers engaged and encourages repeat visits. 

Additionally, the app is a data goldmine, providing Starbucks with insights into customer preferences and behaviors, enabling more personalized marketing.

2/ Seasonal and Limited-Time Offerings

Starbucks has mastered the art of creating anticipation and excitement with its seasonal and limited-time offerings. Examples like the Pumpkin Spice Latte (PSL) and the Unicorn Frappuccino have become cultural phenomena. The launch of these unique, time-limited drinks creates a buzz that extends beyond coffee enthusiasts to a broader audience. 

Customers eagerly await the return of these offerings, turning seasonal marketing into a potent force for customer retention and acquisition.

3/ My Starbucks Rewards 

Starbucks' My Starbucks Rewards program is a model of loyalty program success. It puts the customer at the center of the Starbucks experience. It offers a tiered system where customers can earn stars for each purchase. These stars translate into various rewards, from free drinks to personalized offers, creating a sense of value for regular patrons. It boosts customer retention, elevates sales, and cultivates brand loyalty. 

In addition, it enhances the emotional connection between the brand and its customers. Through personalized offers and birthday rewards, Starbucks makes its customers feel valued and appreciated. This emotional bond encourages not only repeat business but also positive word-of-mouth marketing.

Starbucks marketing strategy is a testament to the power of creating memorable customer experiences. By emphasizing uniqueness, sustainability, personalization, and embracing digital innovations, Starbucks has solidified its position as a global brand that extends far beyond coffee.

To enhance your own business's marketing strategy, consider incorporating AhaSlides. AhaSlides offers interactive features that can engage and connect with your audience in novel ways. By harnessing the power of AhaSlides, you can gather valuable insights, personalize your marketing efforts, and cultivate stronger customer loyalty.

What is the marketing strategy of Starbucks?

Starbucks' marketing strategy is built on delivering unique customer experiences, embracing digital innovation, ensuring product quality, and promoting sustainability.

What is Starbucks most successful marketing strategy?

Starbucks' most successful marketing strategy is personalization through its "name-on-cup" approach, engaging customers and creating social media buzz.

What are the 4 P's of marketing Starbucks?

Starbucks' marketing mix consists of Product (diverse offerings beyond coffee), Price (premium pricing with loyalty programs), Place (global network of stores and partnerships), and Promotion (creative campaigns and seasonal offerings).

References: CoSchedule | IIMSkills | Mageplaza | MarketingStrategy.com

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How Starbucks’s Culture Brings Its Strategy to Life

• Varya Davidson
• Paul Leinwand

They focus on a few positive attributes and amplify them.

In most organizations, culture and strategy tend to be discussed in separate conversations. Executives know that culture is important and that a negative culture can hurt company performance, but they often don’t know what to do about it. Or they attempt to improve the situation by launching a culture initiative to “make the workplace more positive.” What most executive teams typically fail to do is to connect the company’s culture with how the company makes its strategy work.

• Varya Davidson leads the people and organization business for Strategy& in Australia, Southeast Asia, and New Zealand and sits on the Katzenbach Center’s global leadership team. She is a partner with PwC Australia, and has worked with leading public and private sector organizations across Europe, the Middle East, North and South America and Asia-Pacific.
• Paul Leinwand is a principal at PwC U.S., a global managing director at Strategy&, and an adjunct professor at Northwestern’s Kellogg School. He is a coauthor, with Mahadeva Matt Mani, of Beyond Digital: How Great Leaders Transform Their Organizations and Shape the Future (HBR Press, 2022).

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Starbucks Reinvented

Harvard Business School Professor and historian Nancy Koehn has studied Starbucks and its leader, Howard Schultz, for close to 20 years. For her, the company represents much more than a phenomenal success story.

In a recently published case, "Starbucks Coffee Company: Transformation and Renewal," (available soon) Koehn and coauthors Kelly McNamara, Nora Khan, and Elizabeth Legris trace the dramatic arc of the company's past seven-plus years—a period that saw Starbucks teeter on the brink of insolvency, dig deep to renew its sense of purpose and direction, and launch itself in new, untested arenas that define the company as it exists today.

"This case distills 20 years of my thinking about the most important lessons of strategy, leadership, and managing in turbulence in the frame of a very relevant company," says Koehn, the James E. Robison Professor of Business Administration. "As a brand, leadership, and entrepreneurship scholar, I've been dogging Starbucks for a long time."

On a 1995 trip to Seattle, Koehn visited a Starbucks store for the first time and was struck by what she saw and felt. The notion of a "third place" between home and work to relax and enjoy the small, affordable luxury of a special coffee beverage seemed to resonate with the social and economic moment, she recalls. Six months later she met Howard Schultz, an entrepreneur who acquired the company in 1987, and was struck by his seriousness of purpose and the breadth of what he wanted to accomplish.

The case, Koehn's fourth to focus on Starbucks, opens in February 2007. Schultz, no longer Starbucks' CEO but still its chairman, is worried the company is losing its ability to be true to its values while providing a store experience that conveys a sense of comfort, connection, and respect for its product and the communities Starbucks serves.

So Schultz composed a heartfelt, searching memo to senior leadership. In it, he bemoaned decisions (for which he accepted responsibility) that improved efficiency and increased economies of scale but robbed stores of some of their essential magic, such as the smell of roasting coffee and the sights and sounds of traditional Italian espresso machines and baristas at work.

He also cited the company's rapid expansion and the potential "commoditization" of the Starbucks brand. "[W]e desperately need to look into the mirror and realize it's time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks Experience," Schultz wrote.

The scope and richness of Koehn's case gives it the feel of a page-turning novel; in that sense, Schultz's memo is the inciting action for all that follows.

Remaining True To Core Values

The challenge that had confronted Starbucks in the early- and mid-2000s was one common to many organizations: Could the company continue to grow while preserving its culture and values? In some areas, the drive to expand, egged on by Wall Street, was compromising the company's ability to invest in its partners (Starbucks' term for its employees), deliver personalized customer service, and maintain a close connection to the local community.

In addition, McDonald's and Dunkin' Donuts had emerged as serious competitors, offering their own lines of specialty coffee beverages. Even so, Starbucks' financials for 2007, the year Schultz composed his memo, didn't look so bad. But the entrepreneur became concerned as he dug more deeply into the numbers. Sure, revenues were up almost 21 percent over the previous year, but had slowed by over a third; transactions per store were up 1 percent, versus 5 percent the year before. Same-store sales rose only 5 percent, the smallest increase in five years.

In January 2008, Schultz returned as Starbucks CEO, replacing Jim Donald, the man he and other senior colleagues had chosen to lead the company.

Starbucks Sails Again

The case chronicles the blizzard of decisions and initiatives that follow what could have been the company's death knell as the financial crisis hit home and consumers cinched their belts.

"Schultz understood that you can't lift your foot off the gas pedal when you're attempting to transform a company," Koehn says. "Severe as its financial needs may be, you also have to figure out what you will invest in. Schultz knew that if he waited until the company was out of the woods to invest in new products, communication channels, and ways of doing business it would be too late—Starbucks would no longer be relevant."

From the start, Schultz sent the clear, unwavering message that Starbucks' transformation would represent a return to its roots and an uncompromising commitment to core values, such as health care benefits for any partners working at least 20 hours a week.

At a March 2008 gathering of 200 senior-level company leaders, Schultz unveiled a Transformation Agenda that included seven "Big Moves":

• Be the undisputed coffee authority;
• Engage and inspire our partners;
• Ignite the emotional attachment with our customers;
• Expand our global presence—while making each store the heart of a local neighborhood;
• Be a leader in ethical sourcing and environmental impact;
• Creative innovation growth platforms worthy of our coffee;
• Deliver a sustainable economic model.

The case provides a behind-the-scenes look at how the coffee company moved forward on these goals, including the introduction of the milder Pike Place Roast; the story of its VIA Ready Brew line; the launch of a loyalty program; investment in and engagement with social media; focus on a global expansion strategy; and the extension of social programs. The company closed stores, restructured its manufacturing and supply operations, and, perhaps most significantly, took steps to reengage its partners and store managers. In February 2008, Starbucks closed more than 7,000 of its stores across the country for "Espresso Excellence Training," taking the time to work with approximately 135,000 baristas to ensure they could pour a perfect espresso shot and steam milk properly.

For Schultz, however, that wasn't enough—he wanted to reach the company's store managers, recognizing them as essential to the transformation process.

"I needed an unfiltered venue for expressing my empathy about all that we were asking our partners to do and telling them plainly what was at stake," he wrote in Onward: How Starbucks Fought for Its Life without Losing Its Soul . The answer, in Schultz's mind, was a three-day conference in New Orleans in October 2008, a moment when the global economy happened to be tanking. Starbucks' fourth quarter profits were down 97 percent from the same time a year earlier; for the fiscal year, net earnings were down 53 percent to $316 million. The Starbucks board was reluctant to send 10,000 partners to New Orleans at a cost of $30 million, but Schultz stuck to his guns.

In addition to rolling up their sleeves and taking part in community service projects to aid areas of the city still recovering from Hurricane Katrina, partners participated in team-building events that reviewed the company's guiding principles and reminded them of their central role in the customer experience. Schultz also brought in Bono, lead singer of U2, to announce a partnership to channel proceeds from holiday beverage sales to the Global Fund in support of AIDS relief programs in Africa.

The New Orleans conference was a turning point for Starbucks; in the "novel" of Koehn's case, it's the climax.

"Investing in a conference of that size is such an unusual thing to do when faced with a cash crunch," Koehn says. "Schultz understood that what saves and breaks businesses is much more than cash. In the midst of so much turbulence, it's all too easy to pull levers on the low-hanging fruit of cash and logistics. But you don't save a business and turn it around without speaking to, focusing, and calling on the spirit of your people."

Schultz's experience qualifies him for closer study in Koehn's HBS course Power and Glory in Turbulent Times: The History of Leadership from Henry V to Steve Jobs. Not all managers are confronted in their careers with the sort of transformation challenge faced by Starbucks, but Schultz's reflections and actions are instructive for anyone charged with finding sources of strength, innovation, and renewal in today's turbulent business environment, Koehn says.

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Starbucks, reinvented: a seven-year study on schultz, strategy and reinventing a brilliant brand.

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BY JULIA HANNA

Harvard Business School Professor and historian Nancy Koehn has studied Starbucks and its leader, Howard Schultz , for close to 20 years. For her, the company represents much more than a phenomenal success story.

In a recently published case, "Starbucks Coffee Company: Transformation and Renewal," (available soon) Koehn and coauthors Kelly McNamara, Nora Khan, and Elizabeth Legris trace the dramatic arc of the company's past seven-plus years—a period that saw Starbucks teeter on the brink of insolvency, dig deep to renew its sense of purpose and direction, and launch itself in new, untested arenas that define the company as it exists today.

"This case distills 20 years of my thinking about the most important lessons of strategy, leadership, and managing in turbulence in the frame of a very relevant company," says Koehn, the James E. Robison Professor of Business Administration. "As a brand, leadership, and entrepreneurship scholar, I've been dogging Starbucks for a long time."

On a 1995 trip to Seattle, Koehn visited a Starbucks store for the first time and was struck by what she saw and felt. The notion of a "third place" between home and work to relax and enjoy the small, affordable luxury of a special coffee beverage seemed to resonate with the social and economic moment, she recalls. Six months later she met Howard Schultz, an entrepreneur who acquired the company in 1987, and was struck by his seriousness of purpose and the breadth of what he wanted to accomplish.

Starbucks Chairman Howard Schultz (Photo credit: Wikipedia)

The case, Koehn's fourth to focus on Starbucks, opens in February 2007. Schultz, no longer Starbucks' CEO but still its chairman, is worried the company is losing its ability to be true to its values while providing a store experience that conveys a sense of comfort, connection, and respect for its product and the communities Starbucks serves.

So Schultz composed a heartfelt, searching memo to senior leadership. In it, he bemoaned decisions (for which he accepted responsibility) that improved efficiency and increased economies of scale but robbed stores of some of their essential magic, such as the smell of roasting coffee and the sights and sounds of traditional Italian espresso machines and baristas at work.

He also cited the company's rapid expansion and the potential "commoditization" of the Starbucks brand. "[W]e desperately need to look into the mirror and realize it's time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks Experience," Schultz wrote.

The scope and richness of Koehn's case gives it the feel of a page-turning novel; in that sense, Schultz's memo is the inciting action for all that follows.

Remaining True To Core Values

The challenge that had confronted Starbucks in the early- and mid-2000s was one common to many organizations: Could the company continue to grow while preserving its culture and values? In some areas, the drive to expand, egged on by Wall Street, was compromising the company's ability to invest in its partners (Starbucks' term for its employees), deliver personalized customer service, and maintain a close connection to the local community.

In addition, McDonald's and Dunkin' Donuts had emerged as serious competitors, offering their own lines of specialty coffee beverages. Even so, Starbucks' financials for 2007, the year Schultz composed his memo, didn't look so bad. But the entrepreneur became concerned as he dug more deeply into the numbers. Sure, revenues were up almost 21% over the previous year, but had slowed by over a third; transactions per store were up 1%, versus 5% the year before. Same-store sales rose only 5%, the smallest increase in five years.

In January 2008, Schultz returned as Starbucks CEO, replacing Jim Donald, the man he and other senior colleagues had chosen to lead the company.

Starbucks Sails Again

The case chronicles the blizzard of decisions and initiatives that follow what could have been the company's death knell as the financial crisis hit home and consumers cinched their belts.

"Schultz understood that you can't lift your foot off the gas pedal when you're attempting to transform a company," Koehn says. "Severe as its financial needs may be, you also have to figure out what you will invest in. Schultz knew that if he waited until the company was out of the woods to invest in new products, communication channels, and ways of doing business it would be too late—Starbucks would no longer be relevant."

From the start, Schultz sent the clear, unwavering message that Starbucks' transformation would represent a return to its roots and an uncompromising commitment to core values, such as health care benefits for any partners working at least 20 hours a week.

At a March 2008 gathering of 200 senior-level company leaders, Schultz unveiled a Transformation Agenda that included seven "Big Moves":

• Be the undisputed coffee authority;
• Engage and inspire our partners;
• Ignite the emotional attachment with our customers;
• Expand our global presence—while making each store the heart of a local neighborhood;
• Be a leader in ethical sourcing and environmental impact;
• Creative innovation growth platforms worthy of our coffee;
• Deliver a sustainable economic model.

The case provides a behind-the-scenes look at how the coffee company moved forward on these goals, including the introduction of the milder Pike Place Roast; the story of its VIA Ready Brew line; the launch of a loyalty program; investment in and engagement with social media; focus on a global expansion strategy; and the extension of social programs. The company closed stores, restructured its manufacturing and supply operations, and, perhaps most significantly, took steps to reengage its partners and store managers. In February 2008, Starbucks closed more than 7,000 of its stores across the country for "Espresso Excellence Training," taking the time to work with approximately 135,000 baristas to ensure they could pour a perfect espresso shot and steam milk properly.

For Schultz, however, that wasn't enough—he wanted to reach the company's store managers, recognizing them as essential to the transformation process.

"I needed an unfiltered venue for expressing my empathy about all that we were asking our partners to do and telling them plainly what was at stake," he wrote in Onward: How Starbucks Fought for Its Life without Losing Its Soul . The answer, in Schultz's mind, was a three-day conference in New Orleans in October 2008, a moment when the global economy happened to be tanking. Starbucks' fourth quarter profits were down 97% from the same time a year earlier; for the fiscal year, net earnings were down 53% to $316 million. The Starbucks board was reluctant to send 10,000 partners to New Orleans at a cost of $30 million, but Schultz stuck to his guns.

In addition to rolling up their sleeves and taking part in community service projects to aid areas of the city still recovering from Hurricane Katrina, partners participated in team-building events that reviewed the company's guiding principles and reminded them of their central role in the customer experience. Schultz also brought in Bono, lead singer of U2, to announce a partnership to channel proceeds from holiday beverage sales to the Global Fund in support of AIDS relief programs in Africa.

The New Orleans conference was a turning point for Starbucks; in the "novel" of Koehn's case, it's the climax.

"Investing in a conference of that size is such an unusual thing to do when faced with a cash crunch," Koehn says. "Schultz understood that what saves and breaks businesses is much more than cash. In the midst of so much turbulence, it's all too easy to pull levers on the low-hanging fruit of cash and logistics. But you don't save a business and turn it around without speaking to, focusing, and calling on the spirit of your people."

Schultz's experience qualifies him for closer study in Koehn's HBS course Power and Glory in Turbulent Times: The History of Leadership from Henry V to Steve Jobs. Not all managers are confronted in their careers with the sort of transformation challenge faced by Starbucks, but Schultz's reflections and actions are instructive for anyone charged with finding sources of strength, innovation, and renewal in today's turbulent business environment, Koehn says.

About the author:  Julia Hanna is associate editor of the HBS Alumni Bulletin .

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Publication date: 4 December 2018

Teaching notes

Learning outcomes.

Students after reading the case will learn about the issues and challenges of expansion in emerging markets. Global expansion versus multinational expansion. Stardardization versus localization. Socio-cultural aspects in international marketing. Leadership succession in multinational companies.

Case overview/synopsis

The case is about Starbucks’ journey of global expansion. It focuses on challenges in emerging markets. It also talks about the challenges to new CEO Kevin Johnson post stepping down of iconic leader Howard Schultz.

Complexity academic level

MBA Executive MBA Specialisation in Strategy, International Marketing.

Supplementary materials

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Subject code

CSS 5: International Business.

• Competitive strategy
• Customer relationship management
• Global marketing strategy
• International market entry

Acknowledgements

Disclaimer. This case is written solely for educational purposes and is not intended to represent successful or unsuccessful managerial decision-making. The authors may have disguised names; financial and other recognizable information to protect confidentiality.

Gupta, P. , Nagpal, A. and Malik, D. (2018), "Starbucks: global brand in emerging markets", , Vol. 8 No. 4. https://doi.org/10.1108/EEMCS-03-2018-0044

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Copyright © 2018, Emerald Publishing Limited

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International Strategies of Starbucks Company

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Starbucks competitive strategies

Starbucks corporate strategy, global marketing mix strategy, starbucks international expansion, starbucks market opportunities in india and middle east.

Starbucks Corporation earns above average returns because it found unique ways to differentiate and deliver superior food value to its clients. Starbucks gained competitive advantage in the entire ready to drink coffee industry through the inimitable market strategies (Aaker, 2012). These include the appealing store ambiance, superior client services, flavorful coffee drinks and convenient locations that make it to stand out amongst other market competitors that sell coffee.

Through selecting unique differentiation strategies to offer superior value to the clients while determined to attain operative excellence, Starbucks is able to achieve long-term brand-loyalty. This rather makes it very hard for other competing companies to succeed by just replicating Starbucks strategic international market approach (Welsh, Raven & Al-Mutair, 1998).

Indeed, the strategies dubbed as “Me Too” as applied by other corporations can hardly be anticipated to provide stellar performances and competitive advantage lest the copycats possess competencies and resources which allow them to offer superior values to the clients.

It is via the unique differentiation strategy that Starbucks has managed to proffer a wide range of valued and unique products to the clients. The pace at which Starbucks fared its market ascension materialized to be as incredible as the alterations the corporation designed in the customary brand marketing outset.

The company is renowned to take the global oldest products and modify them into differentiated, value laden and lasting brands. Besides, most Starbucks products are differentiated to attract low costs which further offer a source of potential and sustainable competitive advantage to the company.

At the international markets, the low cost of producing the imitable differentiated products makes Starbucks to overcome the external environmental changes (Biederman, 2005). The differentiated products are difficult to replicate because they are of; unusual positive brand image, based on technological capability, innovative design, extraordinary service and exceptionally high quality. These clearly validate the premium prices charged on each coffee cup which surpasses the differentiation costs.

Starbucks corporate strategy appertains to the maximization of market penetration, creation of great networking environments, realization of profitability while offering high quality products and providing socially attractive and relaxing environment. When Starbucks became public, merely one hundred and sixty five stores surrounded Seattle and its environs.

The company has however exceeded the targeted one hundred thousand store outlets globally. The acknowledged business model for this corporation was to spread out its outlets in a given region and saturate the market in order to maintain profit margins (Kaplan & Woznicki, 1999).

The supply chain retail outlets are strategically located and focused on increasing Starbucks foot traffics in a particular area. Rather than being worried that the new stores would eat up each one’s business space and market share, the corporation aimed at cutting down the management times and the corporation’s delivery while shortening the waiting queues for clients at all stores.

This optimistically increased the overall clients’ traffic. Despite being risky, the corporate strategy adopted by Starbucks paid off because the regionally clustered stores helped the corporation to rapidly gain global market dominance (Theodore, 2002).

Starbucks corporate strategy neglects the excessive use of the generated revenues to advertise its products. Most marketing are carried by word of mouth ads. Besides crowding its retail outlets, the company follows smart joint business ventures with companies deemed to be right while rolling out novel and fresh initiatives like newfangled product lines (Taylor, 2011).

Starbucks hardly markets its products using posters, newspapers, ad spaces or billboards as is apparent with other global corporations such as McDonalds (Talpau & Boscor, 2011). In fact, Starbucks does not just employ unconventional marketing strategies merely for fun.

The marketing mix strategy perfectly matches the concept Starbucks yearned to exhibit (Perera et al., 2009). To display its current incredible level of success, the company uses strategic marketing techniques that have attracted millions of individuals globally and these are as subsequently outlined.

Clients’ satisfaction : With Starbucks, client satisfaction is considered very essential. Starting from entering the retail stores to the latter coffee drip, it is clear that clients have a sensation of distinctiveness as they consume coffees made Starbucks Corporation. Undeniable, coffees from Starbucks Corporation provides every reason why client servicing is essential (Talpau & Boscor, 2011).

Brand marketing: The marketing mix approach for Starbucks often centers on the word-of-mouth ads. This technique lets the Starbucks high quality services and products to express and market themselves. The company has been very successful based on this viral marketing strategy which allows clients to admit that Starbucks makes its own brands and runs the market with them (Taylor, 2011).

Perfect and innovative coffee cups: The history of Starbucks clear depicts that the company places more weight on the quality of products offered. While the coffees tendered are a bit more dear than anticipated, Starbucks coffees are famous for quenching the client thirst with their appealing, rich scent and flavor.

The coffee cups comprise of innovative and creative ideas that add value to Starbucks services and products. Through innovation, Starbucks has managed to add different aromas to its coffees, additional foodstuffs to its menu besides becoming first in offering internet capabilities in its retail stores (Weber, 2005).

Third place : Since its inauguration, the marketing mix plan for this corporation has been tailored towards the creation of third-place for each client going amid homestead and workplace. The creation of such a calming and distinctive atmosphere and experience for individuals and groups materializes to be very important for this corporation as it is the resilient model that Starbucks has used to strongly attract and retain most of its customers.

Smart partnerships and the creation of Starbucks communities : This Corporation is recognized for its strategic creation of partnerships. This implies that to increase its global market dominance, the smart business partners that Starbucks has formed helps it to augment its annual sales.

Furthermore, the marketing approach adopted by Starbucks has been extended to produce a community about its various coffee products. For instance, people have been fortified to give their views and experiences as regards to the history of Starbucks on this company’s website. The company has been part and parcel of such discussions (Talpau & Boscor, 2011).

Before expanding its business into any new country, Starbucks ideally conducts meticulous quantitative market studies. The company develops extensive focused group interviews to obtain a pulse of the market and its potentiality.

After realizing that even big companies cannot fill the new market gaps unaided in serving the demands of its target market, Starbucks resorts into seeking the help of another company or entrepreneur with whom it can work and share the financial risks (Taylor, 2011). Starbucks strategic partners helps it penetrate into new markets, keep abreast with the technological innovation advancements, achieve objectives and amicably obtain the services and products available in those markets very quickly.

To realize its global business expansion missions, Starbucks ensures that it selects local business partners who are ideal business leaders. Thereafter, Starbucks jointly with its strategic partner tries to acclimatize its business traditions to that local market.

It is also evident that Starbucks attachment to the internationalization business process varies in the mode of licensing, wholly owned subsidiary and joint-ventures. This is because Starbucks is persistently informed with operators to stay abreast of the lucrative marketplaces (Holmes et al., 2003).

This is implies that, the strategic choices that Starbucks has to make while expanding into the international markets are in line with the consideration of the international business partners. The company seeks to ensure that its local partners will positively share its commitments and values into bringing the Starbucks experience to the global clients.

Therefore, the strategic choices may include: partners who share its corporate culture and value; partners with strategic fits to Starbucks business; local business leaders; individual with premium brands and concepts as well as experience in managing license. Such strategic market choices are made because Starbucks believes that the success of any company is based on conducting ethical business and striving to execute all that is vital to accomplish the client demands (Aaker, 2012).

Both India and Middle East appear to be emerging markets for Starbucks products. For instance, India is densely populated and the younger Indian generations and the classy individuals from Middle East always look for cool and relaxing places to study and meet friends.

The wider market base, the financial potentiality of these people and the availability of potential business partners in both India and Middle East provides lucrative business opportunities for Starbucks to expand its global market operation to these regions. These factors are critical in upholding the success rate that Starbucks currently enjoys (Taylor, 2011).

Aaker, D. (2012). Remove Negatives to Remain Relevant. Marketing News , 46(1), 14-14.

Biederman, P. S. (2005). Commentary on Expo Fling a North American Concept to Asia: Starbucks in China. Cornell Hotel and Restaurant Administration Quarterly , 46(2), 288-290.

Holmes, S., Kunii, I. M., Ewing, J. & Capell, K. (2003). For Starbucks, There’s no Place Like Home. BusinessWeek , 3836, 48-49.

Kaplan, D. A. & Woznicki, K. (1999). Trouble Brewing. Newsweek , 134(3), 40.

Perera, L. C., Kerr, R. B., Kimura, H. L. & Lima, F. G. (2009). Case Study: Starbucks- Adding Value to Brand Equity through an Innovative Brand Image. Journal of the Academy of Business & Economics , 9(4), 174-185.

Talpau, A. & Boscor, D. (2011). Customer-Oriented Marketing – A Strategy that Guarantees Success: Starbucks and Mcdonald’s. Bulletin of the Transilvania University of Brasov. Series V: Economic Sciences , 4(1), 51-58.

Taylor, D. (2011). Siren’s call: Is Starbucks Steering its Brand Identity onto the Rocks? Central Penn Business Journal , 27(3), 13-13.

Theodore, S. (2002). Expanding the Coffee Experience. Beverage Industry , 93(10), 56.

Weber, G. (2005). Preserving the Counter Culture. Workforce Management , 84(2), 28-34.

Welsh, D. H., Raven, P. & Al-Mutair, N. (1998). Starbucks International Enters Kuwait. Journal of Consumer Marketing , 15(2), 191-197.

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Bibliography

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