Starbucks is an American Multinational Corporation that deals with coffee. It operates as a coffee company, as well as a coffeehouse chain. Founded in Seattle, Washington, as Starbucks Coffee, Tea and Spice Company, by Jerry Baldwin, Gordon Bowker, and Zeg Siegl, it experienced rapid growth, having more than 15,000 stores around the world by 2007 and 28,000 as of 2018. Starbucks underwent most of its growth between 1987 and 2000 when Howard Schultz was its leader and CEO. Schultz learnt about Starbucks in Hammarplast when he noticed a Seattle retailer selling more than a department store. He joined a position in the company in 1982 as its marketing director, after a whole year of negotiations. At the time Starbucks only dealt in manual coffee pots and equipment needed to grind the coffee efficiently at home.

It was Schultz, driven by his customer-retailer interaction ideology, who introduced the idea of coffeehouse chain stores to the company, after his trip to Milan. However, his bosses were not interested as they argued this would only make the company another restaurant or cafeteria. Not ready to quit his dream, Schultz left Starbucks and opened Il Giornale, in which Starbucks was the first investor. In 1987, in an unexpected turn of events, Starbucks owners decided to sell six stores, the company name, and the roasting plant. Schultz went for it, and this was the beginning of the thriving of Starbucks.

1.WhenSchultz Starbucks, who was the target market? How was the brand positioned, and what decisions about the product, price, their location and promotion supporting this positioning? When Schultz acquired and launched Starbucks in 1987, he had the sole dream of redefining the Italian coffee bar culture. He took a customer-oriented point of view, as he wished to identify what the consumer wanted, that is what would help him make the biggest possible customer network. The target customer of the company was any person, especially those people who needed somewhere to relax between work and home.  Schultz wanted to make it clear that home was not the only place that good coffee would be made.

To Schultz, the first idea towards achieving his dream was to ensure there was good contact between the customers and the baristas as they made the coffee: This would lead to customer loyalty and building of trust. Besides, it would ensure first-hand feedback from the customers. He also put a lot of effort towards developing new products, as this would create a massive diversity for the company, ensuring that it satisfied the prospects of many customers, thus acquiring a broad customer base. Schultz also figured that for success to be achievable, he had to incorporate his employees in the company’s dream (make them “partners”). To achieve this, he introduced a training programme for all his employees, that taught basic retail skills, coffee knowledge, brewing the perfect cup and customer service. He also ensured health insurance for all, even the part-timers. He also offered Bean Stocks, which allowed partners with at least six months in the store to be involved in major decision-making processes of the company: This ensured him of a satisfied partner base.

2. Wall Street and Starbucks management placed a significant priority for aggressive growth. How did they go towards achieving that growth? Starbucks first went public in 1992, with only over 100 stores in four states, and Vancouver. At its first entry to Wall Street, it’s stock price escalated from 17 dollars a share to 21 dollars a share. With it’s market capitalization standing at 273 million dollars, Starbucks became a public company and a significant player in the economy and the stock market. This however subjected it to unforeseen circumstance as it became subject of the stock market. Measures had to be taken, to counter the unstable stock prices. For Schultz and his management, the primary strategy was to make growth their main goal. This was the beginning of Starbucks’ tremendous growth.

The first move towards growth was to diversify and develop new products. The company added Howard Behar, who had deep retail experience to the management team right after it went public. Behar introduced real change in the way of thinking of the company. He instilled that business was about the consumer, and not the product. He is the one who introduced the use of nonfat milk, after reading the customer comments, even though Schultz thought that it tasted terrible. Frappuccino, cold blended beverages, were also introduced, that had never been considered before. Within a year, frappuccinos were being sold national wide, and their sales had mounted to 52 million dollars. This inspired the development of more new products, especially at the stores. They also began diversifying and adding flavors to some of the products they had. Within time, they also introduced snacks and food items like sandwiches and cookies to their menu.

The company also formed alliances with other companies like Pepsi, Dreyer’s and Jim Beam. These and their broad distribution networks assured Starbuck entry into supermarkets and restaurants and a broader customer base. This was however done with caution to avoid being controlled by these companies, which were way more significant than Starbucks.

Starbucks also started entering new and unexplored markets, with the goal of opening at least 20 stores I the first two years. They established business hubs in the large cities and opened new stores in smaller towns and suburban areas. Due to the lack of financial muscle to advertise, Starbucks would enter new markets through the establishment of community events. They also use artwork on mugs and t-shirts to celebrate the personalities of each town. They also used local ambassadors, who have established customers, to recruit new partners and customers. They gave free “share Starbucks with a friend” tickets that invited new customers. The company management also discovered that dense store placement was also a good strategy, even though it did hurt the sales of some stores in the initial times. It helped to create more awareness among the potential customers in each market.  The company also established drive-through services that were mainly to target parents with young children. These were profitable but also had some downsides, like real estate prices and the need for new partners to operate the drive-through windows.

In the endeavor to connect with customers, the company also ventured into music, movies, and books. Jazz and classical instrumentals was a part of Starbucks. Customers would always ask to be referred to where to acquire the music played in the stores. Thus, when Schultz came across Hear Music, he bought the company. He was impressed by the unique appeal of music they had, and the acquaintance they had to music. Starbucks, in collaboration with Hear Music, started producing a new music series that included the most famous artists of the time. The series became very popular, and the customer would come to buy coffee and produce a copy of the series. The CDs made huge sales. This raised boundless competition among recording companies to supply Starbucks. Starbucks also extended its reach into entertainment, by introducing books to their menu. They provided books and discussion forums for the books. Books did not, however, work so well as expected due to problems in the book industry. Starbucks could not just stop at that; they entered a promotional deal with Lions Gate Entertainment to produce the African American film, ‘Akheela and the Bee.’ Despite suspicions that the film wouldn’t sell due to its genre, Starbucks did aggressive promotion and managed to raise interest among its many customers, making unexpected sales. Starbucks repeated this with several other production companies, including Paramount and National Geographic Films.

Starbuck began international expansion in 1995, in a partnership with SAZABI Inc. to open stores in Japan, extending to countries without a coffee culture, like the United Kingdom, opening stores in more than 43 countries in the world

3. In retrospect, which of these growth initiatives were sound decisions of the brands positioning? Which ones not so much? To conclude this essay, let me state that whereas some of Starbucks’ growth strategies may have been very significant and instrumental, some were inappropriate and wrong, and may have led to its deterioration. An example is an expansion to countries with no coffee culture. Stores in such states made low sales but required the same amount of capital as those with high sales. This caused the problem of the extra allocation of resources. The drive through services may also have been a poor strategy because it was introduced into the company at a very ripe age, when the company could not afford the real estate and additional employees.