Starbucks the Company That I Am Writing Case Study

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Starbucks

The company that I am writing about is Starbucks. Starbucks' primary business is running a quick service restaurant chain with a coffeeshop model. The company is the third-largest quick service restaurant in the U.S. By sales, and has a major international presence (Oches, 2012). In its 2011 Annual Report, Starbucks describes its business as "the premier roaster, marketer and retailer of specialty coffee in the world, operating in more than 50 countries." At present, the U.S. is the largest market, followed by the United Kingdom, Canada and China. Starbucks feels that the Chinese market will be the second-largest market for the company by 2014 (Starbucks, 2012).

Starbucks faces a unique challenge in that its core U.S. business is shrinking, as evidenced by successive rounds of store closures including 310 stores closed in 2011 (Oches, 2012), while simultaneously managing rapid growth in overseas markets, especially China. Not only is the Chinese market critical to the success of the company today, but as China becomes more important and the U.S. business plateaus, the challenge will be to define the company going forward. The company is also facing a number of competitive challenges. While it has first-mover advantages in China, it is facing competition in China from conglomerates like Nestle (Doherty, 2012) that could threaten the company's planned growth trajectory in China.

Managing growth might seem like a good problem to have, but if growth is managed poorly, the company could face hard times in China, or even a market exit. Starbucks has been forced to pull back from markets before as the result of botched growth strategies (Israel and Australia being two). In addition, poor growth management in the United States not only led to hundreds of store closings over the past five years, but a significant erosion in the company's brand value in the process. Customers began to find that the stores had become cookie-cutter, lacking the warmth and comfort that was a hallmark of the Starbucks experience (Quelch, 2008). The Starbucks Experience, as the in-store experience is known within the company, is essential to the success of a coffee chain in tea-drinking China (Wang, 2012). Thus, it is imperative that the company management growth properly, or it will blow the biggest opportunity in the company's history. Yet the company also faces challenges associated with the experience being too successful, with customers staying for hours without buying anything (Baertlein & Jones, 2012).

The company therefore must devise a growth strategy that will allow it to meet its objectives for growth in China. This strategy cannot, however, come at the expense of the Starbucks experience, but at the same time the success of the experience must also be addressed -- it needs to generate revenue, not just visitors. Simultaneously, Starbucks needs to address weakness in the domestic market, increased competition around the world and must confront the issue of its identity given that the Chinese market is the company's revenue and growth focus for the coming years.

The CEO is the person responsible for setting the generic strategy of the company. Starbucks has faced the competition problem before, most notably with the entry of McDonalds to the coffee shop market in the U.S. several years ago. Starbucks initially backed away from its premium positioning to match McDonalds, but then shifted back to premium positioning in order to ensure that it was differentiated. This is the approach that Starbucks needs to use with Nestle as well. Starbucks has a better product, and given the high price of the Nestle product Starbucks also has a better value proposition. These both need to be the focus of the company's marketing efforts.

The bigger challenge is with respect to positioning in China. For now, Starbucks benefits from… [END OF PREVIEW]

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Starbucks the Company That I Am Writing.  (2012, October 31).  Retrieved December 13, 2019, from https://www.essaytown.com/subjects/paper/starbucks-company-writing/7538782

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