Starbucks 1996 Case Study Essay Example

penetration into the grocery channel)

Marketing (brand equity primarily generated by retail business- Starbucks is not just coffee, it’s a place, an experience) Starbucks must decide how it should leverage its core competencies against various growth opportunities:

Key consumer drivers of Starbucks success:

• Health consciousness
• Social experience/socializing (“The Starbucks Experience”)
• Affordable luxuries
• Awareness

Introduction of Starbucks Coffee at McDonalds- Starbucks should beware of diluting the brand. McDonalds does not portray a health conscious, luxurious atmosphere. Associating a clearly positioned “white color product” in an environment that clashes with the luxury essence of the Starbucks product, may cause confusion and inevitably tarnish the brand. In addition, McDonalds certainly does not provide a cohesive social “experience” with the Starbucks brand.

Further expansion of retail operations- If Starbucks continues to saturate areas with retail stores, they may not only lose some of the quality control over these locations, but begin to deteriorate the brand image. A unique “third place” between work and home providing luxury and a rich social experience will not be very appealing if, over time, there’s one on every corner. However, Starbucks could grow organically- current stores could become more elegant, a place welcoming, rewarding, and surprising customers at a higher level than what they’re accustomed to.By further developing current retail locations, Starbucks may be able to gain greater market share in areas without adding new stores.

Leveraging the Starbucks brand into the grocery channel- Can Starbucks maintain its appeal and identity through the

packaged foods channel? Again, If Starbucks is not just coffee, but rather a place and more importantly an experience, entering grocery stores may be very risky. This could once again prove to contradict everything Starbucks seemingly stands for. However, if done properly, this may be more realistic than entering McDonalds.Starbucks has a better chance of translating many of its key success drivers into the grocery channel.

Leveraging the Starbucks brand into other product categories- Starbucks must identify new products that uniquely belong to, or can be associated with their brand. It may be too far of a stretch to believe Starbucks could successfully market a pair of designer jeans, however there may be ways to reach non-coffee drinkers. Starbucks must ask: What could coffee be – besides hot or liquid?

Leveraging the Starbucks brand into the international market- The competitive strength of Starbucks is clearly dominant on a domestic level.However, this does not guarantee the brand identity/quality can be successfully translated into the international retail market. What Starbucks represents to the American consumer: “a third place”, “affordable luxury”, “health oriented”, may not even be relevant to international consumers. Furthermore, the question remains: Can Starbucks maintain the same level of control and discipline over their operations and brand if distributed internationally:

• Sourcing
• SCO
• Employees

Real Estate Conclusion: Starbucks must walk a fine line between leveraging its brand to achieve growth and not allowing it to deteriorate in the process.

Recommendations: 1. Starbucks must identify its core capabilities that are transferable into International Markets as well as packaged foods. Starbucks needs to assess whether or not it can transfer control and discipline over their operations and brand if distributed internationally. Also,

Steps should be taken to evaluate international response to Starbucks, as well as gauging the current “brand loyal” consumer opinion on branching into the grocery channel.

Starbucks should not partner with McDonalds.

The company should stay away from retail partners who do not have a cohesive image.Partnering with McDonalds will certainly deflate the Starbucks “experience” which in turn, may cause long-term brand equity to decline. 3. Starbucks must stay true to itself if leveraging the brand into other product categories.

Becoming a consumer brand instead of just a specialty coffee outlet may be difficult. As long as Starbucks can translate the high level of quality and brand essence that made them famous, it has a chance to succeed outside of the retail coffee industry. However, they must stay relevant. What could coffee be – besides hot or liquid? - Candy - Desert products- cakes, toppings, etc.Starbucks branded coffee merchandise: - Packaging- unique vacuum sealed bags - Hardware- highest quality coffee-making equipment and accessories

Starbucks should attempt to grow organically.

Starbucks can achieve sustained growth without over-saturating the market with new retail locations. Current stores could become more elegant, a place welcoming, rewarding, and surprising customers at a higher level than what they’re accustomed to. By further developing current retail locations, Starbucks may be able to gain greater market share in applicable areas without adding new retail stores.

Starbucks may be able to create a new segment/category within the coffee industry. Based on the consistent growth of the specialty coffee industry and the brand loyalty generated by the Starbucks name, there may be an opportunity to create an even higher-priced, more distinguished (luxurious) coffee category appealing to an additional segment of

coffee drinkers.

If Starbucks can infuse a more expensive line of coffee within their current line-up, they may be able to sustain growth by playing off of the “perceived value” of “affordable luxury”. Basic Coffee / Specialty Coffee / “Exclusive Luxury Coffee”