STAR BUCKS E-COMMERCE STRATEGY

Star Bucks E-commerce Strategy

Star Bucks E-commerce Strategy

Executive Summary

Starbucks became very successful because it was a disruptive innovation to the market. It is selling more than coffee; it is selling the third place between home and work. Starbucks is a place to sit down and have a conversation or have an informal meeting with a rich tasting high quality coffee in a unique environment. It attracts students, office employees, and people who simply like to sit down to drink a cup of coffee.

Introduction

Since going public in 1992, Starbucks US and international stores rapidly grew from an incredible total of 165 to 16,548 stores. These stores are company operated and licensed stores. In 2003, Starbucks decided to franchise to expand more quickly with the help of investors. Starbucks closed franchising the same year because by owning and running the stores themselves, they can control the quality directly. Even without franchising, Howard Schultz admits his disruptive innovation has become a commodity due to the quick store growth and has opened a door for poor quality of service.

In recent years, Starbucks has lost US market share to its competitors such as Dunkin Donuts and McDonalds due to several factors. The rise in gas prices and a slowdown in the economy have made customers think twice about spending on luxuries like Starbuck's cappuccino and lattes. There is growing challenge from Dunkin' Donuts and McDonalds who are offering their own cheaper priced gourmet coffee. Financially, Debt has increased the last two years. To gain back the market, our team recommends:

•Focus on its Core Competency. Do not make selling coffee the number one priority. Sell the “experience” before the coffee.

•Offer services such as free internet, newspapers and bookshelves.

•Focus on quality of service and product by investing in training•Focus on Re-branding product.

Background

Starbucks Coffee, Tea, and Spices was founded in 1971 by Gordon Bowker a former writer for Seattle magazine, Jerry Baldwin an English teacher, and Zev Siegl a history teacher in Seattle, Washington to sell high quality roasted coffee beans. The three men contributed $1,350 each and raised an additional $5,000 each to build their first store in Seattle's Pike Place Market.

Siegl, the former history teacher set out to learn all he could about the coffee business from Alfred Peet who ran Peet Coffee which was highly respected for its coffee. Siegl adopted Peet's approach to coffee beans and for the first six months of operation, Starbucks bought its coffee beans from Peet Coffee.

In 1972, Bowker, Baldwin, and Siegl, opened a second Starbucks store in University Village. Starbucks continued to expand in Seattle, Washington and by 1982 the company had five retail stores, a small coffee roasting plant, and a whole sale business that supplied coffee to local restaurants.

A turning point was when in 1983, the Vice President of marketing, Howard Schultz, took a trip to Italy and was captivated by the Italian espresso and coffee bars where coffee drinking was a relaxing social event. He decided he wanted to bring the same concept to ...