Schultz’s goal is to:” Establish StarBucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow.” To achieve this vision StarBucks founder Howard Schultz has articulated six principles:
* Provide a great work environment and treat each other with respect and dignity.
* Embrace diversity as an essential component in the way we do business.
* Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee.
* Develop enthusiastically satisfied customers all of the time.
* Contribute positively to our communities and our environment.
* Recognize that profitability is the essential to our future success.
In order to have an edge over its competitors Schultz has integrated a number of corporate objectives:
Securing the finest raw Materials
Starbucks begins its coffee quality right from the start i.e. bean procurement. Although in America other companies used low quality coffee beans,Starbucks strictly used best quality Arabica beans.Company’s vice president Dave Oleson himself keeps a check on the quality of the beans used.In 1992 Starbucks outbid European Buyers For exclusive Narino Supremo Bean Crop one of the worlds best coffee and became the elite supplier of the coffee beans in the world.
Vertical Integration
The company operates three roasting and distribution facilities out of them two are in Seattle area and one in East Manchester Township, Pennsylvania. In Seattle area the company leases about 92000 sq. feet in one building in Seattle, Washington and another plant and distribution facility of approx. 305000 sq. feet in Kent, Washington.
The Experience:
Star bucks provide seductive atmosphere in its stores which are distinctive and sleek, but yet very comfortable. Starbucks stores are mostly located in busy malls, street corners and even grocery stores. They are well lighted and jazz or opera music plays in the background. The company has employed about 100 people whose only job is to plan, design and build the unique interiors and displays in the stores.
The product packaging of Starbucks is also distinctive. The restaurants also offer coffee-by-the-pound, specialty mugs and home-espresso making machines. The company has also developed unique marketing strategies to establish its products in new markets such as free half pound coffee after one has bought ten half-pounds of coffee. Also the Starbucks employees spend a lot of time in describing the Starbucks global selection of best coffee and also help them to make decision on beans, grind and home brewing.
Building a unique Culture:
In the opinion of Schultz, happy employees are the key to competitiveness and growth. As he says “We can’t achieve our strategic objectives without a work force of people who are immersed in the same commitment as management.Our only sustainable advantage is the quality of our workforce.We’re building a national retail company by creating pride in- and stake in – the outcome of our labour.”
StarBucks promotes an empowered employee culture through employee training, employee benefits programs and an employee stock ownership plan.
Employee training:
Employees at Starbucks have to complete atleast 24 hours of training which includes stretches from everything of coffee history to a seven hour workshop. The workshop is one of the five classes that all employees must have to complete during their first six weeks and it focuses on the need to educate customers in coffee making techniques. During this training the store managers also teach the employees to make decisions that will add to customer satisfaction without requiring manager authorization.
Employee benefits:
All employees working with Starbucks whether part time or full time enjoy no. of benefits provided by the firm as benefits package.It includes medical, dental, vision and short term disability insurance as well as paid vacation, paid holidays, mental health/chemical dependency benefits.
Schultz is of the belief that without these benefits people don’t feel financially or spiritually tied to their jobs. He argues that stock options and the complete benefits package increase employee loyalty and encourage conscientious service to the customers.
Leveraging the Brand:
Multiple Channels of Distribution:
in addition its exclusive stores ,StarBucks has set up cafes and carts in hospitals,banks,office buildings,supermarkets and shopping centres.In 1992 Starbucks enetrerd into an agreement with NordStorm as exclusive supplier to its restaurants and espresso bar chain.A n year after,StarBucks sealed an agreement with StarBucks to implement a “caf�-in-a-bookshop” plan .Other distribution agreements included Associated Services, a office coffee suppliers; Sheraton Hotels and United Airlines.Star aims at capturing more of the US market with the help of these distribution agreements and new product partnerships.
Brand Extensions:
During the year 1995 Starbucks launched a range of packaged and prepared teas realizing the growing demand for tea houses and packaged tea.StarBucks initiated an agreement with PepsiCo. Inc. to bring out an bottled version of Starbucks’ Frappuccino (a cold and sweetened drink) in the year 1996.Starbucks also had an agreement with Washington-based Redhook Ale Brewery to make a product called Double Black Stout,a coffee-flavoured stout.In another partnership Dreyer’s Grand icecream Inc. agreed to distribute seven quart-products and two bar products of Starbucks coffee ice cream.Starbucks also entered into some other partnerships like collaboratin with Capitol Records Inc.,to produce two Starbucks jazz cds avialble only instore and Brueger’s Bagel Bakeries with the view to form new product associationswith coffee.
International Expansion:
Howard Schultz,the Starbucks founder, always followed a strict growth policy.Unlike many other coffeehouses or espresso bars, which are franchised,Starbucks owns all of its stores outright,excluding the license agreements at the Airports.Starbucks enters into an market and tries to completely dominate it before looking for further expansion.
In 1996,firm opened 307 stores and converted 19 Coffee Connection stores to Starbucks. Company aimed to open about 325 stores in the 1997 and to enter three new North American firms including Phoenix, Arizona and Miami,Florida.Schultz also aimed to own about 2000 store by the year 2000.But some analysts believe that the US coffee market may be reaching saturation.Keeping this in view, Starbucks has turned its attention to foreign markets for continuing its growth.Acc to Schultz Starbucks is looking at the Asia Pacific region for its international expansion.
Starbucks’ expansion into Asian Markets
In the year 1996,firm established an subsidiary named Starbucks Coffee International Inc. with the investment of $1.5 million. The subsidiarys’ aim was to penetrate into Asia-Pacific region.This subsidiary is responsible for developing new business internationally,financing and planning of international stores, manaing international operations and logistics, merchandising in international markets and finally for the training and developing of Starbucks Inetrnational managers.Since its establishment this subsidiary has opened and managed Starbucks coffeehouses in Hawaii, Japan and Singapore.Acc. to Kathie Lindemann, director of international operations atStarbucks, firm look for partners who share our values, culture and goals about community development and having plenty of experience.
Enetring the Japanese Market:
In Oct 1995,Starbucks entered into a joint venture with Tokyo-based Sazaby Inc.Starbucks focus to open about 12 new stores in Japan by the end of 1997.Starbucks Coffee International and Sazaby equally owned this joint venture of worth $2.33 million.Tokyo based Sazaby,operates upscale retain and restaurant chains throughout Japan.
With the help of Sazaby,Starbucks opened two stores in Tokyo in Sep 1996.The first outlet was opened in Tokyo’s posh Ginza shopping district and second store was located in Ochanomizu, a student clutered area with colleges,bookstores and fast-food restaurants.
Acc. To all Japan Coffee Association,Japanese consumed about 6.1 million coffee bags,each bag consists of 60 kilo of coffee beans,compared to the US and German consumption of 18.1and 10 million respectively.
Despite the absolute size of Japanese coffee market,analysts believe that Starbucks is likely to face stiff competiton and retaliation from well establishrd players in Japan, which include Doutor Coffee Company and the Pronto Corp.Doutor Coffee is Japan’s leading coffee-bar chain.It had about 466 shops in and around Tokyo.It is reported that nearly 10 million customers per month visit Doutor coffeehouses. Pronto Corp. is Japan’s second largest coffee-bar chain.In the year 1996,it had about 95 outlets most of them were in Tokyo.
Yuji Tsunoda, president of Starbucks Coffee Japan Ltd., mentions the company’s intentions to have 100 directly owned coffee bars in major Japanese cities in the next 5 years.
