Starbucks: Getting Grounded Before Getting Ground Up
Week 2 Case Study: A Crack in the Mug
Sunday, November 10, 2013
Starbucks is a household name. There is one; it seems, within a three mile radius of work or home, no matter where in the world you might be. As is apparent, Starbucks experienced swift growth in its first twenty or so years; however, due to several factors: a rapid decline in sales, a rise in coffee competitors and an oversaturation of the market, Starbucks was left rethinking everything they had done for the previous twenty years. While their strengths were still apparent, a re-“vision” of the direction of the company was necessary. And that is exactly what they started to do in late 2007/ early 2008. Addressing strengths and weaknesses, figuring out their future goals and concentrating on getting “back to basics” became their focus. Could they bounce back and regain their crown as coffee king?
Starbucks: Getting Grounded Before Getting Ground Up Starbucks. What comes to mind when we hear this name? Well, it truly depends on who the coffee drinker is. Ironically enough, there is sufficient information, input, ideas, opinions, thoughts and customer feedback to fuel any Google search one might plug in related to Starbucks. Like it or not, Starbucks has become synonymous with what we talk about concerning coffee.
Starbucks exploded in popularity in the 1990s. This was a time when incomes and lifestyles were on the rise in the United States (Sizemore, 2012). For at least twenty years, Starbucks saw nothing but incredible success and growth. However, toward the end of 2007, the company was “jolted by a decline in share price of 50 per cent and a decrease in customer visits to it’s outlets in North America” (Herriman, Wanikawa, Ichinose, Darak and Chaivan, 2008). For a company that had only seen phenomenal growth, any kind of decrease was distressing. Addressing the problem, rectifying it and regaining momentum seemed like the only natural thing for Starbucks to do.
Main Issues Facing the Organization
Competition. Many of the issues facing the organization are simple: twenty years ago, there weren’t any real competitors within the market. What has occurred in the past few years is that,
In an economy that increasingly favors cheap deals, Starbucks has been flailing while its competitors take advantage. McDonald's is expanding its McCafe into more and more markets, while Dunkin' Donuts is running various promotions as well as investing in advertising and new stores. Both companies are aggressively targeting Starbucks customers. (Glover, 2009)
When places like McDonald’s started to offer its breakfast crowd varied coffee options, the market shifted. However, the flip side to that argument is that Starbucks isn’t just selling coffee, but an experience, and McDonald’s or Dunkin’ Donuts can’t sell that same kind of experience; one might say that they serve two different types of customers—or do they? It leads to, “The our-drink-is-cheaper only lends credence to Starbucks’ premium position and cements McDonald’s as the ‘cheap place’” (Moger, 2012). “Cheap place” or not, McDonald’s’ McCafe quickly forced Starbucks and coffee drinkers to take notice.
Market Saturation. Some would argue that one of Starbucks other major problems is it’s oversaturation of the market—they are everywhere! While it’s comforting for some to know that no matter where in the world you are, you can still get your Venti Skinny Vanilla Soy Latte; others state, "How much more of the market can you continue to penetrate? How many more people are going to be emerging as new latte drinkers at Starbucks?" (Gillespie, 2007). What one must remember is that it isn’t just that they have saturated the market; it’s now competitors who have added to the market. To add to their “emerging new latte drinkers from a tea dominated market,” Starbucks has branched…