TROUBLE BREWS AT STARBUCKS-- - Case Study Example

Starbucks case analysis Howard Schultz vision and the 5Cs situation analysis Starbucks began operations in 1971 under the leadership of Siegl Zev, Bowker Gordon, and Baldwin Jerry where the Company has grown to almost twenty two thousand stores across sixty-two countries whose base is in Seattle, Washington (Buchanan and Simmons 1). One of the renowned CEO of Starbucks is Howard Schultz in which the vision that this leader had led to his ousting and return as not many shared in it. For one, Schultz appears to have applied the 5Cs situation analysis at the time that he was developing the vision that he had for Starbucks, which he did not have the opportunity to implement at the beginning.

Essentially, the 5Cs analysis, which was initially the 3Cs strategy, includes elements such as customer, company, collaborators, climate and competitors. The key aspects that Schultz had in mind were customer, competitors, and the company itself in order for the vision to expand Starbucks to be realistic. In essence, Schultz intended for Starbucks to serve coffee at its outlets with the same taste of that made at home and factored in the growing competition from entrants such as McDonalds, which was winning its customer base.

The main target market for Starbucks as part of this vision was to be the people that prefer to brew their coffee from home because not many chain stores served coffee that was of their desired quality. The value positioning to customers would be that Starbucks would be able to serve coffee that was the same as that brewed at home hence saving their customers the hustle of having to only rely on home ground coffee with the taste that they know. Additionally, Schultz also examined Starbucks position and sought to remain relevant in the market by providing its needs and meeting customer satisfaction while registering profits.

Schultz vision met resistances, but Starbucks later bought into the idea in which the first step in implementation based on the 4Ps marketing mix was to create a place or atmosphere that customers would relax in. The idea was to create the third place after home and work where their target market would enjoy the ambience of Starbucks while sipping on a cup of coffee (3). The ambience of the ‘third place’ included the access to music, books, and movies as part of its product delivery options, which was successful in increasing customer flow to their stores (7).

The other factor was that Starbucks also targeted areas with heavy population flow such as airports, which succeeded in capturing a wider target market. Secondly, Starbucks also trained its staff on the company’s culture in order for them serve the products according to its standards as a way of retaining their already acquired target market. Additionally, Starbucks developed new markets in order for them to capture a wider target market and to surpass customer expectations to influence their satisfaction.

Starbucks growth initiative and strategy based on Ansoff’s matrixStarbucks recorded the strongest performance on the Wall Street despite the immense global economic challenges as compared to other companies and indicated that the company would experience steady growth rate. Essentially, most companies apply the Ansoff Matrix strategy as a tool for determining their market growth and help in the development of strategies that would assist in achieving this goal. In the case of Starbucks, the company’s intent was for it to open more chain stores within and across American borders despite the competition that it was facing from strong and emerging competitors.

Based on Ansoff’s matrix, the most suitable strategy would be market penetration for existing products and markets and product development for their already existing markets. Further, Ansoff’s matrix also suggests market development for new markets that have existing products and diversification of products within the new markets that Starbucks is set to capture. Starbucks implemented this strategy by making growth to be one of its core missions in order for the company to enjoy success in terms of coffee bars establishment across the regions that it operated in.

Further, the bringing on board of Howard Behar was also instrumental for Starbucks because of the wealth of experience that he brought to the company’s operations. Behar held customer needs with high regard as his noted concern for the desire by customers to have non-fat milk in their coffee through the feedback given on the customer comments card led to the development of this product. Other products developed included Frappuccino accompanied with a Pepsi soda and the cold sandwiches among a list of other products that boosted the company’s revenue turn over (5).

Growth initiatives evaluation: success and failuresOne strength that Starbucks growth initiative attracted was the company was able to shift to that of listening to the customer needs and also delivering as per the same as a way of retaining and attracting more customers. Ideally, Starbucks’ main area of focus was on capturing new markets and retaining the ones that they had already captured with their presence irrespective of the location that they chose to target. To some extent, Starbucks opened stores that could be right opposite each other, which was a quite disturbing to some bystanders as the this meant that the services and products offered would be duplicate within the same region (6).

In essence, this move was not quite advisable as this meant that the Starbucks outlets facing each other in the same area would have to compete among themselves on top of the list of other companies providing the same products. The most advisable aspect would have that Starbucks should have opened other outlets in order regions in order for them to capture a wider market as much as this did not affect their profit levels. Recommendation to Starbucks after the 2007 financial decline of the companyIn the history of Starbucks, 2007 was one of the hardest financial times for the company as the global recession influenced consumer spending hence affecting the profit margins for this coffee house giant.

In 2008, Starbucks had foreseen the closure of one hundred Starbucks that were under performing, which translated to the loss of employment for almost twelve thousand employees. The breaking of this news influenced a drop in share prices by two percent while the Company also had to pull out breakfast sandwiches that the customers had come to appreciate. In order for Starbucks to remain afloat, the company closed down its underperforming stores that operated within the same region because of the unnecessary completion that they had attracted among themselves.

After applying this unprecedented move, Starbucks regained its financial dominance after three months with a recorded profit of $151 from the loss recorded the previous year of $6.7 million. Schultz pledged that the Starbucks team was going to work towards improving customer experience through innovation and application of different strategies. Based on Ansoff’s product market matrix, the recommendation would be to try out new products gradually across regions rather than trying them out at the same to obtain a balance instead of uniformity.

Essentially, the Starbucks that were opposite each other on the same street should sell different products from each other to ensure that they offer variety rather than unnecessary competition. Work citedLauranne, Buchanan and Carolyn, Simmons J. “Trouble brews at Starbucks.” Ivey Management Services (2009):01-22.