The Company Brand of Starbucks - Case Study Example

Outline Thesis ment 2. Introduction 3. Background of Starbucks 4. Success of Starbucks and the Tipping point Criterion a. Contagiousness effect in Starbucks b. Little changes having big effects c. Not gradual but dramatic change 5. Gladwell's Ideas and their application with Starbucks a. The Law of the Few b. Stickiness Factor c. Power of Context 6. Conclusion Its Not Just Coffee It's a Lifestyle Thesis Statement Starbucks has developed into the most favorite American Coffee spot primarily due to its fascinating ambience and efficient service. Introduction Starbucks lifestyle is a commonplace for everyone in United States. It is not just the taste of the Coffee, High Speed Internet, Sandwich or Pastry supplements that make it a treat to visit Starbucks but it's the ambience and the experience that attracts millions of customers to stop at their nearby Starbuck outlet and to spend the most relaxing time of their day. Starbucks has created a retails store environment that is attractive, comfortable, and even entertaining, and is designed to keep customers coming back to the stores. Comfortable chairs, wireless internet connection, even a selection of music, books and CD burning facilities all add to the charisma and promote an atmosphere that enhances the customers coffee drinking experience. Taking its name from a character in the novel Moby-Dick, Starbucks is the largest coffeehouse company in the world, from a small Coffee shop in Seattle 36 years ago its has developed itself to own 7521 self-operated and 5647 licensed stores in 39 countries. Surveys have shown that is the most successful and admired company in United States today, it has revolutionized the way Americans used to view Coffee and rejuvenated the drinking experience into a lifestyle, a trend that has been a successful social epidemic, as Gladwell puts it, for the past two decades. Starbucks' success has been attributed to a number of factors apart from the ones mentioned above, the theories put forward by Malcolm Gladwell are well suited to its case as it had a number of Connectors, Salesmen, the stickiness factor and the power of context all played a major role in it turning out to be a successful trend. Starbucks Connectors and Salesmen involve some big names like the Pepsi Cola and McDonalds. Background of Starbucks The story of Starbucks represents one of the classical American commercial success stories where three college friends used to meet from time to time to discuss the potential business venture to initiate. An English teacher Jerry Baldwin, history teacher Zev Siegel, and writer Gordon Bowker were three people who conceived the idea of Starbucks and opened the first coffee bean roaster and retailer outlet under the banner of Starbucks in Seattle, Washington in 1971. Coffee was a neglected commodity in America at that time mainly due to the procedures and the type of coffee that was available throughout the country. The three founders Siegel, Bowker and Baldwin managed to provide the European style roasted coffee which was a lot different then the percolated brown beverage that the Americans were used to. A unique taste and an innovative product was the primary reason for its Starbucks in the first ten years of its operation. Howard Shultz, the entrepreneur, formerly working for a Swedish Kitchen company felt attracted by the growing success of Starbucks and joined as a Marketing Manager in 1982. Shultz was always ready with new ideas and was hungry for changes that would make life easier for the customer and transform Starbucks into a more user friendly spot. Returning from a tour to Milan, Howard Schultz suggested that the company should sell coffee and espresso drinks in addition to beans. The owners rejected this idea, believing that getting into the beverage business would distract the company from its primary focus. To them, coffee was something to be prepared in the home and they strictly opposed the idea of bringing the Italian coffeehouse culture in United States. But, Schultz was not prepared to hold back with an idea which he considered would be a real time success in United States. Thus to advance his concept, Schultz stepped away from Starbucks and founded a company II Giornale. In 1987, the owners decided to end their coffee business and Schultz purchased Starbucks, merged it with II Giornale, and renamed the company Starbucks Corporation. The year 1987 marked the beginning of the Starbucks experience. Following his ascension as the CEO of the company Schultz has transformed the Starbucks Coffee shop into a multi-facilitated experience. In the past 20 years Shultz has made small but smart changes that have resulted in huge success for the company and as Joseph Michelli writes: "Starbucks is one of the best of the best business global enterprises" (Michelli 2007) Success of Starbucks and the Tipping point Criterion Tipping point is the moment of critical mass, the threshold, the boiling point, a place where the unexpected becomes expected, where radical change is more than possibility, or to put it in Gladwell's words: "A key moment of crystallization that unifies isolated events into a significant trend". (Gladwell, Chapter 1) Starbucks has undoubtedly reached its tipping point and in the last 36-year period has developed itself into a lifestyle. This can be well explained with respect to the criterion laid down by Malcolm Gladwell: Contagiousness: For a trend to develop it is important that it is contagious and the product and demanded by all. Starbucks showed a contagious behavior in the spread of its popularity and sales even when it was a small retail outlet. It was seen to be worth of paying $4.5 dollar for a coffee and at the same time be able to listen to your favorite numbers and access to internet. Starbucks provided it customers an environment to relax, socialize to hold meetings, thus a multitasking environment proved to be contagious and on record Starbuck was inaugurating a new retail outlet everyday in early phase of the 21st Century and its attractiveness is diffusing epidemically. Starbucks is not associated with any single age group of the society but it has equally infected all classes be it the teens, those in twenties, middle-aged or even executives. This Contagiousness is further more visible with the cluster of shops in a single and still reports of above average sales on each identifies the recognition and passion with which Starbucks is received. Little changes having big effects: In order to maintain consumer loyalty Schultz and his team have been in constant touch with customers through comment cards and have been trying their level best to refrain for being monotonous to the customer every time he/she walks in. therefore a number of modifications in design and structure are constantly being and fortunately for them all such steps are really paying off. The introduction of automatic coffee makers, a musical surrounding, wireless internet facility or the editions of the menu card all have reaped tremendous advantages and multi-folds increase in sales. Hence little changes have caused big effects for Starbucks. Not gradual but dramatic change: Even the smallest of changes as stated earlier shattered the epidemic equilibrium i.e. had reasonable effects. For e.g. resistance by the customers over an Italian style menu in the early phase of Starbucks led to the transformation of the card and the ambience, a minor modification though increased Starbucks sales dramatically as the customers felt a greater conformity with the native culture. But at the same time Starbucks used the slow-but-sure approach to business growth. It was certainly not an overnight success. But through perseverance, patience, management and financial smarts, the company has become a formidable global presence. Gladwell's Ideas and their application with Starbucks The Law of the Few The Law of the Few is used as an aid in illustrating why trends tip. "The Law of the Few ... is that one ... exceptional [person that] found out about the trend, and through social connections and energy and enthusiasm and personality spread the word..." (Gladwell 22) There are three types of persons that are part of the idea of the Law of the Few: Connectors, Mavens, and Salesman. In case of Starbucks success is mainly attributed to the human power. It incorporates the minimal amount of advertisement, 1% of the annual budget, and is greatly dependant on the word-of-mouth phenomenon for the spread of news. Hence a number of Connectors, Mavens and Salesmen have played a huge role in its substantial success. One of the key factors in Starbucks success worldwide in the 1990's was the choice of it partnership and ultimate connectors it developed for itself. Starbucks strategic partnership initiatives with names like Barnes and Nobles, Pepsi-Cola, Johnson and Johnson's, McDonalds's and JumpStart helped Starbucks break into new markets quite easily and increase their bottom-line. Connectors according to Gladwell are those "Who know lots of people they are the kind of people who know everyone" (Gladwell 36) The company's major connectors in this context were its Baristas, these were the people who were in constant contact with the customers, and they knew their names, their choices and played a major role in extending consumer's loyalty towards Starbucks. One of the principles laid down by the management states the importance of consumers in following words: "Develop enthusiastically satisfied customers all of the time" In this regard the baristas played a phenomenal role and their welfare and satisfaction is one of the Starbucks major goals as once presenting the Health and Care Program for part timers in front of the Board of Directors, Howard Schultz argued: "Employees are vital to Starbucks they are Connectors between us and the customers if they left our connection would break" Moreover customer satisfaction is one of the key elements of the Starbucks experience and it strategically kindles the word-of-mouth epidemic. As one of the customers exclaimed "What made me visit Starbucks was this 'You have to try this! It's called a frappuchino! It's delicious!' from one of the colleagues" Stickiness Factor Howard Schultz throughout his career at Starbucks has worked to enhance the Customer's experience and for this he and his team have been committed to constant brainstorming to come up with ideas and modifications that would make the customers 'stick' with Starbucks and not to even thinks about its closest competitor. Apparently Starbucks has been successfully able to do this so far. The author of the Tipping Point in his book discusses examples of TV shows that have stuck to the US population and world at large for generations. He even emphasizes the fact that to be able to this the managements have been involved in countless researches which ultimately helped them in deducing the parts of their programs that grasped maximum attraction. These companies then worked over these sections and tried to present them in the best way possible so as to expand their viewer base. Gladwell's explains Stickiness in following words "The specific quality that a message needs to be successful is the quality of "stickiness." Is the message - or the food, or the movie, or the product - memorable Is it so memorable, in fact, that it can create change, that it can spur someone to action" (Gladwell, 75) Like Cigarettes the test of Starbucks coffee itself provides enough stickiness to the customer, who once having taken a sip tends to add it to his daily routine and become a loyal Starbuck fan. Moreover extensive research has been conducted by the management to ensure that the customer gets what he wants and their goal of maximum customer satisfaction is fulfilled. To be able to do this Starbucks offers its every customer a comment card which has to be filled on each visit, these comments are weekly read by the management and helpful suggestions if any are accounted for. Moreover Starbucks stresses on the principle of 'Make it your Own' for both the customers and the employees and any objection over any policy is greeted by the Management and Schultz explained that employees shouldn't have any fear of being hit back. The introductions of chairs and an English Style Menu were one of the first few changes that were made in the context of improving stickiness. These have been followed by a number modifications over the years all aimed at improving customer satisfaction. These include the own choice of music, wireless internet connection, extension of the menu by offering Ice Creams, Sandwiches and pastries as supplements to its main Product that is Coffee. Moreover when operating in different countries Starbucks has made it a point to make certain variations with regards to the countries culture to avoid an alienated feeling in the customers, this has added to their stickiness in the foreign market. Lastly the one of the other major factor that has helped in maintaining Starbucks stickiness is its quality control, throughout the past 36-year period Starbucks have been strict on quality and this has been ensured by avoiding franchises so as to keep control centralized and quality sustained. Power of Context Another crucial aspect that has been identified as an important mechanism in causing a trend to tip has been referred to as the Power of Context by Gladwell. "If the environment or historical moment in which a trend is introduced is not right, it is not as likely that the tipping point will be attained" (Gladwell, 137) While discussing this Gladwell explores the gigantic drop in crime in New York in the early nineties. While many attribute this to a giant "crack down" by the police, the truth is rather astounding. Instead of bravely sweeping hardcore criminals off the streets, the city government focused on the subway. At that time, subways were coated, from floor to ceiling, with graffiti. The crackdown needed cleaning the subways so they sparkled, and rounding up turnstyle jumpers for arrest. The idea was that if you change the context of the subway--if you show that you care about the little things--the bigger things (robbery, rape, murder) won't happen. It surely worked and the crime rate in New York dropped. In Starbucks context has obviously been given a lot of importance and it is one of its major reasons for the company's success. For e.g. most of the expansion came in the 1990's during the period of the economic boon and people were prepared to welcome any new product in the market and a pay a price for it. Moreover the ambience that has been created at the Starbucks is one of the little things that have obtained great benefits for the company. The relaxing atmosphere, rock music environment, a cool coffee culture and a Television Vision show like setting adds to the entailed environment and augments the experience. Conclusion Starbucks has is on the verge of becoming the Nike or Coca Cola of the specialty Coffee segment, while the industry analysts view greater prospects with the growing expansion of the company. The secret of Starbucks success primarily lies in the patient and courageous leadership of Howard Schultz, the entrepreneur. Starbucks would not have been what it is today without the self belief and efforts of Schultz who proved to the world that his idea and observation did not fail and he managed to rejuvenate the Coffee culture not only in America but throughout the globe. Once considered a trait of the oldies Starbucks has made coffee a routine of every individual irrespective of his/her age group. Gladwell' ideas and theories have played a significant role in Starbucks success over the years but if not for the effective leadership that set the base Starbucks would not have been where it stands today. Bibliography 1. Corporation, Starbucks. "Company Overview." Starbucks Homepage. 2007. Starbuck Corporation. 26 Jun 2007 . Read More