Managing High Growth Brand-Starbucks

Submitted To Mahbub Hossain Course instigator and product management the Statesn Inter res publicaal University Bangladesh (AIUB) Submitted By Khan Samara Salsabeel 07-09162-2 . Mr. Mahbub Hossain Course Instructor cross out and Product Management, sec-A give in STARBUCKS CORPORATION Managing luxuriously growth tell on. Dear Sir, We argon grateful to you for giving us the chance to work on this case study.We would besides like to pronounce gratitude to you for your gracious cooperation and valuable guidance for preparing the report. Sincerely, Khan Samara Salsabeel (07-09162-2) Sadia Rezwana (07-09013-2) Kazi Masum (08-09933-1) Mohammad Abdul Kader (08-11783-2) In 1971, Seattle entrepreneurs Jerry Baldwin, Gordon Bowker and Zev Siegl firstborn opened Starbucks in Pike Place Market. At that time, Countrys study chocolate tree grasss were engaged in price war, therefore they were forced to use cheaper bean plants in their blends to reduce costs.As a result there was a decline in coffee consumption. To harness the potential of the gourmet coffee trend in the Seattle area, the founders of Starbucks experimented with the new concept of a transshipment center dedicated to selling only the finest coffee beans and coffee create from raw stuff machines. This emphasis on calibre whole-bean coffee retail was fairly unique. Starbucks placed lineament as its top priority. The Starbucks management dedicated a great deal of their time and financial resources to establishing healthful relationships with coffee growers from around the world.In 1982, Howard Schultz, current CEO of Starbucks recognized that the conservative business plans of early Starbucks management hindered the fraternity from reaching separate potential coffee lovers. Hence he transformed Starbucks from a coffee retailer into a cafe business. He had a visual sensation of expanding the scope and reach of the Starbucks speck. In addition to selling only best of level coffee, Starbucks w orked to fill its bloodlines with only the highest timbre of everything, from coffee making equipment to the fixtures and furnishings to the music and artwork.Each Starbucks store is carefully designed to enhance the calibre of everything the customer see, touch, hear, smell or taste. The stores are designed in such a manner that it gives a warm, inviting surround essential for giving Starbucks a pleasurable coffee centered experience. The keys for success for Starbucks in building the brand are 1. Starbucks was the first to introduce Coffee nominate with premium coffee to American market. 2. Consistent premium coffee. 3. It placed quality as its top priority. 4. Starbucks established strong relationships with coffee growers from around the world. . Formation of high-octane management team with highly innovative and creative employees. 6. Profitable partnerships and reefer ventures with some of the nations strongest corporations such as Host Marriott, United Airlines, Pepsi Co, Dryers and others. brand name values of Starbucks 1. Top priority is the quality of its products 2. Premium coffee experience 3. value simplicity over technology 4. Investing in innovation 5. Employees as partners and viewed as the intimately important assets of the corporation. The sources of equity of Starbucks are Brand awareness and brand image.Brand awareness and image are collectively known as brand experience. Brand awareness has been established through word-of mouth, partnership and selective and fruitful location of Starbucks outlets. Brand image is established through 1. premium coffee beans 2. create from raw stuff techniques 3. store designs, artwork and music 4. Consistently nigh customer service 5. Classy, romantic atmosphere with un labeld store design that meets five senses. Pivotal to Starbucks high growth strategy was the carefully planned expansion of its specialty coffee stores to new markets throughout North America and eventu each(prenominal)y worldwide. Hence geographic market expansion, joint ventures and partnerships are some of the strategies the corporation followed to grow the brand. However these strategies had both merits and demerits for Starbucks which deplete been discussed later in the report. There are several things which are needed for a corporation to become a world class spherical brand which are likewise discussed in the report. For Starbucks to become a world class global brand, it moldiness get the best some major hurdles. In addition to hurdles, Starbucks has many challenges which they need to meet in terms of American market. All these are discussed in detail in the report. SI DESCRIPTION PAGE 01 Objective Of The Report 07 02 Methodology of The Report 08 03 Limitation Of The Report 09 04 Starbucks Corporation At A peek 11 05 Success Keys For Starbucks In Building Brand 12-13 06 Starbucks Brand Values 14 07 Sources Of Equity For Starbucks 15 08 Evaluation Of Starbucks Growth Strategy 16-18 0 9 Starbucks Challenges In neat A World Class Brand. 19 10 Recommendation 20 11 Conclusion 21 12 Reference/Bibliography 22 1. It reflects a draft description of the corporation. 2. To know the following Success keys for Starbucks Starbucks brand values Starbucks sources of equity Starbucks growth strategies Starbucks hurdles and challenges in seemly a world-class brand. We put one over serene almost all data from the case study. Moreover, we have collected data from Annual Report published by the corporation. Reference books, study materials and the internet were in like manner of great aid for the preparation of the report.The first and foremost limitation was the time constraints. Gathering information on various aspects of the corporation was quite difficult. This is the reason we could non go to the in depth analysis within the limited time frame. In less than a decade, Starbucks was transformed from a neophyte whole bean coffee retail chain into a globally reco gnized brand. In 2002, Starbucks was comprised of more than 5400 stores located throughout North America, Latin America, the Pacific Rim, Europe and the warmness East. Growth of the corporations coffee retail business continued at a steady pace of one store opening a day on average, and annual revenue for 2001 topped $2. 7 billion.Moreover, joint ventures with some of the nations strongest corporations including Pepsi, Kraft, Dryers and Capitol Records, allowed Starbucks to launch a mercenary consumer product division to complement its cafe business. Licensing partnerships with other companies such as United Airlines, ITT Sheraton and Host Marriott further added to the growth of the Starbucks brand. Indeed, Starbucks rose to become one of the most impressive high growth brands in the 1990s. Despite this strange growth, some questioned whether Starbucks began to lose focus as the company strove to constantly reinvent itself. Critics wondered if perhaps the brand grew too quickly r apidly to remain focused on its pump values and business objectives.In less than a decade Starbucks was transformed from a fledgling whole bean coffee retail chain into a globally recognized brand. By 2002 Starbucks was comprised of more that 5400 stores located throughout North America, Latin America the Pacific Rim, Europe and the Middle East. There were some success keys which accelerated the growth of the company, some of which are given below 1. The company had a strong and dynamic management team. The creative and highly innovative team monitored the problems of the customer and the employees. They also found out issuanceive solutions to the problems the company encountered at different stages of its operation.In other words, the key to the companys success and widespread appeal among loyal customers had al expressions been the employees, whose knowledge and dedication attracted customers to continue returning to the store. 2. joint ventures with some of the nations stronges t corporations including Pepsi, Kraft, Dryers and Capitol Records, allowed Starbucks to launch a lucrative consumer product division to complement its cafe business . 3. Licensing partnerships with some other companies such as united airlines ITT Sheraton and host Marriott further added to the growth of the brand. 4. Use of improved and new technology was another key to the success of the brand. This make it easier for the company to maintain the quality of the products.Innovations such as the FlavorLock bags prevented harmful air and moisture from seeping into the coffee thereby preserving the quality and frugality the company from much more significant costs. 5. Starbucks was the first to introduce Coffee house with premium coffee to American market. 6. It placed quality as its top priority. To distinguish their coffee from the bland and tasteless store brands, Starbucks only purchased Arabica beans from a carefully selected network of suppliers across the land, from places like Sumatra, Kenya, Ethiopia and Costa Rica. Arabica beans were selected because the beans chemistry is such that it can withstand high cook temperatures, resulting in richer flavor. 7. Starbucks established strong relationships with coffee growers from around the world.Starbucks sought vendors who sold products that would protect and even enhance the arabicas flavor. This required the formation of partnerships across the globe with coffee brewing equipment suppliers who provided products that captured the essence of the coffee brewing tradition. The brand values of the company are given below 1. The company placed quality at its top priority they emphasized on quality and never compromised with it. The Starbucks founders realized that if they wanted to enhance Seattles appreciation for fine coffee, they had to provide the best ingredients and brewing equipment to ensure that customers had the most enjoyable coffee experiences possible. 2.Employees are viewed as the most important ass ets and partners of the corporation. They were adequately educated and trained to provide the best customer service. The knowledge and dedication of the employees attracted customers to continue returning to the stores. The employees played a vital role. This is because word-of-mouth publicity can only be achieved if the company continues to recruit and retain dexterous individuals who can lead the company to new markets and communicate Starbucks strong values to the communities who knew little about the brand. 3. Another brand value for Starbucks was investing in innovation. It do easier for the company to maintain the quality of the products.Innovations such as the Flavor Lock bags prevented harmful air and moisture from seeping into the coffee thereby preserving the quality and saving the company from much more significant costs. The source of equity for Starbucks is Brand knowledge. Brand knowledge is the key to create brand equity because it creates differential effect that d rives brand equity. Brand knowledge has two components Brand awareness Brand image Brand image is the impression in the consumers mind of a brands total personality. Brand awareness is again consists of Brand recognition relates to consumers ability to confirm prior exposure to the brand when given the brand as a cue. Brand recall Relates to consumers ability to retrieve the brand from memory when given the product category.Brand awareness for the company has been established through word-of mouth, new impart partnerships and selective and fruitful location for Starbucks outlets. Brand image is established through premium coffee beans brewing techniques store designs, artwork and music Consistently good customer service Classy, romantic atmosphere with consistent store design that meets five senses. Starbucks growth strategy mainly comprised of Geographical Market Expansion, variegation and Partnerships. Pivotal to Starbucks high-growth strategy was the carefully planned expansion of its specialty coffee stores to new markets throughout North America and eventually worldwide.The first manikin of the Starbucks expansion strategy focused on securing a major foothold in the Pacific Northwest while experimenting in other key markets that were farther away, but had a high potential for rapid growth in cities such as Chicago, Los Angeles, San Francisco, New York and Washington, D. C. Successful expansion throughout Florida, Hawaii and capital of Japan showed that fine coffee could be a hit in warmer climates as well as in the frigidity cities. The Starbucks management team agree of the companys massive expansion program by owning the operation by itself instead of pursuing franchising. This was a smart move because franchising runs the risk of a possibility of ruining the brands image to some extent. Other disadvantages of franchising are Franchisees are self-employed there may be problems in ensuring that they all adhere to the operational methods t hat are designed to achieve uniformity.Failure by an individual franchisee will reflect badly on the whole franchise operation. The franchisee may have different objectives from those of the franchisor. In the long run, they may begin to resent the control exercised by the franchisor. This may cause problems in terms of policing the franchisee Diversification means growing new products for new markets. Some of the reasons why it is advantageous for companies like Starbucks are Diversification promises to be especially profitable To avoid dependence on a single product To expertnessen existing products by synergy To compete on all points with a rival firm To take advantage of byproducts.Although variegation strategy is risky, the company runs the risk of neglecting the existing products and introduces new products to new markets which are a desperate move. Starbucks diversified with new products namely Frappuccino, a popular bottled cold coffee beverage using extracts from S tarbucks famous Arabica beans. Frappuccino put the Starbucks brand into supermarkets for the first time. In November 1999, Starbucks launched Barista Aroma thermal coffeemaker which was positioned as a durable, convenient and consistent way to brew coffee. Two new lines of proprietary products were launched in 1999 chocolates and hot cider. Starbucks also introduced a line of coffee blends, called Milder Dimensions that aimed at capturing demand for lighter roasted coffees. Starbucks purchased Tazo Tea, an operating theater tea retailer, indicated a potential new trend for Starbucks to acquire companies as a means extending product lines. With Tazo Tea, Starbucks hoped to attract new customers who were looking alternatives to coffee. With Starbucks geographical market expansion proceeding at a phenomenal rate and with much success, many companies across the country began to approach Starbucks with partnership proposals. But selecting the misemploy partner company or the wrong p roduct to introduce with a partner could have devastating consequences for the brand. As a result, Starbucks entered into partnerships with companies who maintained the same commitments to quality such as Kraft, Dryers, Pepsi, Host Marriott, and United Airlines.These partnership ar pluckments provided the company with a number of benefits given below Increased brand awareness Broader range of potential customers Exposing to new customers helped the company to cultivate stronger brand image Partnership is a way so that consumers regard Starbucks as a world class brand. Partnership resulted in innovative product development. The Dryers joint venture with Starbucks led to the creation of six popular Starbucks coffee ice skitter flavors that are marketed under the Starbucks name but produced and distributed by Dryers. Sales of these ice creams surpassed others such as Haagen-Dazs and increased to 54% in the year becoming the market leader. By partnering with Kraft, the second lar gest packaged-foods company in North America, Starbucks was able to benefit from Krafts extensive distribution network. The Kraft partnership also left the door open for Starbucks to explore the possibility of marketing food products with the help of Krafts distribution and marketing expertise. Despite of the above benefits the partnerships were providing to Starbucks, they also had problems There was a risk that the partner companies will not maintain the same quality, customer service and commitments because Starbucks was allowing an outside source to brew its coffee. Staffs and bartenders may not be well trained and may not provide adequate information to customers regarding Starbucks. In case, bad tasting coffee was being served to thousands of customers, then the brand would develop a negative connotation. For the above problems, Starbucks were able to solve these problems so that Starbucks brand image would be harmed in the partnerships. The partnering companies were quick t o remedy coffee quality problems by working with Starbucks to install more effective filtering devices in aircraft brewing equipment, and to better educate staffs of the partnering companies on how to protect on how to protect the quality of the coffee. Therefore, since Starbucks could overcome the problems, partnerships have proved to be beneficial.To make Starbucks a world-class global brand the followings are needed Production and distribution (saving costs and coffee quality). market costs ( packaging and promotion ) Power and scope ( credibility, acceptance, social status, high quality, etc ) Consistency in brand image. Sustainability of core competences Uniformity ( controlling and coordination ) The hurdles which Starbucks must overcome are given below Consumer needs and wants in different cultures. People in different countries may have different coffee intoxication behavior and coffee consumption. Consumer response of marketing mix (attitudes and opinions). Legal environment (different labor policies between countries). Administrative procedures. In terms of American market, Starbucks biggest challenges are Biggest threat Dunkin Donuts Increasing of direct competitors Aggressive global marketing strategies Focus on overseas growth and brand development Despite Starbucks remarkable growth, it began to lose focus as the company stove to constantly reinvent itself. The brand was growing too rapidly to remain focused on its core values and business objectives. Starbucks developed non related or other products, such as in November 1999 it launched Barista Aroma Thermal coffeemaker which was positioned as a durable, convenient and consistent way to brew coffee.In case of this coffeemaker the problems were, it was blocking the sightline and the traditional coffee taste was being lost. Hence in this case it can be recommended for semi-automated coffee machines and scheming of proper layout for the coffee machines so that the machines do not b lock the sightlines. It also launched non related products such as custom made CDs and other entertainment products. Although these have the advantages of increased brand awareness, improved brand image and enhanced parent brand, these products have the demerits of losing brand identity, core values and the company may end up with frustrated and confused customers.So it can be recommended to pull out unrelated diversification and focus on being number one in the coffee business. Starbucks meteoric rise from a tiny local retailer to an international coffee powerhouse as one of the great success stories in American business in the last decade. The fact that Starbucks garnered such media and investor attention in the midst of the Information Age without an ounce of tech in its product made this growth all the more remarkable. Incredibly, Starbucks achieved its market leader position largely without aid from advertising campaigns. Instead, the company built the brand by relying on the q uality of their products and services to induce free word-of-mouth advertising from customer to customer.As Starbucks continued to push for new product innovations and business opportunities as a way to differentiate itself from its competitors, the company ran the risk of straying too far from its original focus of spreading its passion for fine coffee. The ballooning size of the corporation suggested that the quality of Starbucks products and services, and the strength of the companys relationships with its most valued people, would need to be closely monitored. A larger, global Starbucks had to find the right balance in pursuing product- driven, people- driven, value- driven and sales- driven objectives. www. starbucks. com www. hoovers. com www. businessweek. com Strategic Brand Management, Keller, 2006 Best Practice Cases in Branding written by K. L. Keller STARBUCKS BRAND & PRODUCT MANAGEMENT Acknowledgement Executive thickset Table of Contents Objective of the Report Meth odology of the Report Limitation of the report Starbucks at a glance STARBUCKSSuccess keys for Starbucks in brand building Brand values of Starbucks SRAR Sources of Equity Growth Strategies Starbucks- A Global Brand Recommendation Conclusion STARBUCKS STARBUCKS pic References STARBUCKSssS STARBUCKS STARBUCKS STARBUCKS STARBUCKS STARBUCKS STARBUCKS STARBUCKS STARBUCKS STARBUCKS STARBUCKS STARBUCKS STARBUCKS STARBUCKS Brand & Product Management