Starbucks Business

Starbucks, the coffee making and serving company took its unique name from a character of the novel “Moby Dick� and has its roots in Seattle, Washington. Here you can still find the very first coffee shop at the pike place market, which has been opened since 1971. In 1987, Starbucks was bought by Howard Schultz and ever since has been exploring all over the United States. Today Starbucks is the most known chain of coffeehouses around the world (Lambert, Emily “The buck stops here”, Forbes 2003 Volume 171, p.52). There are over 6500 coffee stores all over North America and 30 other countries around the world. According to Fortune Magazine three new stores are opened every day making Starbucks biggest competitor Starbucks itself by cutting off up to 30% of neighboring store` s sales. The company’s strategy is to “blanket an area completely, even if the stores cannibalize one another` s business”, as it “cuts down on delivery and management costs, shortens customer lines at individual stores, and increases foot traffic for all the stores in an area� (Daniels, Cora “Mr. Coffee, The man behind the $ 4.75 Frappuccino makes the 500”Fortune 2003 Volume 147).

An example of Starbucks successfully entering a new market internationally is the company’s expansion into Latin and South America. In 2003, Starbucks announced its plans to move into Chile following successful expansion into Mexico, Puerto Rico, and Peru. The company signed a joint-venture with Grain Red S.A. to open stores throughout the country. The new joint-venture, Sur-Andino Café S.A., opened its first store in the capital city of Santiago in the Avenida Isidora Goyenechea and San Sebastián, a prominent business and restaurant district (www.starbucks.com). Starbucks is currently “proceeding with its strategic plans for the Latin America market and is actively exploring opportunities in Argentina, Brazil, Central America, Colombia, and Venezuela” (Yeap, Soon Beng “Starbucks Announces Plans for Chile; Expansion into Chile Marks Entry into South America” Pacific, 2003).

The third tier is Starbucks’ attempt to differentiate itself from its competitors. The basis of this is termed “specialty blend”. Starbucks offers “specialty blend” coffees, teas, iced drinks, and ice cream. Whether in the coffee shop or grocery store, Starbucks’ brands are specialized. Starbucks emphasizes this promotion plan through coffee testing, global coffee competitions, and the Coffee Olympics.

The Company has two non-retail domestic 50-50 joint ventures. The North American Coffee Partnership, a joint venture with the Pepsi-Cola Company, was formed in fiscal year 1994 to develop and distribute ready-to-drink coffee-based products. By the end of fiscal year 2000, the joint venture was distributing bottled Frappuccino® coffee drink to approximately 250,000 supermarkets, convenience stores, and other locations throughout the United States and Canada (www.starbucks.com). Starbucks also formed a joint venture with Dreyer's Grand Ice Cream, Inc. in fiscal year 1996 to develop and distribute Starbucks premium coffee ice creams. By the end of fiscal year 2000, the joint venture was distributing a variety of ice cream and novelty products to over 21,000 supermarkets throughout the United States.

The “Starbucks Experience” is not just about a cup of coffee, it is about an atmosphere. It is the Starbucks’ employees that provide this unique coffee experience. A Starbucks’ employee is called a partner and all partners are given stock in the company. The company has a stringent dress code policy. There can be neither visible tattoos nor piercing beyond 2 earrings per ear. Partners can wear black or kaki pants with a black or white collared shirt or an issued Starbucks’ shirt. All employees are hired on a temporary six month basis, after the three month training period they are given three more months to learn the precise was of making all drinks on the Starbucks’ menu board. Once pass the temporary phase, Starbucks offers their partners opportunities to develop their skills, further their career, and achieve their goals (www.starbucks.com). In 2003, Starbucks was on Fortune Magazines’ 100 Best Places to Work.