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Starbucks – Going Global Fast? Developing Pricing Strategies and Programs.

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Presentation on theme: "Starbucks – Going Global Fast? Developing Pricing Strategies and Programs."— Presentation transcript:

1 Starbucks – Going Global Fast? Developing Pricing Strategies and Programs

2 My - Eli -Ocha - M987Z247 M987Z254 M987Z212 Fernando - Loan – Joice - M987Z257 M987Z234 M987Z224 Group 3 - Members

3 Outline Starbucks Corporation: Introduction Mission & Guiding Principles Corporate Social Responsibility Starbucks Corporation: Products Starbucks Corporation: Competitors Copy Cats Vs Starbucks Starbucks Corporation: Logo Criticism and Controversy Marketing Strategy of Starbucks Marketing Strategy on Customer Marketing Strategy on Places Marketing Strategy on Market Marketing Strategy on Partner Starbucks Strategy to Improve Profitability in Japan Environmental Mission Starbucks Shared Planet The Basic Problem with Coffee Cups Starbucks’ Cup Recycling Starbucks Environmental Care Starbucks Ethos Water Building Partnership Questions & Answers

4 Starbuck Corporation: Introduction The original Starbucks was opened in Pike Place Market in Seattle, Washington, in 1971 by three partners: English teacher Jerry Baldwin history teacher, Zev Siegel, and writer Gordon Bowker.The original Starbucks was opened in Pike Place Market in Seattle, Washington, in 1971 by three partners: English teacher Jerry Baldwin history teacher, Zev Siegel, and writer Gordon Bowker. In 1984, the original owners of Starbucks, led by Baldwin, took the opportunity to purchase Peet's. In 1984, the original owners of Starbucks, led by Baldwin, took the opportunity to purchase Peet's. In 1987, they sold the Starbucks chain to Schultz's Il Giorna.In 1987, they sold the Starbucks chain to Schultz's Il Giorna. Starbucks opened its first locations outside Seattle at Waterfront Station in Vancouver British Columbia and Chicago, Illinois that same yearStarbucks opened its first locations outside Seattle at Waterfront Station in Vancouver British Columbia and Chicago, Illinois that same year

5 Starbucks entered the U.K. market in 1998 with the acquisition of the then 60-outlet, UK-based Seattle Coffee Company, re-branding all its stores as Starbucks.Starbucks entered the U.K. market in 1998 with the acquisition of the then 60-outlet, UK-based Seattle Coffee Company, re-branding all its stores as Starbucks. In 1999, Starbucks experimented with eateries in the San Francisco Bay area through a restaurant chain called Circadia.In 1999, Starbucks experimented with eateries in the San Francisco Bay area through a restaurant chain called Circadia. In April 2003, Starbucks completed the purchase of Seattle's Best Coffee and Torrefazione Italia from AFC Enterprises, bringing the total number of Starbucks- operated locations worldwide to more than 6,400In April 2003, Starbucks completed the purchase of Seattle's Best Coffee and Torrefazione Italia from AFC Enterprises, bringing the total number of Starbucks- operated locations worldwide to more than 6,400 Starbuck Corporation: Introduction (cont’d)

6 On September 14, 2006, rival Diedrich Coffee announced that it would sell most of its company-owned retail stores to Starbucks.On September 14, 2006, rival Diedrich Coffee announced that it would sell most of its company-owned retail stores to Starbucks. In January 2008, Chairman Howard Schultz resumed his roles as President and Chief Executive Officer after an eight year hiatus and replaced Jim Donald, who took those posts in 2005.In January 2008, Chairman Howard Schultz resumed his roles as President and Chief Executive Officer after an eight year hiatus and replaced Jim Donald, who took those posts in Starbuck Corporation: Introduction (cont’d)

7 MISSION & GUIDING PRINCIPLES MISSION STATEMENT To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow. GUIDING PRINCIPLES Provide a great work environment and treat each other with respect and dignity. Embrace diversity as an essential component in the way we do business. Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. Develop enthusiastically satisfied customers all of the time. Contribute positively to our communities and our environment. Recognize that profitability is essential to our future success.

8 CORPORATE SOCIAL RESPONSIBILITY Starbucks focuses its efforts on providing a great work environment for our partners (employees); making a positive contribution to our communities; working with coffee farmers to help ensure their long- term success and minimizing our environmental impact.  In 2006 provided 4.9 million hours of training for store partners.  Quadrupled our renewable energy purchase to equal 20% of the energy used in our company-operated stores in the U.S. and Canada.  Introduced the first-ever paper cup made with 10% post-consumer recycled fiber which reduced the wood use by 11,300 tons – the equivalent of 78,000 trees – in the first year alone.  Recycled in 79% of our U.S. and Canada stores where we control waste and recycling.

9 Coffee: More than 30 blends and single-origin coffees. Handcrafted Beverages: Fresh-brewed coffee, hot and iced espresso beverages, coffee and non-coffee blended beverages, and Tazo® teas. Merchandise: Assorted home espresso machines, coffee brewers and grinders, a line of premium chocolate, coffee mugs and coffee accessories, and a variety of gift items. Fresh Food: Baked pastries, sandwiches and salads. Starbucks Entertainment: A selection of the best in music, books and film from both emerging and established talent, offering Starbucks customers the opportunity to discover quality entertainment in a fun, convenient way. Starbuck Corporation: Products

10 Global Consumer Products: Line of bottled Starbucks Frappuccino® beverages, Starbucks Discoveries®chilled cup coffee (in Japan, Taiwan and Korea), Starbucks DoubleShot® espresso drinks, Starbucks® Iced Coffee, whole bean coffee and Tazo® teas at grocery, Starbucks™ Coffee Liqueurs and a line of superpremium ice creams. Starbucks Card: a reloadable stored-value card. Due to its success in the U.S. and Canada, the Starbucks Card global program has been launched in other international markets, including Mexico, Hong Kong, Australia, Thailand, Greece and the United Kingdom. Other markets (Japan, Taiwan and Spain) have a stand-alone Starbucks Card program, specific to their market. Brand Portfolio: Starbucks Entertainment, Starbucks Hear Music, Tazo, Ethos water, Seattle’s Best Coffee and Torrefazione Italia Coffee. Starbuck Corporation: Products

11 Starbuck Corporation: Competitors Competition from nationwide coffee manufacturers such as Kraft, Procter & Gamble, and Nestlé. Because many consumers were accustomed to purchasing their coffee supplies at supermarkets, it was easy for them to substitute these products for Starbucks. KraftProcter & GambleNestléKraftProcter & GambleNestlé

12 Copy Cats Vs Starbucks Starbucks is fighting an ongoing legal battle in Asia trying to stop local coffee houses from using logos that too closely resemble the distinctive trademark of the Seattle company.

13 Have you ever wondered where the Starbucks logo came from? Take a look at it. What do you see? Starbuck Corporation: Logo

14 In 1987, the original Starbucks Logo which was a UPS brown and featured a two-tailed mermaid, also known as a siren. The siren is a mythical creature whose stories tell of luring fisherman through song. Starbucks is using the lure of female sexuality to draw customers attention to the coffee. Starbuck Corporation: Logo (cont’d)

15 Criticism and Controversy The strategy to expand and maintain their market position buying out competitors' leases intentionally operating at a loss clustering several locations in a small geographical area i.e., saturating the market Critics claimed this was an unfair attempt to drive out small, independent competitors, who could not afford to pay inflated prices for premium real estate. For example, Starbucks fueled its initial expansion into the UK market with a buyout of Seattle Coffee Company, but then used its capital and influence to obtain prime locations, some of which operated at a financial loss.

16 Labor Disputes On November 24, 2006, Industrial Workers of the World (IWW) members picketed Starbucks locations in more than 50 cities around the world in countries including Australia, Canada, Germany, and the UK, as well as U.S. cities including New York, Chicago, Minneapolis and San Francisco, to protest the firing of five Starbucks Workers Union organizers by Starbucks and to demand their reinstatement. In 2005, Starbucks paid out US$165,000 to eight employees at its Kent, Washington, roasting plant to settle charges that they had been retaliated against for being pro- union. At the time, the plant workers were represented by the IUOE. On November 23, 2005, organized by Unite Union, workers sought secure hours, a minimum wage of NZ$12 an hour, and the abolition of youth rates. The company settled with the Union in 2006, resulting in pay increases, increased security of hours, and an improvement in youth rates. In March 2008, Starbucks was ordered to pay baristas over US$100 million in back tips in a Californian class action lawsuit launched by baristas alleging that granting shift-supervisors a portion of tips violates state labor laws. The company plans to appeal. Similarly, an 18 year-old barista in Chestnut Hill, MA has filed another suit with regards to the tipping policy. Massachusetts law also states that managers may not get a cut of tips. A similar lawsuit was also filed in Minnesota on March 27, 2008.

17 Criticism and Controversy Opening without planning permission Starbucks has been accused by local authorities of opening several stores in the United Kingdom in retail premises, without the planning permission for a change of use to a restaurant. Starbucks has argued that "Under current planning law, there is no official classification of coffee shops. In May 2008, a branch of Starbucks was completed on St. James's Street in Kemptown, Brighton, England, despite having been refused permission by the local planning authority, Brighton and Hove City Council, who claimed there were too many coffee shops already present on the street. Starbucks appealed the decision by claiming it was a retail store selling bags of coffee, mugs and sandwiches, gaining a six month extension, but the council ordered Starbucks to remove all tables and chairs from the premises by 20 February 2009, to comply with planning regulations for a retail shop residents have signed a petition against the store, and public inquiry is due to be held on 10 June A Starbucks in Hertford won its appeal in April 2009 after being open for over a year without planning permission. Two stores in Edinburgh, one in Manchester, one in Cardiff, one in Pinner, Harrow, and one in Blackheath, Lewisham were also opened without planning permission.

18 Criticism and Controversy Alleged relationship with the Israel Defense Forces Starbucks has been a regular target of activists protesting against the Gaza War. Protesters claim Howard Schultz donates money to the Israel Army. Starbucks was forced to close a store in Beirut, Lebanon because of demonstrators shouting anti-Israel slogans and causing customers to flee. Violence against Starbucks in the United Kingdom On January 12, 2009, a Starbucks in Whitechapel Road in London was the target of vandalism by pro-Palestinian demonstrators who broke windows and reportedly ripped out fittings and equipment after clashes with riot police. On January 17, 2009, a pro-Gaza protest was held by the Stop the War Coalition in Trafalgar Square in central London. After the rally, two groups of people, some hiding their faces, smashed and looted two Starbucks on Piccadilly and Shaftesbury Avenue.

19 Criticism and Controversy Accusations by Egyptian Cleric Safwat Higazi On January 25, 2009, Egyptian Cleric Safwat Higazi claimed that Starbucks's "siren" logo is actually a depiction of the ancient Jewish queen Esther. He then called for Muslims to boycott all Starbucks coffee shops in the Arab world as a result. Columnist Melanie Phillips has satirized this idea as the "The Protocol of the Drinkers of Coffee". US military viral A US Marines Sergeant ed ten of his friends in August 2004 having wrongly been told that Starbucks had stopped supplying the military with coffee donations because the company did not support the Iraq war. The became viral, being sent to tens of millions of people. Starbucks and the originator sent out a correction, but Starbucks' VP of global communications, Valerie O'Neil, says the is still forwarded to her every few week

20 Criticism and Controversy The Way I See It Quotes by artists, writers, scientists and others have appeared on Starbucks cups since 2005 in a campaign called "The Way I See It". Some of the quotes have caused controversy, including one by gay writer Armistead Maupin and another by Jonathan Wells that linked 'Darwinism” to eugenics, abortion and racism. "My only regret about being gay is that I repressed it for so long. I surrendered my youth to the people I feared when I could have been out there loving someone. Don't make that mistake yourself. Life's too damn short.“ - Armistead Maupin author of the Tales of the City series and the novel The Night Listener- “Darwinism’s impact on traditional social values has not been as benign as its advocates would like us to believe. Despite the efforts of its modern defenders to distance themselves from its baleful social consequences, Darwinism’s connection with eugenics, abortion and racism is a matter of historical record. And the record is not pretty.” – Jonathan Wells, Biologist and author of The Politically Incorrect Guide to Darwinism and Intelligent Design-

21 Marketing Strategy of Starbucks CustomersCustomers PlacePlace MarketMarket PartnerPartner

22 Marketing Strategy on Customers Supplying more comfortable conditions: comfortable chair, wireless internet connection, selection music…to attract customersSupplying more comfortable conditions: comfortable chair, wireless internet connection, selection music…to attract customers Focusing on making customers happy:Focusing on making customers happy: –Process of buying coffee fast –Supply deluxe coffee lifestyle –Avoid the spectacle of impatient customers. –Customers can order products by cell phone or use prepaid Starbucks card

23 Marketing Strategy on Places Opening many stores that are so close together to helps achieve the market’s dominance.Opening many stores that are so close together to helps achieve the market’s dominance.

24 Marketing Strategy on Market - Has grown from 17 coffee shops in Seattle 15 years ago to 5,689 outlets in 28 countries. The chain now operates 1,200 international outlets from Beijing to Bristol - Starbucks expects to double the number of its stores world-wide, to 10,000 in the three years. During the past 12 months, the chain has opened stores in Vienna, Zurich, Madrid, Berlin and even far-off Jakarta

25 Marketing Strategy on Partner To enlarge the market shares, revenue, the company has partnership with many good companies: Pepsi-Cola, Barnes and Noble bookstore and specially partnered with a number of organization such as conservation international, Jumpstart.To enlarge the market shares, revenue, the company has partnership with many good companies: Pepsi-Cola, Barnes and Noble bookstore and specially partnered with a number of organization such as conservation international, Jumpstart.

26 Starbucks’ strategy to improve profitability in Japan Since Starbucks in Japan has a huge competition factor, they should start to reconsider their pricing strategy.Since Starbucks in Japan has a huge competition factor, they should start to reconsider their pricing strategy. A lot of people tend to think Starbucks overprices their coffee so choose a competitor instead.A lot of people tend to think Starbucks overprices their coffee so choose a competitor instead. After cutting the ribbon on its first Japan store in 1996, the company began opening stores at a furious pace and it now has 570.After cutting the ribbon on its first Japan store in 1996, the company began opening stores at a furious pace and it now has 570.

27 Starbucks’ strategy to improve profitability in Japan New shops attracted large crowds, but the effect wore off as the market became saturated.New shops attracted large crowds, but the effect wore off as the market became saturated. Japan was a success when they first opened new stores;Japan was a success when they first opened new stores; -They need to research their customers and market to find out the sudden change. -By being more aware of their customers and their likes and dislikes -They will be able to find out what adjustments are needed to become more successful.

28 Starbucks’ strategy to improve profitability in Japan Encouraging domestic competition and greatly expanding the market for coffee chainsEncouraging domestic competition and greatly expanding the market for coffee chains Introducing a dynamic decision-making style and corporate governance policiesIntroducing a dynamic decision-making style and corporate governance policies Focusing on job creation and staff retention through stock options and by promoting a Japanese-style “family” atmosphereFocusing on job creation and staff retention through stock options and by promoting a Japanese-style “family” atmosphere Finding a partner with similar corporate values and complementary strengths, and helping it grow much fasterFinding a partner with similar corporate values and complementary strengths, and helping it grow much faster Adding a unique dimension to the local coffee culture by offering a nonsmoking environmentAdding a unique dimension to the local coffee culture by offering a nonsmoking environment

29 Environmental Mission “Starbucks is committed to a role of environmental leadership in all facets of our business” To fulfill this mission, Starbucks commited to: –Understanding of environmental issues and sharing information with partners. –Developing innovative and flexible solutions to bring about change. –Striving to buy, sell and use environmentally friendly products. –Recognizing that fiscal responsibility is essential to environmental future. –Instilling environmental responsibility as a corporate value. –Measuring and monitoring progress for each project. –Encouraging all partners to share in our mission.

30 Starbucks Shared Planet Starbucks Shared Planet is company’s commitment to doing business responsibly and conducting the company in ways that earn the trust and respect from customers and neighbors. Starbucks Shared Planet means focusing on the areas of ethical sourcing, environmental stewardship, and community involvement. It also conduct a great workplace, promoting ethical business practices and supporting legal compliance, employing sound corporate governance practices, ensuring nutrition information for customers, and advocating in public policy.

31 The Basic Problem with Coffee Cups (www.sustainabilityissexy.com/facts.html)www.sustainabilityissexy.com/facts.html Typical paper coffee cups aren’t made from recycled paper. Instead, most cups are manufactured using 100% bleached virgin paperboard. Cups are laminated with a plastic resin called polyethylene in purpose to keep beverages warm and prevents the paper from absorbing liquids and leaking. Every paper cup that is manufactured and coated with plastic resin ends up in a landfill. And decomposing those cups release methane, a greenhouse gas with 23 times the heat-trapping power of carbon dioxide. The entire process requires a substantial amount of water, energy… and a lot of trees. A report conducted jointly by the Alliance for Environmental Innovation and Starbucks found that 1.9 billion cups were used by Starbucks in In 2006, Starbucks reported that this figure had grown to 2.3 billion cups for use at their stores.

32 Starbucks’ Cup Recycling In the late 1990’s, Starbucks experimented with a variety of coffee cups made with recycled paper. Unfortunately, the cups were too often flimsy and leaked their contents. As of 2007, Starbucks has begun to use cups made from 10% post-consumer materials, while the remaining 90% of the cup is composed of new paper.

33 In a bid to promote green behavior among the community around Starbucks, Starbucks launched the Bring Your Own Tumbler Program at all Starbucks stores nationwide. Receive discount for the original price of Starbucks beverage when the customer purchase with their own Starbucks tumbler. The program is designed to help conserve the environment by reducing the use of paper and plastic cups. Bring Your Own Tumbler Program

34 Starbucks Environmental Care In 1999, Starbucks started "Grounds for your Garden" to make their business more environmentally-friendly. This gives leftover coffee grounds to anyone requesting it for composting. In 2004, Starbucks began reducing the size of their paper napkins and store garbage bags, and lightening their solid waste production by metric tons (1.8 million pounds). In 2008, Starbucks was ranked #15 on the U.S. Environmental Protection Agency’s list of Top 25 Green Power Partners for purchases of renewable energy. In October 2008, The Sun newspaper reported that Starbucks was wasting 23.4 million liters of water a day by leaving a tap constantly running for rinsing utensils in a 'dipper well' in each of its stores, but this is often required by governmental public health code. In June 2009, in response to concerns over its excessive water consumption, Starbucks re-evaluated its use of the dipper well system. In September 2009, Company operated Starbucks stores in Canada & the United States successfully implemented a new water saving solution that meets government health standards. Different types of milk are given a dedicated spoon that remains in the pitcher and the dipper wells were replaced with push button metered faucets for rinsing. This will purportedly save up to 150 gallons of water per day in every stores. source:

35 Starbucks Ethos Water ”Helping Children Get Clean Water” Ethos Water is a brand with a social mission of awareness of the World Water Crisis. Every time you purchase a bottle of Ethos water, Ethos Water will contribute US $0.05 (C$0.10 in Canada) toward our goal of raising at least US $10 million by Ethos Water was founded in 2002 and acquired by Starbucks in By making Ethos™ water available in Starbucks coffeehouses, we hope to inspire and empower our customers to help children and their communities around the world get clean water. Through The Starbucks Foundation, Ethos Water supports humanitarian water programs in Africa, Asia and Latin America. To date, Ethos Water grant commitments exceed $6.2 million. These programs will help an estimated 420,000 people gain access to safe water, sanitation and hygiene education.

36 Building Partnership In order to against environmental issues, Starbucks collaborated with NGOs which bring specialized expertise and experience to the table, and they work with us to create solutions that support our commitments to ethical sourcing, environmental stewardship and community involvement.

37 QUESTIONS & ANSWERS

38 Question # 1 Identify the controllable and uncontrollable elements that Starbucks has encountered in entering global markets. Controllable Elements: Price: Increasing opinion that starbucks charge too much for the coffee Placement: Starbucks coffee shops environment is a key point of its success, offering an warm and pleasant place.. Advertisement: local level, focus on its target market. Product: offering a recognized and high quality coffee, supported by its worldwide brand awareness.

39 Question # 1 Uncontrollable Elements: –Tact in International relations (Religion, culture) : In Israel starbucks take long time to take off because they didn’t maintain Kosher standards. –Competitors: Several companies are introducing a wide range of flavors and varieties of coffee. –Sociological factors, terrorism, protest, environmental and social responsibility issues because being a multinational company starbucks can be seen as a symbol of the free-market capitalism.

40 Question # 2 What are the major sources of risk facing the company and discuss potential solutions. –Prices of the commodities: a spike in prices could dramatically narrow the company's profit margin. Solutions: being an external factor, is quite difficult for starbucks to avoid this risk, one possible way is making close the relationship with its providers and try negociate an agreement in order to have a frozen price and keep it for a period of time could be one year. –Competitors: Starbucks is no anymore the sole dominate player. Solutions: The company can face this problem with: Advertisement and Promotion: renewing the company brand awareness. Product differentiation: convincing consumers that starbucks coffee is superior (coffee variety and quality control) in quality, aroma, flavor and also in the pleasant environment that its coffee shops offer. Effective store expansion decisions.

41 Question # 3 Critique Starbucks’ overall corporate strategy. Starbucks have been developed an strategy that seems to be successful in almost all the countries the company has operations, this is focused in: –Consumers: selecting a specific target market (high level income), developing a starbucks culture between its consumers in order to achieve loyalty and long term relationships. –Placement: offering a good atmosphere and pleasant environment. –Product: differentiation in quality, high quality, and related products, souvenirs, –Partnership: the company also has agreements with several recognized organizations and enterprises, to increase its brand awareness and focus in its target market.

42 Question # 4 How might Starbucks improve profitability in Japan? Being the Japanese people traditional and high quality sensitive, and in order to improve the profitability in this market starbucks could: Develop an Advertisement education program about the high quality of it product and its service. Innovate its products and services matching this with the traditions and cultural behaviors of the Japanese population (Providing a familiar environment and giving to its product a local touch)


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