Starbucks Case Commentary

Starbucks Case Commentary

The “fairy tale” rise of Starbucks would be any entrepreneur’s dream come true. Two decades after Howard Schultz joined in 1982, the company grew from a handful of coffee shops in Seattle to over 4,600 around the world. By 2002 (when this article was written), Starbucks far outshined companies like Wal-Mart, GE, Pepsi, Coca-Coal, Microsoft and IBM in total return. Company growth rate continued steadily despite consumer lull following the 9/11 terrorist attacks, with an average annual revenue growth rate of 20%.

Even with this much success, there are still many threats to the company that must be addressed. Mentioned first is the issue of over-saturation in the US, resulting in self-cannibalization at an estimated rate of 30% per year (Holmes, 2002). Most agree that growth depends on more expansion internationally; however, that also comes with the problem of 20-50% less profit on overseas stores because they are operated by private partners. Most importantly, Starbucks is facing a handful of company image and public perception challenges. These include the Gen-Xers feeling the store environment is too pretentious, an unhappy labor force, unhappy managers (some that have sued), merciless strategies to weed out local competitors, and questionable treatment of long-time bean suppliers.

Some of the things Starbucks is doing to help combat these issues include the launch of the world’s largest free Wi-Fi network for it’s in-store customers (still effective in the brand’s favor today). Also, Starbucks has begun to get involved with sustainability models in Guatemala and purchasing fair-trade coffee beans.

Following along with this Starbucks case, if you are like me and a little curious how the numbers have changed from 2002 to present, see the chart below. Stock price and total stores have quadrupled, yearly advertising has increased by nearly ten times, and sales have doubled.

Starbucks 2002 versus 2019:

*(Holmes, 2002) **(Starbucks Corporation,2019)  

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References

Holmes, Stanley. “Planet Starbucks.” Bloomberg.Com, 2002, www.bloomberg.com/news/articles/2002-09-08/planet-starbucks. Accessed 11 June 2019.

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