A.

EXECUTIVE SUMMARY
Is Starbucks, the famous coffee brand name, a global premium coffee? The answer that cannot be denied is YES. However, another question raised up is: How did Starbucks get it? To find out the answer for the second question, we have to look at its strategy. First and foremost, it is claimed that Starbucks has used broad differentiation strategy . From the beginning, Schultz chose top quality, fresh-roasted, whole-bean coffee as the companys differentiating feature and bedrock value. After 1983 trip to Milan, recreating the authentic Italian coffee bar culture in the U.S was the additional differentiating factor. The ideas of how to design stores were started in 1991 that Starbucks formed a project team called stores of the future to in charge of bring out new ideas to decorate each Starbucks stores. They came up with 4 stores designs that each has its own color combination, lighting scheme and component materials. Schultzs ambition was to create a third place that everybody can feel comfortable to meet friends, family and it also has to be environmental friendly. Moreover, in this period of time, Schultz started to expand Starbucks products offering in order to make the products more accessible to customers and also to entered new market segments. Thus the first initiative is the establishment of a sale group in order to marketing its products to restaurants, airlines, hotels Then, Schultz decided to co-operate with PepsiCo to create coffee related products that were distributed by Pepsi channels . Following up that event, Starbucks started to partner with others brand in order to boarder its market. In 2008, Starbucks began to offer other products beside coffee to better serve the diversity taste of customers for example like introducing new coffee blend or Starbucks VIA ready brew In 2010, Schultz pointed out 7 key elements for Starbucks long term vision that he undertook a series of moves to revamp the companys executive leadership team and change the role and responsibilities of several key executives. He also brought out several reshuffle in order to make Starbucks perform better. According to Michael Porter, the most important thing that makes strategy succeed is neither winning the rivals nor earning more and more profit. It is the unique and difference of products and services that contribute to represent the companys competitive advantages . The mission of CEO is to maximize and sustain those competitive advantages and it is undeniable that Schultz did it very well, which will be shown in the detail analysis below.

B. CASE ANALYSIS
I. COMPANY BACK GROUND

Starbucks got its start in 1971 when the three academics, English teacher Jerry Baldwin, history teacher Zev Siegl, and writer Gordon Bowker opened Starbucks Coffee, Tea, and Spice in Seattle. Initially, Starbucks ordered coffee bean supplies from a specialty coffee retailer, but toward the end of the first year, they purchased a used roaster, set up roasting operations, and came up with their own blends and flavors. In 1981, Howard Schultz decided to pay Starbucks a visit. Schultz was immediately taken by the powerful and pleasing aroma of the coffee. After taking three sips of the brew, Schultz was hooked. He began asking questions about the company and its ways of roasting coffee. On his return trip to New York, Schultz could not stop thinking about Starbucks and what it would be like to be a part of the enterprise. But it took a year, numerous meetings for Schultz to have his job in Starbucks. In 1984, the original owners of Starbucks, led by Jerry Baldwin, took the opportunity to purchase Peet's. During the 1980s total sales of coffee in the USA were falling, but sales of specialty coffee increased, forming 10% of the market in 1989, compared to 3% in 1983. By 1986 the company had 6 stores in Seattle and had only just begun to sell espresso coffee. In August 1987, - who left Starbucks in late 1985 and formed his own company, Il Giornale Coffee Company, bought Starbucks and combine with his own Company. The name of the combined company is Starbucks Corporation, and Howard Schultz became Starbucks president and CEO at the age of 34.

2 1

By 1989 there were 46 stores across the Northwest and Midwest in 1989 and Starbucks was roasting over 2,000,000 pounds of coffee a year. At the time of its initial public offering on the stock market in June 1992, Starbucks had grown to 140 outlets and had a revenue of $73.5m, up from $1.3m in 1987. Its market value was $271m. The 12% portion of the company sold raised the company around $25m which would help it double the number of stores over the next two years. By September 1992, the share price had risen 70% to over 100 times the earnings per share of the previous year. From the IPO, Starbucks stock price continuously increase over

time, even after 2for-1 stock split, its stock price is often higher than or at least equal to half of the

previous price. For instance, the price change from

$48.25 to $27.50 after a 2-for-1 split in Sep 30, 1993. In June 28, 2013, its stock price reached $65.51. In 1996, Starbucks opened its first location outside North America in Tokyo, Japan. Starbucks entered the U.K. market in 1998 with the $83 million acquisition of the then 65outlet, UK-based Seattle Coffee Company, re-branding all the stores as Starbucks. From there, Starbucks started to expand its business all over the world. In 2012, Starbucks has more than 18,000 stores worldwide and 13.3 billion U.S. dollars in total revenues (about 11% higher than its total revenue in 2011). Today, at least one in a hundred cups of coffee served every day is Starbucks and it's estimated to have 32.6% shares in the market.

II. STARBUCKS STRATEGIC VISION AND ITS EVOLUTION

In 1983, Howard Schultzs original strategic vision for Starbucks was There was much more to the coffee business than just selling beans and getting people to appreciate grinding their own beans and brewing fine coffee in their homes. What Starbucks need to do was serve fresh-brewed coffee, espressos and cappuccinos in its stores (in addition to beans and coffee equipment) and to try to create an American version of the Italian coffee vary culture. Going to Starbucks should be an experience, a special treat, a place to meet friends and visit . 1987-1992, Schultz told that his vision was for Starbucks to become a national company with values and guiding principles that employees could be proud of. He aspired for Starbucks to become the most respected brand name in coffee and for the company to be admired for its corporate responsibility. In 2010, Schultzs long-term vision for Starbucks had seven key elements: Engage and inspire Starbucks partners. Ignite the emotional attachment with our customers. Expand our global presencewhile making each store the heart of the local neighborhood. Be a leader in ethical sourcing and environmental impact. Create innovative growth

platforms worthy of our coffee. Deliver a sustainable economic model Be the undisputed coffee authority.

It is very clear that Schultzs vision has changed three times and the latter was different from the one before. The difference comes from the change in the position of Starbucks in marketplace and its future direction. Coming up with a new vision means that Schultz had reached the previous and decided the new challenges to conquer. Therefore, each changed vision provided the solid background for the next that contributed to the reputation, the expansion and success of Starbucks. His strategic vision for Starbucks in 2011-2012 is not likely to undergo further evolution. Instead, he prefers a sustainable economic model to maintain
Starbucks standing as one of the most recognized and respected brands in the world.

4 1

In essence, the first standing in marketplace required Starbucks not outperforming the rivals but keep the image as something unique in the customers mi nd, which Schultz realized and directed for the future. In fact, Starbuckss vision had changed over time. In 1983, Howard Schultz set a vision to transform Starbucks to be an American version of Italian bar coffee that serve fresh-brewed coffee, espressos and cappuccinos in its stores instead of beans and coffee equipment. Following up his vision, he started to convince Baldwin and Bowker then his idea was approved a year later and it had created many successions. However, when he wanted to take this opportunity to make Starbucks enters a new level, his proposal was declined so he decided to leave the company, created II Giornale Coffee to apply his initial idea and he received many achievements. In March 1987, Starbucks was sold and Schultz immediately knew that he had to buy it back. Thus, he became the CEO of Starbucks and started to apply his initial idea. Schultz did not just stop there. After being the CEO and president of Starbucks, his vision for Starbucks was to become a national company with values and guiding principles that employees could be proud of . He combined Starbucks and II Giornale Coffees logo to create the new one to symbolize the integration of the two companies. Then, he decided to make an expansion outside the Pacific Northwest. Schultz firstly opened the store in Chicago but it proved more troublesome than management anticipated due to different coffee flavor also inconvenience location. However, the situation was gradually improved and Starbucks started to open another branch and profit was increase. He kept follow up with his idea to transform Starbucks into a worldwide company by opening stores in San Francisco and this time he had far more troubles. However, overall, Schultzs store expansion proved to be more easier to meet that he original anticipated. His vision to make Starbucks becomes a worldwide company can be proved in his strategy to applied a new way of design each stores that must reflect the environment which it operated and was to be environmental friendly in order to gain LEED certification. The company also centralized buying, developed standard contracts and fixed fees for several items in order to control average store opening cost. He dreamed to make Starbucks become a welcoming a pleasant third place where people could meet friends and family, enjoy quiet moment alone reading books In 2002, Starbucks teamed up with T-Mobile USA to

provide Internet access to heighten third place experience. In 1992 and 1993, Starbucks developed a three-year geographic expansion strategy to target areas that not only had favorable demographic profiles but also could be serviced and supported by the companys operations infrastructure. However, in recent years, Starbucks strategy in major metropolitan cities had been to blanket major cities with stores, even if some stores cannibalized a nearby stores business. In 2010, Schultz set up a long-term vision for Starbucks that he undertook a series of moves to revamp the companys executive leadership team and change the role and responsibilities of several key executives. He also brought out several reshuffle in order to make Starbucks perform better. It is clearly seen that Schultz had fulfilled his vision setting different strategy though strategies cope up even some had with to several strategic by up

problems at first time. With Schultzs clear vision and strategy, he has systematically transformed Starbucks from a small-size company to a well-known international brand.

III. GENERIC COMPETITIVE STRATEGY OF STARBUCKS

According to Chapter 5, there are five generic competitive strategies that companies pursue: - A low-cost provider strategy: striving to achieve lower overall costs than rivals comparable. - A broad differentiation strategy: seeking to differentiate the companys product offering from rivals with superior attributes that will appeal to a broad spectrum of buyers.

- A focused low cost strategy: concentrating on a narrow buyer segment and outcompeting rivals on costs, thus being able to serve niche member at a lower price. - A focused differentiation strategy: concentrating on a narrow buyer segment and outcompeting rivals with a product offering that meets the specific taste and requirements of niche members better than the product offerings or rivals. - A best cost provider strategy: giving customers more value for their money by satisfying buyers expectation. This option is a hybrid strategy that blends elements of differentiation and low cost strategies; the aim is to have the lower costs and prices among sellers offering products with comparable differentiating attributes. As they provide a high quality coffee and unique experience in the convenience of a large volume of locations, which separates them from their competition, it is clear that Starbucks gets their success by A BROAD DIFFERENTIATION STRATEGY. To see a broader picture of this strategy, lets follow the analysis below: The first evidence for the broad differentiation strategy is that Starbucks. Since its founding, Starbuck has a bedrock value of top quality, fresh roasted and whole bean coffee. They always try to guarantee the quality of the input. Starbucks promotes environmentally sustainable practices in coffee cultivation methods and has specific guidelines they follow called Coffee and Farmer Equity Practices that help farmers to grow high quality coffees in environmentally beneficial ways. In 2000, they began purchasing their coffee organically and a growing percentage of their coffees were grown organically as well as Fair Trade Certified. The founders wanted their

customers to appreciate the quality of different flavor of coffee. Starbucks also has an immense number of products in which they offer compared to its competitors. They offer everything from the specialty coffees sold in stores to ice cream, tshirts and other merchandise, liqueur, food products, etc.

7 1

Secondly, Starbucks has a broad market and they are able to meet the needs of a multitude of consumers. They are able to reach the more on-the-go customers through their VIA Ready Brew, health conscious customers with their Vivanno smoothies, at home consumer through their grocery store sales, as well as international consumers through their overseas expansion. Thirdly, Starbucks has successfully satisfied the variety of customers by improving customer service and adding additional features. Howard Schultz was so sensitive that he realized one key problem of first-time consumers who often take it very hard on their absence of knowledge about high-quality coffee so then he could came up with the idea of a pamphlet to teach new customers about coffee. The additional features that Starbucks offers are fireplaces, couches, music, Wi-Fi access, ability to use paid sites and services like Wall Street Journals site, exclusive content and previews, free downloads, local community news, and activities. Besides, Starbuck also pursued production R&D activities. Starbucks is constantly brewing new flavors and blends to offer their consumers a variety of coffee to try. Flavors are rotated daily or weekly to offer constant variety. They also test new product offerings like Frappuccinos, Lattes, Skinny Lattes, and seasonal drinks. Finally, Starbucks increase intensity of marketing and sales activities. Starbucks did not spend a lot of money on advertising, because they relied mostly on word-of-mouth. In 2008 McDonalds stepped up their advertising to highlight their McCafe coffee drinks. In order to counter this Starbucks undertook the largest advertising campaign ever.

IV. INTERNAL ANALYSIS

Key Policies, Practices, Business Principles, and Procedures The key policies that have been implemented can be broken down into five groups. 1. First is how the company goes about expanding the number of Starbucks stores. 2. The second is their international expansion practices. 3. The third group is their staff training. 4. The fourth is their principles towards ethical business practices. 5. Fifth, is their coffee roasting practices?

Store Expansion Starbucks managements approach to store expansion is using a hub city approach. After a suitable demographic area is chosen Starbucks begins to open up stores in a large city that serves as its hub. After about 20 stores are opened in this hub city, they will then move on to the surrounding areas that are the spokes. This expansion strategy serves to create buzz and brand recognition for the company in an area that has a high amount of foot traffic before moving into a location that has less customer traffic. When a new area was selected for expansion a group of professionals were sent to facilitate the opening. Starbucks also had zone vice presidents who would oversee the expansion process and instill the culture of Starbucks in the new stores. International Expansion When expanding internationally Starbucks has two options; they either open companyowned and operated stores or license to a company that has a good reputation and the knowledge of retailing in that area. Starbucks prefers to license, rather than franchise because licensing provides more assurance of quality control. When they move into foreign markets one of their practices is to use a partner or license to help recruit individuals for employees, set up relationships with suppliers, find store locations, and learn how to cater to local market conditions. For stores that were licensed Starbucks would receive a license fee and a royalty on sales. Companies that were licensed to supply Starbucks coffee were required to follow their detailed operating procedures. Not only was that, but managers and employees required to attend the same training as employees at company-owned stores. Staff Training As mentioned above, employees are put through an extensive amount of training to learn daily practices and how to treat customers. They are put through this training because customer service is so integral to their organization. Some of the things that baristas learn in their 24 hours of training are coffee history, drink preparation, coffee knowledge, customer service, retail skills, and beverage preparation.

9 1

Beverage preparation includes grinding the beans, steaming milk, pulling a perfect shot of espresso, memorizing the recipes, practicing the drinks, and learning how to customize drinks. Finally, partners were trained on cash register operations, how to clean the milk wand, how to explain Italian drink names, how to sell espresso machines, making eye contact, interacting with consumers, and taking responsibility for the cleanliness of the store . Not only that but they had many rules that needed to be learned as well such as: milk needs to be steamed to 65.5 degrees Celsius but not more than 76.6 degrees, an espresso shot not pulled within 23 seconds needs to be thrown out, coffee cant sit in the pot more than 20 minutes, and disgruntled customers were given a coupon for a free drink. Managers were required to go even more in depth with their training. Ethical Business Principles Starbucks purchases products that are Fair Trade Certified, meaning that farmers make a fair amount of money for their products. They are very involved in Corporate Social Responsibility and take a number of measures to reduce, reuse, and recycle. They are also committed to purchasing from companies that use environmentally sustainable growing practices. Coffee Roasting Practices Coffee recipes are put together by the coffee department once all components have been tested. In order to be sure of consistency computerized roasters are used, trained personnel are required to monitor the process by using hearing and their sense of smell to check when the beans are perfectly done. There are extremely exacting standards that must be met and the color of the beans is tested in a blood-cell analyzer and if it doesnt meet the requirements the batch is discarded. Directly after roasting and cooling coffee is vacuum-sealed into bags that are guaranteed to preserve freshness for 26 weeks. However, policy says that after three months they need to be used. Once opened the shelfs life is seven days.

10

For all of these, we can say that Howard Schultz has done a good job since his return as Starbucks CEO; he can get the good grade for what he has done for improving Starbuck. When Schultzs relinquishment as Starbucks CEO (2000) , the aggressive growth of company had led to a watering down of the Starbucks experience so that in 2008, the Starbucks board asked Howard Schultz to return to his role as CEO and lead a major restructuring and revitalization initiative. It isnt difficult to see the positive results because of Schultzs cost containment and efficiency campaign - The productivity of Starbucks employees in USS increased from 9.8 transactions per labor hour in 2008 to 11.3 in 2011. - The percentage change in sales at company-operated retail stores open at least 13 months had risen from -9 percent in 2009 to +9 percent in 2012. - Company began to open thousands of new stores in 2010. When Howard Schultz returns as Starbucks CEO, he can get the good grade for what he has done for improving Starbuck: - Revamp executive leadership team; change the roles and responsibilities of key executives - Push the company to new plateaus of differentiation and innovation - Strengthen the core, elevate the experience, and invest and grow We cant deny that leadership in factors relevant to market industry success.

11

V. STARBUCKSS VALUE
The original strategic vision for Starbucks was form in 1983 by Howard Schultzs: There was much more to the coffee business than just selling beans and getting people to appreciate grinding their own beans and brewing fine coffee in their homes. What Starbucks need to do was serve fresh-brewed coffee, espressos and cappuccinos in its stores (in addition to beans and coffee equipment) and to try to create an American version of the Italian coffee various culture. Going to Starbucks should be an experience, a special treat, a place to meet friends and visit. 1987-1992, Schultzs vision for Starbucks was to make it become a national company with values and guiding principles that employees could be proud of. He aspired for Starbucks to become the most respected brand name in coffee and for the company to be admired for its corporate responsibility. In 2010, Schultzs long-term vision for Starbucks had seven key elements: Be the undisputed coffee authority. Engage and inspire Starbucks partners. Ignite the emotional attachment with our customers. Expand our global presencewhile making each store the heart of the local neighborhood. Be a leader in ethical sourcing and environmental impact. Create innovative growth platforms worthy of our coffee. Deliver a sustainable economic model. It is clear that his vision has changed 3 times and the latter was different from the one before. The difference comes from the change in the position of Starbucks in marketplace and its future direction. Coming up with a new vision means that Schultz had reached the previous and decided the new challenges to conquer. Therefore, each changed vision provided the solid background for the next that contributed to the reputation, the expansion and success of Starbucks.

12

His strategic vision for Starbucks in 2011-2012 is not likely to undergo further evolution. Instead, he prefers a sustainable economic model to maintain Starbucks standing as one of the most recognized and respected brands in the world. In essence, the first standing in marketplace required Starbucks not outperforming the rivals but keep the image as something unique in the customers mind, which Schultz realized and directed for the future. Starbucks is an ethical and socially responsible

organization. The company is involved many social

initiatives such as Ethical Sourcing which deals directly with farmers - Farmer Loans. Starbucks has given more that $15 million to coffee farmer loan funds in order to support the small family farms Starbucks uses as coffee suppliers. They hope to give $20 million by 2015 Starbucks buys coffee beans which are responsibly grown and ethically traded. The companys green initiatives include LEED ( Leadership in Energy and Environmental Design ) certified green stores and work with organizations such as Conservation International, The organization's mission is to protect nature, and its biodiversity, for the benefit of humanity. These organizations have helped change the coffee farming techniques of clear-cutting forests to more ecofriendly techniques that help preserve rainforests and clean water resources. Starbucks employs several recycling measures at its stores which include green and re-usable cups. The company contributes help to youth literacy through its Starbucks Foundation, Access to Get Clean Water, and Fostering Education in China. Starbucks encourages healthy eating through the companys wellness program. Diversity is promoted through the companys employees and suppliers through its Diversity program.

13

Employees are treated as partners of the company by giving them different stock options and providing for career growth opportunities. Starbucks has created numerous opportunities for success starting with its offer of full health benefits available to full and part-time employees. Howard Schultz, CEO of Starbucks said that: For Starbucks, these metrics are important indications of how we are growing our brand and returning value to our shareholders. But equally important to the value we create are the values we live by. Weve been

building a company with a conscience for more than four

decades, intent on the fair and humane of our

treatment

people as well as the communities where

we do business, and the global environment we all share. For these reasons, we continue to broaden our ethical sourcing programs. Just as Starbucks does not accept the status quo in our business, and proactively embraces innovative products and ideas, we also look for and champion fresh inventive ways to use our existing assets and resources beyond business. Starbucks is refusing to be a bystander as the world around all of us changes. I would like to take this opportunity to extend my heartfelt thanks to our partners, customers, business partners, farmers and suppliers for their extraordinary dedication to the hard work and humanity that embodies the spirit of Starbucks. All of the things Starbucks created start from both sincere and enterprises images to communities. All of Starbucks CSR initiatives make them extremely attractive to mass people all over the world and boosts their public image.

14

VI. FINANCIAL ANALYSIS

During the beginning period of the fiscal year 2007-2011, Starbucks has made lots of profits (total net revenues of $9,411.5 and $10,383 in 2007 and 2008, respectively) also, it has open about 700 more stores all over the world. However, the economic recession in late 2008 and all of 2009 hit Starbucks really hard. The revenues dropped from $10,383 to $9,774.6 in 2009 and nearly 1,000 underperforming stores of Starbucks were closed, resulted in about 6,700 employees were cut down. Moreover, the operating income of Starbucks dropped approximate 50% of those in 2007. In response to these, Starbuckss founder and CEO, Howard Schultz made a lot of transformation in order to elevate the customer experience at Starbuck stores. His efforts were successful when Starbuckss net revenues increase to $10,707.4, then $11,700.4 in 2010 and 2011. The total assets of the company were also significantly increased (about 15% per year). Also, the companys current assets are now greater than its current liabilities, so it will not need to worry about bankruptcy. Overall, Starbuck is on average a healthy and profitable company. The only years that they saw a decrease in sales was during the recession which is quite common in most companies. However, Howard Schultz had a plan for this decline in sales in which he cut stores, and made sure to refocus the company on sustaining growth. In fact, in 2011 Starbucks gave out its first ever dividend to shareholders or $.10 per share. This is a good sign for the financially health of Starbucks. Ratio
Sale revenues Operating income (EBIT) Net income Operating margin Current ratio Debt ratio Return on common equity Return on total assets Profit margin Basic earning power $ $ $

2011
11,700.4 1,728.5 1,245.7 15% 1.28 48% 28% 17% 11% 0.23

2010
$ 10,707.4 $ 1,419.4 $ 945.6 13% 1.02 51% 26% 15% 9% 0.22

2009
$ 9,774.6 $ 562.0 $ 390.8 6% 1.29 38% 13% 7% 4% 0.18

2008
$ 10,383.0 $ 503.9 $ 315.5 5% 0.80 48% 13% 6% 3% 0.20

2007
$ 9,411.5 $ 1,053.9 $ 672.6 11% 0.79 51% 29% 13% 7% 0.46

The figures and ratios are taken and calculated based on Financial and Operating Summary for Starbucks Corporation, Fiscal Years 2007-2011

15

VII. ISSUES AND RECOMMENDATIONS

As of the mid-2012 the recession was the biggest issue confronting Starbucks, as was how to deal with the recent decline in sales caused by the recession. Management should be extremely worried about this seeing as never before had they had a decline in sales. Starbucks must confront the issue of their higher prices compared to their competitors. With the recession people are less willing to spend money on simple things like coffee every morning. Starbucks must reconnect with customers reminding them of the high quality of the coffee and even perhaps they should slightly lower their price point, because it is higher compared to other coffee shops. They also faced the challenges of expanding internationally. Breaking into international markets is always hard for companies. One reason it is hard to break into international markets is due to the lack of brand awareness. Since Starbucks was started as an American company there is a good chance that in other countries their awareness of Starbucks and what it stands for may be weak. This reduces the chance of a companys success drastically. Also Starbucks has always emphasized that the atmosphere of each store location corresponds with the geographic location. If Starbucks were to continue to expand internationally they would need to put a great deal of time and money into researching the customs and atmosphere of the countries they were moving into. Expanding internationally is extremely difficult to do. Nowadays, Starbucks has the certain position in the beverage market not only in American but also many places in the world. So that, to keep Starbucks sustain development and continued strong is not easy tasks. Depend on the issues of Starbucks, we can recommend some possible ways: K-Cup Availability: The Keurig system has become increasingly popular within the United States. Especially during the recent recession when consumers are more likely to make coffee at home than buy it on their way to work. This opens up an opportunity for Starbucks to break further into the at home coffee market. The Keurig machines brew single cups of coffee using their K-Cups, which are easily disposable after use. This system allows you to make coffee mess free and quickly at home. Starbucks could easily partner with Keurig in order to create Starbucks K-Cups for sale.

16

They could start with basic blends of Starbucks coffee for sale in local grocery stores. Starbucks competitors such as Dunkin Donuts have already broken into this market, and I believe it would be a golden opportunity for Starbucks to do the same. Supplier: Coordinate with suppliers to address consumers needs better , by

coordinating with the farmers and growers they source their beans from they will be able to add value to their product. They have been doing this by purchasing Fair Trade coffee and organically grown products. They need to continue to increase this initiative and to take part is environmentally-friendly initiatives that add value to their customers. Partnership: Continue with their partnerships with companies like PepsiCo, Unilever, and Jim Beam Brands that will allow them to extend their product offerings into new consumer markets. These partnerships will allow them to use their brand name for products that are not directly related to coffee and therefore appeal to more consumers. These partnerships like the ones with PepsiCo and Unilever are particularly strong, because Starbucks has been able to extend them beyond their original

purpose. For example, Starbucks and Unilever originally created a partnership to manufacture Starbucks brand ice cream, but when they acquired Tazo Tea they extended that agreement to manufacture, market, and distribute Starbucks ready-to-drink Tazo beverages in the United States and Canada. Starbuckss business model: In order to successfully implement any of these

strategies the core of Starbucks business model: customer service, marketing, brand management, and technology must be strong so that they can successfully implement value additions. Good customer service will help them out because it doesnt cost them any extra. There are small differentiations that they can add, such as offering delivery services or catering for a business meeting.

17

Price:

Lower Prices or have more promotions: in order to reach more consumers who may shy away from Starbucks due to their high coffee prices Starbucks may want to think about slightly lowering their prices. This would help to reach more consumers who dont feel comfortable with the current high prices. Alternatively if the management did not feel comfortable in doing this perhaps by offering new deals such as a buy one get one free offer during obscure hours for example, from 3-6pm on week days. This would help increase the flow into Starbucks during the non-rush hours. This would also attract more consumers who perhaps have never tried Starbucks but are interested in the deal. When they taste the high quality of the brew they may be more willing to splurge on a good cup of coffee. Take caution with price premium: Starbucks charges a significant amount of money for their coffee, but they should be careful that they dont turn their product into too much of a treat, a product that people cant afford to indulge in every day. They need to make sur e that their products and experience have enough differentiations from the basic product. If consumers are satisfied with a basic product and dont think that differentiations are worth the price premium they may switch to a company that follows a low-cost provider strategy. Tangible and Intangible feature: Increase incorporation of tangible features that increase customer satisfaction: This is an important aspect in delivering superior value via a broad differentiation strategy. This involves adding product specifications, functions, and styling. One way that Starbucks can do this is by offering delivery of coffee within a certain distance by bicycle. This way they will incur little costs and be using environmental transportation methods, while adding value to the customers. They need to continue to know the customers in the area where they are opening a store in order to offer them the store environment they want.

18

For example, a store versus a kiosk, versus a drive through location creates a marketing campaign that focuses on adding intangible features to their products. This will increase the value added to the customers product in non-economic ways. Their marketing campaign should highlight on their CSR campaign to increase consumers knowledge of how they support the environment, their neighborhoods, and suppliers. This will add value to the product, because consumers will know what their money is going to. International Growth: Although Starbucks is currently located in over 50 countries; we believe the idea Howard Schultz had to expand into Japan and China is a good one. Japan outside of the United States has been the largest consumer of Starbucks products. This opens up the door for Starbucks to open up a multitude of stores in Japan. Due to Chinas ever expanding economy and its large ties with the United States it would also be beneficial to open up a large number of Starbucks there. It is important to start opening stores strategically in large cities within these companies and recording their growth. This way the locations that are failing can be shut down, and stores that are thriving can be focused on. United States Growth: Although the United States has an extremely large number of stores the number of drive thru locations is still fairly small. In order to cater to the on-the-go American coffee drinkers I believe that more drive thru locations are necessary. This would also allow for quicker customer turnover due to dividing the customers between coming inside to order, and the outside drive thru window. Of course it is imperative that Starbucks with the addition of the drive-thru windows keeps the high quality costumer experience alive. This would be done through nice flower bedded.

19

C. CONCLUSION
In conclude, thanks to the desirable strategy of Howard Schultz, Starbucks is the most well-known coffee brand in the world at present. The flexibility in their movements fitted with the vision and mission of Starbucks getting along with the daily fluctuation of market has created an extreme profits and market shares for this company. In addition, the succession in strategy of Starbucks is considering made by the concentration on customer services and quality of products. Comprehending trend and needs of customers, getting feedbacks, measuring the effective of business strategy to ameliorate action steps is used in Starbucks and the fact that their position in international market is the best evidence for how Starbucks could be lucrative. Until now, there is no close competitor to Starbucks, however, in the dynamic global economy nowadays, it is hard to predict whether any company can come over Starbucks first market position in the near future. On the other hand, there are some issues come from both insides and outsides, Starbucks had better figure them out to keep developing their business. The previous recommendation might make senses on Starbucks case. To sum up, the question for all companies is that how they differentiate from their competitors to get competitive advantages. Starbucks business strategy could be considered a good case practice for those companies in order to succeed. In Viet Nam, Starbucks has just opened one branch in Ho Chi Minh City. In case of Starbucks opening more coffee shops in Ha Noi, there is no doubt that it will become one of the first choices of coffee for Vietnamese customers.

20

A. EXECUTIVE SUMMARY
Is Starbucks, the famous coffee brand name, a global premium coffee? The answer that cannot be denied is YES. However, another question raised up is: How did Starbucks get it? To find out the answer for the second question, we have to look at its strategy. From the original strategic vision of offering a welcoming experience for customers, being part of their community, and becoming a warm third place that is part of their lives everyday and that it can provide a superior cup of coffee, Howard Schultz Starbuckss CEO had evolved it based on the difference required during companys development. His evolving strategy changed as his strategic vision evolved to ensure that crafting and executing strategic under the future direction and still adapt to the change of circumstances and conditions. With the broad differentiation strategy, Starbucks always focus on building its standing in the midst of customers by offering differentiating features and factors. Along with understanding customers, not only knowing how to keep them but also telling the way to attract more is the strong point of Starbucks, which resulted from the good policies, practices, business principles, procedures and high evaluated social responsibility that created a good public image as well. Moreover, take advantages of his capabilities and experience, Schultz links tightly between vision and the core values of Starbucks. However, everything has its drawbacks and so does Schultzs management. The more important thing is finding out the effective recommendations to sustain the companys growth and support continued strong financial performance in the years ahead. According to Michael Porter, the most important thing that makes strategy succeed is neither winning the rivals nor earning more and more profit, it is the unique and difference of goods and services that contribute to represent the companys competitive advantages. In essence, Schultz had crafted a winning strategy and the detail analysis below will show how did it pass Fit Test with external, internal and dynamic fit, The Competitive Advantage Test with achieving long-lasting competitive advantage and the last, The Performance Test with two strong performance indicators: competitive strength and market standing, and profitability and financial strength. When it comes to a conclusion, the success of Starbucks comes from a winning strategy which has a good fit, offer a competitive advantage and contribute to performance improvements.