Case Summary

In 1971, Gerald Baldwin, Gordon Bowker and Ziev Siegl opened a small shop in Seattles
Pike Place Market. The specialised in selling whole arabica beans to a niche market of coffee
purists. In 1982, Schultz joined Starbucks. During his travel to Italy, he was inspired with
Milans coffee culture. Upon return he had convinced the company to set up an expresso bar
in the corner of its only downtown Settle shop. A few years later the founder of the company,
sold the company to Schultz. As soon as he took over, he started opening new stores. The
same year the company went public also. By the year 2002, Starbucks sales and net earnings
had climb at a compounded annual rate (CAGR) of 40% and 50%.
Starbucks brand strategy was captured by the mantra live coffee a phase that reflected
the importance the company attached to keeping the national coffee culture alive. From a
retail perspective, it meant creating an experience. The three main components to the
experiential strategy were The coffee itself, service and atmosphere. Almost all of
Starbucks locations in North America were company-operated stores located in high-traffic,
high-visibility settings. Beverages accounted for the largest percentage of sales in these
stores.
All Starbucks employees were called partners, which mostly compressed of hourly-wage
employees called baristas. Howard belief was that partner satisfaction leads to customer
satisfaction. The company had a policy of giving health insurance and stock option to even
the most entry-level partner. This in turn gave high partner satisfaction and low employee
turnover. The company encouraged promotion from within its own ranks. The partners had to
go through two types of training, hard skills and soft skills.
Starbucks tracked services using various methods, the most prominent was the Customer
Snapshot, compressing of three Basis Service - 1. Service 2. Cleanliness 3. Product
Quality 4. Speed of Service. The stores were also rated on Legendary Services. The
companys overall objective was to establish Starbucks as the most recognized and respected
brand in the world. The two biggest drivers of the companys growth were retail expansion
and product innovation. Even though Starbucks was considered one of the worlds most
effective marketing organisations, it lacked a strategic marketing group. The marketing
department was divided into three groups market research group, category group and
marketing group. On conducting a research, the finding was that there was very little image
or product differentiation between Starbucks and the smaller coffee chains, Starbucks brand
image had rough edges, Its customers were evolving and Starbucks did not meet with
customer satisfaction despite high Customer Snapshot score.