Starbucks Case Analysis

Starbucks Case Analysis

Marketing Management

Abstract

Starbucks has seen great growth and profit since it's inception in 1987. They have grown internationally as well as add thousands of stores stateside. For a number of reasons, Starbuck's started showing signs of weakness in 2007. This paper will go over the events that led to the problems as well as things that could have been done to prevent themselves. It will also go over ways the company could have revived itself quickly after the losses started to show. I will analyze the growth of Starbucks and what distinguishing characteristics led to the growth. I will talk about Starbuck's pricing strategies and the way they attempted to penetrate the international market. Lastly I will discuss the case from a marketing standpoint and the main lessons that can be taken away from tis case.

Starbucks Case Analysis

According the, A Crack in the Mug: Can Starbucks Mend it? The last half of 2007, Starbucks had a decline of 50% per share as well as a decrease in consumer spending. From 2007 to 2008 the price of a Starbucks share had gone from $19-$20 down to $18(2008,pg.1). The main cause of this decline would have to be the competition that came from McDonald's, Dunkin Donuts and Peet's Coffee & Tea. According to page 8 of the case study, this competition also boasted generally lower prices. Page one cites a consumer reports study of a taste test done between McDonald's, Burger King, Dunkin Donuts and Starbucks in 2007 , and McDonald's was the winner of the black drip taste test. Another cause was overexpansion, from 2001 to 2007, Starbuck's added 4,061 company operated stores alone(pg.10). That does not include licensed stores or international stores. At the same time, their Long-term debt figures went from 6 to 551 (pg.13)In 2007 Starbucks compiled a list of risk factors. Some of these were: Declines in actual or estimated sales growth rates and expectations, Declines in general consumer demand for specialty coffee products, and effectively managing the company's rapid growth is challenging.

These are just a few of the risk factors mentioned in the case analysis. There is also a fact that coffee costs between .10 and .50 and provides upwards of 300% return on investment(pg. 7) Numbers like this show that there is room for Starbuck's to make changes without having to sacrifice products. According to public data, the current population of San Francisco is 808,976. Starbucks has 68 locations in San Francisco. San Francisco is one area where Starbucks is successful. There are people who enjoy stopping in to relax or meeting friends over a cup of Coffee. Even

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