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Global Marketing Management Case Study: Starbucks

Global Marketing Management Case Study: Starbucks. MKTG 3215-001 Spring 2013 Mrs. Tamara L. Cohen. Class #7. Starbucks. Readings for this class: Course Pack reading # 11: “Starbucks’ quest for healthy growth: An interview with Howard Schultz”

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Global Marketing Management Case Study: Starbucks

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  1. Global Marketing ManagementCase Study:Starbucks MKTG 3215-001 Spring 2013 Mrs. Tamara L. Cohen Class #7

  2. Starbucks Readings for this class: • Course Pack reading # 11: “Starbucks’ quest for healthy growth: An interview with Howard Schultz” Allen Webb; McKinsey Quarterly, March 2011 • Other resources of your own choice

  3. BACKGROUND • Excellent core idea • Young dynamic company • Very rapid growth nationally & internationally due to changes in consumer behavior & booming economy • Wall Street pressure to maintain rapid growth rate of 20% • Non-coffee products 16% • 1st international market: Japan • 1987 Howard Schultz bought out bosses • 1994 17 coffee shops Seattle • 2009 >16,000 outlets in 44 countries • 1999 281 stores overseas 2009 5,000 stores overseas • 2006 stock price >$40 • 2009 stock price >$20 • 2011 stock price $56.12 (1/31/2013) old logo

  4. controllables uncontrollables PROBLEMS • “Growth became a carcinogen” – chasing growth, Wall St. pressure • Growth without discipline (cannibalizing, predatory real estate practices, etc) • Underperforming stores; closed stores open < 18 months • Comparisons of same-store sales statistics is supposed to illustrate growth/health, but actually skewed decision-making (p.4: teddy bears). • No cohesive strategy for growth nationally or internationally (“vision”) • International strategy seems to be just go with the mainstream big-name emerging markets (China, India, Brazil) • Constraint of “human capital” (want to attract world-class people”) • No evidence of globalizing top mgt/board for more global perspective • No succession planning evident • No evidence of supply chain carbon literacy • Approaching mature phase of life cycle in US / market saturation • Innovations (non-coffee products & services) have had mixed success • Changing lifestyles (health issues vis-à-vis coffee consumption) • Economic downturn • Operating with local partners overseas compromises profits • Threats to intellectual property rights (legal risks - overseas rivals/copycats/pirates) • Barriers to entry / operation overseas (legal, political, cultural, economic) • Rising prices of coffee beans

  5. Growth “carcinogen” Growth without discipline Underperforming stores Same store sales comparisons No growth strategy (“vision”) International strategy weak Constraint of “human capital” No globalizing of top mgmt No succession planning No supply chain carbon literacy Market saturation in US Innovations had mixed success Changing lifestyles Economic downturn Overseas partners share profits Overseas rivals / copycats Barriers to entry overseas Rising prices of coffee beans Stop responding to Wall St. Devise & apply strategy Articulate vision & conform to it Halt same store comp’s Articulate vision & conform to it Devise & apply int’l vision & strategy Commit to globalizing top personnel Commit to globalizing top personnel Start succession planning a.s.a.p. Get educated re CO2 & environment More energy in growth overseas Subject innovations to ‘vision’ test Recognize changes & ‘adapt or die’ Address economy in advertising Transfer pricing. Franchising? Address legally or via advertising Study alternative strategies Get more involved with suppliers COURSES of ACTION ACTIONS PROBLEMS

  6. RECOMMENDATIONS • Develop cohesive growth strategy nationally & internationally. • Consider emerging market targets carefully, to avoid same old national problems of impressive growth masking undisciplined international expansion. • Cultivate the best ‘human capital’ & commit to globalizing management personnel.

  7. CONCLUSION Starbucks has a very strong brand and a record of impressive aggressive growth. Strong cash flow can enable risk-taking. The company faces challenges in the future to sustain acceptable corporate growth and profitability by consolidating its market presence nationally, addressing international political, legal, cultural and economic challenges, and careful planning of emerging market growth.

  8. EXECUTIVE SUMMARY Starbucks’ major strength is its dominant global brand. The company has strong cash flow, and focused, talented management. Starbucks is challenged to reclaim its previously impressive growth by following the national strategy to excel as “both a retailer and a purveyor”, and by expanding and developing international markets, especially emerging markets. Howard Schultz wisely recognizes the “cultural differences in every market”.

  9. Next class: Exam # 1 Wednesday, February 6 Preparation: Review PPTs & your notes from classes 1 - 7 Review your notes from elevator speeches in class Review homework assignments & assigned readings

  10. Sample exam question

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