Discuss the elements of Starbucks business strategy and how execution of the strategy lead to company growth and provide the organization a competitive advantage in the marketplace.;Attachment Preview;Starbucks.doc;Starbucks Week 1;In 2008, Starbucks was the worlds leading specialty coffee retailer, with more than 11,000 tores;in the United States and approximately 4,500 stores in 43 other countries. Since 2000, the;companys sales of ready-to-drink coffee, coffee beans, coffee-flavored products, pastries, and;coffee accessories had grown by more than 20 percent annually to reach $9.4 billion in 2007. Its;net earnings had increased from $95 million in 2000 to $672 million in 2007.;The companys success and dramatic growth were attributable to its superior execution of an;excellent strategy. Starbucks business strategy was made up of the following elements;Expand the number of Starbucks stores domestically by blanketing metropolitan areas, then;adding stores on the citys perimeter. Starbucks also made its locations readily available to;consumers by entering into licensing agreements with food service vendors operating in airports;universities, hospitals, and other places where people congregated.;Make Starbucks a global brand by opening stores in an increasing number of foreign;locations. The international expansion effort involved opening company-owned-and operated;stores in some foreign countries, while entering into licensing agreements with reputable and;capable local companies in other countries.;View each store as a billboard for the company and as a contributor to building the;companys brand and image. Each detail was scrutinized to enhance the mood and ambience of;the store, to make sure everything signaled best-of class and reflected the personality of the;community and the neighborhood. The thesis was Everything matters. The company went to;great lengths to make sure the store fixtures, the merchandise displays, the colors, the artwork;the banners, the music, and the aromas all blended to create a consistent, inviting, stimulating;environment that;evoked the romance of coffee, that signaled the companys passion for coffee, and that rewarded;customers with ceremony, stories, and surprise.;Broaden in-store product offerings. Starbucks stores went beyond coffee to include coffeeflavored ice cream, Frappuccino, teas, fresh pastries and other food items, candy, juice drinks;music CDs, coffee mugs, and coffee accessories.;Fully exploit the growing power of the Starbucks name and brand image with out-of-store;sales. Examples of such out-of-store sales included the sale of ground coffee and coffee beans in;U.S. grocery stores. Starbucks also sold Frappuccino in U.S. grocery and convenience stores;through a partnership with PepsiCo and sold coffee flavored ice creams in grocery stores through;a partnership with Dreyers Grand Ice Cream.;Display corporate responsibility and environmental sustainability. Key social responsibility;and sustainability initiatives included purchasing Fair Trade Certified coffees, donating more;than $30 million annually to charitable organizations, purchasing paper cups made from recycled;materials, and implementing in-store recycling programs.;Control the costs of opening new stores. The company centralized buying, developed standard;contracts and fixed fees for certain items, and consolidated work under those contractors who;displayed good cost control practices. The retail operations group outlined exactly the minimum;amount of equipment each core store needed so that standard items could be ordered in volume;from vendors at 20 to 30 percent discounts, then delivered just in time to the store site from;either company warehouses or the vendor. Modular designs for display cases were developed;and the whole store layout was developed on a computer, with software that allowed the costs to;be estimated as the design evolved. All this cut store-opening costs significantly and reduced;store development time from 24 to 18 weeks.;Promote customer-friendly service and enhance store ambience by making Starbucks a great;place to work. CEO Howard Schultzs thesis was that high employee morale would spill over to;inject energy, positive vibes, and a feel good atmosphere into the operations of its stores, thereby;making the Starbucks experience more pleasing to patrons.;However, while Starbucks strategy was largely on target, it was far from being set in concrete.;In early 2008, co-founder and CEO Schultz announced that Starbucks would slow the pace of;store expansion in the U.S. and close 600 of its U.S. stores that were underperforming, over 70;percent of the stores scheduled for closing had been opened since 2006 and were in areas where;Starbucks already had a number of other stores nearby. The basic reason why so many new;Starbucks stores had failed to reach the expected sales and profit levels had to do with putting;stores so close together that they cannibalized each others salesa number of customers found;it more convenient to shop at a newly opened store rather than go to the nearby store they had;previously patronized. Schultz also began launching a series of new initiatives to re-ignite sales;at Starbucks stores via new product offerings and actions to wow customers with an even better;experience, by offering new products and providing store patrons with an even more intriguing;Starbucks experience.
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