Evaluating the Performance of Starbucks - Essay Example

Starbucks Case Analysis It is very inspiring to hear stories of great people who started from nothing to something. History is full of inspirational true life stories of great men, captains of industry and great warriors of war who started from humble beginnings and rose to become iconic figures in the human race. One such story is this of Howard Schultz. His is one really inspirational story of how people can go from rags to riches. His name is proudly associated with the famous coffee retail outlets called Starbucks. This is one of the best performing companies in the country with great lessons on business acumen (Schultz 20). Howard was of a humble background and little was known about him in his early years. He studied in a poor school and his life had financial challenges that at one point he was even selling blood and bartending just to make ends meet (Schultz 25). He later grew to become a great salesman and switched from his career as vice president of a Swedish kitchen equipment firm to help the Starbucks stores grow their business. He worked on expanding this business, which he successfully did until the owners sold the whole Starbucks Company to him. Howard has been a true inspiration of how hard work and determination are necessary requirements for the growth and expansion of any business (Schultz 30). He has endured threats and trying times but his company is still among the best to this day. Many critics opposed his expansion plans to cities such as Chicago and Los Angeles but his sheer determination and persistence saw him become a top brand countrywide in a few years. We see that this man was not only making a difference in his life but was also focused on improving the lives of all around him (Schultz 40). Howard Schultz has devoted much of his time to corporate responsibility and has been very keen on making sure that his employees are happy at the work place. To evaluate the performance of this highly successful company, we are going to use the SWOT analysis on Starbucks. Among its strengths is the fact that Starbucks has built its name to be a brand name in the coffee business in the United States and globally. This is due to its specialty in the coffee sector (Schultz 50). The company CEO Howard Schultz is also a barista. This is important due to the fact that this implies he has expert knowledge of the services he is providing to his customers. He is able to relate with his employees as well. Among the other strengths is the huge customer loyalty base the Starbucks has attracted. These customers are willing to pay premium prices for the Starbucks experience. The profitability of the company is far ahead of its competitors’ as well as its financial strength (Schultz 80). Among the weaknesses of the Starbucks chain is the high priced value of their product. This makes it easy for customers to switch to alternative competitors in times of economic hardships (Schultz 48). The content of calories and fat content in the company’s products also come as a matter of concern to coffee consumers. Most people are cautious of the amount of calories that they consume in their diet. Thus taking Starbucks coffee products may increase the risk of high calories intake. This is among the weaknesses that the company struggles with (Schultz 20). There are various opportunities that the company is yet to maximize on. Starbucks has been successful in expanding across the nation but has not yet maximized on international growth. This would enable it expand its market share and profits consequently. Also, the company should fully exploit the alternative of home brewing (Schultz 150). This is also a form of expansion since it has acquired its own brewing machine and should use it effectively to cut down on costs. Starbucks is doing great in terms of introduction of new products often. It also gas different distribution centers which work successfully and they should capitalize more on the above two strengths (Schultz 200). Competitors in the same field as Starbucks include McDonald´s Mc Café. It has global presence and is attractive due to its low pricing on products. To make it more competitive, Mc Café is a globally recognized brand. Dunkin Brands is another threat to the dominance of Starbucks with its reputation for customer loyalty due to the coffee and other beverages the company produces (Schultz 250). Panera is the other food and beverage company that is growing fast and is reputable for premium coffee prices as Starbucks. To add onto the threats that Starbuck faces is the price fluctuations of the coffee commodities while having problems in supply of coffee and other various products (Schultz 300). One of the crucial marketing decisions that have to be made in regards to the company is the advertisement of other fast foods that the company is about. This is because as much as the company originally started as a coffee company; it has expanded to offer fast food services (Schultz 190). Fast foods are a profit making venture and as such the company should include it in its marketing campaigns. Most of its managers strive to keep the company as a coffee brand and as such advertise it as only that. This is not prudent enough since the company is on a growth curve. To solve this marketing issue, a few measures may be put in place. There could be advertising of the fast food chain separately from the coffee chain. This means that there should be two marketing divisions, one for the coffee and the other for the fast food (Schultz 280). The advantage with this is the maximizing of expertise in the two different areas of coffee and fast foods. The disadvantage with this is the increased cost having two marketing departments in the same company. Another way of solving the marketing issue is by use of external marketing firms to help manage the marketing decisions of the firm. This may be beneficial in that most external marketing firms are highly skilled in what they do and they save companies a great deal of time and resources if they are hired. However, the deal may come costly considering that the company is well established and will be around for the next several years (Schultz 233). Hence it would need its own marketing department to cut down on costs of hiring outside help to do the marketing work. Cutting down on the marketing of one product would also be a solution. This would favor the decision of the managers who preferred to keep Starbucks as majorly a coffee ‘shop’. The advantage with this would be in still retaining the brand name of Starbucks as primarily a coffee house (Schultz 240). The downside to this decision is the fact that the fast food side of the business chain would not have so much customer attention and would lower on the profits of the firm (Schultz 300). Of all the three decisions on marketing, I would favor the one that has two distinct marketing departments in the firm. I chose this business strategy since it would enable the firm to maximize on its customer base. Also, it would avoid clashes in the amount of time and effort given to the marketing of either product. Both the fast foods and the coffee businesses would boom in such a case (Schultz 342). To implement my suggestion above, Starbucks should open at least one marketing department in each region. This department is to have two divisions that work independently of each other. One is to handle the marketing of fast foods for the company while the other is to carry of marketing of the coffee brand in the region. Both departments should be allocated the same resources to carry out their activities (Schultz 56). A region may consist of several locations, states or counties depending on the location of the different retail outlets of the Starbucks firm. Evaluation may be based on the impact of marketing and advertisement on the sales of the company. This is because marketing is expected to yield a direct positive impact in the sales of any firm (Schultz 200). Hence, if the sales of the company do not increase after huge sums of resources have been utilized to market a product, then the marketing plan is not only weak but unprofitable. Evaluation may also be done by looking at the sales conversion rate. This implies not only telling the customers about the product but looking at the sales figures and determining if they are on the rise. Marketing is also expected to bring a positive return on investment and this should be checked to ensure it is so (Schultz 170). Control measures have to be put in place to ensure that the marketing plans do not ruin the activities of the firm. If the marketing department is not showing any signs of positive outlook, then the plan to have two marketing departments should be evaluated and dropped if unprofitable. Also, the marketing departments should be given fair play so as not to underestimate the efforts of one part as they all contribute towards the profitability of the company (Schultz 360). Work Cited Schultz, Howard. Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time. Hyperion: United Kingdom, 2012. Print. Schultz, Howard. Onward: How Starbucks Fought For Its Life without Losing Its Soul. John Wiley & Sons: United States, 2011. Print. Read More