Question 01: In the early 1980s, how did Howard Schultz view the possibilities for the fledgling specialty coffee market? What were the most important factors in shaping his perspective?
In the early 1980, Howard Schultz was actually looking for different opportunities for the business. The most feasible option which came his mind was in 1983, when Schultz was attending an international house ware show in Milan, Italy. During his stay in the city, he actually visited a number of espresso bars. The thing that attracted him the most during his visit to the espresso bars was the fact, the way he was greeted at these bars.
Along with this, Schultz was even inspired by the ambiance of the bar and the overall atmosphere which was soothing, pleasing and electrifying. The idea which came up his mind, during the stay was to actually develop an atmosphere and a bonding with the consumers through a cup of coffee. He actually decided that the coffee might serve as the major product, and the ambience, the element of customer care might become the differentiating factor for the Starbucks.
Along with this, Schultz even looked upon the possibility for the specialty coffee market where his focus was not only to sell the product or the brand through advertising and promotion, in fact Howard wanted to attract, retain customers through the personal experience of the customers. The taste of the coffee, the ambiance and the way coffee was being served at the specialty stores.
In the late 1970s and early 1980s, the bigger coffee stores or the businesses were becoming stagnant and the sales were declining considerably. Along with this, as per the research conducted, the average American consumed even less than two cups of coffee each day.
This was obviously a significant dropin the sales and the consumption of coffee simultaneously.Along with this, the research also indicated that every third person in the United States did not actually consumed coffee at all. The situation made the larger coffee business companies to compete in an industry was stagnant and mature.
In such a situation, smaller brands or the independentspecialty coffee stores were still selling coffee at a reasonable pace where they used high quality Arabica beans. The major advantage of consuming this type of coffee was that it had lesser caffeine, more aromatic, less acidity and is of superior quality as compared to the traditional coffee beans used by the larger coffeebusinesses.
Many of the consumers had some knowledge of the origin of coffee while some had never even tasted an espresso based beverage or did not have a coffee grinder. However, with the advent of Arabica beans and specialty coffee stores opening in the country, the consumption and the sales for coffee started increasingly considerably.
Many of the coffee aficionados were opened, where they sold fresh roasted coffee around the different areas of the country. Along with this, the demand and supply also increased with the introduction of specialty coffee stores and the demand rapidly increased for coffee where it generated a yearly revenues of more than $750 million.
The industry with the introduction of specialty coffee stores say a rapid improvement in the industrydemographics and eventually more people were attracted to consume coffee on daily basis. In spite of the growth prospect, the market for the specialty coffee remained a limited segment where the sales were almost 10% of the total industry.
Howard Schultz and Starbucks Coffee Company Case Solution
Based on the above analysis, Howard Schultz was actually convinced and committed to open up a specialty coffee store where the customer can be provided ambience, quality coffee and soothing experience which made him explore the market and gauge upon the opportunities presented in the coffee market.
Question 02: In 1987, Schultz bought Starbucks from its original founders. At the time, Seattle based coffee been retailer had six stores and a roasting plant. By the end of the twentieth century, Starbucks had 3,300 locations in 17 countries and was the leading specialty coffee purveyor in the world. What were the critical drivers of Starbuck’s success?
At the time when Schultz bought Starbucks in the year 1987, it had limited presence in the market, however within a decade or so, the company has become one of the most successful brands of the country where it operates in the global market and has more than 3,300 stores across the world..............
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