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Starbucks business case study
The business model of Starbucks
The business model of Starbucks
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Coffee is a growing part of people’s daily lives. Just before the 9-5 weekdays, and even during the 9-5, it is common for the working class to drink a cup of coffee. To support this accustomed part of our culture, it involves a complex supply chain that allows those coffee beans to turn into a cup that can be consumed. This paper is structured on how Starbucks, the top coffee supplier in the world, can supply its stores, from raw materials to manufacturing, right to the start of someone’s day.
CEO of Starbucks, Howard Schultz, originally had the idea that Starbucks would have the community/traditional feel in their stores, and still serve high-quality coffee (“Our Heritage” 1). Adding an Italian vibe to the coffee shops, keeping its traditional logo, which is based on a mythical creature, and advertising some of its products in a more “traditional” style accomplished the first goal. For an example, Starbucks recently created a commercial about their Refreshers, which was about cooling someone down in the summer time, with the scenery of Tuscany in the background. Serving high-quality coffee was obtained by ordering coffee beans from where they naturally grow and giving it a perfect roast to give to a customer. It was a marketing strategy that helped Starbucks grow and transform its commodity chain to support gathering more raw materials for a cheaper and more efficient way.
The most important part of the cup of coffee, the coffee beans, is typically harvested from South America, mainly because of the fact that Starbucks uses Arabica beans (Weinberg 1), which is dependent on a temperate climate that exists on the majority of the continent. The country that provides the biggest market supply of coffee beans for Starbucks is Brazil ...
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...l Could Leave 700 Elmhurst Dairy Workers Unemployed." NY Daily News. N.p., 15 June 2011. Web. 11 Nov. 2013. .
"Our Heritage." Starbucks Coffee Company. N.p., n.d. Web. 13 Nov. 2013. .
Root, Jessica. "Green Living." TLC. Planet Green, n.d. Web. 11 Nov. 2013. .
T., Kate. "A Cup of Low-Cal Goodness." Starbucks Coffee Company. N.p., 16 Apr. 2010. Web. 11 Nov. 2013. .
Weinberg, Benett A. "Burned Beans — The Shame of Starbucks." World of Caffeine. N.p., 09 Mar. 2011. Web. 08 Nov. 2013. .
Starbucks Corporation engages in the purchase, roasting, and sale of whole bean coffees worldwide. It offers brewed coffees, Italian-style espresso beverages, cold blended beverages, various complementary food items, coffee-related accessories and equipment, a selection of premium teas, and a line of compact discs, through its retail stores.
Until about 1990, coffee was traded in a managed market, where both consuming and producing countries agreed on pre-determined coffee supply levels through export quotas for the producing country. This managed market was regulated by the International Coffee Agreement (ICA). But in 1990, disagreements broke out among the countries and the ICA was broke down. This, along with market liberalization, created an increase in the global coffee production. The increase in coffee supply brought on a rise in inventories in consumer countries along with a poor demand. One of the consequences of this shift was a change in power to the roasting and retailing industries and created a decrease in the prices that were paid to producers. This whole scenario is known as the coffee crisis.
One of the most important factor that can influence the taste of coffee is the type of coffee beans. There are two most common varieties of the coffee plant that make up nearly all of the world’s coffee production: Arabica and Robusta. 75% of the world’s coffee production is Arabica and 25% being Robusta. Arabica coffee beans, grown significantly in Brazil, Colombia and Latin America, are the type best known to Western consumers. Robusta beans are largely popular in Asia and they are used in instant coffee and supermarket brands. Vietnam is the 2nd largest coffee producer but 90% of is production is Robusta, rather than Arabica beans typically used in European-style espresso and Starbucks coffee.
Print. The. King, Winfield C. Brazil's Coffee Industry. Washington, D.C.: Foreign Agricultural Service, U.S. Dept. of Agriculture.
Try taking a walk in New York without bypassing a Starbucks. Seriously, try– I dare you! Starbucks coffeehouses are so ubiquitous this task would almost certainly be impossible. The truth is, this is not just a New York thing, I was just trying to make the point relevant. Starbucks is the largest coffee distributor in the world and exist all over cities across the country as well as a global expansion. Before getting to the company’s origin, branding and success, a closer look will be taken at the company’s most simple, unique and important graphic representation: the logo.
Coffee has always been a staple part of the American breakfast, and work life. With its promise of a much needed midday energy boost, or morning pick me up, millions of Americans often turn to coffee to start the day. According to a recent Gallup poll nearly 64% of Americans adults ages 18 and up report drinking at least one cup of coffee a day, with the average coffee drinker drinking 2.7 cups a day (Saad, 2015). While some Americans choose to drink coffee blends, most Americans prefer to consume pure source coffee, or coffee that a specific type from a specific country. While coffees from Central America and Africa are popular, one of the richest and most pure forms of coffee is considered to be Arabica coffee from the Ugandan mountains. In the U.S. the most popular Ugandan Arabica coffee is Café Vianté’s Uganda Expresso, grown in the slopes of Mount Elgon. Grown and processed in Uganda, Arabica coffee
When Starbucks started their target market were people who enjoyed coffee not just for the energy boost that they got from the caffeine, but people who enjoyed sitting down and drinking a well-prepared cup of coffee. Upon visiting Italy and falling in love with the coffee bars and the experience that they offered, Schultz envisioned a place between home and work where you could just sit and enjoy your coffee. Starbucks wanted to control their coffee from “raw green bean to the steaming cup” this meant that they had to talk with their farmers to make sure the quality was up to their standards. They
Starbucks is one of the most recognizable and successful coffee brands in the world. Starbucks believes in serving the best coffee possible. Starbucks’ international market that was expanded into China in 2002, still has only a tiny part of the Chinese beverage market (Harrison et al., 2005). The company President, Charles Shultz is ascertaining the possibility of establishing new coffee houses in China.
As we know, Starbucks has made a name for itself making and selling coffee and specialty coffee drinks. It has made its biggest impression by becoming the espresso expert and public educator of how to make the perfect espresso; "Roasters" of the company are trained for one year.
Starbucks is currently the industry leader in specialty coffee. They purchased more high quality coffee beans than anyone else in the world and keep in good standings with the producers to ensure they get the best beans. Getting the best beans is only the first part, Starbucks also has a “closed loop system” that protects the beans from oxygen immediately after roasting to the time of packaging. They did this through their invention of a one-way valve which let the natural gasses escape but keeping oxygen out. This gave them the unique ability to ensure freshness and extended the shelf life to 26 weeks. Starbucks isn’t only about the coffee, it’s also about a place where people can escape to enjoy music, reflect, read, or just chat. It is a total coffee experience. The retail outlet has been responsible for much of Starbucks growth and has contributed substantially to their brand equity.
One important aspect of Starbucks is his supply chain strategy. “The ability of supply chains to provide the level of value desired by the customers begins, with the capacity of channel integrators to optimize their productive resources” (Frederick Ross, 2008).
An article in the Seattle Post, describes the alliance that Starbucks is making to ensure that a sustainable supply of high quality of coffee is produce in Latin America. "Starbucks President and CEO Orin Smith said the alliance is partly his company's effort to pass on the "high price" of a cup of coffee to farmers." (Lee, 2004). He states that the high price enables them to pay the highest price to the farmers. Though the high prices to suppliers can demonstrate that money get to farmers with being diverted. Starbucks overall goal with this alliance is to buy 60 percent of its coffee under the standards agreed upon by 2007. "The agreement reflects the growing power of the premium coffee market and efforts to exploit it for the benefit of small farmers" (Lee, 2004).
“Starbucks purchases and roasts high-quality whole bean coffees and sells them along with fresh, rich-brewed, Italian style...
A range of social and economic positive impacts occur in relation to the production of coffee. Coffee makes a positive contribution on the social side as it maintains a substantial rural employment and stable communities. Housing is improved as the living standards for many coffee producers is improved. This is because of fair trade which therefore increases how much money they are earing daily thus, farmers can afford better living conditions. This than means in many developing countries, this then provides more jobs for small- scaled farmers as the author even remarks “over a million jobs are generated by the industry as a whole,” (Courtney- Guy, 2017, p.1.).
Coffee trees grow in about seventy countries around the world, and in the United States alone, people consume about 400 million cups of coffee every day. The coffee bean boom came from the Middle East, specifically from Islamic tribes who drank coffee instead of alcohol. After visiting the Middle East, a Dutch man stole a coffee tree and brought its delicious beans back to Europe (Brisbin). Essentially, one of the most popular beverages in the world today spread through the works of a thief. The extraction and roasting of coffee beans from their fruit takes quite a bit of time. First, the beans are removed from the “cherries,” and ferment in water for ...