Starbuck is a company, which started in 1971 in Seattle and expanded from 55 stores in 1989 to more than 10,000 stores currently. It offers products such as beverages, pastries, and whole coffee beans. It has grown over the years and becomes one of the world leading coffee chain stores. Currently, stores are located in most countries that have a taste and likening of coffee. It has a somehow short history when compared to how it has performed so far. The paper is focusing on the history of the company, major events that occurred.
In addition, the business model that they use will be analyzed, decisions that made the company to expand and negative effects that they faced concerning globalization. In the final part of the paper, personally contribution towards the next few years in terms of how they can improve their company reputation or restore to previous years is also analyzed. History Starbucks started operating in 1971 when three people: Jerry Baldwin, Zev Siegel and Gordon Bowker, came together to open the first Starbucks Coffee – Spice and Tea in the tourist attraction area of Pikes Place Market in the State of Seattle.
They employed the picture of San Francisco Bay clientele. These three people loved exotic tea and fine coffee. They each contributed $ 1,350 and borrowed $ 5,000 to open the first shop – Pikes Place store. The name came about after the partners decide to honor a famous coffee lover and mate- Starbuck who lived in Herman Melville’s and was featured in a novel. The name was chosen because it made it possible to remember the romance of high seas and the tradition of traders’ seafaring coffee. Alfred Peet a Dutch immigrant was an inspiration to the development of the Starbucks enterprise.
In the 1950’s Peet was importing Arabica coffees into United States. Peer saw that coffee was more like the brewing of wine and the products depended on the country of harvest or estate. In 1966, Pete opened a Peet’s Coffee and Tea in California and had a loyal clientele. His duty was to import coffee and tea, and then dark-roast it like the European way, which resulted in freshly brewed coffee. The three partners were close friends to Peet and had a thorough knowledge from Peets’ teachings. The first store – Pikes Place was hand built and had modest nautical fixtures.
One side of the room was composed of whole bean coffee while the other side contained shelves of coffee products. This store did not offer fresh coffee, but there were samples offered for testing. Siegel was the only person among the three partners who was paid and was the one who worked in the store. The other two partners came during their free time to help. Baldwin was dedicated to the books, which resulted to the success of the business, in terms of revenues that exceeded the expectations. When the business was still new, the partners had to travel to Peet for advices on issues that concerned coffee and tea.
In the first year, the partners had to get their orders of coffee from Peet, and later bought a roasting machine from Holland. It was installed in a ramshackle where they began roasting the coffee. Bowker and Baldwin employed the methods that were used by Peet to obtain their own tastes, flavors and blends. In 1972, they opened another new store. In 1980, they had four shops in Seattle and since the opening of the first store profits continually increased. The cofounders duties and roles were changed.
Siegel left the company; Baldwin became the person to manage day-to-day activities of the business. Bowker was not devoted to the company since he was managing his company that concentrated on advertising and design. In 1982, the business was stable and solid, a roasting facility, and a wholesale that sold coffee to the inhabitants was in place. Charity mission began after they said that the life span of fresh coffee was 14 days and the eight-day-old coffee was given out. Howard Schultz was hired in 1982 to deal with the retail sales and marketing part of the company.
The same year the wholesale part was changed to Caravali, this was to prevent the Starbuck reputation been stained by other coffee beans that were obtained through wholesale basis. At the same time, they tried to do business with supermarkets through the Blue Anchor but it was not successful. Key Events of Starbuck The history and important events of Starbuck are traced back to 1971 when the first Starbucks was started in Seattle. The three partners received information that contributed to production of unique tastes of coffee from Peet.
In addition, at the same time they began the process of selling fresh roasted coffee, gourmet coffee and brewing and roasting accessories that are associated with coffee. In 1980, saw Sigel sale his portion of the company to pursue personal interests. At that time, the Starbucks was the biggest coffee house in Washington with six retail shops. In 1981, an attraction and interest towards Howard Schultz was born, who was a sales representative dealing in plastic equipments and represented a Swedish Company in the United States.
Baldwin hired Schultz in 1982, and was appointed head in marketing and was sent for an international show in Italy. This created an inspiration when he saw the patrons in a cafe being joyous while taking their coffee. This gave him the idea of creating cafes in United States. In 1984, Schultz conveyed a meeting that brought together the founders of Starbucks. This he wanted to test the concept of the Milan-Italy cafes in the United States and it was sold to the owners of the company. It was decided to test the plan in a downtown cafe in Seattle.
This cafe was successful; it formed the basis that was employed by Schultz in 1985. In 1985, II Giornale came around and it started selling espresso and coffees that were brewed from Starbucks coffee beans. In 1987, II Giornale was able to acquire the Starbucks assets and the name of II Giornale was changed into Starbucks Corporation. At the same time, new locations were identified and located. These locations included the stores in Vancouver and Chicago. At the end of the year, there were 17 stores (Dicum 1999, pp. 39 – 42). By the year1988, Starbucks increased to 33 locations.
At the same time the used, the criteria that they obtained from Peet of mail order. Mail order cataloging was possible and all the service that the company dealt with was taken to the 50 states. In 1989, they obtained a store in Port and Oregon and the Starbuck was located in 55 locations. The store locations climbed to 84 in 1990 and the headquarters in Seattle was expanded. A new roasting plant was also build. They collaborated with CARE international in 1991. CARE is an international relief agency and a development institution. It was able to introduce the CARE coffee sampler.
The same year the company became the first in United States to be owned privately. It was able to offer a stock option program that included part time employees. It opened its first licensed airport location with the help of HMS Host at the Sea-Tac International Airport. At the same time, it opened the Los Angeles store making the total to become 116. In 1992, it completed an initial public offering and the stock was traded in the NASDAQ National Market with the trading symbol “SBUX”. The benefits that they provided the employees included dental and health care benefits to all employees: part time and full time.
At this time the employees were trained, a course that took 25 hours on matters that related to coffees, which include the history of coffee, the preparation of coffee and how to make a cup of coffee at home (Dicum 1999, pp. 39). The same year saw the stores totaled 165 after the opening of the San Diego, San Francisco, Denver and the Orange Country. They formed relations with Barnes & Noble Inc. that they offered their coffees. In 1993, due to the fast growth and demand for the coffee it was essential to open the second roasting plant that was located in Kent- Washington.
There were only 19 people who were qualified to roast the coffee at a 600 pounds of it in a time 0f 12 -15 minutes. Prospectus roasters had to undergo a training that took more than a year. At the end of the year, the stores reached 275 and a year later 425 with sales reaching $284. 9 million. In 1994, they were able to open more stores in Boston, Minneapolis, New York, Atlanta, and Houston and at the same time obtained, the 23- store Coffee Connection that was based Boston. This included the promotion of two members- Smith became presented and Behar became the international president.
In the same period, they entered partnership with Pepsi-Cola that developed a ready to drink coffee beverages. The first product that they produced at this period was the Frappuccino that hit the stores in 1995, which lead to developing a bottle version that was sold in convenience, grocery and drugstores. They further opened new stores in San Antonio, Pittsburgh, Philadelphia and Las Vegas. The same year of 1995, the Starbuck started supplying the United Airlines flights with coffee and developed music CDs that were sold in their stores.
In 1996, saw the expansion of the company to the North America and mostly to Idaho, North Carolina, Rhode Island, Utah, Ontario and Arizona. In addition, it ventured into international markets. The first country was Japan, where with the help of SAZABY Inc. , which was dealing with restaurant and retails business. In the same year saw, Singapore and Hawaii received their Starbucks share. They also entered partnership with Dreyer’s Grand Ice Cream and resulted in the development of Starbucks Ice Cream.
In 1997, they expanded to the Philippines and also there was expansion in Michigan, Florida and Wisconsin that increased the number of the stores to 1,412. In addition, the total sales reached $1 billion. In the same year, there was public outcry in San Francisco, Toronto, Portland, Brooklyn and Oregon. There were developments in partnership and coming together with other companies to diversify their products. They were able to have an agreement with the Albertson’s and were allowed to open the Starbucks stores in 100 Albertson’s supermarkets.
In addition, they acquired the five store of the Hear Music Chain in San Francisco and increased the music capacity. At the same year, the revenues reached $1. 68 billion. Human based organizations that were in San Francisco arranged for a demonstration that could have affected 29 cities. They were claiming that the Starbuck were buying their coffee cheaply. The demonstration never took place because the company decided to increase the amounts that they used to purchase the coffee. The company- international segment opened locations in Kuwait, China, and Lebanon. This time saw the acquisition of the Tazo tea company.
They were involved in the promotion of environmental activities with collaboration with the Conservation International. It opened stores in Memphis, Tennessee, Canada, Nashville and Canada. The total stores totaled 2,135. In 2000, they entered an agreement with the TransFair USA to enable it to sell certified Fair Trade coffee. The year saw the company introduce the commitment to Origins type of coffee that included the organic, shade grown, and the Fair Trade Certified selections. The get into agreement with Host Marriot International and they open stores in Hong Kong, Dubai, Qatar, Shanghai, Bahrain, Australia and Saudi Arabia.
Starbuck Business Model A business model is the method in which an organization or company makes money. It further explains the sources of revenues, how much are the revenues and the frequency of the revenues. To clearly ascertain the business model of an organization: issues such as the structure in which the revenues are obtained, does the business posses franchise or the company owns their own outlets. In addition, does the company lease the business site and other services, does the company support retailing or direct sales or the methods in which the products are delivered to the required places and in by which means.
Starbuck business model is unique and has been applied in through many years. Since its’ incorporated as a company in 1992, the company has grown more than 6500% and more than 11,000 stores are there. It has more than 2,400 coffee stores in Canada and United States, over 100 in UK and other stores in different countries including China, Malaysia, South Korea, Thailand, and Taiwan. The different stores have features such as the Tazo teas, pastries and other food items such as coffee brewers, espresso machines and many assorted items and foods.
Most of these products are sold at their stores, mail orders and the online facility that doubles as their website. They sale their products to customers in bulk, and in most cases they retail in different restaurants, education institutions, businesses, airlines and hotels. They sell Frappuccino beverages through its collaboration with the Pepsi-Cola company and are supplied in convenience stores, supermarkets and drugstores. They have partnership collaboration with Kraft Foods, Inc. , that sales the Starbucks ground coffee and whole beans in warehouse clubs, grocery and mass merchandise stores.
The third collaboration is with Dreyers Grand Ice Cream that produces the Starbucks Coffee Ice Cream. They have the authority to sale the products through supermarkets and other stores. All these methods are coupled by having many coffee shops within blocks that are near each other. This enables saturation and drives up the amount of sales. This means that the market saturation increases the rate of consumption and creates virtual billboards that increase their sales. Due to their presence in most streets, competitors are kept off these streets. This results to the Starbuck becoming more popular each time.
Starbuck International Expansion Plans for expansion began as early as 1992 – 1993 when they developed a three-year geographic growth strategy in those areas that had encouraging profiles, this new stores could be supported by the company’s operation infrastructure. Hence, it resulted to big cities being selected to form the focal point to supervise the expansion strategy. The implementation of the focal point was successful and resulted in new stores in smaller surrounding areas. Managerial positions were in terms of Zone Vice presidents who had wide experience in retailing.
The company was able to generate great revenues that resulted in opening new markets, hence resulting to international markets. The U. S market in the mid-90s became saturated due to their plans to blanket the location with new stores. Market saturation is when a firm has taken all the places where it is possible to have their presence, hence results into no plans for expansion. This resulted to decrease of sales. The blanket strategy was to reduce the time that a customer would wait before been served and to reduce the distributions cost.
Due to the proximity of their stores with each other, they were not able to expand within the U. S locations. Therefore, for the company to maintain and at the same time increase revenues, the only solution was to expand internationally. Starbuck is not only a coffee store but also a place where foods and drinks can be found. There are diverse choices of brands that range from grande fat free to caramel macchiato makes the customers to have a variety of drinks to choose from. In addition, the stores offer a variety of food staffs that range from apples to old-fashioned donuts.
Music is been sold in the stores – DVD’s and VCD’s, and they know that variety sells. Such diversification creates new opportunities that allow a customer to buy what they want and hence increases sales. Through their brands, Starbucks realized that due to the fact that in United States it has a wide customer base this they extrapolated to other parts and knew that there are still open markets. This also contributed to their decision to expand internationally. Another issue that may have lead Starbuck to go international is the charity and assistances that they provide.
Their contribution and association with CARE, which is an international body and the Conservative movement, made them feel that they can explore the new markets. In addition, most of the unique coffee that they roast came from other countries, which made them to send the prepared coffee back to the farmers or countries so that they could taste their farm products. Negative Elements Globalization Starbuck have expanded their businesses in most parts of the world and to some extend their presence can be seen in all the continents.
In the past years, products that originated from the United States were loved and everything that was associated with America was loved. Issues such as anti-globalization and policies that are associated with the United States government have contributed to the dislike of brands that originates from United States. Example is in UK where there is great hostility from many quarters against products and brands from Starbucks. There claim is that Starbuck makes the local business to lose business, they pay their workers poorly and the pay badly farmers who are from the third world countries.
Hence, most parts in Europe have said that, Starbuck has over grown to no good and other negative perceptions. In 1999 – November there was anti-globalization in which activists went on to the streets and protested on the globalization of Starbuck. In Mexico where they opened their first store in 2002 at the Reforma Boulevard, which was the first store in Latin America, was also criticized. In addition, this is among the countries that produce coffee. Consumers association from Mexico said that Starbuck sold their coffee at $3. 60; this is ten times the amount that the Indian farmers are been paid for a pound of their coffee.
Such criticism has affected even their local expansion plans like when they tried to open a new store in Massachusetts in 1998, they were confronted by picketers. They claimed that the issue of mass production was affecting people’s desire to control some local culture and retain the self-control attitude (Massing 2001, p. 42). In other parts of the globe they have witnessed issues that are related to push ups. An example is in London where activists campaigned against the product and the firm, whereby it was unable for them to open stores.
They were faced with the same issues when they opened a store in an historic district in Beijing, but they did not close. Environmental concerns have come their way, in Primrose Hill where most inhabits are writers, photographers and actors are usually protective and ensure that no chain of stores can open or operate in the area. When they applied for permission to be granted space for their store, it received wide criticism; conservative committee that claimed that, Starbuck would increase pollution through noise, litter and disruption.
They faced activism from the actors’ and presenters and they were able to collect 1,300 letters that showed that they were against the Starbuck. This prevented the company from opening a store in Primrose. Generally, the anti-globalization and negative attitudes that are directed to the Starbuck are clustering of their stores, they are accused of driving locals or independent retailers, loss of diversity, are affected by fair trade policy and the comparison of the price that the coffee cost and the original coffee from the farmers (Massing 2002, p. 14).