Starbucks Harvard Case Solution & Analysis

Step 2: Business Competitive Environment

Starbucks’ stakeholders include suppliers who are the exporters of coffee, worldwide consumers, employees who process and serve coffee to consumers, shareholders and management-owners.

Specialty coffee industry is growing 15% per year but the basic industry is suffering and the US per capita consumption of coffee fell to 1.7 cups per day during the year 1996.

Starbucks has developed technologically improved process and search of new materials in order to give a unique taste that has helped Starbucks to capture the big market share. Starbucks has years of experience in roasting specialized coffee and if an organization has to enter the espresso business then it will be amazingly troublesome for them to offer the same nature of espresso at the same cost. However, since buyers are very small individual customers but with no switching cost, coupled with availability of alternates, therefore, buyers have strength to some extent.

Suppliers of Starbucks comprise mainly of the farmers and their bargaining power is low but the quality and prices of beans will be derived by the efforts of farmers that will give them more power.

Moreover, the alternate of coffee could be a cup of tea but again the taste lovers would not be willing to switch for a less tasty alternate.

Starbucks’ competitors such as Diedrich's Coffee, A.L. Van Houtte and Green Mountain Coffee with annual revenues of $10.2 billion, $164.1 billion and $38.3 billion are not in a position to compete with Starbucks who has annual revenues of $696.48 billion. However, Mr. Schultz has established good distribution channels and has been successful for introducing innovative products.

Step 3: Business and Corporate Strategy Analysis

Goals and Objectives

Starbucks’ objectives and goals are to provide a place other than home and office where people can gather and socialize; meanwhile, they can enjoy the great taste of Starbucks’ innovative coffee products.


Starbucks’ strategy is to develop its worldwide coffee brand through high quality and innovative products by using the worlds’ best work force. In addition, Starbucks is opening more outlets around the world. It wants to exceed customer expectations and give a memorable experience through every interaction with Starbucks. Additionally, it gives importance to cultural values and makes sure that growth and expansion do not erode their cultural values. All in all, Starbucks’ strategy is focused on its product and the people who make and deliver that product.

Product Market Mix

Product Market Mix
MarketExistingMarket Penetration StrategyProduct Development Strategy
NewMarket Development StrategyDiversification Strategy

Market Penetration Strategy

In order to further increase the existing market share, Starbucks needs to spend heavily on its marketing strategies and should provide the customers with additional services such as free home delivery.

Product Development Strategy

Starbucks can develop new products such as offering breakfast deals and it can enhance quality level of its service in order to exceed customers’ expectations; meanwhile, it can add more features to its existing products and Schultz has been very successful in doing so.

Market Development Strategy

Starbucks can identify new markets for its coffee products such as it can expand its operations into neighboring countries. Moreover, new distribution channels can be identified such as agreements with chain stores, meanwhile, Starbucks can target new market segment that has been unidentified in past.

Diversification Strategy

Diversification strategy will not be suitable for Starbucks because they have established their goodwill in coffee products, therefore, diversification into new market with new product is not recommended.

Step 4: Operations and Organization Analysis


Starbucks has bypassed the middle market and has developed direct relations with bean growers; meanwhile, it provides support and advices to growers in order to grow higher quality of coffee beans. Moreover, Starbucks purchases the coffee beans from different regional areas in order to add portfolio of tastes. Mr. Schultz has developed strong relationship with exporters, which helps Starbucks in order to get the best quality coffee beans even when they are in short supply.........................................

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