Term Paper on "Starbucks Wake Up and Smell the Coffee"

Term Paper 5 pages (1788 words) Sources: 3 Style: MLA

[EXCERPT] . . . .

Starbucks

Wake Up and Smell the Coffee:

Starbucks Offers Unique Services and Products to Coffee Drinkers Worldwide

Like any other substance that has answered one of society's needs and therefore become one of its staples, coffee has a host of myths and legends detailing how it was born. According to the National Geographic Society, coffee first became a commodity around the year 800, when a an Ethiopian named Kaldi noticed the goats he was tending feeding on strange, red berries. Those berries contained coffee beans, and soon both master and goats were jumping with the extra energy supplied by consuming the beans.

Far from a magical bean used to inspire joy and energy in the early years of Africa, the coffee industry is now a booming sector of the international economy. According to the International Coffee Organization, from April of 2006 to March of 2007, worldwide coffee exports totaled 95, 797, 529 bags. An industry that has seen high rates of concentration for the largest companies, the coffee industry continues to witness increasing concentration in 2008. According to the most recent data, the concentration ratio rose to 37.84% up from 36.93% in 2007 (Indicators). Of those large companies, Seattle, Washington-based Starbucks is the largest in the world. With its number of stores topping 16,000 in 35 countries, the internationally known symbol of a mermaid in a green symbol has come to mean fresh brew and designer drinks to many patrons and addicts worldwide (Starbucks Company Description). As an example of their reach and global scope, Starbucks managed to gain a location inside the walls of China's forbidden city, where caused controversy over it's symbolism -- some Chinese said the American company represented "low-end U.S. food culture" and had no place in an area representative of Chinese culture (Shen and Zhao).

Regardless of their cultural clashes with communist governments, Starbucks continues to thrive as a very symbol of culture in many countries, including the United States. Started in 1971 as a local Seattle coffee roaster, the company maintained moderate success locally until 1982 when an innovative Howard Schultz signed onto the company as a marketing executive. Discontent with Starbucks as a local vendor, Schultz moved to place the company's product in high-end establishments, and after a trip to an inspirational trip to Italy, the executive opened Seattle's first coffee bar in 1985. Eventually, Schultz would purchase the company and expand its sphere of influence to other U.S. cities and, in 2001, the world (History of Branding).

Though the company's success can be measured by the cultural icon it has created and popularity of its coffee, statistics present consumers with an economic picture of Starbuck's success. In 2007, he company's operating costs were $945.9 million as compared to a $9,411.5 million revenue, leaving a profit of close to $8,500 million (Starbucks Corporation). In terms of production technology, Starbucks is not much different than its primary competitors. Though the Seattle-based company does have an emphasis on green production that reduces the amount of paper used in the stores and recycles coffee grounds, Starbucks' main advantage in the coffee roasting world is its branding and marketing techniques in addition to its ability to create new flavors. With a 73% market share in U.S. coffee houses in 2006, a whopping 172,000 employees, Starbucks is a mammoth for any competitor (Iwata, Starbucks Corporation).

Specializing in top-of -- the line teas, roasted coffees, and specialty drinks, Starbucks' products are sold in its coffee bars in addition to grocery stores and other high-end and not-so-high-end retailers. Recently, the company has branched out to include other lines of products, including books and music. The company also sells novelty items featuring the Starbucks logo, including T-shirts, key chains, and coffee mugs. Though research and development is still poured into discovering new coffee flavors and specialty drinks, Starbucks' research primarily focuses on its brand and cultural icon, including its media.

Starbucks' main line of products has always been coffee. Back in 1971, the company originated as a coffee roaster. Though coffee is still the company's main product, fresh brew and roasted beans are not Starbucks' primary claim to fame. Though customers can buy bags of roasted beans in Starbucks stores, and even in other retailers such as Wal-Mart, the coffee bar atmosphere and specialty drinks such as cappuccinos, lattes, and frappes are what attract most visitors to Starbucks in the 21st century. In addition to the coffees, Starbucks has made its way onto the list of top restaurant chains by offering sandwiches, cookies, and other small food items at some of its locations, in addition to other beverages like Italian sodas and teas. Starbucks items are priced higher than their primary competitors items, but they make up for the price difference by offering more variety.

Starbuck's primary competitors include other fast coffee chains such as Dunkin Donuts and McDonalds (Starbucks Corporation). Though these competitors are valid when it comes to fresh brew and roasted coffee, neither has managed to cultivate the cultural, coffee bar image that Starbucks boasts, though not from lack of trying. Because Starbucks came onto the scene as a posh coffee bar in the Italian style, it had a preexisting advantage over both McDonalds and Dunkin Donuts, companies that existed for years as merely fast food chains. Both Dunkin Donuts and McDonalds have attempted to imitate the image of Starbucks through new construction, services, and products in recent years. New McDonalds stores have offered WIFI Internet, iced coffees, and comfortable couch seating around fireplaces of big screen TVs to emulate the comfort of a Starbucks hang out. Dunkin Donuts has created a line of blended drinks that closely resemble Starbuck's frappes. Regardless of the changes, Starbucks is still an icon while Dunkin Donuts and McDonalds are still seen as fast food chains. In terms of coffee houses and coffee bars, Starbucks has no competitor other than local coffee chains.

Though Starbucks has enjoyed wild success in its endeavors so far, this does not mean it should stop growing. Obviously, the corporation's management is of a similar view, as Starbucks continues to journey down new alleys of products and specialties. A prime example of this is Starbucks' media lines, including both CDs and books. But if the company wants to increase its coffee sales and new product sales, a simple and effective product to add to each store's stock would be a Starbucks car air freshener in the shape of a Starbucks cup. As already discussed, the Starbucks culture is booming. The Starbucks icon is revered as a cultural icon, and Starbucks coffee bars are generally seen as "cool" places to hang out. Poets can meet to enjoy a cup of coffee while they work on their literary masterpieces, friends can meet to hang out, and business professionals can have a meeting away from the office. Walking down the moving walkway in an airport holding a cup of Starbucks coffee is seen as culturally posh. It is for this reason that Starbucks branded products cell; it is why students have Starbucks key chains on their car keys; it is why professors come to class with a Starbucks coffee mug. Having a Starbucks air freshener hanging from the rear view mirror would make a similar impression, so people would be likely to purchase it.

Additionally, this product is not simply a novelty item. People need car air fresheners, and just as much as they like to spruce up the scent of their cars, they like to personalize them. If this item were stocked by the checkout counter in each Starbucks like the Starbucks mints and other impulse items are currently stocked, it is almost guaranteed to make a significant contribution to Starbucks sales. In addition, by making available several different scents, Starbucks would not only appeal to a variety of customers, but also the company would increase its coffee sales. Air fresheners could be able to choose the smell of any drink, from mocha to the Christmas gingerbread flavors. Not only would customers freshen their cars with the smell, but the appetite of each customer would be whet as soon as he or she sat down at the steering wheel. And with more and more Starbucks accommodating the coffee lover on the go with drive through windows, drivers would find it hard to resist the aroma or a trip to the nearest Starbucks.

Customers who are already lovers of Starbucks products would be the primary target for this product. Because these customers already enjoy Starbucks beverages, the air fresheners would prompt these customers to buy more products. In addition, the scent could entice some new customers who ride in existing customers cars to give Starbucks a try. For a low price of $3 per air freshener, the company would make a large profit on the production cost of the freshener, in addition to increasing coffee sales. The fresheners should be manufactured out of an environmentally safe product so the company can continue with its motto of being a greener corporation.… READ MORE

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