Starbucks Nathan Washburn Associate Professor Huntsman School of

Starbucks Nathan Washburn Associate Professor Huntsman School of Business “ 'Tis extolled for drying up the Crudities of the Stomack, and for expelling Fumes out of the Head. Excellent Berry! which can cleanse the English-man's Stomak of Flegm, and expel Giddinesse out of his Head. ” “ …the Excessive Use of that Newfangled, Abominable, Heathenish Liquor called COFFEE […] has […] Eunucht our Husbands, and Crippled our more kind Gallants, that they are become as Impotent, as Age. ”

Brief history of coffee § Originated in Ethiopia and exported as a luxury drink from the Arab world to Europe ($50) § In 1600 s, stolen seeds and seedlings spread production to Dutch, English, and Portuguese colonies ($10) § By the 1800 s, Brazil dominates world production. With production increases, prices drop, and the drink becomes affordable to the masses ($1) § P&G and General Mills introduce economies of scale in production and distribution ($. 02) 2

5 forces in coffee industry before Starbucks Threat of New Entrants Bargaining Power of Suppliers Folgers 1 Folgers 2 Maxwell 1 Rivalry among Existing Competitors Threat of Substitute Products or Services Bargaining Power of Buyers

Case discussion § What was Starbucks’ strategy? What was it’s position? Was there good fit among it’s capabilities? Were there any tradeoffs? § How should Starbucks leverage its capabilities to achieve its growth objectives? § How would you respond to the Mc. Donald offer? 4

How should Starbucks grow? § Domestic retail expansion § International retail expansion § Doppio carts in malls § Specialty agreement to sell Starbucks coffee (airlines) § Bean in grocery stores § Developing special blends and roasts for customers § Icecream, Frappuccino in the grocery § Expand food and merchandise in store 5

Taste Test 7

Impact of strategic choices on performance 8