Starbucks - Multinational Management

February 2003

Multinational Management

Thought Paper: Starbucks

Starbucks’ competitive success in the US is attributable to its commitment to the highest-quality coffees, rapid expansion and vertical integration, creating an enjoyable, memorable, and unique “Starbucks experience” for its customers in all of its stores, and a happy, well-trained workforce. Despite the fact that Americans are notorious for drinking the cheapest, worst coffees, Starbucks has found immense success in selling the more expensive, high-quality specialty coffees, partly because it invests heavily in consumer education. But there is no big secret to selling high-quality coffees; Schultz has noted, “There is no secret sauce here. Anyone can do it.” So, to deter potential copycats, Starbucks has followed a plan of aggressive expansion. Starbucks is essentially following the strategy that the best defense is a good offense—by expanding so rapidly, competitors have less opportunity to cut in on Starbucks’ share in newer markets. In addition, because Starbucks’ places such a high premium on the entire Starbucks experience, which includes everything from the quality of the coffee bean and the roasting process, to the customer service and atmosphere of every store, Starbucks has chosen to vertically integrate in order to control every step of the process. As a result, Starbucks does not expand through franchising, but rather through wholly-owned new stores that are part of the Starbucks family. This guarantees that every Starbucks will be the same high-quality experience for consumers.

For the consumer, the Starbucks experience could be described as enjoying a great cup of coffee in a relaxing, stylish place to either read, get some work done on your laptop, or chat with friends. In addition, a high level of customer service is part of the experience. Starbucks employs motivated, better-educated young people than most large-scale food service chains. They pay their employees...