Planning by 2012, Starbucks' Chairman Essay

Finally, increasing repeat business through expanded customer loyalty efforts would help to increase sales.

Threats abound. A longer than expected recession could lead to more sagging demand for premium-priced coffee. An ongoing recession will also continue to make it difficult for Starbucks to impose additional price increases at a time when U.S. operating margins are falling because of increased labor and utility costs and increasing coffee prices (MCRoskey, 2008). Dunkin' Donuts and McDonald's are fierce competitors at lower-price points and could always scale up to offer more premium-based products. The company's international expansion plan is extraordinarily aggressive and customers may find that it has failed to meet their cultural expectations for cafes and coffee. This expansion is coming at a time when the company is experiencing problems in its established global markets. Continued growth could further erode the company's brand image and lead to commoditization that threatens the company's ability to charge high prices. Additionally, health conscious consumers are increasingly turning away from sugar-laden beverages such as Starbucks' 440 calorie Grande latte and this trend may spread..

Based on the SWOT analysis in this paper, I do not believe that Starbucks will even come close its goal of tripling annual sales to $23.3 billion by 2012. Much of this has to do with timing and its premium coffee strategy. This isn't very appealing to a mass market during a recession. When the recession will end is anyone's guess, but consumers may continue to be more price conscious for some time to come, especially with a product such as premium coffee that can easily be replaced with lower-cost options from Dunkin' Donuts, McDonald's and many other options. Starbucks' strategy that relies heavily on aggressive international expansion is troubling. it's now faltering in global markets where it was previously successful, leading to the conclusion that the company is spreading itself too thin, too quickly and should not forge ahead until it gets these situations under control. Opportunities are global, but markets are local. Mass store openings are likely to fail to capture the culture of vastly different countries and may do more harm to Starbucks image that is increasingly commoditized as it expands. All these factors are likely to outweigh opportunities Starbucks may have for new products and services and for increasing customer loyalty.

Bibliography

Helm, B. (2007, April 9). Saving Starbuck's Soul: Chairman Howard Schultz is on a mission to take the company back to its roots! Oh, yeah-- he also wants to triple sales in five years. Business Week, 4029, p. 56. http://proquest.umi.com/pqdweb?index=2&did=1252343951&SrchMod e=2&sid=12&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1235501315&c lientId=29440

McRoskey, R. (2008, August 19). Starbucks: Big investors' divorce grounds. Business Week. http://proquest.umi.com/pqdweb?index=0&did=1534482941&SrchMode =2&sid=13&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=123

Rae, J. (2006, November 27). The importance of great customer experiences. Business Week, 4011, p. 32.