Create a culture of warmth and belonging

Starbucks was founded in 1971 as a roaster and retailer of whole bean and ground coffee with a single

store in Seattle’s Pike Place Market. Right from the start it focused on selling only specialty coffees.

Today, Starbucks is a leading specialty coffee retailer and offers ready-to-drink coffee, coffee beans,

pastries, and coffee accessories. As of 2016, Starbucks owns 25,085 retail stores in 70 countries and

pursues to follow its mission: To inspire and nurture the human spirit – one person, one cup and one

neighborhood at a time. Thereby, 12,711 stores are operated by the company itself and 12,374 are

licensed stores that are run by licensees. The total revenues of Starbucks increased to $21,315.9 million

in 2016 and the net earnings to $2,818.9 million. Revenue from company-operated stores accounted for

79% of total net revenues during the fiscal year 2016 and revenues from the licensed stores accounted

for 10% of total net revenues in fiscal 2016. Revenues from sales of consumer-packaged goods

comprised 8% of total net revenues and revenues from food service accounts comprised 3% of total net

revenues in fiscal 2016. Starbucks plans to increase its revenues by 8% to 10% in the fiscal year 2017.

The company’s success and dramatic growth is due to its excellent execution of strategy. Starting from

1971, Starbucks dramatically expanded the number of Starbucks stores in the US and in an increasing

number of foreign locations. Thereby, Starbucks mainly focused on metropolitan areas and high-traffic,

high-visibility places. Moreover, Starbucks did not only operate the stores itself, but entered into licensing

agreements with capable partners, such as other foreign companies, food service vendors in airports, and

hospitals. However, in 2008, co-founder and CEO Schultz announced the closing of more than 600

Starbucks stores in the US. Most of these rather young stores were located too close to older stores, thus

cannibalizing each other’s sales. However, Starbucks plans to open approximately 2200 additional stores

worldwide in 2017. Approximately 50% of these new stores will be run by licensees.

Right from the start, Starbucks view each store as a billboard for the company and as a contributor to

building the Starbucks brand. The company went to great lengths to promote customer-friendly service,

extensively trained its personal, provided dress-code look books for its employees, made Starbucks a

great place to work, enhanced and aligned store ambience and background music, and provided

additional services, such as free Wi-Fi to its customers. During the course of time, Starbucks broadened

the scope of its offerings as well. It moved beyond coffee to include coffee-flavored ice cream,

Frappuccino, Pumpkin spice lattes, tea, fresh pastries, coffee mugs, and so on. All of this contributed to

create a consistent, inviting and stimulating store atmosphere and low attrition rate that created a

differentiation advantage towards its competitors and supported customer’s willingness to pay

comparably high prices for Starbucks’ offers.

Part of Starbucks’ success is moreover attributable to its strong adherence to its values: It wants to

create a culture of warmth and belonging, where everyone is welcome, it strives to act with courage,

challenging the status quo and finding new ways to grow the company, its employees and partners, it

wants to be present, connecting with transparency, dignity and respect and it is always eager to deliver

the best in all it does, holding itself accountable for results.

Additionally, Starbucks was eager to exploit the growing popularity of its brands with out-of-store sales.

Subsequently, it started initiatives such as selling its products to selected grocery stores or selling ice

cream in grocery stores through a partnership with Dreyer’s Grand Ice Cream.