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The Empire of Starbucks
Erik Rider
Liberty University
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Introduction
Creation
In 1971, English teacher Jerry Baldwin, history teacher Zev Siegel, and writer Gordon
Bowker writer envisioned a small coffee shop and began a company in the touristy Pikes Place
market of Seattle. What they did not realize was that in a little over three decades later, they
would be the founders of one of the largest coffee makers in the world. They named the
company Starbucks after the coffee loving first mate of the novel Moby Dick by Herman
Melville. Since that time Starbucks has taken a rapid approach to building a corporation with
numerous products and tastes but also trying to feel like a small friendly company that is trying
to give back to the environment.
The three opened a store called Starbucks Coffee, Tea, and Spice in the touristy Pikes
Place Market in Seattle by investing a little over thirteen hundred dollars and getting a small loan
from a bank to open the store. They named the company Starbucks because they thought the
name evoked the romance of the high seas and the seafaring tradition of the early coffee traders.
The new company’s logo, designed by an artist friend, was a two-tailed mermaid encircled by the
store’s name. By the early 1980s the company had four stores throughout Seattle and during this
decade would make a major transformation.
Being Noticed
In 1981, Howard Schultz, vice president and general manager of U.S. operations for a
Swedish maker of stylish kitchen equipment and house wares noticed that Starbucks was placing
larger orders than Macys were for a certain type of drip coffeemaker. Curious to learn what was
going on, he decided to pay the company a visit. The day after arriving in Seattle, Schultz went
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to the Pikes Place store and ordered a cup of coffee. After four sips, he was hooked and started
talking to the workers of the store and then decided he wanted to talk to Jerry Baldwin and
Gordon Bowker, whose offices overlooked the company’s coffee-roasting operation. They
discussed the reason for starting the company with Schultz, and he was amazed at the overall
knowledge of dark roasting coffee the founders presented to him. It was clear from their
discussions that Starbucks stood not just for good coffee, but rather for the dark-roasted flavor
profiles that the founders were passionate about. It was also clear to Schultz that Starbucks was
strongly committed to educating its customers to appreciate the qualities of fine coffees, rather
than just trying to sell a cup of coffee. The company depended mainly on word-of-mouth to get
more people into its stores, and then relied on the great tastes of their coffee to give customers a
sense of discovery and excitement. As word spread it would grow its customer base one cup at a
time. As the year went on Schultz made a proposal to the founders that he could market
Starbucks and get stores opened across the United States and Canada and after many negotiations
the three founders offered him the job and that is when the company took a whole new direction
towards global marketing.
Beginning of Expansion
In March 1987 the founders of Starbucks decided to sell the stores, roasting plant, and the
name. The buyer was Mr. Schultz for 3.8 million dollars. This was a large turn around for a
couple of guys who founded the company for a few thousand dollars. The new Starbucks had a
total of nine stores. The business plan Schultz had presented investors called for the newly
owned company to open 125 stores in the next five years. In the next several months, a number
of changes were instituted. The major one being a merger between Starbucks and Il Giornale,
which was an espresso shop that Schultz owned prior to buying Starbucks. Schultz combined the
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two cultures and created a new logo that melded the Starbucks and Il Giornale logos together.
The Starbucks stores were equipped with espresso machines and remodeled to look more Italian
than Old World nautical. The traditional Starbucks color brown was replaced by Il Giornale’s
green. This resulted in a new type of store which was a cross between a retail coffee shop and an
espresso bar. Throughout the 1990s this was the style of business that the Starbucks Company
was becoming. In the 1990s the expansion plan started by opening stores outside the Seattle
area and even opened one in Vancouver, Canada. In 1992, Starbucks became a publicly traded
company with 165 outlets. In 1996, it opened its first non-North American store in Tokyo.
Since then it has grown to over 12,000 stores worldwide. While Starbucks has been expanding it
had to look inside to make sure it was heading in the direction it wanted to. To do this they
created a SWOT analysis to base their future decisions on.
SWOT
A SWOT analysis is a method of market analysis and stands for Strengths, Weaknesses,
Opportunities, and Threats. These four categories make up the major areas that a company
would need to consider to make the best decisions internally against the external threats and
opportunities that exist for that company. This analysis also helps to look at the ever changing
business environment. Looking at the opportunities and the threats, the company needs to
compare them to the internal areas, which are the strengths and weaknesses and develop the best
strategy for the company both short term and long term. (Meek & Meek, 2003). The following
is an example of what Starbucks’ SWOT could look like.
Strengths
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⚫ One of the biggest strengths for Starbucks is their brand and its important image. The logo
has become very popular with young people, especially students. According to Alderman,
“laptop-wielding young people embrace the coffee chain as an avatar of American popular
culture,” (Alderman, 2012).
⚫ Starbucks has created a modern website that is very eye pleasing to customers and not to
mention very easy to navigate. In today’s world this is important because more and more
people rely on the internet to get information about companies and their goods and services
that they offer.
⚫ Starbucks created a loyalty program that has become a major advantage for them. The
loyalty program encourages customers to come back and buy more from the store and to buy
