Starbucks' dream is to become the world's largest brand. However, as we move toward this direction, the personalized experience as the root of our life is inevitably shaken.
In some people's opinion, Howard Schultz is a bit of an uproar. The Starbucks chairman and chief global strategy officer successfully created a wealth myth. Since the stock exchange of Starbucks in 1992, the cumulative increase in its share price has reached 3500% so far, and the market value has increased from 400 million U.S. dollars to 15 billion U.S. dollars this year. According to analyst estimates, Starbucks’ revenue growth is expected to reach 7% in the fourth quarter and 2005 fiscal year. Schultz, however, said that Starbucks is at a critical turning point.
How much room for growth?
Schultz said: "Excellent companies can correctly understand themselves, they must have the courage to study the opportunities for transition." He believes that Starbucks is facing such an opportunity.
Adrian Slywotzky, partner at Mercer Management Consulting and author of "How to Grow When Markets Don't" According to this evaluation, Schulz has realized that Starbucks may grow for several years according to current business model, but this model cannot be prosperous.
In fact, more and more people think Starbucks's market is approaching saturation. Today, the number of Starbucks cafes in the world is close to 8,000, which is equivalent to 48 times in 1992. Twelve years ago, Starbucks opened cafes in only a few states in the United States. Now Starbucks coffee flavor has drifted to almost every state, the largest state - California has more than 1,400.
For many years, Starbucks’ revenue has been growing at an annual rate of over 20%. With the expansion of the scale, double-digit growth has given way to single digit growth. Starbucks CEO Olin Smith admits that despite its same-store sales revenue growth over the past three years, it is the toughest ever. In 2003, Starbucks's same-store sales increased by 9%. Smith expects that Starbucks's same-store sales growth will be in the range of 3% to 7% in the second half of this year.
Starbucks' international expansion has not been very smooth. At present, the company has about 1867 stores overseas. It is expected that this year's international business is expected to be profitable for the first time, but it will be possible to surpass its domestic business after 5.
Germany is one of the largest consumers of coffee. The average coffee consumption per person per year is about 158 ​​liters. But Starbucks did not make money here. In 2001, Starbucks and Karlstedt, the German department store and tourism group, established a joint venture between Karlstedt Coffee Company, Karlstedt Group accounted for 80% of the shares, and Starbucks accounted for 20%. The two parties originally planned to open 200 stores by 2006, but the current plan is to open 43 at the end of this year and increase to 180 in 2007. Currently, Karlstedt Coffee operates 31 Starbucks coffee shops in 11 cities in Germany. At the beginning of the joint venture, both parties stated that the sales profit rate is expected to reach 9%. In fact, two years after the opening of the Starbucks coffee shop in Germany has not yet escaped losses. According to Karlstedt Coffee Company, it will take another 3 years for it to be equal. In Malaysia, the first Starbucks store opened in late 1998 and now it has only 48 cafes in Malaysia.
Schultz disagrees with the idea of ​​market saturation. He retorted that Starbucks’ share in the North American coffee market was only 7%, indicating that there is still a lot of room for growth. He stated that Starbucks’ goal is to open 25,000 cafes. This is a grand plan. McDonald's, which depends on franchising, currently has about 30,000 stores. Starbucks insists on keeping control of every coffee shop, so there is no intention of franchising. In this case, it is doubtful whether it has enough strength to achieve this goal. Moreover, its current share of 7% in the North American coffee market cannot be a proof of the market space, because Starbucks's market positioning is not all coffee drinkers. Now, the company has intentionally or unintentionally controlled its pace of opening new stores.
However, Schultz still feels the challenge of the company becoming bigger. He said: "The most difficult thing is to stay small while getting bigger." To reduce risk, Starbucks relies mainly on its own funds to expand and does not raise funds by selling stocks or bonds. In addition, it also improves the speed and quality of services in various ways.
One problem is that Schultz considers most -- how does Starbucks reposition? Levitt, a professor at Harvard Business School and the father of modern marketing, suggested that a company must be repositioned at a certain stage of development. Otherwise, it may fail to see the threat of new competitors. He took the American Railway Company as an example. In the successive development of the automotive industry and the aviation industry, the railway companies turned a blind eye to the threats of these two modes of transportation, believing that the competition still remained between the railway companies, and eventually the railway companies became increasingly thin. Levitt pointed out that this is mainly because the railway company has not repositioned itself in time and has turned its sights beyond the original market.
Schulz also emphasized that a company must have the same thinking as an athlete, that is, once it reaches a certain height, it must rethink. Obviously, as a "coffee service company," Starbucks has indeed reached a certain level of rethinking. Schultz's vision is toward the high point that most people do not dare to dream about - becoming the world's largest brand. He said bluntly: "We have the ability to become the world's most famous and most respected brand." But this is not a dream at your fingertips.
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