I need the answer for question 13 chapter 7 please Twenty-five years ago, coffee
ID: 1224608 • Letter: I
Question
I need the answer for question 13 chapter 7 please
Twenty-five years ago, coffee was a commodity product. Coffee brands such as Maxwell House (“good to the last drop”) and Folger’s advertised on television, but the difference between the brands was minimal. Not very satisfying, but no great pressure for change, either. In the 1990s, after touring coffeehouses in Rome, Howard Schultz brought the concept of upscale coffee to the United States and Starbucks was born (“Starbucks to Open 1,500 More Cafes in the U.S.,” The Seattle Times, December 5, 2012). In 2012, over 13,000 Starbucks existed in the United States alone. How could a company such as Starbucks make any money in a highly competitive market like coffee? What factors did Howard Schultz need to consider before venturing into this business?
Explanation / Answer
The first thing that struck to our mind when we decide to have a cup of coffee is Starbucks. Starbucks is not only brewing quality coffee, but it serves their customers better. The kind of public image the company has made, people stand out in queue to feel the aroma of fresh coffee instead of choosing street-shop.
Starbucks food products are natural without any artificial ingredients and running environmentally responsible operation that creates a public image. Moreover, it provides their customers a Wi-Fi access to smartphones and laptops, which allows them to spend hours around the table.
In fact, the company has adopted few steps to reduce the energy consumption and leverage renewable resources for electric power. Moreover, water is the primary ingredient to prepare a coffee and they are planning to re-filtrate water or recycles the same to reduce waste by 50%. All this factors are highly responsible for make the Starbucks standout in compared to its competitors.
I don’t think Howard considered any such critical factor. In 1986, Howard established a coffee shop in Seattle and he was running it very successfully. After a year, he found that the Starbucks’ owner is planning to sell its roasting factory for $4 million and Howard somehow managed to buy it and became owner at Starbucks. The primary strategy would have been a vertical integration, as Howard was already running its coffee shop and at the same time he could leverage the Starbucks factory to reduce the cost drastically.