The product innovations and store ambiance that the company created are all intended to promote an environment that would enhance and complement the customer’s coffee drinking experience. The end result is a pleasurable experience for the customer – a unique Starbucks experience that is consistent from Seattle to Washington D.C.

6. Keep customers happy.

The success of Starbucks is largely due to its steadfast commitment to the customers. The company lives by its mission statement “Develop enthusiastically satisfied customers all of the time.” Every strategy pursued by the company is intended to keep customers satisfied -- from the moment a customer walks into one of the retail stores, to placing of an order, to receiving a fresh cup of coffee and finally to the choice of relaxing in the Starbucks store or moving on with the daily routine.

Starbucks strive to make sure that no one has a bad experience in their stores. Hence, many of their strategies – from opening of clusters of stores to drive-through in some areas – are all designed to speed up customer line and avoid the spectacle of impatient customers.

Even the decision to cluster stores stemmed from the realization that people are not willing to stand in a long line to buy a product considered to be a luxury item. Customers will not delay their day or alter their daily routines just to buy a luxury cup o’ joe. To make the process of buying coffee fast, Starbucks felt they needed to be where the customers are, even if it means that the next Starbucks is just around the corner. In the end, Starbucks succeeded in making their deluxe coffee lifestyle as accessible as possible.

7. Dig deep into customers’ wallets.

With coffee as its main product, Starbucks continue to introduce new products in order to get customers to spend more money in their stores. The company knows that customers would want something else with their coffee; hence they introduced hot sandwiches and pastries to go along with the coffee. Later this year, they even plan to introduce CD burners in their stores so customers can sample online music from their HearMusic subsidiary while taking their coffee.

Even the wireless Internet access that Starbucks introduced in many of its stores is a clever but indirect way to get customers to spend more and increase the stores’ revenues. Customers stay longer in the stores, and apparently purchase more coffee, food items and other products. In fact, company officials in interviews state that their most successful stores turn out to be the ones where customers loiter the most. They welcome people staying awhile in their stores, as they then have greater opportunity to market to them their other products.

8. Ability to roll out new initiatives.

Starbucks’ ability to roll out new initiatives and products relatively quickly is a considerable competitive strength for the company. Its disciplined innovation is one of the primary reasons behind the company’s success in generating consistent high level of same store sales. It continues to experiment and introduce new products in the market, while making sure that it maintains the consistent strength of its core product.

Starbucks has a number of new ideas being tried and tested in its stores. The company has new plans for food such as hot sandwiches and breakfasts, as well as new drinks such as coffee liqueurs, even a pumpkin spice lattes for the holidays. In the past years, Starbucks have moved to expand supermarket sales of their whole beans. They’ve introduced prepaid Starbucks cards, priced from $5 to $500, which clerks swipe through a reader to deduct a sale. In 2002, Starbucks introduced the innovative ordering program, wherein customers can pre-order and prepay for beverages and pastries via phone or on the Starbucks Express website.

9. Good management.

Starbucks has a well-seasoned management team that continues to develop winning strategies for the company. One of its best decisions thus far is its strategy of foregoing franchisees and making sure that its stores are company-owned. This strategy allowed the company to maintain a tight grip on its image and provide a consistent quality of excellent service.

Starbucks’ management is also judicious in its use of resources. It fuels expansion with internal cash flow. Unlike other companies of its size that spend upwards of $300 million per year in marketing, Starbucks only spend 1 percent of its revenues, or roughly about $30 million in marketing and advertising. Instead, the company relies on word-of-mouth and mystique of its brand to market itself. Marketing expenses are poured on product launches and introduction of new coffee flavors.

The depth of management resources is one of the main differences between Starbucks and small businesses. Starbucks has the money to hire the best minds to work on various facets of its operations, whereas many small businesses have less than 10 employees, if at all. Some small and home-based businesses are even run by a single person expected to do everything for the business.

However, it should be noted that it took Starbucks several years before it had the resources to hire the team that propelled it to success. It current chairman, and the chief architect of the many winning strategies of Starbucks, was hired only in 1982, almost a decade after Starbucks started.

10. Diversified revenue stream.

Starbucks understands that good business does not mean putting all eggs in one basket. Hence, it strives to reduce its reliance of certain product lines in order to keep a healthy financial position and grow its revenues.

According to DataMonitor, Starbucks’ retail sales mix by product type during fiscal 2003 was comprised of approximately 78% beverages, 12% food items, 5% whole beans coffees and 5% coffee making equipment and accessory. It is currently looking at additional opportunities in distribution channels for Starbucks products, whether in foodservice, grocery, licensed stores or business alliances.

October 5, 2004