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Quality Case Analysis - Starbucks

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Quality Case Analysis

February 9, 2008


Problem Definition
Recently, the US based coffee company Starbucks is facing great problems affecting not only their financial situation. The company’s price share decreased by more than 40% over the past year and the sales in the US stores opened for more than one year decreased by 1% in the quarter. The consumer spending in US was decreased, thus the company decided to open 425 outlets less than it initially planned. At the beginning of the January, chief executive Jim Donald was sacked because of the company’s problems and consequently was hired chairman and former chief executive Howard Schultz (Smale, 2008). According to the analysts, the problems of Starbucks are much deeper and are affecting also the image and good name of the company.
One of the greatest problems of Starbucks is that the company lost its focus. According to Schultz, the company “got a little soft” after being so long in this kind of business and needs to return to what made it extraordinary (Smale, 2008). As he continuous, he admits that company is literally “cannibalizing” its own sales because the US outlets are opened almost on every corner of biggest cities (Smale, 2008).   Thus it seems that Starbucks outlets compete between themselves not with their direct competitors. Such quick and great expansion hurt image of the company since it is no longer considered exclusive and upmarket for what it was popular at the beginning. Furthermore, the expended Starbucks caused a perception about worse quality of the coffee and customer service. In reality, this does not necessarily need to be perception anymore.
As a result of these, the US customers that were once loyal to the Starbucks are moving to their competitors. Small but more fashionable coffee stores are attracting customers and taking them away from Starbucks. White collar customers are now consuming at the more exclusive coffee stores, on the other hand, blue collar customers are...

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