Summary Starbuck Company Background: Take all the important points. Please not too much short.

Company Background Open with The story of how Howard Schultz managed to transform a commodity into an upscale cultural phenomenon has become the stuff of legends. In 1971, three coffee fanatics-Gerald Baldwin, Gordon Bowker, and Ziev Siegl-opened a small coffee shop in Seattle's Pike Place Market. The shop specialized in selling whole arabica beans to a niche market of coffee purists. In 1982, Schultz joined the Starbucks marketing team; shortly thereafter, he traveled to Italy, where he became fascinated with Milan's coffee culture, in particular, the role the neighborhood espresso bars played in Italians' everyday social lives. Upon his return, the inspired Schultz convinced the company to set up an espresso bar in the corner of its only downtown Seattle shop. As Schultz explained, the bar became the prototype for his long-term vision: The idea was to create a chain of coffeehouses that would become America's "third place." At the time, most Americans had two places in their lives-home and work. But I believed that people needed another place, a place where they could go to relax and enjoy others, or just be by themselves. I envisioned a place that would be separate from home or work, a place that would mean different things to different people. A few years later, Schultz got his chance when Starbucks' founders agreed to sell him the company. As soon as Schultz took over, he immediately began opening new stores. The stores sold whole beans and premium-priced coffee beverages by the cup and catered primarily to affluent, well- educated, white-collar patrons (skewed female) between the ages of 25 and 44. By 1992, the company had 140 such stores in the Northwest and Chicago and was successfully competing against other small-scale coffee chains such as Gloria Jean's Coffee Bean and Barnie's Coffee & Tea. That same year, Schultz decided to take the company public. As he recalled, many Wall Street types were dubious about the idea: "They'd say, "You mean, you're going to sell coffee for a dollar in a paper cup, with Italian names that no one in America can say? At a time in America when no one's drinking coffee? And I can get coffee at the local coffee shop or doughnut shop for 50 cents? Are you kidding me?""2 Ignoring the skeptics, Schultz forged ahead with the public offering, raising $25 million in the process. The proceeds allowed Starbucks to open more stores across the nation. By 2002, Schultz had unequivocally established Starbucks as the dominant specialty-coffee brand in North America. Sales had climbed at a compound annual growth rate (CAGR) of 40% since the company had gone public, and net earnings had risen at a CAGR of 50%. The company was now serving 20 million unique customers in well over 5,000 stores around the globe and was opening on average three new stores a day. (See Exhibits 1-3 for company financials and store growth over time.) What made Starbucks' success even more impressive was that the company had spent almost nothing on advertising to achieve it. North American marketing primarily consisted of point-of-sale materials and local-store marketing and was far less than the industry average. (Most fast-food chains had marketing budgets in the 3% -6% range.) For his part, Schultz remained as chairman and chief global strategist in control of the company, handing over day-to-day operations in 2002 to CEO Orin Smith, a Harvard MBA (1967) who had joined the company in 1990. 2 Batsell. 2