Starbucks’ strength rested on four factors: retail expansion, product and service innovation, having an observed clean store, and being a brand associated with the specialty/gourmet coffee niche. The strongest attribute that consumers associate with the Starbucks brand is its being known for specialty/gourmet coffee. Starbucks is a widely-recognized brand. Its top-of-mind recall is high. It is both a household name and a buzzword.

Starbucks has implemented two effective drivers of growth: retail expansion and product/service innovation. By 2002, Starbucks already owned more than 30 percent of all US coffee bars, more than its next five competitors combined. The Frappuccino became a pop culture buzzword. The new product came in both coffee and non-coffee based lines. The company provided an in-store high speed wireless Internet service in 2,000 of its stores. It also introduced a prepaid service card that people were availing of to give as a convenient gift item.

Externally, the shifting behavior of the market customer base poses as threat to Starbucks. The old clientele profile belonged to the high-end and educated population. The market was shifting to such characteristics as lower economic bracket, less educated, and younger. This new market was visiting the stores less.

The opportunity for Starbucks lies in the potential market link between its highly-perceived product and a wide potential market for such. The growth of market in the specialty-coffee category is expected to be 9-10 percent annual growth rate. Because of this, Starbucks US business is projected to grow 20 percent revenue growth. In the US specialty coffee retail market ($3.2 billion), Starbucks was estimated to have a 4 percent share.

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Via Marketing Teacher/Business Week