Star Bucks Case Analysis

Starbucks Pre se n te d b y: A rch a n a B a la ji

Howard Schultz’s idea with Starbucks in the mid 1980’s was to create a chain of coffeehouses with a product differentiation of specialty “live coffee”, service or customer intimacy with an “experience”, and an atmosphere of a “third place” to add to their work and home alternatives. 

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Starbuck’s brand image     

Dominant specialty coffee brand Growth rate 40% since it got public serving 20 million unique customers opening 3 stores a day spent nothing on advertising

Objective To

establish Starbucks as the most recognized and respected brand in the world.

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Differentiation Strategy 

Unique

in ways that are valuable to a wide range of customers.

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Growth strategies  In

1991, Starbucks became the first privately owned company to offer a stock option program to all of their employees.  Higher employee satisfaction leads to lower turnover rates, which in turn leads to lower employee training costs, which leads to greater profits.  Starbucks also gives back to the community, both local and  abroad.  This provides Starbucks with plenty of good publicity.  Starbucks also takes great interest in its suppliers wellbeing. 

Factors that contributed to startbuck’s success Experimental

branding strategy

Reach Product

variety Customer service High quality coffee Starbuck’s transformed coffee  consumption from a picking  behavior to an experience with  high credence attribute

Starbuck’s value proposition 1.To create an “experience "around the consumption of coffee an experience that people would weave into their lives 2.To create an uplifting experience in “customer intimacy” 3.To create an “ambience” based on human spirit, sense of community, and the need for people to come together

Channels of distribution Stores in high-traffic , high-visibility(retail centers , office buildings and university campuses)  Product mixes  Variety of pastries , sodas , juices , music CDs , games and many more  Sold through non company operated retail channels 

S ta rb u cks p a rtn e rs

Why so successful?  1st

to introduce Italian coffee house with premium coffee to the American market  Organic growth  Partnerships 

Key drivers to future growth Expanding

core retail opportunity worldwide Continued to innovate Expanded customer base Increased average unit volumes Leveraged starbucks brand in  other products and channels Did not use advertising at all

Delivering on service  Training

-hard skills n soft

skills  Hundreds of combinations of drinks in their portfolio  Removing non value added tasks  Introduction of automated espresso machines.

Measuring service performance “BASIC 

SERVICE” service , cleanliness ,product quality, speed of service

 “LEGENDARY 

SERVICE”

Expansion §Owned close to one-third of America's coffee bars §Coffee consumption was on the rise §Eight states in US without a single company operated starbucks . §It was far from reaching saturation levels in many existing markets. §New products were launched on a regular basis §Product development process-12-18 months §Partner acceptance §Starbuck’s stored value cards(SVC) §T-mobile hotspot wireless internet service

problem Lacked a strategic marketing groupNew stores cannibalized existing store sales, but Starbucks did not see that as an important issue. Very little image or product differentiation between Starbucks and competing chains. The newer customers were younger, less educated, in lower income brackets, had less frequent visits, and had a different perception of Starbucks. Concern had been expressed that Starbucks had lost the connection between satisfying our customers and growing the business, Starbucks wanted to serve the customer within 3 minute time window Starbucks wanted more handcrafted time consuming choices for consumers. Starbucks sees themselves as selling innovative products

Rediscovering the Starbucks customer Challenge-relaxing the labour-hour controls in the stores to add an additional 20 hours of labour ,per week , per week , per store , at a cost of an extra $40 million per year  Focus on building the image and introducing new 

Evaluations  

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Redefine their marketing strategies starting with a proper research and evaluation of what the customer wants. Analyze the customers, and potential customers through their specialty sales to see the impact upon current or potential retail sales in stores Research customers who do not frequent Starbucks, or who have never been inside a Starbucks store to determine why Create a centralized marketing department which can attempt to coordinate all marketing efforts Analyze the innovative sales to determine the effect on labor costs to determine if the sales support the costs and the potential decrease in the time available to quickly serve the customer. Concentrate new store openings in areas that would not cannibalize existing sales. Advertise more to establish the branding of Starbucks. Quick term fix to add more employee hours to reduce wait time, although this should be allocated according to an established need per store Separate serving customers with customized orders from those which will require less time, such as the customer just wanting coffee.

Solutions Starbucks

should pursue all of these alternatives Starbucks appears to consider competition as minimal, and they are somewhat insulated. probably, entertaining either idea is a strategic mistake .

Strengths The product is strongly differentiated from those of rivals Strong brandname image/company reputation Good supply chain management

Better product quality relative to

Weakness

Leverage the brand to other that has to be proven to strengthen the brand portfolio strategy such as Hear Music

Opportunities Expanding into new geographic markets

Threats

Loss of sales to substitute products

Restrictions trade Expanding the polices on the part company’s of foreign government product line to meet a broader range of of product Joint ventures that Entry new competitors customer needs can expand the

firm’s market coverage or boost its competitive capability

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