Amity Business School

STARBUCKS

Presented by

Abhinav(24) Shivam Yadav(25) Dhruv Narang(27) Sudhanshu Gupta(26) Pankaj Pant (28)

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How it started..

In 1971, Baldwin, Gordon Bowker, and Ziev Sieglopened a small coffee shop in Seattles 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. Upon his return from a business trip in Italy, the inspired Schultz convinced the company to set up an espresso bar in the corner of its only downtown Seattle shop. When Starbucks founders didnt go with his idea, he started his own coffee house and later bought the Starbucks name

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The growth
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As soon as Schultz took over, he immediately began opening new stores. The stores sold whole beans and premiumpriced coffee beverages by the cup and catered primarily to affluent, welleducated, whitecollar patrons between the ages of 25 and 44.

By 1992, the company had 140 such stores in the Northwest od USA and was successfully competing against other small-scale coffee chains such as Gloria Jeans Coffee Bean and Barnies Coffee & Tea.
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By 2002, Schultz had established Starbucks as the dominant specialtycoffee brand in North America

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Starbucks value proposition

Places the customer and the service delivered to the customer above everything else. The value proposition is not about the coffee exclusively but about the coffee culture and the experience of drinking coffee. Moves away from the tangible benefits that the coffee offers, such as taste, stimulation, alertness and concentrates on the quality of its coffee and the intangible benefits of the experience of drinking Starbucks coffee. Starbucks value proposition is not about coffee, it is about the experience of drinking coffee in a Starbucks store integrating the product with the emotional benefits.

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Factors that accounted to Starbucks success

Atmosphere

Schultzs idea was to make Starbucks Americas third place. By recreating the Italian coffee culture he met in Milan, he managed to make Starbucks a place where people can enjoy their social interactions, relax, or just spent some time by themselves. From buying coffee as a drink to the experience of enjoying coffee. People viewed Starbucks as a place they wanted to be at and they spent as much time as they could in the stores. It was an uplifting experience that was complemented with the layout designed to provide an inviting environment.

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Factors that accounted to Starbucks success

Coffee quality

Starbucks strategy was to open only companyowned stores and avoid franchising. This enabled the company to keep full control of quality of its products and services. At the same, Starbucks tried to control as much of the supply chain as possible in order to keep the quality of coffee at high and consistent levels by working with growers and enforcing coffee standards. These two strategies enabled Starbucks to deliver on the first component of its value proposition; quality

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Factors that accounted to Starbucks success

Service

Partners were trained on both hard skills and soft skills when hired to work for a Starbucks retail store. This equal emphasis on the hard and soft skills further highlighted Starbucks strategy to make the experience pleasant for the customer. The soft skills were a way to teach the partners on how to connect with the customer, by establishing eye contact, smiling and greeting them with their names when the customers were regulars. In addition to that there was also the Just Say Yes policy for which the partners went beyond company rules in order to satisfy the customers. These again created a friendly environment for customers who felt special and in combination with the two points mentioned above increased their customer satisfaction.

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Factors that accounted to Starbucks success

Partner satisfaction

Schultzs belief was that if the Starbucks employees were happy, then this would lead to higher customer satisfaction. For this reason, Starbucks partners were among the highest paid hourly workers, they enjoyed health benefits and they had stock options. This resulted in one of the lowest employee turnover rates in the industry and a consistently high employee satisfaction rate. Furthermore, the majority of promotions for Starbucks were within its own ranks. Even though there is no evidence that the satisfaction of partners led to customer satisfaction, it would be safe to assume that the low employee turnover meant that partners stayed at their positions for longer time, were more experienced in treating the customer and could provide a faster service.

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Measuring Service Performance

Starbucks tracked service performance using a variety of metrics, including monthly status reports and self-reported checklists. The companys most prominent measurement tool was a mystery shopper program called the Customer Snapshot. Under this program, every store was visited by an anonymous mystery shopper three times a quarter. Upon completing the visit, the shopper would rate the store on four Basic Service criteria: ServiceDid the register partner verbally greet the customer? Did the partner make eye contact with the customer? Say thank you? CleanlinessWas the store clean? The counters? The tables? The restrooms?

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Measuring Service Performance

Product qualityWas the order filled accurately? Was the temperature of the drink within range? Was the beverage properly presented? Speed of serviceHow long did the customer have to wait? The companys goal was to serve a customer within three minutes, from back-of-the-line to drink-in-hand. This benchmark was based on market research which indicated that the three-minute standard was a key component in how current Starbucks customers defined excellent service.

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Value Chain

The above is the value chain for Starbucks. The upstream portion of the value chain shows the product development from adding teas and international influences, to the research that took place to develop the VIA instant coffee line. They also search the globe for Fair Trade suppliers of high quality beans. These products are then distributed to corporate storefronts, franchise locations, airport terminals, grocery stores and more, and finally offer ground coffee and gift cards to take home.

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New Value Chain

The above is a new value chain with international development added upstream to allow for international markets to develop new products that better suit there cultures that could potential add value to the US market as well such as the Green Tea Latte developed in Japans Starbucks. Added downstream is Online Storefront customization, that would allow you to create a profile online, order online, create new drinks etc. Also added is a mobile app that could locate starbucks locations, put in drink orders etc.

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Why starbucks is staying ahead of competitors in the competitive Quick Service industry.?

Centralized Decision Making Process

Data Driven Marketing Technology

Leverage

Great

Relationship with Customers

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Continuous Service Innovation

Starbucks stored-value card (SVC) had been launched in November 2001. This prepaid, swipeable smart card was used to pay for transactions in any companyoperated store in North America In surveys, the company had learned that cardholders tended to visit Starbucks twice as often as cash customers and tended to experience reduced transaction times.

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Continuous Service Innovation

Starbucks was the 1st coffee outlet to introduce HotSpot wireless Internet service, in August 2002. The service offered high-speed access to the Internet in Starbucks stores

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Continuous Service Innovation

Starbucks recently announced that they will be adding Duracell Powermat wireless charging stations to its stores in Silicon Valley following a successful test of the technology at Boston area stores.

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Continuous Service Innovation

Starbucks has also introduced a mobile application by which we can order coffee from our mobile .

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We arent in the coffee business, serving people We are in the people business, serving coffee.
Haward Schultz