business analysis and problem solving starbucks

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Starbucks – Case analysis and problem solving

Starbucks Corporation is an international coffee company and coffeehouse chain based in Seattle, Washington. In October 2006, Starbucks was the largest global roaster and retailer of coffee with more than 12,000 retail stores in 60 countries, some 3,000 of which are to be found in forty countries outside the United States. Looking forward, the company expects 50% of all new store opening to be outside the United States.In 2006, Starbucks closed a decade of astounding financial performance with increasing sales from $697 million to 7. 8 billion, net profit from $36 million to 40 million and ROIC was 25.

5%. These superior financial performances resulted from the excellent coffeehouse format with designing stores to create a relaxed, informal, and comfortable atmosphere and selling premium roasted coffee, freshly brewed espresso-style coffee beverages, a variety of pastries, coffee accessories, teas, and other products in a coffeehouse setting.This also resulted from superior customer services through highly trained and progressively compensated employees; the strategy of owning stores rather than making franchising arrangement for the basic formula. Sophisticated location strategy, and successful exploration of foreign opportunities also contributed to the Starbucks financial performance. Case Discussion Question 1: Identify the resources, capabilities, and distinctive competencies of Starbucks ? Answer:- I) Resources: Resources of Starbucks include-Tangible Resources: Starbucks Corporation’s tangible resources include- 1.

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Design of stores: Design of Starbucks coffeehouse store was very much comfortable, relaxed, and an informal third place between Home and Workplace. 2. Premium location: They located their stores in premium location as possible before its competitors could. Intangible Resources: Intangible resources of Starbucks were as follows- 1. Superior brand name, and brand loyalty; 2. Experience and training of employees, 3.

Intellectual property-Basic formula of the product.II) Capabilities: Starbucks Corporation’s capabilities include- 1. Good organizational rules and procedures for managing operation; 2. Better hiring system and training program. 3. Service oriented values of the company; 4.

Progressive compensation policy. 5. Differentiated products and sophisticated demographic analysis. III) Distinctive Competencies: The above said resources and capabilities were strengths of Starbucks that allowed it to differentiate its products from those of rivals and achieve lower costs structures than its competitors.Distinctive competencies of Starbucks helped it achieve superior efficiency, product quality, and customer responsiveness which are the basis of competitive advantage in the Coffee Retailing Business. Starbucks Corporation’s distinctive competencies are given below- ? Establishment and management of Superior Coffeehouse (Coffee Store): Starbucks Corporation used a very sophisticated location strategy and demographic analysis to identify and capture the premium location for stores as possible its competitors could.

The company designed its store to create a relaxed, comfortable, and informal third place between home and work where customers could spend a very good time. ? Superior Management of Employees: Starbucks used employee hiring and training program that were the best in the restaurant industry. It provides progressive compensation policies including stock options and medical benefits which increased the motivation of the employees to provide the best customer services. These various incentive programs and hiring strategy helped them to manage employees effectively. Preference to Owing Stores rather than Making Franchising Arrangements: Starbucks prefer owning stores for their own rather than performing franchise arrangements with other companies for the basic formula that appears to work.

? Ability to Provide Superior Customer Services and Best-Known Brands: Starbucks were able to provide superior customer services in selling its various premium products through highly trained and motivated employees. This superior customer services had resulted in the creation of the best-known brand name and customer loyalty which generated enormous volume of repeat business for the company.Case Discussion Question 2: Answer:- Starbuck took strategy to sell coffee in a unique way of delivering better service. With their strategy they have built some resources such as unique design of their stores, premier location, superior brand name, experience and training of the employees and basic formula of the product and they have also developed some capabilities such as good organizational rules and procedures, better hiring system, training program, service oriented values and progressive compensation policy.The resources coupled with the capabilities developed by the strategy of the company have given Starbucks to develop some distinctive competencies of unique service delivering process, superior management of employees, preference to owing stores and ability to provide superior customer services. These distinctive competencies are giving Starbucks competitive advantage.

As a result, with these competitive advantages, they have developed a unique brand name and efficient service delivery system.Their efficient service delivery system and high employee productivity have given them economies of scale and have lowered their cost structure. Their products and services are high in quality. Their customer responsiveness is also superior as they have developed their products services according to the need of the customers. The benefit of superior efficiency, superior quality, superior process innovation and superior customer responsiveness has been reflected in the sales of the country and their low customer defection rate helped them to retain their customers.They have now captured a large share of the market and have been able to make their customers buy repeatedly.

This is shown in the following. Competitive advantage to Value creation and superior financial performance: Competitive advantage leads to superior profitability which results in superior financial performance. At most basic level, how profitable a company becomes depends on three factors: (1) the value Case Discussion Question 3: How secure is Starbucks competitive advantage? What are the barriers to imitation? Answer:- The extent of security of Starbucks’ competitive advantage: Low |Moderate |High | |Store designing |Employee hiring |Compensation policies | |Customer services |Training program |Product formula quality | |Premium location |Detailed demographic analysis |Exploration of foreign opportunities | | | |Very limited franchising arrangements | Low:- Starbucks’ comfortable and informal design and premium location of stores are tangible resources so rival groups can easily build these by following them. Where identical customer services can be provided by rivals by easily visiting the stores and following them. Moderate:- As hiring and training programs are developed by committed executives so it is rare to be copied by rivals.

Most competitors lack the abilities to assess the market and to choose premium location by making detailed demographic analysis. High:-Compensation policies like medical benefits and stock option even for part time employees are costly that everybody cannot provide these. Product formula and quality are protected by limited franchising and strong observation. Exploring foreign opportunities are not feasible for all. ———————– Design of stores Premium location Superior brand name Experience and training of employees Basic formula of the product Good organizational rules and procedures Better hiring system Training program Service oriented values Progressive compensation policy Unique service delivering process Superior Management of Employees Preference to Owing Stores Ability to Provide Superior Customer Services Strategy Competitive Advantage Superior Financial Performance

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Starbucks Operations Management, 10 Decision Areas & Productivity

Starbucks operations management, 10 decisions, strategic decision areas, productivity metrics, coffeehouse chain business analysis case study

Starbucks Corporation’s operations management (OM) represents business decisions encompassing coffeehouse operations and corporate office activities. These decisions also influence the productivity and operational efficiency of franchisees and licensees. Strategic decisions in operations management direct business development toward the realization of Starbucks’ mission statement and vision statement . However, the diversity of coffee markets worldwide requires the company to apply different approaches to ensure the suitability of operations management to different business environments. Licensed and franchised Starbucks locations flexibly adjust to their local market conditions.

The 10 strategic decisions of operations management facilitate the alignment of all business areas in Starbucks’ organization. The business objectives in these decision areas implement strategies for industry leadership, such as the Coffee and Farmer Equity (C.A.F.E.) program in supply chain management. Effective operations management fortifies the strong brand image and other business strengths discussed in the SWOT analysis of Starbucks .

Starbucks’ Operations Management – 10 Critical Decisions

1. Goods and Services require decisions on the characteristics of business processes to meet the target features and quality of Starbucks products. This decision area of operations management affects other areas of the coffeehouse business. For example, the specifications of Starbucks’ roasted coffee beans establish the cost and quality limits and requirements in corresponding production operations. The coffee company’s emphasis on premium value and premium design means that production operations and productivity measures involve small margins of error to support high quality and value.

This decision area of operations management demonstrates the influence of the coffee industry environment on the company and its target consumers. Food product specifications are made to match social and economic trends, as well as the other external trends discussed in the PESTLE/PESTEL analysis of Starbucks . In addition, distribution channels affect food, beverage, and service design decisions in this area of operations management. For example, the packaging features of Starbucks instant coffees consider the logistics and inventory processes of distribution channels and retailers.

2. Quality Management ensures that business outputs satisfy Starbucks’ quality standards and the quality expectations of customers. Decisions in this area of the coffee company’s operations management aim for policies and processes that meet these standards and expectations. For example, Starbucks sources its coffee beans from farmers who comply with the company’s quality standards. The firm also prefers to buy from farmers certified under the Coffee and Farmer Equity program. Starbucks’ generic competitive strategy and intensive growth strategies are applied to use quality specifications as a selling point.

This critical decision area of operations management also accounts for customer experience in the company’s cafés and online operations. Starbucks’ strategic objective is to maintain consistent quality of service for consistent customer experience in brick-and-mortar and e-commerce environments. Premium service quality is ensured through a warm and friendly organizational culture at Starbucks coffeehouses. This service quality contributes to competitiveness against other coffeehouse firms, like Costa Coffee and Tim Hortons, as well as food-service companies that serve coffee, such as Dunkin’, McDonald’s , Wendy’s , Burger King , and Subway . Thus, Starbucks’ competitive advantage partly depends on this decision area of operations management.

3. Process and Capacity Design contributes to Starbucks’ success. The company’s operations management standardizes processes for efficiency, as observable in its cafés. Also, Starbucks optimizes capacity utilization to meet fluctuations in demand for coffee and food products. For example, processes at the company’s stores are flexible to adjust personnel to spikes in demand during peak hours. In this decision area of operations management, strategic planning at Starbucks aims to maximize productivity and cost-effectiveness through efficiency of workflows and processes.

4. Location Strategy in Starbucks’ operations management for its coffeehouses focuses on urban centers. Most of the company’s locations are in densely populated areas where demand for coffee products is typically high. In some markets, Starbucks uses strategic clustering of cafés in the same area to gain market share and drive competitors away. Strategic effectiveness in this decision area of operations management comes with a suitable marketing strategy to ensure the profitability of these cafés. Starbucks’ marketing mix or 4P helps bring customers to the company’s restaurant locations. Also, the organization of operations in these locations is supported through a suitable corporate structure. Thus, Starbucks’ organizational structure (corporate structure) reflects this location strategy.

5. Layout Design and Strategy for Starbucks cafés address workflow efficiency. The strategic decision in this area of operations management focuses on high productivity and efficiency in the movement of information and resources, including human resources, such as baristas. This layout strategy maximizes Starbucks coffeehouse space utilization with emphasis on premium customer experience, which involves higher prices for a more spacious dining (or drinking) environment. In this decision area of operations management, the company uses customer experience and premium branding to guide layout design and strategy.

6. Human Resources and Job Design have the objective of maintaining stable human resources to support Starbucks’ operational needs. At coffeehouses, the company has teams of baristas. In other parts of the organization, Starbucks has functional positions, like inventory management positions and marketing positions. This decision area of operations management considers human resource management challenges in international business, such as workforce development despite competition with other large food-service firms in the labor market. This area of operations management also integrates Starbucks’ organizational culture (corporate culture) to enhance job satisfaction, combat employee burnout, and support high productivity and operational efficiency.

7. Supply Chain Management focuses on maintaining adequate supply that matches Starbucks’ needs, while accounting for trends in the market. With this strategic objective, operations managers apply diversification in the supply chain for coffee and other ingredients and materials. Starbucks’ diverse set of suppliers ensures a stable supply of coffee beans from farmers in different countries. The company also uses its Coffee and Farmer Equity (C.A.F.E.) program to select and prioritize suppliers based on ethical practices, sustainability, and community impact. Thus, this decision area of operations management integrates ethics and Starbucks’ corporate social responsibility (CSR), ESG, and corporate citizenship into the supply chain. The Five Forces analysis of Starbucks indicates that suppliers have moderate bargaining power in the industry. Decisions in this area of operations management create a balance between the coffee company and its suppliers’ bargaining power, in order to benefit all parties involved.

8. Inventory Management is linked to Starbucks’ supply chain management. The critical decision in this area of operations management focuses on maintaining the adequate availability and movement of inventory to support the coffee company’s production requirements. At restaurants, inventory management involves manual monitoring combined with information technology to support managers and baristas. In supply and distribution hub operations, Starbucks uses automation comprehensively. Such an approach to this decision area of operations management minimizes stockout rates and guarantees adequate supply of food and beverage products and ingredients.

9. Scheduling has the objective of implementing and maintaining schedules that match market demand and Starbucks’ resources, processes, operating capacity, and productivity. In this decision area of operations management, the company applies a combination of fixed and flexible schedules for personnel at corporate offices, coffeehouses, and other facilities. Also, automation is widely used to make scheduling processes efficient and comprehensive, accounting for different market conditions affecting Starbucks locations.

10. Maintenance concerns the availability of resources and operating capacities to support the coffeehouse chain. The strategic objective in this decision area of operations management is to achieve and maintain the high reliability of Starbucks’ resources and capacities, such as for ingredient production processes. The company uses teams of employees and third-party service providers for maintaining facilities and equipment, like machines used for roasting coffee beans. Also, in this area of operations management, Starbucks maintains its human resource capacity through training programs and retention strategies. This approach satisfies the company’s workforce requirements for corporate offices and facilities and supports franchisees and licensees.

Productivity at Starbucks Coffee Company

Operations management at Starbucks uses various productivity criteria, depending on the area of operations under consideration. Some productivity metrics that are applicable to the company’s operations are as follows:

  • Average order fulfillment duration (Starbucks coffeehouse productivity)
  • Weight of coffee beans processed per time (roasting productivity)
  • Average repair duration per equipment type (maintenance productivity)
  • Bai, J. (2023). The Starbucks Crisis – External and endogenous pressures of coffee market giants. Frontiers in Business, Economics and Management, 8 (1), 272-275.
  • Faeq, D. K. (2022). The importance of employee involvement in work activities to overall productivity. International Journal of Humanities and Education Development (IJHED), 4 (5), 15-26.
  • Molnárová, Z., & Reiter, M. (2022). Technology, demand, and productivity: What an industry model tells us about business cycles. Journal of Economic Dynamics and Control, 134 , 104272.
  • Reid, R. D., & Sanders, N. R. (2023). Operations Management: An Integrated Approach . John Wiley & Sons.
  • Starbucks Corporation – Form 10-K .
  • Starbucks Ethical Sourcing of Sustainable Products .
  • Starbucks Ethical Sourcing – Coffee .
  • Szwarc, E., Bocewicz, G., Golińska-Dawson, P., & Banaszak, Z. (2023). Proactive operations management: Staff allocation with competence maintenance constraints. Sustainability, 15 (3), 1949.
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The Perfect Blend: Starbucks and Data Analytics

business analysis and problem solving starbucks

Every day, Starbucks grinds through mounds of coffee beans to serve its customers. In doing so, the company has also been collecting mounds of data that could be used to improve customer experience and business performance. In this article, we will investigate how this 26 Billion USD company captures value through data analytics.

An opportunity brewing

Through its network of over 30,000 stores worldwide, Starbucks has been gathering over 100 million transactions a week. To make use of these data, the company set up a dedicated team of data scientists, led by Jon Francis, Starbucks’ Senior Vice President of enterprise analytics, data science, research data, and analytics. Since then, the team and the company have been able to tap into the power of data analytics to enhance its business performance. 

Using data collected at the store and through its mobile apps with over 17M members, the company has been able to drive business improvements in 3 significant ways. 

(1) Personalized experiences and promotions

Pathways to a Just Digital Future

When Starbucks launched its rewards program and mobile app, they dramatically increased the data they collected and could use to get to know their customers and extract info about purchasing habits. Through its mobile app, Starbucks has been collecting data about what, where, and when members buy coffee. To do so, Starbucks leverages the Digital flywheel program, a cloud-based artificial intelligence engine that’s able to recommend food and drink items in a precise manner. As such, even when people visit a new Starbucks location, the store’s point-of-sale system can identify the customer through their phone and give the barista their preferred order.

Based on customers’ purchase history, Starbucks could also suggest new products a consumer might enjoy and provides unique discounts and rewards on certain items based on customers’ unique preferences. Taking it a step further, Starbucks has also been collecting data on weather patterns and their relationship with customer order patterns. Doing so allows the company to provide even more personalized experiences and promotions such as targeting a customer with cold drinks on hot days.

business analysis and problem solving starbucks

(2) New product introduction

When launching new products, Starbucks also turned to the data collected to determine what products they should offer. Specifically, when expanding its product lines into grocery stores, the company relies heavily on the data collected. For example,  data collected has shown that 43 percent of tea-drinking customers tend to skip the sugar. To cater to this segment, Starbucks created its lines of unsweetened ice tea. When data has shown that 25 percent of consumers don’t add milk to their coffee, the company launched a new line of black iced coffee without milk.

business analysis and problem solving starbucks

(3) Location selection

Selecting the right location is critical to winning in retail. Using location-based analytics powered by Atlas, a mapping and business intelligence tool developed by Esri, the company can select the most strategic location to open up its new stores. The tool enables Starbucks to evaluate massive amounts of data including variables such as population, income levels, traffic, competitor presence, and proximity to other Starbucks locations before recommending a new store location. Using these data, the company can also predict revenues, profits, and other aspects of economic performance associated with that location.

business analysis and problem solving starbucks

While Starbucks was not born in the digital era, it has successfully integrated new technologies into its core business like a digitally native company. Over the years, data analytics has undeniably become the backbone of Starbucks’s continuous improvement. Looking ahead, I have no doubt that Starbucks will continue to gather more data and make even more innovative use of those data to create an even more personalized customer experience and achieve business excellence.  

“Starbucks Isn’t a Coffee Business – It’s a Data Tech Company,” Marker, Jan 16, 2020

“Big Data: The Secret to Starbucks’ Supply Chain Success,” Sisense, Jun 25, 2020

“Starbucks: Using Big Data, Analytics And Artificial Intelligence To Boost Performance,” Forbes, May 28, 2018

“6 Ways in Which Starbucks Uses Big Data,” Analyticsteps, Nov 17, 2020

“How data empowers human connection at Starbucks,” Tableau, Jan 15, 2021

“Starbucks knows how you like your coffee,” CNBC, Apr 6, 2016

Student comments on The Perfect Blend: Starbucks and Data Analytics

Thanks, Max, for the very interesting article! I am just wondering how successfully Starbucks was able to attract new customers with their initiatives with big data. It definitely added a lot of value to existing customers but was it enough to pull customers who like other coffee shops? Also, I wonder what would happen (or maybe is already happening) if competitors start to do the same things with big data. In a such setting, what would be the real competitive advantage? Would it go back to the basic things such as the quality of the coffee?

Great post Max! Very informative. I did not know that Starbucks is actively monitoring the weather information to make product decisions. I would like to know if you think that data is giving Starbucks any sustained competitive advantage?

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Starbucks: Business Model, SWOT Analysis, and Competitors 2023

Inside This Article

In this blog article, we will delve into the Starbucks business model, conduct a SWOT analysis, and explore its competitors in the year 2023. Starbucks, a renowned global coffeehouse chain, has become synonymous with premium coffee and a unique customer experience. We will examine the key elements of their business model, including their emphasis on quality, customer loyalty programs, and strategic store locations. Furthermore, we will analyze Starbucks' strengths, weaknesses, opportunities, and threats to gain insights into their current position in the market. Finally, we will highlight the major competitors that Starbucks is likely to face in the competitive landscape of 2023.

What You Will Learn:

  • Who owns Starbucks and the background of the company's ownership
  • The mission statement of Starbucks and how it guides their operations
  • How Starbucks makes money and the key revenue streams of the company
  • An explanation of the Starbucks Business Model Canvas and its components
  • The main competitors of Starbucks and their impact on the coffee industry
  • A comprehensive Starbucks SWOT Analysis highlighting the company's strengths, weaknesses, opportunities, and threats.

Who owns Starbucks?

Starbucks ownership structure.

Starbucks Corporation, commonly known as Starbucks, is a publicly traded company. This means that it is owned by shareholders who hold its stock. The ownership structure of Starbucks can be divided into two main categories: institutional ownership and individual ownership.

Institutional Ownership

Institutional ownership refers to the ownership of Starbucks shares by large financial institutions, such as mutual funds, pension funds, and insurance companies. These institutions often hold significant stakes in the company and play a crucial role in its ownership structure.

Some of the major institutional shareholders of Starbucks include The Vanguard Group, BlackRock, and State Street Corporation. These institutions manage investment portfolios on behalf of their clients, which may include individual investors, organizations, or other funds.

Individual Ownership

Individual ownership of Starbucks refers to the ownership of its stock by individual investors. These investors can include retail investors, employees, and executives of the company. Individual ownership allows individuals to directly participate in the company's performance and growth.

Retail investors can purchase Starbucks shares through brokerage accounts or online trading platforms. Employees of Starbucks may also have the opportunity to own shares through employee stock purchase plans or stock options as part of their compensation packages. Additionally, executives of the company may hold significant ownership stakes as a result of their positions and involvement in the company's management.

Starbucks is owned by a combination of institutional shareholders and individual investors. The company's ownership structure reflects the participation of both large financial institutions and individual stakeholders, who collectively contribute to the success and growth of Starbucks as a global coffeehouse chain.

What is the mission statement of Starbucks?

The mission statement of starbucks.

The mission statement of Starbucks is to inspire and nurture the human spirit—one person, one cup, and one neighborhood at a time. This powerful statement reflects the core values and aspirations that drive the company's operations and impact on communities around the world.

Starbucks is not just a coffee company; it envisions itself as a catalyst for positive change. By inspiring and nurturing the human spirit, the company aims to create a unique and uplifting experience for every customer who walks through its doors. The mission statement emphasizes the importance of individual connections and the impact they can have on a larger community.

"One person, one cup" signifies Starbucks' commitment to treating every customer as a unique individual, providing them with personalized service and a high-quality cup of coffee. The company strives to create an environment where customers feel valued and welcomed, fostering a sense of belonging and connection.

The mission statement's mention of "one neighborhood at a time" highlights Starbucks' dedication to being a responsible corporate citizen and making a positive impact on the communities it serves. The company believes that by investing in local neighborhoods, it can contribute to their growth and well-being. This commitment is reflected in Starbucks' efforts to support local farmers, promote sustainable practices, and engage in philanthropic initiatives.

Starbucks' mission statement serves as a guiding principle for the company's employees, known as partners, who are encouraged to embody its values and bring them to life in their daily interactions with customers. The mission statement sets a clear direction for Starbucks' growth and expansion, ensuring that each new store and market align with the company's core purpose.

In summary, Starbucks' mission statement encapsulates its commitment to inspiring and nurturing the human spirit, one person, one cup, and one neighborhood at a time. By creating meaningful connections, providing exceptional service, and giving back to local communities, Starbucks aims to make a positive and lasting impact on the world.

How does Starbucks make money?

The starbucks experience.

Starbucks is not just a coffee company; it is an experience. From the moment customers enter a Starbucks store, they are greeted with a warm and inviting atmosphere that encourages them to stay and enjoy their coffee. The company has created a unique ambiance that combines comfortable seating, soothing music, and the aroma of freshly brewed coffee to create a relaxing and enjoyable environment.

Coffee and Beverages

The primary source of revenue for Starbucks is, of course, their coffee and beverages. Starbucks offers a wide range of options to cater to different tastes and preferences. Whether it is a classic brewed coffee, a handcrafted espresso drink, a refreshing iced tea, or a flavorful Frappuccino, customers can find their favorite drink at Starbucks.

The company takes pride in sourcing high-quality coffee beans from around the world. Starbucks has established relationships with coffee farmers and suppliers to ensure that they get the finest beans available. They also offer a variety of coffee blends, including seasonal and limited-edition options, to keep customers intrigued and coming back for more.

Food and Snacks

In addition to beverages, Starbucks also generates revenue through their food and snack offerings. The company has expanded its menu to include a variety of pastries, sandwiches, salads, and snacks that complement their beverages. These options attract customers who are looking for a quick bite to eat or a light meal to accompany their coffee.

Starbucks has also capitalized on the growing demand for healthier and more sustainable food options. They offer vegan and gluten-free items, as well as ethically sourced and organic products. This commitment to catering to different dietary preferences and values has helped Starbucks attract a wider customer base.

Merchandise and Gift Cards

Starbucks has successfully built a strong brand that resonates with its customers. To capitalize on this brand loyalty, the company sells a range of merchandise, including mugs, tumblers, and coffee accessories. These products are often adorned with the Starbucks logo or feature limited-edition designs that appeal to collectors and enthusiasts.

Gift cards are another significant contributor to Starbucks' revenue. Customers can purchase gift cards for themselves or as presents for friends and family. These cards can be used to make purchases at any Starbucks store, encouraging repeat visits and customer loyalty.

Starbucks Rewards Program

Starbucks' loyalty program, known as Starbucks Rewards, is a crucial aspect of their revenue generation strategy. Customers can sign up for free and earn stars for every purchase they make at Starbucks. These stars can be redeemed for free drinks, food, or merchandise.

The rewards program not only incentivizes customers to choose Starbucks over other coffee shops but also encourages them to spend more to earn more stars. This leads to increased customer engagement and loyalty, driving repeat business and higher sales for Starbucks.

Starbucks' ability to create an exceptional customer experience, offer a wide range of beverages and food options, sell merchandise, and maintain a successful loyalty program are key factors in how they make money. By focusing on these aspects, Starbucks has become one of the most iconic and profitable coffee chains globally.

Starbucks Business Model Canvas Explained

Introduction to the business model canvas.

The Business Model Canvas (BMC) is a strategic management tool that provides a visual representation of a company's key components and how they work together to create value. It allows businesses to analyze and communicate their business model in a structured and concise manner. In this section, we will explore the Starbucks Business Model Canvas and gain insights into how the company operates.

Key Partnerships

Starbucks has cultivated strong partnerships with various entities that contribute to its success. One of the notable partnerships is with coffee bean farmers from around the world. By collaborating with these farmers, Starbucks ensures a sustainable supply of high-quality coffee beans. Additionally, the company has partnered with food suppliers, equipment manufacturers, and technology providers to support its operations.

Key Activities

Starbucks engages in several key activities that are instrumental in delivering its value proposition. These activities include coffee sourcing, roasting, and blending, which are carried out at the company's roasting plants. Starbucks also operates its own retail stores, where it serves freshly brewed coffee and other beverages, along with offering a range of food and merchandise. Moreover, the company invests heavily in marketing and advertising campaigns to promote its brand and products.

Key Resources

To fulfill its value proposition, Starbucks relies on a variety of key resources. The most critical resource is its workforce, including baristas, store managers, and corporate employees, who ensure the smooth functioning of the company's operations. In addition, Starbucks heavily invests in its supply chain management to ensure a consistent supply of coffee beans and other raw materials. The company's extensive network of retail stores and distribution channels is also a valuable resource that allows Starbucks to reach a wide customer base.

Value Proposition

Starbucks' value proposition revolves around providing a premium coffee experience to its customers. The company aims to create a welcoming and comfortable environment where customers can enjoy high-quality coffee and connect with others. Starbucks differentiates itself by offering a wide range of coffee options, personalized service, and a unique ambiance in its stores. The company also emphasizes sustainability and ethical sourcing, which resonates with consumers who prioritize these values.

Customer Relationships

Starbucks prioritizes building strong and lasting relationships with its customers. The company achieves this by offering personalized service and creating a welcoming atmosphere in its stores. Starbucks has also embraced technology to enhance its customer relationships. Through its mobile app, customers can place orders, earn rewards, and receive personalized recommendations. By leveraging data and digital tools, Starbucks aims to deepen its engagement with customers and provide a seamless experience across various touchpoints.

Starbucks utilizes multiple channels to reach its customers and deliver its value proposition. The primary channel is its extensive network of retail stores, which are strategically located in high-traffic areas such as shopping malls, airports, and city centers. The company also offers online ordering and delivery services through its mobile app and website. Additionally, Starbucks partners with grocery stores and other retailers to distribute its packaged coffee products.

Revenue Streams

Starbucks generates revenue through various streams. The primary source is the sale of its beverages, including brewed coffee, espresso-based drinks, and tea. The company also earns revenue from the sale of food items, packaged coffee products, and merchandise such as mugs and tumblers. Moreover, Starbucks offers a loyalty program called Starbucks Rewards, which encourages repeat purchases and provides additional revenue through membership fees.

Key Conclusion

The Business Model Canvas provides a comprehensive overview of Starbucks' key components and how they interconnect to create value. By analyzing the various elements of the canvas, we can understand the company's operations, its unique value proposition, and its revenue generation strategies. This understanding allows us to appreciate the success and sustainability of Starbucks as a leading coffee retailer and the ways in which it continues to innovate in the ever-evolving coffee industry.

Which companies are the competitors of Starbucks?

Local coffee shops.

Local coffee shops are often considered competitors of Starbucks. These smaller, independent cafes offer a more personalized and unique experience to customers. With their emphasis on quality and artisanal coffee, local coffee shops attract a niche customer base that appreciates the attention to detail and the sense of community that these establishments offer. While they may not have the same global presence as Starbucks, local coffee shops can often provide a more intimate and cozy atmosphere that appeals to many coffee enthusiasts.

Dunkin' Donuts

Dunkin' Donuts, a well-known chain of coffee and baked goods, is also a major competitor of Starbucks. With its wide range of coffee options and extensive menu of breakfast items, Dunkin' Donuts attracts a diverse customer base. While Starbucks focuses on creating a premium coffee experience, Dunkin' Donuts offers a more affordable and accessible alternative. The company's strong brand presence and vast number of locations make it a formidable competitor in the coffee industry.

McDonald's, although primarily known for its fast food offerings, has also entered the coffee market and poses a significant threat to Starbucks. With its McCafé line of beverages, McDonald's aims to capture a share of the ever-growing coffee market by offering a more convenient and affordable option for coffee lovers. The company's vast network of restaurants and drive-thru services appeals to customers seeking a quick and hassle-free coffee experience. While McDonald's may not offer the same level of coffee expertise as Starbucks, its competitive pricing and convenience make it a noteworthy competitor.

Costa Coffee

Costa Coffee, a British multinational coffeehouse chain, competes with Starbucks on an international level. With a strong presence in Europe, Asia, and the Middle East, Costa Coffee offers a similar range of coffee beverages and food options. The company prides itself on its commitment to sustainability and ethical sourcing, which resonates with environmentally-conscious consumers. As Starbucks expands its global footprint, Costa Coffee poses a substantial challenge in regions where it has established a loyal customer base.

Peet's Coffee

Peet's Coffee, a specialty coffee roaster and retailer, is another competitor of Starbucks in the United States. Founded in 1966, Peet's Coffee focuses on providing high-quality, freshly roasted coffee to its customers. The company's commitment to sourcing the best beans and its meticulous roasting process have earned it a dedicated following among coffee connoisseurs. While Peet's Coffee may not have the same scale as Starbucks, its emphasis on craftsmanship and superior coffee quality make it a formidable competitor in the premium coffee segment.

Starbucks SWOT Analysis

Strong brand recognition: Starbucks is one of the most recognized and respected brands in the global coffee industry. It has built a strong reputation for offering high-quality products and excellent customer service.

Global presence: Starbucks operates in more than 80 markets worldwide, which gives the company a strong global presence. This allows it to benefit from international growth opportunities and diversify its revenue streams.

Wide product range: Starbucks offers a diverse range of products, including coffee, tea, pastries, sandwiches, and even merchandise. This wide product range appeals to a broad customer base, ensuring that there is something for everyone.

Weaknesses:

High prices: One of the major weaknesses of Starbucks is its high pricing strategy. The premium prices may deter price-sensitive customers and limit the brand's reach in certain markets where competition is high.

Dependence on seasonal beverages: Starbucks heavily relies on seasonal beverages, such as the Pumpkin Spice Latte during the fall season. While these limited-time offerings create excitement and drive sales, the company may face challenges in maintaining consistent revenue throughout the year.

Overreliance on the United States market: Despite its global presence, Starbucks is heavily dependent on the United States market for a significant portion of its revenue. This dependence exposes the company to risks associated with economic downturns or changes in consumer behavior in the US market.

Opportunities:

Expansion in emerging markets: Starbucks has the opportunity to further expand its presence in emerging markets, such as China and India. These markets offer a large and growing middle class with increasing disposable income, providing a favorable environment for Starbucks to tap into new customer segments.

Product diversification: Starbucks can explore diversifying its product offerings to cater to changing consumer preferences. This may include introducing more plant-based options, expanding its non-coffee beverage selection, or partnering with popular food brands to offer a wider range of food options.

Digital innovation: Starbucks can continue to invest in digital innovation to enhance the customer experience and drive customer loyalty. This can include initiatives such as mobile ordering and payment, personalized rewards programs, and leveraging customer data to provide targeted promotions and recommendations.

Intense competition: The coffee industry is highly competitive, with numerous local and international players vying for market share. Starbucks faces competition from both large chains and independent cafes, which may impact its market share and profitability.

Changing consumer preferences: Consumer preferences and trends can change rapidly, and Starbucks needs to stay agile and adapt to these changes. For example, increasing health-consciousness may lead to a decline in demand for sugary beverages, which could impact Starbucks' sales of specialty drinks.

Economic downturns: Starbucks is vulnerable to economic downturns, as consumers may cut back on discretionary spending during tough economic times. A global recession or economic instability in key markets could negatively impact Starbucks' sales and profitability.

Key Takeaways

  • Starbucks is a publicly traded company, meaning it is owned by shareholders who purchase its stock.
  • The mission statement of Starbucks is to inspire and nurture the human spirit—one person, one cup, and one neighborhood at a time.
  • Starbucks primarily generates revenue through the sale of coffee and other beverages, food items, merchandise, and licensed stores.
  • The Starbucks Business Model Canvas encompasses key elements such as value proposition, customer segments, channels, customer relationships, revenue streams, key activities, key resources, key partnerships, and cost structure.
  • Competitors of Starbucks include Dunkin' Donuts, McDonald's McCafe, Costa Coffee, and independent local coffee shops.
  • In a SWOT analysis, Starbucks' strengths include a strong brand image and global presence, while its weaknesses include high prices and limited product diversification. Opportunities for Starbucks include expanding into emerging markets, while threats include intense competition and changing consumer preferences.

In conclusion, the ownership of Starbucks is a complex web of shareholders and investors, with the largest stake held by institutional investors. However, the day-to-day operations are overseen by the executive team led by the CEO.

The mission statement of Starbucks is to inspire and nurture the human spirit—one person, one cup, and one neighborhood at a time. This reflects their commitment to not only providing high-quality coffee but also creating a positive social impact in the communities they serve.

Starbucks primarily makes money through the sale of their beverages and food products. They have a diverse revenue stream that includes sales from their cafes, licensed stores, and consumer packaged goods sold in grocery stores. Additionally, their loyalty program and mobile ordering app contribute significantly to their revenue.

The Starbucks Business Model Canvas provides a comprehensive overview of their key activities, resources, and partnerships. It highlights their focus on delivering a unique customer experience, maintaining a strong supply chain, and investing in innovation to drive growth.

In terms of competition, Starbucks faces several formidable rivals in the coffee industry. Some of the major companies that compete with Starbucks include Dunkin' Donuts, McDonald's McCafé, and Costa Coffee. These companies vie for market share and constantly strive to offer unique value propositions to attract customers.

Lastly, a SWOT analysis of Starbucks reveals their strengths in brand recognition, global presence, and strong customer loyalty. However, it also identifies weaknesses such as high dependence on a few key markets and potential threats from changing consumer preferences and increased competition.

Overall, Starbucks has established itself as a dominant player in the coffee industry through its strong brand, customer-centric approach, and dedication to social responsibility. While they face competition and challenges, their mission, business model, and strategic strengths position them for continued success in the future.

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Starbucks quietly solved the biggest problem plaguing the brand - and customers are already seeing a huge change

Starbucks quietly solved the biggest problem plaguing the brand - and customers are already seeing a huge change

Kate Taylor

Starbucks has made a number of changes to its mobile order and payment system over the last year.

  • Starbucks recently made a behind-the-scenes change called Deployment 2.0, which readjusts workers' tasks to better fit the evolving chain's needs. 
  • The coffee giant has struggled with its mobile ordering process, a huge problem for a company that says digital sales are the key to its future. 
  • After visiting Starbucks every day for a week, it is clear that Deployment 2.0 and other adjustments have allowed the chain to make huge progress.

Starbucks quietly made a major change to fix its mobile ordering process - and the improvement is already apparent. 

The coffee giant has long maintained that mobile order and pay are crucial to its future. 

"Almost all of our same-store sales growth [is] from those customers that we have digital relationships with and those that are in our Starbucks Rewards program," Starbucks CFO Scott Maw said at a JPMorgan forum on Friday. 

However, Maw said that Starbucks has struggled in this crucial area. In January 2017,  Starbucks reported that transactions - an important measure of customer traffic - had dropped 2% in the most recent quarter, in part because of problems caused by mobile ordering.

Shortly after that, Business Insider visited the chain every day for a week - and discovered a mess.

In March 2017, orders that were supposed to take two to five minutes at a high-traffic location in Manhattan often took more than 10 minutes.

Customers were angry that they were forced to wait, and they complained on social media. Some even walked out without ordering or picking up their drinks, which had a noticeable impact on sales. 

Fixing Starbucks' biggest problem

starbucks mobile

Crowds wait to pick up their mobile orders at a Manhattan Starbucks in March 2017.

Over the last year, the chain has made a number of changes to its mobile ordering process.

Last spring, the chain rolled out pick-up shelves for mobile orders so that baristas wouldn't have to waste time repeatedly calling out absent customers' names. The app also now alerts customers when their order is ready.

Employees' roles shifted, with certain workers assigned exclusively to mobile-related tasks - such as handing off drinks - during busy hours. 

The most recent change took place in late February. 

"About three weeks ago, we rolled out a national update ... what we call Deployment 2.0, which is a terribly boring name," Maw said.

Deployment 2.0 is Starbucks' first national effort in roughly five years to determine how many employees should be working at different times of day, and what exactly their tasks should be.

Over the last five years, Maw said, the types of orders people are placing has changed, with more cold drinks and food in addition to traditional espresso-based beverages. However, employees' assigned tasks hadn't changed until now. 

"We think we are on to something," Maw said. "We think we are off to a good start. And, even if the partners [Starbucks' term for employees] are just happy and nothing else happens, it's going to be a good thing."

We visited Starbucks again - and the change was obvious

starbucks

While Starbucks still often has a crowd, the pick-up process is much speedier.

The combined force of the changes is having a noticeable impact on the mobile-ordering experience. Business Insider visited Starbucks locations in New York City every day for a week in March, soon after Deployment 2.0 rolled out, though we were unaware of the new initiative at the time.

We were shocked by how much the speed and experience seemed to have improved.

While Starbucks was still hit-or-miss in August 2017, the last time we last recorded mobile wait times, almost every single order took less than five minutes this time around. Typically, our drink was ready when we showed up to the mobile pick-up area, roughly two minutes after placing the order. Even ordering food didn't significantly slow things down. 

The only time an order took over five minutes was when we ordered a hot and cold beverage. Still, that took just over six minutes - nothing close to the 10-plus-minute wait times that we routinely faced last year. 

On social media, anger against Starbucks' mobile ordering and payment system seems to have transitioned into celebration of efficiency - and laziness. 

What comes next

Starbucks

With most of its sales growth coming from mobile orders, Starbucks realizes that it cannot afford to rest on its laurels when it comes to digital. The chain is still struggling to increase traffic, which has been flat in the US over the past year. 

Maw spoke extensively about the opportunities that personalized digital marketing will give Starbucks, as it targets different customers in distinct ways. 

The company's next big digital push will come at the end of March, when Starbucks rolls out mobile order and pay for all users. Currently, only Starbucks Rewards members can order via the app. 

However, the chain is certainly not forgetting about its Starbucks Rewards customers. According to Maw, the company hopes to have the group increase how much they're spending at Starbucks in the mid-single digits every quarter, with double-digit increases in the number of members. 

Starbucks quietly solved the biggest problem plaguing the brand - and customers are already seeing a huge change

just mobile ordered a green tea latte while sitting in starbucks so i didn't have to get up and order, ive truly MASTERED the life hack game - Maura Sitzmann (@maurasitz) March 9, 2018
I just reached a new level of laziness and used my mobile app to order a coffee while sitting in Starbucks because I didn't feel like waiting in line - Casey Murphy (@caseyamurph_) March 9, 2018
walking past everyone in line at Starbucks to pick up my mobile order pic.twitter.com/jkcyJB3rxr - wig (in arkansas) (@stonevancamp) March 3, 2018

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business analysis and problem solving starbucks

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Home » Business Analysis » Business Model Analysis of Starbucks

Business Model Analysis of Starbucks

Starbucks Coffee company is headquartered in Seattle, Washington. It began in 1971 with just one retail store at Seattle’s historic Pike Place Market. Now it has become the leading brand and retailer in the world. Starbucks went public on June 26, 1992.

The main aim of Starbucks is to become the leading brand and retailer of finest coffee in each of its target markets nationally and internationally by selling the best quality coffee and related products, and by providing high class customer service. Starbucks purchases and roasts a high quality whole bean coffees to sell them with fresh, rich-brewed espresso beverages, different varieties of pastries and coffee related accessories and equipment’s. Moreover Starbucks also sells coffee and tea products strategically through other channels such as supermarkets and non traditional retail channels such as United Airlines, Marriott International, Barnes & Noble bookstores and Department stores.

business analysis and problem solving starbucks

More than quality coffee, Starbucks features a variety of hand-crafted beverages, pastries and in some markets, a selection of sandwiches and salads. Starbucks merchandise includes exclusive espresso machines and coffee brewers, unique confections and other items related to coffee and tea. Some of the Starbucks products are as follows;

  • Beverages:  Brewed coffees, Italian-style espresso, cold blended beverages, roasted whole bean coffees, tea products, fruit juice, sodas, and coffee liqueur.
  • Food:  Sandwich, Salads, pastries and ice creams
  • Non food items : Mugs, Travel tumblers, coffeemakers, coffee grinders, storage containers, compact discs, games, seasonal novelty items, Starbucks card, media bar.

Starbucks’s main mission is to be a global company. In order to achieve this it needs, the development strategy that Starbucks implemented to adapt with variety market and local need are: joint ventures, licenses and company owned operation .

The total number of Starbucks stores are 15,011 which are operated and 3,891 are licensed operation in US which are spread out in 50 states. For the international location, Starbucks’ store can be found in 44 countries outside of the United States and 1,049 stores are company owned operated in Australia, Canada, China, India, Germany, Singapore, Thailand and the U.K. and 6,506 are joint ventures and licensed operation.

The business model concept is defined as the value a company offers to customers and the architecture of the firm and its network of partners for creating, marketing, and delivering this value in order to generate profitable and sustainable revenue streams. It also consists of a narrative of both how the business works and how it makes a profit. Schindehutte and Allen (2009) developed a framework in order to define the core competencies of a business model from an entrepreneurial perspective.

The most important component of the framework is concerned with value creation . Starbucks creates unique value through great customer experience and interactive service. The unique value proposition of Starbucks is best described by Howard Schultz: The idea was to create a chain of coffeehouses that would become America’s ‘third place’, a place where people could go to relax and enjoy time with others, or just be by themselves. Starbucks enhances the coffee experience for the customers by creating a relaxed environment within the store whilst offering consistently rapid and on time delivery.

Many companies pursue a resource-based strategy which attempts to exploit company resources in a manner that offers value to customers in ways rivals are unable to match. Starbucks’ customer value proposition is also based on its unique resources and capabilities. Starbucks capitalizes on intangible resources like brand power and image as a high quality coffee provider to attain its objectives. Starbucks also utilizes its immense human capital and expertise in product innovation , location selection, and its marketing ability to stand out as the premier coffee brand. Particularly, Starbucks utilizes technology extremely well, e.g. the heavy use of internet capabilities, social network marketing , rechargeable payment cards, and even new mobile apps help to ease and speed up the payment and ordering . Moreover, Starbucks has other competitive advantages based on its skills and specialized expertise, and valuable alliances. Starbucks has a skill set in creating and introducing innovative products into the market . These skills give Starbucks a competitive advantage to be an innovation leader, but not a copycat follower. It is essential to differentiate itself from rivals in the coffee industry. Last but not the least, Starbucks has abundant free cash flow and physical assets to fund and drive its strategic initiatives. Without these physical assets, Starbucks would not be able to aggressively expand in the market or fund further product research and development .

Another important component of the business model is the firm’s core competence . Core competencies are defined as a proficiently performed internal activity that is central to a firm’s strategy and competitiveness . The core competency can also lead to sustainable advantages . To be a sustainable advantage, the core competency must be hard to imitate or copy by rivals. For Starbucks, its core competency can be defined as high quality coffee and products at accessible locations and affordable prices, providing a community the coffee drinking experience. Its sustainable advantage resides in the intellectual capital of defining and leading the market. Starbucks stands out as a leader, mainly because of its good business model that can generate innovative products that consumers desire.

Starbucks is able to leverage its resources, both tangible and intangible, to create competitive capabilities and core competencies to form its business model. Starbucks achieves this by utilizing its human capital and expertise to constantly strive for excellence in product innovation. Furthermore, Starbucks is able to internally fund its growth strategy from sound financial performance .

However, Starbucks needs to take more efforts to innovate its business model. Specialty coffee shops copy or adopt the Starbucks model, which leads to Starbucks’ competitive advantage shrinking and this poses a serious threat to the company. In addition, the gap between customer’s expectations and perceptions of Starbucks is bigger. Many customers are not satisfied with Starbucks’ offerings as they were before. They think Starbucks charges a premium for coffee and experience, but actually it falls behind its promises. This may be because customers become more demanding while Starbucks’ ability to innovate value offerings is weak. Therefore, to keep its popularity and consistent growth, Starbucks needs to innovate its value-adding activities so as to innovate its business model.

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Starbucks Business Case

Curiosity and my love for problem-solving led me here, the power of data: understanding starbucks’ customer demographics to drive business decisions.

As a data analyst for Starbucks London, I was tasked with analyzing a survey dataset to understand the customer base demographics, enhance customer retention, and acquisition efforts to generate more revenue. Based on my analysis, I derived insightful information that can help Starbucks make more informed decisions and boost revenue.

Firstly, I found that customers in their 20s (Gen-Zs) make up the majority of Starbucks’ income, with male customers earning more than female customers. To encourage them to buy more products, Starbucks could create a conducive ambiance for date hangouts, run ads that promote Starbucks as a place for catching up with friends or discussing business ideas. This age group mostly buys coffee, with male customers being the most significant consumers. Therefore, Starbucks could focus on ads that emphasize how coffee boosts work productivity and inevitably leads to career growth.

image

Secondly, cold drinks are another popular product mostly purchased by female students. The majority of them prefer to do a takeaway than to eat in. Starbucks can leverage this information by targeting female students in their ads and promotions.

image

Thirdly, the female gender in their 20s is Starbucks’ most loyal ambassadors, with most of them indicating that they are most likely to tell their friends about Starbucks. Starbucks can capitalize on this by offering discounts to female customers when they visit, giving them discount codes to get their favorite drinks when they bring a friend or running ads that promote female hangouts and dates at their stores.

image

Moreover, On the Customer Acquisition bit of the analyses; in order to improve customer acquisition, Starbucks could consider targeting potential customers who are not currently within their customer base. From the analysis, I found that customers above the age of 40 are significantly underrepresented in Starbucks’ customer base. This presents an opportunity for Starbucks to expand its reach to this demographic by creating targeted marketing campaigns and offering loyalty programs or discounts for this age group.

Additionally, it was discovered that the majority of customers in their 30s and 40s are employed and spend more than 30 minutes at the store. Starbucks could tailor its marketing efforts to these individuals by highlighting the benefits of a coffee break during a workday or offering promotions that cater to longer stays.

Customer Retention:

On the Customer Retention bit of the analysis, Starbucks can leverage the insights we obtained on customer demographics and preferences. For example, I found that female customers in their 20s are the most loyal ambassadors and are most likely to bring their friends to Starbucks. This presents an opportunity to create referral programs that incentivize these customers to bring more customers to Starbucks.

It was also discovered that the most popular product is coffee, and customers in their 20s make up the majority of coffee purchases. To retain these customers, Starbucks could offer promotions that cater specifically to coffee purchases or launch new coffee flavors that appeal to this demographic.

The analysis further revealed that the social media platform is the most effective in reaching customers, particularly employed males in their 20s who prefer takeaway orders. Starbucks could allocate more resources towards social media marketing to reach this target audience and create ads that promote takeaway orders or highlight the convenience of ordering through their mobile app.

Furthermore, to improve customer retention, Starbucks London can enhance its ambiance, especially for those who voted it as ‘Just There’. The analysis showed that this group is mostly composed of females in their 20s. To make the ambiance more attractive to Gen-Zs, Starbucks can focus on making it more appealing to this age group.

image

In conclusion, based on my analysis, Starbucks London can tap into its customer demographics to make more informed decisions and generate more revenue. By leveraging this data, Starbucks can tailor its marketing campaigns, and product offerings, and enhance customer retention and acquisition efforts, leading to a more profitable business.

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