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o “Live coffees” mantra - to keeping the national coffee culture alive. o Creating an “experience” around the consumption of coffee
Three components to this experiencing branding strategy:
First, coffee itself – offering the highest-quality coffee in the world, coffee standards by controlling the supply chain as possible and the distribution to retail stores
Second, service – customer intimacy
Third, atmosphere. To make customers want to stay. Based on human spirit, a sense of community, the need for people to come together.
Channels - Broad distribution strategy
Want to reach customers where they work, travel, shop, and dine
Good Location: Company-operated stores located in high-traffic, high-visibility settings
Product mixed tended to vary depending on a store’s size and location
non-company-operated retail channels, food-service accounts, domestic retail store licenses
Good Starbucks Partners All Starbucks employees were called “partners” -Most hourly-wage employees o Generous policy of giving health insurance and stock options o High partner satisfaction rate (80% to 90%), well above the industry norm. o Lowest employee turnover rates in the industry (just 70%, compared with fast-food industry averages as high as 300%) o Lower managers turnover rates & encouraged promotion from within its own ranks Delivering on Service and good measuring service performance o Training: hard skills and soft skills o Treated as a valuable customer (75%), friendly staff (73%) and highest quality coffee (67%). o A variety of metrics, including monthly status reports and self-reported checklists. o “Customer Snapshot” measurement tool Less competition o A variety of small-scale specialty coffee chains (regionally concentrated). o independent specialty coffee shops & Donut and bagel chains
The company's efforts to greatly increase its sphere of strategic interest by its joint ventures with Pepsi and Dreyer's, its move to sell coffee in supermarkets, and the possibility of marketing fruit-juice drinks and candy under the Starbucks label represented
In order to sustain the company's growth and make Starbucks a strong global brand, that the company had to challenge the status quo, be innovative, take risks, and alter its vision of who it was, what it did, and where it was headed.
Every partner/barista hired for a retail job in a Starbucks store received at least 24 hours training in the first two to four weeks.
Management trainees attended classes for 8 to 12 weeks. Their training went much deeper, covering not only the information imparted to baristas but also the details of store operations, practices and procedures as set forth in the company's operating manual, information systems, and the basics of managing people.
One of their major objectives was to ingrain the company's values, principles, and culture and to impart their knowledge about coffee and their passion about Starbucks.
Cannibalizations: one challenge lies on its own dominance – with Starbucks in every corner of a street there is likelihood of cannibalization of sales from existing locations. Starbucks closed 600 underperforming locations in 2008. This seems to be an admission that cannibalization seems to be a major challenge.
Quality :premium coffee quality with local taste, there’s some specific coffee drinking market that Starbucks still left open.
Prices : as a high-end coffee, Starbuck has a substantial price premium, should have a more reasonable price strategy to face with harsh competition of others like Mc coffee.
Economic situation : The company relies on consumer discretionary spending to drive sales. Consequently, a major economic change can have a large impact on revenues. Eg: With the global economic recession of 2008-2009, potential customers have less money and are more likely to forgo a $4 specialty coffee in favor of a cheaper alternative.
Target demographics-yuppie, teens: Starbucks targets a higher-income crowd of the young and college-educated, a group that tends toward higher luxury-consumption levels. Although this focus allows the company to maintain high profit margins, it also puts Starbucks at greater risk from a shift in consumer spending habit.
Environment : In October 2008, Starbucks was report wasting 23.4 million litres of water a day by leaving a tap constantly running for rinsing utensils, 10% used cup in the US is not recycle, what about hundred million cups served over the world?
Health Concerns: Consumers’ awareness of their health rise the concern of obesity with dairy, sugar and caffeine product, may caused some “would-be” Starbucks customers to turn to their health options.
Labor relation : should improve working conditions and others benefits for employee
Identify the controllable and uncontrollable elements that Starbucks has encountered in entering Global Market.
What are the majors sources of risk facing the company and discuss potential solutions.
Critique Starbucks’ overall corporate strategy.
How might Starbucks improve profitability in Japan.
The controllable and uncontrollable elements that Starbucks has encountered in different markets
What are the major sources of risk facing the company and discuss the potential solutions?
Three major risks at domestic region
Saturated market condition in USA.
Loosing customers, customers that grow annoyed because fewer options are available.
The young generation (Generation X) feels about Starbucks
What are the major sources of risk facing the company and discuss the potential solutions?
Base on the risks faced by Starbucks, the solutions we suggest are:
One of the risks that they faced in USA-the risks of market saturation can be over come in focusing on international or global marketing. They may focus on to increase the quality of service and coffee for which they are well known.
As they were facing ominously hostile reception from its future consumer (Generation X), they should reposition their product according to customers need , so that they find can the $3 they are paying for a cup of coffee is reasonable. They can also change their pricing strategy.
As coffee is the core product of them to serve they should give more focus on improving the quality of coffee. They may make arrangement for some other items beside coffee as well.
As Starbucks is going abroad to expand it business with local partners of that region there risk of Self Reference Criterion (SRC) and ethnocentrism. It can be over come through proper adjustment keeping SRC and ethnocentrism away in decision making.
Starbucks are incurring losses for mismatch between their corporate strategies and
the customer’s expectations. Those are described below:
When Starbucks is blanketing some specific cities for dominance, still eight states in the United States are with no Starbucks stores. Starbucks free cities are - Butte, Mont., and N.D.
They believe that the more the outlet the more the sale. Basing on this strategy they are increasing their outlets day by day in their domestic region as well as abroad. Without satisfying the customers need, by increasing the numbers they will not be able to succeed in their mission.
Starbucks’s target customers are the Baby boomers or older generation, it has no
differential pricing for the Generation X or younger generation.
Though Starbucks fully control its business in the USA, but it has franchisee outside the USA. Depending on the franchisees’ undermines the strength of Starbucks outside the USA.
Starbucks is about to become a global company. But its spending does not match with its status. Starbucks only spends 1% of its revenue as advertisement; whereas most companies its size spend at least 10% revenue. Low spending on advertisement obstruct Starbucks’s brand building outside the USA.
By aggressive marketing strategy they have created entry barrier for the competitors through “predatory real-estate strategy”.
They have focused on the product concept which myopic attitude in making corporate strategy.
Starbucks pay does not come close to match the work load of their employees that created dissatisfaction among them affecting sterling service and even the coffee itself.
Schultz should be more cautious to various cultural and ethnic affairs. As a Chair of Starbucks and having market in Muslim dominated regions , he can not make any scathing comment against Palestinian.
How might Starbucks improve profitability in Japan?
To improve the profitability in Japan they should reposition their product and service. The Japanese are less conscious about the price. According to the present cultural trend in Japan, younger generation is inclined towards spending their time in a constructive manner. The source from internet says that the Japanese youth have very less time for their leisure. Besides sipping a cup of coffee in a coffee shop they love to learn English Language. Even they do not hesitate to spend ¥ 1,500 in an internet café just for sleeping.
How might Starbucks improve profitability in Japan? (Cont’d)
Starbucks and its competitors in Japan are providing the same fare. As a result, competitors can easily eat up Starbucks’s share. So, Starbuck should either reduce the price or increase benefits in Japan.
Starbucks can introduce US style online system in Japan, so that busy Japanese can provide their order in the internet.
Starbucks can introduce various cultural campaign or entertainment campaign in Japan, so that Japanese youth feel attraction to come Starbucks. In times of economic recession extra activities are necessary to boost up sales.
So, for attracting the Japanese market in addition to coffee, arrangement of internet facility and other amenities should also be provided.