STARBUCKS- Group 7

Group Members-
Himanshu Mittal(020)
Dipti Jha(017)
Shruti Mandal(050)
Raghu Vamsi(035)
Priyanka Chauhan(032)

Value chain can be linked to Starbucks competitive advantage for creating customer value by two ways:
1. Value chain activities
2. Support functions
Value chain activities:
a) Sourcing- The Company sourced the coffee from the exporters and Starbucks was the biggest
buyer of high quality coffee in the world. Their relationship with the exporter was so well
maintained that Starbucks orders and deliveries were always given the top priority. Moreover,
Starbucks maintained right to reject the coffee beans at any stage of the sampling procedure
which made exporters to always deliver quality beans.
b) Roasting and blending- The company carried these process with the help of state of the art
roasting and manufacturing equipments. Since they had proprietary software which made the
roasting curves non replicable, this enabled them to provide customers with a unique high
quality coffee taste. Moreover, the one way valve technology used in packaging helped in
extending the shelf life of coffee by insulating it from oxidative rancidity.
c) Supply chain operations- Starbucks had one of the best transportation rates in the industry, a
complex bakery distribution model, an accurate forecasting process, strong inventory turnover
and a fully integrated manufacturing and distribution system which ensured cost effectiveness
and efficiency.
d) Sales & marketing- Starbucks marketing strategy was always to offer complete coffee
experience to its customers. To achieve this they offered interesting coffee related drinks in a
theatrical kind of atmosphere.
e) Follow up services- They provided customers query resolution and helped customers choose
appropriate coffee compatible with their dining.
Support functions:
a) Design and real estate team- This team provided design solutions to the company. They
specialized in transforming irregular spaces into retail store by using each and every nook and
corner creatively and efficiently. The real estate managers ensured that they get the most
suitable location on A sites in A markets to ensure the maximum visibility and foot fall in
minimum cost.
b) Human resources- They had a very flat organization which provided autonomy and
empowerment to the employees. Their training emphasized on- hospitality, production and
STARBUCKS- Group 7
education which differentiated Starbucks from its competitors. The employees were provided
with better compensation & benefits along with Bean Stock. The HR functions ensured the
lowest turnover rate in the industry (60%). Their culture was emphasized on their annual report
also.
c) Finance- The Companys EPS was consistently increasing since 1994 in spite of 2 for 1 stock split
which boosted the confidence of equity holders and industry analysts on the company. Due to
this, their financing requirements for capital projects were always met.
Leverage resources to achieve growth objectives:
The companys main growth objective is to increase the number of stores to 2000 by 2000. To achieve
this they need to leverage on their resources and capabilities which provides sustained competitive
advantage as per VRIO framework. They need to leverage on continuous update on roasting curves in
the form of proprietary software so that customer loyalty is maintained. Moreover, to achieve the
growth, the supply of high quality coffee beans needs to be increased; hence their strategic alliances
with exporters must be maintained and strengthened. The company also needs to change their brand
image from retail centric to uplifted coffee experience. They must continue to acquire A sites in A
markets with their unique real estate business model. This would reduce their capital investments
substantially maintaining the high ROI.
The analysis can be performed using industry benchmarking and modeling the representative value
chain for the entire industry. This will help them assess their current position in the industry. The
weakness and threat can be reduced by implementing an action plan after a route cause analysis.