STARBUCKS CONTINUOUS

IMPROVEMENT:
A Case Study

Prepared by:
Group 3
Fruelda, Adrian Lester F.
Estayan, Thomas Jefferson Y.
Lopez, Pearl Hannah N.
Mamangon, Maria Angelica M.
Mamaril, Alwyna Marie R.
Medina, John Marvin R.
Mira, Jude Altair M.
Nerveza, Mary Joy D.

Total Quality Management

Prof. Ma. Jocelyn Guevarra
BSBA-MM 4-4D

Background about the Company

Starbucks Corporation is an American coffee company and coffeehouse chain.

Starbucks was founded in Seattle, Washington in 1971. Today it operates 23,768 locations
worldwide, including 13,107, in the United States, 2,204, in China, 1,418, in Canada, 1,160,
in Japan and 872 in South Korea (bumping United Kingdom from 5th place) (Differences
reflect growth since Jan 8, 2016).
Starbucks is considered the main representative of "second wave coffee", initially
distinguishing itself from other coffee-serving venues in the US by taste, quality, and
customer experience, while popularizing darkly roasted coffee. Since the 2000s, third wave
coffee makers have targeted quality-minded coffee drinkers with hand-made coffee based on
lighter roasts, while Starbucks nowadays used automated espresso machines for efficiency
and safety reasons.
Starbucks locations serve hot and cold drinks, whole-bean coffee, microground instant
coffee known as VIA, espresso, caffe latte, full- and loose-leaf teas including Teavana tea
products, Evolution Fresh juices, Frappuccino beverages, pastries, and snacks including items
such as chips and crackers; some offerings (including their Pumpkin Spice Latte) are seasonal
or specific to the locality of the store. Many stores sell pre-packaged food items, hot and cold
sandwiches, and drink ware including mugs and tumblers; select "Starbucks Evenings"
locations offer beer, wine, and appetizers. Starbucks-brand coffee, ice cream and bottled cold
coffee drinks are also sold at grocery stores.

I.

TIME CONTEXT

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The first Starbucks location opened in 1971. The name is inspired by Moby Dicks
first mate. This name and the mermaid logo were inspired by the love of the sea, from
Starbucks original location in Seattle Washington in the heart of Pike Place Market. . In 1981,
current CEO Howard Schultz recognized a great opportunity and began working with the
founder Jerry Baldwin. Schultz left Baldwin to open his own Italian coffee house Il Giornale
which found outrageous success and in 1987 when Starbucks decided to sell the original 6
locations, Schultz raised the money with investors and purchased the company and fused
them with his Italian bistro locations. The company experienced rapid growth going public in
1992, and growing tenfold by 1997, with locations around the United States, Japan and
Singapore. Starbucks also began expanding its brand. Today, according to the Starbucks
website, they have 16,706 stores (as of Dec. 27, 2009) in 50 countries. In 2009 they made
strives socially as they opened the Farmer Support Center in Kigali, Rwanda and became the
worlds largest buyer of Fair Trade Certified coffee.
Every company faces major challenges, even companies that are as successful as
Starbucks. Although they have an outstanding reputation, have won many awards, and even
give back to their community, they are still facing challenges like any other company. One of
the most challenging hindrances that Starbucks is facing now it the dissatisfaction of
customers which started in 2008, that causes the decrease of sales, resulting to financial
crisis, especially in America, and closure of almost 600 stores.

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VIEWPOINT
Starbucks is facing its own struggles however as it saw sales start slipping before

other companies did in the recent recession. According to Melissa Allison in her article
Starbucks has a new growth strategy more revenue with lower costs, Starbucks has closed
600 stores and eliminated 34,000 jobs. Starbucks new strategy is to refocus on some of the
areas that decrease risk and upfront investment. This includes expanding foreign stores, with
aid of partnerships that share risk and costs, selling VIA instant coffee and other products in
retail and convenience stores, and reinvigorating the Seattles Best Brand coffee.
A statement from CFO Troy Alstead this March paints this picture:
We clearly hit a wall and didnt do very well in the 2007/2008 time period. From
here forward, when we grow Via, Seattles Best Coffee and consumer products, theres less
investment for each dollar of revenue.
Actual store closures may differ depending on a variety of factors including, but not
limited to, risks related to finalization of third party agreements, expected costs savings,
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income tax and other benefits associated with the store closures in the anticipated time frame,
if at all.

III.

PROBLEM
Researchers has found through pilot study that a lot of customers demand for more

innovation in terms of products, services, and amenities which shows the customers volatility
and alteration and its effect not only on the customer satisfaction but also on the brand itself.
This is a usual problem among different other brands; what they can do in order to catch up
with the ever changing and dynamic needs and wants of the customers. Kaizen or continuous
improvement is practiced by Starbucks, as well as other brands, when they are facing this
kind of problem. Continuous improvement is one of the most important pillars of an
organization or companys long-term competitive strategy. One of the most notable features
of kaizen is that big results come from many small changes accumulated over time. However
this has been misunderstood to mean that kaizen equals small changes. In fact, kaizen means
everyone involved in making improvements. While the majority of changes may be small, the
greatest impact may be kaizen that are led by senior management as transformational
projects, or by cross-functional teams as kaizen events.
We can formulate a research question, What are the measures, practices, and
strategies Starbucks can do to continually improve their products, services, and amenities in
order to comply with the customers dynamic and changing taste preference and demand, and
achieve customers satisfaction?

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IV.

OBJECTIVES

1. To achieve customer intimacy

2. To attain customer satisfaction using hard skills and soft skills
3. To become America's "THIRD PLACE", a place that would be separate from home or
work.
4. To establish Starbucks as the "Most Recognized and Respected Brand in the World"
5. To inspire and nurture the human spirit one person, one cup and one neighborhood at a
time
V.

AREAS OF CONSIDERATION (SWOT ANALYSIS)

Strengths
S1- the company consistently maintains its brand, even without heavy marketing.
S2- They search for quality beans worldwide.
S3- They offer drink variety and customization.
S4- locations are everywhere as one of the companys main goals.
S5- with new products live VIA, drive thru windows, in store locations convenience is
important.
S6- ambiance was a foundation of the Starbucks brand and continues in its locations.
S7- by using fair trade ingredients they are a leader in ethics.

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STRENGTH

Weakness

S1- Brand Identity

W1- Overexposure

S2- Quality

W2- Too many products

S3- Variety

W3- Risky investment in

S4- Locations

more locations

S5- Convenience
S6- Store Ambiance
S7- Ethics
Opportunities

THREAT

O1- Customization

T1- Direct Competition

O2- International Markets

T2- Cheaper Alternatives

O3- On-the-Go Lifestyle

T3- Recession

O4- Partnerships

Weaknesses
W1- Starbucks goal to have 30,000 locations stalled in the recent recessions. By becoming
overexposed they risk losing the unique quality they were founded on.
W2- By constantly adding products, some products have lost value, Seattles Best for
example, and they are risky endeavors.
W3 expanding locations in the US, is a high risk and costly investment in comparison to
international expansion.
Opportunities
O1- Starbucks introduced a completely custom Frappuccino in Canada.
O2- Increasing efforts internationally, to increase stability.
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O3- Instant coffee and other productssold in groceries and convenience stores.
O4-Partnering with more locations including NYSE.

Threats
T1- Direct competition from Peets and Coffee Bean increasing. Lack of marketing
T2- Cheaper alternatives from McDonalds and Dunkin Donuts
T3- Recession has affected customers willingness to spend greater risks in investment

VI.

ALTERNATIVE COURSES OF ACTION

1. Product Innovation
1.1 Represents packaging innovation. It is innovative to sell high quality ready brew
coffee in individual serving sizes.
1.2 Represents meeting a high consumer need. Starbucks introduced individual-serve
coffees during recessionary times at a price point below an Americano allowing
customers to enjoy the same flavor at an affordable price.
1.3 Represents processing technology. An innovative product cannot be introduced to the
general marketplace before the technology is available at an affordable price.
1.4 Represents incremental innovation. Starbucks will definitely hit the ball out of the ball
park with incremental flavor innovation.
1.5 Represents the ability of an innovative product to change consumer behavior. In this
category, we believe that Starbucks via Ready Brew Coffee will clearly create a
consumer segment that regularly drinks high quality, single serve coffee separated from
the social network of their neighborhood store.
2. Service Innovation
2.1 Installation of Wi-Fi hotspot. We believe that by doing this, customer will be more
enticed to go and buy coffee.
2.2 Using Starbucks Stored Value Card. (SVC) Using SVCs can help gain customer
loyalty and intimacy by persuading customers to buy often.
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2.3 My Starbucks Reward. This can help gain and attract more customers by persuading
them to buy often with the thinking that they can get something in return.
2.4 Mobile and Mobile Payments. Through the use of this mobile payment, customers can
easily purchase with less hassle and effort.
3. Design Innovation
3.1 New Social Media Innovation. One adopter Starbucks can use is through social media
for marketing and social commerce. This can help Starbucks to easily learn about the
customers insights and demands for change, etc.
3.2 Cultural Change and Adaptation. They can combine the concepts of change,
experimentation, social media, customer engagement, and market research and made
the results key components of both their brand as well as their marketing strategy.
3.3 Experience Customization. Starbucks provides its unique experience through programs
such as personalized signature drinks, and localized store experiences.

VII.

RECOMMENDATIONS

1. Product Diversification
Customers may want to try something different and way afar from the usual and norms of
Starbucks. Starbucks should offer different product line in order to attract and gain new
customers. They should entice and coax customers with new and improved product
variations.
2. Starbucks in Campus

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Students encompasses the almost 50% of the entire customers of Starbucks. Starbucks
can allocate their quota for campus students buying and patronizing Starbucks products. They
can also offer different promotions and special offers to regular buyers and create exceptional
relationship with the students.
3. Reservation Service
They can practice and implement reservation services to a group of customers, such as
employees who are having meetings, or group of students studying together or handing out
some minor events or parties.
4. Delivery Service
Some people or customers may want to have a cup of coffee from Starbucks without
having to leave their homes. Somemay be having a hard time to at least drive thru, and so
Starbucks may also offer delivery services for these kind of customers.

VIII. FINAL ANALYSIS

Among the recommendations above, we think that the best and will be the most
effective is the Starbucks in Campus, because, as stated above, students account a huge
percentage in the total customers of Starbucks. It will be a great help for the company to
extend their services and products to those students who comprises 50% of their customers. It
will be easier to target those students if Starbucks can offer their products and services within
the campus, though it may be hard because there will be too many competitors, but with
Starbucks identity, it will surely be worth it. It is also an advantage for Starbucks to offer their

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products and services within the campus because students often drink coffee when they are
studying or doing their academic requirements.
Correspondingly, disadvantages are also present. One of these disadvantages is huge
number of competitors and the difficulty to comply with the requirements of the campus, etc.

IX.

PLAN OF ACTION

Activities
1. Target
Market

and

Demand
Research
2. Campus

We will first identify our

Person-in-charge
Marketing

target campuses where we

Personnel

Target Date
June to August

3 months

September

will establish our branch.

We will conform and

Administrative

requirement

meet the terms of the

Staff

compliance

target campuses and the

3. Hiring

Time Frame
3 months

requirements needed.
We will hire additional

HR Managers or

employees

HR Personnel

that

will

to

November

6 months

December to May

December to May

operate on our campus

4. Training

branches.
As part of development of

HR Managers or

newly hired employees,

HR Personnel

(Simultaneou

they

will

undergo

months

s to Hiring)

trainings varying on their

5. Preparations

job functions
Final preparations such as

Construction

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2 months

April to May

6. Grand
Opening
7. Promotions

the construction of the

Staffs

branch and its designs

This is where we begin

Managers

As promised, we will

Staffs
Marketing

grant

the

Personnel,

selection of promotional

Managers,

tools they can enjoy

Staffs

students,

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and

June to May

Seasonal

and

Pick Seasons