9/11/2017

CASE 6: STARBUCKS

Bus 496
Lecturer: PhD. Hien Pham
Group #7

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I. Summary
Starbucks was founded in 1971 by Jerry Baldwin, Zev Siegal and Gordon Bowker. The first

store opened in Seattle's Pike Place Market. With mission is “To inspire and nurture the

human spirit - one person, one cup and one neighborhood at a time” and vision is "Establish

Starbucks as the most recognized and expected brand in the world".

In 1982, Howard Schultz participated in Starbucks as a CEO of retail operations and

marketing. He set out the company's goal is to offer a new consumer experience. Starbucks

has been trying to create an ambience that makes customers feel comfortable and encourage

to enjoy their beverages. As a result, it has been very successful to keep loyal customers.

The core competency of Starbucks is to bring a unique consumer experience for customers

and allowed company to gain competitive advantage as well. However, in the 4-year period

from 2004 to 2008, Starbucks doubled the number of stores from 8,500 to 17,000; it seemed

to forget what made it unique and special. Consequently, the revenue decreased markedly. In

January 2008, the return of Howard Schultz with the position of CEO and president of

Starbucks brought the success again. He re-created what had made Starbucks special by

introducing Via, a new instant coffee. In the fall of 2010, he gave a new guideline for the

process of making cups of coffee with the goal is to bring back the consumer experience that

has built the Starbucks brand. In the summer of 2013, it opened 21,000 stores in more than

60 countries around the world and brought the annual revenue of $14 billion. And now, there

are 24,000 stores in 70 countries with yearly revenue reached over $21 billion.

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 II. Case Analysis

Question 1: what resources and capacities formed the basis of the uniqueness of

Starbucks in the first place? Why was it so successful?

Starbucks has undergone a dynamic growth over the last years and as a result is the leading Coffee

shop in the world. To make the differences with others at the first place, Starbucks has formed the

uniqueness of the resources and capacities.

a. The trademark

Starbucks originated its uniqueness by offering an appealing image. For example, the original

Starbucks logo showed a suggestively posed mermaid with exposed breasts.

The Starbucks logo is one of the most instantly recognizable ones in the world. That logo reveals a

connection between a siren and coffee with the hope of associating its coffee with the irresistibly

seductive powers of a siren. Moreover, the company has chosen to cover up the siren’s bare breasts

and her suggestively positioned twin tails, which were visible in the original brown-colored version

of its logo (Adrian Aris, 2014). Although that logo has changed several times, it could stimulate the

customer’s curiosity.

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 b. Product & Service

Offering special flavor of coffee beans beverages with the combination of 30 different coffee blends

at the high quality of products. Starbucks Arabica beans are different from regular Arabica beans.

At every step, it makes sure beans meet the highest standard of quality like the best beans grow at

higher altitudes (Starbuck, n.d.).

Starbucks stores have a unique ambience like music and comfortable furniture (sofas and chairs)

that create a great seat for the customers to enjoy beverages. Particularly, Starbucks' solo round

tables aren't just a cute design choice. They're meant to make people feel less lonely (because there

are no empty seats at a round table). And here we thought they were just to make it okay for us to

take up a whole table with all our gear and not feel like the world hates us (Noelle Devoe, 2016)

Moreover, customers can access to the Internet by using the free wireless hotspot. When you’re at

Starbucks, you can stay connected to your world with unlimited Wi-Fi service from our friends at

Google™. To further enhance your experience, every participating Starbucks store has its own

homepage that brings your local news and more. To log on, simply select "Google Starbucks" Wi-Fi

network, open a browser and click "Accept & Connect." Then you’re on your Starbucks® store

homepage and ready to enjoy fast Wi-Fi with your coffee (Starbuck, n.d.).

c. Core competency

One of the key of Starbucks’ successes is that Starbucks offers product differentiation strategies by

providing a premium product mix of high quality beverages and snacks. Moreover, the business is

not only a transaction, but also the whole buying experience so Starbucks focuses on creating a “felt

sense” or “Starbucks Experience” that contributes to its success at the first time that was a valuable,

rare, costly-to-imitate intangible resource (Strategic Analysis of Starbucks Corporation, n.d.).

Another thing well-worth mentioning is that Starbucks’ human resource management's values based

approach for building very strong internal and external relationships. For example, it created a

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strategic alliance with employees like a win-win scenario. It has known that if the partners win,

Starbucks wins. For example, employees can reward something, caring and concerning them to

inspire passion and creativity like Starbucks spends more on the healthcare insurance which

amounted to a staggering $300 million of its employees than on its coffee beans (Adrian Aris,

2014).

As a result, this core competency drives the successful deployment of its business strategy of

organic expansion into international markets, horizontal integration through smart acquisitions and

alliances that maintains their long-term strategic objective (Strategic Analysis Of Starbucks

Corporation, n.d.).

Question 2: Why and how did Starbucks lose its uniqueness? How is Starbucks

attempting to recreate its uniqueness?

By expanding operation on a larger scale, Starbucks forgot what made it unique and special which

diluted the inside culture. For instance, baristas used to grind beans throughout the day whenever a

new pot of coffee had to be brewed (which was at least every eight minutes). The grinding sounds

and fresh coffee aroma were trademarks of Starbucks stores. However, many baristas start to grind

all of the day’s coffee beans in the morning and store them for the rest of the day.

In late 2009, begin to re-create the uniqueness, Starbucks introduced via - new instant coffee. In the

fall of 2010, Schultz gave a new guideline: Baristas would no longer multitask, making multiple

drinks at the same time, but would instead focus on no more than two drinks at a time, starting a

second one while finishing the first. The goal was to bring back the customer experience that built

the Starbucks brand. Once again it was so successful due to brand loyal customers.

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 III. Recommendation
Starbucks should concentrate on their core competencies what make them unique and focus on

providing high quality products and services existentially, instead of expanding product line into

unrelated field of products and services. For example, by reducing some of their product lines,

therefore, they can refocus on their core products such as coffee and tea. In addition, if they return

to grinding coffee throughout the day so that each time a customer walks through the doors, their

customers can feel a constant smell of fresh coffee aroma. Moreover, Starbucks should remind their

VRIO (valuable, rare, costly-to-imitate intangible resource) (Appendix 4).

Last but not least, enhance their intangible brand’s image through aligning the tangible products to

their customers. For example, Baristas (intangible resource) instead of multi-tasking and making

multiple drinks at a time, Baristas will no longer make more than two drinks at a time. After that,

Starbucks will bring the focus back to their customers. Customers will feel that they are important

again, instead of being just any ordinary customer. Customers will be served with better and higher

quality of products and services.

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Appendix 4: Detailed VRIO Analysis of Starbucks Corporation (Strategic Analysis Of

Starbucks Corporation, n.d.)

Resources and Value? Rare? Costly to Exploited? Competitive

capabilities of Starbucks imitate? Implication?
Corporation
Prime and strategic Yes Yes No Yes Temporary
location: competitive
In high-traffic, high- advantage
visibility locations near a
variety of settings,
including downtown and
suburban retail centers,
office buildings, university
campuses, and in select
rural and off-highway
locations across the world

Global Brand Yes Yes Yes Yes Competitive

Recognition & Equity advantage
 The most
recognized brand in
the coffeehouse
segment and is
ranked 91st in the
best global brands
of 2013

 Effectively
leverages its rich
brand equity by
merchandizing
products, licensing
its brand
Aesthetic Appeal and Yes Yes Yes Yes Competitive
Concepts of its Stores advantage

 Provide free Wi-Fi,

great music, great
service, warm
atmosphere
and provide an
environment of
community
meeting spot,
which
forms a wider part
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 of the ‘Starbucks
Experience’.

 Concept of the
stores as being a
‘third place’
besides home and
work.

 Designed to reflect
the unique
character of the
neighborhood
they serve in and
environmentally
friendly.
Large Size and Strong Yes Yes Yes Yes Temporary
Global Presence competitive
 Operation in 60 advantage
countries and
largest
coffee/snack
retailer

 Economies of scale
through superior
distribution
channels and
supplier
relationships

 Lower input costs

Human Resource Yes Yes Yes Yes Competitive
Management and advantage
Company Culture
 Ranked 91st in the
100 best places to
work for by
Fortune
Magazine

 Great human
capital
management
couple with great
corporate
culture translates
into supreme
customer service

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References

10 Facts You Didn’t Know AboutStarbucks. Retrieved from

https://www.therichest.com/business/companies-business/10-facts-you-didnt-know-about-
starbucks/

14 Mind-Blowing Starbucks Facts You Never Knew.

Retrieved from http://www.seventeen.com/life/food-recipes/a30549/starbucks-facts/

Coffee quality. Retrieved from

https://www.starbucks.co.uk/coffee/ethical-sourcing/coffee-quality

Strategic Analysis Of Starbucks Corporation. Retrieved from

https://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf

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