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Discussion 2 – Management Data Drive Starbucks Location Decisions

1. How important is location data to Starbucks’s business strategy? Explain

your answer.

Location data to Starbucks business strategy is very important since it is an

accurate picture of consumers buying habits. If Starbucks stores become too
common, consumers might get tired of the company. Geographic Information
Systems (GIS) is a valuable tool to Starbucks considering it helps with site
selection and product placement. As well as Starbucks uses a market planning
store development application called Atlas. The software analyzes massive
amounts of location-based data and demographic data to determine the best
placement of stores without decreases sales at nearby locations. Overall,
location data is critical for Starbucks due to the growth of new stores and well-
known locations, as well as consumer habits.

2. How do location analytics help Starbucks managers make better

decisions? Give examples of two decisions that the Atlas system helps

Location analytics help Starbucks managers make better decisions due to

application called Atlas. Atlas system analyzes location-based data and
demographic data to determine the best place to open without disturbing sales in
other nearby locations. As well as Atlas handles workflow and store performance
analysis. This can help manager since it can show data like local trade areas,
retail clusters and locations that are newly built. Also, it can help individual stores
be more profitable in the long term.

More so, Starbucks uses GIS to analyze where its customers spend more money
than average on coffee purchases to support decisions on where to install
its high-end Clover Brewing System, which brews one cup of coffee at a time at a
precise temperature and length of time to create exceptionally flavorful coffee.
Geographic information systems (GIS) play an important role at Starbucks for
both site selection and product placement. For years, Starbucks has continued to
grow throughout the United States and internationally, opening franchises at an
extremely rapid rate—as many as 800 per year.

3. Compare Starbucks decisions about store location in 2007–2008 and 2012.

What made the later decisions more successful? What management,
organization, and technology factors were involved?

In 2007, Starbucks started to rapidly open franchises throughout the United

States, as many as 800 per year. As the economy turned down, Starbucks had to
closen600 stores. Starbucks was trying to expand and growing the company their
brand by adding more and more locations, however, did not focus on individual
location growth. In 2012, Starbucks began opening a series of new stores after
collecting location data. The stores were very strong and some of the best unit
economics. The decision to close hundreds of stores, analyze location data and
use the location data help Starbucks create more growth and profit.

Management: Management factors that are involved are the senior

management. In 2007, management wanted to open as many stores as possible
and see them succeed just because of Starbucks brand. After seeing these
stores not doing too well, senior management decided to close hundreds of
stores to focus on individual growth.

Organization: Organization factors that are involved is Starbucks strategy. In

2007, the business strategy was to grow the U.S business in a fast rate. In 2012,
Starbucks strategy was to focus on individual store success and growth.

Technology: Technology factors that are involved is GIS. Starbucks used it

since the late 1990s and used it to make the decision to open many stores 2007-
2008 yet, they closed many of stores. Using GIS in 2012, helped Starbucks to
analyze the data to open a few stores that exceeded sales expectations.

4. What is the value to Starbucks of a good decision about where to open a

Starbucks store? Explain your answer.

The value of a good decision about where to open a Starbucks store is about 1
million. Rob Sopkin, Vice President of Store development advises to open a
Starbucks franchise it would cost around 1 million dollars due to data driven
location decisions. This is due to the theory of one poor decision will negate five
good decisions. As Starbucks learned in the past to work on individual store
success rather than growing the Starbucks brand. The theory is based on
working towards a successful decision rather than a poor decision.