Starbucks goal is to become the ‘Third Place’ in the customer’s daily lives, a place away from work or home (Starbucks, 2016). A place where the customer can rest, read, think, write and even stare into blank space. In other words, it is a place where customers can connect with people and also reconnect with themselves. Just like McDonald’s has been promoting sales of joy, Starbucks gradually breaks down the typical American culture into elements that can experience: visual warmth, music genre that appeals to everyone, aroma of coffee and so on. They are not just selling coffee but also a lifestyle.
The Industry demand has changed due to a shift in consumers’ attitudes towards healthier products. This placed Starbucks’ coffee culture at risk and threatened the company’s future. Starbucks has tailored their menu to include more organic and healthy product mixes, venturing into tea, bread and fresh juice products (Geereddy, n.d). Starbucks’ cornerstone product differentiation strategies and Human Resource Management are the main impacts to strategy formulation. Starbucks’ is a premium valued brand; costly to imitate.
Originally, Starbucks was a trendsetter with its unique brand positioning and differential values. It offers not only food and services, but most importantly, experiences. Starbucks can gain high customer motivation to pay with relatively low cost and earn reasonable profits. Its "non-brand" decisions, such as licensing arrangements, store locations and drive-through service, may financially make sense over a short period of time (Ferrell and Hartline, 2014, p. 527- 528). However, such short-term financial growth is in sacrifice of brand positioning and equity in the long term.
Customers appreciate its ethical sourcing of raw materials and are happy to pay more for Starbucks products. Even though the company does not hold the first place in the UK market, which is held by Costa Coffee, they have acquired a strong customer base of students, as well as their normal target group of working class. Based on the findings from the Marketing Mix, Starbucks has successfully created value for their customers. (Shubber, 2015) They have succeeded in growing their cafes into experience and a place for people to meet to spend their time. In the recent years Starbucks has expanded their sales channels from cafes to smaller pop-up units inside shopping areas, bookstores, college campus and airports.
Unlike before, not all baristas were hand-picked who had mastered ‘both’ the hard-skill and soft-skill required for the job. Moreover, the diversification of customer base and increased product portfolio meant that they had to deliver ‘customer-made’ beverages as quickly as possible and maintain the ‘customer intimacy’ quotient at the same time. The above table clearly states that the most profitable / valuable customer for Starbucks is a ‘Highly Satisfied Customer’ with an average lifetime revenue of
The increase in average temperatures and the turning of rainy seasons destroy large parts of farmers' yields and impede the overall yield of coffee. • Competitors The main potential challenges facing Starbucks are increasing competition from other retailers with similar concept of products. These competitors are able to stand out in the markets to generate customers. The main competitors are Dunkin Donuts, McDonald’s and Costa. It is essential for Starbucks to know their rivals and what they are currently doing to gain completive edge over them.
The main reason for this is the fact that it operates in the Food and Beverages space which means that despite the recession, consumers cut down on the consumption to a certain extent and not completely. Therefore, the task before Starbucks is to lower costs and increase the value so that it retains its consumer base and attracts consumer
This strategy will bring more revenue to the company and will put the Starbucks on the map with other great small shops. The brand has also positioned itself best coffee brand in the market by providing attractive store design, unique environment, elegant taste and high quality coffee beans (Kotler & Keller, 2009). Risk management in Starbucks organization is very important and the company takes them very seriously. The company cannot afford mistakes or failures, so they hire the best of the best to managers and employees. The company has a very tough hiring process, because they want to be sure that the person they are hiring is a perfect fit for its position.
Executive Summary Starbucks is an American coffee chain that began operating on the 31st of March 1971. Since then they have grown and expanded to over 24 000 outlets globally. Starbucks has a extensive Corporate Social Responsibility (CSR) programme. They are committed to Ethically and Sustainably 1Sourcing their Tea, Coffee and Manufactured Goods. This means that they hope to reach their goal of 100% ethically sourced cocoa, 65% ethically sourced tea and manufactured products by 2020.