Starbucks’ value chain system, in the beginning, created additional value on its products, which the customers are willing to pay for. Hence, the firm is not reluctant to charge above-market prices for its products. In fact, its customers are not looking for the prices of the coffee but they are seeking for the quality of the products and brand image that the company offers. Let us then examine the Starbucks value chain and how it contributed to the company’s current downfall.
In the Starbucks value chain system, its primary activities include raw materials (coffee beans) procurement from suppliers, storing the coffees to keep it fresh, and an inventory system to maintain stocks and distribution to all outlets whilst maintaining the freshness of the beans. It also includes the management of stores/coffeehouses, marketing and promotional activities, sales and delivery and customer service/customer relations. These activities belong to the primary activity in the value chain in that it involves the creation of the product, selling, marketing and distributing the product to the consumers, and ensuring the continuing relationship with customers and consumers through service activities such as installation of equipment in stores/coffeehouses, repair and upgrading of these equipments and managing inventory to ensure continuous supply of the materials (coffee beans). All of these involve the physical activities that are necessary to perform in creating and selling its products to consumers and enhancing its brand image/ reputation.
The secondary activities, on the other hand, include the firm infrastructure to support these activities. These are corporate management functions (i.e. management or administrative planning), accounting and legal work. Also included in the secondary activities are human resource management (such as personnel skills development and training), determination of employee salaries, benefits and other emoluments,...
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