Technology Helps Starbucks Find New Ways to Compete
Chapter 3 Information Systems, Organizations,
and Strategy
129
TECHNOLOGY HELPS STARBUCKS FINO NEW WAYS TO COMPETE
Starbucks is the world's largest specialty coffee retailer, with over 1,700 coffee shops in 55 countries. For years, Starbucks grew throughout the United States and internationally, opening franchises at an impressive rate. From 2002 to 2007 alone, the company tripled the number of stores it operated worldwide. Starbucks offers a unique experience: high-end specialty coffees and beverages, friendly and knowledgeable servers, and customerfriendly coffee shops. This was a winning formula for many years and enabled Starbucks to charge premium prices.
During the economic downturn beginning in 2008, profits plunged. Customers complained that the company had lost its hip, local feel and had become more like a fast-foodchain. Many coffee drinkers went in search of cheaper alternatives from McDonald's and
Dunkin' Donuts for their coffee fixes. Starbucks stock lost over 50 percent of its value by the end of 2008.
Major changes were in order.
Starbucks seized the opportunity to overhaul its business by using severaldifferent strategies simultaneously. First, the company has revamped its in-store technology and sought to integrate its business processes with wireless technology and the mobile digital platform. Also, rather than copy the practices of competitors, Starbucks pursued a more aggressive product differentiation strategy, intended to emphasize the high quality of their drinks and efficient and helpful customer service. At the same time, however, Starbucks also focused on becoming
'lean', like many of their competitors, eliminating inefficiency wherever possible.
When Starbucks set out to improve its customer experience, it found that more than a third of its customers are active users of smartphones. The company set out to implement several features and improvements that would appeal to this segment of its
and Strategy
129
TECHNOLOGY HELPS STARBUCKS FINO NEW WAYS TO COMPETE
Starbucks is the world's largest specialty coffee retailer, with over 1,700 coffee shops in 55 countries. For years, Starbucks grew throughout the United States and internationally, opening franchises at an impressive rate. From 2002 to 2007 alone, the company tripled the number of stores it operated worldwide. Starbucks offers a unique experience: high-end specialty coffees and beverages, friendly and knowledgeable servers, and customerfriendly coffee shops. This was a winning formula for many years and enabled Starbucks to charge premium prices.
During the economic downturn beginning in 2008, profits plunged. Customers complained that the company had lost its hip, local feel and had become more like a fast-foodchain. Many coffee drinkers went in search of cheaper alternatives from McDonald's and
Dunkin' Donuts for their coffee fixes. Starbucks stock lost over 50 percent of its value by the end of 2008.
Major changes were in order.
Starbucks seized the opportunity to overhaul its business by using severaldifferent strategies simultaneously. First, the company has revamped its in-store technology and sought to integrate its business processes with wireless technology and the mobile digital platform. Also, rather than copy the practices of competitors, Starbucks pursued a more aggressive product differentiation strategy, intended to emphasize the high quality of their drinks and efficient and helpful customer service. At the same time, however, Starbucks also focused on becoming
'lean', like many of their competitors, eliminating inefficiency wherever possible.
When Starbucks set out to improve its customer experience, it found that more than a third of its customers are active users of smartphones. The company set out to implement several features and improvements that would appeal to this segment of its