Starbucks' Value Chain and Marketing Metrics

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STARBUCKS CASE STUDY

INTRODUCTION

Starbucks was created in 1971 by 3 coffee fanatics in Seattle, and was originally an Arabica beans store. It started expanding to a coffee shop and opened more stores throughout the country in the 1990’s and today, Starbucks owns more than 15,000 stores in 50 countries, and it had become the premier roaster and retailer of specialty coffee in the world. Starbucks’ mission statement is: “To inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time.” Starbucks also sells coffee beans and coffee products through other retail channels, such as airlines, hotels, restaurants in airports, grocery stores and warehouse clubs. However in this report we are only going to focus on Starbucks coffee Retail shops. The case we are dealing with is about customer satisfaction. Indeed, a market research revealed that the customers’ expectations were not met and the company is deciding whether or not to invest an additional $40 million annually in order to add the equivalent of 20 hours of labour in each store per week. Starbucks has two segments of customers. First we have the “take out” customers, who buy their coffees and snacks on the way to work or to school, and are going to consume it either in the public transports or at their workplace. Then they have the “drink in” customers, who come to Starbucks in order to enjoy a moment inside the coffee shop, either with friends, family or colleagues, or on their own to enjoy a coffee by themselves.

STARBUCKS’ VALUE CHAIN

The value chain is the combination of the value-adding activities, the primary activities and the support activities, which converts inputs into outputs and offer the customers a level of value that exceeds the cost of these activities. The customer perceived value “depends on the product's ability to satisfy his or her needs or requirements” (Businessdictionary.com). Starbucks’ value chain can be summarized as shown on the diagram below:

Firstly, the customer perceived value is based on the performance value of Starbucks, which means the quality of their core service. On the first hand, the quality of the service provided by Starbucks is based on tangible elements such as the coffee itself. Indeed, Starbucks’ communication and advertisement are mainly about the fact that it is providing the highest quality coffee in the world, by working directly with growers around the world and overseeing the custom-roasting process of its coffee beans. It offers a wide choice of beverages and snacks and keeps on innovating to release new products. The beverages are handcrafted in front of the customers, following some pre-established quality standards so the coffees and various drinks always taste as good in any Starbucks store. Another tangible element of Starbucks service quality are the employees, also called “partners”. Indeed, they are the most visible elements of the service and significantly determine the service quality provided to the customers, as well as representing the Starbucks brand. Thanks to an efficient human resource strategy, Starbucks have a low turnover rate and a high partner satisfaction rate, which help achieving customer satisfaction. In order to provide the best service for the customers, Starbucks tries to hire the right people, according to their technical skills and their personal characteristics. It also motivates and enables its partners, for example by encouraging promotion and thanks to an extensive training covering both hard and soft skills. On the other hand, the service quality of Starbucks is based on other elements perceived by the customers. First, the quality is based on the reliability that Starbucks offers to its customers. Indeed, Starbucks respect its promises to the customers for instance thanks to the simplification of the beverage production process and to the pre-established quality standards, and also with its waiting time of 3 minutes maximum....
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