Starbucks

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Market Analysis
Starbucks provides the highest-quality coffee what it believes in the world. It has hundreds of product lines and the sales of beverage take the largest percent. Despite of Starbucks’ overwhelming presence and convenience, customers think there was just a little of image and product differentiation between Starbucks and the smaller coffee chains. However, Starbucks has an uncomplicated distribution strategy, and it tries to make customers get entrance to Starbucks products easier and provide more convenience to customers. Moreover, it has company-operated stores located in high-traffic and high-visibility and non-company retail channels. In addition, Starbucks has four major competitors. Minneapolis-based Caribou Coffee which provides the look and feel of an Alaskan lodge has more than 200 stores in nine states. California-based Peet’s Coffe&Tea- the freshest coffee is itsstrategy - has about 70 stores in five states. Others are Independent specialty coffee shopswhich offer beer, wine, liquor, satellite television, and internet-connected computers and, Donut and bagel chains like Dunkin Donuts offering flavored coffee and non-coffee alternatives.

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For product innovation, new products werelaunched on a regular basis. For service innovation, Starbucks has launched Stored-Value Card (SVC) and T-Mobile HotSpot wireless Internet service. In addition, the expanding strategy was to open stores in new markets while geographically clustering stores in existing market. Furthermore, the cost of cannibalization covered by total incremental sales associated with concentration.

Evaluate Starbucks’ Plan
It is a good idea to make customers feel like valued customers with faster service with more labor. As you said, it justmakes about 7 penny loss a share. However, it is a minor loss of share, and there are some problems in the $40 million plan. First of all, it is too large amount of money to spend for small factor. Secondly, there is another way to satisfy customers.

Every $40 million per year is quite a huge amount of money. The net income of Starbucks was $151.4 million in 2001 and $215.1 million last year, so it will have risks about no growth in net income next year. Moreover, it is unsure if it would be successful. Starbucks is trying to reduce consumers' waiting time continuously. However, there has no successful reduction. Furthermore, in 2002, waiting time of - 3 -

Starbucks was just 3.10 minutes, so we cannot assure every customer will be satisfied with 3 minutes.
Finally, we suggest another plan which is more efficient. There are 19% of customers who responded that they would feel like valued customers when they could get free coffee after every x visits. Through the calculation [Appendix 1], free cup after every 10 times-visit can make more efficient results. Furthermore, friendlier staff can make 19% of customer satisfaction, so education of staff can be a better idea. 3Fs Recommendation

We have made 3Fs recommendation for Starbucks: Friendly staffs, Free drink service, Friendly environment.
For the ‘Friendly staffs’, we can use methods of evaluation and education. From the survey of customers’ satisfaction, friendlier staff is the most important part that can make customers feel like valued customers. Therefore, evaluation and education would be a good solution.

Evaluation can be done by both staffs and customers. There are some standards like Appendix 2. After evaluation, Starbucks can educate poor partners and award the - 4 -
best partners. Because it just needs some papers with pens and money for educators, customers’ satisfaction rate would be higher with low cost. There are two types for free cup service.One of them is a free cup after x number of visits. In "Valued Customer" perceptions 19% of customers would feel more like a valued customer, if Starbucks offers a free cup after x number of visits. 19% of customer is not so small...
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