Value Chain Analysis (Starbucks)
Starbucks had its agents travelled regularly to coffee – growing countries to establish relationship with growers and distributors. In sourcing green coffee beans, it was increasingly dealing directly with farmer. It normally offered high prices to ensure that the poor small coffee growers have enough money to cover their production cost and for their families. To buy coffee beans, Starbucks used fixed price purchase commitments to limits its exposure to fluctuating coffee prices in upcoming periods and on occasion, purchased coffee futures contracts to provide price protection. Starbuck sourced bean from multiple geographic areas not only allowed it to offer a variety range of coffee to customer but also spread the company’s risks such as weather, fluctuated price, political and economic issues in coffee-growing areas. This enabled the company to predict prices over multiple crop years. In 2003, Starbucks marketed Fair Trade Certified coffee at most of its retail stores through some 350 universities and hotel locations that were licensed to sell Starbucks coffees.
Starbucks was able to expand its market through a number of channels such licensing with a reputable and capable local company with retailing know how in the target host-country to develop and operate new Starbucks stores. Starbucks used a local partner/licensee to help it recruit talented employees, set up supplier relationships, locate suitable store sites. To avoid problems, Starbucks looked for partner/licensees that had strong retail/restaurant experience, had values and a corporate culture compatible with Starbucks, were committed to good customer service, possessed talented management and strong financial resources, and had demonstrated brand-building skills. In additional with Starbuck’s strategy in major metropolitan cities was to blanket the area with stores. Though the new store might...
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