Starbucks - Case analysis and problem solving

Topics: Coffee, Coffeehouse, Starbucks Pages: 6 (1136 words) Published: August 23, 2013


Course: Business Policy Ethics and Strategy (F-410)

Case Summary

Starbucks Corporation is an international coffee company and coffeehouse chain based in Seattle, Washington. In October 2006, Starbucks was the largest global roaster and retailer of coffee with more than 12,000 retail stores in 60 countries, some 3,000 of which are to be found in forty countries outside the United States. Looking forward, the company expects 50% of all new store opening to be outside the United States. In 2006, Starbucks closed a decade of astounding financial performance with increasing sales from $697 million to 7.8 billion, net profit from $36 million to 40 million and ROIC was 25.5%. These superior financial performances resulted from the excellent coffeehouse format with designing stores to create a relaxed, informal, and comfortable atmosphere and selling premium roasted coffee, freshly brewed espresso-style coffee beverages, a variety of pastries, coffee accessories, teas, and other products in a coffeehouse setting. This also resulted from superior customer services through highly trained and progressively compensated employees; the strategy of owning stores rather than making franchising arrangement for the basic formula. Sophisticated location strategy, and successful exploration of foreign opportunities also contributed to the Starbucks financial performance.

Case Discussion Question 1: Identify the resources, capabilities, and distinctive competencies of Starbucks ?


I) Resources: Resources of Starbucks include-

Tangible Resources: Starbucks Corporation’s tangible resources include-

1. Design of stores: Design of Starbucks coffeehouse store was very much comfortable, relaxed, and an informal third place between Home and Workplace.

2. Premium location: They located their stores in premium location as possible before its competitors could.

Intangible Resources: Intangible resources of Starbucks were as follows-

1. Superior brand name, and brand loyalty;

2. Experience and training of employees,

3. Intellectual property-Basic formula of the product.

II) Capabilities: Starbucks Corporation’s capabilities include-

1. Good organizational rules and procedures for managing operation;

2. Better hiring system and training program.

3. Service oriented values of the company;

4. Progressive compensation policy.

5. Differentiated products and sophisticated demographic analysis.

III) Distinctive Competencies: The above said resources and capabilities were strengths of Starbucks that allowed it to differentiate its products from those of rivals and achieve lower costs structures than its competitors. Distinctive competencies of Starbucks helped it achieve superior efficiency, product quality, and customer responsiveness which are the basis of competitive advantage in the Coffee Retailing Business.

Starbucks Corporation’s distinctive competencies are given below-

➢ Establishment and management of Superior Coffeehouse (Coffee Store): Starbucks Corporation used a very sophisticated location strategy and demographic analysis to identify and capture the premium location for stores as possible its competitors could. The company designed its store to create a relaxed, comfortable, and informal third place between home and work where customers could spend a very good time.

➢ Superior Management of Employees: Starbucks used employee hiring and training program that were the best in the restaurant industry. It provides progressive compensation policies including stock options and medical benefits which increased the motivation of the employees to provide the best customer services. These various incentive programs and hiring strategy helped them to manage employees effectively.

➢ Preference to Owing Stores rather than Making...
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