Starbucks Case Study
Starbucks Case Study
1. In the beginning, how was Starbucks different from other coffee options for coffee drinkers in the United States? What activities and assets did Starbucks leverage to differentiate itself from competitors?
Starbucks strategy at the beginning was based upon creating a symbolic-expressive value trough a social meaning concept of offering the American community meeting places; this positioned its original products and made associations to identify consumers with self-expression providing personal, social and sociocultural meaning.
Assets acquired such as Starbucks-branded locations were decorated with detailed patrons to define a symbolic environment focused in giving privileged interactions with specialized staff (baristas) to support status and privilege. Starbucks focused in assuring supply chain innovation upon differentiation in the coffee tone providing unique flavor products and consistency in the product quality, specialized service and speed.
2. When Starbucks was rapidly expanding its store locations in 2006–2009 it made specific changes in order to facilitate that growth. What did Starbucks gain—and give up—as a result of each change?
Starbucks made operational changes to facilitate its rapid expansion. First, it changed La Marzocco machines for Verismo models, which were automatic and produced espresso quicker. This reduced the costs of training baristas and reduced the time of the process, so customers were served more quickly. However, some customers argued that the new machines produced lower quality coffee and the customer-barista relationship was lost.
Other operational change was coffee grinding. At the beginning, coffee was grounded throughout the day for best tasting. In order to reduce time, Starbucks started shipping pre-ground coffee to its stores. However coffee quality could be compromised by this decision.
To lower store-opening costs, Starbucks created four standardized store designs. This reduced the amount of money needed to open a new store, but there were limited variations so stores couldn’t adapt to specific communities.
3. When Schultz returned to Starbucks as CEO in 2008, how had the competitive context changed since his first tenure running the firm? What had caused or facilitated the changes?
In general the coffeehouse industry in the United States was experiencing an increase in coffee consumption per capita due to the “Starbucks effect”. At this time Starbucks was operating approximately 20,000 stores in the United States and was living a fast expansion strategy worldwide.
The context change in form that Starbucks found itself competing with smaller chains that resembled its former pre-expansion model with competitors focusing in creating symbolic-expressive value and fast food restaurants that had started to offer specialty coffee with more aggressive advertisement at a lower cost. The competitive context changed for Starbucks because it’s focus in mass distribution channels and its retail footprint strategy stated its product within a standard performance product value; this affected the value perception of the product.
4. Why did Schultz respond the way he did to the changes he found in 2008? What was he trying to achieve? Were his responses effective or ineffective?
Schultz tried to make changes in order to adapt to the new competitive context. He tried to reduce costs to be able to compete with their low cost competitors. For this, he closed underperforming stores and reduced operating costs through procurement savings, improved logistics, labor cost savings, and reduced operations waste. Also, he improved it supply chain operations to reduce costs caused by errors.
He made other changes to resolve the problems and allegations of customers who argued that the quality had been significantly reduced by expansion. He tried to make new innovations to create value by differentiation and quality. He introduced new semiautomatic espresso machines, returned to in store coffee grinding, trained baristas, and started offering free refills on same-day purchases. Starbucks also stopped the rotation of its coffee bean/roast combinations to standardize its flavor in all locations and days.
Even though Schultz introduced all this changes, his policies were ineffective and the stock price declined to half its peak value during the next fifteen months.
5. Did the introduction of VIA make sense in light of the market
In light of the market the introduction of a new instant coffee market brand did not make sense because it will lower the expectation of customers to standard coffee distributed thorough grocery channels, lowering the symbolic-value of Starbucks product. However there was an existing gap in the instant coffee market and the introduction of VIA created a new brand category in a mature market (instant coffee market); so providing a market development thorough a product development diversification was a high effective and innovative solution to position Starbucks in a mature market segment. This generated that the consistency in the quality and service provided by Starbucks would be a representative for coffee brands in this category.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 4 October 2016
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