The Success Story of Starbucks
Abstract In a well competitive USA market to be the global leader with a highly dedicated customer service, innovative ideas and guaranteed quality delivery through its collection of growing services in its global outlets Starbucks established its own achievement with an inspired success story. Its growing popularity has created a special image among its customers. Not only a dedicated customer service helped Starbucks to taste the fruit of success but also other factors like tactical marketing strategy and the proper utilization of Information Technology pushed it to grab a huge market. Keywords: achievement, popularity, image, success, tactical marketing strategy, Information Technology
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The Success Story of Starbucks

Abstract

In a well competitive USA market to be the global leader with a highly dedicated customer service, innovative ideas and guaranteed quality delivery through its collection of growing services in its global outlets Starbucks established its own achievement with an inspired success story. Its growing popularity has created a special image among its customers. Not only a dedicated customer service helped Starbucks to taste the fruit of success but also other factors like tactical marketing strategy and the proper utilization of Information Technology pushed it to grab a huge market.

Keywords: achievement, popularity, image, success, tactical marketing strategy, Information Technology

The Success Story of Starbucks

Introduction

Starbucks Assignment Help   With a unique idea the three entrepreneurs Gordon Bowker, Jerry Baldwin and Zev Siegi started their business in the year 1971 with the use of roasting technique in their newly made coffee company Starbucks. They used the name “Starbucks” for their newly made company lent a name of character from a famous novel Moby Dick with a purpose to popularize the name of their company in the large USA market (Coffee.org, n.d.). With a successful journey of more than 45 years with 21,500 stores across 64 countries worldwide, Starbucks proved its efficiency both in the area of customer satisfaction and quality assurance (Marshall, 2015).

Analysis of Starbucks and the Industry

With a significant brand image, Starbucks always intended to prove its best by incorporating its value in its mission and vision. The company’s focus arena not only includes customer satisfaction but also giving a treasured experience with its differentiated service delivery strategy. According to Starbucks (2016a),, the company is devoted to working plan which maintains a balanced diversity in its working environment with its stakeholders. However, to understand the company’s place within the market and nuances of coffee industry, it is vital to conduct proper analysis of both Starbucks and the industry.

SWOT Analysis of Starbucks

As mentioned by Kotler (2000), the SWOT analysis is the analysis of strength, weakness, opportunity and threats of a company’s internal and external environment. With this context, SWOT analysis of Starbucks is as follows:

  • The company’s profits increase each year due to several strengths (Jones, 2014). Firstly, the company offers high-quality products, environmentally friendly and convenient locations of chain stores. As the company believes that a cup of coffee is not just a drink to serve but a way to make the peoples’ life better. Secondly, the company reinvests into its own chain by enhancing its number of stores. The strength of Starbucks is its growing popularity and demand for its product, which shows the goodwill prospect for the company (Molla, 2014). Every store is a place of achievement field through delivery of a high class customer service. Thirdly, the company’s strategy towards its employees is motivating and effective. As a result, Starbucks has a highly dedicated work-force with a perfect co-operation to achieve a sole target.
  • As every business, Starbucks has weaknesses which influence the company’s activity. To begin with, the company looses number of customers due to high prices even on their basic coffee products. Besides, Starbucks’ range of products does not contain any unique options for its customers. In other words, their rivals have the same number of options to offer.
  • Starbucks constantly expands its chain of stores globally (Statista, n.d.). However, there are still several regions which lack the company’s stores. Such regions include Central Europe, several African countries, and India. Besides, the company would be able to develop its reputation even more if their branded products were widely offered in supermarkets. Even though, Starbucks has already begun to introduce its products to stores, the strategy still seems as a tryout (Starbucks, 2015).
  • Threats: Starbucks ranks a true market leader with a market share of 59.20% after its rival McDonald’s, Keurig, Dunkin and other ones (Trefis Team, 2016b). However, the latter companies offer cheaper coffee products with the same quality to the customers, which is a threat for Starbucks. It means that the company should find the way to attract its customers on a constant basis.

Consequently, Starbucks enjoys large capital which along with its massive brand can help the company to overcome any market difficulties. If the company continues implementing effective approach to employee motivation, customer attraction and developing its products, it will be able to remain on a leading position in the industry. Currently, there are number of opportunities and only a few threats the company faces.

Analysis of Industry by Using Porter’s Five Forces Model

Porter’s five forces model is a clear base to analyze the industry in a noteworthy way. In accordance with Whalley (2010), the Porter’s five forces of an industry include analysis of the new entrants, substitutes, suppliers, buyers and the industry competitor. The analysis of the industry Starbucks operates in is as follows:

  • Threat of new entrants can be regarded as moderate for several reasons. As Starbucks is an established company with a optimum market value and popularity, so the new entrants can’t compel its operation negatively. However, since even small coffee shops can offer the same range of products as Starbucks and there is no switching cost for buyers, the possibility of successful new entrants is medium. Starbucks has a big market share and offers eco-friendly environment and products, which is advantageous for the company (Starbucks, 2016b).
  • There is a high level of substitutes. Besides, there are such beverages as water, tea, energy drinks, soda, and juices provided by shops, pubs, and bars and homemade drinks that can substitute Starbucks’ range of products. Since there is no switching cost for the consumers, companies as Starbucks creat strategies to offer their products in grocery-stores.
  • Bargaining power of suppliers can be regarded as low. – Starbucks always gave the chance to the qualified suppliers to work with comfortably with a joint common mission. Starbucks works with the suppliers from domestic, overseas, and corporate firms (Starbucks, 2016a). Since the company buys coffee beans from several selected regions with standard requirements, switching between suppliers will not pose any difficulty. The same is applicable for other suppliers.
  • Bargaining power of Buyers/customers can be regarded as medium. The industry has many buyers. The product differentiation is vertical, which means that volume purchases are low and do not erode the power of customers. Since customers pay high price for Starbucks’ products, they expect premium class coffee and the company should guarantee the high quality constantly.
  • Intensity of competitive rivalry is medium. Starbucks has the largest market share within the industry characterized by monopolistic competition. Even though the rivalry is high due to lack of switching costs, the Starbucks’ premium products are differentiated from competitors’ standard products, which results in low intensity of competition. Currently, the industry cannot be regarded as having over capacity, which contributes to intensity among competitors.

Consequently, the Porters five forces analysis gives an opportunity to conclude that the profitability and strengths of forces in coffee industry are medium.

How Starbucks Uses IT

For Starbucks to become famous and achieve such success as it is today, it is not only due to the quality of products that Starbucks offers to the marketplace, but also its customer service. During the presentation of group six, they had said that a smart business was the one whose priority was to take care of its customer. And, in order for businesses to perform better, they need to clearly understand what their customers’ needs. We strongly agree with that customer relationship management is extremely an important part for many corporations. And Starbucks is not an exception; it has captured it very well, and even recognized the advantage of the implementation of technology will help it serve customers much better, and make it turn out to be a well-known brand.

Initially, the social media is widely used as an instrument in to help Starbucks involve with customers. Till now, Starbucks has more than 11.8 million followers on Twitter, more than 36.5 million likes on Facebook, and 13 million fans on Instagram. The strong presence on Facebook and YouTube demonstrates that Starbucks has very effectively used the social networks. So, what has helped Starbucks created a large, strong fan base in the online community?

Starbucks has a very good relationship with customers because they speak in the language of the customer. It always listens and communicates with its clients. Starbucks has done this by using social media to gather customers’ information such as feelings, demands, ideas, events, and etc. On most of the social media channels today, Starbucks uses most of its time to interact directly with customers rather than providing only new contents, or advertising articles. In addition, Starbucks acknowledges customers do not interested in what is rigid, or boring. Therefore, its fan pages often show off with the eye-catching images, art together with its products, and also do not forget to post such a funny or attractive status.

More and more, customers cannot resist when there is an opportunity to approach and engage in conversation with their idols. Grasp that, Starbucks has attracted a lot of customers by holding those events in the presence of famous artists. For instance, in 2012, Starbucks used to set up an event with the performance of Maroon 5. Plus, they could comment and ask questions to Adam Levin and James Valentine on Google+, and even follow the conversation on Twitter with the hash-tag of “#HanginwithMaroon5” (Paige D., 2012). It let customers, who missed the show, could watch it again on their fan pages as well. By this way, Starbucks has increased a large number of fans on social media by offering them an opportunity to reach their idols.

Secondly, Starbucks has completely satisfied their customers by launching Mobile Order and Pay application that has the reward program built right in. Starbucks is very creative in serving customers. Not surprisingly, Starbucks’s over the phone transactions accounted for 20% of the total in-store transactions in the United States and has continually increased significantly. Each week, there are handling approximately nine million transactions (Joseph, 2015). This application is designed base on the speedy and time saving platform. It brings a lot of new and convenient experiences for customers.

By using the smartphone, clients can place orders for their food or drinks beforehand. They can even customize how they want their drinks to be like such as extra topping, extra whipping cream, and etc. After 5 to 10 minutes, their orders will be ready to pick up from a selected location. Furthermore, for every dollar they spent, they can collect two stars. Whenever they reach 125 stars, they can redeem for a free drink or food. They can use this application to make a payment in-store by scanning the QR code at the cashier, and still can earn the same rewards. Most of customers are happy with the program of a free drink on their birthdays. With higher productivity and more effectively serving, it will support Starbucks to drive more sales. It means customers are no longer have to wait in line as well. Once customers are satisfied, they are willing to go back instead of losing patience and walk away from the store. For Starbucks, they absolutely can benefit hundreds of millions of dollars per year just by saving up to 10 minutes a day for customers with Mobile Order and Pay application.  Besides, so as to make it easier for future orders, this application can keep a history of customers’ orders to quickly order again.

Nothing can make customers more interested when a salesperson can understand their personal preference, and this application is now able to do that. Another great feature is customers can send a Starbucks digital card as a gift to their friends via this application. It’s easy to redeem it from email or in the application. For “Music” feature, customers can find what songs are playing in the stores. Additionally, to manage the cards, customers can check the Starbucks Card balance, reload money, views previous purchases, or transfer balances between cards. Customers can leave a tip on purchases made with the application too. Starbucks is holding a leadership position in the field of payment on the mobile platform. We can say that Starbucks is an e-commerce because it is involved in buying and selling goods or services online. It has done what any technology companies would like to accomplish. All their developments are the result of its research process on customer behavior carefully. With a huge customer base and very diverse, a personalized product is a challenge. However, Starbucks has conquered this challenge and find its own success.

Thirdly, Starbucks has finally seen the light when installing free Wi-Fi network for customers to use comfortably. Nowadays, the user’s need of accessing to the Internet is extremely high; thus, free Wi-Fi has become an indispensable “dish” for many the stores. One of Starbucks‘s strategies is to create a third place where people can come between work and home. Whenever stepping into a Starbucks store, customers will quickly recognize its atmosphere, which is organized and clean with the light system is installed meticulously at each corner. Especially, it offers free Wi-Fi. Starbucks understands exactly how to increase the quality of experience for customers. According to an article from The New York Times, Starbucks began to provide free Wi-Fi on July 1st, 2010 for its stores in the United States via AT&T provider (Miller, 2010). It is now in a new partnership with Google. Therefore, the speed of its Wi-Fi will be “up to 10 times faster than the current service powered by AT&T” (Tibken, 2013). With free Wi-Fi, people can come to enjoy a cup of Joe and have access to the Internet; hence, they are able to do many things such as study, do homework, read electronic newspaper, download some files, or discuss the works without extra charge. Starbucks do believe that not yet all families has well equipped with the connection as fast as its network. Generally, Starbucks turns its stores into a place “where people can socialize, work, or relax outside of the home and office” (Taylor, 2016).

Overall, Starbucks is a very ingenious when applying technology into its business. It has acknowledged how significance of technology is, and what its advantages. Starbucks is the following the right trends and the needs of customers. It clearly knows what kinds of technology must to invest in order to increase revenues, attracts more clients, and makes them feel related to the business. That is a reason why Starbucks always well thought out about the investment in the new technology is a part of the long-term business strategy. It is gradually making itself to be more and more unique in the food service industry.

Value Created by Starbuck With the Use of IT

Information technologies improve Starbuck’s performance for several reasons. The sturdy availability in the popular social media sites builds a face of leadership in a well competitive coffee as well as fast food industry for Starbucks. It is evident that Starbucks rivals also use the same information technologies, but there is a difference in a strategy implemented by them. Starbucks does not use social sites for its promotion for customer attraction. However, through social networks, the company reflects its friendly manner of caring for its mates. In the year 2012, Starbucks set up a program in alliance with Maroon5 and posted the live video in its social networking sites for the fans that missed to watch it (Paige D., 2012).

The other advantageous feature by Starbucks is providing its customers with up-to 10 times high speed Wi-Fi with the help AT&T in its stores in USA (Taylor, 2016). In fact, such strategy is beyond the reach for its competitors to offer in their stores (Tibken, 2013). With this diverse behavior prioritizing its customers, Starbucks always proves its significance and boosts its popularity among its customers in relation to its competitors.

Starbucks concerns on application of information technologies in the future are focused on overcoming challenges and using IT effectively further. As described by Kline (2016), Starbucks strives to highlight and strengthen its current IT enabled marketing strategy by improving and adding more advantage features into it. Starbucks plans not only to keep coffee as its future menu but also a deliberate execution of operation and IT. The current mobile order and pay app is running with a good speed by giving proximity to both the customer and the store for an easy and clear crystal delivery service.

Conclusion

The success story of Starbucks is not just a story but a guideline and inspiration for the firms that want to get success with a well ahead business strategy. By creating a strong market place, Starbucks is forwarding itself with optimized work tactic to move ahead with a steady leadership in its business industry. It is no doubt that with this current pace, Starbucks will diversify its business to more extent by using its growing goodwill, brand image and popularity. As stated by Trefis Team (2016a), Starbucks has busy plans to grow its international leadership in more extent by creating more innovative ideas to improve a high definition customer experience in China and by utilizing the growing opportunity with a clear string operation in the market of India.

References

Coffee.org. (n.d.). History of Starbucks 1970s. Retrieved from http://www.coffee.org/History-of-Starbucks-1970s

Jones, A. (2014, December 2). Starbucks increases leverage in 2014. Retrieved from http://marketrealist.com/2014/12/starbucks-increases-leverage-fy-2014/

Joseph, S. (2015, July 24). Starbucks CEO: We are growing because we invested in tech. Retrieved from http://www.businessinsider.com/starbucks-ceo-says-investment-in-tech-not-digital-ads-has-spurred-growth-2015-7

Kline, D.B. (2016, December 5). Starbucks’ future: Is technology more important than coffee? Retrieved from https://www.fool.com/investing/2016/12/05/starbucks-future-is-technology-more-important-than.aspx

Kotler, P. (2000). Marketing management (Millennium ed.). New Jersey: Person Education Company.

Marshall, C. (2015, May 14). The first Starbucks coffee shop, Seattle – a history of cities in 50 buildings, day 36. Retrieved from https://www.theguardian.com/cities/2015/may/14/the-first-starbucks-coffee-shop-seattle-a-history-of-cities-in-50-buildings-day-36

Miller, C. (2010, June 14). Aiming at rivals, Starbucks will offer free Wi-Fi. Retrieved from http://www.nytimes.com/2010/06/15/technology/15starbux.html

Molla, R. (2014, August 12). New York has nine Starbucks for every square mile in Manhattan. Retrieved from http://blogs.wsj.com/numbers/new-york-has-nine-starbucks-for-every-square-mile-in-manhattan-1647/

Paige D. (2012, June 22). #HanginwithMaroon5. Retrieved from https://www.starbucks.com/blog/hanginwithmaroon5/1205

Starbucks. (2016a). Diversity. Retrieved from  http://www.starbucks.in/responsibility/diversity

Starbucks. (2016b). Our Starbucks mission statement. Retrieved from http://www.starbucks.in/about-us/company-information/mission-statement

Starbucks. (2015, April 21). One million places to find Starbucks beyond the coffee shop. Retrieved from https://news.starbucks.com/news/beyond-the-coffee-shop-one-million-places-to-find-starbucks

Statista. (n.d.). Number of international and United States Starbucks stores from 2005 to 2016. Retrieved from https://www.statista.com/statistics/218366/number-of-international-and-us-starbucks-stores/

Taylor, K. (2016, May 04). Offering free Wi-Fi leads to an unexpected consequence at Starbucks. Retrieved from http://finance.yahoo.com/news/offering-free-wi-fi-leads-195305335.html

Tibken, S. (2013, July 31). At Starbucks, AT&T is out and Google is in for Wi-Fi. Retrieved from https://www.cnet.com/news/at-starbucks-at-t-is-out-and-google-is-in-for-wi-fi/

Trefis Team. (2016a, January 18). How Starbucks plan to grow its international operations. Retrieved from https://www.forbes.com/sites/greatspeculations/2016/01/18/how-starbucks-plans-to-grow-its-international-operations/#2c4913d11941

Trefis Team. (2016b, October 13). Starbucks is maintaining its competitive edge. Retrieved from https://www.forbes.com/sites/greatspeculations/2016/10/13/how-is-starbucks-maintaining-its-competitive-edge/#3bab8580759c

Whalley, A. (2010). Strategic marketing. New York: Andrew Whalley & Venture Publishing.

 

 

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