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Starbucks Case Study

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Starbucks Case Study



As we know that functional level strategies are directing at improving the effectiveness of operations, which are manufacturing, marketing, materials management, product development, and customer service. The following functional strategies at Starbucks helped the company to achieve superior financial performance.

• At Starbucks they manufactured company's own premium roasted coffee, along with freshly brewed espresso-style coffee beverages and a variety of pastries, coffee accessories, teas, and other products, in a coffeehouse settings. Some grocery stores sell Starbucks branded ice cream and coffee as well.

• The marketing was enhanced by devoting considerable attention to the design of its stores. This resulted in a relaxed, informal, and comfortable atmosphere, away from home and work.

• The Starbucks material management is evident from the following excerpt taken from Starbucks 10-K 2009, "Starbucks is committed to selling only the finest whole bean coffees and coffee beverages. To ensure compliance with its rigorous coffee standards, Starbucks controls its coffee purchasing, roasting and packaging, and the distribution of coffee used in its operations. The Company purchases green coffee beans from coffee-producing regions around the world and custom roasts them to its exacting standards for its many blends and single origin coffees. (Starbucks)

• They are constantly developing their coffee products. They recently developed "VIA", ready brew instant coffee, and are working on "fresh-pressed" coffee system (Wikipedia)

• Starbucks is said to have one of the best employee hiring and training programs in the restaurant industry. Employees of Starbucks attend mandatory training classes that not only teach them to make a good cup of coffee but also train them on the service-oriented values of the company.


Tangible Resources: Starting in 1991, the company began to create its own in-house team of architects and designers to ensure that each store would convey the right image and character. Stores had to be custom-designed because the company didn't buy real estate and build its own freestanding structures like McDonald's or Wal-Mart did; rather, each space was leased in an existing structure and thus each store differed in size and shape. It's their Product line with hot and cold coffees and alternate options among those options. It's the ambience of the store and now most of the stores offer free Wi-Fi capabilities to its patrons.

Intangible Resources: Undoubtedly the management and the employees with extensive training and experience to wow the guest experience.

Starbucks capabilities are the marriage of its tangible and intangible resources. It is how the employees, and management work together to provide a unique customer service. It's their decision making strategy such as knowing their demographics and rapidly expanding them to capture as many premium locations they could before their competitors and imitators. It's their repeat customers which come back on an average of 20 times per month.

Distinctive competences of Starbucks lay in their specialty products, and innovation in the coffee industry. Their mission says it all, "to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time." (Starbucks). Starbucks is the largest coffeehouse company in the world with 17,009 stores in 50 countries, including over 11,000 in the United States, over 1000 in Canada, and over 700 in the UK.


In late 2006, Starbucks had 12,000 stores in operation, and currently they have 17009 stores. That is a rate of 100 stores per year. This tells us that even though they have competitors like Dunkin Donuts, Macdonald, and their direct coffee competitors, such as Diedrich Coffee, and Einstein/Noah Bagel Corporation do not even come close to what kind of market share, In fiscal 2010, the company's stores (retailer and licensed) generated US$ 10.7 billion in revenue.



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