INTRODUCTION AND HISTORY

Starbucks began in 1971 when three academicsEnglish teacher Jerry Baldwin,

history teacher Zev Siegel, and writer Gordon Bowkeropened a store called Starbucks
Coffee, Tea, and Spice in the touristy Pikes Place Market in Seattle. The three partners
shared a love of fine coffees and exotic teas and believed they could build a clientele in
Seattle much like that which had already emerged in the San Francisco Bay area. Each
invested $1,350 and borrowed another $5,000 from a bank to open the Pikes Place store.
Baldwin, Siegel, and Bowker chose the name Starbucks in honor of Starbuck, the coffeeloving first mate in Herman Melville's Moby Dick, and because they thought the name
evoked the romance of the high seas and the seafaring tradition of the early coffee
traders. The new company's logo, designed by an artist friend, was a two-tailed mermaid
encircled by the store's name.
The inspiration for the Starbucks enterprise was a Dutch immigrant, Alfred Peet,
who had begun importing fine arabica coffees into the United States during the 1950s.
Peet viewed coffee as fine winemaker views grapes, appraising it in terms of country of
origin, estates, and harvests. Peet had opened a small store, Peet's Coffee and Tea, in
Berkeley, California, in 1966 and had cultivated a loyal clientele. Peet's store specialized
in importing fine coffees and teas, dark-roasting its own beans the European way to bring
out their full flavor, and teaching customers how to grind the beans and make freshly
brewed coffee at home. Baldwin, Siegel, and Bowker were well acquainted with Peet's
expertise, having visited his store on numerous occasions and spent many hours listening
to Peet expound on quality coffees and the importance of proper bean-roasting

techniques. All three were devoted fans of Peet and his dark-roasted coffees, going so far
as to order their personal coffee supplies by mail from Peet's.
The Pikes Place store featured modest, hand-built nautical fixtures. One wall was
devoted to whole-bean coffees; another had shelves of coffee products. The store did not
offer fresh-brewed coffee by the cup, but samples were sometimes available for tasting.
Initially, Siegel was the only paid employee. He wore a grocer's apron, scooped out beans
for customers, extolled the virtues of fine, dark-roasted coffees, and functioned as the
partnership's retail expert. The other two partners kept their day jobs but came by at lunch
or after work to help out. During the start-up period, Baldwin kept the books and
developed a growing knowledge of coffee; Bowker served as the "magic, mystery, and
romance man." The store was an immediate success, with sales exceeding expectations,
partly because of a favorable article in the Seattle Times. In the early months, each of the
founders traveled to Berkeley to learn more about coffee roasting from their mentor,
Alfred Peet, who urged them to keep deepening their knowledge of coffees and teas. For
most of the first year, Starbucks ordered its coffee beans from Peet's, but then the partners
purchased a used roaster from Holland and set up roasting operations in a nearby
ramshackle building. Baldwin and Bowker experimented with Alfred Peet's roasting
procedures and came up with their own blends and flavors. A second Starbucks store was
opened in 1972.
By the early 1980s, the company had four Starbucks stores in the Seattle area and
could boast of having been profitable every year since opening its doors. But the roles
and responsibilities of the cofounders underwent change. Zev Siegel experienced burnout

and left the company to pursue other interests. Jerry Baldwin took over day-to-day
management of the company and functioned as chief executive officer; Gordon Bowker
remained involved as an owner but devoted most of his time to his advertising and design
firm, a weekly newspaper he had founded, and a microbrewery he was launching (the
Redhook Ale Brewery).

STARBUCKS COFFEES OPERATIONS MANAGEMENT: 10 DECISIONS,

PRODUCTIVITY
Starbucks Coffee Companys business success is linked to the proper application
of the 10 decisions of operations management (OM). These 10 decisions refer to the
different areas of operations where the firms management must address specific business
objectives. As a global business, Starbucks addresses these 10 decisions of operations
management through different approaches and policies. For instance, the company
applies its Coffee and Farmer Equity program in supply chain management. Starbucks
cafs also exhibit the firms organizational culture as a way of optimizing quality of
service. Thus, Starbucks has integrated strategies for streamlining the 10 decisions of
operations management.

Starbucks Coffees business fulfills the 10 decisions of operations management through

varying strategic initiatives for productivity and management in different areas of the
organization.
Starbucks Coffees Operations Management, 10 Decision Areas
1. Design of Goods and Services. Starbucks emphasizes premium design for its goods
and services. The premium character is linked to the companys broad differentiation
generic strategy, along with its premium pricing strategy. Other firms, such as
manufacturers, are also involved in the design of some goods like Starbucks mugs. In this
decision area of operations management, Starbucks ensures that its goods and services
reflect the firms high-end brand image.
2. Quality Management. Starbucks also uses the premium character in quality
management. For instance, the company carefully sources its coffee beans from coffee
farmers who comply with Starbucks quality standards. The firm also prefers to buy coffee
from farmers certified under the Starbucks Coffee and Farmer Equity (CAFE) program.
Premium quality service is ensured through servant leadership and a warm friendly
culture. In this decision area of operations management, Starbucks implements high
quality to align with the firms premium brand image.
3. Process and Capacity Design. Process and capacity efficiency is one of the
contributors to Starbucks success. The companys processes are highly efficient, as
observable in its cafs. Also, Starbucks optimizes capacity and capacity utilization by
designing processes to meet fluctuations in demand. For example, processes at the firms

cafs are flexible to adjust personnel to a sudden increase in demand during peak hours.
In this decision area of operations management, Starbucks aims to maximize costeffectiveness though efficiency of workflows and processes.
4. Location Strategy. Starbucks location strategy focuses on urban centers, especially
those with large middle and upper class populations. Most of its cafs are in densely
populated areas. Also, Starbucks occasionally uses strategic clustering of cafs in the
same geographic area to gain market share and drive competitors away. This decision
area of operations management shows that Starbucks emphasizes areas with affluent
consumers who could afford its premium priced products.
5. Layout Design and Strategy. The layout design of Starbucks cafs maximizes
workflow efficiency. It also supports a warm and friendly ambiance to match the
companys organizational culture. This layout strategy does not maximize space
utilization for tables and seats because Starbucks focus is on premium customer
experience, which involves higher prices for more leg space in the cafs. In this decision
area of operations management, Starbucks prioritizes customer experience over space
utilization.
6. Job Design and Human Resources. Starbucks human resource management
integrates organizational culture in all areas of the business. This organizational culture
involves the employees-first attitude that cares for Starbucks workers. Also, at the cafs,
the company uses work teams of baristas. In other parts of the organization, Starbucks
uses functional positions, such as HRM positions and inventory management positions,
with less emphasis on work teams. In this decision area of operations management, the
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focus is on ensuring that the Starbucks culture is woven into every job, while satisfying
basics on technical specifics of tasks.
7. Supply Chain Management. Starbucks Coffees supply chain is global, although
majority of the companys coffee beans come from farmers in developing countries. The
companys strategy for its supply chain involves diversification of suppliers to ensure
stability of supply. Starbucks also uses its Coffee and Farmer Equity (CAFE) program to
select and prioritize suppliers. This program uses criteria for ethical practices, including
emphasis on sustainability. Thus, in this decision area of operations management,
Starbucks integrates ethics and corporate social responsibility with supply chain
efficiency.
8. Inventory Management. Inventory management at Starbucks is linked with the firms
supply chain and various facilities. At the cafs, inventory management involves office
automation and manual monitoring. In Starbucks supply hubs, automation is more
comprehensively used. The company aims to minimize stock out and ensure continuous
supply of coffee beans to its cafs. Starbucks addresses this decision area of operations
management by focusing on supply adequacy and automation.
9. Scheduling. Starbucks uses automated and manual scheduling approaches for its
various business activities. The company also applies flexible schedules for management
personnel. This decision area of operations management relates with Starbucks in terms
of the firms objective of streamlining processes, while allowing some degree of
flexibility among management positions in the organization.

10. Maintenance. Starbucks maintains its physical assets through dedicated teams of
employees trained for maintaining facilities and equipment, as well as third parties that
offer maintenance services. These third parties include local businesses that provide
equipment tune-ups for Starbucks cafs. In addition, the company maintains its human
resource capacity through training and retention strategies that include relatively high
compensation. Thus, Starbucks addresses this decision area of operations management
through the involvement of caf personnel, dedicated maintenance teams, and third-party
service providers.
MISSION
Starbucks Coffees website states that the companys mission statement is To inspire
and nurture the human spirit one person, one cup and one neighborhood at a time.
This mission statement reflects what Starbucks does to keep its business running. Such
mission statement has the following key components relevant to Starbucks:
1.

Inspire and nurture the human spirit

2.

One person, one cup and one neighbor at a time

Starbucks Coffee inspires and nurtures the human spirit starting with its employees. To
address this component of its mission statement, the company maintains a small company
culture, where rapport and warmth are important. This component of Starbucks Coffees
mission statement also pertains to customers experience. The company extends its warm
and small company culture to its customers. At Starbucks, employees and customers
first names are used. Also, the design of Starbucks cafs has a warm and cozy feel. These

approaches inspire and nurture meaningful and warm relationships. Starbucks Coffees
mission statement also indicates a personal and gradual approach. The one person, one
cup and one neighbor at a time component of the mission statement show that the firm
ensures meaningful impact on every employee and customer. This part of the mission
statement also means that Starbucks Coffee plans to continually and gradually grow the
business, one place or neighborhood at a time.
VISION
Starbucks Coffee does not readily present its vision statement. However, a careful reading
of the companys website reveals that its vision statement is to establish Starbucks as
the premier purveyor of the finest coffee in the world while maintaining our
uncompromising principles while we grow. This vision statement has the following
components relevant to Starbucks:
1.

Premier purveyance

2.

Finest coffee in the world

3.

Uncompromising principles

4.

Growth

Being a premier purveyor means that, Starbucks Coffee wants to achieve leadership in
providing its products, especially coffee of the best quality. Starbucks has already
achieved the premier purveyance component of its vision statement because it is now the
largest coffee and coffeehouse company in the world. However, it is not yet clear if
Starbucks effectively addresses the finest coffee in the world component of its vision

statement. Analysts and critics point out that coffee from McDonalds or Dunkin Donuts
may be better than Starbucks coffee in some aspects. Nonetheless, Starbucks Coffee
addresses the uncompromising principles component of its vision statement. These
principles include ethical conduct and a warm culture. Starbucks maintains these
principles, especially after Howard Schultz resumed his role as CEO in 2008. Also, the
firm satisfies the growth component of its vision statement, as manifested in the
continuing global expansion of the business through new Starbucks cafs. Starbucks
Coffee now has more than 22,500 locations around the world. Thus, the firm effectively
addresses its vision statement.
GUIDING PRINCIPLES

Provide a great work environment and treat each other with respect and dignity.

Embrace diversity as an essential component in the way they do business.

Apply the highest standards of excellence to the purchasing, roasting and fresh
delivery of their coffee

Develop enthusiastically satisfied customers all of the time.

Contribute positively to their communities and their environment.

Recognize that profitability is essential to their future success.

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MARKETING STRATEGIES
Starbucks chose an unconventional marketing strategy that may be unique and seldomtried, that will most perfectly match the concept that the company wants to portray.
Perfect Cup of Coffee- Emphasis on product quality. Their coffee, even though priced
slightly more expensive than expected, is notorious for satisfying customers with rich,
delicious taste and aroma.
Third Place. Creating this unique and relaxing experiencing and atmosphere for
people to go to between home and work has been very important for the company as
they realized that this is one of the strongest concepts attaches to the company, to which
customers have been strongly attracted
Customer Satisfaction. From the entrance to the store to the very last drop of their
coffees. It is a must that customers feel the uniqueness of enjoying their Starbucks
coffee experience.
Creating a Starbucks Community. The Starbucks marketing strategy has even expanded
to create a community around their brand. On their website, individuals are encouraged
to express their experiences with Starbucks history, and the company strives to
personally join in the discussion.
Smart-Partnerships. Starbucks Coffee Company has been known to create strategic
partnerships that demonstrate the fact that another way to grow your business is to
partner smart.
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 Innovation. Through the years, theyve added different flavors to their coffee, more food
on their menu, and even became one of the first to offer internet capability in their
stores.
Brand Marketing. The Starbucks marketing strategy has always focused on word-ofmouth advertising and letting the high quality of their products and services speak for
themselves.

CUSTOMER AGE GROUPS

41-54; 6%
13-17; 2%
25-50; 49%

18-24; 40%
55+; 3%

Demographics and Perceptual Mapping for McCafe, Dunkin Donuts and Starbucks

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Convenience Store; 13%

McCafe; 7%
Local & Regional Specialty Coffee Shops; 47%
Starbucks; 33%

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Starbucks' Target Market: Starbucks' target market is any person and any age. The
store offers juices and cocoa for children, creamy blended drinks for those who don't
particularly like coffee, and a number of different types of brewed coffee. Starbucks
continues to refine and target their product offerings to the changing tastes of consumers.
The stores now sell specialty breakfast foods such as scones and muffins as well as a
variety of beverages and coffee. The chain's specialty flavors of coffee are popular among
American consumers.
Psychographics: Changes in the social and economic structure of the country are
resulting in higher levels of disposable income and a greater interest in Starbuck products
and merchandise. At the same time, other coffee shops are trying to tap in on the fad
created by Starbucks. There are many competitors trying to become successful selling
franchises for competitors to Starbucks. Starbucks senior management realized some time
ago that there was no real difference between the quality of their coffee to that sold in
competitor companies. Instead, the ubiquitous cup of Starbucks' coffee is a prop for many
people. It makes a statement about the amount of disposable income and individual may
have.
EXPANSION STRATEGIES
Establish hubs in large major cities.
Ensure city is able to support 20 or more locations in the hub within the first two years.

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 Once hub is blanketed, open more stores in smaller city areas around the region.
Implement zone managers to oversee the development process of each hub.

UNIQUE STRATEGIES
To capture key locations and open stores in close proximity to each other is
unique strategy for Starbucks.
Ensures that licensed stores that do not meet set achievements are closed down.
Clustering its stores in one area helped Starbucks quickly achieve market dominance with
over 20 million regular customers per week.
Spends less than 1% of its annual revenues on advertising- Starbucks strategy relies on
word of mouth advertising.
Engaging in small joint ventures with the right companies: Pepsi-Cola Co.

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COMPETITIVE ADVANTAGE

The above is Porters Generic Competitive strategy. Shown is Starbucks as a

whole in the differentiation strategy as they provide a high quality coffee and unique
experience in the convenience of a large volume of locations, which separates them from
their competition. VIA, the new instant coffee line is straddling differentiation and low16

cost leadership. While it will be a low cost and convenient alternative to Starbucks
regular coffee, it is still unique from other products in the market. The in-store gifts and
brewing utensils are in focused differentiation category as they cater to the coffee lover,
and are unique items found only in the Starbucks stores.

SWOT ANALYSIS

Porters 5 Forces

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Above are Porters 5 Forces and their level of threat to Starbucks. The bargaining
power of suppliers is high because of the natural resources needed to create their
ingredients and Starbucks believes in finding fair-trade and high quality beans, often from
other countries These specifications limit the number of suppliers. The threat of new
entrants is medium in that the coffee market is changing. The need for ambiance and a
place to share is losing edge to the on-the-go alternatives, and should a new entrant come
along with a different business model there is room for threat. However Starbucks is the
household name. Industry competitors are on the rise because of McDonalds creating the
McCafe line. Peets has increased presence as well. Threat of substitutes is low, because
coffee is always going to be a desired drink and pastime of choice.
STRATEGY CANVAS VALUE

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STARBUCKS IN THE PHILIPPINES

In December 4, 1997, the Philippines had its first taste of the Starbucks
Experience with its very first branch at the 6750 Ayala Building in Makati City. Starbucks
has since won the hearts of the Filipinos. The opening of the 6750 Ayala store marked an
important milestone in our history the Philippines became the third market to open
outside North America. The tradition of warm hospitality, constant need for connection,
and love for coffee these are the qualities that make Starbucks Coffee and the Filipino
people a great culture fit.

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BIBLIOGRAPHY
http://www.starbucks.com/
http://www.slideshare.net/manikgun/marketing-plan-for-starbucks
http://www.lotsofessays.com/viewpaper/1697075.html
http://www.slideshare.net/angeloestrada10/starbucks-report-38955273#!
Lee, Kathleen. Case Study: Starbucks Coffee
http://www.mhhe.com/business/management/thompson/11e/case/starbucks.html
Greereddy, Nithin. Strategic Analysis of Starbucks Corporation
http://www.slideshare.net/LulettaGain/final-starbucks-24693769
http://panmore.com/starbucks-coffee-operations-management-10-decisions-areasproductivity

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