Hamza Tariq

19L-2552
MBA-A

Summary Of Starbucks company:

Starbucks is one of leading brand of coffee globally. Three coffee fanatics
Gerald,Bowker and Ziev opened a small coffee shop in Seattle’s in 1971. Schultz
joined the marketing team of Starbucks in 1982.Schultz envisioned that “to make a
place that would mean different things to different people from the home and
work”. A few year later he got a chance to buy a Starbucks and draw out a strategy
to open more, for the purpose raising of funds he offered a public shares to market
many stakeholders criticize to it but he done in way to achieve CAGR of
50%.Starbucks strategy is a simple to attract the customers. “live coffee “is a
mantra to keep national coffee culture alive. Its strategy has three components.
First one is highest-quality coffee in all over the globe sourced from various
regions. Second is “Customer Intimacy “in the form of service. Jim Alling
Starbucks senior vice president stated that our most loyal customers visit us as
often as 18 times in a month. The third brand component was atmosphere. “People
come for coffee explained Day but the ambience is what makes want to stay”. They
are opened their franchises retails centers, office building and university campuses.
Beverages accounted for largest percentage of sales in these stores 77%. And non-
operated retail channels accounted 15% of net income. Day explained distribution
strategy as to reach the customers and serving best quality with commitment to the
value. Starbucks partners were of their employees which around 60,000. They were
offering health insurance and stock options. Company had ranked 47thbest place for
work in fortune magazine and therefore their turnover ratio of employees also low.
The company main goal is to make position lifetime job. They are delivering
service to customers in form of employees. So they are trying to train their
employees with respect to soft skills as well as hard skills.Alling explained that” to
teach the partners to connect with customers with encourage welcome them to the
store and establish eye contact, to smile and to try remember their names.” Alling
believed that it is a challenging to the baristas to create a balance between soft and
hard skills at a time. For determine the performance of the company they were
using Customer snapshot which divided into four basic service criteria Service,
 cleanliness product quality and speed of service. Starbucks not only competing
with other coffee makers regionally but also donuts and bagel chains such as
Dunkin Donuts which operated 3700 stores in 38 states. The main goal required an
aggressive growth strategy with two main driver’s retail expansion and product
development. In a retail expansion Schultz believed that “we self-cannibalize at
least a third of our stores”. So the company objective was to entirely have 15000
international stores. They were introduce new product at least one new product
every holiday. The new product heavily relay on the baristas Alling believed that
“if our partner accepted the product they would sell but if they are not excited
about it ; would not be sell “Starbucks R&D team good at collecting the market
data but company would not be fine to come up with a specific decision. According
to the market research team discovered that Starbucks brand image had rough
edges The number of respondents agreed with the statement “Starbucks primarily
about making money also building more stores. Which is highest in percentage
53% to 61%. At that point question arise were they satisfying to customer with
their expectation? The customer used to visit 18 times in a month’s reduce to the 5
times in a month.
Dilemma in Case
Starbucks failed to achieve customer satisfaction to their expectation.so as
resultantly Day had come up with a plan to invest an additional 40$million
annually in company’s 4500 stores which would allow each store to add the
equaling of 20 hours of labor a week. The idea is to improve speed of services and
thereby increase customer satisfaction”
Why dilemma exist in Starbucks?
 Starbucks failed to achieve customer satisfaction Customer satisfaction to
the customer expectation due to the rapid expansion of stores.
 They are not making proper budgets of advertising campaigns of marketing
because CFO not hired by the company. Whereas other firms average
industry investing budget 3% to 6 % on the marketing activities.
 Nature of job is complex. Partners of Starbucks were not maintain balance
between hard skills and soft skills. Baristas had worked load high and not
properly manage the relationship with the customers
 They are lacking training and development of their employee because they
believe that no matter how great it is/if our partner are not exciting it would
not sell by Alling
  They had not analyzed a data of customers in a perfect ways. SVC cards
assisted the customer data but this data would help to assist in making
decision.
 Low speed of services customized drinks slowed down the process of
delivering
 Perceived differentiation between Starbucks and others was very less.
Solution:
They are must hiring marketing staff with proper hierarchy structure they also
require chief marketing officer who can guide about the marketing plan.
In order to satisfy the customer they have to hire new baristas so that their work
load will divided into various tasks and responsibilities so that the hard and soft
skills level will be easily managed to the policies of the company( just says yes).
Allocate the money based on size of stores and number of customers, needed labor
and location.
Even if they are expanding, they have to make their customer believe that they care
about them as well.
They have to decrease the time of their service provided to customer in line from
even from 3 minutes to less.
They must higher CMO’s to cover the communication gap instead of creating three
separate groups.
Hire more barista so that their customer will be entertained in less time during rush
hours.
The data received by R&D should be used properly and on time to bring changes
to their business.
Yes. They should make investment labor as it will improve services which is the
major factor in a value preposition further 40 million result in investment of 9
thousand dollars per store(45000 stores).