Suyash Bajpai

M057-15
Assignment 1 Starbucks
A. Based on the memo AND any other information you can
collect ( eg. online, articles etc. ) , I would like you to :
- Describe the Value proposition of Starbucks initially, when
Starbucks was being run by Howard Schultz and the number
of outlets was low.

At the time when Starbucks had lower number of stores, its value proposition
focused on a brand strategy that was comprised of three components. The brand
strategy was best captured by the phrase live coffee. Starbucks wanted to
create an experience that people would want to incorporate into their everyday
lives.
The first component was simply the coffee. Starbucks offered the highest-quality
coffee in the world and controlled much of the supply chain as possible to help
insure that. The high quality product was sourced from Africa, Central America,
and the Asian-Pacific areas. Starbucks worked directly with growers to purchase
green coffee beans, it oversaw the custom-roasting process, and it controlled
distribution to retail stores around the world.
The second brand component was service, or what was also referred to as
customer intimacy. This included simple things such as remembering
someones name or drink order. There was a bar counter in every single store
where professional baristas (experts in coffee preparation) were grounding coffee
beans, brewing and serving fresh coffee. Barista was supposed to know all the
regular customers by their names, and, also, to remember their preferences.
The third brand component was atmosphere. Starbucks stated that people came
for the coffee but stayed for the atmosphere. Therefore it was important to
provide a comfortable atmosphere that allowed a sense of community. All of
these things combined led to a compelling value proposition.
Howard Schultz offered a democratic coffee house, which worked on the principle
of self-service. Here, the customer had a freedom of choice: the type of a drink
(not just coffee, but latte, cappuccino, espresso, mocha, macchiato and other
alternatives), the size of a cup, and the type of milk (regular or fat-free)
completely depended on a choice of the visitor. This approach gave the
customers an opportunity to order a quite individual drink.

Describe how the value proposition is now

Starbucks in 2007 is more of a chain of stores than the more appealing third
place for its consumers. Things like Wi-Fi, own label music were added to the
value of Starbucks shifting the focus from just coffee. Starbucks increasingly
appealed to grab and go customers for whom service meant speed of order
delivery rather than recognition by and conversation with a barista. Starbucks
introduced Expresso machines which were fast and decreased the service
time but they lacked the customer involvement which was with the La
Marzocca machines. The height of the new machines blocked the visual sight
line the customer previously had to watch the drink being made, and for the
intimate experience with the barista. Starbucks introduced many new
products to broaden its appeal. These new products undercut the integrity of
the Starbucks brand for coffee purists. With increasing customer base baristas
now didnt have enough time to socialize with the customers like it used to be
earlier. Opening of too many stores resulted in cannibalization of existing
stores and commoditization of its brand as mentioned in the memo of Howard
Schultz. The aroma of coffee beans being grinded in the store was no more
present after the introduction of flavour locked packaging.

B. What were the reasons for the change in the Value

Proposition?
The company was too worried about quickly expanding and they lost track of
customer satisfaction, and delivering that strong customer intimacy that
Starbucks believes in. They were targeting customers who wanted quick
coffee rather than a holistic caf experience. In order to scale up and to
increase the speed of service and efficiency these changes were introduced.
To supply fresh roasted coffee to all the stores, Starbucks introduced flavour
locked packaging.

C. Now take ONE Indian caf business (can be a standalone or a

chain; local store or national or International) which you are

familiar with and describe the value proposition of this
business.
Caf Coffee Day: It is mainly targeted towards the youth and the average
middle class Indian consumers with value for money proposition. To cater to
different customers and different needs CCD operates three models of stores:

Caf Coffee Day Express

Targeting youth and middle class. Having benefits such as relaxing
environment, good price of products, and convenience of coffee with
food.
Caf Coffee Day Lounge
Targeting families, upper middle and upper class. Having benefits like
better in store experience than the express stores, more space and
better quality and variety of food and coffee.
Caf Coffee Day Square
Targeting affluent and international customers and connoisseurs. It
offers an international caf experience in India.