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Both Julie and Mary have always considered their primary customers to be City Hall employees, thus their strategy
was to offer a tasty and healthy lunch to these workers. Jennifer decided to conduct a quick phone survey to
understand the primary customers‘ perceptions about Café Bijoux. Specifically, Jennifer sought to gather
information on how City Hall employees took care of their lunch needs, their level of awareness of Café Bijoux, and
their interest in other products/services.
To Jennifer‘s surprise, an estimated 50 percent of City Hall employees brought lunch from home, going out for
lunch once or twice toward the end of week. Some of the City Hall employees told Jennifer that they would have a
more regular need for a bagel and coffee operation in the morning, from 7:30 to 10:00 am. Approximately 70
percent of respondents did not even know about Café Bijoux. 30 percent of people who were aware of the café
indicated that they would like to see a printed menu so they could make decisions about ordering food. It seemed
that people decided on food before they decided on a restaurant, especially when in a group. They did not want to be
surprised or to have to call the restaurant to find out about the day‘s menu.
In addition to the telephone survey, Jennifer conducted a small scale taste testing of the café‘s soups and
sandwiches among other nearby office workers. The quality of food was rated very highly by people who
experienced the food. The taste testers remarked that the food was fresh, lean, and delicious and they could tell
they were eating
2. Problem Definition
Despite the current success and seemingly undisputed market position of Starbucks, the company
faces not to be underestimated challenges in the short- to medium-term. Analysts are reminded
that direct competitors, such as Dunkin Brands and McDonald’s are aiming to gain and attract
customers globally who otherwise may go to the pricier Starbucks stores.
Customers
Starbucks is catering its products to three different customer groups: kids and teens, young adults,
and adults (25-40 years). The company’s primary market comprises men and women between 25
and 40 years. They account for almost half (49%) of its total business sales.13 This age group
perceives Starbucks as a status symbol. For them, beverages and Starbucks’ merchandise is hip and
contemporary and perfectly relates with their relatively high income, professional career, and urban
lifestyle. The long-term experience with Starbucks turns this age group into frequent visitors and
loyal customers.
Young adults comprise the age group of 18 to 24 year old customers. About 40 percent of total sales
can be contributed to this group.14 Starbucks positions itself as a place where college students can
hang out, work on their assignments, and meet people. Wi-Fi access, contemporary store design,
and “cool” music help to retain young adults and eventually turn them into regular customers.
Beverages and food products are perceived as cool and merchandise as hip and must-have.
Although Starbucks is not catering directly to kids (high calorie and caffeine products), about two
percent of sales can be attributed to customers age 13 to 17. While kids usuallwy accompany their
parents (passiveness), teens use Starbucks as a place to hang out with friends. They usually order
non-caffeine beverages and foods because of how it tastes.
India is on the verge of becoming the second biggest country in terms of coffee consumption.
Starbucks arrives to India at a time when the government is trying to attract more foreign retail
investment, but is slow in loosening restrictions.48 Stringent limitations on foreign ownership have
inhibited many international companies from setting up their branches. Unlike those companies,
Starbucks seems to have a less difficult time in gaining a foothold in the highly profitable Indian
coffee market. It can retain 100 percent of ownership of its outlets with the requirement that a part
of its products come from Indian producers – which, essentially, will not be problem since the
Arabica coffee beans will be sourced from Indian farmers anyways.49 The joint venture with
conglomerate Tata Group will further help Starbucks to circumvent possible political bottlenecks.
In India, it became cool to drink coffee due to the influence of western cultures and fashionable
international brands, such as Starbucks. Moreover, coffee houses have become an alternative
sanctuary and social hangout or India’s youth in a culture that has generally shun bar-going,
particularly for young women.56 Growing disposable income, urbanization, and coffee drinking
becoming a fashion have spurred the expansion of the domestic coffee market in India. The
customer base generally comprises young age groups (15 – 30 years old), and the company who is
able to offer good coffee at an affordable price will have a competitive edge over competitors.
Store (Experience)
• Warm atmosphere with brown and green toned
interior
• Ambiance includes music, comfortable seating
for
work or socializing, and friendly employees
• Mix between classic and modern
• Fixed temperature
• Specific method of taking orders
• Coffee aroma
Student
Summary: The Experience
• Starbucks offers luxury that is readily available.
• Daily coffee without losing the indulgence of the
experience.
• Ambiance, music playing, seating, friendly people.
• Customers experience personal service.
• Only automated task should be the printing of a
receipt.
• Employees know what regular customers want.
• Grinding coffee in front of the customer.
Student
Status
Rationale
Everything starts with the menu. The menu dictates much about how your operation will be
organized and managed, the extent to which it meet its goals, and even how the building itself - certainly
the interior - should be designed and constructed.
ABSTRACT
The study is about customer perceptions about customer experience practices of Barista vs. Cafe
Coffee Day. The study was conducted in the city of Pune (India) during 01.06.2012 to
15.07.2012.For the purpose of this study Exploratory Research Design is used. Convenience
sampling method is adopted for the study. Survey method is used for collecting the data. The
data is collected through interviews with respondents from different professions, age,
occupations & also intercepts at Barista and CCD. The sample for the study is 146 respondents.
Nominal scale is used for all the variables except age, income, family size, no of children
wherein ratio scale is used. SPSS 17 versions is used. Various statistical tools like Cronbach’s
Alpha for Scale Reliability, Kaiser-Meyer-Olkin Measure of Sampling Adequacy and z test are
used for data analysis. The findings of the study reveal that of the twenty five variables
considered in the study customer’s perception is found to be unfavorable in case of four variables
viz. 1) Exterior (facade) of the restaurant 2) Enough space in the isles to move comfortably in the
restaurant 3) Scent & Perfume in the Restaurant 4) Delivery time taken for serving the products
& 5) Taste and quality of Products
8. DISCUSSION
1. Appeal of the store from outside
A good-looking façade is important as it helps stimulate desire to visit the store. Store facade
attracts attention and provides consumers an out-of-the-world shopping experience, convenience
and satisfaction.store. Store entrance makes a statement to your buyers. It sets the tone for
retailer’s products and services and also creates visual appeal to attract clients to enter in the
stores. Each store needs to constantly invest in re-inventing itself, whether in terms of display,
façade, interiors or products. The elements of store façade include height of the building,
color scheme, business sign, parking areas, the neighborhood, window displays,
illumination of the frontage, approach & the entry door of the store, to mention a few.
The CCD and Barista outlets are located on High Streets with high traffic density and
flanked by large and attractive stores selling high end branded products with eye catching
facades. The Coffee Cafes have to compete with the other stores to gain the attention of
the shoppers. Therefore it is all the more essential on the part of coffee cafes to keep the
façade more and more different, attractive, eye catching and appealing to the customers.
2. There was enough space in the isles to move comfortably in the restaurant
Isle is the place between two racks. If the space between two racks is too narrow in the
isles then it is not possible to move freely between the isles. The customers often shop
with their social groups and need personal space. Personal space is an issue when
trespassed causes customers to feel uncomfortable and frustrated. Personal space in a
retail stores viewed from the perspective of retail environment suggests that when a
shopper is bumped or jostled while looking at merchandise, may become uncomfortable,
get annoyed, lose interest, and leave the area.
Therefore provision of enough spaces for the customers to maneuver makes the
customers comfortable and results in customers spending more time in the store thereby
increasing the possibility of spending more &translating into enhanced profitability for
the stores. Since Aisles are part of the store design the same may be incorporated in the
store design stage itself anticipating future footfalls in the store.
3. Scent & Perfume in the Restaurant
Our sense of small works continuously and therefore it evokes immediate and emotional
response and as such it can be effectively used as strategic element in the store atmospherics.
Ambient scents are the general odors that do not emanate from a product but are present as part
of the retail environment. We as human beings like pleasant fragrances/odors and their presence
in our vicinity make us happy and have a positive impact on our behavior and result in a
motivated state of mind, more purchases and strengthening of bond with the store.
The intention of the customers who visit coffee cafes is to unwind, relax and spend memorable
time in the café. Therefore odors which are pleasing to sense of smell can transport the customer
altogether to a different level, motivate, spend more time in the café thereby increasing the
probability of spending more & generate referrals. The coffee cafes therefore need to take
cognizance of the impact of odors ‘on consumer buying behavior and factor it in as an important
element in the store atmospherics.
4. Delivery time taken for serving the products
Though Customers visit coffee cafes for spending time in a relaxed & leisurely manner still it is
relative to the time at their disposal. Therefore any delay in service delivery process will have a
negative impact on the customer. Customers will be satisfied if their perceived delivery-times are
shorter than their expectations. It is a common experience that uncertain waits and unexplained waits
seem longer. In a restaurant setting delays are likely to take place due to inefficiencies in the service
delivery process or circumstantial reasons like peak hours, unpredictable flow of customers,
crowding etc.
Therefore it calls on the part of the restaurant managers to remove the flaws in the delivery process in
the first place and understand the circumstantial factors that influence the customer’s reactions to
delay in service delivery and taking corrective actions can lead to customer satisfaction
5. Taste and quality of Products
We consume food to keep ourselves energized and healthy. When we look at the Indian culture,
in addition to keep us going, enjoyment-taste and quality- is one of the most important aspect of
consuming food. Given the diversity of cultures coupled with diversity in food habits from the
region to region, state to state and within the state it is evident that customers look at the quality
and taste of a given product from different perspectives. The increasing urbanization and lateral
movement of the people is making the cities and town more and more cosmopolitan.
Given the scenario it therefore calls on the part of the restaurants to have deeper understanding of
the changing tastes of the diverse customers. It is observed that other than the base product,
coffee, the coffee cafes are outsourcing other products. It is therefore calls on the part of the
coffee cafes to keep a keen eye on the taste and quality of the products leading to customer
satisfaction
2.0 Products/Services
Most adult coffee drinkers said their lifelong habit began during their teenage years. In fact,
54% said they began drinking coffee between 13 and 19. Another 22% reported their coffee
cravings started between the ages of 20 and 24. This means that 76% of adult coffee
drinkers began drinking coffee by the time they were 24. So, despite the large amount of
marketing and advertising directed at the younger age groups, savvy coffee shop owners
will not forget to cater some of their offerings to the adult and senior market. (National
Coffee Drinking Study).
The SKS coffees will offer a unique experience for coffee aficionado by offering a quiet and cozy
yet sophisticated cafe and offer a sense of refinement and peace in an otherwise hectic and fast
paced world. While other coffee shops cater to convenience with drive throughs or loud music
venues late into the night, itwill stand apart from its competitors with its quiet yet soothing
ambience, capturing a truly unique (and much needed) market niche
Coffeehouse
A coffeehouse shares some of the characteristics of a bar, and some of the characteristics of a
restaurant, but it is different from a cafeteria. As the name suggests, coffeehouses focus on
providing coffee and tea as well as light snacks. This differs from a café, which is an informal
restaurant, offering a range of hot meals, and possibly being licensed to serve alcohol. Many
coffee houses in the Muslim world, and in Muslim districts in the West, offer shisha, powdered
tobacco smoked through a hookah. In establishments where it is tolerated - which may be
found notably in the Netherlands, especially in Amsterdam - cannabis may be smoked as well.
From a cultural standpoint, coffeehouses largely serve as centers of social interaction: the
coffeehouse provides social members with a place to congregate, talk, write, read,
entertain one another, or pass the time, whether individually or in small groups.
a. Barista Coffee
Barista Coffee is a chain of espresso bars in India. Headquartered in Delhi, Barista currently has
espresso bars across India, Sri Lanka and the Middle East. It was founded in 1997, p Led by the
dynamic duo of Ravi Deol & the marketing ace Sandeep Vyas; Barista was the fastest brand to
make it to the list of super brand's and is ranked among the top 50 phenomenons that changed
India. Starbucks corporations decided to enter into an agreement that allowed Barista Coffee to
use the brand for cafes as long as it allowed Starbucks to use the brand "Barista" for brewing
equipment. Italy's Lavazza has now acquired Barista.
Barista Coffee in India can be easily called the pioneers of ‘coffee culture’ in India. Established
in February 2000 to recreate the ambience and experience of the typical Italian neighborhood
Espresso Bars. Barista Coffee aims to provide a comfortable and friendly place for people to
relax and unwind over a cup of coffee.
Ownership: Barista Coffee Company is owned by Lavazza, Italy’s largest coffee company.
Lavazza is one of the most important roasters in the world, a leader in Italy with a 46.5%
share of the retail market (in value, source: Nielsen). It operates in over 80 countries, in
the Home and Away-from-Home sectors (Foodservice, Vending and Retailing). In 2006
sales totalled USD 1.2 billion.
Outlets: Barista at present has over 170 Espresso Bars and 7 Barista Crèmes in over 29
locations: Delhi, Gurgaon, Bangalore, Hyderabad, Kolkata, Mumbai, Chennai, Pune, Ghaziabad,
Noida, Chandigarh, Mohali, Dehradun, Shimla, Mussorie, Jaipur, Kanpur, Lucknow, Bhopal,
Indore, Bhubaneshwar, Ahmedabad, Baroda, Cochin, Coimbatore, Manipal, Guwahati etc.
making it one of the largest retailers of specialty coffees in Asia. Barista further has laid
international footprints in Sri Lanka (4 outlets), Oman and UAE (6 outlets).
Ambience: Barista Coffee is not just about drinking coffee but also about the entire experience.
At Barista the ‘Joy of Coffee’ is reflected in the warm ambience, the exotic flavours and the
friendly service provided by the brew-masters. To add to the informal ambience, Barista
Espresso Bars offer games like Scrabble, Pictionary and Battleship for the guests. Barista
Espresso Bars were the first place where the customers were called by their first names to
create an atmosphere of informality and friendliness. Barista in its outlets have Wi-Fi enabled
corners for executives-on-the-go. Open seven days a week, most Barista Espresso Bars begin
brewing from 10 a.m. and are open till late night.
Coffee: Barista Coffee places strong emphasis on the quality of coffee beans and the process of
preparing, rich aromatic coffee. The coffee is created with carefully hand picked mature
cherries of the Arabica coffee plant, ensuring a uniform and high quality harvest. This 100%
Arabica coffee is sourced from Tata Coffee’s plantations in Karnataka, India. House blend beans
are sourced and roasted in India by Tata Coffee. The international coffees such as Costa Rican,
Kenyan and Jamaican Blue Mountain are sourced from the respective countries and custom
roasted in Italy.
Food: In an attempt to further enhance the experience at the Barista Espresso bars, it has
on offer a delicious snacks and dessert menu. On offer are authentic Italian food items
such as biscottis, paninis, wraps, twisters, puffs, sandwiches and other munchies to go
along with its wide coffee range. To cater to the sweet tooth, Barista also offers
mountains of ice creams, oodles of chocolate, chunks of crumbly apple pies, walnut
brownies etc.
Research shows that teen-agers form 25% of our customers while 38% of the customers are
between 20 and 24years and another 23% belong to the age group of 25-29 years. Students
and young professional comprise around 72% of our customers.
18% of the customers visit the cafes daily while another 44% visit weekly. Each café,
depending upon its size attracts between 500 and 800 customers daily, mainly between
4pm and 7 pm. Customers describe Café Coffee Day as the place they frequent most after
“home and workplace/college”. It is a place where they meet friends and colleagues, in
groups of 3 or more; a place where they rejuvenate and are free to be themselves rather
than a place to be “seen at” vis a vis other cafes.
3.0 Introduction:
A greater product quality, operational management and service reliability are
considered as the key factors in the business growth of an emerging coffee shop. It
is a proven fact that reliable products, store ambience and variety of services have
influenced the market share of the large coffee shops like Costa Coffee, Strabucks,
etc. The current market competition and the success story of the pre established
coffee shops indicate that the operational management involves flexible work
environment, applying a highest standard of service excellence to the coffee bin
purchasing, roasting and delivery freshness of the coffee. On the other hand, Mahobia
and Jain (2015) also argued that operation management not only includes the in
store operations, it also includes the positive contribution to the communities and the
business environment of the coffee shop. Thus, floor spacing and its planning and
front office services are to be well designed to generate unique service identity and
attract more customers towards an independent coffee shop.
Location of the business:
The cafe offers more than 30 seats per branch. Each table has accommodation of
three persons and if additional arrangements are required, the tables are joined to
accumulate numbers of guests as and when required
Mixed cultural customers are served in the JAVA Lounge. Different store ambience
has been made for mainly adults and old age groups, followed by young adults,
business professionals and other communities as well.
Layout:
The outdoor seating, the basement lounge promotes a quieter atmosphere and looks
perfect for making gossip with the friends, family members of business professionals.
The patrons are hit by the vibrant decor and it is accentuated by the natural light
flooding by a large front window. Each service also indicates informative offerings to
the customers as well (www.independent-birmingham.co.uk/java-lounge/.com,
2016). The overall operational strategy is based upon a few factors like inventory
management, layout plan, process orientation, quality offerings and competitive
features (refer to appendix, exhibit 2, 3 and 4).
Services offered:
It offers coffees (flat white, cappuccino or latte, etc.) and beverages (refer to
appendix 5, 6 and 7).
4.0 .0 Analysing how the operation management process supports the coffee shop:
The operational management process of a coffee shop starts with planning the initial
budget wisely, followed by identifying the required cost of opening an independent
coffee shop in a specific location (Stevenson, 2009). In the next step, the operational
management process enables the marketers to identify a suitable location, where the
customer gathering is optimum. In the third step, a business plan is established by
the marketers as a part of the operational management process. Below mentioned
processes support the operation of the beverage industry operating in the global
platform.
Location decision is closely tied to the strategy of the current coffee shop and the low
cost; convenience factor has helped the firm attracting more customers towards the
shop. In the words of Cho (2014), the individual coffee shop needs to have own real-
estate strategy for locating the company owned stores. The greater the density,
higher will be the chances of improving footfall in the store. However, the store layout
evaluation, work centre, equipment, customers or materials, combination of the
layout, cellular layout, etc. is another valuable factor that is controlled by the
operational management system (Jason and Kim, 2013). Additionally, the lesser
acceptance of credit card or debit card by JAVA Lounge helps to keep the customer
lines moving towards the order counter. The ambience, posters, seating
arrangements, power outlets for plugging in the laptops is thoroughly checked by the
operational manager, which creates higher customer satisfaction and brings the
brands towards higher profitability. The tables are checked in each ten minutes for
the cleanliness and refilling of the sugar and water in each table (Mahobia and Jain,
2015). Thus, the potential operational management system could extensively support
the customer service flexibility of a small independent coffee shop.
5.0 .0 Critical discussions regarding how the 5 performance objectives are applied to the coffee
shop:
The five performance objectives generally apply across all industry types, as it helps
to improve the quality of the services along with the delivery time and the overall
operational flexibility. In the words of Jagan Mohan Rao (2009), the five performance
objectives are quality, speed, dependability, flexibility and the cost. Through this
internal process, the current coffee shop has configured the operating environment,
so that one or more of the five performance objectives can be met.
Quality:
Speed:
A speed factor can be applied to a coffee shop irrespective of the volume and the
areas of operation. As it helps to reduce the operational cost of allocating right
resources to deliver speedy and quality services to the customers. Cunha and Salazar
(2013) also stated that the relative success of speed creates higher benefits like early
maintenance of the dependability factor. Hence, the speed objective needs to be
applied to the coffee shop, in order to attain higher service competitiveness in its
business operation.
Dependability:
The dependability is a parameter which identifies how a firm is serving the customers,
in accordance with the promises kept by the coffee shop. After placing an order, the
customers judge the performance of individual units and decide the reliability value
accordingly. Firms like Costa Coffee, Starbucks, etc. identify the dependability, value,
so that the firm’s performance can be improved and a sustainable competitiveness
can be attained. Azad et al. (2013) also stated that dependability generates greater
stability by saving time, and money. Thus, the dependability factors can be
excessively applied to the individual coffee shops, irrespective of the size and brand
expansion.
Flexibility:
The flexibility refers to the organisations’ ability to get changed in its operational
process, as and when required. In the words of Wackwitz and Lehmann (2007),
flexibility can be of varied types such as product or service flexibility, mix flexibility,
delivery flexibility and the volume flexibility. Costa Coffee one of the leading coffee
brand in the UK, adopted different flexibility parameter and the firm has improved its
sales ratio in the global market. However, one of the leading coffee brand Starbucks
has introduced a change in its supply chain management process by forming a total
systems approach, in order to manage the overall flow of information (refer to
exhibit 8). This strategy has enabled Starbucks creating a balance between the
supply and demand of the customers belongs to the beverage industry. Thus,
flexibility can be applied to the modern coffee shop marketers, to improve the
information flow of the process, thereby improving the business sustainability.
Cost:
One major operational objective of the small coffee shop could be the cost factor,
where the market competitiveness is specially based upon the cost effectiveness
parameter (Wijaya Ibr and Zailani, 2010). The appropriate cost can be identified for
producing goods and services and it could help the firm receiving a moderate return
on investment. The application of this method could create a unique identity and the
increased market competitiveness could help the firm attracting more customers
towards the brand. The cost of producing the services and products can be influenced
by the volume of production, variety, variation and visibility as well. The management
of all these factors could help the current coffee shop improving the quality, speed,
dependability and the flexibility as well. Eventually, the firm could gain external
rewards and the same could also save the operational cost, thereby meeting higher
ROI in the global operation.
However, the company Starbucks is a famous and reliable brand with high quality of
products. The company has many outlets in high class location. The employees are
well trained and provide fastest device the customers. The consumer group is always
attracted by the products and services of the Starbucks (refer to Appendix Exhibit
12). The major advantage of the company is it is developed in the high street areas.
On the other hand, Elrod et al. (2011) argued that the products of the Starbucks are
little unhealthy and costly. Therefore, it has always a threat from the new entrants.
The customer can switch the brand any time who offers cost effective and healthy
products. Despite of the disadvantages the company Starbucks target different age
group of people like youngsters, adults, and the middle age of people with several
products for the different age group. For the coffee lovers the company provides
fresh, trendy and high quality of products (refer to Appendix Exhibit 13). In the
opinion of Hawkins and Holden (2013), the enlarged product item like tea, juice,
special coffees and hot chocolate is the attractive point of the customers in case
Starbucks. High productivity is beneficial for the products of Starbucks. The children's
corner in the food items signifies its concern for child's community. Free wifi facility
for the children is the most advantageous business approach of Starbucks (Yoo,
2015). Fair trade and green coffee charity are the advanced promotional strategy of
the brand. The online or mobile coffee ordering facility helps the busy people to stay
attached to the brand. The theory of new coffee evaluation enlarges the competitive
advantages of the Starbucks in the global marketplace. The analysis of activities of
Starbucks gives a velar view of its long term dominance in the brewing industry.
Moreover, the comparative analysis reflects that the new brand JAVA Lounge Coffee
Shop requires developing in several sectors to become a stable brand in the beverage
industry.
6.0 Conclusion:
The primary assertion of the study indicates the product quality and service quality
of the coffee shop the Java Lounge Coffee. The company paid a premium price for
high quality foodie coffee beans and managed the supply chain from start to finish
without compromising the quality and reliability. The study analyses the Kaizen model
for the improvement of the supply chain model of the company. The comparative
analysis between the Starbucks and the Java Lounge Coffee shop has been assessed
in the research. Finally, a potential recommendation for continuing the improvement
of operations management process of the Java Lounge Coffee shop maintaining the
quality and reliability of the products and services is evaluated in the research.
Strengths:
Strong Market Position and Global Brand Recognition: Starbucks has a significant geographical
presence across the globe and maintain a 36.7% market share in the United States (Appendix 1) and has
operations in over 60 countries. Starbucks is also the most recognized brand in the coffeehouse segment
and is ranked 91st in the best global brands of 2013.8 Starbucks effectively leverages its rich brand equity
by merchandizing products, licensing its brand logo out. Such strong market position and brand
recognition allows the company to gain significant competitive advantage in further expanding into
international markets and also help register higher growth in both domestic and international markets.
Over the years, they have achieved significant economies of scale with superior distribution channels and
supplier relationships.
Products of the Highest Quality: They give the highest importance to the quality of their products and
avoid standardization of their quality even for higher production output.9
Strategic Analysis Of Starbucks Corporation
Location and Aesthetic appeal of its Stores: Starbucks has stores in some of the most prime and
strategic location across the globe. They target premium, high-traffic, high-visibility locations near a
variety of settings, including downtown and suburban retail centers, office buildings, university
campuses, and in select rural and off-highway locations across the world.10 This has earned them a
significant competence and advantage to be able to penetrate prime markets and tap into customers
convince factor. Their stores are visually appealing and have a ‘cool’ factor attached to it with being
designed to reflect the unique character of the neighborhood they serve in and environmentally friendly.
They provide free wifi, great music, great service, warm atmosphere and provide an environment of
community meeting spot, which forms a wider part of the ‘Starbucks Experience’. The main aim for the
firm is to make their stores a ‘third place’ besides home and work.11
Human Resource Management: Starbucks is know for its highly knowledge base employees. They
are the main assets of the company and they are provided with great benefits like stock option, retirement
accounts and a healthy culture. This effective human capital management translates into great customer
services. It was rated 91st in the 100 best places to work for by Fortune Magazine.12
Goodwill among consumers due to Social Responsibly Initiatives: Their stores are community
friendly, focused on recycling and reducing waste. They build goodwill among communities where they
operate.13
Diverse Product Mix: Starbuck portfolio of products given in Appendix 8, that caters to all age
groups demographic factors.14
Use of Technology and Mobile Outlets: Starbucks efficiently leverages technology with its mobile
application “Starbucks App’ in both apple and android software’s. They make significant investments in
technology to support their growth every year.15
Customer base loyalty: Starbucks has cult following status among consumers and they have also
implemented loyalty-based programs to drive loyalty with the Starbucks Rewards programs and
Starbucks Card. The Starbucks Card is a value card program that provides convenience, support gifting,
and increase the frequency of store visits by cardholders and integrated with their mobile application.16
Weaknesses:
Expensive Products: While Starbucks does differentiate their products with being highly quality
couple with the whole ‘Starbucks Experience’, in times of economic sluggishness, consumers to have so
switching costs to competitor’s products with lower prices and forgo paying a premium. These premium
prices could also pose some weakness for it to succeed in developing countries.
Self-Cannibalization through overcrowding: By aggressive expansion and high saturation due to
overcrowding in the market leads to self cannibalization and diminishes long term growth targets of
Starbucks. This is happening especially in the United States where Starbucks operates 8078 stores.17
Overdependence in the United States market: In line with self-cannibalization of the US market with
8078 stores, Starbucks generates a huge percentage of their total revenue from the US and this makes it
very sensitive to prospects of the US economy and growth.
Negative large corporation image: Like any large corporation, Starbucks does come under increased
scrutiny and have to invest in corporate social responsibility activates and maintain tight control over
labor practices.
American/European coffee culture clash with that of other countries: Starbucks coffee culture may
not widely accepted in some countries as part of their international expansion strategy.
Threats:
Increased Competition: This is by far the biggest threat that Starbucks faces with the market being at
a mature stage, there is increased pressure on Starbucks from its competitors like Dunkin Brands,
McDonalds, Costa Coffee, Pete’s Coffee, mom and pop specialty coffee stores. Dunkin Brands had at its
main threat in the US market by trailing Starbucks with a 24.6% share. (Appendix 1)
Price Volatility in the Global Coffee Market: There has be significant fluctuations in the market
prices of high quality coffee beans, which Starbucks can’t control.
Developed Countries Market Saturation: Starbucks derives a significant amount of its revenue from
the development markets and there is increased market saturation currently.
Developed Countries Economy: In an increasingly economically integrated world, an economic crisis
like the one in 2008 could have a trickle down effect from the developed markets to the developing
markets. This threat would hurt revenues for Starbucks as consumers shift away from premium product
mix to stay in limited budgets during economic hardships.
Changing Consumer tastes and lifestyle choices: The shift of consumers toward more healthy
products and the risk of coffee culture being just a fad represent a threat for Starbucks going into the
future.
4) Recommendations:
Starbucks biggest growth is in its International segment. The emerging markets of Brazil, India,
China, South Africa and Mexico with a growing middle-class population continue to offer significant
opportunities to add new stores and serve more customers. Starbucks has already made significant inroads
into the Chinese market but there still is a lot of untapped potential growth in these markets. Starbucks
should grow in these emerging markets by winning locally Starbucks must remain relevant to the
customer in order to grow in these markets, and its management teams should have the freedom to operate
within their overall framework to tailor store format, introduce local product mix and price points to the
needs, lifestyles and tastes of each individual market/community.
Under Starbucks international strategy, it should transfer its core competencies and capabilities
country to country and then gradually build profit drivers in several countries as it continues its global
expansion in an organic way.
Starbucks has great growth opportunities in Tea and Fresh Juice products mix. They should build up
these products along the same line of their core coffee products.
Also as consumer tastes and lifestyle shift towards more snacks and beverages options, Starbucks
should tailor its menu’s and expand to give more healthy product offerings in its mix.
Coffee beans are a significant input into Starbucks value chain and there have been wide fluctuations
in the market prices of high quality coffee beans. Starbucks could mitigate this price volatility risky by
implementing an effective hedging strategy like future contracts to lock in their estimated quantity inputs
at a low swing price so that the future costs can be managed to a greater extent.
Starbucks growth strategy in the saturated U.S. market should focus on getting additional penetration
into untapped rural markets.
Another growth sector is its packaged coffee packets and iced beverage products. Starbucks should
build better relationships with big box retailers to get premium shelf space and increase the efficiency of
this distribution channel.
From their 10-K’s, we can see that Starbucks invest very little in advertising and marketing
initiatives. It would be recommended that Starbucks make significant investments in advertising and
marketing initiatives in the face of increased competition in the market.
Further build and retain customer loyalty, by building on beta concept of on-the-go home delivery.
Their mobile apps business drove 10% of the sales in the US, so it would be recommended for
further building to stream lining ease of use and payment process which would help drive more
customers, decrease wait time in stores and increase efficiency. Integrating Starbucks loyalty program
with the mobile application would also be recommended.
Starbucks remains on track to open more than 5,000 stores in China by 2021 and will continue
to drive market-leading and locally relevant inovation in coffee, store design and digital
Type of Segmentation
segmentation criteria Starbucks target customer segment
US, Canada, Latin America, Europe, Middle East, Africa, China and Asia
Region Pacific region
Geographic
Density Urban
Age 22 – 60
Demographic
Occupation Students, employees, professionals
Degree of
loyalty ‘Hard core loyals’
A place to work
Behavioral Benefits sought
Personality Easygoing, determined and ambitious
Mainstreamer
Aspirer
Succeeder
Explorer
Reformer
Psychographic Lifestyle[1]
Fluctuating commodity prices in 2011 made coffee purchasing exceptionally challenging for
specialty coffee roasters and retailers, including Starbucks. Despite the volatile market, we
were able to continue our commitment to buying and serving high-quality coffee that is
responsibly grown and ethically traded through our responsible coffee purchasing practices,
farmer support centers, loan programs and environmental efforts with Conservation
International (CI).
6.4. Current Pricing Strategy
Starbucks sets its prices on a simple idea: high value at moderate cost. When people feel like
they are getting a good deal for their money, they are more likely to pay a higher cost. Quality is
key. Starbucks has to maintain strict quality controls in its coffee sourcing as well as in its
customer service and peripheral products to justify its costs.
Starbucks products are priced higher than most other brand coffees due to the image its brand
carries. However, they knew just how to put a higher price and yet get their targeted market to
buy their coffees without thinking twice. Starbucks began to offer P55 bottomless 8 oz. cup of
coffee, with unlimited refills that cost approximately 50 cents less than any other Starbucks
products. They also implemented “value strategies” that emphasized more on inexpensive
products rather than being perceived as unaffordable to price-skittish consumers. For example,
the introduction of the P215 “breakfast pairings,” including popular breakfast items paired with
a coffee, and highlights P110 brewed coffees instead of the more expensive specialty drinks.
When quality becomes the desire of the target market, then pricing is no longer much of an
issue. That is somewhat the case for Starbucks. They have created such an ‘experience’ – the
‘Starbucks experience’ – that most of their customers go back to them for their coffees because
of the ambience, comfort and their great coffee, even if they could get an almost similar coffee
for half the price at some other coffee outlet.
Another promotional implementation is that they deliver coffees to offices or work places
without any coffee size restrictions. There are very few or rare coffee outlets that are willing to
deliver without placing any conditions or restrictions.
Thirdly, they appeal to a diverse customer base by offering international teas and coffees to
accommodate those customers that want a taste from home or for locals that enjoy tea.
Lastly, using the aid of performing a ‘good deed’ as a means for promotion – Starbucks
contributes to several non-profit organizations as a way to improve brand image and awareness
in local communities.
9. Marketing Strategy
Starbucks has a distinct marketing strategy that starts right from its products. It has
differentiated itself from the others based on the premium quality of its coffee. From its
humble origins in Seattle, the brand has spread throughout the world to become the number
one coffee retail brand. It’s an international brand and the newest chapter in its growth story is
the Asian part. Starbucks has used the formula of quality based product differentiation which
has resulted in very high level of popularity and loyalty. However, its entire marketing strategy
is not limited to products only but Starbucks is equally unique in other aspects of its marketing
and promotion strategy. Still, product quality must be considered the central pillar of its
marketing efforts. Great quality has several benefits. First of all it helps with reputation
management. Great taste equals higher popularity. As a brand, Starbucks has acquired great
reputation over time for the quality of its products, their flavor and for unequalled customer
service. A lot of marketing takes place at those stores and through brand merchandise. Great
customer service has also added to the brand’s positive reputation. Its new focus on marketing
and advertising has resulted in better sales and increased brand recognition.
Element 1: Plan coffee shop facilities
1.1 Plan coffee shop operations according to available
facilities and customer expectations
The type of business will be limited by the facilities that are available in the business and this
can be less than the expectations of the customers.
Floor space
The floor space available determines how many customers will be able to sit in and enjoy the
ambience of the coffee shop and it is this section that will earn the income for the business.
Some very successful coffee houses have minimal seats.
Their trade is built on take away business.
Quick service
Quick turnover
Good quality ingredients
Efficient staff
Affable staff.
A coffee shop that opens at 7am will require staff to be there by 6.30am.
Peak times will be for coffees purchased by customers on the way to work.
Customers may come in for breakfast items - Take away of eat in.
After 9am trade may slow for 1 hour before mid morning coffee drinkers come to purchase.
Lunch time is the peak of the day lasting maybe 2-3 hours.
Slow down after 2pm.
Keep open and serve until 4pm close.
Final 30 minutes to do final clean in preparedness for next day‟s trade.
So when is staff required?
1 front of house to open
1 in Kitchen.
Physical Evidence
Starbucks is known for its ambience and personalized experience provided. We want to suggest mainly
two accommodations in it.
For the interior decoration of the store, there can be an option of indigenization. But in India, people are
more inclined to foreign culture and treat it as a status symbol. This was evident in the conducted depth
interviews. So, they can focus more on bringing American store design to India.
We also suggest that efforts should be made to reinforce emotional cord with customers. This can be
done by giving personalized attention to the customers and giving them a sense of ownership. This can
be achieved by providing a lounge to the frequent customers in the same price range.
Starbucks currently provides customers with personalized name written on their mugs. They should
continue it in India also, as it is highly appreciated by customers.
Price
Starbucks is positioning itself as a “Premium Quality Coffee Provider”, however, according to our
primary research, Starbucks outlet in New Delhi was “strongly associated” with “long queues”, and we
believe this is huge de-positioning factor, given coffee purchases are generally light touch, and such mis-
events, could prevent customers from coming to Starbucks.
In order to avoid this rush at peak hours, we are proposing a differential pricing strategy, wherein we
will incentivize “morning/afternoon” visits via discounted menu. This will help off-load consumers to off-
peak hours. Moreover, this lunch time off-loading will also encourage managers to schedule client
meetings in Starbucks, thereby, helping build longer relationships with this target segment.
Promotion
Customers Engagement and Long Lasting Impact to make a winning entry
Beverages come under a convenience good category and to drive brand preference in a convenience
category, there is a need for deeper emotional appeal.
This can be achieved by associating it with events & experiences. For example Starbucks can celebrate a
‘Week of Joy’ between Christmas and New Year. Christmas is considered a festival of giving gifts and
New Year for making new resolutions. These two emotional appeals can be used with a slogan of ‘This
time gift your time’ and by associating with ‘Caring’ and ‘Responsible’ attributes of Starbucks Brand
Concept Mapping.
Through massive advertisements via e-mails, Facebook etc. customers can be encouraged to
spend time and gift Starbucks mugs with personalized name and message for the loved ones
written. Customers can be encouraged to come up with personalized messages for the others in
their group visiting the outlets, which can be delivered by writing them on the cups that are
used to serve coffee. “Heart’ and ‘Soul’ emails sent by Starbucks and blogs where customers
share their experiences in the ‘Joy of Week’ can be used for advertisements.
Discount coupons can be distributed in this week in outlets of Archies, with slogan ‘This Time Give your
Time’. In-store decorations can also be done with ‘Hangout’ theme and small games can be organized
like “how much you know your friend?” and rewarding the winners with Starbucks coffee packs. This will
help to have a long lasting impact on the customer’s mind.