Rachel Jane M.

Tan BSBA-MM 3rd yr

Case Study : Starbuck Management Customer Service and Digital Marketing

Introduction

Starbucks Coffee can be considered one of the largest coffee companies in the coffee industry.
By occupying almost half of the market share, Starbucks Coffee has made a name for
themselves. Along with the Starbuck Coffee Brand, Starbucks Coffee owns, Seattle’s Best
Coffee, Teavana, Tazo, Evolution Fresh, La Boulange, Ethos Water and Torrefazione Italia Coffee
(Starbucks Company Profile, 2017). This report analyzes the strategic methods StarbucksCoffee
currently is involved in. Then these strategies are analyzed through various strategic matrixes
designed to identify new strategic strategies for the company to peruse. The matrixes include a
SWOT analysis, Five Forces analysis, Confrontation Matrix, Impact/Probability Matrix,
Positioning Map, EFE and IFE Matrix, IE Matrix, GE/McKinsey Matrix, Industry Life Cycle, SPACE
Matrix, Grand Strategies Matrix, and the QSPM Matrix. Through the combined matrixes it can
be concluded Starbucks Coffee holds an excellent strategic position, but there can be room to
improve upon. Through various investment such as market penetration and product
diversification Starbucks Coffee can still claim new profits in an industry that is reaching its
maturity.
Point of View

Starbucks Coffee was started in 1971 as a roaster and retailer of whole beans, ground coffee,
teas and spices in a small store in Seattle’s Pike Place Market (Starbucks Company Profile,
2017). They were named after the first mate in Herman Melville’s Moby Dick and their logo is
inspired by the sea siren from Greek mythology. Now Starbucks Coffee has a customer base of
over a million who come every day to purchase quality coffee. As of January 1, 2017, Starbucks
Coffee has opened over 25,734 doors inviting their guest to enjoy a delicious beverage or baked
good. Starbucks Coffee buys their coffee beans from coffee farms in Latin American,Africa and
Asia where their special buyers will select high quality beans. Then the master roasters bring
out the balance and rich flavor of the beans through the signature Starbucks Roast.In 1992,
Starbucks went public and was listed on the NASDAQ under the ticker SBUX(Starbucks
Company Profile, 2017). They offered their common stocks at $17 per share. By the close of the
first trading day, the stock’s value rose to $21.50 per share. Starbucks Coffee believes in the
importance of a company that can balance between profitability and a social conscience. The
company achieves this through their practices of ethical sourcing, community involvement and
environmental stewardship. Starbucks Coffee practices in responsible purchasing, supporting
farmer loans and forest conservation programs. This ensures a better future for the farmers and
a more stable climate for the plants. It also creates a long-term supply of the high-quality bean
that has been used for over 40 years.Currently Starbucks has a range of products that can be
used in stores, at home, or on the go. Starbucks Coffee famously sells more than 30 blends of
coffee and even has single-origin premium coffees (Starbucks Company Profile, 2017). They sell
handcrafted beverages, which include espresso beverages, Frappuccino’s, but also smoothies,
teas and refreshers. Additionally, they sell merchandise such as coffee and tea brewing
equipment, Verismo Systems by Starbucks, mugs and more. Guest can also enjoy fresh food
such as baked pastries, sandwiches, salads, bistro boxes and more2
Time Context

This doesn’t mean here isn’t room for them to improve to enhance the company’s brand and
wealth. One of the main issues most matrixes identified is a need to invest in product
development and market penetration. Starbucks has a variety of products within store
operation include merchandise and baked goods. They have venture into the at home market
by selling products such as their coffee and teas for at home enjoyment and the ready to drink
line. By investing in selling other products such as their tumblers or accessories at local
groceries they could see a potential increase in sales. Additionally, if Starbucks Coffee is feeling
completely confident, they could potentially enter a new industry to diversify their company
portfolio.Additionally, the matrixes identified market penetration as the biggest strategic
strategy 3

Statement of the Problem

Will the allure of gourmet Starbucks coffee be maintained or will more appealing options
threaten the success of Starbuck‘s primary product? Can advertising significantly help
maintain Starbuck‘s image? A good place to start involves evaluating the current market for
coffee and do a competitive analysis to see the market performance and to determine the
extent to which designer coffee appeals to current consumers.

Statement of the Objective

Analysis from all the matrixes together has determined that Starbucks Coffee is currently
strategically doing well. This doesn’t mean here isn’t room for them to improve to enhance the
company’s brand and wealth. One of the main issues most matrixes identified is a need to
invest in product development and market penetration. Starbucks has a variety of products
within store operation include merchandise and baked goods. They have venture into the at
home market by selling products such as their coffee and teas for at home enjoyment and the
ready to drink line. By investing in selling other products such as their tumblers or accessories
at local groceries they could see a potential increase in sales. Additionally, if Starbucks Coffee is
feeling completely confident, they could potentially enter a new industry to diversify their
company portfolio.4

Area of Consideration (SWOT ANALYSIS )

Starbucks has a matrix organizational structure which combines different features of basic
organizational structures (Meyer, 2017). The organizational structures are broken down into
functional structure, geographic divisions, product-based divisions, and teams. The functional
structure is grouped based on their business functions. The HR department,
financedepartment, and marketing department are located at their corporate headquarters.
They will issue policies and activates that are applicable and implemented through all their
stores. This structure features a top-down monitoring and control.At the current moment the
company has three regional divisions for their global market, China and Asia-Pacific, Americas,
and Europe, Middle East, Russia and Africa (Meyer, 2017). Within the United States the
geographic divisions are broken up further to include Western, Northwest, Southeast, and
Northeast. For the geographical structure each division has a senior vice present. Each store
manager has to report then to two supervisors, the geographic head and the functional head.
This was developed in hopes of providing geographic support for geographineeds. Product-
based division splits up the structure into three products, coffee and related products, baked
goods, and merchandise. This allows the team to focus on a certain product line. Lastly, the
teams structure is designed more for each individual store. The company has the teams
organized to deliver their goods and services to the customers. This allows them to provide an
effective and efficient service.

Strength
Starbucks Coffee Company is a well-established and well branded name. There top
threestrength included strong brand image, operating efficiency and strong growth leading to
superior financial performance, and strong customer loyalty. These factors are considered their
strongest strengths because it allows them the ability to drive a higher margin on their profit.
Their strong brand image brings their customers to their place while their operating efficiency
allows them to gain a profit on their product margin. Customers are coming to Starbucks Coffee
for a combination of these strength and will continue to come because of these.

Weakness

With any company, Starbucks has a few issues with their production that could be driving guest
away or could be causing potential guest to shop alternatives. There top three weaknesses
include being highly dependent upon one product, dependent upon the American segment,
and their higher price points. Being highly dependent upon coffee beans could be detrimental
in many scenarios. If an embargo is placed on coffee beans, the cost of coffee beans rises or an
environmental disaster occurs and coffee beans production is decreased, Starbucks main
stream of revenue is cut drastically. Being dependent on the American segment is a weakness
since Americans go through phases and trends. Additionally, by not being heavily invested in
other countries Starbucks Coffee is missing money from potential sales. Lastly, higher price
points might drive away customers who just want a cheap coffee and don’t care about the
qualityUltimately Starbucks Coffee hopes to overcome these weaknesses through their
combined strengths and opportunities.

Opportunities

There are many potential strategies Starbucks Coffee can explore to bring more revenue to
their company. The top three opportunities identified is expansion in Asia, the Middle East, and
Africa, diversification of product mix, and vertical integration. As stated in their
weaknesses,Starbucks is heavily dependent upon America. Since Starbucks Coffee already is in
operation in these places the risk with any foreign market is sustainably lowered and they
would be rewarded with new sales. By diversifying their product mix, Starbucks Coffee would
not need to beheavily dependent upon the coffee bean and could survive any unforeseen
circumstances. Lastly, with vertical integration Starbucks Coffee could ensure quality products
and save costs whenpurchasing their beans since they would be growing it themselves. These
are some potential opportunities to solve some issues they are curently facing in their
weakness.

Threats

The threats Starbucks Coffee is facing are the most important to identify since these are factors
they have no ability to control. The top three threats identified are competition from lowcost
coffee sellers, the independent coffee house movement, and rising cost of the coffee bean.
Low-cost sellers are a threat since there is no switching cost for buyers in this industry. Buyers
who simply want a cheap coffee at a cheap price will go to the low-cost sellers rather than
spending more money since the opportunity cost is beneficial for them. The independent coffee
house movement is a trend with millennial who prefer to go to quality coffee houses instead of
fast coffee stores. Starbucks Coffee in a sense is too “mainstream” and popular which makes
these independent coffee houses more appealing. Lastly, the biggest issue is the current rising
6cost of the coffee bean. As stated in weaknesses and opportunity, the rising cost of coffee
beans is bad for Starbucks Coffee since their so heavily dependent upon it. These rising cost will
either force Starbucks Coffee to raise their prices or will cut into their margin. Threats are the
most distressing factor since a company could be doing everything right, yet these factors could
still cause them to go out of business.

Alternative course of action

Starbucks Coffee’s marketing strategy has been successful for them allowing them to develop a
strong brand image and loyal customers. This is due in part to their ability to switch up their
marketing strategies over the years. Their marketing technique is individualized to fit the
promotion of the Starbucks brand while applying the unique concept it was built on (Starbucks
Marketing Strategy, n.d). Three of their top campaigns include the Perfect Cup of Coffee, Third
Place, and Brand Marketing.The Perfect Cup of Coffee campaign focuses on the quality of the
product in relation to their price (Starbucks Marketing Strategy, n.d). Starbucks Coffee has a
history of placing emphasis on their quality product. Their coffee may be priced slightly higher
than others, but will leave consumers satisfied with their coffees rich, delicious taste and
aroma. The Third Place strategy was Starbucks Coffee idea of making Starbucks the third place
to go in between work and their house. By creating a unique and relaxing experience and
atmosphere, Starbucks Coffee realized this is one of their strongest concepts attached to their
company in which their customers have found a lot of value in. Lastly, their Brand Marketing is
based mostly on word-of-mouth advertising. This type of advertising is beneficial for the
company since it is completely free advertising. Starbucks Coffee does this by allowing their
high quality product and services speak for themselves.7

Strategy formulation

There are four basic functions of management: planning, organizing, directing, and controlling
(Kipley & Jewe, 2014). Planning involves the ongoing, comprehensive process that 7requires
management to evaluate where the company is and where they should be in the future.
Organizing includes an analysis of the different divisions or departments to develop an optimal
staff, distribution of information, delegation of authority and responsibility, and maintain
relationships. Directing oversees the behavior of the staff through motivation, communication,
department dynamics, and departmental leadership to help achieve company goals as well as
the individual employees own personal or career goals. Controlling, the last function, is an
ongoing process that involves establishing performance standards based on the company’s
objectives and evaluating and comparing actual job performance to establish
objectives.Starbucks has a matrix organizational structure which combines different features of
basic organizational structures (Meyer, 2017). There organizational structure is broken down
into functional structure, geographic divisions, product-based divisions, and teams. When CEO
Howard Schultz was working for Starbucks he found he had the impulse to micromanage

(Lebowitz, 2016). For his management team he recruits top performers and encourages them
to step up and push back against him when they don’t agree with his ideas. He believed the
most important task as a leader was to teach people how to think and ask the right questions.7

Action Plan

In 1980, Dr. Michael E. Porter developed a tool for companies to analyze theirorganization’s
industry structure through strategic decision-making (Kipley & Jewe, 2014). This model was
named the Five Competitive Forces Model and was published in his book, Competitive Strategy:
Techniques for Analyzing Industries and Competitors. With this model, Porter has industries
identifying their industry structure and the way their company can change to best meet the
opportunities and threats in their external environment. With this information a company can
determine the intensity of competition within their industry and then can determine the
profitability and attractiveness of their industry. The five key competitive forces Porter
identifies is bargaining power of suppliers, bargaining powers of buyers, threat of new entrants,
threat of substitutes, and industry rivalry (Kipley & Jewe, 2014). Starbucks Coffee Company
belongs in the coffee industry which has a couple of power player already in play, not including
the new small coffee house movement America is facing (Greenspan, 2017). To ensure
Starbucks Coffee stays on top, they must be successful on their effectiveness in addressing the
negative impacts of the five forces of its industry’s environment8

Conclusion

In conclusion, the background of Starbucks Corporation reveals its presence in the market since
1971. Schultz brought a transformational leadership style to Starbucks Corporation by keeping a
clear path of the company’s direction by following the vision and mission statement and serving
as an organizational role model. Starbucks Corporation is a solid and sustainable organization in
the global coffee market because the company strives to surpass excellence by meeting the five
factors of spirituality at work: (a) strong leadership position in the market, (b) organizational
financial sustainability, (c) suitable work environment, (d) innovation commitment, and (e) CSR
requirements. Throughout the years Starbucks Corporation has shown a consistent pattern of
re-engineering the company. The new growth platform of Starbucks Corporation is by
supporting company’s ethical values and branding organizational demand. Starbucks is a global
company that meets the demand for innovation at a global level. As a result, Starbucks
continues to accelerate its international presence. In essence, it continues to be one of the top
leaders in the coffee industry and a customer oriented organization. Starbucks possesses the
intellectual creativity needed to meet the company’s goals and objectives. For example, its
successes rely on principles and practices by surpassing challenges in the local and global
markets. Starbucks has 141 coffee shops across Malaysia and more than 700 coffee shops
around the Southeast Asian region, including the following countries: Indonesia, the
Philippines, Singapore, Thailand, and, most recently, Vietnam.

Online references

Dalavagas, I. (2016, January 11). SWOT Analysis: Starbucks Corp. Retrieved April 28,
2017,fromhttp://www.valueline.com/Stocks/Highlights/SWOT_Analysis__Starbucks_Corp_.px#.
WQNqhHeZPeS

De'Gain, L. (2013, June 28). The Operation Management Strategies of Starbucks. RetrievedApril
28, 2017, from https://www.slideshare.net/LulettaGain/final-starbucks-24693769

Greenspan, R. (2017, January 31). Starbucks Coffee's Five Forces Analysis (Porter'Model).

Retrieved April 28, 2017, from http://panmore.com/starbucks-coffee-five-forces-

analysisporters-model

Gregory, L. (2017, January 31). Starbucks Coffee's Vision Statement & Mission
Statement.Retrieved April 28, 2017, from http://panmore.com/starbucks-coffee-vision-
statementmission-statement

Lebowitz, S. (2016, March 03). 2 brilliant management strategies Howard Schultz used to
buildthe Starbucks coffee empire. Retrieved April 28, 2017,
fromhttp://www.businessinsider.com/management-strategies-of-starbucks-ceo-
howardschultz-2016-3

Let's Look At Starbucks' Growth Strategy. (2016, September 19). Retrieved April 28, 2017,
fromhttps://www.forbes.com/sites/greatspeculations/2016/09/19/lets-look-at-
starbucksgrowth-strategy/2/#8f8a9bc57816
Lombardo, J. (2017, January 31). Starbucks Coffee SWOT Analysis. Retrieved April 28, 2017,from
http://panmore.com/starbucks-coffee-swot-analysis10

Meyer, P. (2017, January 31). Starbucks Coffee Company's Organizational Structure.

RetrievedApril 28, 2017, from http://panmore.com/starbucks-coffee-company-
organizationalstructureStarbucks Company Profile. (2017, January). Retrieved April 28, 2017,
fromhttp://www.citationmachine.net/apa/cite-a-website/manual

Starbucks Marketing Strategy Unconventionally Effective. (n.d.). Retriev10