Starbucks Value Proposition Analysis

Founded in 1985, Starbucks is one of the largest coffeehouse companies in the world with over 16,000 stores in 50 countries. This report evaluates major internal and external factors affecting Starbucks using various analytical techniques. Based on the Starbucks brand in UK, it identifies suitable marketing strategies for Starbucks to expand its business in the UK market within the next two years. In line with the chosen marketing strategies, recommendations for the marketing mix are discussed.

Starbucks Corporation, generally known, as Starbucks Coffee is the leading retailer and a brand of world’s forte coffee in the world, with more than 15,000 retail locations in North America, Latin America, Europe, the Middle East and the Pacific Rim, wherever in this world where premium quality coffee is in demand. Starbucks is the largest coffeehouse company in the world ahead of UK rival Costa Coffee, with 20737 stores in 63 countries and territories, including 11910 in the United States, 1496 in China, 1442 in Canada, 1052 in Japan and 772 in the United Kingdom. The first Starbucks was open in 1970. The name was inspired from Herman Melville’s Moby Dick, a definitive American novel regarding the 19th century whaling industry. The nautical name matches seamlessly for a store that imports the world’s finest coffees to the cold thirsty people of Seattle. In May 1998, Starbucks have finally successfully entered the European market through its acquirement of 65 Coffee Company stores initially originated from Seattle in the UK. Both companies shared a common culture, focusing on a great commitment to customized coffee, similar company values and a mutual respect.

Starbucks has created a competitive advantage with their product quality by setting themselves apart from their competitors. “The Company has stayed with the upper-scale of the coffee market, competing on comfort rather than convenience, which is the case with its closest competitors, McDonald’s and Dunkin Donuts” (Mourdoukoutas, Panos). Consumers believe they are receiving a better product and experience when they purchase from a Starbucks as opposed to another large food service company that may sell coffee.

starbucks Corp., an international coffee and coffeehouse chain based in Seattle, Washington, has expanded rapidly since its opening in 1971. These outrageous success was due to its well-developed strategy vision which lay out the company's strategic course in developing and strengthening its business. Starbucks is a global corporation that sells authentic coffee in 30 countries, reporting revenues of nearly $5.1 billion in 2006. The main goal of Starbucks is to embrace diversity by applying the highest standards of excellence. Starbucks strives to perfect the relationship with the working class by making the service as fast as possible because they believe that every customer has their own personal rate. One

Additionally with its growth strategy Starbucks seemed to have lost the ability to communicate its values to its customers. Note that Starbucks research team discovered that between 2000 and 2001 there was an increase in customers who felt that Starbucks primarily cared about making money and building more stores. This is an indication that the company lost sight of the components making up its value proposition. Customer service was a major component of Starbucks value proposition but according to the research team by 2002 it discovered that Starbucks was not meeting expectations in terms of customer satisfaction. In fact the data collected by the research team indicated that 10% of customers would like to see improvements in service especially speed of service and 19% would like to have friendlier more attentive staff.

ticket size) X (4.4 customer life years)] $921.78. Calculating sales amount for the highly satisfied customer using the same method shows an amount of [(7.2 visits/mo) X (12 months) X ($4.42 avg. ticket size) X (8.3 customer life years)] $3,169.67. The sales figure for the highly satisfied customer is nearly three and a half times as much as the satisfied customer. This is why it is very important for Starbucks to figure out how to provide more customer satisfaction. The company needs to do research to find out if quality of service has actually declined. There is always the societal perception that a large mega brand is incapable of delivering customer intimacy. This perception is not necessarily a foregone conclusion. It’s just a matter of Starbucks collecting accurate information regarding both quality and quantity of its customer service. The company needs to take a look at itself and determine if its customer service strategy had changed from 1992 to 2002. This is an era indicative of the massive growth. Starbucks needs to answer the question, “Did we lose our focus on customer service quality by concentrating too much on opening more stores?”.

Starbucks’ lead in the specialty coffee industry exemplifies the result of deftly executing a well-planned business strategy. Moreover, Starbucks is well positioned for what is expected to be a continuing rise in the popularity of specialty coffee products. The question before Starbucks’ leadership, however, is what avenues will lead to Starbucks’ goal of remaining true to its core, the highest quality coffee products while providing a “total coffee experience” for its customers?

Starbucks faces a difficult and controversial management challenge. The company’s most recent market research has revealed unexpected findings implicating that Starbuck is not always meeting customer’s expectations in the area of customer satisfaction. The purpose of this memo is to analyze and provide recommendation on whether or not the company should go forth with a $40 million investment in additional labor in the stores. This $40 million investment is necessary in order to bring service time down to a three-minute interval and ultimately increase customer satisfaction. A marketing strategy and corresponding recommendation will be provided for your approval.

Starbucks has discovered that they are not always meeting their customers’ expectations in the area of customer satisfaction. Starbucks has to come up with an action plan to address this issue, considering its significant correlation and impact to sales and profitability.

In general the coffeehouse industry in the United States was experiencing an increase in coffee consumption per capita due to the “Starbucks effect”. At this time Starbucks was operating approximately 20,000 stores in the United States and was living a fast expansion strategy worldwide.

The next exhibits show payroll structure and income volume per location in 2002 and product mix for North American company-operated stores. Exhibit 6 shows US retail coffee market predictions till 2005 years. It clearly shows changing in Americans’ coffee drinking style into specialty coffee. It is very important for Starbucks because company’s main market is specialty coffee. Next of the exhibits, shows positive customer snapshot scores for North America stores. Those snapshots suggest further company’s success. The only issue we can find is the product quality. According to the exhibit product quality went down during 3rd quarter of 2002.

Starbucks had a very tight value proposition that matched the needs of the well conceptualized target customer base. Its mantra was ‘Live Coffee’. Their unique value proposition was based on three elements, premium coffee, the right ambience and best service. Starbucks claimed its coffee quality to be the best in the world. A lot of their revenue came from the sale of whole beans. They strived to get a perfect ambience. The labors were trained on honing their soft and hard skills to provide “Customer Intimacy”.

Starbucks first opened its doors in Seattle’s Pike Place Market with the name being coined from that of Moby Dick’s first mate (Schultz & Yang 1999). It has spread its shops across North America, all over Europe, the Middle East, Latin America as well as the Pacific Rim with an estimated 35 million customer weekly (Michelli, 2008). With tremendous growth from a small time coffee shop, the company has matured to an international icon that today it is one of the world’s leading retailer, roaster and brand specialty coffee (Story, 1971). The company offers whole bean coffees, espresso beverages, and confectionery and bakery items.

The purpose of this report is to be able to identify and discuss two of the most recent innovative activities of the world’s biggest and well-recognised retail coffee company, Starbucks Corporation. Starbucks has introduced numerous innovations over its long history. From its signature terms (like barista, venti, chai, Frappuccino®) (Michelli 2007), the drive-thru café concept, the Starbucks Card, the digital app ‘shake to pay’ to the corporate culture that overall makes the Starbucks Experience are some of the reasons why Starbucks has maintained its dominance in the coffee industry. This report will look in to its activities involving innovation and map each of them in the 4P framework of innovation space. Furthermore, the innovation identified will be analysed to understand its strengths and weaknesses in order to come up with new strategies for innovation.

The CEO (Chief Executive Officer), Howard Schultz pointed that the main reason from the decline of “Starbucks Experience” was that the number of Starbucks shops increased sharply from only 1,000 to 13,000 within ten years. Other people considered their brand has been commercialized, and the customers hadn’t had enough enthusiasms to appreciate every moment of their coffee any longer. He suggested that Starbucks should re-find its origin. Nevertheless, his advice apparently was opposite to the