Starbucks Analysis | Course Paper

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Table of contents

Abstract.2

Introduction………..3

Main discussion

Part (1) Starbucks products competitive priorities3

Part (2) Starbucks critical analysis, services and manufacturing strategies…5

Part (3) Product life cycle.10

Part (4) the flow diagram processes .13

Part (5) Tools and standards applied to keep tracking in the industry..15

Recommendations.17

References.19

Abstract

Starbucks opened its first location in Seattles Pike Place Market in 1971. Now Chairman

Howard Schultz joined Starbucks in 1982 as Director of Marketing. Schultz visited Italy

and noticed the popularity of espresso bars there. He thought this would be a great idea in

the Seattle area and convinced Starbucks to open a coffee shop in downtown. Schultz

founded his own coffee company and acquired Starbucks name and assets from its

founders in 1987. The company had just 17 stores but would soon grow quickly and went

public in 1992.

Starbucks popularity soared as it opened coffee shops within Barnes and Noble bookstores.

It also provided coffee for United Airlines and shops in Starwood hotels. The companys

focus on quality and commitment to social causes and the community have made it one of

the worlds most admired businesses.

Starbucks made the cutting-edge step of having its second Corporate Social Responsibility

Annual Report verified by an outside auditor, so readers can be assured the facts and

figures it presents are accurate. One of the revealing statistics in the report is that

Starbucks purchased 74 percent of its green coffee at outright negotiated prices,

independent of depressed commodity prices in 2002, up from just 12 percent in 2001.

Starbucks also paid an average of $1.20 per pound at a time when coffee was trading on

the commodity market for $.40 to $.50 per pound. The end result: higher income for

farmers, which translates to a better quality of life for farmers.

Introduction:

Starbucks began 36 years ago as a single store in Seattles Pikes Place Market, and today is

the worlds leading retailer, roaster and brand of specialty coffee. The company has

experienced extraordinary growth: its number of stores has more than doubled in the past

ten years, with close to 6,000 coffeehouses in over 27 international markets. More than 19

million customers visit a Starbucks coffeehouse each week.

When Starbucks considered its ambitious expansion plans for Europe, the Middle East and

Africa, executives knew that the location they chose for their new roasting plant and

support centre would be critical to their success. In fact, the decision was so important that

the company spent close to three years looking at various sites across Europe and the

International market.

Main discussion:

1. Starbucks products competitive priorities

As we know the competitive priorities is operating advantages that a firms processes must

possess to outperform its competitors.

In this part, we are going to define each possible competitive priorities of Starbucks for

operation process as cost, quality, time and flexibility

* Cost: Market indicators show a potential trouble for the entire coffee industry as a whole,

namely the rising cost of coffee beans and farmers tendency to switch to other profitable

crops. First, rising cost means lower profit margins. Second, the fact that farmers are

switching to more lucrative crops such as vegetables, fruits, and even illegal crops

foreshadows the scarce supply of coffee beans. Hopefully Starbucks competitive prices for

its coffee subcontractors are lucrative enough to retain and deter its suppliers away from

abandoning the coffee production.

Economic trends should not influence Starbucks pricing strategy greatly, because gourmet

coffee, or any other coffee, is measured on quality and availability, and not so much on

price. Furthermore, in times of economic downturn, the business is actually performing

better, since people are fixated on the idea that if we cannot afford something as grandeur

as a new car, then at least we would treat ourselves to a nice cup of coffee. Hence,

economic trends should not greatly influence the performance of coffee sales.

* Quality

-high performance design for quality control, Starbucks has a specialized process for

roasting the perfect coffee bean. It is implemented with the roaster determining by sight,

smell, hearing, and computer, if the beans are perfectly done. Additionally, the colour of

the beans is tested in an Agtron blood-cell analyzer. If the sample is deemed imperfect in

any of these processes, the whole batch is discarded. Starbucks departmental systems are

organized into functional and production divisions such as Supply Chain Operations,

Human Resources, Accounting, etc… Starbucks employs approximately 15,000 individuals

to operate its retail stores and regional offices, and 1,600 individuals to work on

administrative, sales, real estate, direct response, roasting, and warehousing operations.

-consistent quality: measurement of quality products and services that keep customers

retention. Its competitive strategy is to rapidly expand to a market and dominate it

completely before moving on. In the process, it hopes that these rapid expansions would

create a higher barrier to entry, discourage competitors from expanding, and eventually

acquires weak competitors who wants to exit.

* Time: three competitive priorities deal with time fast delivery time, on-time delivery and

development speed.

-fast delivery time: starbucks saves costumers time by offering self-service to the

costumers.

-On-time, delivery by processing orders in efficient time, which guarantees no costumer

delay on service.

-development speed starbucks consumers have tried its product, but not through

advertisement, but through promotions such as gifts introducing new products to the

market.

* Flexibility: the customization of starbucks has the ability to satisfy the unique needs of

costumers by changing products and services designs. Starbucks volume flexibility is

accelerating the rate of production quickly to handle large fluctuation in demand because

of the unique service to the costumers.

2. Starbucks critical analysis, services and manufacturing strategies