OPM 5203 LOGISTICS & SUPPLY CHAIN MANAGEMENT
Starbucks
Prepared by:
Atahan Atalay 20131550
Daulet Shabanbayev 20133609
Aizhan Turarova 20132740
Tokhtar Zhunusbekov 20141531
Aibek Shakirov 20132637
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Almaty 201
Table of content
1. Introduction
a. About Company
b. The main strategies of company
c. The Supply Chain Management and Logistics
2. Offshoring as a part of logistic process
3. Distribution channels
4. Suggested Changes in the Existing Process of Supply Chain.
5. Resistance on implementing process
6. References
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About Company
Starbucks Corporation is a global leader in coffee shop business. It was founded in 1971 in
Seattle in USA. The company provides quality premium products with high level of services. The
variety of assortment gives to company a competitive advantage over their competitors. Starbucks
has assortment such as roasted and handcrafted coffees, tea, and a variety of fresh food: baked
pastries, salads, sandwiches, fruit cups and a different type of beverages. High quality of product is
supported by superior level of customer service at a premium price. Today Starbucks has 21,000
stores in 65 countries1. Starbucks is one of the great marketing success examples of the past 10
years. They are created, delivered and marketed the value of “coffee experience” in a truly
remarkable way. The mission statement of Starbucks is sounds like ”To inspire and nurture the
human spirit – one person one cup, and one neighborhood at a time”, it means that Starbucks pay
more attention on client’s satisfaction, consequently high customer satisfaction generates a huge
profit.
The main strategies of company
Differentiation
Starbucks has very interesting and successful strategies in their developing stage. The main
key strategies are product differentiation and cost leadership. Product differentiation strategy –
provides a product or services to a specific market niche and differentiates from competition in
specific areas. (L. Kelchner, 2008) Starbucks product mix was expanded by venturing into the tea
and fresh juice product offering. This product mix strategy was expanded through utilization of
various alliances, with companies such as: Teavana, Bay Breads, Evolution Fresh, PepsiCo, NAACP
1 http://www.starbucks.com/about-us/our-heritage
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and etc (R.Lingley, 2009). Depending on market, country and customer preferences, Starbucks may
change their ordinary process, objectives and menus. For instance, entrants to Chinese market for
coffee business was a little bit problematic, because a customer preference were differ from
American or European customers. Chinese people prefer a tea rather than coffee, and Starbucks
immediately change their menus, and introduced a variety of tea products. Successful alliances with
green tea producers was supported a sustain expansion of Starbucks coffee shops in China.
Moreover, Starbucks has launched successful product and brand extensions, for example they started
offering coffee on United Airlines flights, selling a premium teas trough it owned subsidiary Tazo
Tea Company, also developing bottled version of some beverages with PepsiCo lead to sustain
demand of these new products among customers. (Tuck School of Business, Dartmouyh, 2003)
Much of their success has been achieved via word-of-moth marketing model and through right
alliances and partnership. Starbucks did not follow franchising model. They are entering in new
market with the help of different partnerships and alliances. The main concept of the stores is being
as a “third place” besides home and work. They are trying to make their stores with all comforts for
customers, free Wi-Fi, calm music, high quality of services. The notable partnership with Apple
Company, provides such opportunity as an “iTunes” free music download in Starbucks coffee shops.
Among Fortune’s list the Starbucks was ranked “100 Best Companies to Work For.” for fifth time2.
Starbucks has a good reputation, and ethical decision-making and employee training. Starbucks is a
ranking as “one of the most valuable global brands”3.
Cost leadership
Starbucks Corporation’s growth was implemented mainly by a differentiation strategy but also
a cost leadership strategy was supported their success in coffee shop business. Cost leadership
strategy has a bright illustration in their supply chain operations. One of the main examples can be
identified between 2007 and 2008 when their operational costs was increased by more than $125
2 http://www.starbucks.com/assets/e31d4604b78141bfb13172aa5fd67cfa.pdf
3 http://www.starbucks.com/about-us/company-information
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million, while sales for the same period were starting to dip. 70% of Starbucks operational expenses
were distributed to outsourcing, because the company was opening new stores around the world in
rapid pace, and the supply chain organization had to focus on keeping up with this high rate of
expansion. Then they started targeting these outsourcing agreements for renegotiations in an effort
to bring down costs. (Starbucks, 2012) In addition to these decreases in costs, Starbucks tried to
reduce own transportation costs by opening up one more manufacturing plant in South Carolina in
United States. This plant was supported a firms which are located in the southeast region of the
United States. These costs saving action in their distribution operation were able to save more than
$500 million in operating expenses over the past two years. (Starbucks, 2012) The main goal of this
strategy is reducing possible costs and improving efficiencies.
The supply chain management and logistics
According to Gibbons senior vice-president of global manufacturing operations in Starbucks
