Planning at Starbucks
Introduction
Starbucks is a renowned coffee place and has grown exponentially over the last forty years. In 2007, Starbucks experienced a decline in their sales. This was largely due to growing competition from McDonalds, Dunkin Donuts, and other similar outlets. Starbucks unique selling point was in providing fresh coffee and convenience. It had special importance for its customers as it provided coffee and other breakfast items. However, with McDonalds launching their breakfast line and entering the coffee market there were more options available to Starbucks customers. By 2008, when Schultz gained control as CEO at Starbucks the company’s share price had fallen, sales were reducing, and Starbucks was experiencing diseconomies of scale. The C.E.O. was able to regain sales by making wise strategic decisions which benefitted Starbucks.
Strengths
Starbucks has recently launched an advertising campaign that does not focus on the company and its products rather it focuses on customer satisfaction. For example: “Painter Eloy Zuñiga Guevara will appear on a poster with a decidedly homespun Latin aesthetic” (Helm, 2007). Adding on, there were many other celebrities who were shown consuming Starbucks and this helped revive lost sales. The company even launched a website to gain customer insight and get customer feedback. This further made the customers feel that the company valued its customers. Along with this, Starbucks worked towards enhancing the local culture of where the stores were located. Through this strategy, the company was better able to relate with its customers.
Schultz considered it vital to alter the management style. He concentrated upon developing an infant entrepreneur mindset that would include taking risks and working diligently. Widespread cost-cutting strategy was adopted. “Macaluso worries Starbucks could be cutting costs too deeply, and ultimately could hurt the quality of products or the cleanliness of stores” (Stevermen, 2009). However, Starbucks reduced costs by closing down unprofitable stores and did not compromise on quality in any way.
Starbucks is a preferred place for employees due to its relaxed environment and health care benefits offered to employees. The Starbucks culture is deeply engraved in employees and this is the major reason that top executive positions are filled internally. Schultz has also focused upon encouraging customers to share their experiences and stories on an online forum. This online forum makes the customers feel more connected with the company.
Weaknesses
The greatest weakness for Starbucks was embedded in its over-expansion. The expansion was so fast that it was leading to diseconomies of scale. “Responding to complaints that Starbucks grew too fast, Schultz put the brakes on the chain's growth and closed 676 U.S. stores” (Stevermen, 2009). Due to this expansion regional officers were disconnected with the head office which led to numerous miscommunications.
Company goals and customer needs were not aligned. This greatly upset the customers who did not have the same experience as they initially did after walking into Starbucks stores. For example; a customer walking into a Starbucks outlet should receive the level of convenience of buying instant coffee. By commercializing the chain at a fast rate Starbucks was losing its personal touch.
As the company lost direction of valuing customers, it forced its loyal customers to turn to McDonalds, Dunkin Donuts, and other similar outlets that were also offering coffee and a personalized service. Furthermore, long lines at Starbucks outlets discouraged people who came to Starbucks because it was convenient for them. Henceforth, customers who were pushed on time chose not to come to Starbucks as they did not have enough time.
Opportunities
The social media including; Facebook and Twitter have helped the company interact with customers and promote their company. Building customer relationships on platforms provided by the social media are more effective than any other form of customer relationship management. Facebook and Twitter help spread news faster than any other form of communicating with customers and it can quickly help clear out any possible rumors. The company has an in-depth website that provides ample information about its stores and products. Furthermore, Starbucks also offers several coupons and attractive deals for customers to avail.
Along with this Starbucks offers services for Android and Iphone users which help in locating stores. Adding on, these applications provide a fun way for the customers to stay interested. Starbucks offers loyalty cards to selected customers. There are various categories for instance; the gold level. These cards offer points and other benefits to the cardholder and may be a source of attraction for other customers. Starbucks products are easily available at large grocery stores which may help the company in merging with local food chains and offering a greater variety of products for example; following the successful partnership with La Boulange.
Threats
Starbucks failed to calculate the extent of economic downturn and the loss in consumer buying power. “McDonald’s remains more popular for breakfast than Starbucks, even among Starbucks customers, according to Dave Jenkins of CustomersDNA, a marketing firm in Chicago” (Berfield, 2012). Consumers are reluctant to spend on luxury goods and spend more on necessities. Starbucks coffees are over-priced compared to other coffee outlets and this is a set-back for the company. For instance; McDonalds offered cheaper coffees and other items compared to Starbucks, this drove away many of Starbucks customers. As Starbucks lost its personalized touch, local outlets attracted customers by offering a greater variety of coffee flavors.
Recommendations
Starbucks has focused upon offering a greater variety of products to its customers. They have been successful in doing this by partnering with La Boulange. This franchise allows them to offer freshly baked items to customers. Starbucks can merge with similar local outlets in regions where they are operating outside America as well. This would help attract more customers towards Starbucks outlets.
Instant coffee in America has reached saturation and is one of the reasons for declining sales. Therefore, it is essential for Starbucks to capture newer markets and take into consideration local tastes while entering different regions. For example; tea is more popular in the sub-continent, hence, Starbucks could incorporate the tea flavor in their menu.
An attraction such as the loyalty card helps retain customers. Starbucks could introduce other features such as home and office delivery which would add to the customers convenience levels. McDonalds for instance provides home delivery and a large proportion of its sales come through home delivery. Starbucks does not only need to compete with McDonalds in terms of price, but methods of reaching the customer also need to be competitive.
Starbucks is a well-known brand and has a relatively constant base of loyal customers. If Starbucks is able to keep customers interested and continues providing them with convenience and value for money then they do not have to worry about customer retention. However, with new competition springing up in America and abroad, Starbucks needs to be more proactive in combating competition.
References
Berfield, S. (2012, June 12). Starbucks' Food Fight. Bloomberg Business Week. Retrieved February 8, 2014, from http://www.businessweek.com/articles/2012-06-12/starbucks-food-fight
Helm, B. (2007, April 8). Saving Starbucks Soul. Bloomberg Business Week. Retrieved February 8, 2014, from http://www.businessweek.com/stories/2007-04-08/saving-starbucks-soul
Ramzy, A. (2013, October 21). State Media Call Starbucks Too Pricey. Sinosphere State Media Call Starbucks Too Pricey Comments. Retrieved February 8, 2014, from http://sinosphere.blogs.nytimes.com/2013/10/21/state-media-call-starbucks-too-pricey/?_php=true&_type=blogs&ref=starbuckscorporation&_r=0
Starbucks Aims to Move Beyond Beans. (2013, October 8). Business Day. Retrieved February 8, 2014, from http://www.nytimes.com/2013/10/09/business/a-juice-and-croissant-with-that-starbucks-latte.html?adxnnl=1&ref=starbuckscorporation&adxnnlx=1391880447-lugqwo4RhSbXWNsE4UfTJA
Starbucks Coffee Company. (n.d.). Starbucks Coffee Company. Retrieved February 6, 2014, from http://www.starbucks.com/
Steverman, B. (2009, July 3). Is a Turnaround Brewing for Starbucks?. Bloomberg Business Week. Retrieved February 8, 2014, from http://www.businessweek.com/investor/content/jul2009/pi20090722_611028.htm
Strong Earnings From Procter & Gamble and Starbucks Help Propel S&P 500 Index to 5-Year High. (n.d.). Yahoo Finance. Retrieved February 8, 2014, from http://finance.yahoo.com/news/strong-earnings-procter-gamble-starbucks-132000921.html
