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Starbucks : Delivering Customer Value

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Starbucks: Delivering Customer value
Case Analysis

Case facts

• Howard Schultz’s idea with Starbucks in the mid 1980’s was to create a chain of coffeehouses with a product differentiation of specialty “live coffee”, service or customer intimacy with an “experience”, and an atmosphere of a “third place” to add to their work and home alternatives
• The original stores sold whole beans and premium-priced coffee beverages by the cup and catered primarily to affluent, well educated, white-collar patrons between the ages of 25 and 44
• By 2002, there were over 5,000 stores around the globe
• The specialty items included strategic alliances with Pepsi Cola to sell alternative beverages, Dreyer’s to develop and distribute a line of premium ice creams, Kraft Foods handled sales of coffee and alternative products to warehouse clubs, and various grocery store chains for their coffee.
• Baristas (employees) were encouraged to interact with customers in a friendly and prompt manner, and were paid higher than average wages and benefits. Employees were considered partners and promotions were usually from within the company.
• While Starbucks was the largest specialty coffee chain, many other chains competed directly with Starbucks, and many other chains could at any time enter retail specialty coffee sales (e.g. Dunkin Donuts, convenience stores, and many similar retail food stores.
• New innovation was based upon partner acceptance. Customers rated the new innovations as being much lower in importance than customer service, yet Starbucks was placing a high importance on developing them. Many new products were introduced which greatly expanded the menu items available.
• Baristas jobs were complicated by the fact that many products required numerous steps to complete the order.
• They had installed automated espresso machines in some stores for the customers use…...

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