Starbuck's Strategy

Problem Statement

Christine Day, Starbuck's Senior Vice President of Administration in North America, faces the decision to re-think the company's strategy regarding customer satisfaction. Although sales for the company have consistently been up and it has seen profitability, market research indicates the company is not meeting the customers' expectation in the area of customer satisfaction.

Starbuck's Strategy

The strategy of Starbuck's is to distribute high quality coffee while creating an experience of high satisfaction for the customer. This strategy has been determined by the customers that it targets (Porter, 1996). The typical Starbuck's customer, although the profile has changed since it was founded, still includes people who want the perfect cup of coffee enhanced by the ultimate experience of service and satisfaction. The customers that Starbuck's tries to reach are those who not only must have high quality coffee, but want to enjoy it in an atmosphere of ambiance. Equally important to its coffee and atmosphere, Starbuck's' strategy follows an attempt to reach customers everywhere, regardless of location. The commitment to availability for its customers defines Starbuck's commitment to convenience. The level of satisfaction should include, by Starbuck's standards, the customer receiving excellent customer service, the perfect cup of coffee or specialty drink, completed by a sense of comfort that encourages the customer to want to stay, and come back again regularly.

Required Needs of Business

Required needs of a business is defined as the needs the line-of-business that must be fulfilled to enter into the business or to be minimally competitive in the market place (Fairbairn 2010).

Specialty

The first required need to be met in order to be competitive is that Starbuck's distributes specialty coffee and like drinks to its customers. Starbuck's main competitors are individual specialty coffee shops, small-scale specialty coffee chains, and other coffee distributors such as bagel and donut shops. To compete for these customers Starbuck's must deliver a specialty coffee to its customer base because that's what the competition is doing. Furthermore, if you were going to compete with Starbuck's in the specialty coffee market, you would need specialty coffee1 at the very least.

Availability

To reach customers the business must have a reliable distribution system. Customers can get to competitors coffee brands through avenues like store locations, supermarkets, and online buying. Starbuck's must match at least one of these sources of availability to be competitive. The company does this through many avenues; however its main source of distribution is through one of over 4500 company-owned stores.

Other Drinks and Snacks

Although the majority of sales come from coffee sales, Starbuck's offers teas, sandwiches and breakfast among many other menu items. These items have become a required part of coffee shop offerings. Other coffee distributors such as Seattle's Best, Community, and The Crooked Tree offer at minimum other drinks like bottled water, steeped teas, and hot chocolate along with a variety of snacks. Specialty coffee shop chains and individual specialty coffee stores and distributors must offer these to be competitive.

Primary Needs: It's not just coffee

What sets Starbuck's apart from other specialty coffee shops and distributors has been its level of customer service, variation of drinks, other related products, and its atmosphere. These are described as the primary needs of business or differentiation.

Quality Coffee: Although to compete in this market Starbuck's must offer quality coffee, it has gone above and beyond importing only the highest quality beans from all over the world; regions of Africa, Central and South America, and Asian Pacific. It controlled the supply chain by buying directly from growers to ensure the freshest product (Moon, 2006.)

Italian Specialty Drinks: There are numerous different kinds of specialty drinks offered that have been very popular such as iced coffees and frappuccinos.

Customer Service: Starbuck's sets itself apart with its high level of customer service. During the early years, when Shultz envisioned what his coffee business would become, he experienced Italian style coffee shops operated by baristas. The barista would prepare coffee drinks. The very personalized relation between coffee maker and drinker inspired the very level of customer service that would define Starbuck's locations all around the world. Activities like greeting with enthusiasm, remembering customer's names and drinks, and empowering employees to ensure customer satisfaction, outlined employee responsibilities.

An important aspect of its activities to support its efforts of sustaining customer service included its internal rating system. This way of governing helps motivate its partners (employees) and managers to performing enthusiastically and keeps teams focused on customer service. Also, the company views its employees and managers as partners and offers stock options and make advancement opportunities available to them.

Customers will tolerate an average product if the service levels of a company are at high level. In Exhibit 10 of the Starbuck's case, coffee taste/flavor and quality of coffee are #5 and #6, respectively, in order of importance to the Starbuck's customer. A friendly staff and personal attention ranked higher. Service was one of the differentiating factors embraced in the founding of Starbuck's. Through market research, it was discovered customers are not pleased with the service levels of Starbuck's and this is what Christine Day must address even though the company is performing well. Furthermore, she is proposing a plan which will have significant impact on EPS, but must be positioned as an investment in service which will result in loyal customers and increased profit

Atmosphere

Starbuck's also branded itself by its atmosphere. Shultz had a vision to bring people together. The company's mission began with a determination to "become America's 'third place' (Moon, 2006). His stores would become the third place to be behind home and work. Customers could go have coffee and stay awhile. Starbuck's addressed this strategy by adding Wi-Fi capabilities, relaxing trendy music,