Introduction: on selling the finest quality coffee and

Introduction:

Starbucks Corporation, an American company founded in 1971 in Seattle,
WA, a premier roaster, marketer and retailer of specialty coffee around world.
Starbucks has about 182,000 employees across 19,767 company operated &
licensed stores in 62 countries. The product mix includes roasted and
handcrafted high – quality/premium priced coffees, tea, a variety of fresh food
items and other beverages. They also sell a variety of coffee and tea products
and license their trademarks through other channels such as licensed stores,
grocery and national foodservice accounts. Starbucks also markets its products
mix with other brand names within its portfolio of companies, which include
Teavana, Tazo, Seattle’s Best Coffee, and Starbucks VIA, Starbucks Refreshers,
Evolution Fresh, La Boulange and Verismo

Industry Life Cycle and Market
Share Concentration:

This industry is in a mature stage with a medium level concentration. Starbucks
and Dunkin Brands make up more than 60% of the market share, giving them considerable
market power in determining industry trends.

Starbucks Core Competency:

The core competence of Starbucks has been its ability to effectively
leverage their cornerstone product differentiation strategies by offering a
premium product mix of high quality beverages and snacks. Starbuck’s  brand equity is built on selling  the 
finest quality coffee and related products, and by providing each customer
a  unique “Starbucks Experience”, which
is derived from supreme  customer
service, clean and well – maintained 
stores that reflect the  culture
of the communities in which they operate, thereby building a high degree
of  customer loyalty with a cult following
. Its other core competency is its human resource management’s values – based
approach for building very strong internal and external relationships with
suppliers, which drives the  successful
deployment of its business strategy of organic  expansion into international markets,
horizontal  integration through smart
acquisitions and alliances that maintains their 
long-term strategic objective being 
the  most recognized and respected
brands in the world.

 

Productivity of Starbucks Coffee

Some notable
productivity measures in the company based on the area of operations are as
follows:

Average
order filling duration (Starbucks café productivity)Weight of
coffee beans processed per time (roasting plant productivity)Equipment
repair duration (maintenance productivity)

 

 

 

Starbucks Experience 

Starbucks’s strategy in targeting its customers is to position itself
as a “third” place in the lifestyles of its customers. That is to  say, 
the  prototypical  Starbucks 
customer  will  spend 
their  time   at 
home,  at  work, 
and  at  Starbucks. 
To  encourage  this 
idea,   Starbucks  locations 
are  furnished  with 
comfortable  seating,  provide 
outlets  for  electronic 
equipment,  and  a 
blanket  no-smoking   policy ensures that all customers are
comfortable in the environment, refer to Figure 2.  

 

 

 

Making  customers  more 
comfortable  while  spending 
time  in  the 
stores  causes  them 
to  stay  longer 
and,  in  doing 
so,  indulge  in  
more of what Starbucks has to offer. 
As customers linger, they  are
more likely to buy a second  cup of coffee
or a snack, to pay for  Wi-Fi  internet 
access,  to  burn 
a  CD,  etc.  
In  addition  to  diversify  its 
product  offerings,  Starbucks 
is  also  looking 
to  broaden   its 
customer  base  beyond 
just  young  urban 
professionals  and  college 
students.    Many  of 
the  more  recent 
adjustments  to  how  
Starbucks  conducts  its 
business  are  aimed 
at  accommodating  the  varied  lifestyles 
of  the  not-so-traditional  Starbucks 
customer.

These include: increased number of drive-thru locations – in locations
with limited parking opportunities, a drive-thru opens up  the potential market to include driving
commuters; increased  presence in
non-urban locations – the move to expand into these  locations 
exposes  Starbucks  to 
“middle-America”  and  could  eventually 
almost  double  the 
domestic  market  for 
their  product; increased  penetration 
of  licensed  products; Starbucks  at  home-
with  genuine  Starbucks 
brand  coffees  now 
available  at  the  
local grocery store and Starbucks for business – contracting  to 
supply  businesses with  products 
for  their  cafeteria services, Starbucks opened up
another area of possibilities.

The three main reasons for why customers choose Starbucks are: the
coffee itself, the Starbuck s people who serve the coffee and the experience
gained in the stores.

The coffee product is dark roasted coffee made from high-quality
gourmet coffee beans grown in developing countries. Once the coffee is roasted,
packaged, and shipped to the Starbucks’s retail stores, it’s the baristas who
bring the product to life.  The  baristas 
are  trained  employees, 
referred  to  as  “partners”,  who 
make  a  coffee 
drink  and  understand 
and  explain  the 
diverse   coffee  varieties. 
To  reduce  baristas 
turnover,  Starbucks  offers  
a  wage  higher 
than  the  industry 
average,  health  care 
benefits,   and  company stock to its partners.  As 
stated  above,  Starbucks 
has  become   a 
“third”  place  for 
its  loyal  customers. 
The “Starbucks Experience” begins when a customer walks into a store
that has been designed with the ambiance and spirit of an Italian espresso bar.
In an attempt to improve  productivity  two 
changes  were  made 
in  the  coffee-making 
process:  the  old 
style  espresso  machines 
were  replaced  with 
more   efficient ones and the
baristas stopped grin ding coffee before brewing. In an attempt to gain back
market share, Howard Schultz, CEO, is bringing back the old style espresso
machines so the customers can see their drinks while being made. As the
baristas have already started grinding coffee, there is the pleasant aroma of
fresh coffee in the stores as customers walk in. 

Stores Location Selection Decision
of Starbucks:

Location decisions are closely tied to an organization’s strategies,
low-cost, convenience to  attract  market 
share, effect  on  capacity 
and  flexibility,  represent a long-term commitment of resources,
effect investment requirements, operating costs, revenues, and operations,
impact  competitive  advantage, and importance to supply chains. Location
decisions arise for a variety of reasons such as addition of new facilities, as
part of a marketing strategy to expand markets, growth  in demand that cannot be satisfied by  expanding 
existing  facilities,  depletion 
of  basic inputs  which 
requires  relocation, shift  in  markets,  and 
cost  of  doing 
business  at   a 
particular  location  which 
makes  relocation. Starbucks uses
its own real-estate strategy for locating company-owned stores. When entering a
new market, analysis is made to determine if multiple stores will survive in
order to take advantage of economies of scale. A major customer complaint  is 
the  long  lines 
waiting  for  coffee 
drinks  at  Starbucks 
stores. Starbucks opens  new  locations close to  busy 
locations  in  order 
to relieve the wait in lines and increase service rates. The downside to
this strategy is the new location tends to cannibalize sales from the busy store.  When 
same-store sales growth  for  the 
busy  store  is 
reported  to  weaken, 
Wall  Street  reacts 
with  a  decline in 
the stock price. To establish a new store, as with Wal-Mart, Star bucks
also experiences resistance from rural communities who feel a Starbucks store
will put the local coffee shops out of business an d change the character of
the rural community. There have been times that Starbucks declined to move into
a new community because of this local resistance sentiment (Schultz and Jones,
1997). Starbucks  management  is 
sometimes  able  to 
reverse  this  sentiment 
by  becoming  involved 
in  the  community 
with  donations  and  
charitable  events  or 
contributions. The tremendous growth of Starbucks, as a mass-market
coffee retailer, can certainly give its ubiquity impression. Traditionally, when  a 
new  store  would 
open  the  customers 
would  come  by 
word-of- mouth without spending large amounts of money on advertising.

Store Layout Evaluation of Starbucks:

Layout  is  about 
the  configuration  of 
departments, work centres, 
and  equipment,  with 
particular   emphasis on movement
of work, customers or materials, through the system. Facilities layout
decisions arise when designing new facilities an d/or re-designing existing
facilities. Basic layout types are product layouts, process layouts,
fixed-position layout, and combination layouts which contain hybrid layouts and
cellular layouts. From   the  beginning  the 
idea  behind  the 
Starbucks’s  stores  layouts 
was  to  recreate 
the   experience  in 
the  espresso  bars 
in  Italy  where 
customers  come  in  
daily  and  stand 
to  enjoy  an 
espresso  drink. Starbucks, however,
found customers want take-out service and a place to sit in the store while
having a drink. Over time, Starbucks has become a “third” place for customers
to go to get away from daily hectic, enjoy a cup of coffee, listen to music, do
some work using  the  Internet 
service,  socialize  with 
friends,  and  even 
hold  a  business meeting. Young   customers 
drink  lots  of 
coffee  and  enjoy 
having  a  place 
to  go   where 
alcohol  is  not 
served. Before  moving  into  a 
new  location,   research 
is  done  to 
understand  the  culture,  
and  art  work  is  displayed 
in  the  stores that 
reflect  the  community’s 
culture.  Seating  layout 
is  a  mixture 
of  comfortable  couch type 
chairs,  with  groupings of 
tables and  chairs for  the store layout for the Starbucks store. The
store layout shows that Starbucks mainly uses the product layout approach where
customers stand in line, going from station to station so to speak, to be
served while interacting with the baristas to place an order. No credit cards
or checks are taken which helps keep the lines moving. During busy times, at
this store, one or two baristas take the order and payment while one makes the
basic coffee and tea drinks and another fills orders at the espresso bar.
Everything happens in view and in control of the customer. The customer watches
the barista grind fresh coffee beans before brewing which is a change that  Starbucks 
has  recently  made 
to  re-introduce  the 
spirit  of  the  Italian  espresso 
shops. This spirit or “Starbucks Experience” is more important than the
mere productivity improvement of, for example, the quick opening of a package
of pre-ground coffee. The customer 
watches  a  drink 
order  being  made 
while,  concurrently,  having 
a  conversation  with 
the  barista. This high-degree of   customer contact is enhanced in two ways:
when a barista walks around the store offering samples of products or when a
master barista is holding a coffee seminar or demonstration. The espresso bar
is separated from the area where the drink order is taken, so the customer must
walk to the bar to pick up the specialty drink. The espresso machine located
here is too high which would not allow the customer to watch as the barista prepares
a drink. Had the machine been placed at a lower level, the customers would have
been able to see that the barista is well-trained to prepare an espresso
between 18 to 23 seconds. One of the changes that Starbucks plans to make is to
replace the espresso machines with the old style machines that sit lower. The downside
to this decision is that the old style machines are not as efficient; however, the
customers will be able to see the baristas the drink is being made which adds
to the ambiance of the Starbucks stores and provides the spirit of the Italian
espresso shops. The seating capacity is not adequate during busy times, and
there are only two power outlets for plugging in laptops. The power outlets
that are available are loose from constant use. Many  of 
the  customers, standing  or 
sitting,  are  asking 
the  baristas  how management plans to bring Starbucks back
to profitability. The condiments station is checked every 10 minutes for
cleanliness. However,  the  condiments 
station  can  be  
very  messy  during busy times when the baristas do not
get a chance  to  check 
the  front  of  the 
store.  In  this 
layout the condiments 
station  is  not 
properly  located  for 
busy  times.  If 
the  arrival  customers 
queue  is  long,  the  customers 
in  need  of  the  condiments 
must  interrupt  that 
line to get  to  the 
condiments  station.  The alternative layout recommended is simply
replacing the condiments station with a product station and widening the
pathway between the espresso station and the product stations located in the
middle of the store,  the movement of
customers is enhanced and the queue for orders is not interrupted. The last
shift restocks the condiments for the 
morning  because  the 
morning  shift  has 
its  own  procedures 
to  complete.  Pastries are delivered daily and must be placed
on the shelves before the store opens. Any pastries with defects are returned
for a refund. The pastry station and the newspapers stand are strategically
placed so the customer sees the display while waiting in line. Many times a
pastry purchase is a last minute decision. Cleanliness is a priority
consideration at Starbucks, which is another way it differentiates its stores
from the competition. Bathrooms are cleaned often and accommodate  anyone 
who  wants  to use 
them, even  if  they 
are  not a customer. This happens frequently
in bigger cities because there are very few public restrooms available. Thanks
to Starbucks since no one is turned a way to get relived from this vital human
need. However, the condiments station can be very messy during busy times when the
baristas do not get a chance to check the front of  the 
store.  In  this 
layout  the  condiments 
station  is  not 
properly  located for  busy 
times.  If  the  arrival  customers 
queue  is  long, 
the  customers  in 
need  of  the 
condiments  must  interrupt 
that  line  to 
get  to  the 
condiments  station.  The alternative layout recommended in which
by simply replacing the condiments station with a product station and widening
the pathway between the espresso station and the product stations located in
the middle of the store, the movement of customers is enhanced and the queue
for orders is not interrupted. The last shift restocks the condiments for the  morning 
because  the  morning 
shift  has  its 
own  procedures  to 
complete. Pastries are delivered daily and must be placed on the shelves
before the store opens. Any pastries with defects are returned for a refund.
The pastry station and the newspapers stand are strategically placed so the
customer sees the display while waiting in line. Many times a pastry purchase
is a last minute decision. 
Cleanliness  is  a 
priority  consideration  at 
Starbucks,  which  is  
another  way  it differentiates  its 
stores  from  the  competition.
Bathrooms are cleaned often and accommodate anyone who wants to use them, even
if they are not a customer. This happens frequently in bigger cities because there
are very few public restrooms available. Thanks to Starbucks since no one is
turned a way to get relived from this vital human need. 

Recommendation for Starbucks:

  The following are
recommendations to further improve operations at Starbucks retail stores:

 • Widen appeal to many customer
profiles.  Early  research showed  that 
the  profile  of   a  Starbucks 
customer  was  a  
connoisseur, highly-educated, relatively affluent, well-travelled,
technologically savvy, cultured, and interested in the arts. As a result of
Starbucks’s global, mass-marketing strategy, other profiles need to be considered
and catered to.

• Improve housekeeping during busy times. 

• Offer more types of roasted coffee after noon. 

• Develop other light roast coffees that will bring in customers that
normally avoid Starbucks because of the “bitter taste” of the coffee.  

• Offer more types of healthy pastries or light sandwiches. 

• Change the layout of the floor so that long lines do not interfere
with customers approaching the condiments stations. Adopt a hybrid layout in
which the advantages of both the product layout and process layout will be
obtained.

 

By
excelling in these areas and improving operations management, Starbucks can
regain market share, and improve productivity and profitability.  A 
future  study  of  operations 
management  at  Starbucks 
can  include  its 
direct  mail  business 
and  partnerships.   Partnerships 
have  not  always 
been  successful  in 
the  past  due 
to  Starbucks  requirement  of 
high-quality  and  reliability 
throughout  the supply