Introduction: fresh food items and other beverages. They

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Last updated: July 11, 2019

Introduction:Starbucks Corporation, an American company was founded in 1971 inSeattle,WA. It is a premier roaster, marketer and retailer of specialty coffee aroundthe world. Starbucks has about 185,000 employees across 21,767 company operatedand licensed stores across 62 countries. The product mix includes roasted andhandcrafted high – quality/premium priced coffees, tea, a variety of fresh fooditems and other beverages. They also sell a variety of coffee and tea productsand license their trademarks through other channels such as licensed stores,grocery and national foodservice accounts.

Starbucks also markets its productsmix with other brand names within its portfolio of companies, which includeSeattle’s Best Coffee, and Starbucks VIA, Starbucks Refreshers, EvolutionFresh, La Boulange, Verismo etc.Industry Life Cycle and MarketShare Concentration: This industry is in a mature stage with a medium level concentration. Starbucksand Dunkin Brands make up more than 60% of the market share, giving them considerablemarket power in determining industry trends.

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Starbucks Core Competency: The core competence of Starbucks has been its ability to effectivelyleverage their cornerstone product differentiation strategies by offering apremium 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 customera  unique “Starbucks Experience”, whichis derived from supreme  customerservice, clean and well – maintained stores that reflect the  cultureof the communities in which they operate, thereby building a high degreeof  customer loyalty with a cult following. Its other core competency is its human resource management’s values – basedapproach for building very strong internal and external relationships withsuppliers, which drives the  successfuldeployment of its business strategy of organic  expansion into international markets,horizontal  integration through smartacquisitions and alliances that maintains their long-term strategic objective being the  most recognized and respectedbrands in the world. Productivity of Starbucks CoffeeSome notableproductivity measures in the company based on the area of operations are asfollows: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 itselfas 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 arecomfortable 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  aremore likely to buy a second  cup of coffeeor 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 locationswith limited parking opportunities, a drive-thru opens up  the potential market to include drivingcommuters; increased  presence innon-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 upanother area of possibilities.The three main reasons for why customers choose Starbucks are: thecoffee itself, the Starbuck s people who serve the coffee and the experiencegained in the stores.

The coffee product is dark roasted coffee made from high-qualitygourmet coffee beans grown in developing countries. Once the coffee is roasted,packaged, and shipped to the Starbucks’s retail stores, it’s the baristas whobring 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 storethat 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 thebaristas stopped grin ding coffee before brewing. In an attempt to gain backmarket share, Howard Schultz, CEO, is bringing back the old style espressomachines so the customers can see their drinks while being made. As thebaristas have already started grinding coffee, there is the pleasant aroma offresh coffee in the stores as customers walk in.  Stores Location Selection Decisionof 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. Locationdecisions arise for a variety of reasons such as addition of new facilities, aspart 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 usesits own real-estate strategy for locating company-owned stores. When entering anew market, analysis is made to determine if multiple stores will survive inorder 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 tothis 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 bucksalso experiences resistance from rural communities who feel a Starbucks storewill put the local coffee shops out of business an d change the character ofthe rural community. There have been times that Starbucks declined to move intoa 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-marketcoffee 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 movementof work, customers or materials, through the system. Facilities layoutdecisions arise when designing new facilities an d/or re-designing existingfacilities. Basic layout types are product layouts, process layouts,fixed-position layout, and combination layouts which contain hybrid layouts andcellular 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 whilehaving a drink. Over time, Starbucks has become a “third” place for customersto go to get away from daily hectic, enjoy a cup of coffee, listen to music, dosome 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. Thestore layout shows that Starbucks mainly uses the product layout approach wherecustomers stand in line, going from station to station so to speak, to beserved while interacting with the baristas to place an order. No credit cardsor checks are taken which helps keep the lines moving. During busy times, atthis store, one or two baristas take the order and payment while one makes thebasic coffee and tea drinks and another fills orders at the espresso bar.Everything happens in view and in control of the customer.

The customer watchesthe 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 themere productivity improvement of, for example, the quick opening of a packageof 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 amaster barista is holding a coffee seminar or demonstration. The espresso baris separated from the area where the drink order is taken, so the customer mustwalk to the bar to pick up the specialty drink. The espresso machine locatedhere is too high which would not allow the customer to watch as the barista preparesa drink. Had the machine been placed at a lower level, the customers would havebeen able to see that the barista is well-trained to prepare an espressobetween 18 to 23 seconds.

One of the changes that Starbucks plans to make is toreplace the espresso machines with the old style machines that sit lower. The downsideto this decision is that the old style machines are not as efficient; however, thecustomers will be able to see the baristas the drink is being made which addsto the ambiance of the Starbucks stores and provides the spirit of the Italianespresso shops. The seating capacity is not adequate during busy times, andthere are only two power outlets for plugging in laptops.

The power outletsthat are available are loose from constant use. Many  of the  customers, standing  or sitting,  are  asking the  baristas  how management plans to bring Starbucks backto profitability. The condiments station is checked every 10 minutes forcleanliness. However,  the  condiments station  can  be  very  messy  during busy times when the baristas do notget 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 simplyreplacing the condiments station with a product station and widening thepathway between the espresso station and the product stations located in themiddle of the store,  the movement ofcustomers is enhanced and the queue for orders is not interrupted.

The lastshift restocks the condiments for the morning  because  the morning  shift  has its  own  procedures to  complete.  Pastries are delivered daily and must be placedon the shelves before the store opens. Any pastries with defects are returnedfor a refund. The pastry station and the newspapers stand are strategicallyplaced so the customer sees the display while waiting in line.

Many times apastry purchase is a last minute decision. Cleanliness is a priorityconsideration at Starbucks, which is another way it differentiates its storesfrom the competition. Bathrooms are cleaned often and accommodate  anyone who  wants  to use them, even  if  they are  not a customer. This happens frequentlyin bigger cities because there are very few public restrooms available. Thanksto Starbucks since no one is turned a way to get relived from this vital humanneed.

However, the condiments station can be very messy during busy times when thebaristas 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 whichby simply replacing the condiments station with a product station and wideningthe pathway between the espresso station and the product stations located inthe middle of the store, the movement of customers is enhanced and the queuefor 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 shelvesbefore the store opens. Any pastries with defects are returned for a refund.The pastry station and the newspapers stand are strategically placed so thecustomer sees the display while waiting in line. Many times a pastry purchaseis 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, evenif they are not a customer. This happens frequently in bigger cities because thereare very few public restrooms available. Thanks to Starbucks since no one isturned a way to get relived from this vital human need.

  Recommendation for Starbucks:  The following arerecommendations to further improve operations at Starbucks retail stores:  • Widen appeal to many customerprofiles.  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 ofStarbucks’s global, mass-marketing strategy, other profiles need to be consideredand 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 thatnormally 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 interferewith customers approaching the condiments stations. Adopt a hybrid layout inwhich the advantages of both the product layout and process layout will beobtained. 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 chain.

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