Week 4 – Case Study
Strategic Management
Starbucks: A story of growth
06/04/2021
Shatha Nsour,
Tornike Abalaki
Levan Latsabidze
Chanel van der Merwe
Nika Tsitskishvili
Ana Kopadze
Islam Naji
Akaki Dumbadze
Questions to the case study (Starbucks: A story of growth)
Question 1
1. In the beginning, how was Starbucks different from other coffee options for coffee
drinkers in the United States?
Taste - much more expensive, Starbucks coffee had a taste unlike typical American
coffee.
Preparation technique Starbucks roasted its beans in its own carefully controlled
facility, where they were given a robust European-style flavor. barista, a master of both
the art and science of coffee production, ―pulled‖ shots of espresso by hand using a La
Marzocco machine, steamed milk to just the right temperature, and scooped elegant
dollops of foam for cappuccinos.
Concept quasi-Italian lingo for its drink sizes (short, tall, grande, and venti) Caramel
Macchiato and Frappuccino
Overall Experience of getting coffee bow-tied waiters, a stand-up coffee bar, and sleek
European furniture overstuffed chairs, wood floors, and cozy fireplace that encouraged
patrons to linger and relax.
Question 2
1. What activities and assets did Starbucks leverage to differentiate itself from competitors?
1. Grounding coffee right before serving it.
2. Offering customers ‗a third place‘
3. Selling products through mass distribution channels and offering customers their
coffee outside the store
4. Giving customers the sense of fulfillment and superiority
5. New locations that were cautiously chosen
6. Quasi-Italian lingo
2. When Starbucks was rapidly expanding its store locations in 2006– 2009 it made specific
changes in order to facilitate that growth.
Changes:
Starbucks had made some major changes trying to expand and make their turnaround
time on making coffee less, which means that they had automated machines that replaced
La Marzocco manual expresso machines which lost favor with their customers and they
found themselves competing with coffee houses that were like Starbucks was before.
Then Schultz returned to CEO in 2008 after being asked. He made the following changes:
1. Closing stores in almost 1000 locations
2. Revamping supply chain
3. Introduced new low-profile but still semi-automatic espresso machines.
4. Returned in store coffee griding.
5. Introduced a new coffee roast that was stable and not on rotation.
6. Expanded into the ―away from the store‖ coffee market - Introducing instant
coffee.
7. Moved into the manufacturing high end coffee brewing equipment.
3. What did Starbucks gain—and give up—as a result of each change?
Initially Starbucks gave up the experience of coffee for the production line and fast-
moving consumer turn over but lost favour and market share instead.
What did they Gain?
By making the above changes they were able to improve the supply chain and get
important supplies to their various stores and were able to serve their customers better
because if it as well, through doing this they were also able reduce overheads and use the
money to expand into other markets.
When they introduced the new machines, they opened up the customer experience where
customers could interact and see the process again, involving customers again into the
coffee making process and opening up for conversation with the baristas again.
With the introduction of the new roast, they gave stability to the customer experience so
that you could have some of the revolving coffee roasts but you can also come in and get
a coffee that you are familiar and have consistency.
Customers gained that they could have their Starbucks experience at home and either
have their instant or filter coffee from the comfort of their own home.
What did they give up?
With the introduction of merchandising and retail sales they could have diluted their
brand experience a bit, it went from an experience of sitting in a coffee house watching
qualified baristas work their trade to something you can buy in a sachet and someone that
has never even had Starbucks coffee can have a Starbucks mug. There are still good
points it increased revenue and expanded the market, but it could have diluted the idea
and initial intent of what Shultz was trying to create with the experience when he first
bought and took over Starbucks.
When closing locations they lost location customers as customers complained that the
next Starbucks was not as convenient and not part of their community as they were used
to.
Despite these and other actions, over the next fifteen months Schultz watched the stock price of
Starbucks decline to half of its peak value.
