By John Dudovskiy
October 4, 2022
Starbucks business strategy is based on the following four pillars:
1. Offering ‘third-place’ experience. Starbucks stores are effectively positioned as a ‘third place’ away from home and work, where people can spend time in a relaxed and comfortable environment with their friends or alone. Customers are even welcome to get their work done in a Starbucks store. All company-owned stores in the US and most company-owned stores abroad offer free wi-fi. “Starbucks stores are meticulously designed to make customers stay longer, buy more, and return for another visit.”[1]
After returning as CEO for the third time in April 2022, Howard Schultz announced his plans for the company. Plans include building drive-through in 90% of new locations and machinery that will allow baristas to handle increasingly complex customer orders more quickly. Some analysts note that while drive through may increase profit martin, at the same time they may compromise the essence of third place experience for customers.
Furthermore, according to Starbucks Chief Marketing Officer Mr. Brady Brewer the Seattle-based coffee chain is also creating digital third place. Mr. Brewer shares his vision the global coffeehouse chain creating a new global digital community on the basis of Web3 in general and NFTs (non-fungible tokens) in particular.[2]
2. Selling coffee of the highest quality. Starbucks business strategy can be classified as product differentiation. Accordingly, the coffee chain giant focuses on the quality of its products and customers pay premium prices for high quality. Excellent customer services as one of the solid sources of Starbucks competitive advantage further increases the attractiveness of the coffee retailer.
The multinational chain of coffeehouses duly recognizes the paramount role of its employees in customer-facing positions to sustain high level of customer service. Accordingly, the company refers to its employees as partners and offers them a wide range of perks and benefits such as Bean Stock equity reward program, health coverage plans and competitive salary. Nevertheless, theworld’s largest coffeehouse chain is opposed to unionization of employees and employee union problems is one of the major challenges that made it necessary for Howard Schultz to return as CEO.
3. International market expansion with the focus on emerging economies is one of the key elements of Starbucks business strategy on long-term perspective. Started with only one coffee shop in Seattle’s 1912 Pike Place in 1971, the company has expended into 84 markets with 17133 company-operated stores and 16700 licensed stores as of October 3, 2021.[3] On average, the global coffeehouse chain has opened two new stores every day since 1987. The company has announced long-term plans to increase its numbers of stores to 55000 by 2030.
4. Integrating technology into various business processes. “Starbucks is adamant when it says that the purpose of new technology is not just to improve its website or to process payments quicker for people who are waiting in line”[4] The coffee chain achieves technology-related value addition via integrating technology into a wide range of business processes and procedures such as new product development, communication of the marketing message, completing sales and monitoring the level of customer satisfaction. The most notable examples for value creation via technological integration by Starbucks include the launch of Mobile Order & Pay feature, which allows customers to buy without getting in line, the launch of voice ordering app and “sending text message notifications to customers in the Seattle area when their mobile orders are ready.”[5]
Starbucks Corporation Report contains the above analysis of Starbucks business strategy. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on Starbucks. Moreover, the report contains analyses of Starbucks leadership, organizational structure and organizational culture. The report also comprises discussions of Starbucks marketing strategy, ecosystem and addresses issues of corporate social responsibility.
[1] Peterson, H. (2015) “5 ways Starbucks entices you to spend more money” Business Insider, Available at: http://www.businessinsider.com/how-starbucks-entices-you-to-spend-more-2015-2
[2] Brewer, B. (2022) “Starbucks: We’re creating the digital Third Place” Starbucks, Available at: https://stories.starbucks.com/stories/2022/starbucks-creating-the-digital-third-place/
[3] Fiscal 2021 Annual Report, Starbucks Corporation
[4] McNamara, T. & Moore-Mangin, A. (2015) E-Content, Available at: http://www.econtentmag.com/Articles/Editorial/Commentary/Starbucks-and-Social-Media-Its-About-More-than-Just-Coffee-103823.htm
[5] Peterson, H. (2017) “Starbucks is testing a new technology to solve its crisis of long lines and delays” Business Insider, Available at: http://www.businessinsider.com/starbucks-sends-text-messages-to-fix-long-lines-in-stores-2017-3
As an expert well-versed in business strategy and Starbucks in particular, let's delve into the concepts mentioned in the article by John Dudovskiy, dated October 4, 2022, which outlines Starbucks' business strategy based on four key pillars.
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'Third-Place' Experience: Starbucks strategically positions its stores as a 'third place' for customers, away from home and work. This is designed to offer a relaxed and comfortable environment where customers can spend time alone or with friends. The concept aims to make customers stay longer, buy more, and foster repeat visits. The article mentions the CEO's plans to introduce drive-through options in new locations, potentially impacting the essence of the 'third place' experience. Additionally, Starbucks is exploring a digital third place using Web3 and NFTs to create a global digital community.
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Quality Coffee and Product Differentiation: Starbucks adopts a product differentiation strategy by focusing on offering the highest quality coffee. Customers are willing to pay premium prices for this quality. The article emphasizes the importance of excellent customer service as a source of competitive advantage. Starbucks refers to its employees as partners and provides various perks and benefits. However, it also highlights challenges related to employee unionization.
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International Market Expansion: Starbucks has a long-term strategy of expanding into emerging economies. Starting from a single coffee shop in 1971, the company has expanded into 84 markets with thousands of company-operated and licensed stores. The goal is to increase the number of stores to 55,000 by 2030. This expansion into international markets is a key element of Starbucks' business strategy for long-term growth.
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Integration of Technology: Starbucks integrates technology into various business processes to enhance customer experience and streamline operations. Examples include the Mobile Order & Pay feature, allowing customers to order without waiting in line, a voice ordering app, and text message notifications for mobile orders. The purpose of technology for Starbucks is not just improving the website but adding value to multiple business aspects.
The information provided in the article is supported by references to credible sources, such as statements from Starbucks' Chief Marketing Officer Brady Brewer, the company's fiscal reports, and external analyses. The strategic frameworks mentioned, such as SWOT analysis, PESTEL analysis, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix, and McKinsey 7S Model, further demonstrate the depth of the analysis conducted on Starbucks' business strategy.
In addition to the four pillars, the article touches upon Starbucks' leadership, organizational structure, organizational culture, marketing strategy, ecosystem, and corporate social responsibility, providing a comprehensive overview of the company's strategic landscape.
