CASE QUESTIONS: STARBUCKS
1. What factors accounted for Starbucks’ extraordinary success in the early 1990s?
First, Starbucks offered the premium-quality product. Its coffee beans were sourced from the Africa, Central and South America, and Asia-Pacific regions. Starbucks purchased green coffee beans directly from growers and controlled the custom-roasting process, and distribution to retail stores around the world. Most coffee beverages were handcrafted following the number of specific steps.
Second, Starbucks offered uplifting customer service to customers. Store employees (partners) recognized regular customers and provided personalized service. Partners were trained to listen to customers, identify their real
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Starbucks wanted to establish its brand as “most recognized and respected brand in the world” and in turn launched two strategies: retail expansion and product/nonproduct innovation. In 2002, Starbucks opened a total of 5886 stores of which 78% were located in North America (Exhibit 2). Although it allowed the company to offer convenience and accessibility to customers to a great degree, retail expansion resulted in generating negative brand images of Starbucks; retail expansion appeared to customers that Starbucks only cared about building more stores and thus making money. Customers did not differentiate Starbucks from the smaller coffee chains regarding the quality of product and service (Table A and B). For innovation, the company introduced at least one new hot beverage every holiday season and new services including stored-value card (SVC) and high-speed internet access to customers. There was a positive effect of the innovation. For example, SVC attracted new customers. However, despite overwhelming store numbers and hundreds of combinations of drinks in the company portfolio, Starbucks did not improve the coffee-making process much (still required many steps to hand-craft and/or customer coffee beverages), which slowed down the service and reduced