Starbucks Continuous

Improvement:
A Case Study

Prepared by:
Group 3
Fruelda, Adrian Lester F.
Estayan, Thomas Jefferson Y.
Lopez, Pearl Hannah N.
Mamangon, Maria Angelica M.
Mamaril, Alwyna Marie
Medina, John Marvin
Mira, Jude Altair
Nerveza, Mary Joy

Total Quality Management

Prof. Ma. Jocelyn Guevarra
BSBA-MM 4-4D

Background about the Company

Starbucks Corporation is an American coffee company and coffeehouse chain.

Starbucks was founded in Seattle, Washington in 1971. Today it operates 23,768
locations worldwide, including 13,107, in the United States, 2,204, in China, 1,418, in
Canada, 1,160, in Japan and 872 in South Korea (bumping United Kingdom from 5th
place) (Differences reflect growth since Jan 8, 2016).
Starbucks is considered the main representative of "second wave coffee",
initially distinguishing itself from other coffee-serving venues in the US by taste,
quality, and customer experience, while popularizing darkly roasted coffee. Since the
2000s, third wave coffee makers have targeted quality-minded coffee drinkers with
hand-made coffee based on lighter roasts, while Starbucks nowadays used automated
espresso machines for efficiency and safety reasons.
Starbucks locations serve hot and cold drinks, whole-bean coffee, microground
instant coffee known as VIA, espresso, caffe latte, full- and loose-leaf teas including
Teavana tea products, Evolution Fresh juices, Frappuccino beverages, pastries, and
snacks including items such as chips and crackers; some offerings (including their
Pumpkin Spice Latte) are seasonal or specific to the locality of the store. Many stores
sell pre-packaged food items, hot and cold sandwiches, and drink ware including mugs
and tumblers; select "Starbucks Evenings" locations offer beer, wine, and appetizers.
Starbucks-brand coffee, ice cream and bottled cold coffee drinks are also sold at
grocery stores.

I.

TIME CONTEXT

The first Starbucks location opened in 1971. The name is inspired by Moby
Dicks first mate. This name and the mermaid logo were inspired by the love of the
sea, from Starbucks original location in Seattle Washington in the heart of Pike Place
Market. . In 1981, current CEO Howard Schultz recognized a great opportunity and
began working with the founder Jerry Baldwin. Schultz left Baldwin to open his own
Italian coffee house Il Giornale which found outrageous success and in 1987 when
Starbucks decided to sell the original 6 locations, Schultz raised the money with
investors and purchased the company and fused them with his Italian bistro locations.
The company experienced rapid growth going public in 1992, and growing tenfold by
1997, with locations around the United States, Japan and Singapore. Starbucks also
began expanding its brand. Today, according to the Starbucks website, they have
16,706 stores (as of Dec. 27, 2009) in 50 countries. In 2009 they made strives socially
as they opened the Farmer Support Center in Kigali, Rwanda and became the worlds
largest buyer of Fair Trade Certified coffee.
Every company faces major challenges, even companies that are as successful
as Starbucks. Although they have an outstanding reputation, have won many awards,
and even give back to their community, they are still facing challenges like any other
company. One of the most challenging hindrances that Starbucks is facing now it the
dissatisfaction of customers which started in 2008, that causes the decrease of sales,
resulting to financial crisis, especially in America, and closure of almost 600 stores.

In 1971

In 1982

In 1992

- Opened by Gerald
Baldwin,
Cordon
Bowker & Ziev Siegl
- A small coffee shop in
Seattle's Pike Place
Market
- Specialized in selling
whole arabica beans

Howard
Schultz
joined the marketing
team
- Set up an espresso
bar at downtown shop
- Schultz took over
and began opening
new stores

140
stores
in
Northwest & Chicago
- Competed against
Gloria Jean's Coffee
Bean and Barnie's
Coffee & Tea

II.

VIEWPOINT
Starbucks is facing its own struggles however as it saw sales start slipping

before other companies did in the recent recession. According to Melissa Allison in her
article Starbucks has a new growth strategy more revenue with lower costs,
Starbucks has closed 600 stores and eliminated 34,000 jobs. Starbucks new strategy is
to refocus on some of the areas that decrease risk and upfront investment. This
includes expanding foreign stores, with aid of partnerships that share risk and costs,
selling VIA instant coffee and other products in retail and convenience stores, and
reinvigorating the Seattles Best Brand coffee.
A statement from CFO Troy Alstead this March paints this picture:
We clearly hit a wall and didnt do very well in the 2007/2008 time period.
From here forward, when we grow Via, Seattles Best Coffee and consumer products,
theres less investment for each dollar of revenue.
Actual store closures may differ depending on a variety of factors including,
but not limited to, risks related to finalization of third party agreements, expected
costs savings, income tax and other benefits associated with the store closures in the
anticipated time frame, if at all.

III.

PROBLEM
Researchers has found through pilot study that a lot of customers demand for

more innovation in terms of products, services, and amenities which shows the
customers volatility and alteration and its effect not only on the customer satisfaction
but also on the brand itself. This is a usual problem among different other brands;
what they can do in order to catch up with the ever changing and dynamic needs and
wants of the customers. Kaizen or continuous improvement is practiced by Starbucks,
as well as other brands, when they are facing this kind of problem. Continuous
improvement is one of the most important pillars of an organization or companys

long-term competitive strategy. One of the most notable features of kaizen is that big
results come from many small changes accumulated over time. However this has been
misunderstood to mean that kaizen equals small changes. In fact, kaizen means
everyone involved in making improvements. While the majority of changes may be
small, the greatest impact may be kaizen that are led by senior management as
transformational projects, or by cross-functional teams as kaizen events.
We can formulate a research question, What are the measures, practices, and
strategies Starbucks can do to continually improve their products, services, and
amenities in order to comply with the customers dynamic and changing taste
preference and demand, and achieve customers satisfaction?

IV.

OBJECTIVES

1. To achieve customer intimacy

2. To attain customer satisfaction using hard skills and soft skills
3. To become America's "THIRD PLACE", a place that would be separate from home or
work.
4. To establish Starbucks as the "Most Recognized and Respected Brand in the World"
5. To inspire and nurture the human spirit one person, one cup and one
neighborhood at a time
V.

AREAS OF CONSIDERATION (SWOT ANALYSIS)

Strengths
S1- the company consistently maintains its brand, even without heavy marketing.
S2- They search for quality beans worldwide.
S3- They offer drink variety and customization.
S4- locations are everywhere as one of the companys main goals.

S5- with new products live VIA, drive thru windows, in store locations convenience is
important.
S6- ambiance was a foundation of the Starbucks brand and continues in its locations.
S7- by using fair trade ingredients they are a leader in ethics.

Strength

Weakness

S1- Brand Identity

W1- Overexposure

S2- Quality

W2- Too many products

S3- Variety

W3- Risky investment in

S4- Locations

more locations

S5- Convenience
S6- Store Ambiance
S7- Ethics
Opportunities

Threat

O1- Customization

T1- Direct Competition

O2- International Markets

T2- Cheaper Alternatives

O3- On-the-Go Lifestyle

T3- Recession

O4- Partnerships

Weaknesses
W1- Starbucks goal to have 30,000 locations stalled in the recent recessions. By
becoming overexposed they risk losing the unique quality they were founded on.
W2- By constantly adding products, some products have lost value, Seattles Best for
example, and they are risky endeavors.
W3 expanding locations in the US, is a high risk and costly investment in comparison
to international expansion.

Opportunities
O1- Starbucks introduced a completely custom Frappuccino in Canada.
O2- Increasing efforts internationally, to increase stability.
O3- Instant coffee and other products sold in groceries and convenience stores.
O4- Partnering with more locations including NYSE.

Threats
T1- Direct competition from Peets and Coffee Bean increasing. Lack of marketing
T2- Cheaper alternatives from McDonalds and Dunkin Donuts
T3- Recession has affected customers willingness to spend greater risks in investment

VI.

ALTERNATIVE COURSES OF ACTION

1. Product Innovation
1.1 Represents packaging innovation. It is innovative to sell high quality ready
brew coffee in individual serving sizes.
1.2 Represents meeting a high consumer need. Starbucks introduced individualserve coffees during recessionary times at a price point below an Americano
allowing customers to enjoy the same flavor at an affordable price.
1.3 Represents processing technology. An innovative product cannot be introduced
to the general marketplace before the technology is available at an affordable
price.
1.4 Represents incremental innovation. Starbucks will definitely hit the ball out of
the ball park with incremental flavor innovation.
1.5 Represents the ability of an innovative product to change consumer behavior. In
this category, we believe that Starbucks via Ready Brew Coffee will clearly
create a consumer segment that regularly drinks high quality, single serve
coffee separated from the social network of their neighborhood store.

2. Service Innovation
2.1 Installation of Wi-Fi hotspot. We believe that by doing this, customer will be
more enticed to go and buy coffee.
2.2 Using Starbucks Stored Value Card. (SVC) Using SVCs can help gain customer
loyalty and intimacy by persuading customers to buy often.
2.3 My Starbucks Reward. This can help gain and attract more customers by
persuading them to buy often with the thinking that they can get something in
return.
2.4 Mobile and Mobile Payments. Through the use of this mobile payment,
customers can easily purchase with less hassle and effort.
3. Design Innovation
3.1 New Social Media Innovation. One adopter Starbucks can use is through social
media for marketing and social commerce. This can help Starbucks to easily
learn about the customers insights and demands for change, etc.
3.2 Cultural Change and Adaptation. They can combine the concepts of change,
experimentation, social media, customer engagement, and market research and
made the results key components of both their brand as well as their marketing
strategy.
3.3 Experience Customization. Starbucks provides its unique experience through
programs such as personalized signature drinks, and localized store
experiences.

VII.

RECOMMENDATIONS

1. Product Diversification
Customers may want to try something different and way afar from the usual and
norms of Starbucks. Starbucks should offer different product line in order to attract
and gain new customers. They should entice and coax customers with new and
improved product variations.

2. Starbucks in Campus
Students encompasses the almost 50% of the entire customers of Starbucks.
Starbucks can allocate their quota for campus students buying and patronizing
Starbucks products. They can also offer different promotions and special offers to
regular buyers and create exceptional relationship with the students.
3. Reservation Service
They can practice and implement reservation services to a group of customers,
such as employees who are having meetings, or group of students studying together or
handing out some minor events or parties.

4. Delivery Service
Some people or customers may want to have a cup of coffee from Starbucks
without having to leave their homes. Some may be having a hard time to at least
drive thru, and so Starbucks may also offer delivery services for these kind of
customers.

VIII.

FINAL ANALYSIS
Among the recommendations above, we think that the best and will be the

most effective is the Starbucks in Campus, because, as stated above, students

account a huge percentage in the total customers of Starbucks. It will be a great help
for the company to extend their services and products to those students who
comprises 50% of their customers. It will be easier to target those students if
Starbucks can offer their products and services within the campus, though it may be
hard because there will be too many competitors, but with Starbucks identity, it will
surely be worth it. It is also an advantage for Starbucks to offer their products and
services within the campus because students often drink coffee when they are
studying or doing their academic requirements.
Correspondingly, disadvantages are also present. One of these disadvantages is
huge number of competitors and the difficulty to comply with the requirements of the
campus, etc.

IX.

PLAN OF ACTION

Activities

Person-in-charge Time Frame

1. Target

We will first identify Marketing

Market

and our target campuses Personnel

Demand

where

Research

establish our branch.

2. Campus

we

3 months

June to August

3 months

September

will

We will conform and Administrative

requirement

meet the terms of the Staff

compliance

target campuses and

the

Target Date

to

November

requirements

needed.
3. Hiring

We will hire additional HR Managers or 6 months

December to May

employees

that

will HR Personnel

operate on our campus

branches.
4. Training

As

part

of HR Managers or 6

months December to May

development of newly HR Personnel

(Simultaneous

hired employees, they

to Hiring)

will undergo trainings

varying on their job
functions
5. Preparations

Final

preparations Construction

such

as

construction

2 months

April to May

the Staffs
of

the

branch and its designs

6. Grand

This is where we begin

Opening
7. Promotions

Managers

and

June to May

Staffs
As promised, we will Marketing
grant

students,

selection

the Personnel,
of Managers,

promotional tools they Staffs

can enjoy

Seasonal
and

Pick Seasons