1 Running head: Case study: Starbucks Inc.

Case Study: Starbucks Inc.

BUS 525 Strategic Management in a Globalized Economy

Westcliff University

10/11/2020
 2 Running head: Case study: Starbucks Inc.

Abstract

This paper is a part of professional assignment PA1 which includes the discussion of the case of

Starbucks where the company’s competitive advantages in briefly discussed. This paper

highlights the competitive advantage of Starbucks along with its challenge to implement the right

strategy to get competitive edge in the market. The paper also discusses on three major capability

of Starbucks i.e. customer service, employees, supply chain among which customer service is

considered to the core competencies of the company. Further paper also highlights what action

can lead to the company to achieve its mission. Finally, the paper discusses if the newly

appointed CEO of the company can be regarded as a strategic leader or not along with the

recommendation to overcome current challenge he is facing in the company.

 3 Running head: Case study: Starbucks Inc.

Competitive advantage

Since competitive advantage of the firm differentiates the capability of the company with

the other company in the industry, it is one of the foundational principle of strategic

management. Similarly, strategy is the process of defining the long term course of action aligned

with the ultimate goal of the company (Sigalas, 2015).

Case Study: Starbucks

Competitive Advantage of Starbucks

For a very long time, the major competitive advantage for Starbucks has been its

“Starbucks experience” where they sell great atmosphere and excellent customer service coupled

with quality coffee. The stores have been designed precisely so that the consumers visit more,

purchase more and stay longer. According to (Mooney, 2007), Starbucks has been able to sustain

its competitive advantage because other players in the coffee industry have struggled to copy the

inimitable Starbucks’ store ambience and its marketing expertise.

Starbucks is a unique blend of product and service industry where it has created a unique

identity because of its unequaled service. Recently, it has been a tough time for service industry

due to COVID and in order to stay relevant in the market, Starbucks is looking forward to

digitization and innovation which is the competitive advantage it is seeking to establish to keep

the business going. Starbucks is building stores with new set ups like drive-thrust and express

store where speed is the priority and doesn’t require a person to stay in the store. The company

opened its first express store, Starbucks Now in Beijing, China which allows the consumers and

delivery riders to grab their drinks and food conveniently (Taylor, 2017).
 4 Running head: Case study: Starbucks Inc.

Starbucks has been continuously investing their efforts in digital advancement to better cater

their customers. (Peterson, 2017) One of Starbucks’ major digital shifts is launch of Mobile

Order & pay feature where the consumers can place their order through Starbucks app and are

notified when their order is ready. This way they don’t have to wait long in queue.

International expansion is one of the other competitive advantages that Starbucks seems to be

developing for long run success of the firm. The company has been increasing its share of revenue

from China/Asia Pacific (CAP) segment over the years

Challenges for Starbucks to maintain advantage

Along with the competitive advantages, there are few challenges to the company explained

below:

• The challenge that Starbucks can face in trying to maintain this advantage is that it is a

service-oriented business which might deduct the in-store experience with ambience,

aroma and interaction that originally popularized Starbucks experience. While

emphasizing convenience, it will struggle to maintain the experience they promise. Also,

due to wide access to technology and a relatively simple model, it won’t be difficult for its

competitors to copy them resulting in losing its competitive advantage.

• Some of the challenges that this coffee giant may face in their efforts of building

international expansion as their competitive advantage is the worsening relationship

between US and China as Starbucks is an American firm; however, we can expect the

situation to improve after the US elections. Also, similar to failure of Starbucks in

Vietnam due to clash in their own coffee culture, it is important for Starbucks to
 5 Running head: Case study: Starbucks Inc.

understand the Indian consumers and cater to their needs as there is a very strong tea

culture in India.

Capabilities of Starbucks Inc

Starbucks was first established in 1971 in Seattle, Washington, United States. In the span

of almost 5 decades, it has been able to develop capabilities that are unique to this coffee giant.

Employees: Previous chief executive officer of Starbucks corporation, Howard Schultz,

considers that the tip of success in Starbucks is not coffee but employees. People are at the center

of the company’s values, guiding principles and practices. Starbucks emphasizes on providing

great training and education to its employees who are popularly called partners. The

organizational structure of the company is interactive and it allows the employees to gradually

establish themselves into their jobs, which results in motivation among their partners for better

performance.

Customer Service: Starbucks has created a brand image for itself for providing the very popular

“Starbucks experience” through high quality coffee, in-store atmosphere, aroma, product

innovation and consistency throughout its numerous outlets around the globe. The stores are

meticulously designed to ensure a more personal interaction between the customers and the

baristas. Moreover, their database of customers is utilized to identify them and their previous

orders which has resulted in great positive response from their customers. Starbucks has a

customer community where the customers network about ideas, practice, tips about the product

or their own companies. Also, Starbucks takes its customer feedbacks seriously and uses them in

creating new products.

 6 Running head: Case study: Starbucks Inc.

Supply Chain: The supply chain of Starbucks is unique in that the company is involved in every

process of the supply chain including almost 300,000 growers globally. It places great emphasis

at superior quality products instead of marketing. The company selects best quality coffee beans

from producers in Latin America, Africa and Asia. For a company so big, supply chain

mechanism of Starbucks is rather simple. All the activities in supply chain are grouped into four

categories: plan, source, make and deliver in order to avoid any redundancy and to manage the

worldwide network in an easier manner. Also, several digital technologies are used in projecting

demand, managing inventory, developing capacity and real time order fulfillment. Its stable and

strong supply chain can be attributed to satisfying customers with quality product and services.

Customer service as a core competency

Customer service can be considered a core competency for Starbucks as it thrived as a

business because of its unique model of customer service. It was created as an aim to become a

“third place” apart from home and workplace for its customers. Since, it is a service industry, the

policies and practices of the company should be designed around the customers. Also, the

tangible capabilities can be easily imitated by competitors, but it is difficult for them to match

with the intangible aspect of Starbucks which is their customer service and experience making it

their core competence.

Starbucks’ mission is “To inspire and nurture the human spirit- one person, one cup and
 7 Running head: Case study: Starbucks Inc.

one neighborhood at a time.”

This mission statement makes a lot of sense for a firm like Starbucks as it touches lives of

numerous people in different stages of its value chain in forms of its partners, suppliers, farmers

and customers. Instead of talking about business, customer or market position, Starbucks places

equal importance towards every person directly or indirectly connected to it. In nurturing human

spirit, it starts with its employees by training them and prioritizing them through an

employeesfirst approach. The mission statement also holds true for customers as the stores

makes them feel at home through their “third place” approach. They make an effort to write

consumer’s name on their cups for a personal touch and the interior of the stores are designed

such that they create a cozy atmosphere. The mission statement also applies for all the farmers

and suppliers that they work with through a very strong supply chain. Starbucks through its

ethical sourcing, forest conservation programs, responsible purchasing practices, farmer loans

lives up to its mission statement by making humanity its priority while doing business.

Since Starbuck’s mission statement is to inspire and nurture the human spirit- one person,

one cup and one neighborhood at a time, environment is a crucial part of human spirit. Looking

at the scale of its business and its rate of expansion, the efforts that it makes for climate change is

not enough compared to the added carbon footprint due to its rapid expansion of stores requiring

added resources. In many places there are multiple Starbucks stores within walking distance

creating an added environmental impact with energy consumption, materials like cups and straws

and lids. For a company that comes up with great innovative ideas to serve their customers

better, it is important for them to put more effort, innovation, technology and resource into

building a sustainable business (Gregory, 2019).

 8 Running head: Case study: Starbucks Inc.

CEO Kevin Johnson as a Strategic Leader

Before joining Starbucks in 2009 Kevin Johnson served Microsoft for 16 years from sales

role to president of Platforms division of Microsoft. At Starbucks Kevin has served on the board

of directors, as president and chief operating officer. In 2017, Howard Schultz stepped down

from the role of CEO to executive chairman and Kevin took over as CEO ever since. Kevin

Johnson is a strategic leader because he has a vision for Starbucks and the ability to communicate

it such that the employees and stakeholders are convinced about achieving that vision.

In his tenure as a CEO Kevin Johnson has been faced with number of challenges,

including arrest of two black men in Starbucks, Philadelphia, for not ordering anything that

stirred up the racial discrimination protests against Starbucks. Kevin Johnson took this matter

very seriously and decided to shut down the Starbucks store for one whole afternoon to train the

employees about racial-bias.

This shows the leaders commitment towards rectifying the mistakes and living up to their

image of being third place for everyone regardless of their racial background. I would

recommend that the company should communicate matters like this across the organization and

in a frequent manner to emphasize on inclusivity.

One of the other challenges that have been faced by Kevin Johnson in terms of strategic

management is the COVID 19 crisis. With this pandemic, the meaning of social life has

completely changed and service industries have taken a bit hit. However, Kevin plans on

adapting to the new normal through use of innovation. They have installed several express stores

in China and US by the name of Starbucks Now. The company has also launched its mobile
 9 Running head: Case study: Starbucks Inc.

order & pay in an effort to reduce the waiting time of the consumers on the go. The challenge

with this effort is to maintain the customer service that Starbucks is popular for. These effort

shows a leadership quality of the CEO as he is overcoming the challenges that environment

posing as explained above.

Conclusion
Competitive advantage is one of the core principle in the strategic management. Changing

environment, increasing demands and cutthroat competition in the market is posing challenges to

the company to sustain and succeed in the market. Hence, it vital for the company to figure to

figure out the point of difference from other rivals in the market. Achieving competitive

advantage is therefore a foundational principle of the strategy for the company like Starbucks

Inc. Amidst of all the challenges, Starbucks is achieve its competitive advantage through

brilliant consumer experience, consistency in the service, supply chain and good employee base.

The unique value proposition of the company along with their concerned for environment has

made company aligned with the ultimate mission of the company.

 10 Running head: Case study: Starbucks Inc.

References

P. (2019, August 7). Starbucks to embark on aggressive expansion plan in India. The Economic

Times. https://economictimes.indiatimes.com/industry/services/retail/starbucks-toembark-

on-aggressive-expansion-plan-in-india/articleshow/70571739.cms?from=mdr

Mooney, A. (2007). Core Competence, Distinctive Competence, and Competitive Advantage:

What Is the Difference? Journal of Education for Business, 83(2), 110–115.

https://doi.org/10.3200/joeb.83.2.110-115

Sigalas, C. (2015). Competitive advantage: the known unknown concept. Management Decision,

53(9), 2004–2016. https://doi.org/10.1108/md-05-2015-0185

5 ways Starbucks entices you to spend more money. (2015, February 13). Business Insider.

https://www.businessinsider.com/how-starbucks-entices-you-to-spend-more-2015-

2?international=true&r=US&IR=T

Taylor, K. (2017, April 3). Starbucks’ new CEO tells us he’ll never be Howard Schultz — and
that’s

great news for the brand. Business Insider Nederland.

https://www.businessinsider.nl/interview-with-starbucks-new-ceo-kevin-johnson-2017-

4.?international=true&r=US

Peterson, H. (2017, March 20). Starbucks is testing a new technology to solve its crisis of long

lines and delays. Business Insider Nederland. https://www.businessinsider.nl/starbucks-

sendstext-messages-to-fix-long-lines-in-stores-2017-3/
 11 Running head: Case study: Starbucks Inc.

Gregory, L. (2019, February 16). Starbucks Coffee’s Mission Statement & Vision Statement (An

Analysis). Panmore Institute. http://panmore.com/starbucks-coffee-vision-

statementmission-statement

Orso, A. (2019, April 12). One year later: A timeline of controversy and progress since the

Starbucks arrests seen ’round the world. Https://Www.Inquirer.Com.

https://www.inquirer.com/news/starbucks-incident-philadelphia-racial-bias-one-

yearanniversary-stutter-dilworth-park-homeless-tables-20190412.html