2021

“Starbucks” Value-Chain
Analysis

Proshenjit Biswas
ID: F1020090210
  About Value-chain analysis:
The business management concept of the value chain was introduced and described by
Michael Porter in his popular book, "Competitive Advantage: Creating and Sustaining
Superior Performance." The concept of value chain involves all aspects of a business’s
operational activities and can be studied in combination with the supply chain.

Value-chain analysis is an analytical framework that is used to analyze relationships between

various parts of operations and the manner in which each part adds value to contribute to the
level of revenues. Company value-chain can be divided into two groups: primary and support
activities.

Business’s inbound logistics, operations, marketing and sales, outbound logistics, and service
are considered as primary activities in value-chain as they are involved in value creation in a
direct manner. Support activities in value creation, on the other hand, include infrastructure,
human resources management, and procurement.

Inbound Logistics Operations Marketing & sales Outbound Logistics Service

 Strategic  607 stores in two  Reliance on word-  Great emphasis on

relationships with formats : company of-mouth service
suppliers operated & licensed marketing  Customer loyalty
 Effective supply –  Convenient store  Competitive CSR card
chain management locations initiatives.  Effective
integration of IT
 No intermediates.
Infrastucture - A set of support activites such as management ,
planning , finance eyc.

Human Resource Management - Employee renumeration ,

motivation , tranining and development etc

Technology Development - use of technology to increase efficiency

Procurement - purchase of assets and raw materials

 Starbucks Value Chain Analysis:
Value chain covers the entire range of activities included in the process of bringing a product
to the market and to the customer. Beginning from the process of obtaining raw materials to
the final sale of the product, there are several steps involved in it. All of these activities add
value to the product. A value chain analysis provides the companies with a view of the
activities in their production process.

Managers can find out which parts can be optimized for better performance. This type of
optimization does not just bring efficiency but can also be a source of competitive advantage
as in the case of Starbucks. Aligning and optimizing the activities in the value chain enables
companies to generate the expected results by reducing costs and increasing operational
efficiency. Here is an analysis of Starbucks’ value chain.

 Primary Activities:
The first category is that of the main or primary activities.

 Inbound logistics:
This includes obtaining raw materials from the suppliers. The focus of
Starbucks has been on maintaining excellent relationships with the suppliers.
To ensure that it could get a continuous supply of green coffee, it has started a
number of programs to maintain and manage its supply chain better. Its farmer
support centers are a key part of its supply chain management program that
provides support to the coffee and tea producing farmers.
Apart from it, the company has maintained relationships with trading
companies and exporters too. A critical focus of its supplier management
program is ethical sourcing where it has achieved the milestone of 99%
ethically sourced cocoa. Starbucks sources its coffee from around the world
including Africa, Asia-Pacific and Latin American regions.

 Operations:
The coffee brand also purchases, roasts and sells high quality Arabica coffee
beans and related coffee products. Starbucks started roasting in 1971. It roasts
its coffee a little longer than the other coffeemakers to bring out the deep and
 intense flavor. It owns its roasting facilities but has leased a major part of its
warehousing and distribution locations.
 Rancho Cucamonga, —- Manufacturing
 Augusta, GA —– Manufacturing
 Auburn, WA — Warehouse and distribution
 San Francisco —- Warehouse and distribution
 Stratford —– Warehouse and distribution
 Samutprakarn, Thailand — Warehouse and distribution
 Minden, NV (Carson Valley) —– Roasting and distribution
 Kent, WA —- Roasting and distribution
 Amsterdam, Netherlands — Roasting and distribution
 York, PA —– Roasting, distribution and warehouse
 Gaston, SC (Sandy Run) —- Roasting and distribution
 Lebanon, TN —- Distribution center
 Seattle, WA —- Corporate administrative

Apart from it, the brand had 12,235 company operated stores running in 2015
and nearly all of them run in leased properties. The number of total licensed
stores in September 2015 was 10,808. The company has used a mix of
company operated and licensed stores for its operations. The brand operates in
68 countries worldwide where leased facilities are used for the purpose of
administrative offices, training facilities and storage.

 Outbound logistics:
Starbucks sells its products to the customers via the company stores and its
licensed stores mainly. The ready products are shipped to the retail stores from
the warehouses and distribution centers where they are displayed and sold.
Apart from it Starbucks also uses online channels for selling its products and
merchandise. A limited range of these products can be found at Wal-Mart and
Target stores too.

 Marketing and sales:

Marketing is one of the most important parts of any brand’s value chain. A lot
of value gets added at this point. Starbucks does not use the traditional
 methods of marketing its brand. Unlike most others, it has not traditionally
utilized advertising for marketing. Still, in the last few years it has started
investing in promotions and advertising too. During the period of last 5 years
its market budget has grown steadily to grow higher than $351 million in
2015. However, it also uses social media for marketing and customer
engagement purposes. For the rest, it relies on word of mouth marketing, its
customer service and merchandise.

 Service:
Customer service has always remained a priority over the other things at
Starbucks. In most of its history if it did not need to invest in marketing then it
was because it had created a brand image of a premium quality and customer
friendly coffee brand. The brand stores have a customer friendly environment
where customers can interact with the Barista and staff. Overall, Starbucks has
created an environment in its stores where its customers can relax and enjoy
their leisure. These stores are like a third place between their homes and
offices.

 Support Activities:
The second category is that of the support Activities.

 Infrastructure:
It includes the management, planning, finance and other important resources
of the organization. Starbucks has a strong infrastructure and apart from its
physical resources, the brand is in a financially strong position because of its
excellent leadership and management. Its current chairman and Chief
Executive is Howard Schultz who is also the founder of the brand. Schultz’s
role in bringing the brand to its leadership role in coffee industry is exemplary.

 Human Resource Management:

The company’s committed workforce is considered a key attribute in the
company’s success and growth over the years. Starbucks employees are
motivated through generous benefits and incentives. The company is known
for taking care of its workforce and this is perhaps the reason for a low
turnover of employees, which indicates great human resource management.
 There are many training programs conducted for employees in a setting of a
work culture which keeps its staff motivated and efficient.

 Technology Development:
Starbucks is very well known for use of technology not only for coffee related
processes but to connect to its customers. Many customers use Starbucks
stores as make a shift office or meeting place because of the free and unlimited
wifi availability. The company in the year 2008 also launched
mystarbucksidea.force.com as a platform where customers can ask questions,
give suggestions and openly express opinions and share experiences. The
company has implemented some of the suggestions given via this forum.
Starbucks also uses Apple’s iBeacon System wherein customers can order
their drink through the Starbucks phone app and get a notification when they
walk in the store.

 Procurement:
This involves procuring the raw material for the final product. The company
agents travel to Asia, Latin America and Africa for the procurement of high
grade raw material to bring the finest coffee to its customers. The agents
establish strategic relationship and partnership with a supplier which is built
up after reconnaissance and communication about the company standards.
High quality standards are maintained with direct involvement of the company
right from the base level of selecting the finest raw material which is coffee
beans in case of Starbucks.

 Conclusions
Analyzing the information necessary to make decisions about how to most effectively market
a product. Quantitative data, unlike attitudes, perceptions or ideas, refers to information that
can be measured, such as the quantity of a product that is sold during a specified time period,
the sales price or the population of potential customers residing in a particular marketing
area. Various aspects of Starbuck’s operations in the wake of its market position, current
capabilities and various critical success factors make Starbucks Corporation an excellent
model for success.