VIETNAM NATIONAL UNIVERSITY, HANOI

NTERNATIONAL SCHOOL

Individual Assignment

Nguyễn Văn Vương - 18071513

Lecturer: Dr. Nguyễn Thị Hồng Vân

INS3066 - ENTERPRISE
BUSINESS SOLUTIONS
Technology Helps Starbucks Find
Better Ways to Compete

HaNoi, June/2021
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Executive Summary
In 1981, Howard Schultz (Starbucks chairman, president and chief executive officer) had
first walked into a Starbucks store. From his first cup of Sumatra, Howard was drawn into
Starbucks and joined a year later.
A year later, in 1983, Howard traveled to Italy and became captivated with Italian coffee
bars and the romance of the coffee experience. He had a vision to bring the Italian
coffeehouse tradition back to the United States. A place for conversation and a sense of
community. A third place between work and home. He left Starbucks for a short period of
time to start his own Il Giornale coffeehouses and returned in August1987 to purchase
Starbucks with the help of local investors.
From the beginning, Starbucks set out to be a different kind of company. One that not only
celebrated coffee and the rich tradition, but that also brought a feeling of connection.
Although it started with a traditional model and is still known as the largest coffee chain in
the world, Starbucks has been slowly transforming itself into a technology company.

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Table of Contents
Executive Summary ....................................................................................................... 1
INTRODUCTION ......................................................................................................... 3
I. Company background ............................................................................................ 4
1. Introduction of the company .................................................................................. 4
2. Business model, revenue model, target market....................................................... 4
II. Enterprise Business Solutions analysis ............................................................... 6
Diagram where management, organization, and technology elements work
together to create a logical system solution to handle the Starbucks case. .............. 7
Starbucks uses data, AI and IoT to create a competitive advantage ....................... 7
III. Innovative solution............................................................................................. 10
Conclusion .................................................................................................................... 12
Reference...................................................................................................................... 13

Ss

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INTRODUCTION
This report’s main purpose is to analyze the background, enterprise business solution
analysis and to come up with three innovative solutions that could be applied in the
company to improve the organization efficiency. In the report, Starbucks's organization,
which is referred in Kenneth C. Laudon_ Jane Price Laudon 2020, Management
information systems - Managing the digital firm, 16th edition, Pearson Education, New
York, is used to as the subject for analyzing. The report will be divided into three main
parts:
• Company background: This part is the introduction of the company, business model,
revenue model and target market.
• Enterprise business solution analysis: In this part, I use the diagram which is
provided in Kenneth C. Laudon_ Jane Price Laudon 2020, Management information
systems - Managing the digital firm, 16th edition (p. 81) to analyze their business solutions.
• Practical tasks: in this part I will provide three solutions which can help Starbucks
improving their business efficiency.

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I. Company background
1. Introduction of the company
Founded by Jerry Baldwin, Zev Siegl and Gordon Bowker, Starbucks is an American
coffeehouse chain and coffee company. It was based in Seattle, Washington to nurture the
spirit of one person, one cup, and one neighborhood at a time. The business model of
Starbucks revolves around channelizing this American Coffee Company and Coffeehouse
Chain in more than 30,000 locations around the world.
Starbucks focus in four areas where our commitment and scale can make the biggest
impact:
• Making coffee the world’s first sustainable agricultural product by doing our part to
improve the lives of 1 million
people in coffee communities around the world.
• Building and operating the world’s largest green retail business, minimizing our
environmental footprint and
inspiring others to do the same.
• Investing in pathways to opportunity through education, training and employment.
• Strengthening communities by welcoming all and creating impact on issues that matter.
2. Business model, revenue model, target market
2.1. Business model

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2.2. Revenue model

Starbucks has mainly three sources of revenue that include its company operated stores,
earnings from the licensed stores, and other revenues from its channel development
segment. 79% of company revenue generally comes from the Starbucks owned stores.
Other key revenue streams of the company are-
• Premium Coffees
• Whole bean coffees
• Premium Teas
• Food items
• Seasonal Novelty Items
2.3. Target market
• Adults
Starbucks' primary target market is men and women between the ages of 25 and 40. They
account for almost half (49%) of their total business. Starbucks appeals to the consumer
age group through its integrated, contemporary design that is consistent in its advertising

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and decor. Customers are usually people with relatively high incomes, professional
occupations and focus on social welfare. This target audience grows 3% per year.
• Young people
People aged 18 to 24, a total of 40% of Starbucks revenue. Starbucks is positioned as a
place where college students can learn lessons, take notes, chat with friends, meet
people. Starbucks attracts this audience directly through technology, focuses on social
networks and actively builds a dynamic youthful image. Young people grow by 4.6 percent
per year.
• Children and adolescents
Children and adolescents are also a large part of Starbucks' customer audience. Together,
customers between 13 and 17 account for only 2% of Starbucks' revenue, but most
children's items are purchased by parents.
• Current trends
Specialty coffees account for about 75% of Starbucks' revenue, but the growing number of
businesses is focused on selling pure coffee and goods. Starbucks has created coffees
available for online ordering in person, at supermarkets, and offers selected dining service
stores that have the opportunity to carry Starbucks coffee, including Starbucks, Seattle's
Best and Starbucks VIA brands. These products give consumers the opportunity to have a
"Starbucks" experience at home and that's the area Starbucks is stepping up.

II. Enterprise Business Solutions analysis

Information technology has helped thousands of brands grow faster, find a larger customer
base and enter new markets. The power of Information technology is hardly hidden. It is
also a major pillar of its business strategy because managing large scale sales is not possible
without IT and IT enabled tools and channels.
Starbucks’ business model is based on an aggressive product differentiation strategy,
intended to emphasize the high quality of its beverages and foods, efficient and helpful
customer service, and the pleasures of purchasing and consuming these items in a
Starbucks store. Starbucks is using information technology to improve its in-store customer
experience. Its Mobile Order & Pay app expedites order and payment for Starbucks
beverages and food, and Starbucks had to redesign its payment process to take advantage
of mobile technology. The free Wi-Fi network makes Starbucks stores more inviting to
visit, linger, and consume food and beverages. The mobile app enables stores to serve more
customers, and enrollment in the Wi-Fi service provides additional e-mail addresses for
promotional campaigns.

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Diagram where management, organization, and technology elements work together

to create a logical system solution to handle the Starbucks case.

Starbucks uses data, AI and IoT to create a competitive advantage

1. Personalize promotions

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The typical use of customer data is to personalize your offer according to the personal
preferences of consumers, and Starbucks is no different. With more than 16 million
members in the United States alone, its loyal customer program accounts for nearly half
of all in-store transactions in the United States.
Knowing each customer's order priorities and developing "buying patterns" has allowed
Starbucks to create and send personalized proposals to each of their customers. The use
of AI to identify such campaigns has become one of the standard applications of AI, and
Starbucks did this in 2017 with their "Digital Flywheel".
AI’s role in Starbucks Digital Flywheel is to recommend new products that consumers
may like, based on what they have a history of purchases and their behavior on mobile
apps.
But it's not just about providing personalized promotions. AI also contributes to the usual
campaigns of Starbucks, but directly to each consumer in the target segment. These can
include regular drinks, product launches, or seasonal menus.
Personalized promotions are certainly effective, but it's equally important for Starbucks
to use customer data in developing Starbucks' product portfolio.
2. Develop products based on Customer Insights
A powerful way in which Starbucks uses data arises from the habit of buying through
large numbers of consumers. Insights from this data suggest creating new products and
growing from existing products. For example, there is a cute idea more than 15 years ago
to introduce pumpkin-flavored drinks during Halloween. This has become a global
pumpkin-inspired range of products. One result is a large increase in footsteps during the
autumn months.
A second type is the use of data on channels. The best example of this is probably the
company pushing into coffee in the home space in 2016. This is the main launch of the
product into the supermarket, for customers who make coffee at home. In-store data gave
them a strong base to decide which products to target for home drinkers. It can even test
take-home products such as coffee dissolved in regular stores.
Starbucks also develops more products such as sugar-free coffee (for home
products). Another variants that in-store consumption data suggest they develop
additional dairy-free versions.
3. Locate a new store based on Data
The plan to open a Starbucks store is now part of a complex data analysis. How
Starbucks uses data for this includes every understandable element you'd expect,

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conveniently to come. The data also helps them determine where customers don't want to
go.
AI supports store planning models with economic factors in terms of a location. These
include population, income levels, transportation, the presence of competitors, etc. It uses
this to forecast revenue, profitability and other aspects of economic efficiency.
The system also looks at the location of existing Starbucks stores. It looks at the impact
of a proposed new store on existing sales in neighborhoods.
AI technology is at the heart of this application based on location analysis. This is also
known as mapping or GIS (Geographical Sys space information system).
4. Flexible menu

One implication of the above examples is that Starbucks has the ability to constantly
refine and adjust its services. The way Starbucks uses data means they can make
modifications based on customer, location and time. This affects products, promotions
and prices.
However, if you show services in your store on menu tables printed above the counter,
then there is a disconnect with the ability to constantly adjust everything. This is one
reason lo-fi solutions like blackboards are still popular with retailers. But for Starbucks,

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the answer is the appearance of digital signs in stores, with a menu screen set up by a
computer.
This completes a chain that allows changes that may occur elsewhere in the customer
experience to be reflected in the store.
Obviously there are a lot of questions raised, and there is a lot of scope to complicate
things. However, since mid-2018, Starbucks has been testing this in a handful of stores. It
focuses its efforts on pushing selected products based on local circumstances such as
weather or time of day.

III. Innovative solution

+ Applying U-commerce, or ubiquitous commerce, is defined as the use of ubiquitous
networks to support personalized and uninterrupted communications and transactions
between a firm and its various stakeholders, including customers, to provide a level of
value over and above other types of traditional commerce.
• Buyers can reach anytime, anywhere, people
• Buyers are consulted from customers, friends, family reviews
• The buyer receives the goods right within the location range, immediately
• Buyers review and receive commissions when orders come from reviews
• Technology to introduce products tailored to demand (AI)
• On-OFF channel order delivery technology and merchants within range
• Technology to choose the place of delivery or pick-up from the dynamic at the
store
• Technology social review and referral, Affiliate tracking link successful order.
+ Implement the Experience of the Future (EOTF) project at stores to strengthen the loyal
customer base: Instead of diners having to interact with staff as before to order, EOTF
stores will be installed with vending kiosks. With these kiosks, consumers can completely
unleash their creativity and order according to their personal preferences, not being tied
to traditional dishes as before.

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+ Application of Augmented Reality in Marketing Communications

Customers will be added information of products and goods. Interact or communicate, try
out real products and services. That's how you can create visual effects, videos, make
your customers feel, satisfied, interact, think and react.
Example: Starbucks to show customers how beans are transformed into cappuccino. It is
an interesting experience for coffee lovers and enthusiasts.

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Conclusion
Always considering investment and application of new technology as part of its long-
term business strategy, Starbucks is changing the face of the foodservice industry in
unprecedented ways every day. Starbucks is a pretty good example of one of the
leading technology companies in the world. The way Starbucks uses data is a great
example of how data management and technology work. The integrated technologies
in coffee shops have helped this giant to stay ahead of the competition to maintain the
number one position in the industry. Is what Starbucks has been doing is the
inevitable future of traditional chain business models?

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Reference
Kenneth C. Laudon_ Jane Price Laudon 2020, Management information systems -
Managing the digital firm, 16th edition, Pearson Education, New York
Humphry Hung, Y H Wong, Vincent Cho, 2009, Ubiquitous Commerce for Creating the
Personalized Marketplace: Concepts for Next Generation Adoption, Hong Kong
UKEssays. (November 2018). Starbucks Executive Summary Company Mission.
Retrieved from https://www.ukessays.com/essays/marketing/starbucks-executive-
summary-company-mission-marketing-essay.php?vref=1
https://www.starbucks.co.uk/about-us
https://marketingai.admicro.vn/case-study-starbucks-dang-nham-vao-doi-tuong-muc-tieu-
nao/
https://www.marketing91.com/business-model-of-starbucks/
https://statstic.com/revenue-model-of-starbucks/
https://vi.wikipedia.org/wiki/Starbucks
https://stories.starbucks.com/press/2015/starbucks-mission-and-values/
https://www.brandsvietnam.com/congdong/topic/24166-Starbucks-da-thay-doi-tu-doanh-
nghiep-ban-cafe-thanh-cong-ty-cong-nghe-du-lieu-nhu-the-nao/.
https://notesmatic.com/starbucks-business-model-and-strategy/
https://www.brandsvietnam.com/11688-Starbucks-gio-da-la-mot-cong-ty-cong-nghe
https://desklib.com/document/business-plan-starbucks-executive-summ/

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Technology Helps Starbucks Find Better Ways
to Compete

S
tarbucks is the world’s largest specialty coffee retailer, with over 24,000
shops in 75 markets. Starbucks’s reputation rests on its high-end specialty
coffees and beverages, friendly and knowledgeable servers, and customer-
friendly coffee shops. This was a winning formula for many years and has en-
abled Starbucks to charge premium prices for many of its items. But Starbucks
has competitors, and must constantly fine-tune its business model and business
strategy to keep pace with the competitive environment.
Starbucks tried online retailing
and it didn’t work out. If you go to
the Starbucks.com website, you’ll
see coffee, branded mugs, espresso
machines, and brewing accesso-
ries described online, but you will
need to purchase these items from
Starbucks stores, supermarkets,
or Starbucks-designated retailers.
Starbucks stopped selling online
in August of 2017. Starbucks man-
agement believes there has been
a “seismic shift” in retailing, and
merchants need to create unique
and immersive in-store experi-
ences to survive. For Starbucks,
products and services, for the most
part, should not be sold online.
Instead, Starbucks is focusing
© Atstock Productions/Shutterstock
on improving the in-store experience. The company rolled out a new Mercato
menu of freshly-made sandwiches and salads to more than 1,000 stores
in 2018 and plans to expand its line of caffeinated fruit juices (Starbucks
Refreshers) and nitro-brew cold drinks. Management hopes to double food
sales by 2021. Starbucks is also building high-end cafes around the world
under the “Reserve” brand to draw customers willing to pay more for pre-
mium coffee and pastries.
Starbucks continues to enhance the customer’s in-store experience through
information technology. Each Starbucks store has a Wi-Fi network providing
free wireless Internet access for customers. Many Starbucks customers are
active users of smartphones. Starbucks launched a mobile ordering app for
the iPhone and Android mobile devices in September 2015. The Starbucks
Mobile Order & Pay app makes it fast and easy to pay for drinks and food.

79
80 Part One Organizations, Management, and the Networked Enterprise

Customers can place their orders on the way to Starbucks stores with Mobile
Order & Pay and also tip the barista. Those ordering are told the time when
their beverage will be ready. There’s no need to wait in line. The mobile
app can also identify the songs playing in Starbucks stores and save them to
a playlist on Spotify. The app helps Starbucks target products to customers
more effectively, which could be especially important as the chain also adds
more lunch items and cold drinks to its menu to draw in more customers
after the morning coffee rush. Cold drinks now represent half of Starbucks’
beverage sales.
Starbucks wants U.S. customers who use its in-store Wi-Fi network
to enter their email address in the first store where they get connected.
The company’s software remembers the customer’s device and connects
it automatically thereafter. That would give Starbucks additional email
addresses that it could target with more promotions.

Sources: Julie Jargon, “Starbucks Aims for More Mobile Orders,” Wall Street Journal,
March 21, 2018; Stacy Cowley, “Starbucks Closes Online Store to Focus on In-Person
Experience,” New York Times, October 1, 2017; “Starbucks’ Mobile Order Push Meets
Resistance From Ritual Seekers,” Reuters, March 21, 2018; and www.starbucks.com, ac-
cessed March 28, 2018.

S tarbucks illustrates some of the ways that information systems help busi-
nesses compete, as well as the challenges of finding the right business strat-
egy and how to use technology in that strategy. Retailing today is an extremely
crowded and competitive playing field, both online and in physical brick-and-
mortar stores. Even though Starbucks is the world’s leading specialty coffee
retailer, it has many competitors, and it is searching for ways to keep growing
its business. Customers are increasingly doing more retail shopping online, but
Starbucks products do not sell well on the web. They are meant for an in-person
experience. They are too experiential.
The chapter-opening diagram calls attention to important points raised by
this case and this chapter. Starbucks’ business model is based on an aggres-
sive product differentiation strategy, intended to emphasize the high quality of
its beverages and foods, efficient and helpful customer service, and the plea-
sures of purchasing and consuming these items in a Starbucks store. Starbucks
is using information technology to improve its in-store customer experience. Its
Mobile Order & Pay app expedites order and payment for Starbucks beverages
and food, and Starbucks had to redesign its payment process to take advantage
of mobile technology. The free Wi-Fi network makes Starbucks stores more in-
viting to visit, linger, and consume food and beverages. The mobile app enables
stores to serve more customers, and enrollment in the Wi-Fi service provides
additional e-mail addresses for promotional campaigns.
Here are some questions to think about: What is Starbucks’ business
strategy? How much has technology helped Starbucks compete? Explain your
answer.
 Chapter 3 Information Systems, Organizations, and Strategy 81

Business
Problem

• Determine business • Opportunities from new

strategy technology
Management
• Design new products • Intense competition
and services

• Target
promotions
• Optimize in- Information Business
Organization System Solutions
store experience
• Redesign business
Mobile Order and Pay • Increase revenue
processes
• Expedite ordering and • Increase service
purchasing
• Wi-Fi wireless
network
• Increase product promotions
• Smartphones Technology
• Mobile app

3-1 Which features of organizations do

managers need to know about to build and
use information systems successfully?
Information systems and organizations influence one another. Information sys-
tems are built by managers to serve the interests of the business firm. At the
same time, the organization must be aware of and open to the influences of
information systems to benefit from new technologies.
The interaction between information technology and organizations is com-
plex and is influenced by many mediating factors, including the organization’s
structure, business processes, politics, culture, surrounding environment, and
management decisions (see Figure 3.1). You will need to understand how infor-
mation systems can change social and work life in your firm. You will not be
able to design new systems successfully or understand existing systems with-
out understanding your own business organization.
As a manager, you will be the one to decide which systems will be built, what
they will do, and how they will be implemented. You may not be able to antici-
pate all of the consequences of these decisions. Some of the changes that occur in
business firms because of new information technology (IT) investments cannot
be foreseen and have results that may or may not meet your expectations. Who
would have imagined 15 years ago, for instance, that e-mail and instant messag-
ing would become a dominant form of business communication and that many
managers would be inundated with more than 200 e-mail messages each day?

What Is an Organization?
An organization is a stable, formal social structure that takes resources from
the environment and processes them to produce outputs. This technical defini-
tion focuses on three elements of an organization. Capital and labor are primary
production factors provided by the environment. The organization (the firm)