Case Study: StarBucks

Introduction

Starbucks corporation an American company was founded in [Link] name was inspired by Moby dick's
first mate while the mermaid logo was inspired by the love of the sea from Starbucks original location in
Seattle Washington starting as a single shop specializing in high quality coffee and brewing products the
company grew to be the largest roaster in Washington with multiple locations in the early 80sin 1981 the
current CEO Howard Schultz realized that there was a good opportunity to work with the founder jerry till
this day Starbucks has become the leading company in producing premium coffee in the world Starbucks
corporations as a company that produces high quality coffee they offer service and products they offer
services such as a comfortable space for a hangout wi-fi and they serve customers very well they also offer
their product as customers can buy their coffee beans and make it on their own at home additionally as
their mission is to give and nurture human spirit they always try their best to give a positive impact to the
society by creating job opportunities strengthening the community and committed to a green environment
lot of job opportunities are offered to the society in order to strengthen the community they do charity
events and programs with the people who are in need for the green environment Starbucks uses the cups
that can be recycled for their customers to reduce the waste associated with their cups and other
packaging now.

Operations Strategy

Generally Starbucks has implemented some operation strategy in order to improve their competitiveness
in the industry Starbucks has their own way to expand their business globally before they enter their
business in a certain country they will do some market research to enable a deeper understanding of the
country's market they will also study and do some research on the property right laws as it also helps to
make a successful market entry in emerging markets for example after they did some research in china
they found that the people there tend to love drinking tea compared to coffees to attract the customer
they introduced beverages that included local tea based ingredients instead of focusing on expanding the
size of the store Starbucks also changed its store mix the coffee giant is concentrating on drive-throughs
in the urban and sub-urban area this is because people who live in urban areas tend to have busy lives and
sometimes they don't want to waste their time by queuing up just to buy a cup of coffee a drive-through
also opens up the potential market to include driving commuters so they can just go to the drive-through
section and buy the coffee without having to leave the car in this technology era the company has adapted
mobile applications for the promotion of its brand and sales of products earlier than the competition they
introduced Starbucks applications back in 2009 that are available at apple app store and google play store
at first the application only allowed the user to study about the coffee locating the nearest store and
creating their own drinks but now it's already evolved as it allows customers to pay for the drinks through
application with this way the company is able to reduce the processing fee for the transaction through its
mobile app Starbucks apps as a success due to its ability to combine payment and its loyalty program
moreover to show the success of mobileapps Starbucks remains the most popular mobile payment app
compared to apple pay google pay and Samsung pay.

Product and Service Design

Starbucks is very well known to the market because of its high-quality product the products that are
offered by Starbucks are high quality brewed coffee Italian styles espresso cold blended roasted whole
bean coffee tea product. Sodas and fruit juice moreover Starbucks also offered some food such as cakes
sandwiches salads ice-cream and pastries not only that Starbucks also has their own merchandise such as
mugs travel tumblers coffee grinders coffee makers and storage containers other organizations such as
manufacturers also take part in designing their product Starbucks realized that working and collaborating
with other companies will give them a win-win situation because it will attract more customers and profits
to the both companies so Starbucks has collaborated with the bandeau company it is a company that
designs everything from jewelry to 3diphone cases bandeau company will design Starbucks merchandise
such as mugs cold cups canvas totes and notebooks the merchandise then will be sold at Starbucks stores
the uniqueness and the beauty of the merchandise design by bandeau company attract more customers
to come and grab it as it is a limited-edition product.

Process Design

there are four phases of workflow in the process design such as request negotiation performance and
acceptance it is a process for a customer to buy the product in the request phase it's a phase where the
customer lines in makes a choice and orders the coffee next in the negotiation phase it's a phase where
the barista recommended the other things that want to be added to the coffee or the new menu and
promotions that are available to the customer after the customer already decided their choices it will come
to the next phase that is performance it is a phase where the barista makes the coffee during this process
customers can see the way their drinks are made and have a conversation with the barista and have a
conversation with the barista about the coffee lastly is the acceptance phase it's the phase where the
customer tastes the drinks and gives feedback to the barista whether the coffee met their taste or not
otherwise if the drinks are not met with the customer's taste the customer can request the barista to
remake the coffee until it meets up with their taste Starbucks uses the standard product layout approach
where the customer needs to cue in line to order the coffee providing a waiting line for the customer to
queue while buying the coffee there is also a food section where the customer can see the types of cakes
and pastries available lastly the seating sections Starbucks provided a comfortable sofa chair and couch
for the customer the view and design for the shop are very beautiful and calm which will make the
customer feel at home moreover they will also put on songs to entertain the customer.

Quality Management

Starbucks takes a holistic approach to ethically source coffee through responsible purchasing practices
farmer loans and forest conservation programs Starbucks also claimed that by using this way it can help
to cultivate a bright future for the farmers a more stable climate for the planet and create a long-term
supply of high-quality beans that have been carefully blended roasted and packed fresh the company
carefully chooses coffee beans that meet with Starbucks quality from selected farmers only they will buy
coffee from certified farmers under the Starbucks coffee and farmer equity program with this decision
Starbucks can ensure that they give high quality products that align with the firm's premium brand image
in terms of services Starbucks also uses several adequate services to smooth out their service the company
uses random check-in from district managers where they will check the barista talk to the customer to ask
feedback and check the drinks to ensure quality not only that every six months the stores will be checked
in all aspects to ensure the quality standards are maintained Starbucks also encourages the customer to
give feedback toward their service and product Starbucks used Facebook pages Instagram and twitter to
announce any change promotion and feedback from customers which was public where customers could
easily respond Starbucks will answer all the comments and complaints individually to the person’s account
and they will not copy and paste the same replies with this way Starbucks will always know about the
customer's complaint and will fix it in the future in terms of cleanliness Starbucks is really taking care of it
as it is one of the priorities bathrooms are cleaned often and they allow anyone to use it even if they are
not a customer the condiments station also is checked every 10 minutes for the pastries they must be
delivered daily and must be placed on the shelves before the store is open any pastries that are defective
will be returned for a refund to ensure the quality and the image of the company.

Cost of Production

There are various costs that Starbucks faces within the company fixed costs direct and indirect costs and
operating costs fixed costs are costs that remain constant as output changes such as retail space and
payments for fire insurance direct costs include expenses such as wages expense equipment expense and
supplies expense advertising and payroll are classified as indirect costs advertising from Starbucks varied
between the years 2015 to [Link] to Starbucks fiscal 2017annual report advertising
expensestotaled282.6 million dollars over the years 2013 through 2017 the costs of goods sold kept
increasing at a quick pace the cost of goods sold had several factors that impacted the rising expense
Starbucks opened a total of 7572 stores worldwide between the years of 2013-2017 this resulted in the
need for more raw materials especially coffee beans since coffee has become a high in demand material
the supply for premium coffee beans is limited therefore the need to increase the price of coffee beans
has spiked coffee is becoming more expensive by the pound leading to Starbucks having to raise its prices
on its products in 2013 Starbucks had an operating loss of 325million dollars this was because of the
termination of an agreement between craft foods and Starbucks that limited Starbucks to Sell a kind of
coffee pods that worked only in kraft's Tassimo machines which resulted in Starbucks paying 2.75billion
dollars to craft foods however within the next couple of years Starbucks operating income continued to
increase despite the prices for coffee beans rising Starbucks was able to continue to raise its profits
through cost dividends shares and investments including the raise of its products

Distribution strategy

Starbucks have a centralized system which will enable them to coordinate their logistics operations across
six continents currently they have six central distribution center where the coffee is roasted prepared and
packaged after that these will be transported to their large regional or small warehouse where they get
delivered to the final retail stores the process of manufacturing also follows a strict procedure to ensure
the high quality coffee when it comes to their customer Starbucks used an automated information system
that combined with a centralized logistic planning network this system allows them to monitor the real
time of their inventory levels storage capacity trucking schedules. Safety and operations total end to end
supply chain cost and enterprise savings with this kind of tracking the company can plan their next step
with an efficient that matches consumer demand the team reorganized into four basic functional groups
such as plan source make and deliver were tasked to find improvement the sourcing group works on
finding the factors that cause the price to increase through research they can negotiate a better contract
the manufacturing group has come out that they should open the fifth US roasting plant so they can reduce
cost as well as time delivery next they also will introduce weekly score cards with very clear service cost
and productivity metrics this approach allows an extension supply chain to have the same reference
framework with a goal aligned with the success of the entire company.
Q: What inspired the name and logo of Starbucks?

A: The name "Starbucks" was inspired by Moby Dick's first mate. The mermaid logo was inspired by the
love of the sea, representing Starbucks' original location in Seattle, Washington.

Q: How did Starbucks expand globally, and what strategies did they use to adapt to different markets?

A: Starbucks conducts market research before entering a new country, adapting its menu to local
preferences. For example, in China, they introduced beverages with local tea-based ingredients. They also
focus on drive-throughs in urban areas to cater to busy lifestyles.

Q: How has Starbucks embraced technology in its operations?

A: Starbucks introduced mobile applications in 2009, allowing users to learn about coffee, locate stores,
and create drinks. Over time, it evolved to include mobile payments, reducing transaction processing fees.
Starbucks remains a leader in mobile payment apps.

Q: What products and services does Starbucks offer?

A: Starbucks offers high-quality brewed coffee, Italian-style espresso, cold-blended drinks, roasted whole
bean coffee, tea products, sodas, fruit juices, and a variety of food items. They also sell merchandise such
as mugs, tumblers, coffee grinders, and more.

Q: Explain Starbucks' process design for serving customers.

A: Starbucks follows a four-phase workflow: request, negotiation, performance, and acceptance.

Q: How does Starbucks ensure quality in its products and services?

A: Starbucks ethically sources coffee, supporting farmers through responsible practices. Random check-
ins, district manager visits, and biannual store checks ensure service quality. Starbucks encourages
customer feedback through social media and responds individually to comments and complaints.

Q: What is Starbucks' approach to cost of production, and how has it evolved over the years?
A: Starbucks faces fixed costs (e.g., retail space), direct costs (e.g., wages, equipment), and indirect costs
(e.g., advertising). The cost of goods sold increased due to the opening of more stores and the rising price
of premium coffee beans. Starbucks raised prices to offset these costs.

Q: Describe Starbucks' distribution strategy.

A: Starbucks has a centralized distribution system with six central distribution centers globally. Coffee is
roasted, prepared, and packaged centrally before being transported to regional or small warehouses and
then delivered to retail stores. The company uses an automated information system for real-time inventory
monitoring.

Q: How does Starbucks contribute to social and environmental responsibility?

A: Starbucks contributes to society by creating job opportunities, engaging in charity events, and
promoting a green environment. They use recyclable cups to reduce waste. Ethical sourcing practices and
farmer support programs demonstrate their commitment to social and environmental responsibility.

Problem Identification:

The case study highlights several key challenges facing Starbucks. Firstly, adapting to local markets remains
a recurring issue, exemplified by the necessity to tailor offerings to regional preferences, as seen in the
introduction of tea-based beverages in China. Secondly, the rising cost of premium coffee beans poses a
challenge, impacting the cost of goods sold and necessitating a delicate balance between maintaining
product quality and managing production costs. Additionally, while Starbucks has successfully integrated
technology through its mobile application, the need for continuous innovation in the rapidly evolving
digital landscape presents an ongoing concern.

Role of Operations Management:

Operations management plays a pivotal role in addressing these challenges. In the context of global
expansion, it involves meticulous market research and the creation of efficient distribution networks to
adapt to diverse markets successfully. Cost management strategies, such as negotiating better contracts
and exploring cost-effective sourcing practices, fall under the purview of operations management to
mitigate the impact of rising production costs. Furthermore, the integration and evolution of technology,
exemplified by Starbucks' mobile application, showcase the role of operations management in enhancing
customer experience and streamlining internal processes.

Recommendations:
To overcome these challenges, Starbucks should prioritize continuous market research to stay abreast of
evolving consumer preferences, ensuring the company's offerings remain relevant globally. Implementing
cost mitigation strategies, such as exploring sustainable and cost-effective sourcing practices and
operational efficiencies, will be crucial. Moreover, a commitment to ongoing innovation in technology,
including enhancements to the mobile application and exploring new digital engagement strategies, will
bolster Starbucks' competitiveness. Emphasizing sustainable practices throughout the supply chain,
alongside initiatives to reduce waste and support fair trade, aligns with Starbucks' commitment to ethical
sourcing. Lastly, investing in ongoing employee training programs will ensure that baristas are well-
equipped to maintain and enhance the company's service standards, contributing to a consistent and high-
quality customer experience.