1
Case Study - Starbucks
MGT500: Strategic Management in a Globalized Economy
Please note: Abstracts are not required for student
papers (they do not take the place of introductions)
Only write an abstract if your professor specifically
requires one
(If it is required, please see these tutorials for
2
Case Study - Starbucks
Incorporated in 1971, Starbucks was initially in business of selling whole bean coffee.
Through its technological innovation and its effective leadership, especially with Howard
Schlutz as CEO, company had expanded globally with rapid growth. Sophisticated technological
adaptations made Starbucks retail sell thrive even during ecommerce boom. Starbucks quickly
adopted digital tools such as online payment platforms, online orders and pick up services to
ramp up revenue. Over the years, it established a brand-name not just by being customer focused,
but also by its culture. Starbucks incentivizes employess by taking their suggetsions for new
receipe experimentaion, providing stock-options, comprehensive health benefits, and even a
collegue tuition fees. Even with such rapid expansion and high sales revenue, the company did
not stop innovation. Wheather it is a smaller express store experiment in New York, or its
reserve roastery and tasting room, its leadership always found innovative strategies to expand
revenue generating streams. Even at global stage, Starbucks is demonstrating its technological
advances.
This paper will analyze Starbucks’ competitive advantages, core competencies, and
challenges to maintain its competitive edge.
Seeking competitive advantage
Competitive advantage refers to the factors or attributes that allow one to produce more
affordable or high-quality services or products than its competitors (Amado, 2022). These
competitive advantages allow the company to outperform its competitors in terms of long-term
profit and sales growth. Businesses can obtain competitive advantages in a variety of ways,
including through implementing new technologies and distinguishing their offerings. As was said
in the example scenario, Starbucks has also been able to grow by incorporating technology
3
innovation into its operational procedures. It is apparent that Starbucks want to leverage its
technological innovation, brand name and customer service to maintain a competitive edge.
When other retail stores saw decline in revenue, Starbucks realized 5% increase in
revenue from its stores through online traffic. To make customers’ lives easier, Starbucks
adopted various online payment options as well as online ordering services ultimately decreasing
the wait times for customers. To enhance customer experience, the company experimented small
express stores in New York City that provides faster service. Starbucks encourages customers to
use its mobile payment application by providing rewards to its 12 million active users. Such
online payment platforms reduce operational burden on store-fronts and increases transaction
speed.
To continue innovation, the company has developed retail locations for customers based
on the concept of "Reserved Roastery and Testing Room". Using of this innovative approach,
Starbucks customers can now watch in real time as their favorite coffee is made in multiple ways
while also interacting with the barista.
These innovations and technological advances were not just limited to United States.
Starbucks made its innovative approach global. It tried smaller sized stores to expand in suburbs
and smaller town of India. It will not be an exaggeration to say Starbucks is opening one store
daily in China and also expanding its roastery as well as reserve brands globally.
To reduce losses due to employee turnover, Starbucks has made efforts to keep its
employees satisfied by providing various incentives such as stock options, health benefits, tuition
fee reimbursement, etc. To encourage innovation, Starbucks is known for taking suggestions and
ideas from its employees regarding its products, services, and recipes. Such employee incentives
4
can increase employee satisfaction and lead to higher individual job performance (Cappelli et al.,
2019).
These examples explained above suggests that Starbucks is seeking competitive
advantage using innovation and employee satisfaction. In this cutthroat competitive environment,
gaining competitive advantages in these areas is not a simple feat. Businesses like Starbucks,
which are active all over the world, may face difficulties in maintaining their competitive
advantages and long-term success.
The company sells expensive premium coffee compared to other brands. Consequently, it
is crucial that the business concentrate on quality. If not, buyers will not hesitate long to move to
another brand. For global expansion, instead of offering same products, company should offer a
location specific product to according to local taste and practices. For example, Mcdonalds has
different menu in countries like India, China, and Mexico to attract local customers. With
increase in competition, it is necessary to compete with prices as well. To reduce operational
costs, business must consider cost of the employee benefits and reduce it strategically.
Core competencies of Starbucks
Years of business and innovation has helped Starbucks establish a brand value that is
hard to compete with. The ability of Starbucks to successfully exploit its cornerstone product
differentiation methods by providing a premium product mix of high-quality snacks and
beverages has been the company's fundamental competency. Starbucks' brand equity is based on
selling the highest-quality coffee and related products, as well as giving each customer a
distinctive "Starbucks Experience" that is derived from outstanding customer service, clean,
well-maintained stores that reflect the culture of the communities in which they operate, thereby
fostering a cult-like following and a high level of customer loyalty. High product quality,
5
continuous product advancement, investment in technology, customer service, and brand
recognition contribute to company’s success. Some of its core competencies are discussed below.
Global Brand Recognition and Strong Market Position:
Brand value directly or indirectly enhances brand competitiveness through market
orientation (Gupta et al., 2020). Starbucks has over 34,630 stores in 80 different countries
making it a true global enterprise valued at around $82 billion. Starbucks is the most recognized
coffee brand and it successfully uses its strong brand reputation by merchandising goods and
licensing out its emblem. The company can obtain a substantial competitive advantage by further
expanding into international markets thanks to its strong market position and brand recognition,
which also contributes to higher growth in both the domestic and international markets.
High Quality Products and Product Diversity:
Product quality and consistency plays major role in brand development (Hanaysha et al.,
2016). Starbucks place the highest value on product quality and refrain from standardizing it in
the name of higher manufacturing output. Starbucks has a diverse portfolio that caters to various
demographics and age groups. It offers different types of roast coffee, quick-eats, salads, oatmeals, fruit cups, cold beverages, seasonal beverages, brewing equipment, merchandise, and
accessories.
Technical Advancement and Innovation:
Innovation is implementation of ideas to create new solution to problems or
improvements to existing systems, products, or processes (Taylor 2017). As explained in
previous section, Starbucks effectively uses technology with their mobile application and made it
available on different operating systems which provides online ordering platform to help
6
customer save time. Starbucks implemented loyalty-based programs by ‘Starbucks Rewards’ that
provides convenience, support gifting and increases frequency of store visits.
Human Resource Management:
Starbucks treat their employees as asset and provides great benefits in form of stock
options, health insurances and tuition fee coverage. Starbucks also values their employees’
feedback, suggestions, and ideas on new product releases. Great client services are a direct result
of this efficient human capital management.
How will Starbucks fulfill its mission?
Starbucks’ mission is “to inspire and nurture the human spirit-one person, one cup and
one neighborhood at a time” which expresses a sense of social responsibility and purpose to
expand continuously by positively influencing its customers. It also shows that brand gives
utmost emphasis to its customers. Providing education on its products, workshops, and culture is
one way to spread awareness. Starbucks has already started doing this by providing “Reserve
Roastery and Tasting Room” that gives customer a facility tour, explains various types of roasts,
and brewing methods. Starbucks is following its mantra by effective use of social media to
promote environmentally friendly community, waste reduction and recycling.
The idea of "one person, one cup, and one neighborhood at a time" demonstrates how
Starbucks makes sure to leave a positive impact on its staff and customers. Additionally, it
strives to expand its business steadily, one area or location at a time. Even with such
competition, its continuous global expansion proves Starbucks is living up to its mission.
Additionally, Starbucks encourages social responsibility through ethical sourcing, giving
chances to members of various social and racial groups, fostering a green supply chain, and
promoting civic engagement in the local area. By doing this, Starbucks hopes to withhold its
7
position as the industry leader while also being socially responsible. It is important to remember
that this business aims to provide the best coffee possible while emphasizing making a positive
and lasting impact on the neighborhood. In my opinion, this mission is rather a long term
purpose driven statement that plays role determining its strategy and Starbucks should continue
with the ethical way it has been conduction business and expanding.
Change in Leadership
The performance of the leader in directing and influencing his or her activities in
accomplishment of the goals of the company is referred to as the leader's effectiveness. When a
leader is effective, organizational goals are carried out in line with a vision and mission (Sonmez
Cakir & Adiguzel, 2020). Effective leadership played important role in continuous growth and
brand development of Starbucks. Howard Schultz served as CEO of Starbucks from 1986 to
2000, and from 2008 to 2017. After Howard decided to step down as CEO, Kevin Johnson was
appointed as chief operating officer. Johnson joined the board of directors in 2009 while working
as CEO of Juniper Networks and became a member of the leadership team pushing technical
developments utilizing his 16 years of experience work in tech sector through Microsoft.
In addition to leading the business through the Covid epidemic, Johnson leveraged his
experience as a former IT executive to push Starbucks into the digital age, remodeled its reward
program and shop footprint to reflect various ways customers want to buy coffee, He also
hastened the chain's growth in China, which is currently its second-largest market. Due to his
strategic leadership, innovation, and foresight, company valuation rose more than 50% during his
tenure (Corba & Lucas, 2022). His leadership has significantly aided the company's expansion
and ability to adapt to the challenges of the marketplace. Kevin Johnson, after five years on this
role, decided to retire and Howard Schutz became interim CEO, one more time taking
8
responsibilities he once took to make this brand a global enterprise as the company searches for
Johnson’s successor.
Conclusion
Starbuck’s case study proves importance of efficient strategic management, innovation,
customer-centric approach, human resource management and leadership to have a competitive
edge in a highly competitive industry and achieve a brand recognition at global level.
References
Amadeo, K. A. (2022, January 29). Competitive Advantage. The Balance. Retrieved September
11, 2022, from https://www.thebalancemoney.com/what-is-competitive-advantage-3strategies-that-work-3305828
Cappelli, P., Conyon, M., & Almeda, D. (2019, January 31). Social Exchange and the Effects of
Employee Stock Options. ILR Review, 73(1), 124–152.
https://doi.org/10.1177/0019793919827934
Corba, J., & Lucas, A. (2022, March 16). Starbucks CEO Kevin Johnson is retiring, and Howard
Schultz is returning as interim chief. CNBC. Retrieved September 11, 2022, from
https://www.cnbc.com/2022/03/16/starbucks-ceo-kevin-johnson-is-retiring-howard-schultzreturns-as-interim-chief.html
Gupta, S., Gallear, D., Rudd, J., & Foroudi, P. (2020, May). The impact of brand value on brand
competitiveness. Journal of Business Research, 112, 210–222.
https://doi.org/10.1016/j.jbusres.2020.02.033
9
Hanaysha, J., Abdullah, H. H., & Ghani, N. H. A. (2016). Importance of product quality and
service quality in developing brand equity. J. For Global Business Advancement, 9(4),
390. https://doi.org/10.1504/jgba.2016.079883
Sonmez Cakir, F., & Adiguzel, Z. (2020, January). Analysis of Leader Effectiveness in
Organization and Knowledge Sharing Behavior on Employees and Organization. SAGE
Open, 10(1), 215824402091463. https://doi.org/10.1177/2158244020914634
Taylor, S.P. (2017), What Is Innovation? A Study of the Definitions, Academic Models and
Applicability of Innovation to an Example of Social Housing in England. Open Journal
of Social Sciences, 5, 128-146. https://doi.org/10.4236/jss.2017.511010