The Operation Management Strategies of Starbucks

STARBUCKS

BS in Management ScienceOPERATIONS MANAGEMENT - MGT214

Group Project

IT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE

Instructor’s Name: Ms. Dalal Bamufleh

Alaa Gain – 06120012

Shoroq Al-Khateeb – 09120108

Ebtehaj Lafi – 08220255

Afnan Al-Gain – 09120068

Abrar Muzain – 08120002

Alaa Muzain - 08120011

IT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE

STUDENTS NAMES

BACKGROUND

Since 1971, Starbucks Coffee Company has been committed to

ethically sourcing and roasting the highest quality Arabica coffee

in the world. Today, with stores around the globe, the company is the world’s premier roaster and

retailer of specialty coffee.

HISTORY

1971 – Starbucks Coffee, Tea, and Spice

store (coffee bean roasting) opened in Seattle’s Pike Place

Market.

1982 – Howard Schultz joined Starbucks.

1986 – Howard Schultz established Il Giornale

Coffee Company.

1987 – Il Giornale acquired Starbucks and changed the name into Starbucks Corporation.

1992 – Starbucks decertified the union

and made IPO.

1995 – Starbucks Coffee International

opens in Japan − Starbucks

implemented ESOP.

IT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE

LOGO

IT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE

PRODUCTS

Starbucks Corporation offers coffee products and café services throughout the world. It sells high-quality whole

bean coffees (from around the world) along with other types of freshly brewed coffees, premium teas and espresso

beverages, hot and cold. It also offers various sodas and juices, pastries and confectionery, coffee-related

accessories such as the Starbucks mugs, and other café related products such as the Starbucks CD. Starbucks sells

its special products through its company-operated retail stores, warehouse club chains, office coffee distributors,

institutional foodservices such as hotels and airlines, mail-order catalogs, and through its electronic store.

Company Mission

Statement:

“ Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining

our uncompromising principles while we grow.”

Environmental Mission Statement:

“ Starbucks is committed to a role of environmental leadership in all facets of

our business.”

MISSION

Building a

Company with Soul.

Opposing Franchising because of Quality

Control and

Culture.

Only selling coff ee beans

without artifi cial fl avors.

Satisfy customers by all means.

Employees’

contributio-n and

involvement in

making Starbucks a better

company.

GOALS

STRENGTH- Starbucks is the market leader in the coffee

Market.- Customers are satisfied with the quality and

taste of Coffee.- High brand equity.

- Operating in 40 countries worldwide.- Huge number of employees’ approx. 13

thousand.

OPPORTUNITY- Entry into Asian market like Pakistan, India and

Bangladesh.- Market penetration in International countries.- Co-branding with other food manufactures.

- Whole bean sales in supermarkets like.

WEAKNESS- Pricing are higher as compared to the

competitors.- High operating cost·

- The business profits are highly dependent on coffee product.

THREATS:

- Numbers of competitors are increasing, like Barista, Café coffee Day, Gloria jeans coffee.

- Variation in coffee prices in developing countries· - People started to become more health conscious·

- Labour Unions issues in US and international countries·

- Starbucks facing huge resistance in international countries over cultural and political issues.

SWOT ANALYSIS

GLOBAL STRATEGY

COMPRTITIVE STRATEGY

QUALITY STRATEGY

PROCESS STRATEGY

LAYOUT STRATEGY

INVENTURY MANAGEMENT

OPERATION MANAGEMENT

GLOBAL STRATEGY

BY ALAA

IT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE

International Strategy

- Businesses moving from domestic to an international strategy give the firm greater return on its investments.

- In 1995, due to the saturation of the United States market, Starbucks started to expand its business overseas.

- By 2001, Starbucks had more than 150 stores and plans to continue its success.

- The company began by entering into joint ventures with local businessmen.- Starbucks a strong expansion campaign, opened in foreign markets by 2001.

- This plan made the opening of over 600 stores located out of the United States possible.

- More than 200 units including China, Japan, Kuwait, Lebanon, New Zealand, Malaysia, the Philippines, Singapore, South Korea, Taiwan, and Thailand.

GLOBAL STRATEGY

COMPETITIVE STRATEGY

BY ALAA

IT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE

Focused differentiation by serve niche buyers better

than rivals.

Buyers have distinctive preferences, special

requirements, or unique needs.

Have unique capabilities to serve

needs of target buyer segment.

Big enough to be profitable and offers

good growth potential.

Costly or difficult for multi-segment

competitors to meet specialized needs of

niche members.

Starbucks has resources and capabilities to

effectively serve an attractive niche.

COMPETITIVE STRATEGY

QUALITY STRATEGY

BY SHOROQ

IT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE

QUALITY STRTEGY

For Starbucks, quality simple means.

The company even uses "mystery shoppers“.

Starbucks coffee buyers spend about 18 weeks each year visiting

coffee growers and suppliers.

Starbucks gets the first pick of some of the world’s best coffee crops.

Quality means conformance to standards:• be welcoming• be genuine• be considerate• be knowledge• be involved

TQM tools:• Continuous improvement .• Just-in-time (JIT).

QUALITY STRATEGY

PROCESSSTRATEGY

BY EBTEHAJ

IT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE

Repetitive Focused Strategy for

Frappuccion/Milkshakes

- Modules combined for many output options (many cup types & same cap type)- Repetitive operations- Just-in-Time inventory

- Fixed, well-known costs, due to experience- Specialized equipment (coffee machines, customized

blenders, etc.) - Well-trained staff (Starbucks’ policy to train coffee

specialists)

PROCESS STRATEGY

PROCESS STRATEGY

IT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE

- Is the process designed to achieve competitive advantage in terms of

differentiation, response, or low cost?

Yes, it is. Repetitive Focused Strategy is an „intersection”

between Process Focused Strategy and Product Focused

Strategy, hence it incorporates advantages of the two.

- Does the process eliminate steps that do not add value?

Yes, it does, thanks to the specialized

equipment and well-trained personnel.

- Does the process maximize customer value

as perceived by the customer?

Yes, thanks to incorporating „House of

Quality” tool in the design process.

Will the process win orders?

It is possible, as Starbucks strives to

take over the „coffee shakes”

market niche with its product.

PROCESS STRATEGY

LAYOUTSTRATEGY

BY AFNAN

IT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE

The idea behind the Starbucks’s stores layouts was to recreate the experience in the espresso bars in Italy

IT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE

In the U.S. customers want take-out service and a place to sit inthe store while having a drink

IT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE

Starbucks has become a “third” place for customers to go to get away from daily hectic

IT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE

Starbucks Coffee Store Layout in a City in Michigan

LAYOUT STRATEGY

Recommendations and suggestions

LAYOUT STRATEGY

INVINTORYSTRATEGY

BY ALAA & ABRAR

IT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE

Inventory management

means all the goods that are

available to sell in the warehouse.

The techniques that Starbucks company use it to manage their inventory

are

JIT

MRP

INVENTORY STRATEGY

Corporate levelReduce their price by producing a new product of coffee

using cheaper beans or may come out with special discounts

promotions to increase the sales.

Business levelStarbucks can effectively pursue Focus-Based Strategy in conjunction with differentiation or cost leadership based

strategy.

Functional levelAdvertisement can develop through internet that

services convinced for users to access, give the brochures, do road shows, so that public come to know more about Starbucks

details.

INVENTORY STRATEGY

Starbucks success is achieved through a few factors:

1. Outstanding Quality of the coffee.2. Excellent service provided at the

stores3. Fast growth of new stores all around

the world.

These factors not only have increased the sales but also the reputation among the coffee lovers.

CONCLUSION

Starbucks Official Sitehttp://www.starbucks.com/Starbucks Details Strategy for Profitable Growthhttp://news.starbucks.com/news/corporate+news/financial/2009+annual+meeting+of+shareholders.htmStarbucks - Design of Goods and Serviceshttp://www.oxbridgewriters.com/essays/finance/design-of-goods-and-services.phpStarbucks Strategyhttp://www.slideshare.net/tommy2cruise/starbucks-strategyStarbucks SWOT Analysishttp://www.slideshare.net/shahkiran79/starbucks-swot-analysisStarbucks Marketinghttp://www.slideshare.net/Heekuk/starbucks-marketingStarbucks Global Strategyhttp://brainmass.com/business/international-business/402609Operation Managementhttp://dc169.4shared.com/doc/XnYqb0C-/preview.htmlStarbucks Final Presentationhttp://www.slideshare.net/guest020532/starbucks-final-presentationBerger, A., Buchman, J., Chase, D. & Hsu, S. (2003). Starbucks. Retrieved on November 12, 2009 from, http://74.125.153.132/search?q=cache:z1kF8ZdXtXoJ:www.loudoffice.com/donald/resume/portfolio/Starbucks.ppt+STARBUCKS+B+managing+quality&cd=2&hl=tl&ct=clnk&gl=ph.Thompson, A. & Gamble, J. (1999). Starbucks Corporation. New York: The McGraw-Hill Companies. Retrieved on

November 12, 2009Starbucks Website (2009). Starbucks, Inc. Retrieved on November 12, 2009 from, http://news.starbucks.com.

REFERENCES

THANK YOUIT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE