Stephanie Kneble

December 4, 2017

Case Study Analysis

The Commoditization of Starbucks

The Starbucks Company has transformed into a fast-pace coffee outlet focused on

serving quick products and minimizing time between each customer interaction. There

are three problems that have been recognized during the case analysis to be the

underlining issue for the coffee company. The management team is the guiding force

behind executive decisions that are meant to be beneficial to the company but overall the

leadership team has forgotten the mission and values of the original Starbucks brand. The

original mission statement and guiding principles have be overlooked as years proceeded,

and the focus of the company has shifted to mass production of new locations rather then

grooming existing locations for inclusive customer satisfaction and brand loyalty.

The vision for the Starbucks brand, when bought by Howard Schultz and Dave

Olsen in August of 1987, was to bring the romance of Italian coffee bars to America. The

partnership between Dave Olsen and Howard Schultz fueled the combination of planning

for growth and ensuring the best quality coffee and service through employee training.

The original statement by Howard Schultz after obtaining Starbucks focused on the

reassurance to the existing employees of his commitment and loyalty to protect their

personal interests during their continued service. Schultz believed the underlying cause of

quality service was from the motivated and skilled workforce as he stated, satisfied

partners create satisfied customers.

 The original mission statement of the company was to establish Starbucks as the

premier purveyor of the finest coffee in the world while maintaining our uncompromising

principles as we grow. As the company highlighted six guiding principles used to help

make decisions, number three of the guidelines has began to be overlooked by the

management team. Number three states apply the highest standards of excellence to the

purchasing, roasting, and fresh delivery of our coffee. Today Starbucks offers coffee,

handcrafter beverages, merchandise, fresh food, entertainment, consumer products, and

the Starbucks Card. In retail segments the company is selling ice cream, teas, CDs,

books, and other lifestyle products. Another feature in the new store locations is the

option to buy breakfast sandwiches or other foods thus overpowering the smell of fresh

coffee and replacing it with food. Not only is there food being served to consumers in the

locations but also a new strategy to complete orders at an increased rate. To ensure quick

pace service and completion of the increased volume of coffee requests, there was a

transition from grinded coffee beans to pre-grinded beans. This company decision was

established to complete orders at a faster rate thus limiting the interaction between

baristas and customers. There is a misconnection between the principles that are the main

pillars for the company and its deciding factors that are meant to better its brand. The

leadership team moves towards expanding in other industry segments rather than

capturing the brand values originally focused on the experience of coffee.

In 2000 Howard Schultz shifted from CEO to chief global strategist and in 2002

Jim Donald became the new CEO following the retirement of Orin Smith. At the end of

2007 there were a total of 15,011 stores with 2,571 that were opened in 2007 alone. The

sales growth projected for 2008 was expected to fall between three and five percent as the
company prepares to see a recession in the United State but in comparison a projected

growth internationally. As well the company created partnerships with Host Marriott and

Aramark that have enabled the distribution and sales of the product in schools and

airports. A bottle version is being sold in grocery stores through the North American

Coffee Partnership, a joint venture between Starbucks and PepsiCo. Thus enabling

consumers the ability to skip the need to go to Starbucks locations for the coffee products

and instead providing access to the products in outside locations. This alteration to the

accessibility of the products has diminished the brand as a coffee experience to instead a

single product. Starbucks charges approximately $3.95 for a small caramel macchiato

while in comparison McDonalds sells the same drink for $1.98. The target market that

Starbucks is catering their product towards is the consumer that wants to purchase both

the coffee and the experience. The target market that McDonalds caters towards is a

quick pace consumer that wants their coffee and to be on their way. In order to continue

charging inflated prices for their product Starbucks needs to rebuild the bridge between

consumer coffee experiences and the store locations. The original CEO, Howard Schultz,

was not primarily focused on the growth within the national market of the US but rather

his worry was fixated on how do we maintain our culture, our intimacy with the

customers?

Starbucks coffee brand is known all over the world for its iconic logo, concept,

and reputation for a quality product and service. Harnessing the prominent features that

make up the DNA of the Starbucks brand is the solution to maintaining the culture and

intimacy with the customers. At the same time the dominance of a Starbucks culture will

help expand its brand to a broader international market. The company partnered with
other companies to make specific music, books, and film that are featured inside only the

store locations. Strategic relationships with Apple and AT&T are helping enhance the

customer experience through the use of Wi-Fi and other in-store technology. Through

these updates done by the company for the thousands of locations already in existence it

will continue to build on their commitment to unique recognition.

As well, the company can update their facilities to provide an intimate setting but

in a modern fashion. New dcor that can be featured in Starbucks will pay tribute to the

roots of the brand such as woven bags of fresh coffee beans. This new feature will

provide both the esthetic and the aroma of constant brewing coffee within the coffee

shop. In addition the locations can transition back from more space for stanchions and

shelves of merchandise to increased sitting room in order for consumers to consumer

their beverages inside the shops. The Starbucks locations in the immediate area around

Stockton University has limited sitting room such as four tables in the Galloway

shopping center location and five tables in the Mays Landing shopping center location.

This makes it difficult to find seating for customers and forces people to enjoy the coffee

inside their vehicles. Ensuring the company transitions from desiring a large quantity of

customers towards quality customers will rebuild the brand loyalty that customers will

have for the specific Starbucks products.

Furthermore, the accessibility to this authentic product should be screened as it

takes trained, motivated employees to deliver both the product and the service.

Eliminating the outlets within hotels and schools that are not monitored by the same strict

standards of company-operated locations and licensed locations will limit the dilution of

the brand. Focusing on the practices of training baristas to appreciate the company as
their own as well as recognizing that management cares about feedback, this will

influence the employees to care about the success of the company too. Howard Schultz

said, The success of Starbucks demonstratesthat we have build an emotional

connection with out customerswe have a competitive advantage over classic brands in

that every day we touch and interact with our customers directly. Our product is not

sitting on a supermarket shelf like a can of soda. Our people have done a wonderful job

of knowing your drink, your name, and your kids names. This statement has become

incorrect over time as employees of hotels and schools are employed by the specific

institutions and uninterested in the overall welfare of the Starbucks brand. Breaking this

cycle by stressing the importance of employee responsibility for the welfare of the brand

will again drive employees to provide quality interactions and service thus driving the

concept of a coffee culture.

The agenda of Howard Schultz as the reappointed CEO in 2008 addressed the

focus on reigniting the emotional attachment with customers and restoring the

connections customers have with Starbucks coffee, brand, people, and stores. The focus

of the coffee experience has been diluted due to the replacement of tables with stanchions

for customers. The concept of interacting with a barista and watching the coffee grinding

process has been substituted for quick service. Customers can trade the name and inflated

prices of the Starbucks coffee instead for a McDonalds name and deflated price.

Starbucks originally was created for the experience between customers and employees

but has side stepped into the realm of profits through mass sales. Reverting back to the

locations as Italian coffee shops and intimate settings to enjoy coffee while
accomplishing work tasks should be the main priority in order to cultivate the once coffee

culture.
 References

Enz, C. (2005). Case study 7: the commoditization of Starbucks. In, Hospitality

Strategic Management: Concepts and Cases (pp. 564-581). Canada.