Case Study for Strategic Management

Chapter 1: Strategic Management and Strategic Competitiveness

Many brick and mortar stores have experienced decreasing sales in the United States as online traffic has increased. Interestingly, 2014 Starbucks sales store operations increased 5 percent in the fourth quarter; this 5 percent uptick in revenue carne from increased traf- fic (2 percent from growth in sales and 3 percent in increased ticket size).

Additional and more sophisticated technology appli- cations may be the driver of this increase in revenues. To stimulate sales, Starbucks is ramping up its digital tools such as mobile payment platforms. Customers now can place online orders and pick them up in about 150 Starbucks outlets in the Portland, OR area. Besides leadership and a focus on technology, Starbucks receives suggestions, ideas, and experimentation from its employees. Starbucks views its employees, called baristas, as partners who blend, steam, and brew the brand's specialty coffee in over 21,000 stores worldwide. Schultz credits the employees as a dominant force in helping it to build its revenue gains.

To incentivize employees further, Star bucks is among the first companies to provide comprehensive health ben- efits and stock option ownership opportunities to part- time employees. Currently, employees have received more than $1 billion worth of financial gain through the stock option program. An additional benefit for U.S. employ- ees is the frrm's program that pays 100 percent of work- ers' tuition to finish their degrees through Arizona State University. To date, one thousand workers have enrolled in this program. In mid-2018, Walmart offered subsidized college tuition to its employees as a means of attracting and retaining talent in a tight labor market. Walmart's actions may demonstrate the value of Starbucks's approach to sup- porting employees' efforts to earn a college degree.

When developing new storefront concepts, Starbucks innovates. For instance, it is testing smaller express stores in New York City that reduce client wait times. Today, Starbucks emphasizes online payments as a means of increasing the speed of customer transactions. It now gives Starbucks rewards for mobile payment applications to its

Case Discussion Questions

1. What competitive advantage or competitive advantages do

you believe Starbucks seeks to establish? What are the main

challenges the firm faces as it tries to maintain the advantage

or advantages you identified?

2. Identify three or four capabilities you believe Starbuck.s possesses. Of these. are any a core competence? Jf so, explain your reasoning.

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12 million active users. Interestingly, this puts it ahead of iTunes and American Express Serve with its Starbucks mobile payment app in terms of the number of users.

To put its innovation on display, Starbucks opened its first "Reserve Roastery and Tasting Room." This is a 15,000 square foot coffee roasting facility and a consumer retail outlet. According to Schultz, it is a retail theater where "you can \vatch beans being roasted, talk to master grinders, have your drink brewed in front of you in multiple ways, lounge in a coffee library, order a selection of gourmet brews and locally prepared foods:' Schultz calls this store in New York the "Wtllie Wonka Factory of coffee:' Based on this concept, Starbucks opened small "reserve" stores inspired by this flagship roastery concept across New York in 2015. To attract customers in the afternoon, the firm is "rolling out new cold coffee and tea drinks and is intro- ducing happy hour promotions featuring cold beverages:'

These technological advances and different store offerings are also taking place internationally. For exam- ple, Starbucks is expanding a new store concept in India in smaller towns and suburbs. These new outlets are about half the size of existing Starbucks cafes in India. In China, Starbucks is opening roughly one store daily and is rolling out its Roastery and Reserve brands to pene- trate the country further.

Sources: D. 8 Klem. 2018. Here's how Starbuck.s plans to conquer China, n., Motky Fool, www.fool.com. ~larch 25; J. Jargon. 2018. Starbuck.s trying to woo o.fternoon customers. Wall Strat /o11ma/, ""'""'·""'J.com. May 8; S. Nassauer, 2018. Walmartto r•Y cortaon coll.ge CO>ts for U.S. store workers. Wall St,...,t fourtkll. '""'"'·""'J.COm. May 30; I. Brat & T. Stynes, 2015, Eammgs; Starbuck.s p•ck.s a pres•dcnt from technology industry. lla/1 Strret Journal • ...-.. w .wsJ.COm, January 23; A. Adamczyk, 2014, The ne:rt big caffeine craze? Swbuck.s trstmg cold-brrwtd cofftt, Forb<s, ....,., • .forbes .com, August IS; R. Foroohr. 2014, Go •ns•de Starbuck.s' wild new "\V"Illie Wonka Factory of colT«~ Time, ""'"'·t•mr.com, Drcember 8; FRPT-Retail Snapshot. 2014. Starbuck.s' strat<gy of txpans•on .. ,th profitability: To debut in to...-ns and >uburbs w1th half the ••ze of the new stores, FRPT- Retail Snapshot. Septornber 28. 9-10; L l.orenzettJ,2014, Fortune's world most admired compantrs: Starbucks where innO\ration is al\\'a)"S brewing., Fortune, www.fortunr.com. October 30; P. Wahba, 2014, Starbuck.s to offer delivery m 2015 m some key mark.e1s, FortwJt, \\Ww.fortune.com, November 4: V. Wong, 2014, Your boss w.U love the new Starbucks delivery service, Bloomberg BusmrsswccA., ·www.businessweek.com, November 3.

3. Starbucks's mission is "To inspire and nurture the human spirit-one person, one cup and one neighborhood at a time.· What actions do you recommend the firm take to reach this

mission?

4. As Starbucks's new chief executive officer and strategk leader,

what key challenges does Kevin Johnson and his firm face?

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