Introduction
Digital transformation is the process by which technologies drive a fundamental change in companies (Berger, 2015). This transformation involves the use of digital technologies to create and modify business practices and customer experience to accomplish market requirements (Matarazzo et al. 2021). In this case, this study evaluates how the retail industry has managed digital transformations in its operations. The Starbucks Company is the specific retail company for consideration in this topic.
Starbucks is a multinational chain of coffee shops based in America. The company has more than 3200 stores in 80 countries which has made it premiere as the retailer of speciality coffee in the world (Chuang, 2019). Digital transformation has impacted the performance of Starbucks by personalizing marketing campaigns and improving brand awareness. The details of how this company has been digitally disrupted are discussed in this study.
The Extent to which Starbucks has been digitally disrupted
The Starbucks rewards program is one of the digital technology-oriented strategies launched in the company that has seen rapid change. This technology enabled clients to use their loyalty cards to make purchases and redeem them for free in their later orders. This digital strategy has leveraged the reputation of Starbucks and reinforced excellent customer service.
Over the last few years, Starbucks has grown from a regional coffee shop to a major global brand due to the impact of digital disruption. In 2017, Starbucks revealed a new digital flywheel built around rewards, personalization, payment and order. The goal of this digital model was to merge the physical consumer touchpoints with the digital ones to produce higher business results and compete effectively with the other digital businesses. This digital flywheel replaced ordering systems with a new scalable cloud-based platform that enhanced the organization of consumer data. In addition, the model integrated the store-based operating systems with the production management for effective inventory management.
The creation of mobile orders and pay through the digital flywheel has enhanced personalization in the company’s product offering by providing consumers with unique preferences and mastering their spending habits (Santos, 2020). This has been achievable through artificial intelligence where customers would get discounts based on their spending habits in the company. Additionally, Starbucks’ mobile app collects customer data which is used to create a high-level strategy from a selection of locations to in-store staffing logistics.
Later in 2017, in partnership with Microsoft, Starbucks launched the Deep Brew, an artificial intelligence tool that created customizable menus for customers across different channels. The menu would be customised based on the history of customers and their shopping attitude in this company. Espresso machines in Starbucks assisted in accomplishing this customizable shopping experience of the deep brew.
The digital transformation in Starbucks creates significant opportunities for the future expansion of the company. Perhaps, as of 2020, Starbucks was the chief coffee chain with about 15228 openings in the US. The company is also geared to open 600 coffee shops in China before the end of 2021 after experiencing competition from Tim Hortons and Luckin.
In 2020, the company’s investment in digital technology created an opportunity for it to stand out from competitors as COVID-19 aggressively affected businesses. During this period, consumers grabbed orders using the company’s mobile app creating a seamless ordering experience.
The future expansion from digital transformation seems to be true for in 2021, the company’s digital approach performed as the fourth quarter, mobile ordering system and drive-thru accounted for 70% of the US transactions.
Value Chain Analysis
This analysis will focus on the areas transformed by digital disruptions in Starbucks but not the whole Value Chain analysis. Focus is made on the primary activities of Starbucks.
Inbound Logistics: Digital disruptions in Starbucks have had a significant impact on inbound logistics. The company has optimized its supply chain management creating efficient sourcing and transportation of ingredients used in the operation. This transformation has improved speed in delivery and reduced waste.
Operations: The introduction of mobile order and pay systems in the company has streamlined processes by reducing wait times. Additionally, the development of a digital inventory management system creates real-time monitoring of stock and accurate prediction of demand.
Marketing and Sales: Starbucks leveraged digital platforms to transform its marketing and promotion strategies. Through social media, Starbucks has actively engaged with customers building its brand awareness, personalizing its marketing tactics and utilizing customer data to drive targeted promotions.
Service: The introduction of digital personalized menu boards and mobile order pickups portrays how Starbuck’s service offerings have been digitally transformed.
Critique of digital transformation initiatives relating to Starbucks
Critics point out that Starbucks’ initiatives helped the company survive the Covid-19 pandemic in its US outlets and the global market.
Artificial Intelligence and the Deep Brew
Artificial intelligence is one of the significant digital initiatives transforming the operations of Starbucks (Chojecki, 2020). It is being used in the real marketing context of Starbucks in various ways. As mentioned earlier, AI investment has created a deep brew initiative in Starbucks and has enhanced customer satisfaction and resource management in this company in various ways.
In app-ordering: With the use of deep brew, customers can ideally time and pick up their coffee unlike before, when a customer would make an order and wait for the barista to prepare coffee instore-after arriving. The new AI technology enables Starbucks accurately predict the time taken by customers to arrive and an automated machine makes the coffee. This initiative creates a seamless and quick experience by placing coffee in a special area where the client can easily pick it up.
Optimization of coffee machine: Through AI, the deep brew attempts to create a perfect coffee-making machine. This machine makes use of data to minimize excess resources wasted while making high-quality drinks.
Customized drink recommendations: The mined customer data is used to make recommendations for customers’ drinks based on their purchase history. Through the deep brew initiative, Starbucks has a unique value of delivering personal experiences to customers.
Internet of Things in Starbucks
The Internet of Things has revolutionalised Starbucks operations. With IoT, Starbucks can simultaneously upload new drink recipes into its machines globally. With an average of 15-20 pieces of equipment, this technology has saved Starbucks time. Before this initiative, new offerings and drinks in this company were manually uploaded into various units before a barista could start concocting the order. Additionally, IoT enables this company to collect data on time ad act on it at any time which creates a competitive advantage compared to other coffee outlets (Chan, 2015). The company can consistently fulfil orders. For instance, if an individual makes a Caramel Macchiato order while in Florida, it would taste the same if they ordered while in Montana. The IoT pushes for placing customer experience first for this Company.
Blockchain Technology and Starbucks Odyssey
Starbucks launched the Starbucks Odyssey which is a blockchain-driven loyalty program that has immersive benefits for the coffee chain (Hatami et al. 2023). This is a loyalty innovation that recognized and rewards the loyal customers of Starbucks.
Starbucks mobile app
The mobile application of this company is another digital initiative that offers customers a fast method to pay and earn loyalty points which are referred to as stars in the Starbucks rewards loyalty program (Hsiao et al. 2019). Customers use this application to locate the nearer store at their convenience and make an order and use contactless payment. The app makes the shopping experience easier and customers can easily customize their favorites. Also, the Starbucks application is a gold data mine that the Company uses to understand customer preferences and try on how they can improve their experience.
Assess how Starbucks has managed these digital transformation initiatives
The implementation of AI technology in Starbucks has been successful for it has empathised much focus on establishing customer relationships. Additionally, the company utilised AI-generated data to make revenue forecasts and determine the ideal location for opening new coffee shops. Additionally, this technology helps customers gain a radically personalised and warm experience in the coffee shop. The AI technology is integrated into the Starbucks app and presents clients with thoughtful and personalised choices when making their orders.
Starbucks is leveraging AI technology to compete in the coffee industry (Nguyen, 2016). Artificial intelligence gathers customers’ data and aids Starbucks in creating a positive customer experience. Starbucks maximises the customer lifetime value through AI-powered data analytics and this has earned the company an unbeatable competitive advantage.
In the future, AI technology will replace repetitive human tasks and reduce labour costs at Starbucks. Higher revenues will be realised and more coffee outlets from this company will be opened.
Additionally, the implementation of IoT technology has succeeded in Starbucks by allowing the company securely connect to all its coffee machines using a guardian module linked to the cloud (Alexoud, 2023). The guardian module protects coffee machines from attack ensuring data is only transmitted between device communication partners in a trusted cloud. The connectivity provided by this technology allows Starbucks to send complex coffee recipes in a single click, and this has saved the company cut cost expenditure. The IoT connectivity allows Starbucks to diagnose potential problems in the coffee machines and improve customer satisfaction (Wang et al. 2015).
Blockchain technology has succeeded in this firm by improving traceability and transparency in the Starbucks supply chain (Alamsyah et al. 2023). The ‘bean to cup’ strategy in Starbucks used blockchain technology that allowed customers to use their phones to scan a coffee bag and see where the coffee beans were grown. This technological strategy created a connection between coffee farmers and consumers.
From customer reviews provided in the company’s app and other digital platforms, Starbucks rates its performance and looks for measures to improve its operations. Additionally, it evaluates the customer services at its café globally through these reviews. Employees have earned how to respond to the needs of customers through these reviews. These reviews have improved the firm’s social credibility creating positive impressions for future customers. This stragey has given Strabucks a comoettve advanate. Customers have trusted making purchases from Starbucks of the pleasant past experiences given by other customers in the reviews section. The company gains insights into areas for improvement through these reviews and responds by tailoring coffee production to the customer’s demands.
Concerning Starbucks, organisations can learn that technology improves brand awareness and builds the reputation of a company. Also, technology allows organisations to associate with customers from different geographical locations thus enhancing customer engagement and relationship management.
Comment upon key technological factors that may impact the future of work at Starbucks
Various technological factors are crucial in impacting the future of Starbucks. These technologies are likely to shape the operations of the coffee chain, impact customer experiences and shape employee roles to enhance efficiency in productivity. Some of these technological factors include;
Automation and Robotics
Automation and robotics involve the use of control systems and computers to handle industrial processes and improve performance. For instance, some coffee shops are using super-automatic espresso machines that streamline barista work allowing the preparation of more drinks for a short period and this has earned the café so many advantages (Berezina et al. 2019). Advancements in technology may leverage robots to take orders and prepare drinks. The use of robots as baristas in Starbucks would benefit them by reducing labour costs and increasing efficiency (Lowenberg-DeBoer et al. 2020). Additionally, the accuracy and consistency in preparing drinks would be improved since robots are unlikely affected by differences in skill level such as humans (Dixon et al. 2021).
Additionally, automated coffee machines could be advanced to handle more aspects of coffee making. For instance, Starbucks can consider the grinding and brewing mechanism of this machine and upgrade them to produce high-quality coffee. Additionally, the machines can be designed to be more eco-friendly and energy efficient.
Latte art machines
These are machines that use robotic technology to intricate patterns and designs in the coffee foam. Stsrtbcuks can consider this technique to create unique coffee drinks.
Cybersecurity and data privacy technologies
The dominance of digital technologies in transforming the Starbucks coffee chain may require robust cybersecurity technologies to protect consumer data (Mughal, 2019). It would be crucial for this company to invest in cybersecurity technologies by training employees on strict practices of data protection and mitigation measures against these risks.
Augmented Reality and Virtual Reality
The implementation of AR and VR technologies can improve growth and engagement in this coffee shop. AR applications in Starbucks would offer customers interactive experiences of the coffee-making process and learn visual customizations that would improve their trust in the company (And one and Frydenberg, 2019). Starbucks should create AR and VR technologies that let users explore virtual coffee. For this reason, customers would learn more about the brand and its offerings thus driving sales to the shop. These technologies can potentially increase brand awareness and loyalty.
Data Analytics
The availability of huge data presents opportunities for creating data-driven decisions and insights into operational improvements in the company (Gutierrez-Franco et al. 2021). This technology would help the company analyse customer purchasing patterns, operational data and optimize its offerings.
Innovation and technology are transforming the coffee industry. Consumers gain more chances of consuming coffee than ever due to the changes brought about by technology in this industry (Wang and Lin, 2022). For instance in Starbucks coffee technology bridges the gap between a new client’s expectations and a coffee drink. As this company maintains its friendly service, streamlined operations and personal touch, it can consider how these technological factors may impact its future operations.
Conclusion
Starbucks is a multinational coffee chain that has been digitally disrupted and this has driven its success. The impact of these disruptions is evident in its regular improvements in the shopping experience and the quality of drinks it offers. To mention a few, the AI, IoT, data analytics and Blockchain technologies have streamlined coffee making in Starbucks and the company is generating profits from this technological mile. The company has gained a competitive advantage from these technologies and similar organisations should learn how to leverage technology in its operations for higher revenues.
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