Executive Summary
Starbucks was founded in Seattle, Washington, in 1971 and currently has more than 33,833 locations worldwide. . Starbucks is currently the 67th largest retailer in the world and the 27th largest employer, with over 383,000 employees globally. This paper aims to determine the industry and company analysis, the core elements of human capital associated with Starbucks, and how they are tailored to support its strategy. Starbucks operates in the retail coffee and snacks store industry. The industry is characterized by the ability to offer a wide variety of customizable products. Starbucks’ competitive advantage originates from its ability to provide a high-quality brand image and experience and its partner with suppliers. Starbucks’ management team is fully committed to maintaining the core values instilled in the business formation. The company has a strong customer base that provides them with a strong competitive advantage and high-profit margins from sales. Starbucks’ overall strategy is product differentiation. Product differentiation refers to the ability to create and market a unique product with distinct differences in quality or quantity compared to the market. Starbucks’ culture’s core elements are its belief in transparency and social responsibility. Starbucks has been praised for its role in appreciating its employees and promoting a high level of job satisfaction. The company uses a training program to help communicate its values and instill its mission in the minds of all its partners. Leadership has been key to helping support the business strategy that Starbucks has created. The vision and mission have helped inspire every Starbucks employee to help meet their customers’ needs.
History
Starbucks is a popular coffeehouse that operates in the U.S and worldwide. Founded in Seattle, Washington, in 1971, Starbucks is one of the largest coffee companies globally. The company was founded in Seattle, Washington, in 1971 by three college friends, Jerry Baldwin, Gordon Bowker, and Zev Siegl. The company began in Pike Place Market in Seattle until Roy Thompson joined them to help the business flourish. Since then, the company has expanded its presence. There are currently more than 33,833 locations worldwide, and they can be found on six continents (Fariss 2021). Starbucks is a vibrant and ideal place for meeting and connecting with others. The company’s philosophy is that a high-quality cup of coffee is essential to human interaction. Starbucks promotes this philosophy by giving customers a place to meet, connect, and be entertained. The environment is designed for people to enjoy their time as much as they can savor their favorite drink from the numerous choices offered by Starbucks. Starbucks’ success may be attributed to the company’s focus on quality, premium brand image, and customer service.
Starbucks’ first location was in Seattle’s Pike Place Market, which has remained unchanged today. Starbucks is currently the 67th largest retailer in the world and the 27th largest employer, with over 383,000 employees globally. The company’s early success was aided by the personal computer, video cassette recorders, and automatic coffee centers. These items were in high demand during the 1980s and 1990s (Meng et al., 2020). Starbucks also sought to stand out in the crowded coffeehouse business by providing customers with a welcoming environment and great employees. Today, Starbucks is categorized as a specialty coffee retailer. This means they are distinct from general retailers like Walmart or supermarkets that sell a wide variety of goods but may not have the same customer service focus as a specialty retailer. This paper aims to determine the industry and company analysis, the core elements of human capital associated with Starbucks, and how they are tailored to support its strategy.
Industry Analysis
Starbucks operates in the retail coffee and snacks store industry. The industry is characterized by the ability to offer a wide variety of customizable products. The retail coffee and snacks store industry is primarily composed of small chains. These small chains have very low barriers to entry and are considered franchise businesses. Starbucks is a specialty coffee retailer that prides itself on providing high-quality service and great customer relations. Starbucks has grown into an international company with many locations in unique environments but still maintains the same core values and priorities as the company began in 1971. The retail coffee and snacks store industry has a lower average wage per employee, allowing business owners to be more flexible with their human resources. Starbucks’ wage rate per employee is $13,333, which makes it one of the lower wage rates among retailers in the industry (Nair et al., 2021). Over the years, the industry has kept up with the pace of change and remains competitive. Starbucks has remained competitive by providing a unique experience for its customers.
Starbucks buys all its products from suppliers, who source them from producers. Starbucks’ most popular products are coffee beans, tea leaves, and cocoa beans which they source from suppliers. The company has partnered with farmers to ensure that the farmers are given fair prices, stable markets, and paid regularly. They also partner closely with their additional suppliers to ensure that they provide quality products every time they make an order. Starbucks’ suppliers include Bevital, Chirano, Maverick, and Kraft Foods, to name a few. They supply Starbucks with its products (Novak and Richmond 2019). Starbucks’ target market is customers of all ages looking for a premium coffee experience. The company has grown significantly since 1971 and has locations worldwide. They have developed a loyalty program that offers rewards points to customers whenever they buy Starbucks products. These points can be redeemed for different rewards given at the time of redemption, such as free beverages or items from the store’s menu. Through these strategies, they have been able to maneuver through the different levels of the industry to be ranked among the top dealers.
Company Analysis
Competitive Advantage
Starbucks’ competitive advantage originates from its ability to provide a high-quality brand image and experience and its partner with suppliers. Starbucks’ management team is fully committed to maintaining the core values instilled in the business formation. They offer unique and unparalleled products, including free Wi-Fi access, live music and entertainment, comfortable seating, and luxury restrooms. The company has also implemented a customer loyalty program, encouraging repeat customer visits. Starbucks’ competitive advantage lies in providing unique experiences for its customers while still retaining its core values (Alaali and Vines, 2020). The unique experience includes an atmosphere that encourages meetings and interactions among people of different backgrounds in a comfortable environment where they can enjoy their favorite drink from one of the numerous choices offered by Starbucks. Starbucks’ ability to provide a unique customer experience has attracted millions of people to become loyal customers. Starbucks is internationally recognized as a brand with high customer loyalty (Lombardi et al., 2021). The company has developed an effective advertising strategy that ensures that it can reach its target market effectively and efficiently. Starbucks uses various advertising platforms such as social media, television and radio, billboards, and newspapers for advertising its products. Starbucks also offers gifts with every purchase, encouraging customer loyalty upon every visit or purchase.
The company uses its international presence to open new stores in different regions outside its usual operating area. This gives them access to future growth opportunities through additional revenues and higher profit margins from sales of the same products at different locations across the country. Starbucks has remained competitive in the industry by providing a unique experience for its customers. The company has maintained this competitive advantage through employee training programs and partnerships that ensure product quality and fair trade practices. Starbucks has also built a strong customer loyalty program that encourages constant patronage and repeated visits from millions of customers. Starbucks’ competitors include chains like Caribou Coffee, Dunkin’ Donuts, Peet’s Coffee & Tea, and McDonald’s (Sakal 2018). These competitors are considered regulars in the industry and have proven they can provide an excellent customer experience and consistently provide quality products. However, these companies cannot establish a partnership with suppliers and do not provide their customers with the same unique experience as Starbucks.
Value Proposition for Customers
Starbucks is an internationally recognized brand in the coffee industry. The company has a strong customer base that provides them with a strong competitive advantage and high-profit margins from sales. Starbucks’ customers are loyal and repeat customers, which is an important factor for continued profitability and growth. To ensure customer loyalty, the company has tried to build a culture of service and excellence with its employees. Starbucks has maintained its competitive advantage by providing a unique experience for its customers (Liu 2022). Starbucks’ branded products can be purchased worldwide through the company website. This allows customers to personalize their coffee or tea experience whenever they want it. Starbucks has also been able to keep in contact with its suppliers and ensure that they provide quality products while maintaining reasonable prices for both parties involved. Starbucks uses several strategies to retain its customers and remain competitive.
Starbucks’ Value Proposition for Customers is to provide a unique experience by providing products of standard quality made from fair trade ingredients with superior taste experiences. The company believes these products promote a world of mutual understanding and allow customers to taste the flavor of an entirely different culture in their drinks. The company also believes that providing employees with well-paid job opportunities and senior management positions helps promote social mobility among employees. Starbucks’ Value Proposition for Customers is to provide high-quality products made from fair trade ingredients and excellent customer service through its training programs while ensuring fair trade practices. With regular improvements in quality, customers are allowed to enjoy their favorite drink at any of Starbucks’ stores across the globe. Starbucks offers its suppliers a unique opportunity to offer fair trade products to their consumers (Atzori et al., 2018). The company provides its suppliers with an advanced method of communication and transparent information to help improve purchasing power and overall communication between both parties. Starbucks also believes in offering fair business opportunities for disadvantaged farmers from all over the world, which has led them to create a partnership with Conservation International to accomplish this goal in the year 2000.
Overall Strategy
Starbucks’ overall strategy is product differentiation. Product differentiation refers to the ability to create and market a unique product with distinct differences in quality or quantity compared to the market. Competitive advantage refers to choosing between alternative suppliers when the independent assessment of best-in-class supplier’s attributes is unavailable. Starbucks examines each area of its value proposition to determine its total strategy. The company ensures its products are made from fair trade ingredients, supporting its product differentiation strategy. Starbucks uses social marketing strategies to appeal to its target market and helps differentiate itself from competitors (Yan, 2022). The company also tries to create and maintain an atmosphere of service, a strategy that will help encourage repeat business.
Additionally, the company uses innovative management practices to help differentiate itself from its competitors and provides an excellent overall customer experience. Starbucks has maintained its competitive advantage through consistent improvements in product quality and its ability to provide superior customer service through its training programs. At the same time, Starbucks has been able to differentiate itself from its competition by promoting its unique culture, allowing them to grow in a very competitive market.
About its corporate strategy, Starbucks is a publicly traded company that owns and operates more than 17,768 retail locations worldwide, with almost 200 additional outlets planned for this year (2010). Starbucks has expanded across all types of businesses to maintain its status as a leading national brand in the coffee and tea industry. The company is continually identifying new markets to increase its market share. Starbucks has also expanded its product lines by introducing various items such as Frappuccino, bakery, and other specialty beverages. Starbucks also diversified its product line by acquiring Evolution Fresh juice bar and café on February 17, 2018 (Cao and Qiu 2021). These items will help the company compete by taking advantage of the natural healthy trend currently sweeping across America.
Core Elements of Human Capital
Culture
Starbucks’ culture’s core elements are its belief in transparency and social responsibility. Transparency refers to the open communication between Starbucks partners and customers. To achieve this, the company has created an atmosphere where every person could “care passionately about the coffee we roast, the beverages we prepare, and the customer service we provide.” Starbucks believes they have successfully created this environment by enhancing communication through its internal website. This way, partners can provide management feedback and regularly inform all partners. Starbucks has also shown transparency through its commitment to social responsibility (Baldonado n.d). The company acknowledges that it is not solely responsible for improving the lives of its partners but also has a responsibility to all disadvantaged farmers around the world who produce fair trade coffee beans. To accomplish this, Starbucks works with Conservation International to help them identify the root causes of poverty and the natural resources that are affected by it.
Social responsibility is also an important element of Starbucks’ culture because it allows them to impact the communities in which they operate. The company believes that by helping disadvantaged farmers, they can improve the lives of their partners and the communities in which they live. The company also believes in the potential for social responsibility to help resolve some of the world’s most urgent environmental issues. Starbucks’ social marketing strategy is directly linked to its overall strategy (Sara 2020). The company uses social marketing strategies to promote its products while differentiating itself from competitors. Social marketing allows Starbucks to create a unique culture that will enable them to stand out from its competitors. Starbucks has also used social marketing to promote its products while giving back to its communities. The company has created a foundation called the Starbucks Foundation, which allows the company to support organizations that help support its social commitment.
Talent
Starbucks has been praised for its role in appreciating its employees and promoting a high level of job satisfaction. The company uses a training program to help communicate its values and instill its mission in the minds of all its partners. The training program helps Starbucks create an environment where partners can continue to learn and grow mentally. Starbucks has maintained this talent by promoting from within to help ensure all partners are committed to creating an environment where customers receive superior customer service. The company provides employees with a platform to showcase their talents, abilities, and skills, which may be important in developing new programs. Starbucks’ global presence has also helped retain its talent by providing all retail employees with the opportunity to be promoted (Yan, 2022). This helps them retain a large pool of potential partners interested in learning and growing within the atmosphere created by Starbucks’ culture. Starbucks also uses strategic alliances to maintain relationships with vendors and other businesses that help them comply with regulatory requirements, codes, and standards. Starbucks’ culture and training focus help the company excel in its overall talent strategy. As a result of this, Starbucks has been able to maintain its competitive advantage as it continues to grow internationally.
Leadership
Leaders act as steering wheels for any given company. As a result, a company with poor leadership will not be able to achieve the same level of success as a company with a strong leadership team. Management plays an important role in the success of any business because they are responsible for creating and directing overall strategy. Starbucks believes its leadership is successful because they have created an environment where “partners (employees) obsessed about customers.” Starbucks has developed its leadership strategy by investing in leadership training and development. This training allows them to develop people within the organization while adding value to their businesses. Starbucks has also done a good job at leveraging employees who are other companies’ leaders to help create stronger strategic alliances (partnerships) that help their company grow and expand internationally (Atzori et al., 2018). Starbucks’ leadership is important because it has created a culture that allows the company to compete globally. Starbucks values have helped shape its overall strategy, and the culture created by Starbucks to support its vision has helped create an effective leadership team.
Structure
Starbucks employs a matrix organizational structure where they can organize teams by function and geographical region to help meet different market needs. Starbucks’s overall goal is to provide a great customer experience while being socially responsible and environmentally friendly through an integrated environment that allows them to have the best talent available. This structure allows Starbucks’ leaders at all levels of its organization to focus on meeting their customer’s needs, which helps ensure that their customers receive the best customer service possible. Starbucks has achieved this goal by developing various strategies supporting its vision (Lombardi et al., 2021). For example, each geography is organized into a learning center. In this area, employees are given development opportunities, a district office, and a corporate office, where leadership is created and results are aligned. In addition, Starbucks has also created a regional office of sustainability responsible for developing and implementing company-wide social responsibility initiatives. This structure allows Starbucks to achieve its vision by helping ensure all partners are committed to their overall vision and mission.
The matrix organizational structure has contributed to the company’s success by ensuring that all partners are committed to the customer experience while being socially responsible and environmentally friendly. Starbucks’ business model provides exemplary customer service, creating customer loyalty and repeat business. In addition, Starbucks leverages its partnership with other companies, such as Ticketmaster, to expand its online presence and develop new products (Goh et al., 2020). By leveraging relationships with other companies, Starbucks has expanded its customer base by targeting new potential customers who may not have been aware of its products or services. Furthermore, Starbucks’ business model allows them to create partnerships that form strategic alliances with like-minded businesses.
Aligning Human Capital Elements
The elements of human capital mentioned above, culture, talent, leadership, and structure, are all aligned to support Starbucks’ overall strategy as a global coffee retailer. Culture is the base of any company, which has been key to Starbucks’ success. Starbucks has created a culture that helps them create a store environment where employees are obsessed with customers. This culture helps spread values, purpose, and service quality to every employee. Their vision and mission are supported by businesses that help enable growth through the strategic alliances they have formed with other companies. In addition, leaders at all levels of the organization are supported to help ensure that employees are continuously trained to meet needs specific to their community and market area (Alaali and Vines 2020). This environment helps create opportunities for partners to achieve their goals and achieve a high level of consistency in Starbucks’ culture. Talent is the key to being successful within any organization. The talent that Starbucks has been able to attract throughout its organization has helped them create world-class customer service, allowing them to become the leading brand in retail coffee.
Leadership has been key to helping support the business strategy that Starbucks has created. The vision and mission have helped inspire every Starbucks employee to help meet their customers’ needs. In addition, the leadership team who are supported in developing growth and culture at all levels of Starbucks organization through strategic alliances with companies worldwide. This leadership team helps align all elements of human capital to focus on meeting customer needs while being socially responsible and environmentally friendly (Nair et al., 2021). The structure is a key element in helping support the overall business strategy that Starbucks has created. Starbucks’ structure helps ensure that all partners are committed to their overall vision, mission, and values. In addition, the structure allows leaders at all levels of the organization to help support Starbucks’ global growth. The structure also supports the implementation of their strategy by helping ensure that all elements are aligned to reach their goals and objectives.
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