3. Innovative Business Strategy
Making use of an extensive research team, Starbucks constantly develops ways to attract new customers, while maintaining loyalty from current customers. In 2004, Starbucks launched an in-store CD-burning service powered by HP in its’ Santa Monica, California Hear Music Coffeehouse. This innovation allows customers to create personalized CDs while they drink their java. Tuning into some of the most recent technology, Starbucks has instigated a strategic marketing plan with XM Satellite Radio with a 24-hour “Starbucks Hear Music” Channel. Also, utilizing brand loyalty, Starbucks joined up with Jim Beam Brands Company to market a Starbucks-branded coffee liqueur.
4. Quality
In order to increase the amount of high-quality Fair Trade coffee, Starbucks had invested in a program that provides Farmers in Mexico the technical knowledge to improve the quality of their coffees, thus making their coffee more marketable. And Starbucks also has a comprehensive strategy for quality control training program, which is designed to cultivate skills and knowledge in coffee making and delivering. Employees hired for retail-level jobs receive a minimum training of 24 hours in their first two or four weeks in class on customer service skills, coffee knowledge and beverage making techniques. Starbucks goal in each store is to offer super service to their customer while educating them about coffee quality.
5. Excellent product diversification
Starbucks stores offered a choice of regular or decaffeinated coffee beverages, a special "coffee of the day," and a broad selection of Italian-style espresso drinks. In addition, customers could choose from a wide selection of fresh-roasted whole-bean coffees which could be ground on the premises and carried home in distinctive packages, a selection of fresh pastries and other food items, sodas, juices, teas, and coffee-related hardware and equipment. The company's retail sales mix was roughly 61 percent coffee beverages, 15 percent whole-bean coffees, 16 percent food items, and 8 percent coffee-related products and equipment. The product mix in each store varied, depending on the size and location of each outlet. Larger stores carried a greater variety of whole coffee beans, gourmet food items, teas, coffee mugs, coffee grinders, coffee-making equipment, filters, storage containers, and other accessories. Smaller stores and kiosks typically sold a full line of coffee beverages, a limited selection of whole-bean coffees, and a few hardware items.
In recent years, the company began selling special jazz and blues CDs, which in some cases were special compilations that had been put together for Starbucks to use as store background music. The idea for selling the CDs originated with a Starbucks store manager who had worked in the music industry and selected the new "tape of the month" Starbucks played as background in its stores. He had gotten compliments from customers wanting to buy the music they heard and suggested to senior executives that there was a market for the company's music tapes. Research that involved looking through two years of comment cards turned up hundreds asking Starbucks to sell the music it played in its stores. The Starbucks CDs, created from the Capitol Records library, proved a significant addition to the company's product line. Some of the CDs were specifically collections designed to tie in with new blends of coffee that the company was promoting. Starbucks also sold Oprah's Book Club selections, the profits of which were donated to a literacy fund supported by the Starbucks Foundation. The company was constantly engaged in efforts to develop new ideas, new products, and new experiences for customers that belonged exclusively to Starbucks.
6. High Visibility Locations to attract customers
Starbucks retail stores are typically located in high-traffic, high-visibility locations. Because the Company can vary the size and format, its stores are located in or near a variety of settings, including downtown and suburban retail centers, office buildings and university campuses. While the Company selectively locates stores in shopping malls, it focuses on locations that provide convenient access for pedestrians and drivers. With the flexibility in store size and format, the Company also locates retail stores in select rural and off-highway locations to serve a broader array of customers outside major metropolitan markets and further expand brand awareness. To provide a greater degree of access and convenience for non-pedestrian customers, the Company has increased focus on drive-thru retail stores. At the end of 2004, the Company had approximately 700 Company-operated drive-thru locations.
Weakness Factors
1. Expensive Price
When comparing the price of a regular coffee at a smalltime coffeehouse to the price of one at Starbucks, one finds that the Starbucks coffee is considerably more expensive. Technology such as the Internet has made it easier for consumers to hunt down a better deal for their cup of jot, and often the best deal is not at Starbucks. The expenses of a specialty drinks at a local coffeehouse are not as high as at Starbucks. As companies begin to offer Starbucks quality coffee at a small business price, customers tend to flock towards the deal, potentially creating a problem for Starbucks. On the other hand, what customers tend to forget is that at Starbucks a buyer is not just paying for the coffee, but for the experience as well.
2. Overcrowding the Market
When growing at an extensive rate like Starbucks has, clustering can occur. This means that there are more stores in an area than are necessary. A common result of clustering is boredom from customers who get tired of the same old options for coffee when the only choice besides Starbucks down the street is another Starbucks around the corner. If Starbucks has two stores close to each other, they potentially take business away from each other, thus causing the Company to endure expenses for two stores that are only producing one profit. Consequently, competition can creep into the market and steal possible customers.
3. Changing Market
Just like the price of crude oil is ever changing the price of gasoline for automobile drivers, the prices of inputs continue to make the price of coffee unstable for coffee drinkers. Seasonal inputs like the coffee bean are volatile because of unavoidable aspects like the weather, which also affects the price of coffee directly, since less tends to be consumed in the summer than in the winter. A bad growing season can decrease the supply of coffee beans, thus increasing the price. Furthermore, other compliment prices affect coffee sales, like sugar and dairy products. When the price of these compliments increases, so does the price of a regular cup of coffee sold at Starbucks.
