Starbucks Case Analysis

Panelists TRU Degree

Cheng Qihui T00705487
Fan Yuqing T00705550
Group 8 Huang Tengfeng T00704984
Li Lixuan T00704730
Wang Siqing T00704729
Cheng Rongjin T00705596
 Contents
1. Case profile...........................................................................................2

2. Problems faced.....................................................................................3

3. Alternative Courses..............................................................................4

4. SBXU China Status...............................................................................7

5. Conclusion.............................................................................................8

6. Additional Parts：Case Problem Analysis...........................................8

1.Case profile

Starbucks was founded in 1971 and rapidly expanded. By 2002, it had over 5000 stores worldwide
and served over 20 million customers. Starbucks' success mainly relies on high-quality coffee and
a unique customer experience, with little reliance on traditional advertising. Starbucks has a
unique value proposition, which mainly includes three points: first, high-quality coffee, sourcing
from high-quality global production areas, and controlling the supply chain to ensure coffee
quality. Secondly, high-quality service can enhance customer experience through personalized
services. Thirdly, the unique atmosphere provides a high-end and warm environment, making it a
place for people to gather and socialize.

Starbucks refers to its employees as "partners" and is very generous with its partner welfare
policies, including providing health insurance and stock options, which keeps partner satisfaction
between 80% and 90%, far exceeding industry standards. The company also encourages internal
promotions, with approximately 70% of store managers being baristas and 60% of regional
managers being store managers. Starbucks provides employees with extensive training, including
hard skills in using cash registers and making beverages, as well as soft skills in building
connections with customers. Meanwhile, Starbucks tracks service performance through various
metrics, including monthly status reports and self reporting checklists. The company's most
prominent measurement tool is a mysterious customer program called "Customer snapshot".
Customers will evaluate the store based on four "basic service" standards: service, cleanliness,
product quality, and service speed.

Starbucks competes with various small professional coffee chains, independent coffee shops, as
well as donut and bagel chains in the United States. Other competitors include Caribou Coffee and
Peet's Coffee&Tea, as well as independent coffee shops that offer personalized services or
different beverage options. In order to face fierce competition and achieve the goal of being the
world's most well-known and respected brand, the company has adopted an active growth strategy.
Its main growth drivers include retail expansion and product innovation.

 Retail expansion: The company plans to open 525 company operated and 225 franchised
North American stores in 2003, adopting a strategy of opening stores in new markets and
gathering in existing market geography.
 Product innovation: Product innovation includes regularly launching new products, such as
launching at least one new hot drink every holiday season. The product development process
typically takes place within a 12 to 18 month cycle, with internal R&D teams conducting
product formulation adjustments, focus group discussions, and market testing. A successful
new product depends on consumer acceptance and recognition from partners.
Recent market research has shown that customers are increasingly dissatisfied with the speed and
quality of service they receive at Starbucks stores. This dissatisfaction threatens Starbucks'
brand image and customer loyalty, which have always been key drivers of its success. To
address this issue, Starbucks is considering a strategic plan that involves increasing the labor hours
of its stores. The goal of this plan is to improve service speed and overall customer experience,
which is consistent with Starbucks' long-standing commitment to providing high-quality and
personalized services. However, this plan comes with significant financial impact, estimated to
cost approximately $40 million annually. The management is concerned about how this additional
expenditure will affect the company's profitability, and whether the expected improvement in
customer satisfaction can prove the value of this investment.

2.Problems faced

According to the information in the case, we find that Starbucks is currently facing the following
problems

 Customer satisfaction is down

Although the company continued to grow in sales, Starbucks' recent market research had revealed
that its service has failed to meet customers’ expectations in the area of customer satisfaction.
 Brand meaning and image problem
Starbucks’ market research team discovered that there was very little image or product
differentiation between Starbucks and the smaller coffee chains. More generally, there had been
some negative feedback on Starbucks' brand image. A growing number of respondents believe
Starbucks cares primarily about building more stores.
 The changing customer
Starbucks' newer customers tended to be younger, less well-educated, and in a lower income
bracket than Starbucks’ more established customers. In addition, They visited the store less
frequently and had very different perceptions of the Starbucks brand compared to more established
customers.
 Service improvement required
Market research showed that despite its high customer snapshot ratings, Starbucks was not
meeting expectations in terms of customer satisfaction. The customer satisfaction gap could
primarily be attributed to the service gap between Starbucks' score on key attributes and customer
expectations. When Starbucks had polled its customers to determine what it could do to make
them feel more like valued customers, "improvements to service” – in particular, “speed of
service" had been mentioned most frequently.
 The challenges of investment decisions
The most controversial proposal was an extra investment of $40 million per year to increase the
workforce in order to improve service speed and customer satisfaction.

Among the above five problems currently facing Starbucks, we believe that the most important is
that Starbucks needs to improve its service to improve customer satisfaction. Because customer
satisfaction directly affects customer loyalty, and customer loyalty is directly related to the
company's sales and profits. The improvement of service speed can not only meet the expectations
of customers, but also increase the return rate and consumption amount of customers, thus
promoting the overall performance of the company.

3.Alternative Courses

1. Optimize employee training.

Starbucks should train employees in all aspects of multi-process. Including basic training, on-the-
job training, personalized training.

The basic training includes coffee knowledge, beverage production process, service standards and
customer communication skills. The training period is extended to at least two weeks to ensure
that new employees fully grasp the basic skills and brand knowledge.

On-the-job training consists of regular skill enhancement, with quarterly skill enhancement
courses provided to employees, including new product production, the latest service standards and
customer service skills. An e-learning platform has been set up so that employees can learn
relevant knowledge and skills anytime, anywhere. Feedback from employees on training is
collected through questionnaires and interviews to improve the training mechanism and the
content and methods of training in a timely manner.

Individualized training means that employees' abilities are regularly assessed and individualized
training programs are developed based on the assessment results. At the same time, a mentor
system is set up to assign a mentor to each new employee to provide one-on-one guidance and
support to help the new employee quickly adapt to the work environment.

Advantages:
 Enhance service quality. In the training, employees are required to master standardized
service procedures to improve service quality. At the same time, employees acquire more
professional knowledge and are able to provide more specialized advice to customer service,
improving customer satisfaction with Starbucks.
 Improve work efficiency. Through regular training, employees are able to keep abreast of
 new products and learn the latest service standards. Regular competency assessment and
personalized training can also help employees target their weaknesses and develop their
strengths, reducing inefficiencies and errors caused by inadequate skills at work. In addition,
one-on-one mentorship can also point out employees' mistakes in a timely manner and
enhance their adaptability.
 Enhance employees' sense of belonging. Mentorship and personalized training programs can
make employees feel valued by the company and enhance their sense of belonging and team
cohesion.

Disadvantages:
 Higher costs. The research and development of training platforms also requires significant
capital investment. On-the-job training, personalized training all increase the cost of
manpower and time.
 Training takes longer. Employees need to invest more time in training, which may interfere
with daily work schedules during peak periods or understaffing.
 Employee turnover may increase. High-intensity training and more demanding work may
cause employees to feel stressed and choose to leave their jobs. In addition, if the company
fails to follow up and adjust the training content in time to meet the actual needs of the
employees, the employees may think that the company neglects their personal development
and career planning, which may also lead to departure.

2. Strengthen employee assessment

A set of scientific, reasonable and effective employee assessment system, so as to promote the
sustainable development of the enterprise and employee personal growth. When formulating
employee assessment standards, Starbucks should comprehensively consider job responsibilities,
key performance indicators, work attitude and teamwork, multi-dimensional assessment system,
regular review and adjustment, incentive and reward and punishment mechanisms, and
transparency and communication.

1. Clear job responsibilities: First, set a clear and specific responsibility description for each
position, so that employees can clarify their work scope and expected goals. The assessment
standards should be closely developed around the job responsibilities and reflect the actual
performance of the employees in their respective positions.

2. Set up key performance indicators (KPIs): According to Starbucks' business objectives and
values, set key performance indicators for different positions, such as sales, customer
satisfaction, work efficiency, etc. These indicators should be measurable in order to
objectively assess the performance of the employees.

3. Pay attention to working attitude and teamwork: the assessment will not only pay attention to
the performance of employees, but also pay attention to their working attitude, such as
enthusiasm, responsibility, professional dedication, etc. Team work ability is also an important
assessment point to assess the contribution and support of employees in the team.
4. Set up a multi-dimensional assessment system: adopt a 360-degree feedback method,
combined with the evaluation of superiors, colleagues, subordinates and customers, to obtain
comprehensive employee performance feedback. This helps to ensure the fairness of the
assessment and helps employees to identify their own strengths and weaknesses.

5. Regular review and adjustment of the assessment standards: With the change of the market
environment and business needs, review and update the assessment standards regularly to
ensure that they are always consistent with the strategic objectives of Starbucks. Encourage
employees to participate in the discussion and formulation of assessment standards, and
improve their sense of identity and belonging to the assessment system.

6. Strengthen the incentive and reward and punishment mechanism: link the assessment results
with employees' salary, promotion, training and other aspects to form an effective incentive
mechanism. Give timely reward and recognition to employees with excellent performance,
and provide improvement guidance and support to employees with poor performance.

7. Ensure the transparency and communication of the assessment process: remain open and
transparent in the assessment process, and ensure that employees understand the standards,
procedures and results of the assessment. Encourage employees to raise questions or feedback
in the assessment process, and strengthen two-way communication to improve the accuracy
and effectiveness of the assessment.

Advantages:
 Improve service standardization: A strict assessment plan can ensure that Starbucks' service
process is more standardized. From ordering to production, each link has clear standards and
assessment indicators, so that customers can enjoy consistent high-quality service no matter
which store they are in.
 Significant employee incentive effect: By setting specific assessment objectives and incentive
mechanism, employees' work enthusiasm and competitive consciousness can be stimulated.
Employees will work harder to improve their service level to meet or exceed the assessment
standards, so as to obtain corresponding rewards and recognition.
 Timely identify and improve problems: Strict assessment usually includes regular evaluation
and feedback mechanisms. This helps to find the problems and deficiencies in the service in
time, and take corresponding improvement measures. Through continuous improvement and
optimization, the service quality and customer satisfaction of Starbucks can be continuously
improved.

Disadvantages:
 Service may become mechanized: under strict assessment pressure, employees may pay too
much attention to the completion of the assessment tasks, and ignore the interaction and
communication with customers. This can lead to mechanized service, lack humantouch and
personalization, affecting the customer experience.
 Increased employee pressure: Strict assessment plan may bring great work pressure to
employees. If not handled properly, this pressure may turn into negative emotions, and even
 affect employees' working attitude and team atmosphere. A long-term high-pressure
environment may also lead to increased employee attrition rates.
 Increasing assessment cost: The implementation of a strict assessment plan requires more
time and resources to conduct evaluation, feedback and improvement. This may increase the
operating costs and management complexity of the enterprise. At the same time, in order to
ensure the fairness and effectiveness of the assessment, it is also necessary to establish a
corresponding supervision mechanism, which will also bring additional cost burden.
 Neglect of long-term goals: Strict short-term assessment may cause employees to pay too
much attention to their immediate tasks and goals, while ignoring their contribution to the
long-term development of the organization. This may lead to the short-sighted behavior of
the organization, impairing its long-term competitiveness.

3. Optimal solution
When solving the problem of low customer satisfaction, Starbucks should strengthen staff
training, rather than simply strengthen employee assessment.

Strengthening staff training can directly improve the service quality and professional skills of
employees. Through systematic training, employees can better understand Starbucks' brand
concept, product knowledge and service standards, so as to more accurately meet the needs of
customers. At the same time, training can also help employees improve communication skills and
problem solving skills, making them more confident and calm with customers.

Secondly, although employee assessment can motivate employees to work hard, excessive
emphasis on assessment and neglect of training may lead to employees ignoring the real needs of
customers in order to cope with the assessment. In this case, employees may simply perform the
work tasks mechanically, without in-depth interaction and communication with customers. In the
long run, this will not help to improve customer satisfaction.

By strengthening staff training, Starbucks can fundamentally improve the service quality and
professional quality of its employees, and then more effectively solve the problem of low
customer satisfaction. Of course, this does not mean that the employee assessment should be
completely ignored, but that the employee training and development should be paid more attention
to while ensuring the basic assessment system.

4. SBXU China Status

1. Lower partner satisfaction leads to lower customer satisfaction

In the case, "partner satisfaction leads to customer satisfaction." However, nowadays, Starbucks
constantly puts pressure on its operating partners in the quarterly sales task, reduces their salaries,
and even lays off employees, causing a large number of partners to be dissatisfied, which runs
counter to the belief mentioned above, and may explain why Starbucks customer satisfaction has
continued to decline in recent years.

2. The third space is drifting away, core competitiveness is slowly disappearing

The third space has always been the trump card for Starbucks to improve customer satisfaction
and realize experiential marketing. However, due to the economic downturn in recent years, the
audience of Starbucks has gradually decreased. In order to maintain the original market share of
Starbucks, Starbucks began to open the door to welcome customers, requiring customers to sit in
their seats, and adopting the way of promoting ordering, which runs counter to its main third
space. With the opening of Starbucks to welcome customers, the insect infestation in the store
increased, and the atmosphere of consumers in the store was destroyed by the outside world,
causing the dissatisfaction of original consumers. In addition, with the rise of coffee culture in
China, petty bourgeois cafes came into being, and countless cafes focused on the third space,
which led to the erosion of the original advantage of the third space of Starbucks and the gradual
disappearance of core competitiveness.

3. Frustration in the localization process

There is no doubt that Starbucks has made great efforts to localize in China: We independently
developed zongzi, mooncakes, rice cakes and other foods related to traditional Chinese festivals to
cater to Chinese consumers, but did not fully consider Chinese consumer groups. Starbucks
simply positioned zongzi and mooncakes as desserts, which generally taste too sweet, while
Chinese consumers have a certain emotional value to traditional foods, and Starbucks' product
positioning is inconsistent with consumers' cognition. Therefore, it is difficult to be accepted by
Chinese consumers, which leads to lower customer satisfaction.

5. Conclusion

Based on the information, Starbucks currently faces a number of problems, including decreased
customer satisfaction, brand image issues, changing customer groups, needs for service
improvement, and investment decision-making challenges. Of these issues, we think the most
important thing is that Starbucks needs to improve its service to improve customer satisfaction.
Because customer satisfaction directly affects customer loyalty, and customer loyalty is directly
related to the company's sales and profit. Improving the service speed can not only meet customer
expectations, but also increase the customer return rate and spending amount, thus promoting the
overall performance of the company.

In addition, we also mentioned other issues that Starbucks faces, such as declining employee
satisfaction, the gradual loss of core competencies, and setbacks in the localization process. These
issues also need to be addressed to ensure that Starbucks can consistently deliver high-quality
service and remain competitive.

To sum up, Starbucks needs to focus on improving service quality, especially service speed, to
improve customer satisfaction. At the same time, they need to focus on employee satisfaction, core
competitiveness and challenges in the localization process to ensure the long-term growth and
success of the company.

6. Additional Parts：Case Problem Analysis

Q1: What factors contributed to Starbucks' success in the early 1990s? What was the appeal
of its value proposition? What brand image did Starbucks develop during this period?

There were three main factors that contributed to Starbucks' success in the early 1990s. First, high
quality coffee. Starbucks proudly offers some of the highest quality coffee in the world, from
places such as Africa, Central and South America, and the Asia-Pacific region. To achieve such
goals, the company also adopted an aggressive growth strategy. Its key growth drivers include
retail expansion and product innovation. That is, opening stores in new markets while aggregating
and regularly launching new products in existing market geographies. Second, a unique coffee
experience. Inspired by Italian coffee culture, Howard Schultz envisioned Starbucks as a “third
place” for people, a social center separate from home and work. The slogan “Living Coffee”
emphasizes an experiential brand strategy that focuses on creating a unique and immersive coffee-
drinking experience. Stores are designed to be inviting and comfortable, encouraging customers to
linger and enjoy their time. Third, intimacy with customers. Starbucks aims to create an uplifting
experience for each customer, emphasizing personalized service and customer recognition. To
achieve this goal, Starbucks provides employees with soft skills training that focuses on making
connections with customers, such as warmly welcoming customers and talking to them. Stores are
also rated on “legendary service,” which is defined as behavior that “creates a memorable
experience for customers and encourages them to come back and tell their friends.

Starbucks has a unique value proposition, which consists of three main points: first, high-quality
coffee, sourced from high-quality origins around the world, and control of the supply chain to
ensure the quality of coffee. Second, quality service, through personalized service to enhance the
customer experience. Third, a unique atmosphere, providing a high-grade and cozy environment,
and becoming a place for people to meet and socialize. The attraction of its value proposition lies
primarily in the fact that it offers an experience that is integrated into the daily lives of its
customers. This includes high quality coffee, personalized service and a comfortable atmosphere
that makes Starbucks an ideal place to relax and socialize.

During this period, Starbucks developed a premium, community-oriented brand image. Starbucks'
primary audience during this period was affluent, well-educated, white-collar customers between
the ages of 25 and 44 (with a female bias). It was seen as an upscale, high-quality coffee provider
that offered a unique social experience and an inviting environment for customers.

Q2: Why have Starbucks’ customer satisfaction scores declined? Has the company’s service
declined or is it simply measuring satisfaction the wrong way?

The decrease in customer satisfaction is not only due to the problems inherent in Starbucks itself,
but also due to factors such as increased customer standards or differences in personal
convenience. So the overall service of the company may not necessarily have declined, and
Starbucks may not have used the wrong method to measure satisfaction.

Firstly, from the perspective of Starbucks itself. There was very little image or product
differentiation between Starbucks and the smaller coffee chains. The brand image of Starbucks
also had some rough edges. More customers were beginning to agree with the fact the Starbucks
cared primarily about making money and building more stores. In polls by customers
“improvements to service,” particularly speed of service, was most mentioned for improvement.

Secondly, from the customer's perspective. As Starbucks' customer base gradually changes
(Starbucks' newer customers tended to be younger, less well-educated, and in a lower income
bracket than Starbucks’ more established customers) , customer standards for service may
increase, leading to a decrease in customer satisfaction. In addition, the personal preferences of
different customers may have an impact on the satisfaction survey results.

Q3: How has Starbucks changed since its inception?

Starbucks has experienced tremendous growth and expansion since its inception. Major changes
include:

 Retail Expansion: The company expanded from a regional player to a global coffee chain
with thousands of stores worldwide.
 Product innovation and diversification: Starbucks expanded its products to include tea, cold
blended beverages, pastries, sandwiches and other food products in addition to coffee. It also
distributes products through partnerships, such as bottled Frappuccino and premium ice
cream.
 Increased focus on customer service: the company recognized the need to improve customer
service and considered investing $40 million a year to increase its store workforce.
 Technology and innovation: Starbucks uses technology to enhance the customer experience,
such as mobile ordering and loyalty programs.

Community and Social Responsibility: the company has increased its focus on corporate social
responsibility, including ethical sourcing of coffee beans, environmental sustainability and
community involvement.

Q4: Describe the ideal Starbucks customer from a profitability standpoint, What would it
take to ensure that this customer is highly satisfied? How valuable to Starbucks is a highly
satisfied customer?

From a profitability perspective, the ideal Starbucks customer would be the kind of customer who
is willing to pay for high-quality coffee and a unique experience. They are usually less price-
sensitive and pay more attention to brand value and consumer experience.

To ensure that such customers are highly satisfied, Starbucks needs to provide the following
guarantees:

 First of all, the quality of the product must be excellent. This means that every cup of coffee
should maintain a consistent high standard, from the selection of coffee beans to grinding,
brewing every link should not be careless. At the same time, the store environment should
also be comfortable and pleasant, creating a relaxed and happy atmosphere, so that customers
can enjoy a good time while tasting coffee.
 Second, service quality is also the key. Starbucks employees should be warm and thoughtful,
and respond quickly and accurately to customer needs. Whether recommending new
products, answering questions, or handling complaints, we should be customer-centered, and
strive to do the best.

A very satisfied customer has a great value to Starbucks. They will not only become loyal repeat
customers and continue to bring steady revenue to Starbucks, but they will also attract more new
customers through word of mouth. The power of this word-of-mouth effect is huge, especially in
today, where social media is so developed, a satisfied customer's recommendation is often worth a
lot of advertising.

Q5 (1): Should Starbucks make the $40 million investment in labor in the stores?

Starbucks should indeed seriously consider investing to improve this situation when facing
customer reviews about the poor quality of its service. Quality of service is an important part of
the core value of the Starbucks brand, and excellent service often depends on excellent employees.
Therefore, investment in labor force is a key link to improving the quality of services.
First, it is essential to invest in staff training. Through systematic training, employees can better
master product knowledge, service skills and customer communication skills to improve customer
experience. This investment is long-term and can continue to improve the professionalism and
service level of the employees.

Second, improving employee compensation and benefits is also an important investment direction.
Good pay packages can attract and retain better talent, while encouraging employees to be more
active in their work. In terms of welfare, such as providing health insurance and regular leave, it
can enhance the sense of belonging and loyalty of employees, and thus improve the quality of
service.

However, while investing in the workforce, Starbucks could also consider allocating some of its
investment to other areas to achieve a more comprehensive improvement.for instance:

1. Technology upgrade: Invest in the introduction of advanced coffee production equipment and
ordering system to improve service efficiency and reduce customer waiting time. At the same
time, we use technology to optimize customer experience, such as the development of convenient
mobile payment and member management system.

2. Store decoration and environmental improvement: invest funds to renovate and upgrade the
store to create a more comfortable and elegant consumption environment. This will not only
improve customer satisfaction, but also attract more new customers.

3. Marketing and brand building: Increase the investment in marketing, and enhance the brand
awareness and reputation through diversified publicity activities. At the same time, actively
respond to customer feedback, timely improve products and services, in order to create a more
positive brand image.

Q5 (2): What's the goal of this investment?

The main purpose of Starbucks' investment in the labor force is to improve the service quality and
enhance the employee satisfaction and loyalty, so as to stabilize and enhance the market
competitiveness of the brand. By investing in the workforce, Starbucks can systematically train its
employees to ensure that they have professional product knowledge and excellent service skills to
provide customers with a better and more efficient service experience. At the same time,
improving employee salary and welfare can attract more excellent talents to join, and encourage
employees to do more in their work, so as to improve the overall service level. These initiatives
will not only help Starbucks build a positive brand image, but also promote business growth and
sustainability.

Q5 (3): Is it possible for a mega-brand to deliver customer intimacy?

Mega-brands can provide intimacy with their customers in the following ways:

1. Provide personalized services to customers through customer relationship management: The

brand can track customer purchase records through CRM system, understand customer
preferences and needs, and provide customized and personalized products and services. Starbucks'
self-developed online system "Starbucks Now" collects customer order records to better
understand customer needs and provide more targeted marketing campaigns to provide a sense of
intimacy with customers.

2. Storytelling and corporate Social Responsibility: Build an emotional connection with

customers through brand stories and values. Combining its brand story with corporate social
responsibility, Starbucks has taken a number of initiatives in China, such as: Through initiatives
such as establishing intangible cultural heritage stores, sustainable green stores, sign language
stores that care for people with disabilities, and supporting the development of the local coffee
industry in Yunnan and ethical sourcing, Starbucks tells the story of its brand, demonstrates its
commitment to society and consumers, and sends a powerful signal to customers about what kind
of company Starbucks wants to be. This is a great point to resonate and consolidate with
customers.

3. Customer feedback and social media interaction: Engage with customers on social media,
respond to their comments and questions, actively collect and respond to customer feedback, make
them feel that their opinions are valued, and establish two-way communication. With the rapid
growth and continued penetration of social media around the world, Starbucks is using digital
marketing to share brand stories and deepen customer engagement on the platform. The concept of
customer experience as the core has also been brought into the social media platform, and high-
quality content and good experience have enabled Starbucks to quickly accumulate a large number
of fans and successfully spread the intimacy between customers.