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Ways to increase customer satisfaction at Starbucks Introduction Starbucks Coffee Corporation is based in Seattle, U. S. A. In the 1970 's, Starbucks was a local small-scale coffee bean roasting and sales operation in Seattle in Washington State. Today Starbucks is the largest speciality Coffee Company in the world, with reported revenue of 2. 6 billion dollars in 2001. It carries out its operations in roasting and selling of whole bean coffee's and coffee drinks through an international chain of retail outlets.
It is one of the fastest growing organizations with a relative market share of 35 % in the US. It also carries out overseas operation by ways of forming strategic alliances with global partners. (Marketwatch) Starbucks history was started with the new for the US coffee-house concept, which Howard Schultz brought with him from the trip to Italy. He used European concept of coffee houses as places to socialize, relax, and read; in general to escape from the day-to-day routine. In addition to this concept, he added the element of standardization by making Starbucks a National Chain with standard recognizable products and service across the whole country. Starbucks positioning hinges on the idea to provide unique Experience, along with quality product. Experience means providing the atmosphere of peace of mind, where customers can do either individual activities (reading, listen to music) or socialize with friends.
This positioning ties with such basic consumer values, as self-fulfillment, sense of belonging and fun. Starbucks redefined what affordability means when it comes to coffee consumption. It shifted the paradigm of coffee consumption pattern and raised value element in price value equation by delivering a much higher value than regular coffee shops did. Consumers are willing to pay premium prices for the experience, service and premium quality they are getting. In spite of several price increases, Starbucks sales per shop continued to grow. Starbucks has captured the changing consumer behavior since the eighties: first of all, there was a resurgence of out-of-home entertainment; secondly, consumers were more and more willing to treat themselves well, like a movie, a glass of wine, a cup of good coffee.
Meeting customers needs and exceeding their expectations made demand for Starbucks coffee price inelastic. Besides, though this is a premium product, for this target it is not a high out-of-pocket expense. Therefore, by increasing perceived value of Starbucks service, it is able to charge premium prices so that price-value equation remains in equilibrium. Another element of strategy is creating brand loyalty, which also decreases price elasticity of demand.
This strategy is successfully executed by Starbucks through constant innovations in the product itself and in the way its delivered. Starbucks operations along with roasting and selling of coffee beans also sells coffee beverages through its unique coffee bars and national chain of retail outlets and restaurants. These bars form a part of all the metropolitan cities in the US and operating countries. Starbucks purchases and roasts high quality whole bean coffee and sells them, along with fresh, rich brewed coffees, Italian style espresso beverages, a variety of pastries and confections and also coffee related accessories and equipment, mainly through its company related/ operated retail stores. The bulk of the revenue comes from its coffee bars where people can purchase beverages and pastries in addition to coffee by the pound.
Olson Starbucks created a coffee for the coffee connoisseurs and go to great lengths to acquire only the highest quality of coffee beans. They have set new precedence by outbidding the European buyers for an exclusive crop of coffee beans, which produces one of the best coffees in the world. Roasters of Starbucks coffees are extensively trained for one year. Starbucks has the distinction of being the publics educator on Expresso. They have also recently started to expand to packaged and prepared tea in response to the growing demand for this product.
There are no other national coffee bar competitors in the same scale as Starbucks. External and Internal Analysis Although Starbucks has enjoyed tremendous success in the past few years, there are a few obstacles looming. Since the popularity of the coffee house idea has grown, some cities wish to issue regulations on the coffeehouses due to complaints of late night patrons becoming uncontrollable. The cost of coffee beans is expected to rise in the future due to lower supply, which may tighten the margins on coffee merchants. The higher costs have cut into markets, which have heightened the competition in a crowded market. There is an enthusiasm of health consciousness growing in the United States.
People are cutting down on caffeine but the consumption of decaffeinated coffee has not seen an increase. Although Starbucks does not have major national competitors, they do have regional ones. Tourists become confused when ordering, since they cannot simply order a cup of coffee. Although Starbucks is interested in gaining recognition and growth in Europe, they will not be pioneers in the European coffee market as they were in the United States. (Starbucks) Internal Strengths Brand name recognition Quality Products Potential Internal Strengths Good Marketing Skills Well Developed Corporate strategy Location Visionary leader Distribution Manufacturing competencies Exclusive marketing rights
Weaknesses Non-pioneer in global market Narrow Product line Complicated Products
Environmental Opportunities Expand into Foreign Markets Widen Product Range Diversify into new Growth Businesses Apply brand name capital in new areas Downturn in economy
Threats Change in consumer tastes City regulations Increase in domestic competition Changes in economic factors Mission Statement and Corporate Strategy: The Starbucks Corporation serves to establish the company as the premier purveyor of the finest coffee in the world while maintaining its uncompromising principles while the company grows. Some of the guiding principles that helps Starbucks make any appropriate decisions are; providing a great work environment and treating all with respect and dignity, embracing diversity as an essential component in their business style, applying the highest standards of excellence to the purchasing, roasting, and selling of their products, developing enthusiastic and satisfied customers, contributing positively to communities and the environment, and recognizing that profitability is essential to future success. Starbucks Coffee Corporation is built on the philosophy of (Starbucks): Providing a great work environment and treating everyone with respect and dignity.
Embracing diversity as an essential component in their business. Applying higher standards of excellence in purchasing roasting and fresh delivery of coffee. Developing enthusiastically satisfied customers throughout. Contributing positively to the communities and their relative environment Recognizing the profitability for long-term growth. Starbucks's internal operating strategy - "Pampering Employees"We can't achieve our strategic objectives without a work force of people who are immersed in the same commitment as management. " said H. Schultz.
His belief that happy employees are the key to competitiveness and growth has led him to adopt a very controversial approach in treating and dealing with employees. His employees had exceptional benefits that did not discriminate between full-time and part-time status. (Marketwatch) Extensive training and employee career-path development. This was part of the motivation scheme that Schultz used to pamper these employees. Employee stock ownership programs; was the financial motivator for his assets as he referred to them. His determination to never undermine employees led him make sure that employees are empowered to make decisions without constant referral to management and are encouraged to think of themselves as partners in the business. Their packages included medical.
Dental, vision and short-term disability insurance, as well as paid vacation, paid holidays, mental health / chemical dependency benefits an employee assistance program, a 401 (k) savings plan and a stock option plan. Relationship Strategy. The first constituent of relationship strategy is customer relation. Its a tactic characteristic of a successful company. Making a connection with customers at store level is a key component of Starbucks strategy, especially when considering new product offering.
Starbucks achieved customer acceptability by differentiation created through unique and novel value proposition; by high quality of services and products; and by the range of products offered. It also maintained customer loyalty by issuing Starbuck cards that provided a privileged service to regular customers. Next important constituent of Starbucks's relationship strategy is its employee relations. The company human resource culture is based on promotions, compensations and feedback mechanism that kept employees motivated and content. All employees regardless of their positions are called partners and receive stock options and full health benefits. Starbucks human resources strategy is devoted to investing, supporting and engaging its partners (Starbucks Job Center; the Starbucks Experience).
Its total pay package includes compensation, stock, benefit and saving. (Marketwatch) According to Peter Drucker the human resource is of all resources the most productive, versatile and resourceful. Starbucks management is decentralized and regional ized. (Drucker 262 272) Two way flow of information between management and employee, designation based on rotate in, rotate out basis. Johnson & Scholes says that the most challenging question for company is whether a specialist HR function is needed at all, or at least whether its traditional scale and functions are appropriate. Starbucks being a customer oriented business needs to train its employees on customer dealings and need to motivate in order to maintain its high standards. (Johnson & Scholes 484 - 485) In Starbucks all employees are called "partners, " signaling a level of responsibility maintained by few companies with sales in the billions of dollars. Anyone who has an idea uses a one-page form to pass it to the senior executive team-and gets a response. When the company pursues an idea, its author, regardless of tenure or title, is typically invited to join the launch team as a full-time member.
New-style marketing organizations, by contrast, hire marketers not for jobs but for two broad kinds of roles: those of integrators and specialists. Integrators are marketers with broad skills who coordinate the delivery of products and services to the market from beginning to end. Specialists-more narrowly focused marketers with specialized skills-can be mobilized quickly to provide the particular expertise a given opportunity team requires. Starbucks is one of them and finding its way of capturing the market it will surely pay high attention to the recruitment process.
If communications are to be used effectively then there is a need to communicate aspects of the direction in which the organization intends moving and how it intends to achieve this. In other words, the business philosophy and its aims and objectives, often expressed formally through mission and vision statements, need to be communicated to particular audiences in a way that is synchronized and coordinated with the organizations other communication activities. If a low cost strategy is being pursued then it makes sense to complement the strategy by using messages that either stress any price advantage that customers might benefit from or at least do not suggest extravagance or luxury. If using a differentiation focus strategy then price should not figure in any of the messages and greater emphasis should be placed on particular attributes that enable clear positioning. As Howard Schultz, Starbucks' chairman and CEO notes, "It's an ironic fact that, while retail and restaurant businesses live or die on customer service, their employees have amongst the lowest pay and worst benefits of any industry. From the beginning, I wanted to be the employer of choice, the company everybody wanted to work for.
By paying more than the going wage and offering benefits that weren't available elsewhere, I hoped that Starbucks would attract people who were well educated and eager to communicate our passion for coffee. " (Starbucks) In order to sustain the company's growth and make Starbucks a strong global brand, the CEO believes that the company had to challenge the status quo, be innovative, take risks, and alter its vision of who it was, what it did, and where it was headed. Under his guidance, management was posing a number of fundamental strategic questions: What could Starbucks do to make its stores an even more elegant "third place" that welcomed, rewarded, and surprised customers? What new products and new experiences could the company provide that would uniquely belong to or be associated with Starbucks? What could coffee be-besides being hot or liquid? How could Starbucks reach people who were not coffee drinkers? What strategic paths should Starbucks pursue to achieve its objective of becoming the most recognized and respected brand of coffee in the world?
Conclusions and Recommendations. Controlling is needed; otherwise no one can be sure that every assigned plan and task would be perfectly executed. As a large company, it is very difficult to control all of the employees and assume that everybody is doing the things they are supposed to do. However, Starbucks has a good handle on the overall situation which includes increasing total revenues by approximately ten percent per year, earning per share growth of approximately twenty percent per year, opening three new locations a day, and having good development in the international market (Starbucks Raises). Starbucks lets store managers take full responsibility for each outlet. Top management believes in the employees ability to accomplish a task by controlling themselves.
Starbucks primarily relies on commitment-based control systems. The company is bent on boosting employee morale and enthusiasm. The Starbucks Support Center works hard to improve the companys teamwork and sense of mission in order to make sure that the employees are driven to do what they are supposed to do not because they have to, but because they want to. Schultz says that he wants to make sure he and his teams are hearing the views of their co-workers and to ensure they had a long-term plan that their people had helped shape (Shultz 203).
Starbucks uses belief systems and values to foster self-control, which is appropriate for its people, culture, and organizational structure. The company realizes that values can have a powerful influence on controlling ones behavior. It establishes a belief system in which employees do not have to fear making mistakes in their work because if they do, the company will forgive them. The managers trust their employees and assume that they are Starbucks most important assets. The core controlling strategy of Starbucks is to treat people like family, and they will be loyal and give their all. Stand by people, and they will stand by you (Schultz 127).
Moreover, the company builds its partners values by providing opportunities to develop their skills. This includes offering a variety of classes ranging from basic computer skills and conflict resolution to management training (Starbucks Coffee Company). There is unable to find unintended behavioral consequences as a result of the current control system. However, in order to improve the current control system, Starbucks should use more technology in its communication, consider paying overtime and offer more benefits because three months ago, the company faced slumping morale and employee burnout among its store managers.
They complained about being overworked and underappreciated. In the future, it seems likely that more commitment-based control will be used at Starbucks because its managers believe that the most important thing they do at work each day is communicate their values to others. They will try to instill the right values in their employees and build a stronger foundation of people-first values. Now the top management is working hard to encourage a sense of community and shared fate, a sense that they will share the big dream together (Schultz 101).
Therefore, there are a lot of things that the managers have to do. This includes communicating Starbucks vision to its employees all the time and encouraging employee development and self-actualization. In conclusion, Starbucks is using the commitment-based control system, specifically belief systems and values to foster self-control in its employees. The company will use this system more in the future. The way to win the confidence of Starbucks employees is to be honest and to share the plans and excitement with them.
In order to improve the current control system, Starbucks should strengthen its communication skills and foster stronger values in its employees. Bibliography: Starbucks Website, 2004 < web > Olson, Dave. "A Passion For Coffee" Starbucks: A Passion For Coffee. Menlo Park: Sunset Publishing Corp. , 1994, pp. 8, 9, 13 Starbucks Takes a Coffee Break. Marketwatch.
November 1999. Shultz, D. E. and Shultz, H. F. Transitioning marketing communications, 1998 Peter Drucker.
The Practice of Management, Harper & Row, 2000 Johnson & Scholes. Exploring Corporate Strategy. 6 th editions, 2002
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Research essay sample on Percent Per Year Starbucks Coffee
