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How do Starbucks stay competitive against other market giant

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Amy Pilkington

on 4 January 2015

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Transcript of How do Starbucks stay competitive against other market giant

Rapid Store Expansion Strategy
The Comparison between Costa and Starbucks
How do Starbucks stay competitive against other market giants such as Costa?
Who are Starbucks?
Timeline of Starbucks
Starbucks Current Strategy
The Supply Chain
7S Model
Coffee Purchasing Strategy and benchmarking
Customer Service

Purchasing at outright prices

Building direct relationship with farmers

Signing long –term contracts

Coffee Purchasing Strategy
---comparison Starbucks and Costa
Sustainable sourcing strategy

Costa are committed to supporting the British dairy industry

Costa has worked with the group of farmers . 

Coffee Purchasing Strategy
---comparison Starbucks and Costa
The scope of the existing Starbucks network
With over 18,000 retail stores in 60 countries
Headquarter: America, Washington, Seattle
Branches of distribution: North America, South America, Europe, the Pacific region, the Middle East
Starbucks has broad social networks including Facebook, Twitter, Google, You Tube, Pinterest, Klout, etc.

Law (2009) states customer service is a series of activities designed to enhance the level of customer satisfaction before, during and after the purchase of a product or service.

Customer satisfaction is an increasingly important aspect of competitiveness (Harrison & Hoek, 2002).
Customer Service at Starbucks
(Using the Interview Conducted)
Customer Service at Costa
(Using the Interview Conducted)
Benchmarking between
Established in 1971, Seattle, Washington

Exceeding 9000 stores worldwide

Popular for their quality fresh-roasted coffee beans and conducive atmosphere

Product lines contains:
Beverages (coffee, tea, soda, juices)
Whole coffee beans
Coffee-related hardware
Merchandise (mug, CDs)

Starbucks Coffee, Tea and Spice store opened in Seattle’s Pike Place Market
Howard Shultz joined Starbucks
Howard Shultz introduced II Giornale Coffee Company
II Giornale acquired Starbucks and modified the name into Starbucks Corporation
Starbucks decertified the union and made IPO

Starbucks Coffee International opens in Japan
Starbucks implemented ESOP
Starbucks starts to sell bottled Frappuccino
Starbucks acquired Tazo Tea

Acquired Hear Music, a San Fransisco-based business
Starbucks acquired Seattle’s Best Coffee
Starbucks Coffee Liqueur is introduced; Acquires Ethos Waste

Shared Values
Fun working environment
Maintain highest quality standards of products
Satisfy customers and compensate the unsatisfied

Rapid store expansion strategy
Product line
Coffee purchasing strategy

Increase motivation through reviews and raises

1 store manager
1 assistant
Some shift supervisor
16 partners/baristas

Coffee making
Customer services
Sales technique

Centralized control over individual store
Total Quality Management (Just-In-Time)

Employee benefits package:
Base salary
Health care benefits
Stock option plan

7S Model

Store Ambiance
Assessment of standards
Concept of ‘everything matters’

Real estate,
store design, planning
and construction
Broad range of store formats
Strategic location
Control or minimize store opening cost
Wi-Fi available in stores

Starbucks Everywhere approach
Cut down on delivery and management cost
Shortens customers lines at individual stores

Company-owned and company-operated stores
Created new subsidiary, Starbucks Coffee International
Expanding consumer products channel in South Pacific region

Rapid Store
Expansion Strategy
Awarding for partner

Training and recognition of employees

~ Responsible in producing the coffee beans from seeds

Milling~ Improve or maintain the texture of coffee beans

or distributor)
~ supply coffee beans to retailers

Act as the retailers to serve consumers

Enjoy the coffee

-Use of “Personal tumblers”

-Use and recycling of plastic cups

- Ensuring the coffee is not over produced

-Wastes millions of litres of water a day
-Joined ‘Simply Cups” recycling scheme to take a holistic approach towards a sustainable life cycle.

-Produce less waste by recycling

-The organic waste (including coffee ground) is then transported to process as a biomass fuel source

-Food waste is diverted to anaerobic digestion plants to create gas used in power station and biomass facilities or sent to Energy Recovery Facilities

Wastage and Muda
Ohno’s words : “All we are doing is looking at the time line from customer order to cash collection...And we are reducing that time line by removing the non-value-added wastes.”

The Logistic System
- Operational costs were rising open stores at rapid pace

- Starbucks Supply Chain Objectives

- Operating expenses (70%) outsourcing agreements for transportation, 3PLs and contract manufacturing.

- Simplifying the complex reducing costs and improving efficiencies

- Single global logistic system far-flung supply chain

- Create consistency and balance across the global SC.

- Earning the companies confidence initiative to recruit

- Starbucks stay focused on its SC mission of delivering products

Starbucks Logistic System
What is Kanban?

Properties of the method

The flow of coffee orders are written down

Is the work visualised? Software – Kanban

Is the work in process limited?

Starbucks policy - Reliable process for creating a flow of drinks.
The KANBAN Model Within Starbucks
Responding to increasing pressure

Implementation of the system across the business - (Quote from Interview)

Planning to ensure multi-site compatibility

Main focus: the storage and on-time distribution of products

Transport contract

Costa logistics is the first in terms of warehouse management systems

Costa's Logistic System
The flow of coffee - Orders are retained in the mind

They have implemented a new software.

Application of Kanban - Containing everything in one location

New IT system - Manages key supply chain process planning

Balakrishnan, A. (2008). Starbucks wastes millions of litres of water a day. the Guardian. Retrieved 5 December 2014, from http://www.theguardian.com/uk/2008/oct/06/water.drought

Bock, Y. (2008). Starbucks: Understanding the Business Model. Retrieved 2nd December, 2014, from m.seekingalpha.com/article/81626. [Last Accessed 2/12/2014].

Boley, J. (2011). Costa Logistics. Retrieved 21st, December, 2014, http://www.businessinfocus.com.au/index.php/2011/10/costa-logistics/

Coffee shop Kanban: Is your dev team a Starbucks or Costa? Retrieved 26th November, 2014, from http://www.croplink.com.au/Costa%20Logistics%20Leaping%20to%20the%20Front-%20WMS%20Upgrade%20Commences.pdf

Cooke, J. (2014). From bean to cup: How Starbucks transformed its supply chain. Retrieved 28, November, 2014, from http://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/

Dawson, T. (2013). How Starbucks Uses Pricing Strategy for Profit Maximization. Retrieved 1st December, 2014, from www.priceintelligently.com/blog/bid/184451/How-Starbucks-Uses-Pricing-Strategy-for-Profit-Maximization.

Forbes (2014) Why Is The Starbucks Mobile Payments App So Successful? Retrieved December 1, 2014 from http://www.forbes.com/sites/quora/2014/06/13/why-is-the-starbucks-mobile-payments-app-so-successful/

Harrison, A., & Hoek, R. (2011). Logistics Management and Strategy (4th ed.). Prentice Hall.

Hollins, B., & Shinkins, S. (2006). Managing Service Operations: Design and Implementation. London: SAGE Publications Ltd.

Law, J. (2009). A dictionary of business and management. Oxford: Oxford University Press.

Raturi,A.,& Evans,J.(2004).Principles of Operation Management :With infotrac. South-Western, Division of Thomson Learning.

Simonds, L. (2014). Starbucks: A Model of Success. Retrieved 2nd December, 2014, from business.time.com/2013/08/27/starbucks-a-model-of-success/.

Starbucks Corporation (2014). Our Company. Retrieved 2nd December, 2014, from www.starbucks.co.uk/?gclid=CjwKEAiAzIWkBRDO5LDEn8G1nAUSJADnHq_5kpNFKi7Mmi_nUPXorf4i53JKBvb-pnxdgNHGhe_x1hoCRN_w_wcB

Starbucks Coffee Company,. (2014). Recycling & Reducing Waste| Starbucks Coffee Company. Retrieved 5 December 2014, from http://www.starbucks.com/responsibility/environment/recycling

Whitbread.co.uk,. (2014). Costa Perks Up Cup Recycling Scheme. Retrieved 5 December 2014, from https://www.whitbread.co.uk/media/news-press-releases/costa-perks-up-cup-recycling-scheme.html

Whitbread.co.uk,. (2014). Waste Reduction. Retrieved 5 December 2014, from https://www.whitbread.co.uk/corporate-responsibility/good-together-in-costa/environment-management/consuming-less-waste.html

*Tutor: Dr.David Bennett
*Team CCR: Amy Pilkington
Ee Ling Hii (Elaine)
Jesus Prieto Ordonez
WanYi Ho
Ying Zhou (Ashley)

JIT (Just –in-Time)
management:According to research, JIT management practices has been implemented in the restaurant, hotel, and service environment (Hollins & Shinkins, 2006). Starbucks as a restaurant need JIT, inventory management which is used for forecasting, scheduling, ordering, and delivery of fresh goods.
*Classic Kaizen Wastes-Muda (people wating )
:"Starbucks mobile apps business drove 11% of the sales volume" (Forbes,2014). It would be recommended for further building payment process which would help drive more customers and decrease wait time in stores and increase efficiency as Starbucks are implementing technological advancements.
*Single global logistic system
: Most coffee farmers who supply to Starbucks are based in Colombia. Although it would be more beneficial if 100% of the farmers were based in Colombia. This is due to the coffee having better qualities and being cheaper to produce in Latino America.

: Increasing awareness of the use of plastic tumblers and the effects on the environment. Offering a larger discount will entice customers to choose the plastic over the paper cups.

Although Starbucks are the largest coffee house in the world, Benchmarking against their competitors enables them to learn competitors strengths and weaknesses. E.g. As Costa provide a cheaper coffee Starbucks could undercut Costa by offering student pricing.

Our interview
The similarities between Starbucks and Costa
What do Starbucks do differently?
What could Starbucks do to improve?
The definition of benchmarking:

Benchmarking is the process of continuously comparing and measuring an organization with business leaders anywhere in the world to gain information which will help the organization take action to improve its performance (American Productivity & Quality Center, 1993).
References list

Creates a 'third place'
Employees are the brand – first contact to customers
Social action - Community and charity work
Product Innovation -
“variety is the spice of life”
Customer Feedback
Attention to detail -
‘Names on cups’ – personal relationship with the customers
My Starbucks points
“Order today comes in tomorrow” – fresh produce
Costa coffee club card
Product Innovation
Charity into the "coffee community"
Locally sourced products
Full transcript