Case Synopsis

Synonymous with premium coffee, Starbucks is one of the most admired companies in the world. Over its 30+ years in business, the firm has earned top marks for quality, service, management, innovation, and more. Starbucks was the brainchild of Howard Schultz, who conceived of a chain of Italian-style espresso bars. He served as the firm's CEO from 1987 to 2000 and again from 2008 to 2017 before turning the position over to Kevin Johnson.

Supporting Starbucks' explosive growth and rise to a top international brand is a business model that works as well today as it always has. Starbucks' mission is to deliver premium quality coffee, other beverages, and prepared foods to a young, relatively wealthy, primarily urban demographic who view the firm's coffee and other products as an affordable luxury. The firm's products are delivered mostly in inviting, contemporary locations that provide a "third place" (aside from home and work) for customers to relax in, and also through partnerships, such as with Kroger grocery stores. Even as it has expanded into new markets around the globecustomizing its product offerings to appeal to localized tastes and preferencesthe firm relies on the strength of its brand reputation to attract and retain customers.

Innovation in many forms at every level is one of the hallmarks of Starbucks' organizational culture. The firm is continuously devising new products and product variations, such as seasonally themed coffee drinks, and it vigorously encourages both employees and customers to make suggestions and share ideas. Starbucks also innovates on its in-store experience with such measures as free Wi-Fi, branded music, and drive-thru accessibility. Additionally, the firm employs technology in innovative ways (e.g., building loyalty through social media and using apps to facilitate digital ordering and payment methods). And finally, the firm is innovative in its operations. Just two examples include "extreme vertical integration" by owning its own coffee-growing facilities and all other aspects of its value chain, and its attractive benefits package for all employees, which includes tuition assistance and stock options.

However, technological innovations have led to a significant problem that is now up to new CEO Kevin Johnson to resolve. The mobile ordering app is creating delivery bottlenecks at countless locations, and these "congestion" issues are so severe that some stores are seeing a measurable decrease in foot traffic. Declining sales could result in declining stock prices.

Case Discussion Questions

1. Explain how Starbucks has used factors in the demographic segment of the external environment to create opportunities. How does it exploit these opportunities?
2. Describe at least three of Starbucks' resources and three of the firm's capabilities. Using the four criteria of core competencies, determine whether anything on your list is a core competency.
3. Which international corporate-level strategy is Starbucks using? Which mode of entry is it using? Is this the best strategy for the firm? Explain your answer.
4. How would you describe Starbucks 'organizational culture, and how did Howard Schultz implement this culture?
5. Identify at least three different examples of innovation within Starbucks, and explain how these innovations add value to the firm's customers.