Starbucks: Delivering Customer Service Harvard Case Solution & Analysis

External Analysis

PORTER’S Analysis

Threat of a Substitute

A high threat of a substitute is obvious for the coffee industry due to the increasing trend of energy drinks which have allowed the coffee customers to shift from drinking coffee towards drinking energy drinks. Moreover, there is a negative campaign running in different media groups for de-promoting coffee as it possesses caffeine which is harmful for a human body. Thesecampaigns have also allowed its customers to shift away from consuming coffee brands.

Threat of a New Entrant

The threat of new entrants for the coffee industry is low because of many reasons which includes, that the coffee chain market have been saturated in the developed nations. Starbucks have gained the cost and performance advantage as it can increase the value of its customers through offering high quality product at lower cost and can maintain its performance. However, this requires tremendous amount of investment, time, and experience to attain such a level by the new entrant. Furthermore, huge amount of capital is also required either to rent or lease a building. However, relatively higher threat of entrant is there when it is concerned with the old rivals opening up a coffee store for the brand that already exist in the market. Burger King and McDonalds has entered the coffee business by offering low priced coffee than Starbucks which has created problems for the company.

Competitive Rivalry

The competitive rivalry is highly intense as many companies have emerged by offering low cost specialty coffee than Starbucks and other high priced coffee makers. However, the brand image that has been created by Starbucks could not be met by many competitors but it also stands as a threat to the company. As McDonalds and other already existing companies have increased their business portfolio by offering additional products but with a higher customer base. Many global brands have emerged as a brand providing a good quality product, but it is a matter of time when their quality starts to decline and their customers’ satisfaction becomes weak.

Bargaining Power of a Supplier

The bargaining power of the industry is high as the coffee beans are imported from very sensitive and limited places which includes Africa, Latin America, and some of the places in Asia. The good quality beans requires additional amount of cost and also the supplier have the power to renew or end the contract at any time. As the level of competition is fierce amongst different coffee chains, this has allowed the bargaining power of the customer to decline. However, some of the retail giants in the industry have high consumer recognition which controls the mindset of its consumers.

Bargaining Power of a Buyer

The bargaining power of customers is also high because of the increasing number of varieties and products that exceeds the demand of the consumers. A high number of competitors and the fierce competition has allowed buyers to choose from various options. This has also allowed customers to switch to other brand without any cost required or ascertained. This has allowed freedom for customers to switch any company, but as many companies provide high quality products on regular basis then it is difficult for the customers shift away from its particular brand.

Value Proposition

The value of Starbucks was focused upon providing the intangible experience to its customers and the experience of drinking coffee. It aims to provide a different coffee culture through its ambience, the quality of its coffee, and the services provided to its customers. As the senior vice president quoted that Starbucks is focused on providing an uplifting customer experience every time a customer enters the Starbucks retail store. The tangible cues and servicescape of the company is what allows customers to stay at the Starbucks coffee shop. Starbucks aims to offer the live coffee experience which means that it aims to offer a unique customer experience. Furthermore, as the vision of company suggests that it aims to become a brand which is highly respected and as beingthe most recognized brand it has almost achieved its vision. However, the recent research report developed by the company, shows its focus on the concept of customer satisfaction which is not being met by the company. The effect in terms have decreased the customer satisfaction rate and has allowed their customers to switch towards another brand.

The Decision: Relaxing the Labor Hours

It is recommended to Christine Day Vice President of Starbucks, that she shall suggest the CEO of the company to relax the labor hours and invest $40 million to increase the labor hours per week..........................

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