Starbucks: Delivering Customer Service Harvard Case Solution & Analysis

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Problem Statement

While increasing the brand image of the company, Starbucks has been focusing on growing its business by introducing new products. However, in the midst of rapid business expansion and increased retail stores, the company has become weak in satisfying its customers. The connection is lost between satisfying the customers and growing the business.

Christine Day, the senior vice president of Starbucks has recommended that the company shall invest an additional $40 million to increase the labor hours per week, which can ultimately increase the speed of service, and hence, increase in customer satisfaction. Although the plan met internal resistance, Christine Day has to present final recommendations to the CEO of the company to increase customer satisfaction.

Analysis

Starbucks Success Factors in 1990’s

The vision of Howard Schultz regarding the brand inspired the company to become customer centric in its approach and transform the consumer experience while drinking coffee in the country. This approach of Schultz played a vital role for Starbucks in achieving success during 1990’s as he leveraged the human resources to create value in the entire process of coffee drinking experience. Customers hold the prime position in the company’s value proposition that guided the company to create satisfaction among customers.

However, the major success factors include the atmosphere, the quality of the coffee, satisfied employees, and the service. Besides that, the market was very attractive and the target audience was specified as well, which can also be regarded as the key success factors. The atmosphere provided by Starbucks was quite relaxing and soothing as the idea was to create a place that serve as a “third place” in the country.

This idea was inspired by the coffee culture in Italy as people view coffee shops a place to interact, relax and get some time to be comfortable. This idea placed Starbucks in the mind of the customers as a place where they want to be. Furthermore, the company delivered the best quality and tried to keep the control of selling and supply chain in order to maintain the standards of quality. The company sets the standards for coffee and integrated with the growers to maximize the hold over quality.

On the other hand, employees play a major role in customer satisfaction and Shultz identified this concept. Therefore, the company provided employees with major monetary benefits like wages higher than others, and also provided stock options along with the health benefits. These strategies resulted in employee satisfaction and reduced or minimized the turnover rate.

Employee satisfaction eventually leads to customer satisfaction as experience and skills of the employees resulted in better and effective service. The employees were aware of both the hard and the soft skills that facilitated them in providing the customers with a pleasant experience. On the other hand, the company’s focus regarding the target audience was clear and specified as the company aimed at catering well-educated, white collar people.

This focus allowed the company to design their strategies and provide quality service and soothing atmosphere to their customers. Besides that, the company also had the first mover advantage as the competition was not really present in the US in the early 1990’s.

Porter’s Five Force Analysis

Threat of a Substitute

A high threat of a substitute is obvious for the coffee industry due to the increased trend of energy drinks, which has allowed the coffee customers to shift from drinking coffee towards drinking energy drinks. Moreover, there has been a negative trend amongst different media groups in de-promoting drinking coffee as it possesses caffeine which is harmful for a human body. This trend has also allowed customers to shift away from consuming the coffee brand.

Threat of a New Entrants

The threat of a new entrants in the coffee industry is low because of many reasons amongst, which includes that the coffee chain market has been saturated in the developed nations. Starbucks has gained the cost and performance advantage as it can increase the value of its customers by offering high quality product at a lower cost and can maintain its performance. However, this requires a 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, there is a high threat of entrants 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 have entered the coffee business by offering low priced coffee than Starbucks, which has created problems for the company………………………..

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