Starbucks Value Chain Analysis

1) A - Value Chain:

arabica coffee beans

Narino Supremo beans

a special operation to single out the

particular Narino Supremo bean

customize each espresso drink

Hiring and training knowledgeable

Spacious stores
mix of organic and manufactured
components

Consistency of the premium brand

counter servers, called baristas

Product pricing is premium

retail mix
stand-alone stores
cafes and carts in hospitals, banks,
office buildings, supermarkets and
shopping centers

image for coffee beans

Product pricing is premium

retail mix
stand-alone stores
cafes and carts in hospitals, banks,
office buildings, supermarkets and
shopping centers

B - Value Chain Analysis:

Support Activities
o

Firm Infrastructure:
The factors that existed in the environment that provided the opportunity for Starbucks to develop
a new, successful retail chain begin with the insight that Howard Schultz had that the other
players in the coffee market did not have
Its merchandise assortment based on sales distribution is composed of coffee beverages (58
percent), whole bean coffee by the pound (17 percent), food items (16 percent), and coffee-related
equipment (9 percent)
Human Resource Management:
Hiring and training knowledgeable counter servers, called baristas
Educate customers about Starbucks specialty coffee drinks and associated products
Customer service and personal selling are promoted by training new hires to deal with product
related customer complaints on the spot without having to check with a manager
They are also trained to customize each espresso drink and to explain the origins of different
coffees
Technology Development:
Starbucks collaborated with a mill in the tiny town of Pasto, located on the side of the Volcano
Galero. There they set up a special operation to single out the particular Narino Supremo bean,
and Starbucks guaranteed to purchase the entire yield
Starbucks new strategy is to refocus on some of the areas that decrease risk and upfront
investment. This includes expanding foreign stores, with aid of partnerships that share risk and
costs, selling VIA instant coffee and other products in retail and convenience stores, and
reinvigorating the Seattles Best Brand coffee
Procurement:
Starbucks coffee quality begins with the purchase of high-quality arabica coffee beans

In 1992, Starbucks set a new precedent by outbidding European buyers for the exclusive Narino
Supremo Bean crop
Primary Activities

Inbound Logistics:
Olsen, the companys then senior vice president and then chief coffee procurer, scoured mountain
trails in Indonesia, Kenya, Guatemala and elsewhere in search of Starbucks premium bean.
Olsen sometimes had to convince coffee growers to sell to Starbucks
Operations:
Olsens standards were demanding, and he conducted exacting experiments in order to get the
proper balance of flavor, body and acidity.
While the firm could have greater control over the production and distribution of coffee beans, it
may have less control when it comes to the brewed product and service available through
numerous locations.
Consistency of the premium brand image for coffee beans may remain intact, but it is possible
that the brew and services available through various outlets may vary widely, potentially causing
an adverse impact on the value of the brand name.
Outbound Logistics:
Stores, which are spacious so that customers can wander around the store, drinking their coffee
and considering the purchase of coffee paraphernalia ranging from coffee to preparation
equipment, are typically designed around a planned mix of organic and manufactured
components.
Through partnerships, it now provides coffee flavor and expertise and/or its brand name to jazz
music CDs, frappuccino beverages, carbonated ready-to-drink (RTD) coffee, flavored ice creams,
and branded coffee sold through supermarkets
Brewed Starbucks is now available at a variety of places including Barnes & Noble bookstores,
United Airlines, Sheraton and Westin hotels, and Holland America Cruise Lines, as well as
through licensing and joint venture agreements in 15 countries
Marketing and Sales:
Product pricing is premium, which is due to the companys commitment to quality products and a
high level of customer service
Advertising and promotion budget is however, minimal
Perhaps even more notable is the fact that Starbucks has managed to generate those kinds of
numbers with virtually no marketing, spending just 1% of its annual revenues on advertising
(Retailers usually spend 10% or so of revenues on ads)
Licensing the brand name for other food products such as ice cream and soft drinks also increases
its brand awareness
Starbucks, like every retailer, supports its strategy with its retail mix
Besides its stand-alone stores, Starbucks has set up cafes and carts in hospitals, banks, office
buildings, supermarkets and shopping centers
Other distribution agreements have included office coffee suppliers, hotels, and airlines
Associated Services (an office coffee supplier) provides Starbucks coffee exclusively to
thousands of businesses round the United States
Starbucks, through a licensing agreement with Kraft Foods Inc., offers its coffee in grocery stores
across the United States
Service:

The Starbucks-everywhere approach cuts down on delivery and management costs, shortens
customer lines at individual stores, and increases foot traffic for all the stores in an area
Their employees are treated like partners, and their customers like stars. The payoff is what the
Starbucks brand name means to consumers. The average Starbucks customer visits the store 18
times a month, and 10 percent visit twice a day

C - Unique value propositions

Consistency of the premium brand image for coffee beans
Starbucks mission is to provide people with the opportunity to savor a good cup of coffee while
engaging good conversation in a relaxed atmosphere
Their employees are treated like partners, and their customers like stars
Educate customers about Starbucks specialty coffee drinks and associated products
2) IFAS Table
Internal Factor Analysis Summary (IFAS)
Internal Factors
Strengths:
High quality beans
R&D for proper balance of flavor, body
and acidity
Strong diversified retail channels
turnover is only 60 percent
knowledgeable counter servers
employees are treated like partners, and
their customers like stars
Weaknesses:
Overseas beans providers
Premium prices
advertising and promotion budget is
minimal
less control when it comes to the
brewed product and service available
through numerous locations

Total Score

Weight Rating

Weighted
Score

0.20
0.15

5.0
4.5

1.0
0.675

0.05
0.05
0.10

4.0
3.5
4.5

0.2
0.175
0.45

0.20

5.0

1.0

0.05
0.05
0.10

2.0
2.5
2.5

0.1
0.125
0.25

0.05

2.5

0.125

Comments

4.1

Explanation of resulting score:

On a scale from 1 (poor) to 5 (outstanding), a weighted score of 4.1 means that Starbucks is very good
at handling its strategic internal factors.