Case Analysis - Trouble brews at Starbucks

Case Analysis - Trouble brews at Starbucks

• 1.
  Trouble Brews At Starbucks CaseBy - Lauranne Buchanan . & Carolyn J. Simmons . 2009 Analysis By - Navin Sood FORE School Of Management
• 2.
  Key Issues • Thecompany's rapid expansion distracted it from making its cafes an inviting place(“The Third Place”) with new products. • In 2007, deteriorating economic conditions in the US and recession in 2008 affected the Starbucks sales significantly which led to fall of it’s share price to $18. • It faced stiff competition from McDonald and Dunkin Donut in terms of price and service. • Watering down of the Starbucks experience and commoditization of brand.
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  SWOT Analysis STRENGTHS WEAKNESS •Brand name, • Location, • Partners, • Quality • Price, • Competition, • High product Mix • Exponential Expansion OPPORTUNITIES THREATS • Target segmentation, • Operational Excellence, • Product Specialization • Customization • Espresso mainstream, • Competition • Automation
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  Decision Problems • Theshift from customer experience to operational efficiencies led to dilution of Starbucks experience. • Delayed entry in India and Russia gave its competitors head start while the real estate prices soared. • The continuous expansion within US even at the cost of sacrificing their store location. • Increasing number of drive-through windows and in-store food items took Starbucks a step closer to fast food services which caused internal rift. • Reducing maintenance cost and increasing product mix led to commoditization of the brand.
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  Possible Alternatives • Improvethe current state of the U.S. business. • Re-ignite emotional attachment with the customers. • Focus on expanding the company's presence around the world. • Launch some customer loyalty program and feedback system. • Launch a sub-brand. • Reposition its brand as coffee barista giant rather than fast food service. • Focus on implementation of technology and scrapping store redo plans. • Refrain from pushing too many products but focus on quality of current offerings.
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  Decision Criteria Possible AlternativesCost Time Quality Service Reach Launch Sub-brand High Medium High High High Re-ignite Connection Low Low High High Medium Global Expansion High High High High High Customer Programs Low Low Medium High Low Repostion Medium Medium Low Medium Low Techonlogy Medium Low High High Medium Control Product Mix High Medium High High Low Impact Of Alternatives on Decision Criteria
• 7.
  Alternatives Selected • LaunchSub-brand • Improve the current state of the U.S. business. • Re-ignite emotional attachment with the customers. • Focus on expanding the company's presence around the world. • Launch some customer loyalty program and feedback system. • Focus on implementation of technology and scrapping store redo plans.
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  Evaluation Of SelectedAlternatives • Launching a sub-brand will preserve the image of Starbucks and at the same time cater to a wider audience. • Close underperforming stores, restructuring its manufacturing and supply operations will improve US business • Bring back the barista culture which should re-ignite the customer connection. • Loyalty program will retain customer base and feedback system will improve the services with focus on customer. • Instead of redoing the store layout, focus on implementing new technologies and automating processes to improve quality and efficiency.