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Starbucks: Will Growth Spoil
Its Espresso Bar Culture?
One of the biggest services marketing success stories, Starbucks Coffee
Company, started out as just a product, coffee. Only when its top
executive envisioned coffee not as something to retail in a store but
instead as something to experience in a coffeehouse did consumers
began to recognize Starbucks as unique. At that point, the Starbucks that
successfully replicates a perfectly creamy caf latte in stores from
Seattle to St. Paul, was born. Customer connection, committed
employees, and consistency of service and product are three of the mostimportant reasons that Starbucks grew to more than 13,500 outlets and
that it annually reports profit growth of more than 20 percent a year.
Starbucks owns more than 6,000 of the stores and maintains control over
all that takes place in those stores, all of it designed to create a special
cultural experience that differs in every way from fast-food outlets.
Today, however, the company faces a critical crossroads between its
long-term service philosophy and an aggressive strategy to grow the
company from 13,500 to 40,000 outlets worldwide.
THE PHILOSOPHY: ROMANCE AND THEATER
THROUGH CUSTOMER CONNECTION AND
COMMITTED EMPLOYEES
On his first visit to Starbucks in 1981, founder and chairman Howard
Schulzs philosophy of a coffeehouse was born:
A heady aroma of coffee reached out and drew me in. I stepped inside and
saw what looked like a temple for the worship of coffee It was my
Mecca. I had arrived.
The special experience that he created for Starbucks was a place where
customers could come and spend time, comfortable in their
surroundings. The worship of coffee meant smelling fresh-ground beans
and having delicious coffee drinks to languish over. This feeling of being
at home also depended on the connection between customers andemployees, who banter with each other while they order and deliver
coffee. Ideally, employees interacted personally with customers,
recognizing them and the kind of coffees they liked to drink. To
accomplish this, Starbucks treated its employees in special ways. To hire,
keep, and motivate the very best employees, Starbucks set three
guidelines for on-the-job interpersonal relations: (1) maintain and
enhance employee self-esteem, (2) listen to and acknowledge employee
issues, and (3) encourage employees to ask for help. These and other
human resource practices, including higher-than-average pay, health
insurance, and stock options, reduced turnover to 60 percent compared
with 140 percent for hourly workers in the fast-food business in general.
All employees are called partners, and those who prepare coffee are
called baristas, the Italian name for one who prepares and serves
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coffee. As many as 400 to 500 employees per month nationally are
carefully trained to call (triple-tall nonfat mocha), make drinks, clean
espresso machines, and deliver quality customer service. Baristas are
taught coffee knowledge so that, among other things, they know how
everything tastes-and customer service-so that they can explain the
Italian drink names to customers.
Both to reward employees and to stretch them to learn more, the
company offers an advanced Coffee Master program that teaches them
how to discriminate among regional coffee flavors. Patterned after the
wine business, graduates earn black aprons and the right to use an
insignia on their business cards.
THE THREAT: AGGRESSIVE GROWTH AND PROFIT
TARGETS
Given the success of the Starbucks philosophy and execution, one might
wonder what strategy could derail Starbucks. Many say that an obsession
to grow from the current 13,500 to 40,000 outlets-half of them outside
the US- is the biggest threat to the continuation of the Starbucks success
story. Accompanying the growth goals, Starbucks also has aggressive
profit targets than can only be achieved by streamlining operations, often
in ways that remove the authenticity of the Starbucks experience.
Decisions about streamlining operations have cut costs but also affectedthe romance and drama of Starbuckss service experience. One of these
decisions was to adopt automatic espresso machines rather than having
baristas pull shots individually. While this move increased efficiency and
speed of service, the new machines blocked the sight line of the drinks
being made and eliminated the opportunity for baristas to converse with
customers while pulling shots. Another decision involved incorporating
drive-in windows, now in one-quarter of the restaurants, which by
definition eliminated the need for customers to come into the store
altogether. Still another decision ended the practice of scooping fresh
coffee from bins in stores and grinding it in front of customers by shipping
and using coffee in flavor-locked packaging. This decision alone forever
removed the smell of fresh coffee from the outlets. Each of these
approaches made operations more efficient but interfered with the
service experience.
Despite Howard Schultzs obsession to grow Starbucks, he is concerned
that the Starbucks experience may be jeopardized by the time- and cost-
saving approaches that might be needed to fuel that growth. In a 2007
memo distributed internally-but leaked externally-he admonished the
company for making decisions like those just cited that could
commoditize the brand and make it more like a fast-food chain than a
coffee house. He commented:
Many of these decisions were probably right at the time, and on their own
merit would not have created the dilution of the experience; but in this
case, the sum is much greater and, unfortunately, much more damaging
than the individual pieces.
The danger is that the company will become more like fast-food chains
(think McDonalds and Dunkin Donuts, both of which have focused on
improving the coffee experience) and less like the casual coffee houses he
created in the 1990s. The company knows that customers want their
coffee quickly, but Schultz dose not want to sacrifice the intensity of
customer connection between baristas and customers that makes the
firms services different/ The battle within the company is making sure
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growth doesnt dilute our culture, Schultz claims. Starbucks, an
outstanding example of company-owned channels, faces the same
struggle as other highly successful service businesses: growth brings it
efficiency through standardization. In service businesses where personal
connections between employees and customers are critical, growth can
interfere with the intimacy necessary for the service experience to be
real.
Source:
Zeithaml, Valari A., Mary Jo Bitner and Dwayne D. Gremler. 2009. Services
Marketing. Singapore: The McGraw-Hill Companies
Questions for The Case
1. What is the main problem presented in the case?2. Design a business strategy that suits Starbucks for the next
5 years! (Use SWOT Framework for simplification)
3. Based on the strategy you propose from the secondquestion, design an implementation plan based on service
marketing mix for starbucks.
Analysis must be written in a word document (.doc or .docx)
and must be submitted via email ([email protected],
cc: [email protected]) with subject Case Analysis TFL 5.
Font: Calibri, Size:11, Line Spacing: 1.15, Page Size: A4, Page
Number: Maximal 3 pages.
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]