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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 (TFL@ppm-manajemen.ac.id,

cc: ppmtfl@gmail.com) with subject Case Analysis TFL 5.

Font: Calibri, Size:11, Line Spacing: 1.15, Page Size: A4, Page

Number: Maximal 3 pages.

mailto:TFL@ppm-manajemen.ac.idmailto:ppmtfl@gmail.commailto:ppmtfl@gmail.commailto:ppmtfl@gmail.commailto:TFL@ppm-manajemen.ac.id