Institute of Rural Management Anand

Post-Graduate Diploma in Management – Rural Management

Operations Management
Assignment II

Activity Mapping of Starbucks Corporation

Submitted to
Prof. Ruchi Mishra
Institute of Rural Management Anand, Gujarat

Submitted by
Group D6
1. P41193 - Akshat Singh
2. P41194 - Akshay Ghormare
3. P41209 - Chanchal Palhal
4. P41222 - Mrityunjay Agrawal
5. P41223 - Navan Sampath Kumar
6. P41245 - Tanushree Dinkar Kumbhalkar

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Contents
Introduction: ......................................................................................................................................... 4
Brief History:......................................................................................................................................... 4
Strategies adopted by Starbucks: ........................................................................................................ 5
Global level Strategy: ....................................................................................................................... 5
Competition Strategy ........................................................................................................................ 5
Location Strategy:............................................................................................................................. 6
Quality Strategy: ............................................................................................................................... 7
Process Strategy: ............................................................................................................................... 7
Layout Design: .................................................................................................................................. 7
Inventory Strategy: ........................................................................................................................... 7
Perceptual map: .................................................................................................................................... 7
Primary activities .................................................................................................................................. 8
Inbound logistics: .............................................................................................................................. 8
Operations: ........................................................................................................................................ 8
Outbound logistics: ........................................................................................................................... 9
Marketing and Sales: ........................................................................................................................ 9
Service: ............................................................................................................................................... 9
Support activities .................................................................................................................................. 9
Infrastructure of the firm: ............................................................................................................... 9
Human Resource Management: ...................................................................................................... 9
Technology development: ................................................................................................................. 9
Procurement: ..................................................................................................................................... 9
Challenges faced by Starbucks in penetrating Indian market...................................................... 9
Blending in the Indian Culture:..................................................................................................... 10
Price Sensitivity:.............................................................................................................................. 10
Competitive Rivalry: ...................................................................................................................... 10
TRIPLE BOTTOM LINE (3 Ps) – People, planet, profit ................................................................. 10
People: .............................................................................................................................................. 11
Coffee Supply Chain Proceeds ....................................................................................................... 11
Planet: .............................................................................................................................................. 12
Profit: ............................................................................................................................................... 13
Greener Retail Proceeds ................................................................................................................. 13
SWOT Analysis: .................................................................................................................................. 14
Starbucks Strength: ........................................................................................................................ 14
Starbucks Weakness: ...................................................................................................................... 14

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 Starbucks Opportunities: ............................................................................................................... 14
Starbucks Threats:.......................................................................................................................... 14
Activity Mapping of Starbucks:......................................................................................................... 14

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Introduction:

Activity map is a diagnostic tool which helps the organizations identify their competitive
advantage. It helps in connecting the organization‟s value proposition to the activities of the
organization that helps it deliver its services better than the competitors. It is used to
understand the strategic capability by mapping how different activities of an organization
linked together. Activity map is used to make incremental decisions about whether a new
idea or opportunity fits the strategy of the organization.

Starbucks Corporation is a premier roaster, marketer and retailer of specialty coffee around
the world. The company has more than 3, 46,000 employees across 31000 stores spread
across 76 countries. According to the strategy Starbucks is adopting, there are different
drivers to attain the objectives. Starbucks projects itself as a third place between home and
office where people can come and have the Starbucks experience.

Brief History:

Starbucks Corporation was founded in 1971 in Seattle by three partners Zev Siegel, Jerry
Baldwin and Gordon Bowker. Starbucks opened with the intent of being a gourmet coffee
bean retailer and coffee equipment seller. The Starbucks name and logo came from two
influences; a character named Starbuck in the classic book, Moby Dick, and a mining camp
on the base of Mt. Rainier called Starbo. These two influences were combined to create
Starbucks. In 1982, entrepreneur and current chairman, Howard Schultz, joined the company.

When Schultz joined the company, he wanted to change the company‟s focus away from in
home coffee production and coffee bean retailing, to also include selling coffee drinks.
Schultz wanted to create an Italian espresso bar atmosphere for the Starbucks Company.
Siegel, Baldwin, and Bowker didn‟t like the idea, but in 1984 Schultz convinced the
“founders of Starbucks to test the coffee bar concept in a new location in downtown Seattle”.

Fig: Evolution of Starbucks as a brand

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In 1985, Schultz decided to leave the company and start his own Italian espresso inspired
company called Il Giornale. In 1987, Schultz got backing from local investors and purchased
Starbucks. Shultz then changed the name Starbucks to Starbucks Corporation in 2003. Today,
Starbucks has more than 31000 stores globally with more than 14000 in the United States
alone.

Strategies adopted by Starbucks:

Global level Strategy:

Starbucks has adopted a multi domestic company approach in its internalization strategy. The
main feature of a multi domestic company is that it is characterized as having essential ties
with local communities. This approach actually creates a difference between the headquarters
and the subsidiaries by making it an independent sub-unit.

This approach helps a multi domestic company to garner high local response as it caters to
the local needs of the region. This kind of organizations adopts low assimilation with high
responsiveness methodology. The marketing and sales strategies of the Starbucks are unique
in each market (country) it operates in. Besides it also embraces products that are of local
preferences and tastes by providing products in various markets.

This internalization strategy of Starbucks involves the following approaches:

 Licensing - This approach is used when Starbucks wants quick and rapid
expansion in a particular country.
 Joint venture- This approach is used when Starbucks wants to initiate its business
practices in the local market.
 Wholly owned subsidiaries - This approach is used when Starbucks has the
knowledge of the market its operating in. example; the US and the Canada market.

Competition Strategy

When it comes to its competitive strategy, Starbucks uses its core strategy of product
differentiation to gain a sustained competitive advantage. Starbucks offers such kind of
differentiation through an excellent customer experience and quality coffee. “The Starbucks
Experience '' is achieved through its well-designed stores with soothing ambience and well-
trained staff. Starbucks was also highlighted by the study conducted by daily mail, which
praises Starbucks for providing a more welcome decor than other independent coffee shops.
Starbucks also uses following techniques to gain a competitive advantage over its competitors
through-

 Starbucks Rewards cards- It introduced the Starbucks rewards card that provides a
plethora of benefits so as to entice customers to return to the stores to make purchases
and this helps in building loyalty and trust.
 Starbucks Consumer Experience Survey- Starbucks encourages its customers to
share their experiences through this survey which makes it evident that Starbucks is
committed in improving their services through customer response (needs and wants)

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 to establish long term relationships to build customer relationships through their
loyalty and trust.

 The Finest Coffee beans- The best way to get a competitive edge is to use the best of
the ingredients which can assure customers of the quality and safety of the product.
So Starbucks uses the finest beans for its coffee by sending its company personnel in
search of suppliers that can meet their quality standards. Starbucks also purchased
certified organic coffee and Fair Trade coffee. The Starbucks coffee is incomplete
unless it is brewed by Mastrena, a sophisticated Swiss-made espresso machine, which
helps in giving the Starbucks coffee a unique and uniform state all over the globe.

 This differentiation strategy of being a unique and premium coffee drinking brand has
given Starbucks a sustained competitive advantage.

Location Strategy:

The location strategy of Starbucks focuses on urban centers especially those with large
middle and upper class populations. Actually most of its stores are in densely and heavy
populated areas. Starbucks also occasionally makes use of strategic clustering of cafes in the
same geographic locations to increase market share and drive competitors away. The decision
area of operations management shows that Starbucks focuses on affluent customers who
could afford his premium precede products.

Fig: Starbucks coffee shop in Yu garden, Shanghai, China

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Quality Strategy:

To gain a quality edge over its competitors, Starbucks uses premium character in quality
management like the company carefully sources its coffee beans from coffee farmers who
comply with Starbucks quality standards. It prefers to buy coffee from only those farmers
who are certified under Starbucks Coffee and Farmer Equity (CAFE) program. The premium
quality service of Starbucks is ensured through servant leadership and warm friendly
conducive culture. If the decision area of the operations management is concerned, then
Starbucks implements high quality to align with the firm's brand image

Process Strategy:

One of the major contributors to the success of Starbucks is process. The company‟s forms
are exceedingly productive, as discernible in its cafés. Too, Starbucks optimizes capacity and
capacity utilization by planning forms to meet variances in request. For illustration, forms at
the firm‟s cafés are adaptable to alter faculty to a sudden increment in request amid crest
hours. In this choice zone of operations administration, Starbucks points to maximize cost-
effectiveness in spite of the fact that productivity of workflows and forms.

Layout Design:

Layout strategy of Starbucks cafes maximizes its workflow efficiency. It too underpins a
warm and neighborly vibe to coordinate the company‟s organizational culture. This format
procedure does not maximize space utilization for tables and seats since Starbucks‟ center is
on premium client involvement, which includes higher costs for more leg space within the
cafés. In this choice region of operations administration, Starbucks prioritizes client
encounter over space utilization.

Inventory Strategy:

Starbucks‟s inventory management is connected with the firm's supply chain and nearby
various facilities. At the cafés, stock administration includes workspace automation and
manual observing. In Starbucks‟ supply center points, automation is more comprehensively
utilized. The company points to play down stock out and guarantee nonstop supply of coffee
beans to its cafés. Starbucks addresses this choice zone of operations administration by
centering on supply ampleness and computerization.

Perceptual map:

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In the perceptual map Coffee houses operating in the Indian market are placed according to
the prices of products which they serve and the level of luxury which they offer to the
customer. Starbucks is placed at the highest level in the first quadrant. It offers superior
quality of products which are costly and the ambience provided by the Starbucks stores gives
a highly luxurious and rich feel to the customers. Starbucks faces fierce competition from the
major market players such as Café Coffee Day and Barista. Both the firms were launched in
the market way before Starbucks and have a larger market presence. Starbucks creates a
market by providing superior products and luxurious ambience to the customers. The market
also has players such as Indian Coffee House, Costa Coffee and Brewberrys, which keeps the
cost of products low by adopting low cost leadership strategy; they keep the ambience of the
stores at a lower level as compared to players in the first quadrant. Starbucks might face
competition from these players but it has created its own niche in the Indian Coffee houses
market by providing superior product and rich ambience to the customers.

Starbucks value chain:

Fig: Starbucks Value Chain

The value chain of Starbucks can be split into primary activities and support activities.

Primary activities
Inbound logistics:

Starbucks procures its coffee from diverse coffee bean producers (globally) with whom they
have great relationships and build up an efficient supply chain management system.

Operations:

Starbucks has its presence in 60 countries with its stores being modeled on company operated
stores and licensed stores (franchise stores)

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Outbound logistics:

Most of the Starbucks product mixes are sold in-store and some through large retailers
(General trade and modern trade). Payment around source through point of sale, prepaid
Starbucks Cards and mobile app based payments.

Marketing and Sales:

Starbucks has recently invested in marketing activities. Earlier marketing activities have not
been significant and relied mainly on the growing reputation of premium quality product mix
and superior customer services to give the „Starbucks Experience‟ to drive customers to their
stores and products.

Service:

Starbucks has a global reputation for providing the supreme level of customer services to
their consumers. The ambience provided to the customer is top notch which ranges from
good quality seating to free Wi-Fi and many more. Customer experience is given prime
importance in Starbucks.

Support activities
Infrastructure of the firm:

They have well designed, aesthetically pleasing stores. They have an efficient level of
finance, accounting and legal departments to support the firm‟s infrastructure.

Human Resource Management:

Great benefits, employee empowerment and amazing corporate culture makes Starbucks
drive efficient management of human capital.

Technology development:

Investments in innovative technologies like the mobile app for ordering in-store food and
making payments.

Procurement:

Starbucks procures its products from a diverse group of supplier and has fixed contracts with
some of the suppliers

Challenges faced by Starbucks in penetrating Indian market

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Blending in the Indian Culture:

When Starbucks decided to expand globally, it did not imbibe the local taste and preferences,
due to which it had to withdraw from many places. To penetrate the local markets Starbucks
has to research the local taste and preferences and then launch products accordingly. Local
players such as CCD and Barrista have imbibed the culture in their regular offerings. For e.g.,
they offer seasonal drinks like Aam Panna, Mango shake etc. in the summer season.

Price Sensitivity:

Indian consumers by nature are very price sensitive. A regular simple small coffee costs the
consumer as much as Rs. 200/- and the more popular coffee like Cappuccino and Latte would
require the consumers to shell out almost Rs. 300/- for a small cup. To compete in the Indian
market Starbucks has to be developing the right pricing strategy without harming its quality
of service.

Competitive Rivalry:

Starbucks will be facing tough competition from other brands like CCD, Barista and Costa
Coffee. All of them have been in the industry for almost 5-6 yrs. A new strategy has to be
developed for penetrating the Indian market.

TRIPLE BOTTOM LINE (3 Ps) – People, planet, profit

Triple bottom line (TPL) is defined as a company‟s social, environmental, and economic
contribution. The foundational base of TPL is sustainability. It is a way of a company
addressing several issues such as environmental effects, consumer protection, corporate
governance culture, and other social concerns that affect the economic profits.

Starbucks and Triple bottom line:

At Starbucks, sustainability is at the core of the company. The importance of building a

great, enduring company which strikes a balance between profitability and social conscience
has been its motive. It has achieved people and profit efficiency and it is striving to achieve
planet efficiency by various initiatives and innovative measures.

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Ensuring sustainability is the value-addition that Starbucks carries out. It took a relatively
inexpensive good and turned it into a sought-out after high-end product that has redefined the
coffee industry. From sustainably sourced coffee to eco-friendly cups and napkins, triple
bottom line drives decision-making at Starbucks and it exudes sustainability.
People:

In the triple bottom line, a company is responsible for all the stakeholders- direct and indirect.
Everybody‟s well-being is taken into consideration while formulating strategies. Starbucks
takes care of all its stakeholders right from the end consumers to its primary coffee growers.
It passes on the economic benefits to the coffee growers by paying them a premium which
allows them to use the conventional farming methods and preserve the environment. It offers
perks like fair wages, non-discriminatory employment practices, health care, good working
hours, and a safe place to work for its employees.

For the customer, creating the atmosphere of a „third place‟, after home and work, to socialize
is inviting and projects a good public image. It has implemented lowered counters, separate
and easily accessible entrances and hired handicapped people in its stores to empower
differently-abled persons. Starbucks has trained more than 160,000 farmers through open
sources-training programs. Through „The Starbucks foundation‟, more than $5 million has
been granted, in the form of income-generating activities, healthier homes, to 66,000+
women and their families in tea and coffee growing communities across Latin America, Asia
and Africa.
Coffee Supply Chain Proceeds

Figures
Particulars

C.A.F.E practices-complaint coffee purchases $476 million

Farmer Support Center $12 million

Global Farmer Fund $28 million

Coffee sourced per C.A.F.E practice 1.5 billion pounds

Farmer support centers in operation 9

Countries where loans are distributed 13

Figures for the period May13, 2017 to May 13, 2020

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Planet:

Environmental bottom line refers to the planet and the sustainable environment. A company
should not be given a free ride pass if its product is adversely affecting the environment and
biodiversity. At Starbucks, a holistic process of providing the best quality product is
practiced. In May 2019, Starbucks expanded its contributions to almost 50% of the total
profits to enhance the positive impacts of its retail footprint and has adopted the following
practices

 99% ethically sourced coffee- In FY19; more than 99% of its coffee was ethically
sourced and verified. The last 1% amounts to the efforts of bringing new farmers and
cooperatives on board. Starbucks strives to make coffee the world‟s first sustainable
agricultural product.
 40 million trees distributed- Since 2015, Starbucks has donated climate-resilient
coffee trees to various farmers from Mexico, El Salvador, and Mexico to improve
quality, productivity and yield. As of 2020, 10 million additional trees are being
distributed.
 99% ethically sourced tea- Starbucks ensures that the tea that it serves to its customers
is sourced through verified sources.
 10% post-consumer fiber- The hot cups contain 10% post-consumer fiber (PCF) to
decrease the environmental impacts witnessed by sourcing wood paper fiber.
 2.8% reusability rate in measured markets- In 2019, new ways of tracking reusable
cup usage was done in the US, Canada, and Japan. The customers carrying their cup
or using the store ceramic mug received a discount which saved almost 105 million
disposable cups.
 The rollout of sustainable material straws and strawless lids- Starbucks rollouts
lightweight strawless lids and aims to eliminate single-use plastic straws globally by
the end of 2020. However, in the backdrop of COVID-19, this has been difficult to
achieve because customers need or request them.
 Lower environment footprint- Starbucks works towards significantly reducing its
carbon footprint through water, energy conservation, recycling of waste, and green
construction.
 Green Stores- A world leader in green retail, with around 1600+ LEED-certified
stores which are more energy-efficient and help in saving costs and reducing
emissions.

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Profit:

The financial bottom line is what drives a company. The profits earned help empower and
sustain the company in the long run so that it can better serve the community and the people
living in it. The gains should not be earned at the expense of environmental and social cost.
At Starbucks, the shareholders are paid dividends equal to35% or more of the net income.
This is indicative of the financial well-being of the company. Over the last decade, the
revenue earned has increased by almost 78% from $14.9 billion to $26.5 billion. It has also
created a The Farmer Support funding and The Global Farmer fund to provide credit to
farmers across the globe.
Greener Retail Proceeds

Particulars Figures

New LEED-certified and Greener stores $144 million

LED lighting retrofits and condiment carts $18 million

New LEED certified stores 97

Stores newly outfitted with LED lighting 4932

New Greener stores 84

New condiment carts 786

National renewable energy investments and REC purchases $78 million

Sustainable packaging $230 million

New solar projects 2

Single-use plastic straws to be eliminated annually ~1 billion

Proportion of global operations powered by renewable energy ~75%

Reduction in plastic used to make strawless vs. old lid + plastic straw ~9%

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SWOT Analysis:

Starbucks Strength:

 Globally Recognized brand. Starbucks is the most popular and strongest brand in the
food and beverages industry.
 Channelized human resource management and effective implementation of efficiency,
strategic planning and reinvestment strategy.
 Provides High Quality and constantly standardized products in all locations.
 Diversification of business by offering merchandise.
 Good treatment to employees.
 Effective use of technology.

Starbucks Weakness:

 Overdependence on the U.S. Market, around 60% of revenue comes from the U.S.
market.
 Expensive product lineup, for many middle class consumer product offerings of
Starbucks, is expensive.
 Culture clashes in different markets.
 Negative image as large corporations.

Starbucks Opportunities:

 Expansion into upcoming markets like India, China and few regions of Africa.
 Addition and modification in product mix and customized offering.
 Technological advances.
 Addition of new distribution channels like online.
 Retail operation expansion in more cities and subscription offerings.

Starbucks Threats:

 Increased competition from local businesses, many coffeehouses offers cheaper

products with similar taste.
 Changing consumer tastes and preferences, consumers are always looking for new
products.
 Unstable prices of raw materials (coffee), during the pandemic prices of raw material
have increased drastically.
 Unstable market situation in developed economies, there is a threat of recession.

Activity Mapping of Starbucks:

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 References

1. http://panmore.com/starbucks-coffee-operations-management-10-decisions-areas-
productivity
2. https://globalassets.starbucks.com/assets/E7A21654AB2740C298AAEB60E201D958
.pdf
3. https://globalassets.starbucks.com/assets/38b8ab8576d24aa78170e46fd2a51acc.pdf
4. https://www.investopedia.com/articles/investing/103114/starbucks-example-value-
chain-model.asp
5. https://www.ukessays.com/essays/marketing/an-internal-analysis-of-starbucks-
marketing-essay.php
6. https://www.moneycontrol.com/news/business/companies/how-starbucks-is-
puttingindian-coffeeworld-map-1454185.html

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