Starbucks Strategy

To support the rapid expansion that Starbucks was making in their retail stores, they also made operational changes so as to keep the costs down. One of these was to reduce the time taken and to serve each customer and cost of training the baristas by replacing the older espresso machine (Marzocco) with a push-button Verismo models. While earlier, using the older model, the barista would talk to the customers while preparing the coffee, the new model blocked the view and hence removed the theatrical quality about the experience of having coffee at Starbucks. Another change was to ship packets of ground coffee to stores. This was in contrast to the earlier process of centrally roasting the coffee beans and distributing the whole bean to the stores. The beans were then ground immediately before brewing to preserve the freshness and giving a superior taste to the coffee. Hence a trade-off was made for lesser time consumption of serving at the expense of the taste and quality of the coffee. As Starbucks was expanding vigorously, they found it difficult to keep up with the operational and supply chain management demands. Very frequently, the stores ran out of ingredients and did not carry consistent merchandise. To keep the sore-opening costs low, the formats of the stores were kept limited to four standard designs. This again would have provided limited experience to the customers while the earlier value proposition was to provide a ‘lifestyle product’ with aspirational value and the stores were meant to provide an ambience for the customers to relax. All these decisions led to significant trade-offs in terms of customer experience and customer’s perception of taste and quality of product and these deteriorations would have eventually led to reduction in customer satisfaction. At the same time, the expansion would have increased the market penetration and cost savings would have helped reduce operational costs. By reducing the time to serve each customer, an increased