Best Practices in OPS Management : Starbucks Corp:Clouds in your Coffee Case Analysis - Essay Example

Download file to see previous pages Table of Contents Table of Contents 1 2.0.Problem statement 3 3.0.Analysis 3 4.0.Conclusion and recommendations 5 References 6 1.0. Background The vision for Starbucks was largely based on Howard Shultz’s (the founder cum CEO’s) observation of the operations and experience of Italian espresso bars (Zimmerman & Weiss, 2007). This implies that the company’s initial growth strategy was one based on differentiation through its so called “Starbucks Experience”. This strategy implied that Starbucks had to focus on ensuring that its customer experience was World Class through investing significant resources in the hiring, training, and retention of employees; store ambience that created an aura of theatre and romance; and customization of the store to match their locales and make them the place to go between home and office. At this juncture, Starbucks market positioning was an upscale brand and as such in order to support this market positioning, the company’s operation strategy was predominantly market-led. However, the industry’s profitability went down as a result of: (1) increased threat of substitutes from the rapidly growing US quick service restaurants and US ready-to-drink coffee beverage markets; (2) increased competitive rivalry within the industry; and (3) increased buyer power resulting from (1) and (2), which made switching costs minimal for customers. The decrease in industry profitability coupled with Starbuck’s rapid global expansion forced the company to implement techniques to reduce costs such as automating their espresso machines, standardizing and remodeling their stores to accommodate more customers and introducing new products. Moreover, Starbucks has also broadened its target market from the well-defined upmarket market at its inception to its current target market that includes every individual of every age. The problem with this new strategy is that it carries with it new risks such as disenfranchising Starbuck’s most loyal customers who cherished its tradition and heritage, employee resistance due to the shift of focus from customer experience to cost and time management and possible devaluing of the Starbucks brand as it appears no different from any other quick service restaurant. 2.0. Problem statement As a company seeking global expansion, pursuing cost-based strategies such as standardization and automation guarantee Starbucks of maintaining its product quality and maximizing its revenues; however, these same strategies are weakening Starbucks ability to sustain its competitive advantage which is its market positioning. 3.0. Analysis Starbucks competitive advantage has been its market positioning. To the consumer Starbucks does not just sell a cup of coffee, it stands out because it sells an experience. The company therefore assumed a market-led operations strategy that emphasized order winning factors such as customer-barista intimacy, restaurant ambience and aroma and so on. However, as Starbucks expanded its target market to include everyone as well as its physical presence globally, operations factors that it previously did not have to focus on have become vital for its success. For example, whereas previously Starbucks was an upscale brand that could price its products high, it is now a mass market brand that has to be affordable to the masses. Also, with a bigger market and more customers to serve, Starbucks has to cut the lead times between when a customer orders a product and when they receive it or else its cafes ...Download file to see next pages Read More