Competing in the Digital Age - Starbucks Corporation - Case Study Example

Name Professor Course Date of submission Competing in the Digital Age: Starbucks Corporation Introduction Starbucks Corporation is a coffeehouse chain and coffee company. The objective of the company is to involve and engage the customers on the digital media through creation of appealing contents and contests making potential customers want to engage and balancing the consistency and diversity within various media networks (BI Intelligence, 2016). Pricing strategy The digital technologies play important roles in creating the near-perfect transparency, which makes it easy for the corporation to compare prices, levels of services, and the performance of the product. With increasing competition within the coffee industry, the corporation bases its prices of quality, differentiation, value of the authority, and relative value of its services. Using the price-comparison which aggregate information from different providers enable the corporation to make comparison of prices. The Web Models make it easy to compare the physical goods for the best prices based on their specifications and numbers, which in most cases are identical within the industry. Besides, through the years, Starbucks Corporation has been able to achieve its competitive edge using pricing strategy. The consumers also tend to have greater than ever of comparing the prices of products and services they need. Price comparison using online-based models offer convenient, reliable, and cheap method of determining the price and comparing the value of services and products offered to those of the competitors. Switching costs and lock-in mechanism While cutting the cost is accepted generally as the best method of locking in the customers during tough times, the practice in most cases is not based on the deeper analysis or testing of the actual base of the consumers. Within the company, the prices tend to increase throughout the history, which deter the price sensitive customers which leaves the loyal and higher-income customer base perceive that the offered products and services are affordable luxury. To compensate on the customers seeking cheaper providers such as Dunkin Donuts, it increases prices to maximize its profits, which makes the price sensitive customers to depend on their strong gourmet coffee. This strategy has been able to create value for the business due to increased brand level and focusing on customer specific needs. Since it offers products of high quality at higher prices, customer-switching cost is low; however, it locks in the customers through offering quality, convenient, and reliable products and services. Standards used in Starbucks Starbucks is becoming big and becoming big. The impact of technological innovation within the business is standardized to ensure that it considerably meets the expectations of the customers. With high competition level, the technological access within the business influences the customers. To ensure efficiency and reliability in the services provided, the business introduced mobile ordering service program across its branches signifying the success of the business. Presence of standardized services, menus, customer relations, and effective marketing and pricing strategies, has been able to shift consumer purchase behvaiour. Besides, within the food and drink industry, mobile presence is becoming mandatory as consumers as consumers move away from using PC internet instead use mobile devices to access their needs. For proper performance across all the branches, the business uses standardized technological applications in creating customer value. Network effects Starbucks enjoys competitive advantage based on its loyalty programs. The business has been able to credit its loyalty program through driving its potential customers to the mobile payments systems. Technology offers the business the platforms to improve its efficiency and service delivery processes to the customers. Even thought the ease of transactions contributes to the company’s success through the mobile payment, there has also been the network effect taking place (Nithin, 2013). In addition, the business’ locked in strategy play important role in customer retention which increases the network effect even more. In most cases, the business takes for granted and dismisses networking technologies as simply “speeds and freeds” while concentrating on the operating systems, applications, and middleware. To some extent, network itself could be a disruptive technology. With the plans of rolling out the Mobile Order and Pay program, which allows the customers to place their orders and pay ahead of time, the network effect is likely to worsen which could disrupt the business operations. Market participants With continued integration of technology in management and delivery of products and services, Starbucks continue to enjoy the multisided markets. The business has no defined market as it targets both men and women of any age-set, which it serves efficiently and effectively. Additionally, the business is committed to doing business responsibly in a manner of assisting the local communities thrive. Starbucks is part of Business for Social Responsibility (BSR), which is an international network of companies that work together with an aim of advancing social and environmental responsibility to find responsible solutions across the industries. With commitment to conservation of environmental quality, Starbucks uses social media platforms and Conservation International in ensuring that it services do not impact negatively the environmental quality. The business works with Conservation International in designing and continuously improving the economic, environmental, and social guidelines that it uses in sourcing ethical coffee. Other market participants are the Foodservive Institute or Paper Recovery Alliance, International Youth Funding, and Multicultural Foodservice and Hospitality, which focus on environmental stewardship, ethical sourcing, and diversity respectively. Platform control Mobile order and pay application is becoming important within the business. The application is a proprietary integrated relationship that that business aims to use in its infrastructure and with the customers. It is important to note that the company is not starting from cold start as it already has 13 million active mobile users with the ability of handling POS and payments. Even before the emergence of the smartphones, Starbucks had been in the market offering its proprietary payment option using the plastic card. The advent of smartphones did not change the ownership of the program but offered the opportunity of improving customer efficiency and product delivery process. The proprietary nature of the mobile order and pay for the corporation is stacked on the other existing platforms such as the mobile rewards and payments. Such simplicity enables the business the speed new services to the market and fair economical integration. Sources of big data The digital processes and social media exchange produces the big data for Starbuck’s mobile order and pay application. To extract the meaningful value from such data, the business uses optimal processing power, skills, capabilities, and analytics. Based on the volume, the business collects data from the business transactions to machine-to-machine data. The documents could emerge both internally and externally. Public websites and business sources are also important sources. Business apps are structured in nature and use APIs from both inside and outside the business. Internally, the business is integrating Web Content Management with the e-commerce system. Although public web is external in nature, it is useful especially when the business is experiencing challenges associated with daily fluctuation of currency or the search term volume. However, Starbucks could use data source from social media, which is high volume data and velocity enabling the business to detect the trends, analysis of the sentiments associated with the brand, target campaigns, and competitors. Vital analysis Mobile applications are becoming important in Starbucks especially with the business aim of improving efficiency and customer delivery services. For effective analysis of the program effectiveness, the business needs to consider the number of potential customers using smartphones and those who had initially ordered and paid for their services remotely using other payment methods. In addition, the business needs information on the number of customers on the social media platforms and matches them with the mobile phones it has in its database. However, the business might experience challenges associated with effective integration of mobile technology in the management process and phone functions. The smartphones are sophisticated in communication. Some of the customers might as well fail to disclose their information to the business owing to the increasing challenges associated with hacking activities. The big data to sell Customer trend is important within the industry especially with the changing needs of customers. Large corporations such as Starbucks could use the benefits of BdaaS in creating in-house for handling the task. These programs extract and organize data for the business and ensure adequate consultation on how to utilize the data in solving organizational issues. In addition, the program allows the business to create personal profiles for customers through collection of information given on the social media and mobile order and pay program. Therefore, the business could sell information such as names, physical and postal contacts, and photographs where appropriate. Through selling the big data, Starbucks would assist in the consumers through elimination of spam that clog their inboxes. Selling big data pose privacy risk; hence, some consumers might not agree with such activities. Program Patent Since mobile order and pay program is a software, the patent is issued for the only the process but not the code which is copyrightable. Important patents are utility and design. The utility patent protects the structure, composition, and function of the program. In addition, it protects the physical device, composition of matter, and step-by-step method. The design patents involve the protection of the ornamental and non-functional aesthetics associated with the program (Hill 77). Additionally, it protects the look of the program including its coloration. If the patent system is effective to enable innovator patent their innovations, then it could stimulate both the innovation and disclosure of information. An optimal patent needs to provide more or less protection compared to secrecy. Patenting could be the dominating strategy within Starbucks even when it provides less protection compared to secrecy. Considering that patenting is a Nash-equilibrium in strategies viewed as dominant, the patent system is created when it keeps the innovation secret. Parts of the product and service copyrighted For mobile applications or software, having copyright on the software is important as it reflects the original work of authorship. Any source code that the business licensed from other organization in creating mobile application including the open source code is not copyrightable by the business. In addition, there is need to copyright the step-by-step installation method, program utility, and design. According to the copyright laws, the software developed by the employees in most cases is considered work for hire. While considering hiring the company that provides contract software programs, it is vital to ensure that that the copyright ownership passes various stages from the individual programmer to the developer of the software. Industry structure Starbucks mainly operates and competes with the coffee and snacks industry. Within increasing level of competition, the customers have been shifting to the products offered by the competitors at slightly lower cost. Integration of the mobile order and pay technology would solve problems associated with deliveries, queues, and inefficiency. The values associated with technological advancement include improve customer efficiency and high level of customer satisfaction. In the U.S market, the business holds about 33% of the market within the coffee industry. The target market includes adults, young adults, and kids and teens. In the advent of technology, these target market continue to utilize mobile phones, which presents opportunity for the business to effectively implement its mobile pay and order program. Through its market segmentation and penetration techniques, reaching the customers might not be a great challenge to the business. The industry is becoming highly competitive especially with mobile manufacturers such as Apple that continue to develop applications for ordering and paying services online. Besides, there are many reasonable substitute beverages to the coffee, which make competition very stiff. To protect the product from imitation, the business could focus on verification of authenticity, which involves adopting measures of verifying the product, and encouraging feedback, which requires continuous interaction with the program users. To effectively develop and implement the program, the business requires committed and skilled human personnel and program development. Works Cited BI Intelligence. "Starbucks' Digital Strategy Drives Sales." Business Insider, Business Insider, 4 Apr. 2016, www.businessinsider.com/starbucks-digital-strategy-drives-sales-2016-4. Accessed 28 Nov. 2016. Hill, Charles W. L. International Business: Competing in the Global Marketplace. 2014. Nithin, Nithin. "Strategic Analysis Of Starbucks Corporation." Home | Scholars at Harvard, Scholars at Harvard, 2013, scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf. Accessed 28 Nov. 2016. Read More