Starbucks’ Business Model

    Starbucks is the largest chain of coffee houses with a very different story of a beverage brand and a coffee business empire. It was in the year 1983, when Howard Schultz, a young man, walking through the streets of Milan and Verona, was enamored by the coffee experience people had in the Italians bars. The Baristas were the places where the coffee experience was not just limited to serving a cup of coffee, but was all about creating a sense of community. That’s how Howard was convinced to bring the same Barista culture in the US.

    Starbucks was established in the year 1985, with its’ first three stores in Seattle with an objective to replicate the Italian experience back in the US. Thereby, making Starbucks – in the words of its founder – the third place between work and home. Today, the coffee brand has expanded and is operational across 75 countries, with over 28,000 stores worldwide. It has built its strong brand image by offering a large variety of coffee flavors without ever compromising on taste and quality. It has continued to explore stronger options to bring its customers only the best from the world of coffee. 

    Starbucks is not like any other coffee brand. It is successful because it is a customer-centric label and despite the changing industry dynamics, the company has always proved itself relentless in terms of its focus on customer service.

    The success of Starbucks firmly rests on several pillars apart from great production, and clever marketing, a consistent product, a well-managed supply chain and good old-fashioned hard work. 

    It has managed an optimized mix of company-owned and franchised stores. It has around 14,000 licensed stores and over 15,000 company-operated stores. Even though Starbucks is not considered a franchise, it is considered as the most valuable example of a well thought out franchising concept because of its unique business model. 

    The company has a mass-market business model, with no customer segment differentiation. The company just targets its offerings to anyone who likes coffee. Quality has always been at the core of its business strategy. It is a premium brand that sells only premium quality products. It is different from other coffee brands in terms of quality and variety. Ever since Starbucks started its operations it has never compromised on the quality and taste of its products.

    It charges premium prices for its products because of the quality that it offers. Experts across the world taste thousands of cups daily to ensure maximum flavor and highest satisfaction from coffee. The taste and quality offered by Starbucks are irreplaceable and hence, the customers are willing to pay any price to experience better coffee. Overall, this business model has been proved profitable as a response to rising revenues of Starbucks.

    Also, it has a differentiated culture. Customers are at the core of its culture. Hence, it is a customer-centric culture. Starbucks’ culture can be defined in terms of certain traits such as inclusion, transparency, courage, dignity, respect, integrity, and accountability. This culture is not only about the customers, but also about the people who work for Starbucks. The culture at Starbucks is meant to make its employees, whom it calls partners, to be included. To ensure that its employees are satisfied and can deliver their best performance, it has provided them an excellent work environment.

    Talking about the value proposition of Starbucks, it offers innovation, accessibility, convenience, and brand. Ever since Starbucks started its operations it has embraced innovation by using only high-grade beans roasted to a dark extreme by a trained roaster. This helped to popularize darkly roasted coffee.

    The company creates accessibility by the easy availability of its offerings and providing a wide range of options including over 30 blends of coffee as well as teas and fresh foods like sandwiches, salads, and cakes. It offers convenience by easing the process of ordering. Customers can order products on their phones using the Starbucks app rather than waiting in long lines at the store by going to the pickup area.

    Starbucks always had a clear-cut marketing strategy that aimed at creating a long-lasting impression on customers whether new or old and market through flavors, quality, and service. Initially, the company did not spend much demand creations through promotion but during the last few years, this has changed but not significantly. The expenditure on marketing and promotion has not even crossed a half-billion yet. Then the question is how does Starbucks market itself? The answer lies in its great culture and premium products. The range of features, products, and services all together make for the unique Starbucks experience.

    The business model of Starbucks tells us that a unified culture is an important aspect of the success of a business model. It sets an example for every small business operating on the right principles to become very large and successful.  Despite being a premium coffee brand, it is the favorite of millions of people all across the world, and can they be blamed?

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