STARBUCKS – VALUE CHAIN ANALYSIS

GROUP 7
JILL SANGHRAJKA PF2123-A021
SURAJ SINGH PF2123-A096
GAURAV HINGNIKAR PF2123-A088
PRATIKSHA PATIDAR PF2123-A049
ANKUR CHHAG PF2123-A240
SHREYA SHAH PF2123-A025
INTRODUCTION:
Starbucks Corporation is an international coffee and coffee house chain based in Seattle,
Washington, United States. It opened as a single small store opened in 1971 and became a
coffee giant at the end of the millennium. Starbucks has led a coffee revolution in the United
States and beyond.
The store was opened by 3 men: Jerry Baldwin, Zev Siegl and Gordon Browker. Starbucks
for first nine months bought coffee from Peet’s Coffee. Within first decade Starbucks opened
five stores.
There is total 33,833 outlets in 80 countries, of which 252 are located in India and 3,49,000
employees are working in it.
The subsidiaries of Starbucks are-
 Starbucks coffee company
 Ethos water
 Evolution Fresh
 Hear music

Mission and Vision of the company:

 Mission
To inspire and nurture the human spirit-one person, one cup, and one neighbourhood at a
time.
 Vision
To establish Starbucks as the premiere purveyor of the finest coffee in the world while
maintaining our uncompromising principles while we grow.

PORTER’S VALUE CHAIN:

Porter's Value Chain is a useful strategic management tool. It works by breaking an

organization's activities down into strategically relevant pieces, so that you can see a fuller
picture of the cost drivers and sources of differentiation, and then make changes
appropriately.
Value chain covers the entire range of activities included in the process of bringing a product
to the market and to the customer. Beginning from the process of obtaining raw materials to
the final sale of the product, there are several steps involved in it. All of these activities add
value to the product. A value chain analysis provides the companies with a view of the
activities in their production process.
The activities in the value chain are divided into two categories. The first category is that of
the main or primary activities.
INBOUND LOGISTICS:

The inbound logistics for Starbucks refer to company-appointed coffee buyers selecting the
finest quality coffee beans from producers in Latin America, Africa, and Asia. In the case of
Starbucks, the green or unroasted beans are procured directly from the farms by the Starbucks
buyers. The company carefully sources its coffee beans from coffee farmers who comply
with Starbucks quality standards. The firm also prefers to buy coffee from farmers certified
under the Starbucks Coffee and Farmer Equity (CAFE) program. These coffee beans are then
transported to storage sites, after which the beans are roasted and packaged. Value is added to
the beans through Starbucks’ proprietary roasting and packaging, which helps to increase
their selling value. After the beans are roasted and packaged, the finished product is trucked
to regional distribution centers, which range from 200,000 to 300,000 square feet in size.
Starbucks runs five regional distribution centers (DCs) in the United States; two are
company-owned and the other three are operated by third-party logistics companies (3PLs). It
also has two distribution centers in Europe and two in Asia, all of which are managed by
3PLs. Coffee, however, is only one of many products held at these warehouses. They also
handle other items required by Starbucks' retail outlets everything from furniture to
cappuccino mix.
OPERATIONS:

Starbucks operates in more than 80 markets, either in the form of direct company-owned
stores or licensed stores. (Starbucks does not follow the traditional franchising terms.) The
company has more than 32,000 stores globally. It is also the owner of several brands,
including Teavana, Seattle’s Best Coffee, and Evolution Fresh.
According to its financial reports, the company generated 81% of its total net revenue during
the first half of its 2021 fiscal year from its company-operated stores while the licensed stores
accounted for 11%.

OUTBOUND LOGISTICS:
Customers can purchase Starbucks products from company-operated and licensed stores.
Online sales channel is also utilized by Starbucks for certain range of products such as
packaged coffee, tea, drinkware and drink-related equipment. In addition, a very limited
range of Starbucks products such as 3-in-1 coffees in sachets can be purchased from a set of
leading supermarket chains such as Wal-Mart, Tesco and Sainsbury’s.
Apart from supermarket chains that sell limited range of company’s products, the absence of
intermediaries such as resellers or wholesalers is the main source of value for Starbucks
outbound logistics. The company roasts its products in-house and sells on its own company-
operated and licensed stores, thus keeping the margin that otherwise would have gone to
wholesalers and resellers.
MARKETING AND SALES:
Starbucks’ strategy for India is not without risks. But the world’s largest coffee shop chain is
building its position carefully, in a series of well-chosen steps.
 Choose a Local Partner: Global brands face the dilemma of whether to go solo or tie
up with a local partner. Starbucks’ decision to partner up with India’s TATA Global
Beverages shows a focus on leveraging multiple benefits. Backward linkages also
hold its Starbucks’ in-store menu. It has contracted catering to TATA’s TAJ SATS,
which also supplies to TATA’s premium hotel chain – The TAJ
 Consistency in store formats: This helps to maintain the unique selling point of
consumer ‘experience’, and also to gain economies of scale on capex. Starbucks plans
to have the same store format across India, though the size can change based on
economics. This is how it operates globally. Starbucks has projected itself as a place
to have a likable ‘coffee-house’ experience. But keeping the store formats consistent
means it has to choose and open new locations very stringently, such that the location
can yield a throughput in line with the investment.
 Measured pace of expansion: Since Starbucks has to choose new locations
stringently in line with its same-format approach, it has opted for a measured pace of
expansion. It is focusing on the financial viability of each outlet, rather than going for
an ambitious expansion plan which might have resulted in repeated calls for capital.
 Opting for Realistic Pricing: This is based on market affordability and its own
positioning. Globally, Starbucks is priced at a level at which it can be termed an
‘affordable luxury’.

SERVICE:
As per the company reports of Starbucks, the brand has mentioned the following objective:
“To be the leading retailer and brand of coffee in each of our target markets by selling the
finest quality coffee and related products, and by providing each customer a unique Starbucks
Experience.”
Needless to say, the company has certainly lived up to its brand statement by providing the
highest level of customer experience – which has now become a USP for the brand. Apart
from its high-quality beverages, the brand also invests in the service training of baristas as
they provide a unique experience to customers while making and serving their drinks. The
objective of Starbucks is to gain customers’ loyalty through in-store customer service or
assist them with their issues with the product. The service training is the lead part of the value
chain analysis goal is to provide customers with a distinct experience by making an attractive
offering. When baristas make coffee it puts considerable value on the drinks. The brand
stores have a customer friendly environment where customers can interact with the Barista
and staff. Overall, Starbucks has created an environment in its stores where its customers can
relax and enjoy their leisure. These stores are like a third place between their homes and
offices.
INFRASTRUCTURE:
The infrastructure of a company or an organization can be thought of as a physical thing but
the facilities, services, and structure can also be included in the infrastructure of a company.
Starbucks infrastructure comprises different departments such as finance, legal, management,
etc. which are associated with the operations of the company and help them function. The
devoted team of Starbucks who are in green apron provides good customer service and the
managers supervise the stores.

Since Starbucks has been around for almost 5 decades, it has a strong infrastructure in almost
every department like finance, management, marketing, and so on. The main corporate office
of Starbucks is in Seattle, but the company has several other regional corporate offices
worldwide.
Besides its backend management, the company also has a seamless customer service and
employee management infrastructure.
HUMAN RESOURCE MANAGEMENT:
For company’s success employees are vital. They are public face of company and their hands
passes through every single dollar of sales. Howard Schultz thinks that employees can break
or make a company. If an employee has a positive interaction with customer, definitely
customer will be come back. Vice versa, customer is gone. It’s important for Starbucks to
hire and recruit the right person, train well, motivate and retain them. Therefore, the company
should give satisfying jobs, appropriate work schedules, a positive work environment and fair
compensation and benefits. To gain competitive advantage these activities are essential of
Starbucks’s strategy to deploy human resources. Human resource management (HRM)is the
process an organization takes actions to attract, develop, and retain quality employees.
Starbucks employees are motivated through generous benefits and incentives. 5 The company
is known for taking care of its workforce, a key reason for a low turnover of employees,
which indicates great Human Resource management. There are many training programs
conducted for employees in a setting of a work culture, which keeps its staff motivated and
efficient.

TECHNOLOGY DEVELOPMENT:
Starbucks has this vision of using “AI for humanity”- using AI to give space for human
relationships, connections, and communications to grow- of wanting to “flip the script on the
paradoxical relationship between humans and technology.” The basic idea is that the fewer
time employees have to spend tinkering with machines and doing mindless tasks, and the
more comfortable customers are, the more opportunities there are for forming actual
connections over coffee.
Starbucks is very well-known for the use of technology, not only for coffee-related processes
(to ensure consistency in taste and quality along with cost savings) but to connect to its
customers. Many customers use Starbucks stores as a makeshift office or meeting place
because of free and unlimited Wi-Fi.
Starbucks has launched several platforms where customers can ask questions, give
suggestions, openly express opinions, and share experiences. Technology helps to implement
this feedback, especially in the area of its rewards program.
Most of the features for enhancing user experience is provided through the Starbucks mobile
app, first launched in 2011. From being just a way to make payments easy and track rewards,
the app has grown into giving you recommendations and telling you stories. It now has
around 20 million regular users in just the US. Starbucks’ Mobile Order & Pay system- which
lets you order via the app and collect orders from stores, skipping lines- was first launched in
2015, and now almost a quarter of total transactions are mobile orders
Their Loyalty program gives users rewards and lets them redeem rewards for drinks. This,
combined with store timings, menus, and other information that the app provided, quickly
increased its popularity. Now the app is a valuable data mine for Starbucks to understand
customer preferences and trends.
Starbucks has therefore adapted to the demands of the world through its strong technological
backbone and is focused on bringing about a better future despite the setbacks of the
pandemic.

PROCUREMENT:
Starbucks handles all of the procurement for its own coffee beans, which it sees as one of its
competitive advantages.
Starbucks sources its coffee from more than 30 countries in the three major growing regions
of the world. The company's breakfast and house blends come from Latin America. And their
popular Pike Place roast comes from Colombia and Brazil. After sourcing the beans,
Starbucks roasts them in the US and then distributes them among more than 14,000 stores
nationwide and to other countries
As for in INDIA Tata has been a coffee supplier to Starbucks since 2004. Starbucks procures
three percent of the Arabica coffee beans sold in the world. The company sources these
coffee beans from across the world. Starbucks and Tata formed a partnership in January 2012
to leverage on their expertise to promote the quality of Indian-grown Arabica coffees. This
partnership ENSURES THE procure, roast and distribute Arabica coffee beans grown in
India to markets across the world.
Nearly 98% of the coffee growing community in Karnataka comprises of small coffee
growers. The Starbucks and Tata partnership helped in alleviating the condition of these
small growers. Farmers are paid more than the average market price for the procured coffee
beans. This acts an incentive for farmers to grow and supply the best quality of coffee beans
to the partnership.
Starbucks also runs a development programme known as Café Practices, through which the
company works with farmers on methods to improve the harvest and the overall yield. The
programme encourages the use of sustainable practices of harvesting.

CONCLUSION:
In conclusion, Starbucks is leading the market because of its dominating global presence and
leadership. A consumer’s experience at a Starbucks location is arguably different from any
other coffee shop because of its intimate atmosphere, welcoming environment, and
unmatched service. Their inviting “ideal coffee shop ambience” should prove to be a
sustainable competitive advantage. Starbucks’ implemented strategy of retail locations and
on-site partnerships have received greater response rates, giving them the leading seat within
the mature industry. Starbucks, thus, has a strong market position through its all-inclusive
marketing strategy.
Starbucks has found a healthy mix of sustainability aspirations and profitability. It has made
strides all along its supply chain, from farms and its distribution network to its retail outlets.
It believes that customers and employees alike will resonate with their values and support it.
They made their supply chain greener through such steps as a reduction of energy usage and
the elimination of supply chain waste.

REFERENCES:
 https://business-essay.com/starbucks-coffee-company-marketing-in-india/
 https://www.foodprocessing-technology.com/projects/starbucks-tata-roasting-
packaging-karnataka/#:~:text=Starbucks%20procures%20three%20percent
%20of,supplier%20to%20Starbucks%20since%202004.&text=The
%20partnership%20will%20procure%2C%20roast,to%20markets%20across
%20the%20world
 https://notesmatic.com/porters-value-chain-analysis-of-starbucks/
 https://www.edrawmax.com/article/starbucks-value-chain-analysis.html