• Home
  • Business
  • CASE STUDY “Technology Helps Starbucks Find New Ways to Compete”

CASE STUDY “Technology Helps Starbucks Find New Ways to Compete” Essay Example

  • Category:
    Business
  • Document type:
    Assignment
  • Level:
    Masters
  • Page:
    5
  • Words:
    3026

Executive Summary

This reported provides an understanding of the various questions based on the case study analysis of “Technology helps Starbucks find new ways to compete”. The report provides an understanding of the organizational strategy employed by Starbucks which is more inclined towards a Focused Differentiation Strategy and how technology helps in maintaining and sustaining such strategy. The report then provides a flashback and current scenario of Starbucks communication strategy between the company and its customers which has made a rapid change from the traditional mouth-to-mouth publicity to use of technology and social media for branding and marketing strategies. the report also provides an understanding of how technology has helped Starbucks to compete and gain competitive edge over its rivals along with the advantages and disadvantages of using a wireless communication system in its business operations. Finally the report highlights the concepts used by McDonalds, Dominos and Pizza Hut in their business strategies which had been identified using secondary information and qualitative and quantitative research approach.

Introduction

This reported has been drafted in an essay format with critical analysis to the various questions in context to the case study based on how technology has helped Starbucks to find new ways to compete.

The report initially highlights the organizational strategy employed by Starbucks which is more like of Focused Differentiation Strategy and how technology has helped in shaping and ensuing maximum returns from such strategy employed. The report also highlights the communication strategy used by Starbucks between the company and its customers which was before 2008 more word-of-mouth and traditional means and how the same has shifted to advancement in technological fields by use of social media advertising. The use of technology has been studied in details which have helped Starbucks to gain sustainable competitive advantage over its rivals and emerge as market leader. Furthermore a critical analysis of how wireless technology has been both a boon and detrimental to Starbucks daily operations has been identified along with similar strategies used by McDonald’s, Pizza Hut etc has been identified using a qualitative and quantitative research method gathering data from secondary sources.

Q-1. What is Starbucks Organizational Strategy? Assess the role played by technology in your chosen organizational Strategy?

As witnessed from Starbucks current market position and attributes Starbucks seemed to be more inclined towards operating a Differentiation Focus Strategy as indicated by Porter’s Generic Market Theory. The Differentiation Focus Strategy looks to provide a product or service to a specific market niche and differentiate itself from its competitors. In case of Starbucks, the company does not use aggressively market its products and services through traditional means but focus more on high-level marketing and branding of word-of-mouth (Duncan, 2008). The company uses a focus differentiation strategy in the form that they does not market their specific products but drives their sales through marketing their image and reputation. Starbucks also uses various alliances and partnership to market their products on a global basis. It uses technological advancements as well to make sure that customers are targeted on specific basis for example, Starbucks entered into an alliance with i-Tunes to ensure free downloading of songs while experiencing a coffee in their stores with free wi-fi networking system installed in their outlets (Chrisan, 2001). Further looking on the Focus Differentiation Strategy employed by Starbucks the company uses a reward program to target its frequent and loyal customers which allows its customers to receive points for every purchase made in the Starbucks which can be redeemed by the customers using discounts, free merchandise etc. The focus differentiation strategy has certainly helped the company to boost up its sales and emerge as market leader (Drummond and Ensor, 2001).

Technology plays a great role in the Starbucks current Focused Differentiation Strategy for example, using the Starbucks card the company has created an internal opportunity for itself to improve upon its customer service excellence along with shorter lines and making the potential customer visit its store more conveniently and quickly. The company uses several features and improvements to enhance its business strategy. The company makes latest use of technology like allowing customers to use a smart phone application for its customers which allows its customers convenience to pay with pre-pay and rechargeable cards at any of the company’s located stores. Furthermore technology is used to the zenith by allowing its customers the free use of Wi-fi networking systems in all its store locations which are free from advertising pop-ups (Chrisan, 2001). The company has recently launched its own “Starbucks Digital Network”, a portal specially designed for mobile device users in contrast to traditional web browsers.

Q-2. How has communication between customers and Starbucks changed from before 2008 to after 2008 ? Are there any downsides?

Communication plays an important role in any organization as its helps to convey the correct and accurate information which an organization wants to convey to its customers. The financial crisis on a global basis had a major impact on the business strategy of Starbucks as well. Before 2008, Starbucks was more inclined towards traditional use of communication means like mouth-to-mouth publicity and using less of advertising media to promote their brand and products. However during the economic downturn of 2008, the company suffered financially and reported huge profits plunge. There were customer complaints on the overall model of Starbucks used by the company for communication purpose and found the company more inclined towards becoming a fast-food chain. It was due to poor communication and weekend economy that forced Starbucks to close over 900 stores and renegotiate its rents to imply a cost-differentiation strategy by cutting prices on their some ticket items and offering price reduced items such as a sandwich and popular drink for a minimal cost of $3.95 only. This strategy was more towards the business adopted by fast food chains like McDonald’s. The communication strategy changed drastically as a result of the same as Starbucks used more of technology in its communication media to convey messages to its existing and potential customers. Currently after 2008, the company has looked towards different use of social media for communication like creating a Starbuck community in websites like Facebook, Twitter and their own blogs where the company strive to join personally in discussions, its latest communication tool has been “My Starbucks Idea” which is its own version of social networking where customers are welcomed to share their own ideas and beliefs on Starbucks. The blog gives the customer an opportunity to communicate directly with company by giving its users the ability to see what other users are suggesting for betterment of the services at Starbucks, vote on different ideas of the users and check their results (Daniels, Radebaugh & Sullivan, 2007). It has been regarded as one of the Starbucks unique and important social media strategy. However it is to be noted that similar to prior 2008, Starbucks marketing strategy and communication has always focused on mouth-to-mouth advertising and letting its customers know more about the products and services offered by the company.

Though the use of technological advancements has helped Starbucks to regain its market share which it has suffered after the economic slowdown of 2008, the very communication model and business strategy adopted by the company has lead to a shift in its business model to become more like fast-food chains and attract larger competition in the form of McDonald’s, Pizza Hut etc. Starbucks certainly needs to ensure that the large pool of loyal customers are not swayed away from the company by deploying a proper mix of traditional and modern communication mix in its strategies used.

Q-3.How much does technology helped Starbucks compete? Explain your answer

Starbucks is certainly the name trusted by customer and the company has shown increasing trend with new marketing strategies to ensure maximal customer satisfaction. Technological advancements had been one of the key success factors of Starbucks to gain competitive edge over its existing and potential rivals. Without the use of technology the organization would in no sense be successful in launching the Starbucks Digital Network and provide the added and convenient facility to its customers of making payment of their bills using a smart phone application suited for most of the smart held mobile devices (Daniel, Charls & Joseph 2003). Besides that the use of technology has enabled the baristas to make drinks quickly and effectively with constant taste and high quality, it has made a direct impact on enhancement of customer service and speed of service which has been one of the major factors for Starbucks to generate higher revenues and capture larger market share.

After the plunged profits and sales due to Economic crisis in 2008, Starbucks used a unique technology advancement strategy to ensure higher sales and revenues. Some of the ways in which technology helped Starbucks compete successfully and gain sustainable competitive advantage has been discussed as under.

  • Use of technology in the form of Starbucks Application for smart phone devices allowed customers to avoid the long queue of paying their bills which could now be paid by the Starbuck App on a quicker basis. Further the digital network system helped and worked as a complete reward system for faithful customers attracting more loyal customers and boosting up the sales (Hill & Jones, 2004).
  • The use of wireless technology helped in reducing the transaction cost significantly as the same allowed the managers in Starbucks to use the in-store wireless networks to run a larger number of stores apparently without making a daily visit to the stores saving time and money with direct connectivity to the company’s private corporate network system.

The use of technology in the daily operations of the Starbucks helped the company to use its savings from such procedural changes in implementation and innovative strategies and developing high quality offer drinks and sandwiches at a much reduced price thereby allowing the company to target the lower income group of customer in the customer pyramid and enhancing its targeted market with higher revenues and growth (Hill & Jones, 2004). Furthermore, the lower prices and improved customer service in the form of convenience and cozy atmosphere in the Starbuck Café’s increased the profitability of Starbucks and certainly helped the company to standout with higher performance than both its existing and potential customers.

Q-4. What are the business and communication advantages and disadvantages of the use of wireless technology by district managers to run store operations?

There are lots of business and communication advantages and disadvantages of the use of wireless technology by distinct managers to run the store operation in Starbucks the same has been discussed as under.

Starbucks used the wireless technology as a means of saving time and cost reduction strategy along with newer innovation and technological advancement in its business operations. The main advantages of such are.

  • The use of Wi-fi network technology enabled its managers to respond quickly and conveniently to daily operations as previously a distinct manager who oversaw around 10 stores of Starbucks had to personally visit each of the Starbuck store, review its operations, develop the critical items which required follow-ups and then drive to the Regional office of Starbucks and then do the reporting through an e-email. However, with the use of wireless technology it enabled the managers to do most of their daily work sitting on a table and report the same to the regional office thus saving both time and travelling expenses along with quicker response to any emergency situation (Brassington and Pettitt, 2001).
  • With one time investment on the installation of the wireless technology it helped in cost reduction and allowed Starbucks to lower the products of its high quality drinks and sandwiches attracting more customers and generate more profitability. Thus making it a feasible cost-benefit analysis towards higher growth and returns (Brassington and Pettitt, 2001).
  • It helped in effective communication of business information as managers could easily move information across various stores and its respective department without any interruptions (Brassington and Pettitt, 2001).
  • The use of technology further helped in storing large data and file management for which the managers did not have to travel to different stores but could be found in a single drop box.
  • It further helped in improvement of business to customer relationship as the wireless technology helped customers to directly interact with the managers and report any complaint or suggestions.

Though the installation of wireless technology has its advantages it has its own disadvantages which is discussed as under.

  • Previously without the wireless technology the manager had to visit each store and maintained a strict vigil over all operations in the Starbucks store, however with the wireless technology the manager did not felt the need to visit the distinct stores which reduced the strictness in the working pattern of other employees in the Starbucks store (Canhoto, Clark & Fennemore, 2013).
  • Communication of information through wireless technology is always under the threat of internet security issues where valuable information of the company can be leaked and hacked and can prove to very detrimental for Starbucks.
  • The privacy of data is also under constant threat with risk of duplication of data and faulty products.
  • The implementation and maintenance cost of wireless technology is high which may in the long run attract more cost then benefit for Starbucks.
  • With the use of wireless technology Starbucks had an added advantage of reducing the number of managers but on a social implication the same has proved to be a job elimination strategy and brought negative publicity for the company (Doole and Lowe, 2001).

Q-5. What other similar Starbucks concepts are used in Australia? For those that you find, explain how they are similar to Starbucks and why. Identify which research methods you used to obtain this information.

Starbucks has been the global leader offering innovative and unique products and services to its customers over a long time which is directed towards customer satisfaction and excellence service. There have been many similar concepts used by other companies in different segments in Australia which has been identified using a Qualitative research method looking into the strategies and marketing tools deployed by the organizations.

Many strategies of McDonalds (Australia) are similar to the ones employed by the Starbucks which has been discussed as under.

McDonald’s similar to Starbucks has looked towards Technological advancements by using wireless networking system in its operating system. Further many stores in McDonald’s have successfully installed free wi-fi connections to its customers and looked upon customer as the ultimate king and developed strategies for ensuring maximal customer satisfaction. McDonald’s similar to Starbucks has emerged as the global market leader in fast-food chain industry by setting very high standards for themselves and setting benchmarks for others to follow with equal consideration being given to value their employees who are hired from the best talents all across the globe (Cook & Dave, 2004).

There are also similar strategies found in Pizza Hut and Dominos as those of Starbucks which has been identified using a quantitative and qualitative research approach and data collected by secondary means. The same is discussed as under.

Many Pizza Hut and Dominos counters across Australia have used the concept of Focused Differentiation Strategy similar to Starbucks to create a niche market for themselves. Further technology has been used for communication and advertisement purposes like creating their own websites and communities across various social networking sites like Facebook, Twitter etc to welcome users to directly interact with company officials and express their views, ideas and complaints. Furthermore, the use of their own mobile applications for easy booking and payment of orders are similar to the ones of Starbucks.

Conclusion

This report has been prepared to provide readers with complete understanding and solution of the case study of Starbucks and how technology has helped the company to compete. It not just provides valuable information based on case study but provides an overall understanding of the market scenario of Starbucks along with its organizational strategies employed and the use of technological advancements for ensuing higher sales and profitability. It provides readers with an understanding of the communication tools used by the company along with merits and demerits of the use of wireless technology by Starbucks along with how similar strategies are being deployed by other companies in Australia to ensure that readers are equipped with both theoretical and practical understanding of the entire study.

Recommendations

Starbucks has certainly been showing progressive signs of growth however the company should look to capitalize on its core competencies through high quality innovative products and maximal customer satisfaction. It should ensure a proper mix of traditional and modern communication mix and stay unique so as to be differentiated from other fast-food chain companies. It should look to advertise more on its core competencies using technological advancements and ensure increased training period for its baristas. A more diversified strategy shall be of great help for the company to new kinds of products in its product portfolio. It should also look to continue its corporate strategy of more alliances, partnerships and fair trade associations to capture market on a global scale and ensure long term sustainability of its business.

(2650 words)

References

Brassington, J. and Pettitt, M. (2001). Principles of Marketing, 2nd Edition, Prentice Hall

Chrisan, P. (2001). Marketing: A Behavioral Analysis, McGraw – Hill. New York

Cook, D. & Dave, D. (2004). Structural element of service quality product. International Journal of Business Performance Management, 6 (2), 189-207

Canhoto, A., Clark, M. & Fennemore, P. (2013). Emerging segmentation practices in the age of the social customer. Journal of Strategic Marketing, 21 (5), 413-428. Retrieved on May 14, 2014 from http://www.tandfonline.com/doi/abs/10.1080/0965254X.2013.801609#.UkjYzF3Dm_I

Doole, I., and Lowe, R. (2001). International Marketing Strategy. 3rd Edition, Bedford Row, London, Thomson

Daniel, C., Charls, L. & Joseph H. (2003). Marketing, 5th edition, south-western. New York.

Duncan, T. (2008). Principles of Advertising & IMC, 2nd ed. New York: McGraw-Hill/Irwin

Drummond, G. and Ensor, J. (2001). Strategic Marketing, planning and control, 2nd Edition, Butterworth Heinemann.

Daniels, J.D., Radebaugh, L.H. & Sullivan, D.P. (2007). International business: environment and operations ,11th edition. New Jersey: Pearson Education

Hill, L.W.Ch. & Jones, R.G. (2004). Strategic management: An integrated Approach. (6th ed.). Boston: Houghton Mifflin Company