Case Study Starbucks Real Estate Marketing Essay

Howard Schultz (the CEO) developed a head office group to create a sore development process based on a six-month starting schedule. Starting in 1991, the business began to set-up its in-house team of architects and designers to ensure that every store would communicate the right image and identity. Stores needed to be custom designed because the business didn't buy real real estate and build its freestanding structures like McDonald's or Wal-Mart do; somewhat, each space was leased within an existing structure and thus each store differed in proportions and shape. Most Stores ranged in proportions from 1000 to 1500 square feet and were found in office complexes, downtown and suburban retail centers, airport terminal terminals, university campus areas, or busy area shopping areas convenient to pedestrian foot traffic. Only a go for few were in suburban malls. While similar materials and furnishing were used to keep carefully the look steady and expenses sensible, no two stores finished up being exactly similarly.

In 1994, Starbucks started out to experiment with broader range of formats. Special seats areas were put into help make Starbucks a place where customers could meet and talk or simply enjoy a peaceful interlude in their day. Grand Cafes with fireplaces, leather seats, newspapers, couches, and a lot of ambience were created to provide as flagship stores in high-traffic, high-visibility locations. The business also experimented with drive-through home windows in locations where rate and convenience were important to customers and with kiosks in supermarkets, building lobbies, and other general public places.

To better reduce average store-opening costs, which acquired reached an undesirably high $350, 000 in 1995, the company centralized buying, developed standard contracts and fixed fees for several items, and consolidated work under those companies who shown good cost-control tactics. The retail functions group outlined the minimal amount of equipment each central store needed, so that standard items could be purchased in quantity from distributors at 20 to thirty percent discounts, then supplied just in time to the store site either from company warehouses or owner. Modular designs for display cases were developed. And the whole store layout was developed on a computer, with software that allowed the expenses to be estimated as the look evolved. All this slice store-opening costs significantly and reduced store development time from 24 to 18 weeks.


Corporate Strategy

Corporate strategy has an overall path that provides as the construction to carry out all the organization's functions. It specifies the business enterprise or businesses the company will pursue, isolates new opportunities and risks in the surroundings, and identifies expansion objectives.

In order to creating a sound corporate and business strategy Starbucks has a good scanning of the surroundings (the industry, marketplace, and the modern culture), recognition of the firm's main competencies and the primary processes. The central competencies has been its human resources (Starbucks prices its employees and therefore provides appropriate compensation and training programs), its tangible resources like coffees (it includes access to highest quality of coffee beans on earth), its intangible resources like having the reputation of being the best known largest caffeine house chain. The core processes are derived through the business's central competencies. The core techniques of Starbucks have been customer and supplier romantic relationship along with service development.

Starbucks corporate-level strategy has been to create itself as the top purveyor of the best possible coffee on the globe, while keeping their uncompromised concepts as they grow. The firm basic principle of the company have emerged with it's maintenance of a great work place for every employee in its retail stores. It upholds diversity and promises the best standards for its products. The company satisfies and provides back to the community and the environment. Also, Starbucks persists to be profitable. They live by way of a strict slow development which enables those to concentrate on a specific market and become completely dominating for the reason that market and only then established its sights further abroad. This strategy has gained them the good thing about being one of the speediest growing companies within USA. Starbucks depends on increasing market penetration. They also look to provide a very interpersonal and relaxing atmosphere because of their customers.

Operations Management

Operations management is the management of systems or techniques that create good and/or provided services. The creation of goods or services consists of transforming or transforming inputs into outputs. Various inputs such as capital, labor, and information are being used to produce goods or services using one or more transformation processes. To ensure that the desired outputs are obtained, measurements are taken at various items in the transformation process (feedback) and then weighed against previously established benchmarks to ascertain whether corrective action is needed (control). The fact of operations function is to add value through the change process. Value-added is the word used to spell it out the difference between the price tag on inputs and the worthiness or price of outputs. In for-profit organizations (like Starbucks), the worthiness of outputs is assessed by the costs that customers are willing to pay for those goods or services. Organizations use the money produced by value-added for research and development, investment in new facilities and equipment, paying employees, and revenue.

Starbucks uses the operations management to forecasting specific things like supplies and demands for a fresh or current shop, to plan capacity of new stores, to control inventories of such items as drinks, to assure high-quality in each stage of customer face, to stimulate and train employees in all phase of businesses, to locate facilities matching to managers' decisions which towns to provide services for.

Relationship of Corporate Strategy and Businesses Management

The corporate and business strategy and the procedures management of Starbucks are strongly tied together. As stated preceding, OM of Starbucks handles customer marriage, providing employees a soothing environment, providing quality espresso that happen to be pathways to the guiding rules of Starbucks(providing a great work environment and treat each other with esteem and dignity, embrace diversity as an important component in the manner they do business, apply the best standards of brilliance to the purchasing, roasting, and fresh delivery of caffeine, develop enthusiastically satisfied customers constantly, contribute favorably to neighborhoods and environment, realize profit is vital to future success). When you are congruous to the guiding principles, OM of Starbucks penetrates through the corporate strategy of the business and this the required relationship of the organization strategy and the functions management of Starbucks.

Operations Strategy

An operations strategy is performed to plan a design and management of businesses functions, in ways that supports corporate and business strategy. The businesses strategy is the one that associates corporate strategy to businesses function. The target lies on the operation's particular capabilities that give a competitive border to the company. These features are referenced as competitive priorities. By excelling in any of the said features, there exists the opportunity of the business to be the frontrunner in a particular market. Invariably, and functions strategies involve the look of new functions or the redesign of existing ones. Starbucks searches for investor of the country of interest while opening a new shop in a country. The indigenous investor will require some money that is enough enough to open up at least one shop, and that retail store is known as a franchise until it extends to a certain success level. The store is bought from the entrepreneur at a cost over his investment costs only following the franchise starts getting expected profitability margins. . There is absolutely no likelihood for the entrepreneur to keep carefully the retail store as his franchise for this is prohibited by Starbucks Corporation. The result of starting a franchise is a superb success (great success, franchise buyout) or complete inability (little or no earnings, close stores) for the entrepreneur and the organization. The corporation usually waits several years for sufficient success before it makes a decision future programs of action.

Any new shop must support the experience, which is retailing the idea of` a "THE 3RD Place" for customers to take pleasure from the Starbucks experience with focus on quality products, great customer service and good music. In the first years, the new store's primary activities are three: Productions, Marketing and Sales, and Support service under the path of your country brain that is employed by the globe Head office (Seattle), and trained for one yr in Seattle, Washington, USA. The brand new store will therefore come with an administrative or support entity and a coffeehouse entity. This plan ensures Starbucks Company is touching all operations in every retail stores of a certain country and may easily monitor market penetration, from installation to development. Furthermore to simplifying monitoring, a functional framework will also ensure that functions and responsibilities of each actor are obvious: From president who monitors the overall picture and adherence to Starbucks Firm, to the manager who monitors the criteria of day-to-day coffeehouse management, also to the salesperson who understands that his main focus is customer satisfaction and high benchmarks of service.

Starbucks Organization uses constant cross-functional interaction. A Starbucks operations manager collects feedback from marketing division to determine how much capacity should be prepared for a new store and the procedures manager works with finance about the timing and money of the new store. In discovering the operational features needed for the near future, operations managers use the professionals of other useful areas.

The explanation of commercial strategy and operations strategy of Starbucks obviously explains us that the functions strategy is absolutely coherent to its corporate and business strategy. The functions strategy is designed in such a way so that it can achieve a relaxing environment for both customers and staff members, provide quality service to customers and keep maintaining profitability (which is components of Starbucks corporate strategy).

Process Type

Process kind of Starbucks is one of an Forward Office type where customer contact is high and the service provider immediately interacts with external or internal customer. Because of the customization of the service and variety of service options

The process kind of Starbucks is of a front side office type where the process has high customer contact and the service provider interacts directly with the internal or external customers. Due to the customization of the service and variety of service options, the procedure is more complex and many of the steps in it have substantial divergence. Work flows are flexible, and they change from customer to customer. More independence is allowed or inherent in the steps and series of the process. The work will involve many exceptions to the most common work pattern. Not only does the procedure include more steps, but employees find the more difficult to understand, There may be more service variety and services are tailored. The high-contact service process tends to be adapted or customized to each customer. The procedure of Starbucks displays its competitive main concern which is superior customer romance. The process gives dividends because of a very well trained workforce.

Layout Design

Starbucks looks to providing an authentic coffee experience that conveyed the artistry of espresso making, a location to think and envision, an area where people could collect and speak over a great cup of coffee, a comforting refuge that provided a feeling of community, a location that welcomed people and rewarded them for approaching, and a layout that could cater to both fast service and noiseless moments. Starbucks has four store layout designs- one for each and every of the four periods of espresso making :growing, roasting, making, and aroma- each with its own color combos, lighting schemes, and component materials. Within each of the four basic design templates, Starbucks could range the materials and details to adjust to different store sizes and configurations (downtown buildings, college or university campuses, neighborhood shopping areas). The business also offers two ministore layouts using the same styles and finishes: The breve pub, a store-within-a store for supermarkets or office building lobbies, and the droppio, a self-contained 8-square-foot space that might be moved from place to identify. Management of Starbucks believes such layout design permits lower store starting and operating costs, find sales locations Starbucks could normally not consider.

Facility Design

Starbucks looks after each store as a billboard for the business and since a contributor to building the company's image and brand. Each depth was scrutinized to improve the mood and ambience of the store, to be sure everything signaled "best of category" and this it shown the personality of the community and a nearby. The thesis is "Everything matters". The business goes to great lengths to be sure the store fixtures, the merchandise shows, the colors, the artwork, the banners, the music, and the aromas all combined to create a consistent, inviting, revitalizing environment that evoked the love of caffeine, that signaled the business's passion for espresso, which rewarded customers with wedding ceremony, stories, and surprise. Starbuck was recognized for its sensitivity to area conservation with the Scenic America's prize for excellent design and "sensitive reuse of areas within metropolitan areas"

To make an effort to keep the coffee aromas in the stores genuine, Starbucks banned smoking and asked employees to avoid putting on perfumes or colognes. Well prepared foods were held covered so customers would smell espresso only. Brilliant banners and posters were used to keep the look of Starbucks stores fresh and commensurate with seasons and getaways. Company designers came up with artwork for commuter mugs and T-shirts in various cities that was commensurate with each city's personality (peach-shaped coffee mugs for Atlanta, pictures of Paul Revere for Boston and the Statue of Liberty for New York).


Capacity refers to an higher limit or roof on the strain that operating units can handle. The operating device might be considered a plant, department, machine, shop, or worker. Capacity decisions are being among the most fundamental of all the businesses decisions that managers must take. Capacity decisions are critical for Starbucks because capacity decisions have a real impact on the power of the business to meet future needs for services, capacity decisions have an impact on operating costs (which is one of the purpose of Starbucks), capacity decisions are usually major determinant of initial costs of beginning a new retail store, capacity decisions often develop long-term commitment of resources, capacity decisions are determinant of competitiveness.

Starbucks capacity planning decisions involve both long-term and short-term things to consider. Long-term considerations relate to overall degree of capacity, such as store capacity; short-term factors relate to possible versions in capacity requirements created by specific things like seasonal, arbitrary, and unusual fluctuations in demand.

Starbucks provides the service itself departing your options of outsourcing at the rear of. Your choice to provide the service alone is basically as a result of expertise, quality things to consider, the nature of demand, cost associated, and the risk involve with outsourcing.

In deciding capacity Starbucks encounters challenge as a result of factors: 1. the need to be near customers, 2. the shortcoming to store services, and the 3. the degree of volatility of demand.

Convenience for customers is an important aspect of Starbucks service. Generally, a Starbucks store is close to the customers. Starbucks realizes that capacity and locations are tightly tied.

Capacity is also matched up with the timing of demand. Unlike goods, services cannot be stated in one period and stored for use in later period. Thus, swiftness of delivery, or customer hanging around time, becomes a major concern in capacity planning.

Demand volatility reveals problems for capacity planners. Demand volatility tends to be higher for services than for goods, not only in timing of demand, but also in the quantity of time necessary to service specific customers.


Logistics refers to the movement of materials and information in a source chain. Materials include all of the physical items found in a development process. Furthermore to raw materials and work in process, there are support items as fuels, equipment, parts, tools, lubricants, office supplies, and more. Logistics includes movements within a service, overseeing incoming and outgoing shipments of goods and materials, and information stream throughout the supply chain.

Starbucks has soft moves within the store or the facility. The use of superior software in managing the movement of information movement is done in Starbucks. The process is done so so that the maximal or the optimal use of logistics is retained.

Supply String Management

A supply chain is the collection of organizations- their facilities, functions, and activities- that get excited about producing and delivering something or service. The sequence commences with basic suppliers of recycleables and extends completely to the ultimate customer. Facilities include warehouses, factories, handling centers, syndication centers, shops and office buildings. Functions and activities include forecasting, purchasing, inventory management, quality assurance; scheduling, production, circulation, delivery, and customer service. You will find two sorts of movements in these systems: the physical activity of material, generally in the direction of the finish of the string (although not absolutely all material starts at the beginning of the string), and exchange of information, which moves in both directions along the chain.

Starbucks gets the depth in its source chain by obtaining its future expansion by in a way that its suppliers ensured a sustainable way to obtain high-quality coffees. Starbucks believed that the banal objectives in supply chain management - cost, acceleration, quality, versatility - would be insufficient to secure the ever continuing way to obtain beans from the small-to-medium-sized family-owned farms in Latin America, the Pacific Rim and East Africa.

Starbucks turned its target to sustainability. Starbucks built a collaboration with Conservation International, an environmental not-for-profit business, to develop CAFE (Coffee and Farmer Collateral) Methods. CAFE Practices is dependant on the notion a sustainable supply of high-quality coffees depends on a well balanced source of espresso farmers who are not exploited by their trading lovers, have lands that are farmed with environmentally sound methods and who stay in healthy, secure conditions. Starbucks also offers sensible credit through different loan funds programs and bonuses aimed at motivating the spark of advancement.

The indirect benefits Starbucks grabbed included a much better supply capability, increased visibility in the supply chain, better interactions with farmers, accelerate marketing ability. As a result of all these attempts justifies Starbucks prime prices. This type of advantage in SCM of Starbucks helped build reputation as a socially sensible company with higher morale. The price was a short-term decrease in profit.

Starbucks uses Commerce Guard who monitors freight pots as they move through interface infrastructure and intermodal rail and street connectors. Shippers and appropriate federal agencies then access the information from a secure Internet portal on any pc and use the monitoring information to secure and smoothing the resource chain.

With all these initiatives done on the Supply Chain Management of Starbucks, the gain is high that happen to be: improved businesses, lowered vehicles costs, beating competitive pressures, facing the challenge of globalization, supreme management of inventory.

Process Design

A key question in process design is whether to automate. Automation is equipment that has sensing and control devices that enable it to use automatically. If a company makes a decision to automate its process, the next question is how much. Automation can range between factories that are completely programmed to an individual automated operation.

As programmed services have become increasingly important, Starbucks realizes the utilization of automation when it comes to size purchase by customers. The service availableness may also be checked using automation. The warehousing and its safety and different parts of Supply Chain Management are done using automatic process which really is a key feature of Starbucks process design.

Quality and Performance

Quality refers to the ability of a product or service to constantly meet or surpass customer expectation.

Main strategy of Starbucks in preserving quality and performance is a straightforward philosophy of demanding adherence to high quality of products and services. Therefore company doesn't use franchising. It has total control over products' quality never to fail customer's expectation and avoid careless business procedure of franchise purchasers, who hardly ever can disconsider brand and impede consumers from having Starbucks experience.

Starbucks is very open in receiving opinions from the customers about the quality and performance of Starbucks and make changes or adjustments accordingly. Not only that, Starbucks rewards its valued customers in making any faults clear.

Starbucks has established itself as the TQM benchmark for integration and standardization of service not only within its espresso/cafe industry but across other companies because of its extension into music and retail products.

TQM at Starbucks is paying dividends in the sense that it's leading to ongoing improvement, competitive benchmarking, employee empowerment, team procedure in managing work, taking decisions predicated on facts alternatively than opinions, guaranteeing supplier quality, retaining quality at the foundation.

Starbucks Procedures adding value

Starbucks has a wonderful value chain which is defined here:

Inbound Logistics: Starbucks looks for the perfect coffee beans to create high-quality of espresso. Special procedures are set up to select special beans and guarantees are provided to buy the entire stock.

Operations: Starbucks has special system like espresso roasted in a powerful gas-fired drum roaster for 12-15 minutes while roasters use their senses, experience and computers to guage when the coffee beans are perfectly done. The color of the coffee beans is even analyzed within an Agtron bloodstream cell analyzer. In case the test doesn't meet specifications, the entire lot is omitted.

Marketing and Sales: Starbucks is not relying on marketing on MEDIA like Tv, Radio, and Magazines. The company has gained its acceptance through its highly attractive ambience, atmosphere, and person to person. They have also developed some unique marketing strategies to new markets, such as its passport campaign (in which a customer obtains a buyer benefit stamp when they buy a half-pound of caffeine and after they gather ten they get a free half-pound)

Service: Starbucks helps its current customers by educating them to take decisions about beans, grind, espresso/espresso, plus some home making tips.

Technology: The web site of Starbucks permits customers to buy and view through its specialty items and caffeine. Customers may also speak to products; look up current financial ratios, current Starbucks store locations, and some of the sites most frequently answered questions.

Human Learning resource Management: All starbucks employees need a mandatory 24 hours training (where they are simply taught to brew the perfect cup). Starbucks offers its employees benefits deals, with special coverage available as well as stock options. The starbucks stock plan is a factor of low staff turnover.

Administration: The organization is arranged as a matrix between practical and product divisions. Starbucks has avoided a hierarchical composition and therefore has no formal organizational chart.

OM improvement

The waiting range management should be better at Starbucks retail stores as this may be a substantial negative about the swiftness of delivery time and therefore resulting in customer dissatisfaction.

The use of normal water at the stores should be achieved carefully so that environmentalists cannot undertake the issue. Currently, Each and every Starbucks store has a chilly faucet behind the counter for a sink called a 'dipper well' which is utilized for washing spoons and utensils, and staff are forbidden from turning water off under the misguided idea that departing the touch on stops bacteria from breeding in the taps. This practice should be ceased.

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