The standards used by Starbucks is the VERTICALLY INTEGRATED SUPPLY CHAIN i.e. the company does not outsource any step in the supply chain it stays involves during the whole process to provide the best bean or coffee for the best flavour which makes it special. It also means that it works directly with more than 300,000 of coffee growers worldwide. It is the belief of the company that if they work together with the farmer, each bean will achieve the same quality and flavour.
You will be surprised after knowing that the company has its own Coffee and Farmer Equity (C.A.F.E) standards and Coffee Sourcing Guidelines which means the sign a contract between the farmer and the company to work ethically and delivering the best beans to the company having the quality standards. This has not only helped the company but also the workers, it provides suppliers certain advantage. According to these guidelines protect the workers.
Starbucks even gives special training and education to the farmers after they are into contract, this even gives the farmers a sense of belongingness in the companies. They get a feeling that they are an integral part of Starbucks. They also keep having a frequent communication with farmers so it makes the supply chain without any hinderance.
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THE PROCESS OF SUPPLY CHAIN
Once the beans are grown by the suppliers they are take to the six storage sites that are located in Europe and America. Then, in these storage places they are roasted for packaging and sending to eight central and forty eight regional, distribution centers. Even after a handful of storages Starbucks is able to manage its roasting and packaging of beans in exactly the same way at all locations.
It is because the roasting process that Starbucks is able to ensure that the coffee tastes the same at all retail stores all over the globe. As of the direct participation of Starbucks in the supply chain it is able to fulfil the orders on time with more than 70000 deliveries every week.
However, in 2008 this process of supply came to be very expensive, then the executive Vice President Of Global Supply Chain Operations Peter Gibbons came up with a streamlined, cost effective process that relies upon simple operational structures and metrics. He started by regrouping the supply chains jobs into 4 major categories i.e. plan, source, make and deliver. Then later he developed a centralised logistics for the management and coordination of of its global network.
As we all know that in this era one cannot work without getting digital. So, with the simple tools and processes of Gibbons, Starbucks also uses digital technology to keep a track of the real time deliveries, demand, inventory, capacity etc. This method of digitalising ha made the company achieve the efficiency required for supply chain which has made it one of the best.
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THE MARKET COMPETITION
Even after achieving heights there is always someone trying their best to step upon you to become the best, so similarly as in case of Starbucks it is DUNKIN’ DONUTS. But, in contrast Starbucks owns its entire supply chain, Dunkin’ Donut outsources its supply chain, it is totally depended on a third party for its process.
As being a well known brand Dunkin’ Donuts franchises its manufacturing locations and moreover it has franchised almost all of its retail, whereas on the contrary, Starbucks has franchised less than 50% of its retail shops and after the 16th of March it no longer accepted and franchises in the US. There are as good as no intermediaries for the supply chain process.
Mentioned earlier, Starbucks has training and education programs for the growing of coffee beans, and has committed of using 100% sustainably grown beans, on the other hand, Dunkin’ Donut claims to produces the coffee beans as sustainably as possible. Starbucks also works with Fair Trade USA and the Rainforest Alliance to implement sustainable sourcing processes.
It is so very ironical the Dunkin’ Donuts is 20 years older in this market but still Starbucks has been holding a better position in the market ever since. It is because the main focus of Starbucks is only on the Coffee and the beans but Dunkin’ Donuts has earned more fame in the Donut market. There might also be one more difference that Starbucks has always focused on premium consumers and offered a quality product, whereas Dunkin Donuts gives the coffee to the blue-collar job segment who wants the coffee on the go.
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SWOT ANALYSIS
STRENGTHS
STRONG BRAND IMAGE
Starbucks have a very strong brand image. It is a very popular brand among the food and beverage industry. The number loyal customers have been increasing rapidly and have grown to billions in past 10 years. Moreover it has brand value of $11.7 billion according to the 2019 interbrand ranking.
QUALITY, TASTE AND STANDARDIZATION
Starbucks being directly involved with the farmer and the other supply chain workers has been able to maintain the quality of its coffee beans and the other products. The standard of the products is consistent in all of the locations.
EMPLOYEE TREATMENT
The person serving the customer should always be in a good mood and stress free so that the customer remains satisfies with the product as well as when the service is being provided. So, Starbucks treats the employees very well. It even educates the farmers who produces the best coffee beans for the company.
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WEAKNESS
HIGH PRICES
The prices of almost all the products of Starbucks touches the sky, it becomes a high end product for a middle class man. Mostly the rich and high class consumes its products.
RECALL PRODUCTS
Sometimes Starbucks recall its well liked products from the market. This makes negative brand image in the market. This leads to loss in the customer base. In march 2016 Starbucks recalled its in-demand product cheese and fruit bistro box, the reason was that there was a threat of contamination and allergens.
IMITABILITY OF PRODUCTS
Starbucks does not own most of the unique products offered in the market. This makes imitability of the product quite easy for the other companies. Other coffee shops and food chains like Mcdonalds McCafe and Dunkin Donuts offer the same product.
OPPORTUNITIES
EXPANSION IN DEVELOPING MARKETS
Most of the coffee houses owned by Starbucks are located in the US only and with global rise in the market Starbucks should star investing in other countries and own quite a few coffee houses in Europe, Asia and Australia as well.
INTRODUCING NEW PRODUCTS
Starbucks should have unique product of itself that signifies it and makes it different from its competitors. Moreover being popular and having a strong brand image it can offer various same products offered by its competitors to enhance its sales.
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PARTNERSHIP WITH OTHER FIRMS
Partnership has always been beneficial at such a level where Starbucks is right now, it has the opportunity to develop partnership with various major firm at this moment. This would also help in strengthening its position in the market and increase its market share.
THREATS
IMITAION
The products offered by Starbucks can easily be imitated by the new and old rivals.
COMPETITION WITH BIG OUTLETS
Starbucks has a tough competition with Dunkin donuts and McDonalds. They can pose a threat to the market position of Starbucks
CORONA VIRUS
As we all know that at this moment every company on this planet is facing this major threat CORONAVIRUS. Due this outbreak Starbucks had to temporarily close 2000 of its stores in China and that is a loss of major sales. This will have a negative impact on the 2020 financials.