Will a focus on employees and localization allow Starbucks to continue growing?
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Will Starbucks keep growing?
For Starbucks to continue growing as they have in the past they will have to focus on their competitors, localization, and employees...
The main competitors to Starbucks in the US coffee market would be the small local coffee shops. Many of these coffee shops capitalize on the history they have with the local consumer. Many of the locals have been going in these coffee shops for a long time and associate events and stages of their lives with these stores. Another strong competitor is McDonalds, which is using his large consumer base to use its coffee. Through the past years McDonalds has continuously increased the quality of its coffee. Dunkin Donuts and Tim Horton are other competitors in this market segment. "McDonald's is planning to capitalize on the public's willingness to pay $4 for a cup of coffee by hiring baristas and dropping espresso machines in 14,000 of their fast-food outlets. Meanwhile, Starbucks, with business lagging, is fighting back with an "if you can't beat 'em, join 'em" strategy, by offering heated breakfast sandwiches and adding drive-thru windows to some of their locations." (Tancer, 2008)
Possible Business Implications
This is a difficult segment considering there are many competitors and much of the competition is bigger than Starbucks (i.e. McDonald). The company would be able to profit even in this economy if it finds a way to connect the consumer with its unique atmosphere by focusing on creating an environment that enhances the ambiance to reflect the interest in art, culture and environment.
Despite the past success of Starbucks, the company is faced with many challenges moving forward. Over the last several years, Starbucks has lost sight of their original vision for the company, and been predominantly focused on growth. This strategy worked for a while, but it is apparent that this loss of focus has finally caught up to them. This loss of focus has resulted in Starbucks facing lower average sales per transaction, losing business to competitors, and a decline in general consumer demand for their specialty coffee products. The largest challenge to combat the issues listed above is going to be finding a way to reconnect with their customers. In order to do this they will need to shake the “corporate” image that resulted from over a decade of unparalleled growth. Starbucks will need to re-invent their brand as a consumer-focused organization. The best way to do this is for Starbucks to focus on their employees, localization, and keeping it simple.
Focus on the Employees:
Employees are the most important asset a company can have. They are the “ambassadors to the outside world” (http://www.reexperiencestarbucks.com/). Management has to make it a point not just to train them how to make the perfect cup of coffee, but encourage them to make the extra effort with every customer. Something simple like an employee offering a free sample to an indecisive customer, or taking their name with the order and then addressing them personally when their order is ready can make all the difference in the world. The customers will come back regardless of price, whether they are a college student, yuppie, or your average working adult, long as they are made to feel special. When asked in a recent interview with Fortune Magazine, how he plans to counter customers trading down from a $5 cup of coffee to a less expensive product due to the looming recession, Howard Schultz responded:
I am concerned about any attrition in customer traffic at Starbucks, but I don't want to use the economy, commodity prices or consumer confidence as an excuse. We must maintain a value proposition to our customers as well as differentiate the Starbucks Experience. That is the key. (Serwer, 2008)
In my opinion, the employees can create this value and differentiate Starbucks from its competitors. By focusing on their employees Starbucks are much more likely to reconnect with their customers. This in turn will help the company to increase consumer traffic, and keep consumers from switching to a competitor just because of a lower price.
Focus on localization:
It is the time for Starbucks to think about localization. There are so many sub-cultures and sub-groups within the United States, let alone the entire world, that it would be extremely foolish for Starbucks not to consider these basic differences. In order to connect with their customers, Starbucks first needs to understand their customers. This means taking the time to research the areas culture, environmental factors, values, tastes before dropping a new “cookie-cutter” store in the downtown area. It’s absurd to think that people in New York, Dallas, and Des Moines are all going to have the same food and beverage preferences. Localized stores will allow the Starbucks to adapt to the tastes of each separate community