Value chain analysis of Starbucks

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Value chain analysis of Starbucks

This article aims to carry out a detailed value chain analysis of Starbucks. The value chain of a business explains the activities involved in producing goods and services. Understanding it enables one to understand the core value proposition of a business.

 

Primary activities in the value chain of Starbucks

Starbucks’ inbound logistics

Inbound logistics is defined as the activities that occur when a company receives goods or services from suppliers. It is an important business function for Starbucks which purchases coffee from 30 out of 70 coffee producing countries in the world (Starbucks, 2022). It does so to get different flavours as the flavour varies from one country to another due to growing and other conditions.

 

The green or unroasted beans bought from the suppliers are roasted and packaged to add value to the beans. It is important to note that Starbucks’ strategic relationships with suppliers play a big role in the inbound logistics.

 

Starbucks’ operations

Starbucks has over 32,000 stores in 80 countries (Starbucks, 2022). Some of these stores are company-operated while others are licensed ones. The opening times vary from store to store with some opening at 5am and closing late in the evening. Value derived from the operations include many stores remaining open during public holidays, and general positioning of stores in high-traffic and high-visibility locations such as shopping malls, office buildings, college/university campuses etc.

 

Starbucks’ outbound logistics

Starbucks’ outbound logistics is the function responsible for moving products from the company’s stores to customers. This function is also referred to as delivery or distribution operations.

 

Starbucks roasts its products in-house and customers can buy them by visiting a store. Some of its products are available in supermarkets as well. In addition, UK customers can get the products delivered to their doorsteps via Uber Eats, Just Eat and Deliveroo. The U.S customers also have the home delivery option.

 

Starbucks’ marketing and sales

Starbucks’ marketing and sales activities include advertising, sales training, sales promotion, market research and so on. According to Statista (2021) the company spent around $305.1 million on advertising in the fiscal year 2021. Likewise, it applies sales promotion techniques to persuade customers, and its social media presence is very good as well.

 

Starbucks recently shifted its focus from short-term goals to building long-term goals with more personal relationship with customers. This is indeed a move in the right direction as long-term customer orientation often provides companies with competitive advantages.

 

Starbucks’ service

The last primary activity in this value chain analysis of Starbucks is service. Starbucks tries to add value to the brand image with excellent customer services. Its friendly baristas always greet customers very well. However, images of long queues in some stores sometimes raise questions concerning customer service delivery process, and staff productivity.

 

Customers can have answers to their questions (if any) from the members of staff at Starbucks stores. If still unsatisfied, they can call the customer service or send emails. Alternatively, they can reach the company on Twitter and Facebook.

 

Secondary activities in the value chain of Starbucks

 

Starbucks’ procurement

The procurement function at Starbucks is responsible for purchasing goods and services for the company. It is also responsible for managing the company’s relationships and contracts, including purchasing agreements, contracts, and service agreements.

 

Starbucks aims to offers customers the highest quality products that are ethically purchased and responsibly produced. It should be noted that its success is not just rooted in its quality coffee only. It also comes from its ability to source products at an affordable rate that provides both value and profit for it as well as its customers.

 

Starbucks’ technology development

Discussion on technology development is a very important part of this value chain analysis of Starbucks. Though Starbucks is a coffee house chain, it is also often called a ‘tech’ company due to its excellent use of technology across all of its functions i.e. production, supply chain, customer experience, store design and so on.  It makes use of artificial intelligence (AI), big data, cloud computing, and machine learning to develop new products and services for the company and deliver premium customer experience.

 

Starbucks’ human resource Management strategy

Human resource management is a core component of Starbucks’ business strategy. The company has secured good places in the Forbes List of awards such as Best Employers for Diversity 2021, World’s Best Employers 2021, Best Employers for Women 2021, and many others over the years (Forbes, 2021).

 

Starbucks has around 350,000 employees. It is famous for its diverse work force. It refers to its employees as ‘partners’ and listens to them consistently. It considers their feedback while making any important decisions.  Its ethos is about empowering them.

 

Starbucks’ Barista Basics Training programme is designed to equip new barista with the skills and the knowledge required to deliver excellent customer experience.  However, Sainato (2021) reports that some employees at Starbucks in the USA are unhappy with the understaffing at stores, intense workloads, and abusive behaviour by some customers.

 

Starbucks’ Infrastructure

The final part of this value chain analysis of Starbucks is the infrastructure. The infrastructure function of Starbucks includes but not limited to planning, general management, financing etc. It eyes on opening thousands of new stores globally to take the overall number of stores beyond 55,000 mark by 2030. The leadership team comprising of chief executive officer, vice presidents, senior vice presidents, and executive vice presidents are playing a massive role to make it happen.

 

Hope this article ‘Value chain analysis of Starbucks’ has been a useful read. You may also like Marketing mix of Starbucks (7Ps of Starbucks). Please share these articles with others to support our work. You may also like:

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Last update: 21 April 2022

References:

Forbes (2021) Starbucks, available at: https://www.forbes.com/companies/starbucks/?sh=1196ffb828ac (accessed 20 April 2022)

Sainato, M. (2021) ‘Coffee-making robots’: Starbucks staff face intense work and customer abuse, available at: https://www.theguardian.com/business/2021/may/26/starbuck-employees-intense-work-customer-abuse-understaffing (accessed 19 April 2022)

Starbucks (2022) Doing Business with Starbucks, available at: https://www.starbucks.com/business/suppliers/ (accessed 19 April 2022)

Statista (2021) Starbucks: advertising spending worldwide 2011-2021, available at: https://www.statista.com/statistics/289363/starbucks-advertising-spending-worldwide/ (accessed 19 April 2022)

Author: M Rahman

M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.