Overview of Starbucks Business Model
Starbuck’s business model refers to the overall methodologies that the company use to serve customers and generate revenues. It includes the range of products offered, unique strategies, key partners, suppliers, target customers, promotional campaigns, etc. However, this is further explained in detail in the discussion below.
Introduction
Starbucks is an American-originated coffee company and coffeehouse chain. The Starbucks business model was founded by Zev Siegl, Jerry Baldwin and Gordon Bowker, in 1985. It initially started to nurture the spirit of one cup, one person and one neighbourhood at a time, based in Seattle, Washington.
The Starbucks business model revolves around channelling in more than 30,000 locations around the globe. It provides a wide range of products to the customers like hot and cold drinks, whole bean coffee, loose-leaf tea, fresh juices, latte, Frappuccino beverages, VIA, full-leaf tea, and snacks such as salads, pastries, cakes, etc.
The unique category initiated by the company is their popular darkly roasted coffee. Starbucks use automated espresso machines to make coffee to ensure the safety of their employees. However, the key partners of Starbucks’s business model include Coffee Machine Makers and Coffee Growers.
The company keep their touch with coffee traders, exporters and producers to maintain a high-quality supply of coffee. Starbucks’s business model uses a network of licensed and company-related stores to sell products along with the website connection.
Structure of Business Model
The structure of Starbucks’s business model has evolved from its incorporation. The areas showing changes are as follows:
- The Starbucks offerings expanded to involve items like caffe lattes, espresso and iced coffee.
- Moreover, employee training was focused on excellence in customer service for which the living room-style spaces were structured to frame a comfortable customer experience.
- Starbucks maintains a peaceful environment where anyone can even work without placing an order showing an overhaul process of the company.
- The company comprises different business segments that pay off by generating good revenues.
Business Segments of Starbucks
- Europe, Africa and the Middle East: It covers 6% of the total sales of the company
- America: This segment encounters 69% of the sales of Starbucks which includes Canada, Latin America and the U.S.
- China and the Asia Pacific (commonly termed as CAP): The area accounts for 13% of the company whereas India and China are the fastest-growing markets due to which Starbucks grew its reach in the CAP region.
- Channel development: It adds 9% to the revenue consisting of roasted whole bean coffee, ready-to-drink products, Tazo branded single-serve, grounded coffee, and further additions sold worldwide.
Note: Starbucks’s business model slowly transitioned to company-owned stores where it closed 132 licensed stores in Canada (2015), switched 1477 stores in East China to company-owned in 2018 and much more. This explains that the company has gone through a significant model change over many years.
Strategies for Unique Starbucks Business Model
The factors/strategies of Starbucks to become a reputed coffee chain and successful around the globe are as follows which are studied briefly.
Differentiated cultures
Starbucks culture defines clarity that registers its customers and coffee partners to frame culture with warmth, belonging and love. Also, The company holds itself responsible for the results of products and services, enhancing more focus on customer satisfaction or peace.
Premium products
Selling premium products, the company has been a brand of selling items with top-notch quality. So, The level of branding and authentic execution differentiates Starbucks’s business model and strategy from other coffee chains.
Since the Starbucks business model does not compromise its taste and quality, it charges high for its services. As a result, this indicates a high-end loyal customer base for the company.
Top-notch supply chain
The supply chain management of Starbucks’s business model and strategy is adeptly and ethically managed which is dedicated to sustainable sourcing. Also, The company aims at the target of 100% ethically sourced coffee which is projected to be achieved by the end of 2020.
Best Suited Customer Service
Since the company wish for a loyal customer base, it becomes necessary to provide highly personalized service, which is followed by the Starbucks business model and strategy in an efficient and dexterous manner. Also, The employees are trained to serve the customers in an engaging, welcoming and highly tailor-fit fashion.
The right use of Franchise and Owned stores
Starbucks ensures a perfect blend of franchised and company-owned stores that helps in the profit-driven global expansion of the company. The Starbucks business model and strategy has 51% of stores company-owned while 49% are franchises making it more efficient.
Working of Starbucks
The working business model of Starbucks depends on different elements or factors that are as follows individually:
Value propositions
The Starbucks business model has four main value propositions:
- Convenience: The Starbucks app can be used by customers to order products for which trained roasters are employed to work.
- Status: Starbucks is successful a brand that won many awards and is idealised as premium quality coffee.
- Innovation: Starbucks embraced its first value using innovative products or high-grade beans for its customers handled by trained roasters only.
- Accessibility: Starbuck’s business model has 30,000+ stores that provide 30 blends of coffee. The company focuses on the availability of a wide range of product hierarchy examples along with other categories like smoothies, tea, sandwiches, pastries, fruit cups etc.
Customer segmentation
There is no significant segmentation by the Starbucks business model. It is available for all who desire to grab a high-quality and unique coffee. However, by studying the fashion trends and premium price range, the office and home clients are indirectly a part of the Starbucks customer segment. Furthermore, including high-end customers who generally prefer to have a dark range of coffees.
Key Activities Performed
The Starbuck business model mainly focuses on two activities-
- Design and develop innovative products
- Serving it to customers
- In addition to this, the company is also involved in Production, Research and Development, marketing, and cleaning.
Resources
Human resources become critical for Starbuck business model.
- The first category includes a farmer centre that supplies premium quality coffee. These centres are experts and agronomists for guidance.
- Secondly, the product staff is responsible for developing the range of products.
- Lastly, the store associates of company-owned and franchised stores serve the items to the customers.
Role of Customer relationships
Starbucks offer personal help or aid to their customers. Serving and assisting with what the customers need or helping them to choose the right item adds robust CRM from the side of the company. As known before, services are the prime focus of the Starbuck business model which leads to a loyal customer base.
Cost structure
The Starbuck business model is purely based on its values that aim to sell premium quality coffee with warm personal service. The company’s cost structure majorly includes the fixed expense of store operation and administration. So The other is the occupancy cost, a primary cost driver referred to as a variable expense.
Marketing strategy of Business model
The marketing strategy of Starbucks is creative and unique marketing the products to lead to enormous success. Some key aspects are:
Brand consistency
The atmosphere created in the store, digital content, advertising, stylish crockery and modern tumblers gives customers a lavish and comforting feel. Also, consistent experience creates a permanent psychological impact on customers’ minds.
Starbucks introduced the round table at their stores so that a single person does not feel lonely showing the level of the ideology behind the creators.
Classic logo
The classic siren logo has impacted the minds of the loyal customer base. Although the logo evolved over some time but perfectly appeals to a broad audience base.
Cross-selling and Direct-selling
Starbucks business model not only includes famous beverages but a range of other products like conventional food, and pastries that add up the flavour with coffee, coffee mugs or other merchandise etc. Moreover, the products are directly purchased by customers as well from retail stores resulting in higher margins for the company.
Starbuck Business model
Starbucks counts as a perfect example of hard work, premium stress on products, smart marketing and top-notch customer service. Also, It reflects well-thought-out planning behind the urge for a comfortable atmosphere with a beverage to satisfy it.
Unlike McDonald who focuses on licensed stores, Starbucks business model made a blend of two categories to widen their segments. So, It focussed on customer needs and the convenience of building stores for the product they want.
Revenue Model
The revenue mostly depends on the type of segment and the item sold. Also, It explains that beverages (cold and hot drinks) generate maximum revenue for the company or are consumed by the customers. Since Starbucks unique selling proposition is coffee so people enjoy their origin.
79% of the Starbucks business model revenue is generated from company-owned stores. Other key streams are retail stores with premium teas, seasonal novelty items, whole bean and premium coffees etc. Also, there are a few studies below discussing overall figures.
Conclusion
This further explains that Starbuck business model considers seamless digital experience and superior customer service with creative and well-maintained stores. Also, The stores reflect the personalities of the communities where they operate delivering high-end loyalty to customers.
Frequently Asked Questions
What is the business model of Starbucks?
The structure of Starbucks’s business model has evolved from its incorporation. The areas showing changes are as follows:
- The Starbucks offerings expanded to involve items like caffe lattes, espresso and iced coffee.
- Moreover, employee training was focused on excellence in customer service for which the living room-style spaces were structured to frame a comfortable customer experience.
- Starbucks maintains a peaceful environment where anyone can even work without placing an order showing an overhaul process of the company.
- The company comprises different business segments that pay off by generating good revenues.
What is the business strategy of Starbucks?
The factors/strategies of Starbucks to become a reputed coffee chain and successful around the globe are as follows which are studied briefly.
- Differentiated cultures
- Premium products
- Top-notch supply chain
- Best Suited Customer Service
- The right use of Franchise and Owned stores
What is the main business of Starbucks?
Related keylists. Starbucks Corp (Starbucks) is a beverage retailing company. It is one of the leading coffee chains in the world. The company’s main activities include purchasing and roasting high-quality coffees, which are sold alongside handcrafted coffee, tea, and other beverages.