Overview for Starbuck Business Model
Starbuck 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 with the discussion below.
Starbucks is an American originated coffee company and coffeehouse chain. The Starbuck business model is founded by Zev Siegl, Jerry Baldwin and Gordon Bowker, 1985. It initially started to nurture the spirit of one cup, one person and one neighbourhood at a time, based in Seattle, Washington.
The Starbuck business model revolves around channelizing 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, talking the key partners of Starbuck business model includes 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. Starbuck 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 Starbuck business model has evolved from its incorporation. The areas showing changes are as follows:
- The Starbucks offerings expanded to involve items like caffe latte, espresso and iced coffee.
- Moreover, employee training was focussed 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 where 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: Starbuck 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 Starbuck 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.
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.
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 business model and strategy from other coffee chains.
Since the Starbuck 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 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 was projected to achieve by the end of 2020.
Best Suited Customer Service
Since the company wish for a loyal customer base, it becomes necessary to serve 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.
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% stores company-owned while 49% 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:
The Starbuck 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 on.
- Status: Starbucks is successful a brand that won many awards and 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 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 example along with other categories like smoothies, tea, sandwiches, pastries, fruit cups etc.
There is no significant segmentation by the Starbuck business model. It is available for all who desire to grab a high quality and unique coffee. But studying the fashion trends and premium price range, the office and home clients are indirectly a part of Starbuck customers segment. Furthermore, including the 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 develops innovative products
- Serving it to customers
- In addition to it, the company also involves in Production, Research and Development, marketing, and cleaning.
Human resources become the critical ones 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 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 help 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.
The Starbuck business model is purely based on its values that aims to sell premium quality coffee with warm personal service. The cost structure of the company majorly includes the fixed expense of store operation and administration. So, 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:
The atmosphere created in the store, digital content, advertising, stylish crockery and modern tumblers gives a lavish and comforting feel to customers. Also, The consistent experience creates a permanent psychological impact on customers mind.
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.
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
Starbuck business model not only includes famous beverages but a range of other products like conventional food, pastries that adds up the flavour with coffee, coffee mugs or other merchandise etc. Moreover, the products directly purchase by customers as well from retail stores resulting in higher margins to 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 planning behind the urge of a comfortable atmosphere with a beverage to satisfy it.
Unlike McDonald who focuses on licensed stores, Starbuck business model made a blend of two categories to widen their segments. So, It focussed on customer needs and the convenience to build stores for the product they want.
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 consumed by the customers. Since Starbucks unique selling proposition is coffee so people enjoy their origin.
79% of the Starbuck business model revenue generates from company-owned stores. While other key streams are retail stores with premium teas, seasonal novelty items, whole bean and premium coffees etc. Also, there are few studies below discussing overall figures.
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 communities where they operate delivering high-end loyalty to customers.