Analysis of Starbucks Coffee's Business Strategies and Profit Pools

This report provides an in-depth analysis of Starbucks Coffee's business strategy, value chain, and market positioning. It begins with a brief introduction to the company, its history, geographic presence, and environmental responsibilities. The report then delves into Starbucks' marketing and sales operations, highlighting the role of social media, advertising campaigns, and loyalty programs. The coffee production channel, including procurement, product development, and manufacturing, is examined, along with technological advancements like Wi-Fi and apps. Human resources, loan programs, and owned channels such as Teavana and Seattle's Best Coffee are also discussed. The report explores customer service and waste management practices, followed by an analysis of Starbucks' profit pools, including café sales, merchandise, and consumer products. The value chain activities and revenue generation are compared, and a positioning map is presented. Strategies for maximizing positioning, such as product differentiation and premium pricing, are analyzed. The report concludes by summarizing the key findings, emphasizing Starbucks' strong market position, unique pricing strategy, and the importance of its profit-generating pools.

Starbucks Coffee

Introduction
• Starbucks corporation is being considered as one of the popular American
coffee house chain, with the operating value of US$4.135 billion in 2017
(Starbucks.com.au 2019). In order to describe the effectiveness of business
strategy and value drivers of Starbucks, in the coffee industry, the research
has been conducted.
• Starbucks history: In the year 1971, Starbucks was founded by three
partners Gordon Bowker , Zev Siegl and Jerry Baldwin.
• Geographic presence: Starbucks operates 62 countries across the world
with the total numbers of 20000 stores (Starbucks.com.au 2019).
• Environmental responsibility: A greener plan for 10000 environmentally
friendly stores has been introduced by Starbucks. Starbucks has contribution
on World Wildlife Fund and SCS Global Services (Starbucks.com.au 2019).

Marketi
ng
Advertis
ing
Loyalty
Program
s
Coffee
Produce
rs
Product
develop
ment
Focus
groups
Recipe
Procurement
Agencie
s
Owned
Chann
els
Legal
HR Training
Wifi
Apps
Manufac
turing
coffee
cups
Store
Fitters
Real
Estate
Finance
Loan
Program
s
Product
packagi
ng
Techn
ologic
al
innova
tion
Teavana
Seattle’s
Best
Coffee
Evolutio
n Fresh
Starbuc
ks
owned
data
centre
CUSTO
MERS
SERVIC
E
Recyclin
g
Waste
Land Fill
&
Compost
Transpo
rt
Compani
es
Latin
America
Africa
Asia
Third
party
DC
Manufac
turing

Continue…Marketing
• Social media plays an important role in the marketing and sales operations in Starbucks
• Different advertising as well as social media campaigns have been introduced.
• Loyalty program has also been introduced by Starbucks
Coffee production channel
• After completion of the legal licensing processes, procurement process being conducted.
Product development
• In case of developing new product in the market, product recipe is being introduced in the
market.
• Single wall coffee cups has been introduced by the company for make the recycling process
easier
• Based on the needs of target customers, product packaging is being done so that large
numbers of customer attention can be grabbed.
Manufacturing
• Asia, Africa and Latin America are the main source of raw materials
• Maintaining uninterrupted coffee beans supply chain can
• After collecting the manufacturing products, these are being send to the third parties
through transporting channels

Continue..
Technological development
• Wifi and Apps facilities are being provided for making the standard service process
Human resource
• Ensuring standard customer service, training and development program have been introduced.
Loan program
• Financial backup has been taken for store fitters, from the real estate.
Owned channels
• Starbucks has different owned channels such as own data centre, Teavana, holiday cups, Seattle’s Best Coffee.
Customer service regarding waste management
• In order to mange the waste, strong product recycling process has been introduced by the company.
• In case of not breaking the organic waste landfills and giant composing system have been introduced by
Starbucks.

Continue..
The profit pool map of Starbucks is being generated based on
Café
• 20000 stores
• Earned near about $6.3 billion
Merchandise
• Holiday cups
Consumer products
• Starbucks-branded apparel
• coffee machine
• gear and gifts

Profit pools of Starbucks
• Café: Coffee selling stores plays an important role for driving the
profitability rate for Starbucks. Analyzing the business from last few
years, it has been identified that Starbucks has earned near about
$6.3 billion from its stores in the year 2018.
• Merchandise: The benefits of Starbucks has been derived from the
holiday cups due to its terrific marketing and public relation.
• Consumer products: Starbucks coffee gear is the popular coffee
source for affordable, Starbucks-branded apparel, uniform wear, gear
and gifts (Starbucks.com.au 2019). By introducing the packed coffee
beans with its logo high profit has been gained by the company. By
continuing this, it can be said that coffee machine of Starbucks has
also brought huge changes in its profit pools.

Continue..
Based on the value chain activities’ revenue, the profit pool
map is being compared. The profit pool of Starbucks is
being generated based on the funding, servicing and
acquisition activities (Gupta, Nagpal and Malik 2018).
Based on the comparison of previous year financial report,
the profit distribution can be properly examined.

Positioning map of Starbucks
Low Price
High price
Low Quality High quality

Strategies for maximizing
positioning
Based on the analysis of competitors position, Starbucks has adopted
different strategies. Such as
• By distinguishing its products from the competitors has helped
Starbucks to give its products a great strategic advantage
(Ramaswamy and Ozcan 2016)
• Targeting premium customers by providing standard quality of
products (Starbucks.com.au 2019)
• Premium pricing strategy is being followed by Starbucks for
boosting its profits so that the customers feel free to pay more

Continue..
In order to gain strong position in the market, it is very
important for understanding both the strength and
weaknesses of the competitors. In case of Starbucks,
understanding the needs of the customers effective
promotional strategies have been adopted by Starbucks.

Conclusion
In this study, it can be concluded that based on the analysis,
with standard quality of products and strong infrastructure
Starbucks has become one of the popular coffee selling
organizations in the Australian market. Its unique pricing
strategy and efficiency has played an influential for driving
its high profitability rate. By understanding different profit
generating pools, it can be said that café, merchandise and
consumer products are playing essential role for driving its
profitability rate.