Starbucks opened its first outlet in 1971 with the aim to share coffee and make the world a better place. Operating only one shop in Seattle, the shop specialized in providing its clients with fine roasted and fresh coffee beans. The store drew its name from the novel Moby Dick, which was also the source of inspiration for the development of the first shop. Now it is a multi-million company with over 1700 stores worldwide. Like every other business, environmental factors played an enormous role in the emergence and development of the store and still influence its operations today. The store owes its existence to these environmental factors and must thus continue scanning the current environment to identify opportunities for stability and continued growth.
The environment factors at the inception of Starbucks played a significant role in creating opportunities for the business. The first factor was the existence of a coffee culture that supported the establishment of the first shop. According to the company’s information, there was a coffee culture during this time and the adoption of the name Starbuck was meant to benefit from this culture (Company Information, n.d.). This is because the name was inspired by Moby Dick, a famous tale during this time. The name evoked the romance of the seafaring tradition of the pioneer coffee traders. The nostalgia of high seas or the high seafaring coffee trader’s tradition was an attraction to many consumers. The second factor that supported the establishment of the first store was the existence of the high demand for freshly brewed coffee in Seattle in the 1970s (Marshall, 2015). According to Marshall (2015) the demand continued to grow exponentially throughout the decade and even in the subsequent decade, providing increasing opportunities for expansion. Third, the first stores faced no competition in Seattle and other America cities. Evidently, Schultz, who joined Starbucks in 1982 as the marketing director had been to Milan and experienced how the city had many coffee bars serving various brands and flavors of coffee, he thought Starbuck could do the same in the US, but the shops founder was reluctant. However, later after acquiring a percentage of the business and becoming the CEO, Schultz put his idea into practice (Marshall, 2015). Although it stumbled at first, it realized success in the 1990s after the stores expanded to California. He successfully made the stores social centers in places where they were established. Starbucks went on to pioneer an urban coffee culture in the US cities.
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Having been in operation for over 40 years, the stores have experienced some changes in buying purchase patterns of the target customers. The store experience increased sales despite some complaints in different quarters about the price of the beverage prices. However, at $2 for a decent cup of coffee, space to socialize and free Wi-Fi among others, the price is outrageously low (Hennessey, 2012). Also initially intended to attract coffee lovers, the store has added an assortment of coffee beverage, tea and other non-coffee beverages for clients. The stores now attract clients of all ages and walks of life and its continued expansion to new locations across the world will increase the diversity of the customers it serves. Provision of wi-fi and allowing customers to come with laptops and work from the shops has also increased traffic to the stores, making them workplaces in addition to social spaces. The visitors end up grabbing a bite or a cup of coffee.
Starbucks business environment currently experiences various trends affecting the five environmental forces (social, economic, technological, competitive, and regulatory). The most critical social factor that is likely to influence Starbucks is the expanding coffee culture which is likely to increase opportunities for the store. The demand for specialty coffee worldwide is growing due to the globally expanding middle-class and its growing preference for coffee that is fueling the global coffee culture (Smithson, 2015). Technologically, the rise of smartphone apps and mobile payments is likely to improve sales. The store has an opportunity to develop and improve its smartphone or mobile phone apps to include payment options among other service and benefit by riding on the current mobile phone wave (Smithson, 2015). Economically, there is an enormous opportunity for the store to expand due to the growing developing world economies. Given that there are still low employment rates in these economies, Starbucks can benefit by expanding to these countries to increase its revenues. Concerning competition, Starbucks increasingly faces competition from cheaper alternatives which tend to attract more customers (Specht, 2013). Frequent economic recessions make this threat worse since they reduce the consumers’ purchasing power and further encourage them to use cheaper alternatives from competitors. Finally, when it comes to regulatory factors, the greatest trend that is likely to influence Starbucks it the changing regulatory frameworks both in the countries where the store sources its coffee, and in places where it sells its coffee. In the source countries, new regulatory frameworks fueled by increased political awareness may make the raw materials expensive. Similarly, new regulatory frameworks in the countries where the company has its stores are likely in influence employment laws and make labor expensive (Smithson, 2015). The regulatory changes may increase the cost of operation.
The company should focus on customer experience as its main differentiation avenue. Already the company performs well on pricing and product differentiation; however the competitors are catching up on these frontiers. Thus, creating a unique customer experience to match the prices and products would totally differentiate the company’s shops from those of the competitors. Such exceptional customer service can be achieved by being responsive to consumers’ needs and taking into account their cultural values especially in stores located overseas or in multicultural centers. This way, the customer service will have a “wow” factor that will keep the customers talking about the stores, and coming back.
Finally, the main lesson arising from the Geek Squad case study is that customer service is a critical factor in business. The quality of customer service determines whether a customer can return to a store or not. The second lesson which is also related to customer service is that customer service does not end the moment the customer buys a product and exits the premises. After-sales service is necessary to ensure that the customer realizes the maximum utility from the products.
Starbucks has had an adventurous journey and still faces challenges in its environment. There are also opportunities that it can strategically exploit. Similarly, it can borrow a leaf and improve it customer service either directly or find a subsidiary they way Best Buy does with Geek Squad.
References
Company Information. (n.d.). Retrieved from http://www.starbucks.com/about-us/company-information
Hennessey , S. (2012, August 6). 3 Reasons Why Starbucks Still Shines, Despite Market Shortcomings. Forbes. Retrieved from http://www.forbes.com/sites/rachelhennessey/2012/08/06/3-reasons-why-starbucks-still-shines-despite-market-shortcomings/#7b22f823d4fb
Marshall, C. (2015, May 14). The first Starbucks coffee shop, Seattle - a history of cities in 50 buildings, day 36. The Guardian. Retrieved from https://www.theguardian.com/cities/2015/may/14/the-first-starbucks-coffee-shop-seattle-a-history-of-cities-in-50-buildings-day-36
Smithson, N. (2015, September 12). Starbucks Coffee PESTEL/PESTLE Analysis & Recommendations . Retrieved from http://panmore.com/starbucks-coffee-pestel-pestle-analysis-recommendations
Specht, S. (2013). The Starbucks Brand: Branding . GRIN Verlag.
