Starbucks Is “Juicing” Its Earnings per Store through Technological

Innovations

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Ch apte r 1. Mini -Case

Starbucks Is “Juicing” Its Earnings per Store through Technological

Innovations

Th e cho ice of a CEO signa ls po ten tial ac tion s to stakeho lde rs abou t a firm’s po ten tial ac tions .

Howard Schu ltz se rve d as Starbuck s CEO for man y yea rs; the firm ach ieve d multiple

successe s du ring his se rvice . As of Ap ril 2017 , Schu lz beca me execu tive cha irman of

Starbucks ’s boa rd while Kev in Johnson , a former CEO of Jun ipe r Networks an d a 16 yea r

ve teran of Microso ft, assu med the CEO pos ition for the co ffee gian t. Johnson ’s backg roun d

may find him concen trating on the firm’s digital ope rations , information techno log y prac tice s

an d supp ly cha in ope ration s as a mean s of inc reas ing Starbucks ’s effec tivenes s an d efficienc y.

Man y brick an d mortar stores hav e expe rience d dec reas ing sa les in the United States as on line

traffic ha s inc reased . Interes ting ly, 201 4 Starbuck s sa les store ope ration s inc rease d 5 pe rcen t

in the fou rth qua rter; this 5 pe rcen t up tick in revenu e ca me from inc rease d traffic (2 pe rcen t

from growth in sa les an d 3 pe rcen t in inc rease d ticke t size ).

Add itiona l an d more soph istica ted techno log y app lica tion s may be the drive r of this inc reas e in

revenues . To stimulate sa les , Starbuck s is ramping up its digital too ls suc h as mob ile pay men t

platforms. Cus tomers no w ca n plac e on line orde rs an d pick the m up in abou t 15 0 Starbuck s

ou tlets in the Po rtland , OR area . Bes ide s leade rsh ip an d a focu s on techno log y, Starbuck s

rece ive s sugges tions , ideas , an d expe rimen tation from its employees . Starbuck s views its

employees , ca lled ba ristas , as pa rtne rs who blend , stea m, an d brew the brand ’s spec ialty

co ffee in ove r 21 ,00 0 stores worldwide . Schu ltz cred its the employee s as a do minan t force in

he lping it to bu ild its revenu e ga ins .

To incen tivize employee s furthe r, Starbuck s is amon g the first co mpan ies to prov ide

co mprehens ive hea lth bene fits an d stoc k op tion owne rsh ip oppo rtun ities to pa rt-time

employees . Curren tly, employee s hav e rece ive d more tha n $1 billi on worth of financ ial ga in

throug h the stoc k op tion prog ram. An add itiona l bene fit for U.S. employee s is the firm’s

prog ram tha t pay s 10 0 pe rcen t of worke rs’ tuition to finish the ir deg ree s throug h Arizon a State

Unive rsity. To da te, on e thousan d worke rs hav e en rolled in this prog ram. In mid-2018 , W almart

offered subs idize d co lleg e tuition to its employee s as a mean s of attrac ting an d retaining talen t

in a tigh t labo r marke t. W almart’s ac tion s may de mons trate the va lue of Starbucks ’s app roac h

to suppo rting employees ’ efforts to ea rn a co lleg e deg ree . W he n deve lop ing ne w storefron t concep ts, Starbuck s innova tes . Fo r ins tance , it is tes ting

smaller exp res s stores in New York City tha t reduc e clien t wait times . Toda y, Starbuck s

emphas ize s on line pay men ts as a mean s of inc reas ing the spee d of cus tomer transac tions . It

no w give s Starbuck s rewards for mob ile pay men t app lica tion s to its 12 milli on ac tive use rs.

Interes ting ly, this pu ts it ahea d of iTune s an d America n Exp res s Se rve with its Starbuck s mob ile

pay men t ap p in terms of the nu mbe r of use rs.

To pu t its innova tion on disp lay, Starbuck s opene d its first “Rese rve Roas tery an d Tas ting

Roo m.” Th is is a 15 ,00 0 squa re foo t co ffee roas ting fac ilit y an d a consu mer retail ou tlet.

Acco rding to Schu ltz, it is a retail thea ter whe re “yo u ca n watch bean s be ing roas ted , talk to

mas ter grinde rs, hav e you r drink brewed in fron t of yo u in multiple ways , loung e in a co ffee

library, orde r a se lec tion of gou rmet brews an d loca lly prepa red foods .” Schu ltz ca lls this store

in New York the “W illi e W onk a Fac tory of co ffee .” Base d on this concep t, Starbuck s opene d

small “rese rve ” stores insp ired by this flagsh ip roas tery concep t ac ros s New York in 2015 . To

attrac t cus tomers in the afternoon , the firm is “rolling ou t ne w co ld co ffee an d tea drink s an d is

introduc ing happ y hou r promotion s fea turing co ld beve rages .”

Thes e techno log ica l advance s an d differen t store offering s are also tak ing plac e interna tiona lly.

Fo r exa mple, Starbuck s is expand ing a ne w store concep t in Ind ia in smaller towns an d

subu rbs . Thes e ne w ou tlets are abou t ha lf the size of ex isting Starbuck s ca fes in Ind ia. In China ,

Starbuck s is open ing rough ly on e store da ily an d is rolling ou t its Roas tery an d Rese rve brand s

to pene trate the coun try furthe r.

Sou rces : D. B Klein, 2018 , Here’s ho w Starbuck s plan s to conque r China , Th e Motley Foo l,

ww w.foo l.co m, March 25 ; J. Ja rgon , 2018 , Starbuck s trying to woo afternoo n cus tomers, W all

Stree t Jou rna l, ww w.wsj.co m, May 8; S. Nassaue r, 2018 , W almart to pa y ce rtain co lleg e cos ts

for U.S. store worke rs, W all Stree t Jou rna l, ww w.wsj.co m, May 30 ; I. Brat & T. Stynes , 2015 ,

Ea rnings : Starbuck s pick s a pres iden t from techno log y indus try, W all Stree t Jou rna l,

ww w.wsj.co m, Janua ry 23 ; A. Ada mczyk , 2014 , Th e nex t big ca ffeine craze ? Starbuck s tes ting

co ld-brewed co ffee , Fo rbes , ww w.forbes .co m, Augus t 18 ; R. Fo rooh r, 2014 , Go ins ide

Starbucks ’ wild ne w “W illie W onk a Fac tory of co ffee ”, Time, ww w.time.co m, Dece mbe r 8;

FRPT-Retail Snapsho t, 2014 , Starbucks ’ strateg y of expans ion with profitab ilit y: to debu t in

towns an d subu rbs with ha lf the size of the ne w stores , FRPT-Retail Snapsho t, Sep tembe r 28 ,

9–10 ; L. Lo renze tti, 2014 , Fo rtune ’s world mos t ad mired co mpan ies : Starbuck s whe re

innova tion is alway s brewing , Fo rtune , ww w.fortune .co m, Octobe r 30 ; P. W ahba , 2014 ,

Starbuck s to offer de live ry in 201 5 in so me ke y marke ts, Fo rtune , ww w.fortune .co m, Nove mbe r

4; V. W ong , 2014 , You r bos s will lov e the ne w Starbuck s de live ry se rvice , Bloo mbe rg

Bus iness wee k, ww w.bus iness week .co m, Nove mbe r 3. Cas e Discuss ion Ques tion s

1. W ha t co mpe titi ve advan tag e or co mpe titi ve advan tage s do yo u be liev e Starbuck s seek s to

es tab lish ? W ha t are the main cha llenge s the firm face s as it tries to maintain the advan tag e

or advan tage s yo u iden tifi ed ?

2. Iden tify three or fou r capab iliti es yo u be liev e Starbuck s possesses . Of these , are an y a co re

co mpe tence ? If so , exp lain you r reason ing .

3. Starbucks ’s miss ion is “To insp ire an d nu rture the hu man sp irit— on e pe rson , on e cu p an d

on e ne ighbo rhoo d at a time.” W ha t ac tion s do yo u reco mm en d the firm tak e to reac h this

miss ion ?

4. As Starbucks ’s ne w ch ief execu tive office r an d strateg ic leade r, wha t ke y cha llenge s doe s

Kev in Johnso n an d his firm face ?