final project — managing starbucks operations

The Middle East was another region of international development for the firm, but in the late 1990s, it was the United Kingdom that received the company's other significant push, Starbuc

VIETNAM NATIONAL UNIVERSITY, HANOI INTERNATIONAL SCHOOL

— Final Project —

MANAGING STARBUCKS

OPERATIONS Prepare By Group 2

Students:

¢ Cong Chau Anh — 21070081

e Pham Huong Giang — 19071343

¢ Neuyen Da Thao Nhi — 21070900

Question Code: 03

Course ID: INS202301

Lecturer: Prof Nguyen Phu Hung

Hanoi, December 2022

Table of Contents

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3 _ Product Design and Process

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1 Introduction

1.1 Background of Starbucks

1.1.1 Background

Starbucks Corporation is an American coffeehouse and roasteries chain headquartered in Seattle, Washington It began as a single modest business in

1971 and grew to become a coffee behemoth by the millennium's conclusion Starbucks has sparked a coffee revolution in the US and throughout the world Jerry Baldwin, Zev Siegl, and Gordon Bowker were the three individuals that opened the shop Starbucks opened five locations in the first decade

In 1986, they opened his first coffee shop in the Columbia Seafirst Center, followed by two others in Seattle and one in Vancouver As coffee consultants and staff trainer, they employed Dave Olsen, the proprietor of one of Seattle's earliest bohemian coffee shops

Schultz was prospering a year ago, while Starbucks was experiencing difficulties Schultz then made an enticing offer to his old colleagues: "How about

$4 million for the six-unit Starbucks chain?" Olsen remained as a Starbucks coffee buyer and roaster after they sold He united the companies and changed the name to Starbucks; the firm was then renamed Starbucks Corporation and planned to expand across the country Starbucks Corporation had 11 locations and less than

100 workers in August 1987 It established its first location in Chicago in October

of that year, and by 1989, the city had nine Starbucks Starbucks' market was rapidly increasing, with revenues in the United States jumping from $50 million in 198ffi to $500 million five years later In 1988, Starbucks launched a mail-order catalog, and by 1989, the company had ffiffi locations and serviced customers in every state By that time, the country's business had slowly risen through word

of mouth

Starbucks continued to expand to the The Pacific Rim's in 1998, with facilities opening in Taiwan, Thailand, New Zealand, and Malaysia, as well as China and South Korea in 1999 In Japan, there were 100 Starbucks by the early 2000s By 200ffi, the firm hoped to have 500 outlets across the Pacific Rim The Middle East was another region of international development for the firm, but in the late 1990s, it was the United Kingdom that received the company's other significant push, Starbucks bought Seattle Coffee Company, the top specialty coffee company in the United Kingdom, for $86 million in shares in 1998 By late 1999, there were over 100 branches in the United Kingdom Starbucks aimed to utilize its U.K base to launch an assault on Europe, with 500 outlets planned by 200ffi Starbucks has established itself as the world's leading producer and specialty coffee merchant There are 18,000 shops in 62 countries right now

1.1.2 Mission

"To inspire and nurture the human spirit — one person, one cup, and one neighborhood at a time," says their major goal statement

Starbucks' goal, according to its 2011 annual report, is to "keep Starbucks' position as one of the world's most known and appreciated brands." They intend

to gain respect and recognition by utilizing ethnic sourcing and environmental care Customers will be more enticed to buy from Starbucks if the firm employs ethnical sourcing since they know it is dependable and that the people who grow the coffee beans are adequately compensated This also applies to the company's environmental awareness, since it is a very significant problem that has an influence on the globe, and it is another aspect that helps consumers to

be more attracted to Starbucks' goods Their strategy is to promote and publicize their usage of ethically sourced items to their clients, as well as to put the word

"ecologically friendly" on their products (cups, tissues, cup sleeves, and bags) as

a continual reminder that they are environmentally conscious

Instead of each department having its own aim, setting these objectives for their organization offers a shared long-term purpose to strive toward This also encourages fresh ideas for how to enhance the firm in order to keep Starbucks' position as one of the world's most known and respected brands

Growth is the company's principal goal: worldwide expansion, acquisition of smaller firms to grow larger, and creation of a globally renowned brand Starbucks also focuses on delivering a unique experience for its consumers and making them feel good about the purchases they make at Starbucks in order to achieve this aim

1.1.ffi Vision

Starbucks anticipates comparable store sales growth in the range of 7% to 9% annually from fiscal 202ffi to fiscal 2025, up from the prior range of 4% to 5%, both worldwide and in the U.S As the market recovers from the severe effects of COVID-related lockdowns, Starbucks expects outsized comparable store sales performance in China for the fiscal years 202ffi and 2024

From fiscal year 202ffi through 2025, the company's worldwide store portfolio is anticipated to increase by around 7% annually on a net basis, up from the prior projection of about 6% According to projections made during its 2020 Investor Day, Starbucks intends to have close to 45,000 locations worldwide by the end of

2025 and is on track to have around 55,000 locations by 20ffi0

Starbucks now anticipates worldwide revenue growth in the range of 10% to 12% annually With priority investments that boost partner engagement and store efficiency, industry-leading digital programs, an engaged and expanding Starbucks Rewards membership base, ground-breaking product innovation, and a rapidly growing global footprint, this represents an improvement from the company's prior range of 8% to 10%

1.2 Business lines of Starbucks

1.2.1 Product lines

Initially, Starbucks was just a store that provided coffee beans, but now, Starbucks has taken on offering a wide range of food and beverage options

Starbucks offers a range of exceptional products that customers enjoy in our stores, at home, and on the go

- Coffee: More than ffi0 blends and single-origin premium coffees

- Handcrafted Beverages: Fresh-brewed coffee, hot and iced espresso beverages, Frappuccino coffee and non-coffee blended beverages, Starbucks Refreshers, smoothies and Tazo teas

- Merchandise: Coffee- and tea-brewing equipment, Verismo System by Starbucks, mugs and accessories, packaged goods, music, books, and gifts

- Fresh Food: Baked pastries, sandwiches, salads, salad and grain bowls, oatmeal, yogurt parfaits and fruit cups

- Consumer Products:

fi Coffee and Tea: Whole bean and ground coffee, Starbucks VIA Ready Brew, Starbucks K-Cup portion packs, Verismo pods, Tazo tea filterbags, and tea latte concentrates

fi Ready-to-Drink (RTD): Starbucks bottled Frappuccino coffee drinks; Starbucks Discoveries chilled cup coffees, Starbucks Discoveries Iced Café Favorites™, Starbucks Iced Coffee, Starbucks Doubleshot espresso drinks, Starbucks Doubleshot EnergyfiCoffee drinks; Starbucks Refreshers beverages, Evolution Fresh bottled juices, Tazo bottled iced and juiced teas

1.2.2 Target customers and markets

Starbucks controls roughly ffiffi% of the coffee market in the United States Even though the majority of its customers live in cities or expensive suburbs, it sells nearly as much coffee as fast food and convenience stores combined Starbucks has been able to obtain such a significant market share by catering to a certain target population

Men and women between the ages of 25 and 40 are the core target demographic for Starbucks They account for nearly half (49%) of the company's total revenue Starbucks appeals to this demographic by using hip, contemporary style in its advertising and interior, as well as attempting to keep its goods current as status symbols Customers are often urbanites with a reasonably high income, professional occupations, and a social welfare concern This target market is growing at a pace of ffi% each year Starbucks' objective is to provide consumers from low-income groups with a sharing customer experience so that they may form long-term relationships with them

2 Risk Identification Management

Starbucks face several risks that can affect the company operation These are listed in the table below

Table 1.2.2-1 Risk identification management

Issa Sources of risk | Impact na Measures to address

Due of Significant - Promote the transition COVID-19 | decreased ly drive High of the service delivery

consumer traffic | sales process to online and

and shop hours,

the pandemic

will continue to e-commerce platforms - Introduce new service

impact on stores customer experience to

financial the pandemic

performance

- Create a vertically Starbucks integrated global

h vulnerable star bucks fas direct Disruption in the | to control of the

supply chain, commodit High movement of its natural factors y prices as ¡9 products, using no affecting the (due to middlemen to move its

Commodi | agricultural company demi coffee from the farm to

ty price | products, spends an Pandem! | the stores The vertical fluctuatio | geopolitical extraordin recession chain brings consistent,

See ee fuctuations for rroney On | Situation) ane increased profits war ẽ - 2 a coffee beans, ese - Also, in case prices sugar, milk ingredient increase significantly,

ensure its derivative contracts as

Issa Sources of risk Impact a Measures to address Market | Other companies | Directly High - Invest in product competiti | in the restaurant | and development and

on and beverage negatively marketing to be ahead industry (low- affect the in creating quality, cost brands, revenue of market trending

store brands, big

corporations’

M&A of emerging

brands)

image

- Promote and keep partnerships with suppliers like Walmart, Target and online retailers to increase customers’ exposure to Starbucks through new stores, foodservice, and branded products

- Adopt technology to automate the service process and connect with customers

- Can consider introducing price differentiation to its products to cater to different classes

Many products

(physical and - Strengthen protection of intellectual property

Starbucks are les as trademarks, copyrights Products | generic and not there is High and trade secrets imitation | hard to replicate, more 9 - Bring technology

thus they are competitio improvements and

This leads

struggle at work employee employees happy by Employe because they are unhappine raising salaries, and

compensated ith issues for and awards every six

“heir sored vad the months or once a year clr WOrKload business

Affect the Starbucks has company's - Strengthen products recalled alot of | brand quality assessment and Recall of | in-demand image, Low standardization to offer products | products due to | leading to highly produced

a wide range of | a shrink in products ina

issues customer consistent manner

base

ffi Product Design and Process

ffi.l Product Selection

DR RPE = ro poo ee ee

Starbucks’ Pumpkin Spice Latte

In this case, we choose Pumpkin Spice Latte as the main product for analysis Pumpkin Spice Latte is a coffee drink made with a mix of traditional autumn

spice flavors (cinnamon, nutmeg, and clove), steamed milk, espresso, and often sugar, topped with whipped cream and pumpkin pie spice Pumpkin spice latte was opened for sale in the US since 200ffi According to CNBC, the Pumpkin Spice Latte is Starbucks' most popular seasonal drink, with worldwide sales of around

600 million Forbes estimated the beverage accounted for $100 million in revenue for Starbucks in 2015

ffi.2 Product Design

ffi.2.1 Design

Pumpkin spice latte has ffi flavors which are hot cold and blended The flavors are different depending on the preferences of each person and bring their own flavor Different designs create inspiration in each person is also different Starbucks succeeds in designing Pumpkin spice latte products in three main styles

ffi.2.2 Sizing and prices

The PSL in Starbucks, like many drinks, comes with ffi size options Depending on the size and the location, the price for a cup of PSL will range from $4.45 to

$5.95

Short Tall Grande Venti

8 fl oz 12 fl oz 16floz 20floz

Figure 3.2-1 Size options for Pumpkin Spice Latte

Table 3.2.2-2 Comparison of different sizes for the PSL

- 2 pumps - ffi pumps - 4 pumps - 5 pumps

Pumpkin Sauce Pumpkin Sauce Pumpkin Sauce Pumpkin Sauce

- Pumpkin Spice - Pumpkin Spice - Pumpkin Spice - Pumpkin Spice Topping with Topping with Topping with Topping with Whipped Cream Whipped Cream Whipped Cream Whipped Cream

- 2% Milk, - 2% Milk, - 2% Milk, - 2% Milk,

Steamed Hot Steamed Hot Steamed Hot Steamed Hot

- 1 Shot Espresso | -1 Shot Espresso | - 2 Shot Espresso | - 2 Shot Espresso

ffi.2.ffi Ingredients

- Pumpkin Spice Sauce: sugar, - Milk

condensed skim milk, pumpkin

puree, contains 2 or less of fruit and - Brewed Espresso

vegetable juice for color, natural - Pumpkin Spice Topping: cinnamon,

- Whipped Cream: cream (cream,

carrageenan), vanilla syrup (sugar,

water, natural flavors, potassium

sorbate, citric acid)

ffi.ffi Production process

The complete process to deliver a cup of Pumpkin Spice Latte to customer will comprise of ffi main steps: production, marketing and logistics, and customer service This report will particularly detail the first and last step, with an addition

of the online customer service process, in light of the online trasition at Starbucks Fist, the manufacturing process is shown as follow:

Ệ â a 8

Harvest / / Drying — /

ị

/ / / / Ÿ_ Ếinnamon siets

Milk Factory / — Sugar Water / j cloves, ginger,

L

Roasting

/ Whole milk / /Whiapng cream Grinding

to make Pumpkin umpkin pie spice; Brewing /

Measurement of hot!

espresso Measurement of

syrup Measurement of

heated froth milk

Final production of

PSL

Starbucks

Figure 3.3-2 The manufacturing process of the PSL

Top tthe cup with whipped cream Sprinkle for garnish

Next, customer service is the most crucial part of a F&B corporation like Starbucks There can be three ways that Starbucks can deliver this service to customers: walk-in, drive-through, or online pickup For the walk-in process, the steps include:

(1) Conduct market research to make demand, BOM, resources’ and forecast plans for customer's capacity planning

(2) Making quantification and (4) When there are customers, procurement strategy receiving orders from customers

(each customer will have different requirements for beverage type, size, and other ingredients like ice, and sugar)

(5) Check if the order can be fulfilled

If yes, staff will transfer the order to the barista to make drinks for customers, after having the mixture mixed, pour it into cups, pack and serve drinks to customers in stores

(ffi) Proceed to make _ inventory

planning

Figure 3.3-3 The walk-in service delivery process of a PSL order at Starbucks

The drive-thru process is common in the U.S, but recently the online pickup process is becoming more popular during the pandemic due to safety reasons

TOUCHPOINTS phone Store's architectxe Printed materiais Pick up wndow, Empbyee pick-up box,

JOURNEY

4 instrucion

on the door Offer information Al kind of payment s accepted bit card

ayment ed

= pent will

FRONT Hand over

cia OFFICE Wash ti Thang Vash hands Clean the station lean

STAFF

Prnting Application

CÔ system systen

PROCESS

Figure 3.3-4 The online pickup process of a PSL order at Starbucks

10