1. The survey concluded that respondents who are price sensitive get attracted to choices such as 7-eleven and Dunkin Donuts, who offer a low price but with a low environment. The majority of people ranked Starbucks as the coffee shop that offers better environment but the price per cup is higher than the competition. 2. This survey is based on the positioning chosen by the coffee shops. By comparing price per cup and the environment or the service given to the customer, we see the different strategies taken by Starbucks’ competitors.
1. STRATEGIES:
1. Based on the SGM and the survey, Starbucks is a high price/better environment company that positions its stores as comfortable and relaxing as possible. A hang out place that offers hotspots, soothing music, and handicapped access among other features that make it different. 2. McDonald’s not only has an extensive product line but also it has a position and financial resources to leverage their strengths that can threatens Starbucks profitability.
3. Caribou coffee is also positioned as a high environment/ambiance coffee shop because of the type of furniture used, free Wi-Fi, and study/hangout areas that creates a relaxing and comfortable environment for customers. However, the lack of market expansion is keeping it from reach the same amount of success Starbucks has. 4. The graph shows that shops that sell coffee vary from cost-leadership and differentiation strategy. This is because the main focus of the majority of these shops is not coffee, but they have divided attention depending on how extensive their product line is.
1. DIMENSIONS:
1. Technological Leadership: 1. Many of the technology available to make coffee is used by the majority of the competitors in the industry. 2. By acquiring the Coffee Equipment and the Clover Brewing System in 2008, which is the one of the most significant innovations in the coffee industry for the brewing process, Starbucks has gained an advantage because it allows the process of serving a cup of coffee more efficiently while giving the customer fresh coffee
3. Starbucks offers the opportunity to use cell phones to pay for orders creating better customer service and increasing environment/ambiance for the customer. By this technological innovation, Starbucks is creating a cultural shift of how people pay for their coffee. 1. Degrees of product quality: 1. Coffee beans come from different parts of the world specially Africa and Latin America. For decades, the roasting process of these beans has changed by going from a lighter supermarket taste to a darker roast specialty taste. By adding different flavors to the coffee beans such as cocoa, vanilla and hazelnut, coffee shops have attracted a younger customer base.
2. In the brewing process, the precise time and temperature helps highlight the unique flavors of the bean instead of simply roasting the beans dark like it was done before; many of the coffee shops in the survey, especially Caribou Coffee, use this process. 1. Pricing policies: 1. Price adjustments in the coffee industry have a strong relationship with the volatility of coffee bean prices. Starbucks having a premium product with a higher price range and perceived quality has had only a few price adjustments.
2. In recent years, the price of coffee has increased considerably because of the increase of demand but reduce coffee supply. There is short supply of Arabica beans, which are the specialty beans used by most of the coffee retailers, because of the decrease in coffee crops. 3. In 2011, announced its price increases due to the increased cost of not just coffee but other commodities such as beef, bread, and milk (used in most of its coffee products).
1. Distribution channels: 1. Many of the companies mentioned in this survey uses similar distribution channel for its coffee beans. 2. After growing in around 20 countries, coffee beans go through various intermediaries before coming to industry firms in the United States. Normally, they arrive green or un-roasted in order for the firms to buy and roast. Then beans reach the consumer through channels such as supermarkets, gourmet delis, mass merchandisers, Internet and most importantly coffee shops.
3. Many of the firms like Caribou and Starbucks sell whole beans as well as individual drinks at their stores. 1. Customer service: 1. Most of this coffee shops use “baristas” to serve the coffee in exception of 7-eleven (self-serve). 2. Customer service depends on the target market the coffee retailer focuses on. Some people believe a good customer service is to obtain the coffee ready as quick as possible and not plan to stay in the shop.
Others however, determine customer service by the environment or ambiance the shop offers. Not only are they looking for a tasty cup of coffee they are looking for a relaxing and comfortable place with a barista to prepare their favorite combination of coffee. 3. The majority of these shops offer free Wi-Fi to retain their customers a longer time to increase sales.
