Businessmodel of Starbucks

Customer Segments

Starbucks has a mass market business model, with no significant differentiation between customer segments. The company targets its offerings at anyone who wants to drink specialty coffee.

Value Proposition

Starbucks offers four primary value propositions: innovation, accessibility, convenience, and brand/status.

The company embraced innovation from the very beginning, using only high-grade beans roasted to a dark extreme by a trained roaster. This helped to popularize darkly roasted coffee.

The company creates accessibility by making its offerings easily available. It has a large number of stores in numerous locations – 24,395. This is because it expanded significantly in the 1990s and 2000s, opening an average of two new locations per day. Between September 2014 and September 2015 alone, it grew from 10,713 to 12,235 stores. The company also increases access by providing a wide variety of options. Its selection includes over 30 blends of coffee, as well as tea, smoothies, and fresh foods such as sandwiches, pastries, salads, yogurt parfaits, and fruit cups.

The company offers convenience by making life easier for customers. Customers can order products on their phones using the Starbucks app, then avoid lines at a store by going to a “pickup” area.

The company has established a powerful brand as a result of its success. It maintains over 24,395 locations in 74 countries. Its name has become synonymous with premium coffee. Lastly, it has won many honors, including recognition as one of the “World’s Most Ethical Companies“ by the Ethisphere Institute for 10 years in a row (2007 – 2016), as of the “Most Admired Companies in America” by Fortune for 13 years in a row (2003–2015), as “Retailer of the Year” by Visual Merchandising and Store Design (2013), and as one of the “World’s 50 Most Innovative Companies”
by Fast Company (2012).

Channels

Starbucks’ main channel is its network of company-operated stores. It also sells its products through licensed stores, grocery stores, warehouse clubs, specialty retailers, convenience stores, U.S. foodservice accounts, and its website.

The company promotes its offering through its social media pages, advertising, its “Starbucks Rewards” loyalty program, and participation in conferences.

Customer Relationships

Starbucks’ customer relationship is primarily of a personal assistance nature. Company employees make and serve coffee and other products for customers, and answer any questions they may have.

Key Activities

Starbucks’ business model entails designing and developing its products and serving them to customers.

Key Partners

Starbucks’s main partners are the suppliers it relies on worldwide to provide its coffee – namely coffee producers, outside trading companies, and exporters.

It depends on specialty suppliers to provide non-coffee products, typically under long-term contracts. It utilizes national, regional and local sources for food products.

Key Resources

Starbucks’ main resources are its human resources, particularly the product innovation staff that design and develop its offerings and the store associates (called “Partners”) who serve the items.

An important physical resource is its network of seven farmer support centers it maintains to ensure a supply of high-quality green coffee; they are staffed with agronomists and sustainability experts.

Cost Structure

Starbucks has a value-driven structure, aiming to provide a premium proposition through significant personal service and frequent product enhancements.

Its biggest cost driver is cost of sales, a variable expense that includes occupancy costs. Other major drivers are in the areas of store operation and administration, both fixed expenses.

Revenue Streams

Starbucks has one revenue stream: the revenues it generates through sales of its products, which include fresh beverages and foods and packaged coffee and teas.