Internal Analysis

Question 1

4 criteria for sustainable competitive advantage

Answer 1

1. inimitable
2. durability
3. appropriability
4. sustainability

Question 2

4 criteria for sustainable competitive advantage: inimitable

Answer 2

• physical uniqueness
• brand loyalty/trust
• causal ambiguity

Question 3

contect and resources matter

Answer 3

• dont overestimate transferability of capabilities
• constantly update resources
• acquire new capabilities

Question 4

primary value chain activities

Answer 4

1. Supply chain activities
2. operations
3. outbound logistics (distribution)
4. marketing & sales
5. service (follow up)

Question 5

value chain: 3 support functions

Answer 5

1. infrastructure
2. HR management
3. Tech. development

Question 6

value chain: 3 support functions: infrastructure

Answer 6

1. organizational structure
2. finance (makes things possible)
3. company culture

Question 7

value chain: margin or profit

Answer 7

depends on firms effectiveness in performing these activities efficiently so that WTP>cost of the activities in the value chain

Question 8

cost advantage and the value chain

Answer 8

1. reducing the cost of individual value chain activities
2. reconfiguring the value chain

Question 9

differentiation and the value chain

Answer 9

1. changing individual value chain activities to increase uniqueness in final product
2. reconfiguring value chain

Question 10

differentiation strategy

Answer 10

• firms produce nonstandardized/unique G/S for customers
• customers value the unique features more than they value low cost
• willing to pay a premium price for perceived uniqueness
• constant innovation to product lines

Question 11

starbucks: 6 principles

Answer 11

1. great work environment
2. embrace diversity
3. apply highest standards of excellence
4. develop enthusiastically satisfied customer
5. contribute positively to our communities & environment
6. recognize profitability is essential to future success

Question 12

starbucks: business strategy differentiation

Answer 12

• starbucks value proposition
• improves value chain through source of raw materials and marketing (different)
• vertically integrated -> controls all SCMT

Question 13

starbucks resources: tangible

Answer 13

tangible:

• stores located in high traffic, high visibility settings
• lg. variety of product mix
• 2014 $16.45B revenue

Question 14

starbucks resources: intangible

Answer 14

Intangible:

• america’s “third place” atmosphere (“hangout”)
• starbucks partners (stakeholders)
• reputation of high quality

Question 15

Starbucks: primary value chain activities

Answer 15

1. inbound logistics operations
2. outbound logistics procurement
3. channels of distribution
4. marketing & sales
5. service

Question 16

starbucks: primary VC activities: inbound logisitcs operations

Answer 16

• paid farmers fixed (and generally higher) $ for high quality beans -> to sustain products
• sourced bean from multiple areas -> allowed it to offer variety range of coffee to customer; spread the company’s risks such as weather, political and economic issues in coffee growing areas

Question 17

starbucks: primary VC activities: outbound logistics procurement

Answer 17

• centralized control -> processing to distribution
• worked directly with coffee farmers, millers, exporters
• training sessions for suppliers in Guatemala, Indonesia, Costa rica, east africa, and rwanda
• roasted in co-owned facilities & shipped in flavorlock bags
• worked collaboratively with factories to meet performance standards (child/forced labor, wages)
• enables greater consistency of supply and stability

Question 18

starbucks primary VC activities: 7 channels of distribution

Answer 18

• (broad -> reach customers where they work, travel, shop, dine)
• own stores in high traffic visibility centers
• non company operated retail channels - hotel, airlines, restaurants
• licensed stores (8000 no access to desirable retail space - airports) - not a franchise- only license where cant get RE
• grocery stores & warehouse clubs
• joint ventures with pepsi & dreyer’s (bottled frap & ice cream)
• online and mail order sales
• international licensed stores

Question 19

starbucks primary VC activities: marketing and sales

Answer 19

• mkting initiatives emphasized human connection (dont spend a lot on mkting)
• community based high touch, low reach efforts radically different
• break w/ longstanding strategy -> move to traditional ad channels

Question 20

starbucks primary VC activities: service

Answer 20

• “just say yes” policy
• ie division to improve store operation 3 minute goal (order placement -> hands - idea behind service)
• hired engineers to shave off time
• “floaters” during peak time -> saves 20 sec
• pre-measured scoops
• complexity of barista’s job compounded by drink customization

Question 21

starbucks support activities

Answer 21

1. company culture & HR mgmt
2. technology development

Question 22

starbucks: company culture & HR mgmt

Answer 22

• employees called “partners” - partner satisfaction leads to customer satisfaction frontline communicators of co. culture

=> labor exp > coffee expense

• trained in hard & soft skills

Question 23

starbucks: company culture & HR mgmt: benefits

Answer 23

generous benefits to entry level partners (health, dental, vision insurance, & stock options

Question 24

starbucks: company culture & HR mgmt: partner satisfaction

Answer 24

• partner satisfaction hovered in 80-90% range (fortune mag ranked as 1 of best places to work
• lower turnover in the industry (70% vs 200%) => adv.

=> learning curve -> dont have to train as many e’ees

Question 25

starbucks: company culture & HR mgmt: promotion

Answer 25

- promotion from w/n - store managers were ex-baristas - senior executives had to train as baristas

Question 26

starbucks: technology development

Answer 26

- automated espresso machine-\>reduced waste & # of steps - customer loyalty program -\> SBX card accounted for 18% of company rev (27% of domestic retail rev) =\> similar to amazon's prime membership - 2014 processed 5M mobile pmts a week

Question 27

starbucks: the troubled years

Answer 27

- 2008-09 - new competitors - recession - brand dilution b/c had to answer to SH who want growth -- 2 options: =\> open new stores =\> show g in current stores -- sell more=\> incr variety

Question 28

starbucks: recession blues

Answer 28

- rapid store growth cannibalizing existing ones - expansion became butt of jokes (ex. the onion) - "watering down of the starbucks experience" =\> sterile cookie cutter feel b/c had to stdize operations =\> efficiency gains (risk personal connections) =\> introduction of new beverages, food offerings - customers tighten their wallets - dunkin donuts & McDonalds join

Question 29

starbucks: the rebound

Answer 29

- schuttz returns as CEO - 1. rethinks growth strategy 2. scales down plans 3. stores closing in the US 4. target international opportunities - gets out of music & mkt movies busn - refocus on the coffee experience - 15th avenue coffee & tea - successful entry in 2009 to the instant coffee market - Via racks up $135M in 1st yr sales -\> turn around =\> savvy mktg: 1st pushed in stores & then grocery stores

Question 30

starbucks: long range growth strategy

Answer 30

- changed logo - migration to the grocery aisles/mass merchandisers - 03/11 strike deal with green mountain coffee roasters to sell starbucks/tazo coffee & tea for use in keurig - plan to open juice bars (evolution fresh) - battling mcdonalds & dunkin donuts -- seattle's best coffee - SBX sells 1st single cup machine