Starbucks

Starbucks has several locations both domestically and abroad, making it a globally recognized coffee business (Mason, Cole, and Goza 2017, p 17). It is a prosperous business in the coffee sector, and consumers recognize its brand all over the world. Although the business is most known for its coffee products, it also sells tea, smoothies, and baked goods as well as other beverages and accouterments (Mason, Cole, and Goza 2017, p17). The business also provides welcoming spaces for guests to eat, converse, and relax. The company's multiple drive-thrus are there for your convenience. The main customers of the company are the coffee lovers and those who appreciate tea and other beverages. The company has customers of all ages but mostly targets the young and middle age especially those of in the middle class (Mason, Cole, and Goza 2017, p17). The marketing strategy applied by the company is the word of mouth considering its target customers. The company is quality oriented and ensures it provides the customers with the highest value products.

Description of Operational Processes

ITO Model



(Outputs) Coffee beverages and pastries

(Process)

Roasting and Grinding

(Input)

Green Coffee beans

(Input)

Milk

(Outcomes)

Increase in customer satisfaction















The ITO model for the company is:

Inputs- coffee beans, milk, other beverages. This can be measured in terms of the labor and materials used.

Process- roasting and grinding of coffee beans. The productivity of this process can be measured in terms of the amount of coffee beans roasted per month.

Output- the ground coffee which is measured in grams.

Utilization – purchase or lack of purchase of the products. This can be measured based on the amount of sales per day

Outcomes- increased satisfaction for the customer, measured in the number of repeat purchases.

Using the ITO (input transformation model) above, it is possible to measure the effectiveness of the process. The input resources for Starbucks include coffee and milk, (Mason, Cole, and Goza 2017, p17). This can be measured in terms of the labor and the materials used. Coffee being the main product of the company undergoes two operational processes namely the roasting of Coffee and the retailing of coffee and coffee products. Starbucks directly acquires its coffee from the suppliers and ensures it maintains a good working relationship with them allowing smooth workflow. The company acquires Arabica green coffee beans, which are used in the processing of their coffee products (Mason, Cole, and Goza 2017, 17). The onsite roasting of coffee offers the company various advantages in comparison to the acquisition of coffee that is already roasted. By roasting its own coffee, the company manages to save on costs, which will translate to lower costs of production. Further, the demand for fresh coffee has been on the increase thus demanding coffee shops to ensure they offer the freshness desired by their customers (Mason, Cole, and Goza 2017, p17). Further, the company is able to ensure the quality of their inputs is maintained. The process involves roasting the beans at temperatures of 550 degrees Fahrenheit (Mason, Cole, and Goza 2017, p17). To avoid burning, the beans will be moved throughout the entire process and when they are almost ready the oil and caffeoyl emerge from the beans (Mason, Cole, and Goza 2017, p17). Once they are ready, they are cooled by water or air. The coffee is then ground and then used in ensuring that each coffee drink is prepared with the recommended serving to preserve the taste. The coffee is then brewed to the highest standards before being presented to the customers.

The retailing is the sale of the coffee products to the customers an operation process can be measured using the ITO model where the number of products produced in the process. The retailing is the sale of the coffee products to the customers. This involves the sale of all the coffee product offerings either in the company stores or other distribution centers. The company sells the coffee in terms of beverages where they sell both cold and hot coffee drinks (Mason, Cole, and Goza 2017, p17). Additionally, they provide the customers with packed coffee after it has been ground. This product offering is for the customers who love to brew their coffee or those who love Starbucks coffee but do not have enough time to visit the store every time they need to take coffee. The company uses some of the coffee they produced in baking pastries such as coffee cakes, which they sell to the customers as accompaniments to their drinks.

The retailing process involves the customers walking into their restaurant or passing through the drive-thru to make an order of their preferred coffee products. Based on the wide range of the coffee products, which are processed to cover the wide range of customers’ preferences, the clients make their orders and have them delivered within a short while. Once, the customers have made their orders, the waiting staff takes their order and requests the kitchen staff for them to make available the order. For some of the products such as cappuccino and mocha, they cannot be prepared beforehand (Mason, Cole, and Goza 2017, p17). Therefore, ones the order has been passed on to the kitchen staff, they prepare the drink, and once it is ready, they call on the waiting staff who then deliver the products to the customers (Mason, Cole, and Goza 2017, p17).

The operation processes in the company are coordinated effectively and efficiently to ensure the high standards of the outputs are maintained. This is because the customer places a high value on the quality and the tastes of the products. A slight deviation from the taste could greatly affect the perception of the customers and have major negative effects on the satisfaction. Thus, the inputs must be of right standards and the transformation activities which involve the roasting, grinding and the preparation of coffee must be conducted in the right way to ensure the output which is the coffee products are of high quality (Mason, Cole, and Goza 2017, p17).

Literature Review

For any business to be successful, quality management is an important factor that will ensure customer satisfaction is achieved (Bergman and Klefsjo 2010, p102). Therefore, businesses must come up with proper quality management concepts that will ensure the expectations of the customers are preserved. Customers have become a very important part of the business and organizations have realized that for them to be successful, the customers must come first even before their objective of making profits (Bergman and Klefsjo 2010, p111). This is because the customers are the sole reason for the existence of the business and without them, profits cannot be acquired. Customer satisfaction is achieved when the value derived from the product is greater or equal to the spending cost of the customer. Quality management concepts provide the entity with the controls and measures of organizational performance to the required level (Bergman and Klefsjo 2010, p102). Internal and external communication will ensure the standards set by the organization are internationally acceptable giving the company a competitive edge even in global markets. They have a positive impact on the value of the organization and the brand image and allow the company live up to the expectations of the customers.

The concept of quality can be divided into two major areas, which are the external and internal (Bhradaigh, Borchert and Lechler 2014, p1012). The external level of quality is mainly focused on the satisfaction of customers (Bhradaigh, Borchert and Lechler 2014, p1012). Companies must be focused on establishing a large base of loyal customers. This can only be achieved by ensuring they satisfy their customers. Satisfaction of customers is only made possible by having a better understanding of the customer requirements and ensuring the quality level of the products or services is higher than that of other companies in the market (Bhradaigh, Borchert and Lechler 2014, p1015).

Internal quality on the other hand involves the actions that are taken to ensure smooth running of internal operations systems, which is effective and efficient and will lead to minimizing expenses and controlling the costs of operation (Bhradaigh, Borchert and Lechler 2014, p1015). The concept can be enhanced by using Japanese quality concepts, which are the kaizen, 5s, TQM and Six sigma in addition to the ISO standards (Bhradaigh, Borchert and Lechler 2014, p1015). This will benefit both the organization and the customers leading to an increase in customer satisfaction. Quality management will lead to low costs, ensure high quality is maintained thus guaranteeing the customers are satisfied (Bhradaigh, Borchert and Lechler 2014, p1016).

Quality practices have been proven to enhance the performance of both product and service organizations. According to Goetsch and Davis, 2014 customers are now demanding a higher quality of products than ever before. Therefore, the important feature for service firms is to ensure the quality, production and the way the service is being offered to the final consumer is of the highest standards. It has been proven that if continuous improvement in the way products are being perceived based on the expectations of the customers, it has a positive influence on the satisfaction level in addition to the perceptions of the customers towards the company.

The effect of the expectations of quality on customer satisfaction is positive, and significantly, the delivery of quality is seen as an important strategy for organizations to survive in today’s competitive business environments. In the service industry, quality is the determinant of the customer remaining loyal to the company or defecting from it (Mok, Sparks, & Kadampully 2013, p16). The delivery of a service will determine the attitude of the customer towards the company. The quality of the service results in the satisfaction of the customer and consequently impacts on his or her loyalty to the company (Mok, Sparks, & Kadampully 2013, p16). What is delivered and how it is delivered are important factors to consider when it comes to the delivery of a service (Mok, Sparks, & Kadampully 2013, p16).

Since the 1950s, the focus of researchers has shifted towards the measure of the relationship that exists between the quality of services and the satisfaction of customers (Jahanshani, Hajizadeh, Mirdhamadi, Nawaser, and Khaksar 2014, p94). This has led to extensive research on the customer satisfaction in the service industry.

In marketing theory, consumer satisfaction is the main area of focus. It is based on the idea that profits can only be generated from the processes that involve satisfying the demands of consumers.

Therefore, quality management and customer satisfaction have a relationship that can help show that quality is a cause of customer satisfaction (Jahanshani, Hajizadeh, Mirdhamadi, Nawaser, and Khaksar 2014, p94). When the level of customer satisfaction is increased, the chances of the customer filling issues about the flaws in the quality. In the service industry, it offers a better perspective on the importance of determinants of the quality of the service through the development of models that drive customer satisfaction (Jahanshani, Hajizadeh, Mirdhamadi, Nawaser, and Khaksar 2014, p94). This shows that customer satisfaction and service quality have major similarities. The concepts can be considered to be different and independent, but at the same time, they are conceptually closely related. An increase in one leads to an increase in the other. However, there are a number of differences that have been identified by researchers. For instance, satisfaction is considered the decision made by the customer after an experience while quality cannot be defined as the same. The differences help firms determine their goals and objectives in their industries on whether it should perform in a way that ensures the complete satisfaction of the customers or they should work towards providing the highest level of service quality as perceived by their clients.

Therefore, service quality and satisfaction are different concepts but have a causal relationship. The impression of the quality of service appeals to the emotions that are related to their satisfaction which consequently affect future purchase decisions. Additionally, customer satisfaction is considered the overall score or evaluation of the service organization (Goetsch, and Davis 2014 p16).

According to literature relating to service quality and satisfaction, customers compare the performance of products and services through a set of standards, which are then related to their satisfaction (Goetsch and Davis 2014, p54). The quality of the service provided affects the level of satisfaction that will be achieved by the consumers.

The differences between the two concepts have therefore been proven to exist due to the different standards of comparison. The satisfaction depends on a particular customer where perceived service of quality depends on the feelings of the customers concerning what a firm should deliver and through comparison of the performance.

Various models have been designed to show the relationship between quality management and customer satisfaction. Mcdougall and Levesque’s model states that perceived quality and value influences the satisfaction of customers and consequently their future intentions (Blenstock, Mentzer, and Kahn 2015, p72). The perceived quality of service has the core and the relational as its major dimensions (Mok, Sparks, & Kadampully 2013, p16). The customers include other factors in evaluating the quality dimensions, which include the empathy, reliability, assurance, and responsiveness (Blenstock, Mentzer, and Kahn 2015, p72). These factors lead to the overall customer satisfaction. The perceived value is the benefits that are received in respect to the cost. The customers who see that they got something that was worth spending are more satisfied in comparison to those who feel otherwise. Therefore, service providers focus on ensuring the loyal customers who are a result of repeat transactions (Blenstock, Mentzer, and Kahn 2015, p72). The increased customer retention leads to higher customers’ satisfaction and consequently a reduction in the marketing costs of the company. Therefore, customer satisfaction, retention, and intentions are used in the assessment of a service provider.

It is clear from various researchers and literature on the topic that quality of a service is an important factor in addition to performance, expected and perceived service, which affects the level of customer satisfaction (Bansal and Taylor 2015, p76). It also has a great effect on the decisions made by customers concerning making repeat purchases. Through word of mouth of personal needs, a customer develops expectations, perceptions and service performances, which influence the quality of the service (Bansal and Taylor 2015, p76). Once the customer makes the purchases and the service of product measures up to the expectations and value perceptions the customer is satisfied. The customer will, therefore, make repurchase intentions or switch to other providers if they are not satisfied (Bansal and Taylor 2015, p78).

Therefore, companies such as Starbucks need to ensure they provide high-quality services for them to achieve customer satisfaction. The provision of excellent services requires continuous improvements to be made in the culture of the organization to develop one where the employees are challenged to give their best through rewards and recognition. This will contribute positively to the quality of output produced by the company and thus increase their chances of achieving customer satisfaction and consequently acquisition of loyal customers.

Application of Concepts

Despite the success of the company, Starbucks experiences a drop in customer satisfaction, which is linked to quality gaps that might exist between customer expectations and perceptions. The company has maintained overwhelming presence and convenience but is facing a continued threat of a reduction in customer satisfaction. This has been affected by the company’s lack of a differentiation strategy in comparison to smaller coffee companies (Jacobson 2016). Other competitors in the industry such as Dunkin’ Donuts and Kapa coffee have created stiff competition for the company and its failure in differentiating their products has continued affecting the expectation of the customers (Jacobson 2016).

Additionally, Starbucks brand image, which was applied for its differentiation strategy, has faced major challenges in the market. Most of their target customers and the already existing customers were convinced that the focus of the company was not to their satisfaction. They believed the company care more about their profits and increasing the number of their stores, which took a toll on the image of the company (Jacobson 2016). This shows a quality gap that exists due to customer perceptions. Customers believed that the company had service gaps that required to be carefully addressed by the company. They customers provided insight on the improvement that the company needed to make and mention the fact that the company needed to ensure they improve their services (Jacobson 2016). A major area of focus was on the speed of service as most of the clients complained about having to wait for too long before they were served.

The quality of products, the setting and the atmosphere of the company outlets are believed to be high which shows that the service of the company is not on the decline (Jacobson 2016). However, the wait time has been increasing gradually which brings about quality gaps between the customer expectations and customer perceptions. This is particularly important for those people who are there for take-outs (Jacobson 2016). This has affected the satisfaction of the customers negatively. Therefore, the company needs to address the view of the people towards the company and ensure an improvement in the customer satisfaction is achieved for it to become more successful in the market.

In dealing with the issue of reduced customer satisfaction due to lack of an excellent differentiation strategy, the company should consider a change in strategy (Jacobson 2016). The differentiation strategy currently applied is focused on building the brand name and image. However, the company has successfully managed to build the brand name and should now focus on a pricing strategy that will create a competitive advantage (Jacobson 2016). The customer range for the company has increased as people with lower income, the young and the less educated have increased their demand for low quality coffee. The company should, therefore, target this market, which has a high growth potential. This can be made possible by a reduction in the cost of production leading to a reduction in prices.

Further, on the issue of reduced customer satisfaction due to an increase in the wait time. The company needs to ensure that the waiting time for customers is greatly reduced to save on time. This can be made possible by increasing the number of employees who are responsible for handling the orders of their customers. Additionally, the company should ensure an increase in production equipment through an evaluation of the anticipated number of customers at a particular time to reduce the wait time. The strategy will allow for faster service and consequently increase the satisfaction of the customers.

The company needs to pay particular attention to the perception of the customers concerning their focus. The customers believe that the company pays more attention to their profits and expansion other than the delivery of value (Jacobson 2016). This greatly affects the image of the company and could have a great effect on its sales and profitability. Therefore, the company has to ensure they come up with strategies that will change the perception of the customers and create a positive image for the company. This can be done through advertising, which will appeal to the customer and focus more on the quality of the services offered by the company (Jacobson 2016). Additionally, the company should focus on their involvement in activities that help build a positive image. This includes assisting in community projects, caring for the environment among other factors. This will improve their image and positively influence their revenues while increasing the satisfaction of their customers.

However, the company is likely to face major challenges in the implementation of the suggested strategies. In changing the differentiation strategy and adopting a pricing strategy that will ensure the company offers lower prices for their products, the company will face the challenge of ensuring the quality of the output is maintained. In reducing the operating costs of the company, the quality of the output could be affected by a reduction in prices could mean cutting down on spending on some of the factors that ensure the company offers high-quality products. This could lead to more issues and lead to a further reduction in customer satisfaction.

Further, increasing the number of employees and the production equipment could lead to higher operating costs of the company. This would lead to a reduction in profits, and the company may be forced to increase their prices to ensure the operating expenses are not higher than the revenue. Additionally, the strategy involving the improvement of the company’s image could lead to an increase in the costs of operation. Advertisement costs and the costs of activities involved in improving the reputation of the company could lead to more challenges for Starbucks.



References

Bergman, B. and Klefsjo, B., 2010. Quality from customer needs to customer satisfaction. Studentlitteratur AB.

Bhradaigh, E.N., Borchert, and Lechler. T. (2014). The Role of satisfaction in Micro Businesses. In ISCS World Conference proceedings, P. Business (ICSB).

Jeong, M.S., Cha, J.E., & Jang, D.H. 2016. Impact of service quality of horsebackriding on Customer satisfaction and Loyalty-in Case of Jangsu Horse Riding Experience Course. Journal of Korean Society of Rural Planning.

Jahanshani, A.A., Hajizadeh, G.M.A., Mirdhamadi, S.A., Nawaser, K., and Khaksar.S., 2014. Study the effects of customer service and product quality on customer satisfaction and loyalty. The Business and Management Review,7(3).

Mok, C., Sparks, B., & Kadampully, J., 2013. Service quality management in hospitality, tourism and leisure. Routledge.

Blenstock, C.C., Mentzer, J.T and Kahn, K.B., 2015. How are service firms measuring and managing service quality ? In proceedings of the 1996 Academy of Marketing Science AMS anuual conference, pp. 161-161. Springer, Cham, 2015.

Goetsch, D.L. and Davis, S.B., 2014. Quality management for organizational Excellence. Upper saddle River, NJ: Pearson.

Bansal, H.S. and Taylor, S.F., 2015. Beyond service quality and customer satisfaction: investigating additional antecedents of service provider switching intentions. In proceedings of the 1999 academy of marketing and science. Annual Conference (pp.75-82). Springer.

Mason, A., Cole, T. and Goza, N., 2017. Starbucks: A Case Study of Effective Management in The Coffee Industry. Journal of International Management Studies, 17 (1).

Jacobson, L. 2016. Starbucks Case Study. Available at: [Accessed Oct. 7, 2017].