10 Strategies that Starbucks Adopted to Build a Sustainable Competitive Advantage
From having only 6 stores in the year 1986 to operating 28,218 stores in 76 countries today, Starbucks has come a long way. Below are some of the success factors that made Starbucks a global phenomenon that it is today.
1. Identifying the need – In the 1990's, most Americans were unhappy with the taste of inferior quality coffee beans. People were also becoming more health-conscious and were looking for a naturally processed coffee beverage. Starbucks incessantly focused on procuring quality coffee beans and this made the brand awareness spread by word of mouth.
2. Brand evolution over time – The Company observed that coffee lovers looked for a place that offered comfort, community and a sense of an extended family, a home away from home. The Company realized that Starbucks had to go beyond just selling beans and making drinking coffee more of social activity.
3. Paid attention to the Details – The company focused on providing a multi sensory experience that included creating an environment of liking what the customers saw, felt, touched tasted and heard.
4. Understanding the pain point of the consumer – The Company realized that the office goers neither had access to good quality coffee at their workplace nor got quick service at any coffee joint. The company smelled an opportunity here and figured ways to fill the gap.
5. Finding a niche market – Starbucks made its product/service dominate in a niche market. The smaller the segment, the easier it is to focus on the customer needs in that segment. Starbucks, for years, only focused on offering superior quality coffee to its customers and once it established itself in the niche, it then focused on other segments.
6. Hired the right people – In the initial days especially, the company hired like-minded individuals who shared a similar passion and who were willing to create a bigger impact.
7. Sticking to the core values even if it meant doing away with profits – In the late 1990's, the demand for artificially flavored coffee beans rose. Starbucks stayed away from practicing this as it was against their core value of offering authentic quality coffee.
8. Never compromising on the quality of its core product – Every competitor of Starbucks was focused on expanding its franchise to quickly expand. Starbucks didn’t opt for this route for the fear of losing control over the quality of its core product which was coffee. Starbucks always wanted to have control over their entire supply chain.
9. Consistent focus on employees – One of the major factors while Starbucks outperformed its competitors was the dedication of their employees. Howard Schultz writes, “In a store or restaurant, the customer’s experience is vital: One bad encounter, and you’ve lost a customer for life. If the fate of your business is in the hands of a twenty-year-old part-time worker who goes to college or pursues acting on the side, can you afford to treat him or her as expendable?”. Starbucks shared the ownership of the company with its employees and offered them stock options. This was the biggest reason behind the low attrition rate of its employees.
10. Hiring people who are smarter than the founder – Most brands fear to hire people who are more experienced, knowledgeable than the founders of the company. Howard Schultz time and again hired people who he felt had more experience than him.
Overall, Starbucks took consistent steps, all in the right direction but considered every activity from a customer’s standpoint. The Company was backed by strong leadership, especially the founder Howard Schultz who had a great sense of observation and a vision to convert those observations into valuable insights. Competitors tried to copy the strategies of Starbucks at every stage but always failed in terms of having the right values, systems, processes, and people.