Introduction

Value chain covers the entire range of activities included in the process of bringing

a product to the market and to the customer. Beginning from the process of obtaining

raw materials to the final sale of the product, there are several steps involved in it.

All of these activities add value to the product. A value chain analysis provides the

companies with a view of the activities in their production process.

Primary Activities:

Inbound logistics:

 This includes obtaining raw materials from the suppliers.

 The focus of Starbucks has been on maintaining excellent relationships with

the suppliers.

 To ensure that it could get a continuous supply of green coffee, it has started

a number of programs to maintain and manage its supply chain better.

 Its farmer support centers are a key part of its supply chain management

program that provide support to the coffee and tea producing farmers.

Operations:

 The coffee brand also purchases, roasts and sells high quality Arabica coffee

beans and related coffee products. Starbucks started roasting in 1971.

  It roasts its coffee a little longer than the other coffeemakers to bring out the

deep and intense flavor.

 It owns its roasting facilities but has leased a major part of its warehousing

and distribution locations.

Outbound logistics:

 Starbucks sells its products to the customers via the company stores and its

licensed stores mainly.

 The ready products are shipped to the retail stores from the warehouses and

distribution centres where they are displayed and sold.

 Apart from it Starbucks also uses online channels for selling its products and

merchandise.

 A limited range of these products can be found at Walmart and Target stores

too.

Marketing and sales:

 Marketing is one of the most important parts of any brand’s value chain.

 A lot of value gets added at this point. Starbucks does not use the traditional

methods of marketing its brand.

 Unlike most others, it has not traditionally utilized advertising for marketing.
  Still, in the last few years it has started investing in promotions and advertising

too.

 During the period of last 5 years its market budget has grown steadily to grow

higher than $351 million in 2015.

 However, it also uses social media for marketing and customer engagement

purposes.

 For the rest, it relies on word of mouth marketing, its customer service and

merchandise.

Service:

 Customer service has always remained a priority over the other things at

Starbucks.

 In most of its history if it did not need to invest in marketing then it was

because it had created a brand image of a premium quality and customer

friendly coffee brand.

 The brand stores have a customer friendly environment where customers can

interact with the Barista and staff.

 Overall, Starbucks has created an environment in its stores where its

customers can relax and enjoy their leisure.

 These stores are like a third place between their homes and offices.
Support Activities:

Infrastructure:

 It includes the management, planning, finance and other important resources

of the organization.

 Starbucks has a strong infrastructure and apart from its physical resources, the

brand is in a financially strong position because of its excellent leadership and

management.

 Its current chairman and Chief Executive is Howard Schultz who is also the

founder of the brand.

 Schultz’s role in bringing the brand to its leadership role in coffee industry is

exemplary.

Human resource management:

 Apart from training and facilitating the learning and growth of its employees,

Starbucks has focused on human resource policies that provide its staff the

kind of satisfaction they want from their jobs.

 The focus is on being ethical and customer oriented while creating a work

environment that facilitates collaboration.

Technological development:

 From roasting and blending to marketing and customer service Starbucks uses

technologically extensively to serve its target market.

 While technology might not be the central focus, still plays a major role in the

coffee business.

 Information technology systems are used extensively throughout the business

from point of sale and web and mobile platforms to online and mobile

payment systems.

 Apart from that technology also plays a major role in supporting the

administrative functions inside Starbucks like human resources, payroll,

accounting as well as communications internally and externally.

Procurement:

 Procurement management has become highly important in the 21st century.

Companies are focusing especially on it since it impacts their efficiency and

profitability.

 At Starbucks procurement has received a lot of attention.

 The brand has set strict rules related to the selection of its suppliers and

product quality. In terms of procurement, Starbucks has always focused on

sourcing its material from suppliers that guarantee quality and follow ethical

practices.