Name: Saad Baber

Roll No. L18-3168

Section: MBA-B

Summary

The case gives an in depth view of the public listed company named Starbucks which is a coffee
company and a coffee house chain, originated in America 47 years ago. Star bucks was initially founded
by Gerald Baldwin, Gordon Bowker, and Ziev Siegl. However, Howard Schultz who joined in the
marketing team bought the company from the founders and led the company to meet horizons of
success from thereafter with the passage of time.

As Starbucks was growing day by day in terms of business, their SVP Christine Day came across an issue
regarding customer satisfaction. The company was not meeting the customer’s expectation in terms of
customer satisfaction. To handle the situation and problem at hand, Day had to come up with a solution
that can create more customer satisfaction. Before the problem could be resolved, it is also to be
assessed that weather the customer feedback regarding solving this issue creates value for the brand
and constitutes excellent customer service.

The main constitute of lack of customer satisfaction was the time in which the customer gets the coffee.
The time for that was three minutes. This three minute time was industry competitive, however the
customer feedback indicated that it must be reduced. However, the complexity of product preparation
process and to meet the quality as well as required presentation of the coffee, the reduction of this time
had to lead the company to hire more human resource. This solution is to be assessed by the SVP Day,
and she was responsible to recommend Orin Smith, Starbucks’ CEO either to opt this increase of human
resource that would cost the company a total of $40 million per annum or to come up with another
option to increase the customer satisfaction.
Keeping in view the company’s position of being the biggest coffee company in the North America and
operating in different parts of the globe with more than 5000 stores and opening 3 new stores a day. It
was a very complex and influential decision to be made. In a company that considers that partner
satisfaction leads to customer satisfaction, where partners are the employees of Starbucks, employees
were satisfied to such an extent that Starbucks’ employee turnover rate was 70% which was 4 times less
than that of the fast food market. The reason to less turnover rate was the visible career growth in
Starbucks. In this huge company where employees are valued so much and customer satisfaction was
also the key consideration for the company, the decision was crucial and highly critical.

The issue at hand in the case mainly is the concern that customer satisfaction is to be increased as the
customers think that the service quality and speed of service should be improved. The solution to this
problem according to the management is to increase the labor hours by 20 more hours that would cost
the company an extra $40 million per year. The rise in cost was internally resisted as the company had
grown to such an extent that bearing more cost will result in additional burden to uphold the
shareholder’s wealth in a positive trend.
According to my understanding the solution to this problem is to incur this cost of $40 million and relax
the labor hours by 20 more labor hours. This solution will increase the company cost, however it will
increase the customer satisfaction as well as increase the brand value. Through this solution the average
serving time of the customer will decrease that will result in giving more time to customer to think of
any other product which he/she can buy along with the coffee as well, apart from that, more customers
will come in as they will find it less time consuming to order through Starbucks. As the customers will
see that service time has reduced, they will realize that Starbucks values its customers thus increasing
the customer loyalty as well. As Starbucks has many strong competitors, so increasing brand loyalty is
also a key factor here. As mentioned in the case, the complexity of barista’s job has also increased, that
can result in less customer service in terms of greeting the customer as the barista is already under
stress to serve a customer in the benchmark time of three minutes. Thus relaxing the labor hours will
decrease the stress from the baristas which will also result in better customer service. Another
possibility is that the visit of loyal customers can increase from 18 days in a month as they will know that
it takes less than three minutes to grab a coffee and there is a chance that in the remaining 12 days of
the month there are few more days in which that customer can spare some time to grab a cup of coffee
which he/ she was previously not able to do as he/ she was running short of time, and three minutes
were a little more than that customer can afford to spend to grab the cup of coffee. This way, it can
increase the sales of Starbucks which will eventually increase the profit, ending in increasing the
shareholder’s wealth which will create a win-win situation for everyone.