1. How did Starbucks create its uniqueness in the first place?

When Howard Schultz became the CEO of the company (15 years after its founding), he intended to
turn Starbucks into a company which could deliver ultimate customer value, because he knew that
customer-oriented brands are the ones which bring success. His strategy was to make Starbucks a
unique place where people could enjoy high quality coffee in the great atmosphere and feel as a part
of community at the same time. He has implemented the strategy by building the customer
experience with following parts:
 Personal connections with customers – When entering the shop customers are always
greeted properly and asked their names while interacting with baristas, which influences
customer behavior and helps Starbucks to enhance customer loyalty and facilitate customer
retention.
 Pleasant atmosphere – when entering the shop customers stepped into the place where they
could enjoy their coffee beverages in comfortable chairs, sofas while listening to music,
chatting with friends or working.
 Innovative, high quality coffee – back in 1970-1980s the coffee culture didn’t exist outside
houses, People purchased canned coffee beans and took them at home. Initial focus of
Starbucks was providing customers with high quality coffee beans, which were not canned,
but Schultz decided to turn coffee beans stores into cafes, where baristas grinded beans
throughout the day whenever new pot of coffee had to be brewed, so the grinding sound and
fresh coffee aroma became trademarks of Starbucks stores. Since then, Starbucks has been
the company where baristas experiment with different brewing methods and create new,
innovative beverages.
Abovementioned tactics are the ones which were used by Schultz to deliver more than coffee to the
customers. He once said: “we aren't in the business of filling bellies, we are in the business of filling
souls” and superior value made the customers pay 4$ for a cup of coffee.
 2. Was Starbucks’s uniqueness a VRIO resource? Did it help Starbucks
gain a sustainable competitive advantage? Why or why not?

Organizations always strive to find a competitive advantage that drives them in front of their
competitors. For analyzing such competitive advantage organizations are using VRIO framework -
the tool used to analyze firms’ internal resources and capabilities in order to find out if they can be
a source of sustainable competitive advantage.
VRIO analysis stands for four questions that ask if a resource is: valuable, rare, costly to imitate and
is a firm organized to capture the value of the resources?
So, we are going to discuss about VIRO framework according to the Starbucks case. As we have
mentioned, the factors that created Starbucks’ uniqueness were:
 strong brand image
 special quality of coffee
 store environment
 strong supply chain
 explicit customer service
Which in fact can be considered as a VIRO resource for the company and we will explain it step by
step.
 Value - The first question of the VIRO framework asks if firm offers a resource that adds value
for customers. Each of abovementioned resources that created Starbucks’ uniqueness add
value to customer experience and this superior value in turn gives the company opportunity
to retain and at the same time grow its customer base.
 Rare - Second question asks if firm controls scarce resources or capabilities. If we look at
Starbucks’ resources we can see that some of them, for example strong brand image,
excellent customer service and store environment were not so rare and hard to achieve
separately, but it’s quite a challenge to achieve all of them together and companies like this
were very rare in fact. Furthermore Starbucks had two more resources - special flavors,
quality of coffee and supply management system required significant investment and
strategy and therefore Starbucks’ uniqueness definitely was a rare resource.
 Costly to Imitate - Third question asks if is it hard to find an equivalent substitute to compete
with your offerings. All of the resources Starbucks owned were difficult to imitate because of
different reasons, for example, Special flavors, quality of coffee and store it required
investment and human resources companies didn’t have. Other resources like strong brand
image and supply chain were more or less imitatable :D but only in the long run. So
uniqueness made Starbucks a brand that was costly to imitate.
  Organized to Capture Value - Last question asks if firm has organized management systems,
processes, structures and culture to capitalize on resources and capabilities. (here we need
to add some staff that Mau saw in documentary about bartenders cleaning the place …)
Starbucks has an effective organizational structure and coordinating system to fully exploit
the competitive potential of its resources and capabilities.
From our above explanations, Starbucks VIRO analysis revealed that company culture, prime and
strategic locations, customer loyalty, global brand recognition has definitely served as a competitive
advantage for the company.
 3. Why and how did Starbucks lose its uniqueness?

The main cause why Starbucks lost its uniqueness was the change of its strategy. In 2000 former CEO
Howard Schultz retired and as the time has shown, new managers of the company were much driven
by making money rather than deeply understanding the culture of the company.
Company’s main focus became rapid growth for higher sales and earnings. Starbucks had
approximately 1000 stores in the end of 2000 and the number reached nearly 20000 after 7 years in
2007. In this rush the original culture of the company faded away. For instance, fresh aroma of the
coffee was one of important part of store’s ambience, however, because the customer traffic,
baristas hade to grind coffee beans early in the morning and store it for consumption all throughout
the day. Managers ordered baristas to set their priority on speed and not on the quality anymore.
Customers were pushed to takeaway for the reason of cost cutting. Rather than focusing on coffee,
Starbucks started selling additional products like books, additional items on the menu and other
merchandise.
Because of these internal reasons Starbucks lost touch with its customers and several external
reasons have worsened the situation. The world financial crisis of 2007-2008 led people to say no to
their “daily luxuries” and switch to cheaper products and the fact that they didn’t feel special in
Starbucks cafes anymore, made them change their behavior and most of them completely forgot
what they loved about the brand. Other factors like increased competition and demonstrations
against global companies have had their effect on the reduction of the company’s sales and the stock
price as well.
In conclusion, confusing growth with success and therefore changing company’s strategy from
creating unique and valuable experience for their customer to rapid expansion strategy has been the
reason for Starbucks of losing its uniqueness.
 4. How is Starbucks attempting to re-create its uniqueness? Do you think it
will be successful? Do you think it will be unsuccessful? Why or why not.

As we have discussed in the previous question Starbucks faced a problem of sales reduction in 2007.
After realizing this, management team of the company decided to bring Howard Schultz back in
Starbucks. As years have shown, he attempted to re-create company’s uniqueness by changing its
strategy from focusing on expansion to creating ultimate customer experience.
We can read in the case that he started recruiting baristas, so that they would no longer multitask.
As we have done further research on the topic, we found out that Schultz closed 600 stores in 2008
and 300 in 2009. 60700 baristas were laid off and 135000 retrained. This way he made sure “the
theatre” that customers loved about the brand was back in the stores.
In late 2009, Starbucks introduced Via, its new instant coffee, a move that some worried might
further dilute the brand. But with proper promotion it worked. Starbucks announced that they’d
found a way to create an instant coffee, that tasted as good as fresh-brewed coffee, the company
said that “Starbucks VIA is different, the magic is in a proprietary, all-natural process that we spent
years perfecting”. The name for the coffee was perfectly chosen too. “VIA” is an Italian word for
“road” and it signaled the idea that customers could enjoy that coffee wherever they went. The
cheap price of the product also should be taken into consideration. Many were skeptical about it,
but introducing the coffee helped Starbucks to be reachable for people who were suffering world
financial crisis and remembered customers that Starbucks is innovator as it has always been.
There’s no further information about the attempts of the company to re-create its uniqueness, but
the general road of setting priority on bringing customer experience back in the stores was correct.
As an arguments we can state that stock price was up by approximately 143% in 2010 compared to
2009 and Starbucks has posted positive same store sales ever since.