Starbucks Failing New Strategy

Earlier this month, Starbucks sales dipped by 2% in the second quarter. Although external factors contributed to the sales decline, their "Triple Shot With Two Pumps" strategy appears to have done nothing to offset these. Consider that their competitors didn't see the same decline. In my book Strategy Quest - The Executive Guide for Finding Strategy Opportunities, I discussed how Starbucks fulfills customer needs better and worse than its competitors. Here, I'll discuss why their new strategy has yet to deliver results and then review what Starbucks could do.?

Here are the reasons why their strategy will not deliver the 10-15% annualized growth that they claim:

1. Elevate the Brand Initiative

Elevating the brand involved was the first point in its strategy. This was about having better-run stores, opening purpose-defined locations, accelerating renovations, and further product innovation. ?

So far, product innovation has been a flop. As I had previously anticipated, Starbucks' 'game-changing' new Oleato latte unfortunately did not resonate with customers. I applaud them for attempting to innovate with the Oleato; however, this drink has problems, including aftertaste and diarrhea. This drink was only approved because it was the idea of former CEO Howard Schultz. ?Starbucks also began serving all-day breakfast, and this is just copies of what others are doing. ?

Starbucks now plans to introduce more health-oriented beverages. They are doing this because some competitors are. This was an opportunity that I identified in Strategy Quest. All Howard Schultz had to do was read the copy I sent him, and Starbucks might be selling very innovative healthy beverages.?

Purpose-defined stores mean drive-through-only or delivery-only locations. Once again, this is nothing new and, therefore, not strategic. The question is, will people switch away from competitors because they prefer the Starbucks drive-through rather than the competitor's one they are currently using? The delivery-only locations might make it more convenient for customers in areas where locating a store is not economically feasible or otherwise impossible. Is this a significant enough opportunity to be strategic??

3. Strengthen and Scale Digital

This initiative expands its reward membership and utilizes technology to elevate the partner and customer experience. Reward programs are nothing new, and they are intended to retain customers. It is unclear how this will tangibly contribute to sales growth when their competitors do the same.?

4. Become More Global

This involved expanding its stores globally by about 50%. Provided that Starbucks fulfills a need that is lacking in other countries, this might be the only genuinely strategic initiative?

For the most part, Starbucks is simply copying its competitors, which will not lead to strategic growth.?

What Starbucks Needs to Do

In Strategy Quest, my analysis of Starbucks illustrates that its four main weaknesses are order fulfillment times, fulfillment reliability, price, and quality. These weaknesses are opportunities. The company also has opportunities for product innovation that they have yet to discover.?

Order Fulfillment Time - Starbucks Baristas take too long to fulfill customer coffee orders. Starbucks needs to use technology to speed up the process. A CNN article that reported the quarterly results mentioned that people sometimes abandon their orders and leave the store rather than wait.?

Order Fulfillment Reliability - Because delivering customized orders is a big deal at Starbucks, mistakes are often made in preparation. Might it be possible for customers to add their own 5 pumps of peppermint, 3 pumps of hazelnut themselves, or chocolate sprinkles? This would speed up fulfillment time and decrease rework by the Barista.

Product Quality - I don't like Starbucks coffee. To me and many others, it tastes burnt. That tells me that it is being roasted at a high temperature. While visiting a coffee plantation in Hawaii, I asked the roaster how she decided on the roasting temperature. She replied that the poorer quality beans are roasted at higher temperatures. ?I'll take a Tim Hortons medium roast over Pike's Place (supposedly medium roast) or any other Starbucks brew.?

Price - If Starbucks wants to increase revenue, it must lower its prices. The Tim Hortons Medium Roast I prefer is $2.07 (20 oz.) compared to $3.62 for Pike Place (20 oz.).

Starbucks must generate strategic opportunities that address its competitive weaknesses to stop losing ground on competitors. It must also find product innovations that fulfill the needs of more people.?

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