Case Study Description of Starbucks' Loyalty Reigns
By July 2015, 20% of Starbucks' payments in the United States came through its mobile app. The company had created a tool to both drive loyalty and grow its customer base. No stranger to innovation, Starbucks was partnering with iTunes as early as 2007, earned its first mobile marketer of the year award by 2010, introduced its mobile app in 2011, and by 2015, 94% of Facebook users were either fans of Starbucks or friends with someone who was. This case explores the company's commitment to mobile and its social media prowess, and considers just what it takes to drive loyalty in a customer base.
Swot Analysis of "Starbucks' Loyalty Reigns" written by Meghan Murray includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Starbucks Mobile facing as an external strategic factors. Some of the topics covered in Starbucks' Loyalty Reigns case study are - Strategic Management Strategies, Social platforms and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Starbucks' Loyalty Reigns casestudy better are - – central banks are concerned over increasing inflation, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google,
supply chains are disrupted by pandemic , technology disruption, etc
Introduction to SWOT Analysis of Starbucks' Loyalty Reigns
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Starbucks' Loyalty Reigns case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Starbucks Mobile, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Starbucks Mobile operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Starbucks' Loyalty Reigns can be done for the following purposes –
1. Strategic planning using facts provided in Starbucks' Loyalty Reigns case study
2. Improving business portfolio management of Starbucks Mobile
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Starbucks Mobile
Strengths Starbucks' Loyalty Reigns | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Starbucks Mobile in Starbucks' Loyalty Reigns Harvard Business Review case study are -
Strong track record of project management
– Starbucks Mobile is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Starbucks Mobile has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Organizational Resilience of Starbucks Mobile
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Starbucks Mobile does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Starbucks Mobile has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Starbucks Mobile to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Sales & Marketing field
– Starbucks Mobile is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Starbucks Mobile in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Starbucks Mobile are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Starbucks Mobile digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Starbucks Mobile has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Successful track record of launching new products
– Starbucks Mobile has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Starbucks Mobile has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Innovation driven organization
– Starbucks Mobile is one of the most innovative firm in sector. Manager in Starbucks' Loyalty Reigns Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to recruit top talent
– Starbucks Mobile is one of the leading recruiters in the industry. Managers in the Starbucks' Loyalty Reigns are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Starbucks Mobile is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Meghan Murray can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Operational resilience
– The operational resilience strategy in the Starbucks' Loyalty Reigns Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Weaknesses Starbucks' Loyalty Reigns | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Starbucks' Loyalty Reigns are -
Skills based hiring
– The stress on hiring functional specialists at Starbucks Mobile has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Aligning sales with marketing
– It come across in the case study Starbucks' Loyalty Reigns that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Starbucks' Loyalty Reigns can leverage the sales team experience to cultivate customer relationships as Starbucks Mobile is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Starbucks Mobile, firm in the HBR case study Starbucks' Loyalty Reigns needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Starbucks' Loyalty Reigns HBR case study mentions - Starbucks Mobile takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Lack of clear differentiation of Starbucks Mobile products
– To increase the profitability and margins on the products, Starbucks Mobile needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Starbucks Mobile has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Interest costs
– Compare to the competition, Starbucks Mobile has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Workers concerns about automation
– As automation is fast increasing in the segment, Starbucks Mobile needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Capital Spending Reduction
– Even during the low interest decade, Starbucks Mobile has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Products dominated business model
– Even though Starbucks Mobile has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Starbucks' Loyalty Reigns should strive to include more intangible value offerings along with its core products and services.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Starbucks' Loyalty Reigns, it seems that the employees of Starbucks Mobile don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Opportunities Starbucks' Loyalty Reigns | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Starbucks' Loyalty Reigns are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Starbucks Mobile can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Starbucks' Loyalty Reigns, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Starbucks Mobile can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Starbucks Mobile in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Starbucks Mobile has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Starbucks' Loyalty Reigns - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Starbucks Mobile to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Starbucks Mobile can use these opportunities to build new business models that can help the communities that Starbucks Mobile operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Manufacturing automation
– Starbucks Mobile can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Building a culture of innovation
– managers at Starbucks Mobile can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Starbucks Mobile can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Starbucks Mobile has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Starbucks Mobile can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Starbucks Mobile can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Starbucks Mobile has opened avenues for new revenue streams for the organization in the industry. This can help Starbucks Mobile to build a more holistic ecosystem as suggested in the Starbucks' Loyalty Reigns case study. Starbucks Mobile can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Starbucks Mobile can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Threats Starbucks' Loyalty Reigns External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Starbucks' Loyalty Reigns are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Starbucks Mobile in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Starbucks Mobile will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Stagnating economy with rate increase
– Starbucks Mobile can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Starbucks Mobile in the Sales & Marketing sector and impact the bottomline of the organization.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Starbucks Mobile can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Starbucks Mobile needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Technology acceleration in Forth Industrial Revolution
– Starbucks Mobile has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Starbucks Mobile needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Environmental challenges
– Starbucks Mobile needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Starbucks Mobile can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Shortening product life cycle
– it is one of the major threat that Starbucks Mobile is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Starbucks Mobile demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Starbucks Mobile with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Starbucks Mobile high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Weighted SWOT Analysis of Starbucks' Loyalty Reigns Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Starbucks' Loyalty Reigns needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Starbucks' Loyalty Reigns is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Starbucks' Loyalty Reigns is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Starbucks' Loyalty Reigns is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Starbucks Mobile needs to make to build a sustainable competitive advantage.