Through the vision of its CEO Howard Schultz, innovation, perseverance, patience, the contribution of all its employees and the use of information technology Starbucks became a formidable global presence. Due to their experience and high label training Starbucks employees have the ability to recognize when they need the right tools to do their jobs correctly and efficiently.
The use of business intelligence software has allow Starbucks to plan, lead, control, organize employees, and supply link efficiently. Starbucks have differentiate from the rest of its competitors through its top line strategy not only by providing high quality products to its customers, but also by focusing on customer wants and needs through the use of customer relationship and database management systems. Going beyod the line and offering customers a place to escape the chaos of daily life.
Starbucks marketing mix is simply but smart. It uses places as Facebook social platform, or Wi-Fi hotspot to encourage friends and family to share a coffee and coffee gifts, allowing Starbucks at the same time to attract potential customers and increase switching costs, location and convenience all at the same time. These are the reason why Starbucks still holds a dominant position in the specialty coffehouse market and has no single potential rival in the sector.
The part of this blog that we found most interesting was creating the blog itself. Applying all the concept from the book to real life was a challenging experience, specially for the technology post and the business strategy. Learning all the aspect of management information systems and their correlation will be of great help to us, not only in the business world but also in our personal life. Now we all have a better understanding of the basis functions and the usefulness of software and hardware in general, which will allow us to make better decisions when it comes to technology and information.
What is Technology? It is the application of resources to design, produce, and use products and services that extend human potential to improve and control the natural and human made environment.
Starbucks Files and Database
A file is a set of related record. Some of the files uses by Starbucks include order file, customer file, product file, employee file and claim file . The main fuction of these files is to provide information and knowledge to Starbucks regarding employee, supplier and customers.
(Files storage before technology)
At Starbucks files are stores in database which are application that can store and retrieve data rapidly. Starbucks uses a relational database which mean all data are stores in table, they use the DBMS (Database Management System), which is a computer software program that help Starbucks organize, retrieve, search and change information within a database. Starbucks has built a 10TB data warehouse that support 20,000 users and is used daily by close to 8,000 Starbucks stores to manage inventory, staffing, employee, order, and more. This is base on Oracle database, Oracle real application clusters, oracle automatic storage management and oracle business intelligence solutions. It has helped Starbucks identify and retain customers understand their buying patterns which is an example of predictive data mining, and enhance their loyalty to Starbucks through the Starbucks Reward Card Program. The database administrators are responsible for the database, they design, implement and maintain database and manage database development projects. (Files storage with Technology) Managers get reports through database server application running locally or networked on their PC. Data warehouse is a collection of data from a variety of sources, organized to provide useful guidance to Starbucks's decision makers, it is generated by query and reporting tools. Data mart is a miniatures of data warehouse, in other words it is just one segment of the data warehouse. Starbucks use data marts to provide and gather information from specific department, example sales department, the inventory and shipping department. Starbucks uses statistical tools like Microsoft excel and Microsoft access for data mining, which is a process of comparing large amount of data in order to find patterns. The database administrators are also responsible for the data mining, and they received feedback from managers on different departments.
Starbucks use the highest tech database technology and E Business intelligence, which includes things like online analytical processing (OLAP), which is part of the broader category of business intelligence and help to answer quickly multi dimensional analystical queries. Starbucks use RiskIntelligence software which is a good way for them to control claims. OLAP and data mining tools are complementary analysis technologies. OLAP tools let Starbucks view data from many different angles. Manager can twist and run the data in order to discern trends or patterns. That's where data mining comes in, helping reveal correlations and relationships between data that are otherwise not obvious. Starbucks' executives for example look at their claims data to see whether there were more falls from spills in stores with a specific foot traffic pattern. Starbucks uses many different floor designs, in its North American retail locations.
The executives might further drill down to find out that accidents were more frequent at certain times of day. Software as RiskIntelligence can reveal that information. This could result in decisions that would help minimize the risks of claims more effectively.
Hardware
What is a hardware? is the physical aspect of computers, telecommunications, and other devices. Hardware fall into six categories: Input device, ouput device, storage device, central processing unit, telecommunications device and finally connecting devices.
Input Device
As a input device which are tool use to enter information and commands Starbucks uses bar code reader to enter payment information from IPod and IPhone and uses scanner to enter credit card payment information from customers.
Output Device
Output devise in the other hand are the tool use to see hear or recognize the results of the information that was processed. Some examples at Starbucks will be register's receipt printer, speakers, and monitors.
Storage Device
Storage devise is a tool that store information for uase at a later time. At Starbucks information is store on the hard disk of the computer also on flash memory card, USB drive, DVD, and CDs.
Central Processing Unit (CPU)
The CPU is the hardware that interprets and executes the system and application instructions,
and also coordinate the operations of all hardware. In other word the CPU is more like the brain of the hardware, without a CPU a hardware won't be able to function properly. All computers at Starbucks has a CPU, in case the CPU is not working then it will be check and if necessary replace by the IT department.
Telecommunication Device
A telecommunication devise is a tool use to send and receive information from all its customers through telcommunications devices as DSL Modem which are wireless Lan Modem that connect computers to the internet. They also use routers that send data between computers in a network, and telephones as telecommunication devices.
Connecting Devices
Connecting devices are tools that allow hardware to communication each other.For example if an employee at Starbucks wants to connect the printer or a telephone to the CPU they will use the USB port, also the cables that are use are connecting devices.
Computer and Software
Starbucks selected the HP rp5000 computers to be use in all retail stores across North America and on its headquarter. They selected the rp5000 because it has features components that combine the functionality of popular proprietary systems with the low price and flexibility of PC-based POS systems. After becoming Starbucks preferred technology provider HP helped Starbucks to increase operational efficiencies. The IT department at Starbucks is responsible for the basis function of all hardware and software, this include maintenance and making sure all hardware and software work properly. But when it comes to decisions that will impact the whole company as buying a new software then the decisions are taking with the input from other departments.
A system software in simple word is a set of programs that act together to allow a computer and other programs to function. Starbucks is currently usin the Windows Server 2008 created by Microsoft. They selected this software because it has a built in web and virtualization technologies that enables Starbucks to increase the reliability and flexibility of their server infrastructure. Also it has tools as Server Manager and Windows PowerShell, web resources and security enhancements that help the company save time, reduce costs and provide a platform for a dynamic and optimize datacenter. They also uses the IPhone IOS Software which is an Apple's mobile operating system for card holder processing payment. Linux is an operating system that was initially created as a hobby by a young student, Linus Torvalds, at the University of Helsinki in Finland, it is becoming really common for big companies because they can save lot of money by using a open source software, but Starbucks is not using this software at the moment. Application software or app, is computer software designed to help the user to perform a singular or multiple related specific tasks. Starbucks use the Mobile Car App from Apple for card holder customers to install on their IPhone or IPod, it allow customers to manage the fund they have in their account. Starbucks also use application as Itunes from Apple in order to provide free music to its customers. They also use word processor and spreadsheets applications for daily operations from Microsoft.
Network
What is a network? it is a collection of computers and devices connected by communications channels that facilitates communication among users and allow users to share resources with other users.
Starbucks uses WLAN which is a wireless local area network that uses high frequency radio signals to transmit and receive data over distances of a few hundred feet. Starbucks uses AT&T US Wi-Fi Network which is the largest in the nation. Starbucks Coffehouses around the US and Canada offer free unlimited Wi-Fi internet wireless service to customers that have their own laptops, tablet computers, and mobile phones that have Wi-FI connections built in their devices, this same service is also for Starbucks employee or partners. Starbucks CEO Schultz also revealed plans for a new online customer experience called the Starbucks Digital Network, in a parnership with Yahoo, which will debut later this fall and will allow customers free unrestricted access to various paid sites and services such as wsj.com, exclusive content and previews, free downloads, local community news and activities, on their laptops, tablets or smart phones.
Network Interface
Starbucks HP rp500 computers have integrated network interface 10/100 NIC. which is a hardware device that handles an interface to a computer network and allows a network capable device to access that network, it is also call a Lan adpater as it allow computers to communicate over computer network.
Network Media
Network media is the actual path over with electrical signals travel over as it move from one component to another. Starbucks uses many kind of media both wired and wireless. Together with AT&T their Wi-Fi network provider they use optical fiber as a communication backbone which allow them to manage network traffic and internet connection. One advantage of optical fiber is that it can carry more information and faster than conventional cables.
(optical fiber cables)
At their headquarter Starbucks uses twisted pair cable to connect routers and servers, which is the cable most widely use for local area network. Starbucks Wi-Fi hotspot use microwave transmissions the advantage of using microwave transmissions is that a substantial amount of microwave bandwitdth is allocated, so high-speed data, video and multimedia can be supported.
Communication Software
Starbucks currently use Window 8 Server for its corporate headquarters its operating system with built in web and virtualization technologies, help Starbucks increase the reliability and flexibility of their server infrastructure as it offer better infrastructure security.
Components or Connecting Devices
Among the components or connecting devices that help build Starbucks network are routers, they use routers as access point which are basically the base stations for the wireless network. As wireless connections components they also use wifi which is the wireless type of communication used in the network. At their headquarter Starbucks also uses switch in order to plug the computers.
Speeds and Connecting Process
Each customer or employee at Starbucks log in to the Wi-Fi network with a unique identifier, so Starbucks won't only know where they are but also who they are. Computers with Wi-Fi network cards connect wirelessly to the wireless router. The router is connected to the Internet of a DSL modem. The Wi-Fi network provides data transmission at speeds of up to 11-54 MBPS. For additional instructions on how to use Wi-Fi network and what security measures go to the article Starbuck Wi-Fi user and security Guides under related links.
Voice over IP
Starbucks use Voice over IP. Which mean they do voice communication over IP network such as the Internet. Starbucks upper managers as well as many customers use Skype to communicate with people around the world. Skype is an application software that allow users to make voice calls over the Internet within the Skype service area for free.
Principles of Network Security
Starbucks strives to maintain appropriate physical, technical and administrative security with respect to its offices and information systems so as to prevent any loss, misuse, unauthorized access, disclosure, or modification of personal information. The first principle is confidentiality, Starbucks protects account information against unauthorized access or release, they will not provide any personal information to any third party unless legally required. The second and third principles, authenticity and integrity kind of goes together, to secure the authenticity of the page and secure the integrity of any information online, Starbucks encrypt the pipe through which personal information, such as credit card numbers is sent, using Secure Socket Layer (SSL) technology to ensure that the information is safe as it is sent over the Internet to their server. Customers can tell if they are using the Secure Socket Layer encryption when a gold or blue padlock appears in the corner of their Netscape or Microsoft browser. SSL keeps others from seeing the personal information by scrambling it so that only their web browser, and the server of Starbucks web site, can decipher it. In addition, customer online password adds another layer of security to their profile. These measures make it very unlikely that a credit card information will be compromised online. Finally but not least the last principle which is availability, Starbucks website and online communities are always available 24 hours a day 7 days a week. At any time Starbucks can be contacted via emails or phone Mon-Fri (5AM-8PM PST). In case a website is unavailable Starbucks compromised itself to have it running back on 24 hours.
Domain Name
Starbucks domain is http://www.starbucks.com/ the power of the domain name lies in that it gives a website its own unique web address where it could be found at and associated with. The company IP or Internet Protocol is 12.129.19. An IP address is a numerical label that is assigned to devices participating in a computer network that uses the internet protocol for communication between its nodes.
(Internet Service at Starbucks) Services focused towards certain types of customers and also innovation has been very important in helping Starbucks differentiate itself from its competitors. Starbucks goes as far as employing trained chefs and food scientists to develop new products as the introduction of its Creme Frappuccino line and the infusion of Tazo tea drinks, to reach out to target audiences using a differentiation approach. The Starbucks DoubleShot espresso drinks is their answer to the energy drink trend. This product is aimed at a younger crowd, the same customers targeted by energy drinks such as Red Bull. Another group of customers targeted by Starbucks are business person. As result Starbucks began offering high-speed internet access available at many of its stores. The service allows those with AT&T HotSpot access to connect to the Internet inside Starbucks location.
Porter's Five Forces Model
Buyer Power
Starbucks is not susceptible to powerful buyers. The power of buyers is low, because no individual buyer represents a large fraction of sales revenues or purchases in large volumes. Also there are few substitutes for premium coffee. In addition customer enjoy the friendly atmosphere, excellent customer service, and speedy order fulfillment that Starbucks offers. Most customers are loyal to Starbucks due to the high customer satisfaction that they offer and the high quality of their product. The only credible threat that buyers pose is that of switching to another brand. Because price elasticity is high, Starbucks makes sure their prices are optimal and to offer high quality product and services that differentiate from the rest.
Supplier Power
The power of supplier in this industry is low, because coffee is a commodity product and buyers are free to choose between many suppliers. For Starbucks in particular the case is different, Starbucks suppliers seem to possess a considerable amount of power. Starbucks use high quality coffee beans which can only be grow in certain areas of the world, like Brazil, Ethiopia and Costa Rica. Starbucks is very dependent on these high quality beans. Also the fact that all Starbucks supplier need to follow Starbucks Social Responsibility Standards, and that Starbuck encourage diversity in their suppliers by seeking out women and minority owned business to do business with, is something that can lead Starbucks to lose good opportunities and bargain. In order to reduce the supplier power Starbucks negotitate fixed long price purchase contracts, and maintain a close relationship with their supplier. When it comes to technoloy the power is less, currently T-Mobile loses Starbucks and AT&T becomes Wi-Fi hotspot gian for the company, offering only $4 for a two hours Wi-Fi session, compared to $6 per hours which T-Mobile was offering. Now that is a bargain!!!
(Coffee Journey)
Threat of Substitute Products
Even though there are lot of substitutes as regular coffee, fruit juices, colas and sodas, none of these products offer the experience and atmosphere provided by the specialty retailer. In general the threat of substitute products is low.
Threat of New Entrants
There is a great deal of risk of entry by potential competitors due to the low start up costs. Company as Procter and Gamble are currently a potential threat to Starbucks as they have the infrastructure to distribute prepackaged coffee to reailers. By mid August of 2010 Procter and Gamble will be entering the market teaming up with Dunking Donuts to distribute prepackaged coffee to around 40,000 retail outlets nationwide. Starbucks's physical positioning reduces the number of favorable locations available for new entrants, also Starbucks have established a differentiated brand with a wide variety of unique coffee flavors, which has led to brand loyal customers, and also increase customers switching costs.
Rivalry Among Existing Competitors
The number of competitors is large but only a few firms dominate the industry. One of Starbucks larger competitors is Caribou Coffee. But unlike Starbucks Caribou Coffee aims to expand into smaller communities rather than high pupulation areas. In fiscal year 2009 Starbucks reported total revenues of $2534.70 million compared to its nearest competitors Caribou COffee who reported revenues of $262.54. It is easy to see that Starbucks holds a dominant position in the specialty coffee industry.
Starbucks Business Initiatives
(Employee Scanning a 2D bar code mobile coupon) Starbucks is currently using a digital technology provider Codilink, which specializes in mobile services in order to offer loyalty programs to its clients. The main goals of these initiatives are to reward loyal Starbucks customers and to get to know knew customers and attract them to Starbucks stores, the program is based on 2D bar code coupons deployed via SMS. Starbucks is also using Onyx Software to power CRM initiative. Starbucks uses the Onyx system to manage corporate sales activities including efficient delivery and management of leads, effective pipeline management, faster activation of new accounts, and more inmmediate resolution of customer issues. The mission of Starbucks is to have satisfied customers, and they ensure this by providing a positive customer experience, and quality products. In order to accomplish their objectives Starbucks uses top line initiatives, which allow them to reach new customers, create new products, and keep growing.
Starbucks IT Organization
Starbucks IT organization is a Matrix, which means is make up of cross functional work teams that have the ability to report to heads of the organization other than the primary supervisor, and it allow communication upward, downward and laterally with its employees. Technology for Starbucks, is not center stage but is use rather to facilitate the smooth running of its business, it needs to be included in all strategic planning processes. This mean that whenever Starbucks is planning to shift a particular business practice, the goal will be to include IT as a component of that planning process to ensure that the new plan will have the greatest degree if technological support possible.
Starbucks IT Culture Philosophical Approach
Starbucks philosophical culture is decentralized, this mean that they love innovation and are early adopters of technology, they keep up with technology in order to get competitive advantage over their competitors. A clear example of their position is the Starbucks card mobile, which is currently the most significant recent innovations in technology mobile payments. Now we need to wait and see what companies will follow Starbucks by also implementing this system.
Kinds of E-Commerce Starbucks uses
Starbucks uses the B2C (Business to Consumer) e-commerce. Starbucks launched a website in order to be able to better serve its customers and utilize internet technology to keep up with the changing face of globalization. Many loyal customer visit the Starbucks website,http://www.starbucks.com/, to learn information about the art of brewing and roasting coffee, to buy coffee products and gifts. The website also offers services such as the "Starbucks Taste Matcher", which interactiely recommends specific coffee roasts and blends according to the customers preferences. On its website Starbucks also uses B2B (Business to business) commerce. They provide their coffee products to restaurants, airlines such as United Airlines and hotels such as Marriott.
Starbucks Internet Business Model
Starbucks primarily uses a Business to Consumer internet business model. Starbucks internet business model is all about people. Starbucks realized that 90% of Starbucks customers are internet users, and in order to sastify customer needs, they created the website which is broken down into six sections, Coffe (Beans Blends Brewing), Menu (Drinks Food Nutrition), Coffehouse (Music Wi-Fi Community), Responsibility (Ethical Local Global), Card (Register Reload Reward)and Shop (Search Comapare Buy).
Starbucks Marketing Mix
Starbucks has a Twitter page with more than 180,000 followers and a Facebook page with close to 3.7 million fans. Starbucks introduced a contest in which the first person to post an online photograph of one of the company's newest mearketing posters will win a prize. Contest such as these attract thousands of customers, also special offers, coupons and discounts distributed via Facebook seem to be at the heart of Starbucks' magnetic appeal on the social network. Also by broadcasting their ad campaigns on YouTube Starbucks has target the largest online video community ever.
(Starbucks YouTube ad)
Payment System
Starbucks Coffee Co. has launched the 2D bar code payment system for customers to pay via their IPhone or IPod touch. The Starbucks payment app, which is available free of charge at Apple's App Store, lets customers use a credit card to put money on a virtual Starbucks card.
(Starbucks Payment system)
Starbucks Business Strategy Article Summary
On the article "Starbucks Business plan" the author talks about how Starbucks differentiate from the rest of its competitors by providing unique products. Product with quality which sastify their customers and in return create loyal customers. By providing excellent service, and giving customer a new experience Starbucks have become the leader in the industry. Also Starbucks employee have contribute to their sucess as they are the one involve in the day to day operation with most of the customers. They get to know customers so well that they personalized the service they offer, and that make customers feel valuable. Sastify employee mean sastify customers, that is the reason why Starbucks make sure to provide continue training to their employee. Starbucks has become so successful due to its innovations, always trying new ideas in order to get competitive advantage. Currently Starbucks biggest competitor is Caribou Coffe, but at the same time it is not big enough, because with 15,011 stores worldwide Starbucks is far ahead of its competition. The complete article can be found under related links (Starbucks Business Plan).
Starbucks is one of the largest Coffehouse Company in the world. It is typical company-owned store has a pleasant coffee-house atmosphere replete with couches and Wi-FI. Starbucks also licenses stores, not to individuals but to other businesses. For example in US Starbucks licenses stores to Barnes and Noble booksellers. Some of these establishments provide similar Starbucks atmospheres; others just have a counter to sell coffee and pastries. Starbuck's stores account for about 90% of Starbuck's revenue. The first Starbucks was opened in Seattle, Washington on March 30, 1971 at Pike Place Market by three partners, where it remains in operation and where the main headquarters are located.
The CEO
The Comapny took a change in direction through the views of Howard Schultz current CEO of Starbucks who after visiting Italy tried to adapt the same principles in order to build a strong bar culture. Schultz utilized Starbucks ability to provide quality coffee beans and opened up a new store called II Giornale. In 1987 Giornale took over the assets of Starbucks for $3.8 million and also changed its name to Starbucks Corporation. Currently there are 17,133 stores in about 49 countries, which include about 11,068 in the US, more than 800 in Japan and about 1,000 in Canada. When asked by My Prime Time Magazine the secret to his success, Schultz answered " Don't be threatened by people smarter than you. Compromise anything but your core values. Seek to renew yourself even when you are hitting home runs. And everything matters."
Howard Schultz at Starbucks
Ethical and Social Responsibilities
Starbucks believe that businesses can and should have a positive impact on the communities they serve. They are dedicated to earning the trust and respect of their customers, partners and neighbors. By being responsible and doing the things that are good for the planet and each other. In order to accomplish their mission statement, they have installed a list of principles, stated as the understanding of environmental issues, sharing information with their partners, and striving to buy, sell and use environmentally friendly products. Starbucks also organize activities as neighborhood clean-ups and walk-a thons.
Policies that also have been implemented are the bying policies, which only allow the company to purchase from those other businesses (suppliers) who follow the same
environmental strategy as Starbucks.
Environmental Stewarship
Starbucks formalized its business pratice ethics in 2006, in its manual titled " Standards of Business Conduct". Which is a guide for all employees, which Starbucks refers to as "partners" to use for their business dealings with one another, with customers and with suppliers. Also Starbucks created the "Starbucks Information Security Standards, which deal with the use of technology and information within the company. And finally the Starbucks Privacy Statement which indicate how Starbucks uses private information. Starbucks was recognized in 2010 as one of the world's most ethical companies for going beyond making statements about doing business ethically and translating the word into action.
Security and Risk Management
To keep up with the rapid growth Starbucks reduce risk through training, surveillance and supply chain programs. Starbucks security function's goals are to protect people, secure assets and enable mission. Those six words inform everything the Starbucks security team does, from keeping coffee buyers safe on trips to Indonesia and Ethiopia, to helping coffee baristas understand what to do if there's an attempted robbery, to monitoring coffee shipments from farm to roasting plant to corner store. Currently Starbucks use a risk management system called RISKMASTER, which allow them to process around 300 claims per month. Erwin Mallernee the director of risk management for Starbucks said "We put together a program where we could cap losses within the deductible and retention at certain predetermined amounts, and we bought a policy for that purpose, so I could guarantee that my losses would never exceed those amounts."
Erwin Mallernee (Starbucks Director of Risk Management)
