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Question: Starbucks is the world’s largest specialty


Starbucks is the world’s largest specialty coffee retailer, with more than 16,850 coffee shops in about 40 countries. For years, Starbucks has continued to grow throughout the United States and internationally, opening franchises at an impressive rate. From 2002 to 2007 alone, the company tripled the number of stores it operated worldwide. Starbucks offers a unique experience: high-end specialty coffees and beverages, friendly and knowledgeable servers, and customer friendly coffee shops. This was a winning formula for many years and enabled Starbucks to charge premium prices.
During the economic downturn beginning in 2008 profits plunged. Customers complained that the company had lost its hip, local feel and had become more like a fast-food chain. Many coffee drinkers went in search of cheaper alternatives from McDonald’s and Dunkin’ Donuts for their coffee fixes. Starbucks stock lost over 50 percent by the end of 2008. Major changes were in order.
Starbucks used the opportunity to overhaul its business using several different strategies simultaneously. First, the company has revamped its in-store technology and sought to integrate its business processes with wireless technology and the mobile digital platform. Also, rather than copy the practices of competitors, Starbucks pursued a more aggressive product differentiation strategy, intended to emphasize the high quality of its beverages and efficient and helpful customer service. At the same time, however, Starbucks also focused on becoming ‘lean’, like many of its competitors, eliminating inefficiency wherever possible.
When Starbucks set out to improve its customer experience, it found that more than a third of its customers are active users of smartphones. The company set out to implement several features and improvements that would appeal to this segment of its customer base. First, Starbucks implemented a technology that allows customers to pay using a smartphone app. The app is integrated with the Starbucks Card system, which allows regular customers to pay with a pre-paid and rechargeable card at any Starbucks branch. When customers make a purchase using the app, a cashier scans a bar code displayed on the phone, and the resulting sale is charged to the customer’s Starbucks Card account. Customers report that paying using this app, available for all major smartphone operating systems, is much faster than traditional forms of payment.
Many of Starbucks’ most loyal customers regularly spend time using the free Wi-Fi wireless network offered in each store. A majority of these customers also use mobile devices to connect to the in-store Wi-Fi networks. Recognizing this, Starbucks launched what it calls the “Starbucks Digital Network”, a portal designed specifically for mobile devices as opposed to traditional Web browsers. The site is optimized for all major smartphone operating systems (iOS, Android, and BlackBerry), and responds to the multi-touch capability of devices like the iPad.

MIS in ACTION
1. What functions are provided by the Web site?
2. How does the Web site support Starbucks’ business strategy?



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