Starbucks had a rapid growth from 1996 to 2006 reaching to 12,440 from 1,000

stores, worldwide. Starbucks had growth through expansion and made adjustment
operationally. The decade of commoditization of the Starbucks brand have led to
upside along with some major downside. In order to make more revenues or scale
through store expansion/distribution, Starbucks saw the dilution of its brand and
core values. The decisions that led to new assets and capabilities added less value
than the sum of its sole pieces. This article will shed some light on the major
tradeoffs Starbucks had while they were trying to reach every street across the
globe.

La Marzocco espresso machines replaced by push-button Verismo models in every

store
The major issue of timing and efficiency was meliorated dramatically, going from
60s to 30s to make an espresso shot. This decision also helped in hiring and training
employees more simplistically. However, this led to alienation of customers from the
intimate experience they were having with Barista while coffee being made. The
follow-up for installing Verismo model necessitated fresh roasted coffee to be
provided in a flavor-locked packaging through centrally roasted and distributed
coffee beans. The grinding beans for each cup of coffee was time consuming and
was not able to meet 3 min service goal. However, this led to removal of freshness
from the coffee, as earlier, customers could see and smell their coffee being grinded
and roasted in front of them. Further, this might have also distanced servers to
really feel like Baristas but more like an ordinary coffee server, thus devaluing the
whole in-store experience. Thus, the premium-ness and uniqueness was debarred
from Starbucks coffee shops.

Streamlining the design of stores

Gain of efficiencies and high return of investment were met by taking then seemed
appropriate decision by Starbucks. Through this Starbucks was able to satisfy
shareholders by generating healthy financial progress. But Starbucks lost its
differentiation among competitors. Starbucks started looking like any other ordinary
coffee chain than a special place it used to be. There was also a growing
discrepancy between resources each store could keep or utilize, some stores would
be missing filters or French presses. The same store sales revenue year-on-year was
the factor that Starbucks forgot to consider as key determinant of its financial
success. Further, Starbucks was able to increase its revenue at the beginning of this
decade, as there were more Starbucks that could be found at every corner, but this
might have led to cannibalization of its previous old stores as well. As each Barista
or manager responsible to gain market traction was spending less time per
customer, it was obvious that Starbucks wont be able to retain that customer any
more. Starbucks revenue model is based on recurring customer spending, but
streamlining core activities would create a leaky bucket i.e. low retention rate.
All these changes helped Starbucks become well-known, but Starbucks forgot that it
wont be able to brand itself as premium coffee house if its offering is no better than
a chain. Starbucks initiatives forced early adopters to become minority, once
Starbucks focused on entertaining customers who were there to get their cup of
coffee as quickly as possible. Further, in the perception of coffee traditionalist, the
influx of new product offerings created fracture in the integrity of Starbucks. A
decade-long ostensible growth achieved by Starbucks lost the grip from being a
differentiated company. It might have to cut distribution to enhance exclusivity or
cut the prices to match the market. Lastly, this article believes that as Starbucks
was IPO at that time, Starbucks customers were not coffee drinkers rather its
shareholders.