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In today’s overcrowded industries, competing head-on results in nothing but a bloody red ocean of rivals fighting over a shrinking pool. Companies have long engaged in head-to-head competition in search of sustained profitable growth, they have fought for competitive advantage, battled for market share and struggled for differentiation. Blue Ocean Strategy argues that tomorrows leading companies will succeed not by battling competitors, but by creating “blue oceans” of uncontested market space, where competition is rendered irrelevant of companies that made competition irrelevant in their industries to elicit the strategic logic behind Blue Ocean Strategy.

Starbucks did not take away from its competitors or make coffee go away. It simply made it more popular!

Starbucks began in 1971 when three academics—English teacher Jerry Baldwin, history teacher Zev Siegel, and writer Gordon Bowker—opened a store called Starbucks Coffee, Tea, and Spice in the touristy Pikes Place Market in Seattle. Starbucks has since then increased to over 13,000 stores nationwide.

How has Starbucks been so successful?

The primary reason Starbucks has experienced such great success is their business model that is all about people worldwide. From customer service to employee benefits their business model focuses on the people.

They have their own coffee farmers and harvesters, their own roasters, and carefully followed recipes that are just their own, including the Frapaccino. They offer the best payment plans and benefits packages available to all of their farmers (something that many of these people have gone without for generations), they have great payment plans and benefits packages for their local employees including fantastic benefits for their part time employees (something that doesn’t happen very often), and with this idea of people they have worked hard to please those that work hard to please their customers.

Customer service has always been a high priority with Starbucks. It is why a manager or assistant manager at a Starbucks receives at least 80 hours of training and a barista receives 40 hours of training before they are allowed to make drinks without supervision.

CEO, Howard Schultz, figured out how to attract, motivate, and reward store employees in a manner that would make Starbucks a company that people would want to work for and that would result in higher levels of performance. Moreover, Schultz wanted to cement the trust that had been building between management and the company’s workforce. In 1995, Starbucks implemented an employee stock purchase plan. Eligible employees could contribute up to 10 percent of their base earnings to quarterly purchases of the company’s common stock at 85 percent of the going stock price. The total number of shares that could be issued under the plan was 4 million. After the plan’s creation, nearly 200,000 shares were issued; just over 2,500 of the 14,600 eligible employees participated.

Schultz’s approach to offering employees good compensation and a comprehensive benefits package was driven by his belief that sharing the company’s success with the people who made it happen helped everyone think and act like an owner, build positive long-term relationships with customers, and do things efficiently.

Starbucks’ focus on its employees has lead to great customer service. As a result, Starbucks has achieved elite brand recognition that of Coca Cola.

How was Starbucks so successful in the coffee industry without destructing other companies?

Starbucks did not take away from its competitors or make coffee go away. It simply made it more popular!

First, Starbucks has great attention to detail in stores. The employees are well-trained and qualified to make specific drink orders. They offer a wide range of types of coffee, drinks, food, etc. Customers who are particular about their orders are confident when they go to a Starbucks.

Second, Starbucks has been able to attract coffee and non-coffee consumers by offering a wide variety of drinks, coffees, food, snacks, mugs and other paraphernalia. Their plethora of products offered complements individuals of a wide range to have an interest in Starbucks.

Thirdly, Starbucks has transcended traditional coffee houses into a pleasant experience. The well-trained and happy employees provide quality customer service. They are pleasant and consistent in service. Starbucks has also transitioned coffee into a social platform. People gather at Starbucks to relax, read, use the internet, meet for business or chat with friends, etc.

The success of Starbucks has only increased the popularity of coffee and tea amongst consumers. Furthermore, Starbucks has been able to attract the non-customers through there business model of focusing on people. Consequently, Starbucks’ success has experience great success in the coffee industry without destructing competitors.

This entry was posted on Thursday, June 10th, 2010 at 9:39 am and is filed under 1, Blue Ocean Strategy Success Stories. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.