Page 130 -
P. 130
Chapter 3 Information Systems, Organizations, and Strategy 129
INTERACTIVE SESSION: ORGANIZATIONS
TECHNOLOGY HELPS STARBUCKS FIND NEW WAYS TO COMPETE
Starbucks is the world’s largest specialty coffee account. Customers report that paying using this
retailer, with over 1,700 coffee shops in 55 app, available for all major smartphone operat-
countries. For years, Starbucks grew throughout ing systems, is much faster than traditional forms
the United States and internationally, opening of payment. In its first 15 months of use, the
franchises at an impressive rate. From 2002 to 2007 Starbucks mobile payment system processed 42
alone, the company tripled the number of stores it million transactions.
operated worldwide. Starbucks offers a unique expe- Many of Starbucks’ most loyal customers regu-
rience: high-end specialty coffees and beverages, larly spend time using the free Wi-Fi wireless
friendly and knowledgeable servers, and customer- network offered in each store. A majority of these
friendly coffee shops. This was a winning formula customers also use mobile devices to connect to the
for many years and enabled Starbucks to charge in-store Wi-Fi networks. Recognizing this, Starbucks
premium prices. launched what it calls the “Starbucks Digital
During the economic downturn beginning in 2008, Network,” a portal designed specifically for mobile
profits plunged. Customers complained that the com- devices as opposed to traditional Web browsers. The
pany had lost its hip, local feel and had become more site is optimized for all major smartphone operat-
like a fast-food chain. Many coffee drinkers went in ing systems (iOS, Android, and BlackBerry), and
search of cheaper alternatives from McDonald’s and responds to the multi-touch capability of devices
Dunkin’ Donuts for their coffee fixes. Starbucks stock like the iPad.
lost over 50 percent of its value by the end of 2008. The Starbucks Digital Network site was devel-
Major changes were in order. oped in partnership with Yahoo and functions as a
Starbucks seized the opportunity to overhaul content portal. Starbucks customers using the site
its business by using several different strategies will receive free Wall Street Journal access, select
simultaneously. First, the company has revamped free iTunes downloads, and a wide variety of other
its in-store technology and sought to integrate its content. The site will integrate with Foursquare,
business processes with wireless technology and the a location-based social networking site for mobile
mobile digital platform. Also, rather than copy the devices. This arrangement will allow users to
practices of competitors, Starbucks pursued a more check in and receive award points using Starbucks’
aggressive product differentiation strategy, intended site. Because Starbucks has the most Foursquare
to emphasize the high quality of their drinks and check-ins of any company to date, this feature has
efficient and helpful customer service. At the same been popular with customers.
time, however, Starbucks also focused on becoming Rather than serve ads on the site, Starbucks has
‘lean’, like many of their competitors, eliminating opted to offer the site free of advertising, hoping
inefficiency wherever possible. that striking deals with content providers will make
When Starbucks set out to improve its customer it a profitable venture. Even if the Starbucks Digital
experience, it found that more than a third of its Network is not highly profitable, analysts sug-
customers are active users of smartphones. The gest that the site is an effective way for Starbucks
company set out to implement several features and to improve its relationship with its most valuable
improvements that would appeal to this segment customers and a creative use of the mobile digital
of its customer base. First, Starbucks implemented platform to enhance customer satisfaction.
a technology that allows customers to pay using In addition to revamping their business to better
a smartphone app. The app is integrated with the serve the needs of their mobile users, Starbucks
Starbucks Card system, which allows regular cus- has made a concerted effort to become more
tomers to pay with a pre-paid and rechargeable efficient, reduce waste, and use the time saved
card at any Starbucks branch. When customers to provide better customer service. Starbucks set
make a purchase using the app, a cashier scans a out to streamline the business processes used in
bar code displayed on the phone, and the resulting each of its stores so that baristas do not need to
sale is charged to the customer’s Starbucks Card bend down to scoop coffee, cutting down on idle
MIS_13_Ch_03_Global.indd 129 1/17/2013 2:26:24 PM
