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130 Part One Organizations, Management, and the Networked Enterprise

time while waiting for coffee to drain, and finding improve their training. Implementing Wi-Fi tech-
ways to reduce the amount of time each employee nology enabled Starbucks to increase the in-store
spends making a drink. Starbucks created a 10 presence of district managers by 25 percent without
person “lean team” whose job is to travel the coun- adding any extra managers.
try visiting franchises and coaching them in lean In 2008 and 2009, the weakened economy forced
techniques made famous by automaker Toyota’s Starbucks to close 900 stores, renegotiate some
production system. rents, cut prices on some of their big ticket items,
Store labor costs Starbucks about $2.5 billion, and begin offering price-reduced specials, such as
amounting to 24 percent of its annual revenue. If a breakfast sandwich and a drink for $3.95. Cost
Starbucks is able to reduce the time each employee reductions from procedural changes made it pos-
spends making a drink, the company can make sible for Starbucks to offer these lower prices.
more drinks with the same number of workers or Major fast food chains already used these
with fewer workers. Alternatively, Starbucks could techniques. While some baristas have resisted
use this time savings to give baristas more time to the changes, and analysts were skeptical that the
interact with customers and hopefully improve the changes would take hold, Starbucks attributes much
Starbucks experience. of its recent uptick in profits to its efforts to go lean.
Wireless technology enhanced Starbucks’ busi- Starbucks CEO Howard Schultz said that “the major-
ness process simplification effort. Starbucks district ity of cost reductions we’ve achieved come from a
managers use the in-store wireless networks to run new way of operating and serving our customers,”
store operations and to connect to the company’s and also added that the time and money saved was
private corporate network and systems. Starbucks also allowing the company to improve its customer
district managers were equipped with Wi-Fi enabled engagement. By 2011, Starbucks had returned to
laptops for this purpose. Before the in-store wireless profitability and continuing growth, with plans to
networks were implemented, a district manager open 500 new stores, in large part because of the
who oversaw around 10 stores had to visit each success of each these changes.
store, review its operations, develop a list of items Sources: “Starbucks Corporation,” The New York Times, January
on which to follow up, and then drive to a Starbucks 26, 2012; Mark Raby, “Starbucks Mobile Payments Hit 42
regional office to file reports and send e-mail. Million,” Mark Raby, “Starbucks Mobile Payments Hit 42 Million,”
SlashGear, April 9, 2012; Trefis Team, “Starbucks Brews Up
Instead of running the business from cubicles in
Smartphone Payment Platform,” Forbes, February 7, 2011; http://
regional headquarters, Starbucks district managers blogs.forbes.com/greatspeculations/2011/02/17/starbucks-brews-
can do most of their work sitting at a table in one of up-smartphone-payment-platform/; Ryan Kim, “Starbucks’ New
Portal Designed with Mobile in Mind,” Businessweek, September
the stores they oversee. The time saved from going
2, 2010; Starbucks Form 10-K for Fiscal Year ended October 2,
back and forth to regional offices can be used to 2011; Julie Jargon, “Latest Starbucks Buzzword: ‘Lean’ Japanese
observe how employees are serving customers and Techniques,” The Wall Street Journal, August 4, 2009.

CASE STUDY QUESTIONS

1. Analyze Starbucks using the competitive forces 3. How much has technology helped Starbucks
and value chain models. compete? Explain your answer.
2. What is Starbucks’ business strategy? Assess the
role played by technology in this business
strategy.

on the Web. Profits have been dampened. Table 3.5 summarizes some of the
potentially negative impacts of the Internet on business firms identified by Porter.
The Internet has nearly destroyed some industries and has severely
threatened more. For instance, the printed encyclopedia industry and the travel
agency industry have been nearly decimated by the availability of substitutes

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