Business Model Canvas Model Of Starbucks For Innovation Essay

Question:

Discuss about the Business Model Canvas Model of Starbucks for Innovation.

Answer:

Introduction

Business Model Canvas is used by organizations for building strategy and as a tool for entrepreneurship. It helps describing, challenging, designing, and inventing a company’s business model. It is a start up template that helps developing new businesses and documenting the existing business models. Alexander Osterwalder initially proposed this model in his book Business Model Ontology. The following is the template of business model canvas.

Starbucks is a coffee chain and is one of among the leading companies in US and around the world. It was found in the year 1971. The company was primarily involved in only selling coffee and coffee machines. However, currently it engages purchasing the whole coffee beans, roasting them and selling them all around the world (Forbes, 2016).

BMC as a tool for Innovation at Starbucks

The model encompasses the building blocks or activities in its descriptions. Osterwalder’s work (2010) had proposed that the activities based on similarities could be placed in a single model of reference, within a wide range of business conceptualization. This business model helps in easy description of the business and its strategy (Osterwalder, 2004). The following are the building blocks of Starbucks strategy of business model.

Infrastructure

  • Key activities: Every Starbucks store was designed to highlight all quality aspects to its customers. The images, music, surfaces and the coffee at the store is based on the customer satisfaction to create a sense of brand loyalty. Their major or key activities are: coffee beans, seasonal products, complementary products and pastry.
  • Key resources: The key resource functions are Starbucks are its functions in the organization which include financing, human resources, facilities, coffee equipment and accessories and their suppliers.
  • Partner Network: Increasing the business operations and reducing risks in a business calls for a buyer-supplier relationships. The partners of Starbucks are Alsea, Apple, KFC, Pizza Hut and Burger King.

Offering

  • Value Propositions: It is the total offerings that a company provides to meet the needs of a customer. The value proposition of a company is what it distinguishes from its competitors’. The value proposition of Starbucks over its competitors is based on brand strategy comprising of three components. They are “live coffee”, service (customer intimacy) and atmosphere (Jacobsen, 2013).

Customers

  • Customer Segments: Starbucks focused on the young urban adults i.e. the educated and high-income group as their customer segments.
  • Channels: The major distribution channels of Starbucks include coffee shops, wholesale and direct sales. The various channels where Starbucks gets distributed are special coffees, supermarkets, hotels and airlines.
  • Customer Relationships: Various forms of customer relationships at Starbucks are customer care website, Starbucks card, app (iTunes), fast service, personal attention and quality.

Finances

  • Cost Structure: The monetary consequences of a business model are represented here. It is cost driven and value driven. The cost structure of Starbucks includes ingredients, merchandise, equipment, and salaries, building rent, store maintenance and freight.
  • Revenue Streams: It represents the manner in which a company makes revenue from each customer segment. The revenue structure of Starbucks includes coffee, pastry, parcel, merchandise, and partnership.

Strategies of Business Model Canvas

The business model canvas also includes four different types of strategies that a company could adapt to increase their offerings to customers than its competitors. They are:

  • Long Tailed
  • Bundled
  • Open Innovation
  • Freemium

Starbucks could involve these strategies into its BMC to enhance its productivity and increase its brand image.

  • Long Tailed: Under this strategy of BMC the concept relates to selling fewer products with a large number of volumes. The offer made is to niche markets and the customer segments are the large breadth of this offering. Starbucks adapts to this strategy as seasonal model, wherein they introduce beverages that are seasonal in nature. These are introduced on festive lines and those, which cater to a niche market, as favorite holiday beverage (Kline, 2015). Usually introduced during Christmas makes it as a most awaited beverage for its customers.
  • Bundled: Under this strategy of BMC is the manner in which the products are bundled together with a pricing strategy that enables in customers buying more products at one go. Starbucks had introduced an offering of bundled products with pricing techniques. They introduced a value offering breakfast combos, which included a tall cup of coffee and sandwich or a latte and coffee cake or oatmeal. Such offering is aimed at price sensitive customers, who feel that are offered many products at a bundled pricing. Therefore they would purchase more than they would actually do.
  • Open Innovation: This is a strategy under the business model that assumes that a company should make use of external and internal ideas and paths towards market to advance their technology and also share the reward. The open innovation adapted by Starbucks was- ‘My Starbucks Idea’ through crowdsourcing. They became the first company to adopt as a social media engagement. Under this strategy the company could benefit by following:
  • Getting ideas from customers about how to improve their products and services.
  • Interaction between each other, ability to vote and also comment on this platform.
  • Validation of idea of making payment through mobile devices etc.
  • Freemium: This strategy of business model states that a product f service is offered for free. Customers could get upgraded by paying a little extra for getting an access into expanded area. Starbucks follows Freemium model by
  • Offering their customers an access to their Wi-Fi.
  • Free Access to read premium content like Wall Street Journal through Starbucks Digital Network (Starbucks Company Website).

Conclusion

A business model canvas of Starbucks described the way it has been designed and implemented for effective business structure. Starbucks business model is an example of how innovation helps in sustaining and beating competition around the globe.

References List

Osterwalder, Alexander, 2004, The Business Model Ontology, University De Lausanne, viewed 14 November 2004, from

Jacobsen, Lauren, M., 2013, Starbucks Value Proposition, viewed July 26 2013, from

Kline, Daniel, 2015, The Long Tail Effect From Starbucks Holiday Drinks, viewed November 4 2015, from

Starbucks Digital Network (n.d), at

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