“Starbucks new Innovation myStarbucks Starbucks Card Mobile Application”

TMIA
Introduction
Business has changing to suit with every situation which changing always as foll
ow by economic and increasing of rival and completion. Every company need to imp
rove their strategies approach to gain competitive advantage and survive in thei
r markets as long as they can also to go in global market. Many corporations try
to change and improved their business for increased customers and profits as th
e way to reach through customers easily than before, thus, there are e-commerce
which is a way to change the figure of competition such speed of action and the
character of leadership. (Kakakota R, and Robison M., 1999). Every Organizations
’ have to determine of situation for a new millennium as new economic, new tools
or new style and also generate new innovative ideas to change their business cu
rrent position and to enhance their business in the greater way than competitors
, every organization make an effort to create new innovative ideas or product or
services to marketing their new strategy theory to consumer to achieve the mark
et place.
The main of this assignment will introduce the nature, benefits and failure or s
uccesses of innovative ideas which are generated by companies own strategy polic
y. However, this assignment is representing as a report format. In this case the
reports are divided into 2 parts. 1st part introduce the Starbucks company back
ground and its new innovative Starbucks card mobile- the next innovation from th
e Starbucks Coffee Company, and also explore its success or failure stories, and
2nd part illustrate the literature review of innovation, and why its importance
for each business organizations and examples of some most success full creative
innovation companies names

Part 1:
Company background
History of Starbucks
In 1971 Starbucks coffee company was established and first shop was opened in S
eattle’s Pike Place Market. In 1980, Howard Schultz jointed the company as a dir
ector of retail operations and marketing, it was already a local, highly respect
ed roaster and retailer of whole bean and ground coffees. Italian espressos insp
ire him to overtake the Starbucks with the support of local investor in 1987. In
1996 from the first time they introduce their brand coffee shop in overseas loc
ation in Tokyo, Japan, working local companies. Now Starbucks are the world’s le
ading retailers, roaster and brand of specialty coffee in over 32 countries worl
dwide, with coffee houses in North America, Asia Pacific, Europe and the Middle
East. More than 15 million customers visit a Starbucks coffee house every week (
Source: Starbucks [online])
Starbucks in UK
In May 1998, Starbucks Coffee Company that originated in US has entered the Euro
pean market successfully during its gaining of 65 Seattle Coffee Company stores
in the UK. The company focuses on a great commitment to customised coffee, simil
ar company values and a mutual respect for people and the environment (www.starb
ucks.co.uk, 2009).
Financial performance of Starbuck Coffee Holdings UK Ltd, 2004 and 2005
Year ending September 2004 2005 % change
Turnover (£m) 204.0 244.2 +20
Pre-tax loss (£m) (8.1) (12.2) +51
Branches (no) 421 467 +11
Figure 1: Financial performance of Starbuck Coffee Holdings UK Ltd, 2004 and 200
5
Source: Companies House/Mintel (Mintel, 2007)
According to the figure 1, the turnover of Starbuck Coffee increased £204m to £2
44.2m between 2004 and 2005 respectively. At the end of 2006, 70% of branches of
Starbuck were still in the US market which has more than 8,800 of shops. The UK
 is important for Starbucks as Starbuck has 535 branches at the start of 2007 an
d still has space to grow. With the use of the brand within three months in 2006
, A 19% penetration rate has been given to Starbuck by Consumer survey of Mintel
which ahead of Costa s 17% (Mintel, 2007). Starbucks has involved in an increas
ed trend in partnership by combining with Borders Bookshops. This could help the
m to expand the growth of branded coffee bar operators. In November 2006, the St
arbucks card was introduced to the UK which presented as a pre-payment system an
d can hold between £2 and £150. It can also be used worldwide in stores that par
ticipate with the Starbuck in US, Canada, Australia and Thailand. In an increasi
ngly competitive market these cards is part of an overall strategy to maximise m
arket share through increasing customer loyalty and retention (Mintel, 2007).
Rational of chosen the Starbucks Card Mobile Application for iPhone
Nowadays, the retail and industry service has more competition and dynamic. Ther
e are increasing of coffee bars or coffee shops with brand and non brand or some
have more create new thing or changing their management and make stronger in th
eir markets to satisfy their customer’s needs.
This report will be attempt to determine that how Starbuck using their new innov
ation ideas to generate brand awareness, also how they are success to introduce
their new products and services to their customer and how it’s inspire consumer
to make decision of selecting the products and services they generated for custo
mers.
Introduction of Starbucks new Innovation myStarbucks Starbucks Card Mobile Appli
cation
To service customer loyalty ways recently Starbucks introduce two free new apps
for the iPhone and iPod touch. One card is known as myStarbucks app and another
branded as a Starbucks Card Mobile.
With the myStarbucks app, customer can search stores, browse the menu and explo
re Starbucks whole bean coffees. However, Customer also can create their own fla
vour perfect drink, and share their flavour with friends via email or SMS.
On the other hand the Starbucks Card Mobile app customer will able to check thei
r balance, can do card registration, have a chance to enjoy rewards, reloading a
nd even can pay for drinks in selected stores. Beside this consumer also get opp
ortunity to for a limited time, the first time they reload $25 or more using the
ir Visa card, they will also earn a $5 bonus, terms and conditions apply. Howev
er, this new innovative marketing service already introduce to USA regions. May
be in couple of day it will introduce to UK coffee Market. (Source: Starbucks [o
nline]).
Figure 2: iPhone Applications of Starbucks

How Starbucks business related with innovation theories and how it achieved its
success Path with their Brand awareness?
Chuck Davidson, Category Manger, Payment Innovation, Starbucks card team of Star
bucks Company introduces and announces the Starbucks Card Mobile app for custome
r iPhone. He also addressed that “you told us (customer) that convenience is imp
ortant to you- what better way to manage your Starbucks Card than with your iPho
ne or iPod Touch? (Source: Starbucks [online]).
Starbucks companies always give high value to their customers and also respect t
heir suggestions, in this circumstance they built an application that they think
will address customer needs. However, with this apps customer will able to know
their needs, for example they will able to check their balance, able to add all
of their favourites cards and can sign in and able to manage their card account
and reload facilities. Alternatively, in reloading part if customer holds Starb
ucks Card account it will real easier for them to maintaining their account, all
they have to do just enter their password into their iPhone and reload process
will running on. Beside this customer can even pay for their Starbucks purchases
with their iPhone or iPod Touch. Already this innovation innovative app testifi
es 16th select location in Seattle, WA and Silicon Valley, CA (USA).
This new technological innovation will change the human habits to bring their wa
llet when they going out, today people can forget to bring their wallet but not
even going to forget to bring their phone, reason it’s become essential. However
, to introduce their innovation to their customers, clients or business partner,
Starbuck follows all types of innovation theories. According to Edward Huizenga
(2004 p 14) “there are four types of innovation innovate theories are able into
market, for example product innovation, process innovation, organization innova
tion and technological innovation.
Product and Service innovation of Starbucks Application
Product refers to tangible and physical products as services of the companies wh
ich present to the target market such as Brand name, Functionality, Styling, Qua
lity, Safety, Packaging repair and support also include of warranty product and
Accessories. (Source: NetMBA [online]). Many companies trying to produced diffe
rent kind of products and design to have high advantage competitive than others,
as seen that products in market have change every day thus there are improving
new technologies and more attractive also to be suit with new life style than pa
st year. For example, Kellogg’s Company produced new snack from cereal for new l
ife style as people no time to have proper breakfast.
Kotler P., Armstrong G., (2001) described about products as anything that offer
to market for attention, for purchase or use or expenditure which might satisfy
a want or need, it also could be services which are form of product include of a
ctivities, offering for sale, advising, and benefits from organisation such as b
anking, hotel or home repair service.
Nowadays, products and services have created more value for their consumers whic
h many organisation trying to make it different than their competition and they
developed it in different kind of products and services for customer’s experienc
e, people not only purchase products or services but now people buy it for new e
xperience, for example, people buy new favour of drink as Coca-Cola with lemon f
avour or cherry favour, or they buy sandwich or burgers because new ingredients
as Subway’s have new sandwiches with chicken and Thai sweet chilli.
Finally by following product and service strategies policy Starbucks recently re
present myStarbucks and Starbucks Card Mobile application packs for iPhone or iP
od customers. Starbucks always give high value to their customers and also provi
de excellent quality product and services to their customer, for this strategies
reason they try to create new innovation product and services always. However,
product and service innovation basic meaning is “New or improved products and se
rvices”. In this circumstance they introduce two new applications for their valu
able customer by following their customer suggestions and survey research.
Processes Innovation of Starbucks
In Process innovation part Starbucks try to process new habit to customer mind y
ou don’t have to bring your wallet when you visit our door or you can choose or
create your favourite drink before processing work start. For example: Customer
wants to order his/her drink with her own choose quantity or flavour, he or she
can use their iPhone or iPod touch to make order and also can do payment process
. Its seems like before product and services read to reach your hand you already
made out your order and just waiting to get it on your own time your reached th
e doors of Starbucks shop. According to Susan Bridgewater, Peter Doyle (1998, p6
) the characteristic of process innovation is enable clients require to be met m
ore productively.
Organizational and Technological Innovation of Starbucks
Organizational innovation means new ways create business model innovation for or
ganization to generating revenue, for example; Google monetizing search. By the
way, Starbucks didn’t introduce any new business model but they introduce new in
novation to their brand by following their own organizational strategy.
K.c. MacLaren, Manager, retail consumer technology mentioned that “Sometimes, ev
en those of us who work at Starbucks want, well, a little more Starbucks. Whethe
r I want to find a store (with hot food, please) or experiment with a new drink,
there are places in my life that Starbucks fits - outside the store. We ve hear
d from you, and you seem to feel that way too. With that in mind, we took a pile
 of great ideas, helpful suggestions, and a bit of wishful thinking and turned o
ut an iPhone/iPod touch app that we think you ll really like”(Source: Starbucks
[online]).
However, Starbucks is completely drink builder; but by following to generation d
emand its try to diverse or improve their organization and product and service s
trategy. In this way Starbucks try to improve organization, which involves trans
formation and development in new innovation.
On the other hand, at Technological innovation side Starbucks generate the ideas
to introduce Starbucks applications pack to their customers and also iPhone and
iPod touch customers. So it can be seen that, all of main keys innovation conne
ct with each others. However, Starbucks main aim in their innovation sector is t
o improve products and services quality for their customer and able to spread th
eir new myStarbucks and Starbucks Card Mobile apps to globalize.
Reason of success and failure of Starbucks innovation concept
Starbucks Corporation (NASDAQ: SBUX) is one of the top 18 innovators in The Inno
vation Index. SBUX is up 18% for the year owing to the many innovations it brews
each year including the highly successful Starbucks Card that it introduced fiv
e years ago and catalyzed the industry of gift cards (as of the last Innovation
Index weekly report).( Source: Sanjay Dala “ Creativity and Innovation Driving B
usiness- Innovation Index- blog”[online]).
On Oct 14, 2004 in BNET (Business Wire article) website on “Starbucks Strong Inn
ovation Pipeline Continues to Surprise and Delight; Innovation Apparent Througho
ut All Areas of Business Including Store Concepts and Retail Products” - At Star
bucks Corporation s (Nasdaq:SBUX) Analyst Conference today, Starbucks leadership
team outlined the latest innovation updates, including new store concepts, coff
ee, beverages, food and services. Innovation continues to be a major contributin
g factor fueling Starbucks rapid growth and success in the U.S. and internationa
lly.
On the other hand, Jim Donald, CEO designate said “Starbucks has become an endur
ing, global brand by continually raising the bar and finding ways to innovate th
roughout all areas of the business”, he also mentioned that "We will always stay
true to our coffee heritage while offering complementary products and services
to support our ever-growing diverse customer base." (Source: BNET {findarticles.
com} [online].
Conversely, without any doubt that those prove that Starbucks innovation strateg
y policy always draw a strong success path pattern. For a while this innovation
innovative app testifies 16th select location in Seattle, WA and Silicon Valley,
CA (USA). In future it will be globalize all around the Starbucks coffee shops.
However, Starbucks does not always success on the entire new schemes. In 2007, S
tarbucks stated that it is leaving the Jewel food stores in Chicago area, due to
distribution margins or product placement or both reasons their relationship so
ured. Alternatively, Dominick’s is a primary competitor of Jewel’s, builds more
strong connection with Starbucks and planning to add more Starbucks throughout i
ts stores.
Part 2
Literature Review
Concept of Innovation
Innovation defines as an exploiting of new innovative ideas. According to Mckeow
n, Max “Innovation is a new way of doing something or "new stuff that is made us
eful". However, Peter Drucker addressed –“innovations had better is capable of b
eing started small, requiring at first little money, few people, and only a smal
l limited market."
On the on hand, According to Phillip Kotler, (1996)” a product is anything that
can be offered to a market for attention, acquisition, use, or consumption that
might satisfy a need or want. Thus, a product may be a physical good, retail sto
re, person, organization, place, or idea”. Alternatively Susan Bridgewater, Pert
er Doyle (1998, p 1) address – “the innovation have many meaning that relate wit
h implementation of new products, make a new value of organization method in bus
iness practices, process a new method of marketing or new channel of marketing,
and so on”.
Moreover, Innovation had a power to diverse organization and market strategies.
It is not just the innovation of new idea that is vital, but naturally its bring
ing new innovative idea to market, by replacing into practice and exploiting it
in a manner that leads to new product, services or systems that add value or imp
rove quality. It possibly involves technological transformation and management r
estructuring. In simple words it can express as an exploiting new technology and
employing out-of-the- box thinking to breed new value and to bring about major
changes in society.
How many types of innovation identified by Experts?
Most popular type of innovation becomes visible: Product innovation. One way to
take a closer look at product innovation is displayed by the four categories of
(product) innovation by Wheelen and Hunger (2008: 303-305). According to Edward
Huizenga (2004 p14) the basis types of innovation comprises of production innova
tion, processes innovation, organization innovation and Technological innovation
.
Product/ Service Innovation
Product innovation that leads to the introduction of a new product or a service
that is new or considerably improved. Simply it can identify as a new or improve
d product and services, for example the mobile phone, digital photo fame, and to
uch screen laptop.
Process and Operational Innovation
Process innovation covers the operational method of a new product or a extensive
ly improved production or delivery method of any Organization. Simple words it t
ransforming Internal Business processes into competitive strategy. However, Comp
anies such as Dell, Toyota and Zara have written their names in the history of b
usiness success because they have made radical changes in the way business takes
place in their sector. For example, Dell managed to become one of the heavyweig
hts of the industry because of its direct sales model which is sustained by an o
n-demand supply chain. As in many other success stories, Dell’s competitors neve
r thought that this strategy would work out, which provided Dell with an opportu
nity, says Moscoso (Philip G. Moscoso, professor at the IESE Business Schoo). (S
ource: wharton.universia.net [Online]).
Organizational and Technological Innovation
Organizational Innovation actually innovate new strategy structure for their fur
ther improvement. However, it’s also developing new innovation structure for fir
ms. Some organizations today become the leaders in Innovation market by followin
g their extra ordinary market strategy structure. However, company such as HSBC
is an example of concept, value and technological innovation in retail banking.
The idea of using information technology and a telephone call-centre to provide
24 hour access at low cost was very different from the branch-based model that p
revailed, and offered a clearly superior value proposition to an emerging consum
er segment. The product offer of a cheque-account and linked credit card was sta
ndard. Also of interest is the choice of organisation i.e. autonomous operation
and brand, to implement the new concept successfully.
How innovations become beneficial for Businesses
Studies have proved that all businesses or organizations want to be more innovat
ive. However, it’s proved that almost 90 percent of businesses or organizations
believe that innovation is a priority for them. On the other hand its major driv
er of the Economy, which advantage point for companies. And also for society it
is advancement of Science & Technology. Alternatively, for businesses innovation
is new and improved products, services means competitive advantage. Innovations
also create intangible assets for firms, individuals and businesses.
However, Innovation concept cannot be success always. Some time its fail to achi
eve its goal. In this situation some risks can be occurring, like a good talent
can become expensive and good talent can be scattered.
Overall, concept can be success full if the organization able to understand whol
e strategy of innovation policy strategy.
Conclusion
This Report has developed and understanding of innovation essentials point of th
e methods of innovation, the types of innovation and the elements of innovation
from a strategic view point of particularly Starbucks. Whiles, the entre report
base on Starbuck innovative ideas, and how Starbucks decide to set up their inn
ovative innovation for their organization and what kind of innovation in future
company is striving for, and the relations of the individual business elements b
y identify direct product and services process.
Moreover, as the situations of economic crisis in recently, many organisations n
eed to make decision carefully to innovation of their products and services whic
h could not be harmful to the company as using over budget and the idea are not
successes. The advantage of innovation of products and services is helping the c
ompanies to formulate the consumer be familiar with the brand, products, and ser
vices of the organisation intern of positive. However, there are also disadvant
age as its might be too new in the market or not suitable for some people, or th
e products and services are not seem as new creation, or the innovation could be
familiar with other brands or other company then it would be negative image of
the brand.

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