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Chapter 10

ITM 102 Chapter Notes - Chapter 10: Starbucks, Product Placement, 18 Months


Department
Information Technology Management
Course Code
ITM 102
Professor
Roger De Peiza
Chapter
10

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Misbah Ummehani
07 April 2018
Professor Roger de Peiza
CITM 102
Case 10: Data Drive Starbucks Location Decisions
1. How important is location data to Starbucks’s business strategy? Explain your answer.
A business’ location plays an important role in its success or failure. A business should bear in mind
whether their chosen location enables them to reach enough customers or not. In order to make the
investment worthwhile, it is crucial that businesses do their research prior to purchasing a location. It is
important to know the current and future whereabouts of potential customers.
Geographic information systems (GIS) play an vital part at Starbucks because it helps decide a site
location as well as product placement. Starbucks has grown exponentially through the U.S. and overseas
well, opening over eight-hundred stores per year. The number of stores around the globe have tripled
since 2002: 5,886 to 15,011 in 2007. Unfortunately, six-hundred stores were closed during the 2008
recession, but as the economy improved, Starbucks continued to open new locations.
3. Compare Starbucks decisions about store location in 20072008 and 2012. What made the
later decisions more successful? What management, organization, and technology factors
were involved?
Management:
Management doesn’t want Starbucks growing for the sake of growing and looks much more
carefully at the individual profitability prospects of each newly opened store. It no longer assumes that
just because stores are Starbucks, they can succeed anywhere. Management does not want to repeat
what happened in 2007 and 2008, when Starbucks had to close hundreds of stores, many of which
should never have been opened in the first place.
Organization:
Many Starbucks stores closed in 2007 and 2008 were ones that had been opened in the previous
18 months. At that time Starbucks’s strategy focused on accelerating the growth of its U.S. business. It
appeared to be opening stores just for the sake of opening them, even where there wasn’t a profitable
opportunity.
Technology:
Starbucks has been using GIS since the late 1990s and relied upon it to support its 20072008
decision to open so many stores that were subsequently closed. Starbucks decision makers were
inundated with data, especially the decision-makers working with real estate. At that time Starbucks
staff had access to massive amounts of data but lacked sufficient expertise and tools to analyze the data
properly.
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