Case 2: Starbucks and Yahoo!

 

Global Distinctive Practice Cases for Strategic Partnering – Report by Imperial College London Students (Continued).

 

Case 2:  Starbucks and Yahoo!

 

Introduction

Since 1971 Starbucks opened its first shop in Seattle, Washington, it has been committed to deliver high quality coffee for over 40 years.  It now operates 23,187 stores in 64 countries by July 2014 and has become No.1 speciality coffee retailer in the world (Statisticbrain.com, 2014).  Their mission statement is “to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time.”

Founded by two Stanford University students Jerry Yang and David Filo in 1994, Yahoo! Inc. is a multinational internet company headquartered in California, U.S.A.  As an online media company, it is best known for the web portal that provides a variety of latest news, information, search engine and its access to other services such as Yahoo Mail, Yahoo Finance, Yahoo Answers and Yahoo Messenger.  Yahoo websites attract around 700 million visitors every month (CBCnews, 2012).

In October 2010, Starbucks announced the partnership with Yahoo! for a brand-new and exclusive service Starbucks Digital Network.  It is a package of web content where Starbucks curates specific information from other places and category it into six channels: News, Entertainment, Wellness, Business and Careers, My Neighborhood and a personalized Starbucks channel.  This network is only open to Starbucks customers in 6800 U.S. stores over its free Wi-Fi network and can be accessed from smart phones, pads and laptops.  Within these channels, Starbucks customers can have access to LinkedIn, Foursquare, New Word City, Rodale, Good and several other information providers.

 

Background

Digital is undoubtedly becoming a big phenomenon for the world, and, of course, for Starbucks as well.  “Digital helps our store partners and help the company be the way we can tell our story, build our brand, and have a relationship with our customers.,” says Adam Brotman, Chief Digital Officer of Starbucks (VentureBeat, 2012).  For Starbucks, launching this free-of-charge network service was a big move further into the digital arena following its providing free Wi-Fi to its customers in stores at a time when majority coffee shops charged a fee for the same service.

 

Similarities between both missions

The motive behind Starbucks choosing Yahoo! as its strategic partner can trace back to the mission of this internet company.  Over years, Yahoo! has been changing the focus of their business from technology towards people, community and social sharing with its social network such as Yahoo Answer and Flicker, which is reflected in its current mission statement- “to connect people to their passions, communities, and the world’s knowledge.”

The missions for both organisations place an emphasis on people and communities.  According to Bardin (2014), potential partners for successful partnerships are the ones that share broadly similar missions and types of “destinations.”  Therefore, it is a very important precondition in their successful strategic partnership that the missions between two organisations share similarities and both place an emphasis on people and communities.

 

Joint mission and destination

Starbucks came to Yahoo with a vision of “creat(ing) something new, localized and unexpected, and online” (Yahoo, 2014).  This soon became their joint mission for the partnership.  Local-based nature is one of the main features of this new network, which is reflected on Yahoo!’s My Neighbourhood channel and Wellness channel.  The content includes local news and nearby charity projects that can benefit from small donations.  It is consistent with the “neighbourhood” concept from Starbucks’ mission statement – “ to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time.” and the “community” concept from Yahoo!’s mission statement- “to connect people to their passions, communities, and the world’s knowledge.”

 

Respective benefits from this partnership

The motives behind Starbucks’ partnership with Yahoo! is to look for an expert in technology and content.  Starbucks wanted to create something new and online, but lacked relevant technological know-how.  Therefore, they approached Yahoo! as the best candidate because Yahoo!’s strengths and capabilities on online and technical support can help Starbucks become more digitalized.  Yahoo! is well known for offering integrated, searchable and compelling content and network.  “They are so strong in the three areas we knew we needed help with – technology, content and search,” says chief digital officer of Starbucks, “so we came to them … and they were eager.”  For Starbucks, this partnership project not only enabled them to attract more people to come and spend more time in their stores but also provided a bridge that seamlessly connected offline and online user experience of Starbucks customers.  This helps Starbucks connect more to the digitalised world and thus enhancing their customers’ in-store experience.

According to the chief digital officer of Starbucks, Yahoo! was excited by the local and unique aspects of the Starbucks Digital Network (Mashable, 2010).  By partnering with this ubiquitous coffee shop, Yahoo! is able to leverage the advantage of the location-based characteristic of the network service to reach and engage with local communities around the coffee stores.  This network plays a role in helping Yahoo! with customer retention.  Yahoo! can hook up and better serve local customers with more community-based information.

 

Why Yahoo rather than Google?

Why would Starbucks not partner with Google?  Several reasons are analysed here:

First, Yahoos mission has more similarities with that of Starbucks.  Their mission statements are as follows:

Google: “to organize the world’s information and make it universally accessible and useful.”

Yahoo: “to connect people to their passions, communities, and the world’s knowledge”.

Starbucks: “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”

As can be found easily, Yahoo and Starbucks both put high value on people and community.  According to Bardin’s Strategic Partnering, it is critical to choose potential partners that share broadly similar missions and types of “destinations.” in order to achieve successful partnerships.

Second, the two internet companies are specialized in different areas.  Google mainly specialized in search engine, measurement, data, whereas Yahoo plays more as an internet service provider for news, emails, finance, sports and many other content, which better suits the need of Starbucks.

From these two perspectives, Yahoo might have appeared a better partner for Starbucks.

 

Recommendations and Conclusion

The joint mission of this partnership is to “create something new, localized and unexpected, and online”.  Since the United Kingdom and large Asian economies such as China become second and third largest markets, the partnership can consider these countries as their next target destinations.  As a result, this network service could engage a larger audience globally, thus directing the two organizations towards their joint mission.

In this increasingly digital and mobile world, a fast growing number of big companies are embracing digital strategies to keep pace with the era.  Starbucks and Yahoo!’s partnership is an example of a successful and timely one, with both parties mutually leveraging capabilities and resources to form strategic partnership.

 

Conclusion of Case 1 and 2

To summarise, a clear strategic partnership mission, destination, strategic framework and plan play a significant role in forming of a successful strategic partnership.  For Thai Airways and Air Canada, their partnership as part of the Star Alliance helps them to closer fulfil their joint missions and improve their service to an international level and connect more people in the world.  Starbucks and Yahoo! both benefited by using each other’s strengths and successfully brought brand-new and localized digital user experience to customers which was based on the joint mission focused on “one community”.  Only by establishing agreed and clarified long-term mission, destination and plan can organisations become truly strategic partners and achieve transformational value.  This forms the critical foundation of developing compelling partnership “value propositions” and “offers” which are the core of any strategic partnership.

 

(To be continued…)