Harvard Case - Starbucks Canada: The Mobile Payments Decision
"Starbucks Canada: The Mobile Payments Decision" Harvard business case study is written by Deborah Compeau, Cato Pastoll, Tyler Rochwerg, Brandon Vlaar. It deals with the challenges in the field of Information Technology. The case study is 12 page(s) long and it was first published on : May 26, 2015
At Fern Fort University, we recommend Starbucks Canada proceed with implementing a mobile payments system, leveraging a phased approach to minimize disruption and maximize adoption. This strategy will capitalize on the growing trend of mobile payments, enhance customer experience, and drive revenue growth.
2. Background
Starbucks Canada, a subsidiary of the global coffee giant, faced a critical decision: whether to implement a mobile payments system to compete effectively in the increasingly digitalized retail landscape. The company recognized the potential benefits of mobile payments, including increased customer convenience, faster transactions, and valuable data insights. However, concerns regarding infrastructure costs, security risks, and potential customer resistance needed to be addressed.
The main protagonists in this case are Clodagh O'Connell, the CEO of Starbucks Canada, and Mark Smith, the head of IT. O'Connell is a strong advocate for embracing digital transformation and sees mobile payments as a crucial step towards achieving this goal. Smith, on the other hand, is cautious about the complexities and potential risks associated with such a significant technological shift.
3. Analysis of the Case Study
This case study can be analyzed using the Porter's Five Forces framework to understand the competitive landscape and the potential impact of mobile payments on Starbucks Canada's position.
Threat of New Entrants: The mobile payments market is highly competitive with numerous players, including traditional banks, fintech companies, and tech giants. This poses a significant threat to Starbucks Canada's success in this space.
Bargaining Power of Buyers: Customers are increasingly demanding convenient and seamless payment options, giving them significant bargaining power. Mobile payments offer a compelling alternative to traditional methods, potentially leading to customer churn if Starbucks Canada lags behind competitors.
Bargaining Power of Suppliers: The technology required for mobile payments is readily available from various suppliers, reducing their bargaining power. However, ensuring secure and reliable infrastructure requires careful selection and management of technology providers.
Threat of Substitute Products: The availability of alternative payment methods, such as credit cards, debit cards, and loyalty programs, poses a threat to the adoption of mobile payments. Starbucks Canada needs to differentiate its mobile payments offering to attract and retain customers.
Competitive Rivalry: The coffee industry is highly competitive, with numerous players vying for market share. Implementing a robust mobile payments system can provide Starbucks Canada with a competitive advantage, enabling faster transactions, personalized offers, and enhanced customer loyalty.
4. Recommendations
Starbucks Canada should implement a phased approach to mobile payments, focusing on:
Phase 1: Pilot Program:
- Launch a pilot program in select locations to test the system and gather user feedback.
- Partner with a leading fintech provider to ensure secure and reliable infrastructure.
- Offer incentives to early adopters to encourage participation and gather valuable data.
Phase 2: Gradual Rollout:
- Based on the pilot program's success, gradually roll out the mobile payments system to additional locations.
- Provide comprehensive training to staff on using the system and handling customer inquiries.
- Leverage data analytics to understand customer preferences and optimize the mobile payments experience.
Phase 3: Full Integration:
- Integrate the mobile payments system with existing loyalty programs and CRM systems.
- Develop a robust marketing campaign to promote the mobile payments option to customers.
- Continuously monitor and improve the system based on user feedback and data insights.
5. Basis of Recommendations
This recommendation considers the following factors:
Core Competencies and Consistency with Mission: Starbucks Canada's core competency lies in providing a premium coffee experience. Mobile payments align with this mission by enhancing customer convenience and personalization.
External Customers and Internal Clients: The recommendation prioritizes customer satisfaction by providing a seamless and secure payment experience. It also considers the needs of internal clients (staff) by providing adequate training and support.
Competitors: Starbucks Canada needs to stay ahead of the curve in the digital payments landscape. Implementing mobile payments will enable them to compete effectively with rivals who are already offering similar services.
Attractiveness ' Quantitative Measures: While quantifying the return on investment (ROI) for mobile payments is challenging, the potential benefits include increased customer satisfaction, faster transactions, and valuable data insights. These factors can contribute to higher sales and improved profitability.
Assumptions: This recommendation assumes that Starbucks Canada can secure reliable technology partners, effectively manage security risks, and effectively communicate the benefits of mobile payments to customers.
6. Conclusion
Implementing a mobile payments system is a strategic imperative for Starbucks Canada. By embracing digital transformation and leveraging a phased approach, the company can enhance customer experience, drive revenue growth, and maintain its competitive edge in the evolving retail landscape.
7. Discussion
Alternative Options:
- Delaying implementation: This would allow Starbucks Canada to observe the market and assess the long-term viability of mobile payments. However, it risks losing market share to competitors who are already offering this service.
- Partnering with a third-party provider: This could be a viable option, but it would require careful selection of a reliable and trustworthy partner.
Risks and Key Assumptions:
- Security risks: Mobile payments are vulnerable to cyberattacks. Starbucks Canada needs to implement robust security measures to protect customer data.
- Customer adoption: Not all customers are comfortable using mobile payments. Starbucks Canada needs to effectively communicate the benefits of this option and address customer concerns.
- Technical challenges: Integrating the mobile payments system with existing IT infrastructure could be complex and time-consuming.
Options Grid:
| Option | Pros | Cons |
|---|---|---|
| Implement mobile payments | Enhanced customer experience, faster transactions, valuable data insights | Security risks, customer adoption challenges, technical complexities |
| Delay implementation | Time to observe the market, minimize risk | Loss of market share, potential for competitor advantage |
| Partner with a third-party provider | Leverage expertise, reduce development costs | Dependence on third party, potential for security breaches |
8. Next Steps
Timeline:
- Month 1-3: Pilot program launch in select locations.
- Month 4-6: Data analysis and feedback collection from the pilot program.
- Month 7-9: Gradual rollout to additional locations based on pilot program results.
- Month 10-12: Full integration with existing systems and marketing campaign launch.
Key Milestones:
- Secure a reliable technology partner.
- Develop a robust security protocol.
- Train staff on using the mobile payments system.
- Launch a marketing campaign to promote the mobile payments option.
- Continuously monitor and improve the system based on user feedback.
By following these recommendations, Starbucks Canada can successfully implement a mobile payments system, enhancing customer experience, driving revenue growth, and solidifying its position as a leader in the digital retail landscape.
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Case Description
In December 2012, the management of Starbucks Canada, an autonomous subsidiary of the U.S.-based multinational coffeehouse chain, is trying to decide how best to implement mobile payments in its 1,350 locations across Canada. While the company has currently been using a mobile application to accept payments through its proprietary Starbucks Card, rival Tim Hortons has recently introduced a more advanced mobile payment solution. There are many new and emerging technologies to choose from, including Square Wallet, Bluetooth Low Energy Beacons, MintChip and Mobile Wallet/Credit Card Near Field Communication. Will these systems allow for an enhanced store experience? Are customers ready to start paying with their smartphones? And which payment service will be the Canadian lead going forward? The future of Starbucks and mobile payments is exciting, but the choices are almost overwhelming.
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