Every change that Starbucks made over the past few years—automated espresso machines, pre-ground coffee, drive-throughs, fewer soft chairs and less carpeting—was made for a reason: to smooth operations or boost sales. Those may have been the right choices at the time, but together they ultimately diluted the coffee-centric experience. By 2008, Starbucks experienced a drop in traffic as customers complained that in pursuing rapid growth, the company has strayed too far from its roots. Starbucks will once again grind beans in its stores for drip coffee, give free drip refills, and provide two hours of wi-fi. The company will roll out its new sleek, low-rise espresso machine that makes baristas more visible.
a. Explain how Starbucks’ past attempts to maximize profits ended up eroding product differentiation.
b. Explain how Starbucks’ new plan intends to increase economic profit.