Th e r ev ival of Sta rbu ck s fo rt unes a ft er th e return of Howard Schu

Th e r ev ival of sta rbu ck s fo rt unes a ft er th

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Th e r ev ival of Sta rbu ck s' fo rt unes a ft er th e return of Howard Schu ltz as CEO in 2 008 was the r es ull of a reinvigoration of the " Starbucks Experie nce " th rough re co nn ec ti ng with c ustomers , r ee mph as iz ing the my s tique of g oo d coffee , and ren e,Ying ~ta rbu cks' co mmitment to soc ial a nd en vironme nt al r es po nsibil it y. Signaling and R e putation Differentiation is only e ff ec tive if it is co mmuni ca t ed to cu stomer s. But info rma ti on ab out the qualiti es and c hara cte ri stics o f produ cts is not al ways r eadi ly a ,a il able to potelllial custom ers. Th e eco no mi cs lit er arure dis- tin guish es betw ee n s ear ch goo ds, wh ose qualiti es and ch aracte ri sti cs ca n be as ce r- tained by in ,pecl ion, a nd e. ~p erie 11 ce good s, wh ose qualiti es and ch arac teristics are o nly r ecognized a ft er co nsumption. This latter cla ss of go ods include s medi cal se r- vi ce s, bald ness treatments, fr oze n 'IV dinn ers, and wine. Even after pur ch ase. per- formance attribut es may be sl ow in r evea ling them se lves. Bernie Madoff es t ablis hed ue rnar d L. Ma tloff Investment Sec uriti es LLC in 1 960- it t oo k 48 years befo re rhe ren ow n ed investment hou se wa s re vealed as a "giant Ponzi sc heme." '" In t hc ter min ol ogy of game th eory (see C hapt er 4), the market for ex pe ri en ce g oo ds co rr es p _o nd s to a classic pr isoner s· dile mma . A firm ca n offer a high - quality or a . low-q uality produ c 1. The custo mer can pay either a high o r a l ow pri ce. If qua lny c annot he de1 ec 1ed, then eq uilibrium is estab lishe d, with th e customer o ffe nng a l ow pn ce and the s upplier offering a lo w-c 1 ualitv pr o du ct eve ti h b h I I I I 'f , , n 1oug ot wou c Je Jeller of " "ith a high- qu a li ty pr o du ct so ld at a h · I Th .. / · f 1 · 1 ·1 - 1g 1 p11 ce . e 11; ,. ,o ut,on o t 11 s c I e mma is for pr o du ce rs 10 find some c redibl e mean s of signal- ing qu : da y to the customer. The m os t effec ti ve signals arc th ose that ch· th pay o ff. , 111 the pris o ners· dile mma . Thu s. an e xt e nd ed warrant y is e ffec ti ve a~; C~ tU S: ~ CHAPTER 7 THE SOURCES AND DIMEN S ION S OF CO M PETITIVE ADVANTAGE p r ov iding such a warranty wou ld be more ex pe nsi ve for a l ow-q ualit y producer th an a high-q uali ty produ c er . Brand name s, wa rrant ies, e xp e nsi ve p ac k agi ng , m oney - bac k g uarantees, sponso rs hip of spo rts a nd cu ltu ra l eve nt s, a nd a ca re fully d esign ed retail env i ronment in which th e prod uct is so ld are a ll s ignals o f qua li ty . Th eir effect iveness ste ms from th e fa ct th at th ey re pr ese nt s ignifi ca nt in vestme nt » by the ma nufa c turer that will be deva lu ed if the product proves un sa ti sfac to ry to cu st o mers .
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