Course Code: ISM003 Course Title: Information System Management Section: 1 Group No.: 4 Project Title: Starbucks Company (International) Date: 17 th April, 2011 Prepared by Full name in English Student ID Chin Pui Kee, Nessa 8047975 Kwan Yee Ki (Kiki) 8086098
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Course Code: ISM003
Course Title: Information System Management
Section: 1
Group No.: 4
Project Title: Starbucks Company (International)
Date: 17th
April, 2011
Prepared by
Full name in English Student ID
Chin Pui Kee, Nessa 8047975
Kwan Yee Ki (Kiki) 8086098
1
Content
1. Executive Summary
--------------------------------------------------------------------------------------- P. 2 - 3
2. Introduction
---------------------------------------------------------------------------------------- P. 4
3. Background Information
3.1 History
--------------------------------------------------------------------------------------- P. 5 - 6
3.2 Business Strategy
---------------------------------------------------------------------------------------- P. 7
3.3 Business Flow
---------------------------------------------------------------------------------------- P. 8
4. Information Resource
4.1 Hardware
---------------------------------------------------------------------------------------- P. 9
4.2 Software
---------------------------------------------------------------------------------------- P. 10 - 11
4.3 Database
---------------------------------------------------------------------------------------- P. 12
4.4 Cost of the system
---------------------------------------------------------------------------------------- P. 12
5. Information Participants
----------------------------------------------------------------------------------- P. 13 - 15
6. Analysis
------------------------------------------------------------------------------------ P. 16 - 17
7. Recommendation
----------------------------------------------------------------------------------------- P. 18
8. Conclusion
----------------------------------------------------------------------------------------- P. 18
9. References
----------------------------------------------------------------------------------------- P. 19
2
Executive Summary
This report discovers how information system can
help Starbucks Corporation becomes the largest
coffeehouse company in the world by describing
hardware, software and database used to obtain,
store and analyze data.
Starbucks has used four main types of hardware in
their stores: two types of modem, computer, wireless
internet and printer.
Starbucks has used four main software systems: Point of Sale System, Manager Work
Station, Automated Labor Scheduling, Intelligent Restaurant Information System and
Starbucks Card Mobile App.
The database Starbucks has used is Starbucks Enterprise Data Warehouse (EDW), the
largest fact tables consist of billions of rows, are range partitioned, and hold 39 months
of data for reporting purposes.
According to the annual report of Starbucks in 2010, capital expenditures in fiscal 2010
totaled $441 million, primarily for remodeling and renovating existing
company-operated retail stores, opening new retail stores, and investment in information
technology systems.
Results of information analyzed show that different information participants can access
different perspectives to get the information and participate in the operation with diverse
security level.
3
Analysis
Starbucks takes advantages by using software developed by a stuffing management
technology system:
• Operational excellence
• New products, services and business model
• Improved decision making
• Competitive advantage
• Survival
For the Recommendation, we recommend Starbucks make a faster and more efficient
system as Information System have to be updated. For the up-to-date reason, we also
suggest Starbucks Invest in new technologies like new monitors, wireless system and
Printers.
Limitation of Information System is they have to Updated regularly. Moreover, as the
System cannot run by themselves, they need to train their staff how to cope with those
new technologies. There is also risk on using Information System like Virus and Hacker
attack. Sometimes the Computers would out of serve.
4
Introduction
Since I was small, I like to drink coffee and my dream is to open a coffee shop in the
future. In order to fulfill my ideal, I am going to do a research on a successful Coffee
Company – Starbucks Coffee Company.
I choose this company because it has a lot of stores throughout the world, such as United
States, United Kingdom, Japan, Hong Kong, France. In addition, it has received many
rewards and recognition. For instances, “No. 1 Best Coffee,” Fast Food and Quick
Refreshment categories and“No. 1 Most Popular Quick Refreshment Chain” from
Zagat’s Survey of National Chain Restaurants in 2009‐2010, one of the “World’s Most
Ethical Companies” from Ethisphere in 2007‐2010, one of the “100 Best Corporate
Citizens” from Corporate Responsibility Officer/Business Ethics in 2000‐2010, one of
“The 100 Best Companies to Work For” from FORTUNE in between 1998 to 2000 and
2002 to 2010.
From the above rewards and recognition, it shows the popularity Starbucks has in this
industry. By analyzing this international company from its system, business strategy,
structure, business ethics, and so forth, I can understand Starbucks more and point out the
pros and cons of it. Therefore, I can learn and intimate its way to success and open my
own coffee shop.
In this project, first introduce the background of the Starbucks (history, business strategy
and business flow), followed by the information system of it, then how the participant is
going to use it, and last is how this company can achieve by using these information
systems.
5
Background Information
History
Starbucks Coffee opens its first store in
Seattle’s Pike Place Market,
Washington in 1971. By the time, it was
a roaster and retailer of whole bean and
ground coffee, tea and spices.
In 1984, Howard Schultz convinces the
original founders of Starbucks to test
the coffee bar concept in downtown
Seattle, where the first Starbucks ®
(Starbucks’ first store) Caffè Latte is served. This successful
experiment is the genesis for a company that Schultz founds in 1985.
In 1988, Starbucks comes out with their first mail-order catalog, enabling mail-ordering
of their coffee in all 50 states.
In 1991, it becomes the first U.S. privately owned company in history to offer a stock
option program to all its employees.
In 1992, it completes initial public offering
(IPO) with common stock being traded on
the NASDAQ National Market under the
trading symbol SBUX.
In 1996, it forms a partnership and
expanded to Japan (first store outside of
North America) and Singapore.
(Howard Schultz)
6
In 1997, it establishes The Starbucks Foundation, benefiting local literacy programs.
In 2001, it introduces ethical coffee‐sourcing guidelines developed in partnership with
Conservation International.
In 2002, Starbucks enters into licensing agreements with national Fair Trade
organizations to sell Fair Trade certified coffee in the countries where Starbucks does
business.
In 2010, it expands digital offerings for customers with free unlimited Wi‐Fi, Starbucks
Digital Network in U.S. stores and coffee
offerings with ultra ‐ premium Starbucks
Reserve™ line and Starbucks® Natural Fusions,
the first nationally ‐ branded naturally ‐ flavored
packaged coffee. Moreover, Seattle’s Best Coffee
reinvents business strategy to extend brand’s
reach.
Now, Starbucks Corporation is an international
coffee and coffeehouse chain. It is the largest
coffeehouse company which welcomes millions
of customers every day, in more than 17,000 locations in over countries. There are
17,009 stores thought out the world (till January 2, 2011) – 8,870 stores are
company-owned and 8,139 stores are licensed stores.
7
Business Strategy
Starbucks obtained three main strategies. They are rapid store expansion strategy,
strategy on product line and coffee purchasing strategy. This enabled the initially West
Coast yuppie fad to become a global phenomenon.
In the rapid store expansion strategy, Starbucks has saturated the market by domestic
store expansion and international store expansion. For domestic store expansion,
Starbucks has introduced a three-year expansion strategy and “Starbucks everywhere”
approach. While the international store expansion, it launched company-owned and
company-operated stores or licensing, create a new subsidiary (Starbucks International)
and expanded its consumer products channel in South Pacific region. Moreover,
employees have training and recognition. There are systems to recruit, hire and train
baristas and store managers. In addition screening, training programs, awards for partners.
In real estate, store design, planning and construction. There are a broad range of store
formats, a “stores of the future” project team, high-traffic, high-visibility store locations,
controls of average store opening costs and Wi-Fi availability at stores. In store ambience,
it has the concept of “everything matters” and assessment of standards.
The Starbucks strategy has always involved thinking outside the box. In addition to
clustering its outlets, the Starbucks strategy involves engaging in smart strategy on
product line. It provides a wide range of products choices, rolling out fresh, new
initiatives, including a new product line of hot sandwiches and breakfast food and new
drinks such as coffee liqueurs and special product promotion, selling music CDs,
acquisitions hear music and ethos water, joint ventures with the right companies, such as
their successful alliance with Pepsi-Cola Co, Dreyer’s Grand Ice Cream and Jim Beam
Brands. The Starbucks strategy is now also expanding online, allowing customers to
pre-order and prepay for products via the Internet.
Last but not least is the coffee purchasing strategy. Starbucks built relationship with
growers and exporters, checks on agricultural conditions and crop yields, and searches
out varieties and sources that would meet Starbucks’ standards. By using fixed-price
purchase commitment and purchasing coffee future contracts, it contributes to the
sustainability of coffee growers which helps environment conservation. Furthermore, it
has purchased and marketed Fair Trade Certified coffee. It also promotes coffee
cultivation methods that protected biodiversity and maintained a healthy environment.
8
Business flow
Coffee beans begin at the farm on coffee trees. After trees are planted, it takes between
one and three years for the trees to bear coffee “cherries,” which typically contain two
beans. Each tree produces 2,000 to 4,000 beans a year – approximately one pound of
roasted coffee. There are between 50 and 70% of the global coffee supply came from
small-scale farms by 2001.
The coffee export process varied greatly depending on origin country and buyer. In some
countries, beans were exported through government coffee boards while other countries
used private exporters only. After they were shipped to import country, coffee beans were
visually inspected and test-tasted for quality through a process called “cupping”. After
passing inspection, coffee was stored in warehouses until it was shipped to roasters.
Large roasters also stockpiled green coffee at the import warehouses to help decrease
their exposure to market conditions.
After buying green coffee, the beans are shipped to roasting facilities where the beans are
roasted until they receive their characteristic color and aroma and then cooled. Once the
beans are cooled, roaster blend beans from different countries to balance the flavors and
strengths. This process is essential because it allows for a consistent flavor even if
supplies vary due to prices and availability. Roasters then package, market, and distribute
coffee through a variety of methods. The largest roasters grind and vacuum-pack coffee
in packed bricks or cans and distribute their product through wholesale channels. These
roasters supply coffee for restaurants, airlines, and hotels in addition to selling directly to
consumers through supermarket channels. Specialty coffee, in contrast, is roasted and
packaged in a manner to guarantee quality and freshness. It is sold in both whole bean
and ground forms through wholesale and retail channels.
According to Starbucks executives, their chief concern with fair trade coffee was finding
top quality beans from cooperatives that have not demonstrated an ability to produce
quality beans to Starbucks standards. From earlier cupping analyses, Starbucks had little
evidence that fair trade met its quality standards. Starbucks was beginning to move
toward purchasing more of their coffee through direct relationships with exporters or
farmers and negotiated a price based on quality. The company was willing to pay higher
prices for great quality beans and had developed long-term contracts with many of its
suppliers. Starbucks then sell these beans on their stores.
9
Information Resources
Hardware
There are two types of modem:
The speed touch cable modem and the ISDN (integrated services digital network) modem
The speed touch cable modem and the ISDN connect the store computer system to the
Starbucks retail network. The Retail Network is the communication access between the
store and the internet. This allows the management work station to send and receive large
quantities of data and information.
There is a wireless internet provided by T-mobile, which allows customers to connect to
the wireless network.
There are two pieces of equipment:
the Cisco Router and the Cisco Wireless access point
Connected to the Point-of-Sale computer system there is a Printer used to print reports of
any nature, and a cash scale which counts Cash in a faster way and more accurately, mainly
it is used to count the tills and at the end of this process all data are send to the system. At
the Point of sale, there are two small printers where all receipts come out, and two (chip
and pin) credit and debit card machines.
To protect retailers, a new security system has been designed for cards which will use a
smart chip. When customers pay using one of these cards, rather than signing a
confidential security number (PIN) is entered.
10
Software
Starbucks has used five main software systems: Point of Sale
System, Manager Work Station, Automated Labor Scheduling,
Intelligent Restaurant Information System and Starbucks Card
Mobile App.
1. Point of Sale System
The Point of sale consists in two touch screen tills used by
deployed partners that need to insert their username and specific
password before to start. From the Point of sale, managers can
access different manager’s functions menu, such as paid in and
Paid Out, and Refund to customers.
These manager functions are security measures for cash management and inventory
control in the store.
By ringing items through the tills, data such as time, customer transaction, quantity of food
and drinks sold, quantity of wasted items, are transferred to the Manager Work Station
where data are stored, analyzed and produced in form of reports, graphic, charts or
diagrams.
2. Manager Work Station
The Manager Work Station can be accessed
in the office where there is a computer
connected to the intranet, a private
communication channel for employees to
access the organization network that
resembles the internet. To access the system
it is required to sign in with a password and
the partners ID. The system recognizes
security level and allows accessing the function assigned to the security level. The normal
partners can just access the time punching option, which is that function that record staff
punches in and out for breaks and shift.
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3. Automated Labor Scheduling
Planning and building labor schedules that
maximize productivity as well as manage
payroll functions.
By using scenario-based instruction that is
realistic to Starbucks workforce
requirements.
4. Intelligent Restaurant Information System
Starbucks Coffee Company limited uses a Management information system called IRIS
which stands for Intelligent Restaurant Information System.
The IRIS is made up of two components:
4.1 The Point of Sale System (POS) in addition to regular register functions offers some
functions to be accessed only by Store Manager(SM), Assistant Manager(ASM) and Shift
Supervisor(SS), with the correct security level.
4.2 The Manager Work Station (MWS) compiles and reports all store information to
effectively manage all aspects of store business.
It displays all the different functions available on the IRIS, some of which are only
accessible by partners with the correct security which consists in typing the correct
username and password.
5. Starbucks Card Mobile App
In addition to the mobile payment capability, the app
allows customers to manage their Starbucks Card account,
check their card balance, reload their card with any major
credit card (iPhone users can also use the PayPal feature),
check their My Starbucks Rewards status and find a
nearby Starbucks store with the store locator feature.
Customers can pay with their smartphone by holding their
mobile device in front of a scanner on the countertop and scan the Starbucks Card Mobile
App’s on-screen barcode to make a purchase.
12
Database
In the case of the Starbucks Enterprise Data Warehouse (EDW),
the largest fact tables consist of billions of rows, are range
partitioned, and hold 39 months of data for reporting purposes.
The use of a sliding window partitioning scheme was employed
as a means for managing this large volume of fact data. In this
case, a sliding window scheme implies partitions and tablespaces
are added and dropped as time passes. Therefore, a PL/SQL
package that automatically adds and drops partitions as well as
adds/drops tablespaces is used to maintain the table DDL in the
warehouse. Figure 8 shows an example of the Sliding Window Scheme.
As a result of the data being split at the month level over 39 separate tablespaces, the data
volumes in each tablespace will average 180-200 GB in size. In the next few years, new
periods (i.e. months) of data are expected to average 250-300 GB and this is believed to be
a relatively manageable size from a backup and recovery standpoint.
The implementation of the sliding window partitioning scheme also called for setting
tablespaces containing fact data to read-only after 2 months. RMAN can automatically
skip read-only tablespaces and thus optimize backup and recovery operations.
Cost of the systems
According to the annual report of Starbucks in 2010,
capital expenditures in fiscal 2010 totaled $441
million, primarily for remodeling and renovating
existing company-operated retail stores, opening new
retail stores, and investment in information
technology systems.
13
Information Participants
1. Users
Starbucks Card Mobile App
Starbucks Card Mobile App
allows customers to manage
their Starbucks Card account,
check their card balance,
reload their card with any
major credit card (iPhone users
can also use the PayPal
feature), check their My Starbucks Rewards status and find a nearby Starbucks store with
the store locator feature. It is a basic business system that serves the organizations
operational level. Therefore, it is a Sale and Marketing System and Transaction
Processing System.
2. Workers
Point of Sale System
Workers like Cashiers, they will use Point of Sale
System which Perform and record daily routine
transactions necessary to conduct business like Sales
order entry. Paid in and paid out occurs when money
is taken from the till to buy items necessary for the store operations and any kind of
emergency. Other functions such as Cash Skim, Void transactions or refunds occur when
money is given back due to complaints or customers are returning faulty merchandise. It
also serves the organization’s operational level. Therefore, it is also Sale and marketing
system and Transaction Processing System
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3. Administrator
Point of Sale System
Point of sales System serves predefined, structured goals and Decision making which is
Transaction Processing System and Finance and accounting system. The Point of sale
consists in two touch screen tills used by deployed partners that need to insert their
username and specific password before to start. From the Point of sale, managers can
access different manager’s functions menu, such as paid in and Paid Out, and Refund to
customers.
Manager Work Station
Manager Work Station serves predefined, structured goals and Decision making. So it is
Transaction Processing System and Finance and accounting system. Manager Work
Station decided for Store Managers to identify
business requirements and customer needs, to
identify peak time in the store, to increase or amend
product ordering, to control wastage and track stock
and decide whether is necessary to cut labor.
Managers can access staff information and personal
details in the work station, they can insert new
partners, terminate partners, maintain employee
records, track employee‘s training and process
payroll.
15
Automated Labor Scheduling
Automated Labor Scheduling decided for Store Managers to
plan and build labor schedules that maximize productivity as
well as manage payroll functions which is a human
resources system and Management Information System..
Intelligent Restaurant Information System
Intelligent Restaurant Information System
provides a number of reports that can be used
to help to manage store profitability and
accessed to check and monitor inventory
which is a function of Inventory management
system. These reports can be viewed on the
computer monitor or can be printed for review
or archive. Store Managers can use this
Management information System to prepare
short term budget to plan long term profit and
prepare proper forecasts.
16
Analysis
What Starbucks have achieved after using these information systems?
Starbucks takes advantages by using software developed by a stuffing management
technology system.
1. Operational excellence
Starbucks from using the above information
system, it can improve efficiency and attain
higher profitability. Furthermore, information
system can increase productivity and revenue
2. New products, services, and business models
Starbucks has introduced a new
service called Starbucks Mobile
Apps which can create wealth.
3. Improved decision making
Management Information System can help Manager
making decision for Just-in-time production of goods
and services, the suitable allocation of resources and
faster response time. For online ordering, like buying
Starbucks Cards and Coffee machine, it can Reduce
cost and gain more customers
17
4. Competitive Advantage on Information System
a. Starbucks Company and small coffee shop
When you walk in a Small Coffee Shop, you
can see the only Information system they
have used is Point of Sales System or a
cashier machine. Unlike Starbucks which is
an International Company. They have to
organize huge amount of Data by using
complex information system.
b. Starbucks Company and Pacific Coffee Company
Starbucks and Pacific Coffee Company (PCC) are
quite similar in information systems, because both of
them are using complex information system. Yet,
Starbucks Company has more stores and globalized
than Pacific Coffee Company. Thus Starbucks
information systems are more complexes than PCC.
Furthermore, Starbucks has a new service called
Starbucks Mobile App which PCC does not have yet.
5. Survival
Nowadays, Information Technology is a
necessity. Actually Starbucks Company has
done a lot of it, such as Starbucks official
website, gift card, Starbucks Mobile App,
etc.
(Starbucks’ official website)
18
Recommendation
On the above evidences we can see the advantages on the information systems, yet
everything has pros and cons.
We have found some limitations of it, like they have to Updated regularly. Moreover, as
the System cannot run by itself, they need to train their staff how to cope with those new
technologies. There are hidden risk on using Information System like Virus and Hacker
attack. In addition, sometimes the computers would out of serve.
Counter with the limitations above, we have some advises for Starbucks.
First, we recommend Starbucks make a faster and more efficient system as Information
System have to be updated.
Second, for the up-to-date reason, we also suggest Starbucks Invest in new technologies
like new monitors, wireless system and Printers.
Conclusion
After doing this research on Starbucks Company, I have a deep understanding on the
information systems (IS) of it. If I would like to open a successful coffee shop, I am not
only focusing on the quality of the coffee and food, but also need to put a lot of effort on
the information systems of my company. As a good information system can achieve on
operative excellent, improved decision making, comparative advantage, etc which can
increase productivity and revenue.
19
Reference
Arthur, T and John. G, “Starbucks Becomes a Public Company.” McGraw-Hill College Division. Available: http://www.mhhe.com/business/management/thompson/11e/case/starbucks-2.html (Accessed on 10April 2011) Chris, S, “Starbucks Coffee Company - MIS Review.” Free Research Papers. Available: http://www.freeonlineresearchpapers.com/starbucks-coffee-mis-review
(Accessed on 10April 2011)
Chien, T and Greg, G, “Very Large Database Backup & Recovery Best Practices.” Oracle
Joseph L., “Starbucks Training.” Docstoc 2010. Available: http://www.docstoc.com/docs/8390743/Starbucks-Training (Accessed on 10April 2011) Starbucks Corporation, “Executive Biographies.” Starbucks Corporation. Available: http://news.starbucks.com/executive+biographies/?start_row=11 (Accessed on 10April 2011)
Centurion System Inc. 2009, Starbucks Point of Sales, Centurion System Inc., America, viewed 10 April 2011, <http://www.centurionsys.com/Graphics/CSIPORTJPEG/starbucks_pos.jpg>. Gizmoe 2011, Starbucks iPhone Apps, MacApper, America, viewed 10 April 2011, <http://macapper.com/wp-content/uploads/2011/01/115004-starbucks_qr_code.jpg>.