I. CURRENT SITUATIONA. Current PerformanceSTARBUCKS is/has: The
worlds number one specialty coffee retailer Had over 11,000 stores
in 36 countries of the world Employed over 10,000 people Over 40
million customers visit Starbucks every week Had over 7,600 retail
locations in the United States aloneIn addition to the information
presented regarding Starbucks status which proves its domination in
the market, the following tables also present the statistical
information with regard to the success of the company in performing
well in its operations.Return on Investment:
Market Share:
Profitability:
B. Strategic PostureThe company establishes a proper guideline
for the objectives and procedures to be followed in the
organization. These guidelines are evident in its performance as
well. This part of the strategic audit enumerates the mission,
objectives, strategies, policies, and services of
Starbucks.Mission:To inspire and nurture the human spirit one
person, one cup and one neighborhood at a time.Objectives:To
prevent competitors from getting a head start.To build upon the
growing desire for Western brands.To take advantage of higher
coffee consumption rates in different countries.To establish
Starbucks as the most recognized and respected brand in the
world.Strategies: Ensuring that coffee is responsibly grown,
ethically traded and is third-party verifiedProtecting the
environment and farmers livelihoods in coffee growing
regionsApplying the plan known as C.A.F.E- coffee and farmer equity
practices and fair-trade, it is a set of social, economic,
environmental and quality guidelines developed in collaboration
with Conservation InternationalPolicies:Global Human RightsC.A.F.E.
PracticesSupplier Code of Conduct OverviewStarbucks Social
Responsibility Standards for Manufactured Goods and ServicesHealth
Care PositionsMenu Labeling PositionCocoa Practices GuidelinesCocoa
Practices OverviewAnimal WelfareStandards of Business Conduct
Corporate Political Contributions and Expenditures Corporate
Political Contributions and Expenditures 2010 ResultsUN Global
CompactServices:Starbucks offers a range of exceptional products
that customers enjoy in our stores, at home, and on the go. Coffee:
More than 30 blends and singleorigin premium coffees. Handcrafted
Beverages: Freshbrewed coffee, hot and iced espresso beverages,
Frappuccino coffee and noncoffee blended beverages, smoothies and
Tazo teas. Merchandise: Coffeeand tea brewing equipment, mugs and
accessories, packaged goods, music, books and gifts. Fresh Food:
Baked pastries, sandwiches, salads, oatmeal, yogurt parfaits and
fruit cups.Consumer Products Coffee and Tea: Whole bean and ground
coffee (Starbucks and Seattles Best Coffee brands), Starbucks VIA
Ready Brew, Starbucks KCup portion packs, Tazo tea filter bags and
tea latte concentrates. ReadytoDrink (RTD):Starbucks bottled
Frappuccino coffee drinks, Starbucks Discoveries chilled cup
coffees, Starbucks Double shot espresso drinks, Starbucks Double
shot Energy+Coffee drinks; Seattles Best Coffee Iced Lattes,
Starbucks Refreshers beverages, Tazo bottled iced and juiced teas.
Starbucks Ice Cream: Superpremium coffee and coffeefree
flavors.
II. CORPORATE GOVERNANCEA. Board of Directors HOWARD SCHULTZ,
55, is the founder of Starbucks and serves as our chairman,
president and chief executive officer. Mr. Schultz has served as
chairman of the board since our inception in 1985, and in January
2008, he reassumed the role of president and chief executive
officer. From June 2000 to February 2005, Mr. Schultz also held the
title of chief global strategist. From November 1985 to June 2000,
he served as chairman of the board and chief executive officer.
From November 1985 to June 1994, Mr. Schultz also served as
president. From January 1986 to July 1987, Mr. Schultz was the
chairman of the board, chief executive officer and president of Il
Giornale Coffee Company, a predecessor to the Company. From
September 1982 to December 1985, Mr. Schultz was the director of
retail operations and marketing for Starbucks Coffee Company, a
predecessor to the Company.
BARBARA BASS, 58, has been a Starbucks director since January
1996. Since 1993, Ms. Bass has been the president of the Gerson
Bakar Foundation. From 1989 to 1992, Ms. Bass was president and
chief executive officer of the Emporium Weinstock Division of
Carter Hawley Hale Stores, Inc. She also serves on the board of
directors of DFS Group Limited, a retailer of luxury branded
merchandise, and bebe stores, inc., a retailer of contemporary
sportswear and accessories.
WILLIAM W. BRADLEY, 65, has been a Starbucks director since June
2003. Mr. Bradley is a managing director of Allen & Company
LLC. From 2001 until 2004, he acted as chief outside advisor to
McKinsey & Companys non-profit practice. In 2000, Mr. Bradley
was a candidate for the Democratic nomination for President of the
United States. He served as a senior advisor and vice chairman of
the International Council of JP Morgan & Co., Inc. from 1997
through 1999. During that time, Mr. Bradley also worked as an
essayist for CBS Evening News, and as a visiting professor at
Stanford University, Notre Dame University and the University of
Maryland. Mr. Bradley served in the U.S. Senate from 1979 until
1997, representing the State of New Jersey. Prior to serving in the
U.S. Senate, he was an Olympic gold medalist in 1964, and from 1967
through 1977 he played professional basketball for the New York
Knicks, during which time they won two world championships. Mr.
Bradley also serves on the boards of directors of Willis Group
Holdings Limited and Seagate Technology.
MELLODY HOBSON, 39, has been a Starbucks director since February
2005. Ms. Hobson has served as the president and a director of
Ariel Investments, LLC, a Chicago-based investment management firm,
and as the chairman (since 2006) and a trustee (since 2000) of the
mutual funds it manages. She previously served as senior vice
president and director of marketing at Ariel Capital Management,
Inc. from 1994 to 2000, and as vice president of marketing at Ariel
Capital Management, Inc. from 1991 to 1994. Ms. Hobson works with a
variety of civic and professional institutions, including serving
as a director of the Chicago Public Library as well as its
foundation and as a board member of the Field Museum and the
Chicago Public Education Fund. In 2004, The Wall Street Journal
named her as one of its 50 Women to Watch. Ms. Hobson also serves
on the boards of directors of DreamWorks Animation SKG, Inc. and
The Estee Lauder Companies, Inc.
KEVIN R. JOHNSON, 48, has served as the Chief Executive Officer
of Juniper Networks, Inc., a leading provider of high-performance
networking products and services, since September 2008. Mr. Johnson
also serves on the board of directors of Juniper Networks. Prior to
joining Juniper Networks, Mr. Johnson served as President,
Platforms and Services Division for Microsoft Corporation, a
worldwide provider of software, services and solutions. Mr. Johnson
was a member of Microsofts Senior Leadership Team and held a number
of senior executive positions over the course of his 16 years at
Microsoft. Prior to joining Microsoft in 1992, Mr. Johnson worked
in IBM's systems integration and consulting business.
OLDEN LEE, 67, has been a Starbucks director since June 2003.
Mr. Lee worked with PepsiCo, Inc. for 28 years in a variety of
positions, including serving as senior vice president of human
resources of its Taco Bell division and senior vice president and
chief personnel officer of its KFC division. Mr. Lee currently
serves as principal of Lee Management Consulting, a management
consulting firm he founded. Mr. Lee also serves on the board of
directors of TLC Vision Corporation.
SHERYL SANDBERG, 39, has served as the Chief Operating Officer
of Facebook, Inc., an online social utility company, since March
2008. From 2001 to March 2008, Ms. Sandberg was the Vice President
of Global Online Sales and Operations for Google Inc., an Internet
search engine company. Ms. Sandberg also is a former Chief of Staff
of the United States Treasury Department and previously served as a
management consultant with McKinsey & Company and as an
economist with The World Bank. Ms. Sandberg serves on a number of
nonprofit boards including The Brookings Institution, The
AdCouncil, Women for Women International, and V-Day. In 2008, Ms.
Sandberg was named as one of the 50 Most Powerful Women in Business
by Fortune and one of the 50 Women to Watch by The Wall Street
Journal.
JAMES G. SHENNAN, JR., 67, has been a Starbucks director since
March 1990. Mr. Shennan served as a general partner of Trinity
Ventures, a venture capital organization, from September 1989 to
July 2005, when he became general partner emeritus. Prior to
joining Trinity Ventures, he served as the chief executive of
Addison Consultants, Inc., an international marketing services
firm, and two of its predecessor companies. Mr. Shennan also serves
on the board of directors of P.F. Changs China Bistro, Inc.
JAVIER G. TERUEL, 58, has been a Starbucks director since
September 2005. Mr. Teruel served as vice chairman of
Colgate-Palmolive Company, a consumer products company, from July
2004 to April 2007, when he retired. Prior to being appointed vice
chairman, Mr. Teruel served as Colgate-Palmolives executive vice
president responsible for Asia, Central Europe, Africa and Hills
Pet Nutrition. After joining Colgate in Mexico in 1971, Mr. Teruel
served as vice president of Body Care in Global Business
Development in New York, and president and general manager of
Colgate-Mexico. He also served as president of Colgate-Europe, and
as chief growth officer responsible for the companys growth
functions. Mr. Teruel currently serves as a partner of Spectron
Desarrollo, SC, an investment management and consulting firm. He
also serves on the boards of directors of The Pepsi Bottling Group,
Inc., Corporacion Geo S.A.B. de C.V. and J.C. Penney Company,
Inc.
MYRON E. ULLMAN, III, 62, has been a Starbucks director since
January 2003. Mr. Ullman has served as the chairman of the board of
directors and chief executive officer of J.C. Penney Company, Inc.,
a chain of retail department stores, since December 2004. Mr.
Ullman served as directeur general, group managing director of LVMH
Met Hennessy Louis Vuitton, a luxury goods manufacturer and
retailer, from July 1999 to January 2002. From January 1995 to June
1999, he served as chairman and chief executive officer of DFS
Group Limited, a retailer of luxury branded merchandise. From 1992
to 1995, Mr. Ullman served as chairman and chief executive officer
of R.H. Macy & Co., Inc. He also serves on the board of
directors of the Federal Reserve Bank of Dallas.
CRAIG E. WEATHERUP, 63, has been a Starbucks director since
February 1999. Mr. Weatherup worked with PepsiCo, Inc. for 24 years
and served as chief executive officer of its worldwide Pepsi-Cola
business and President of PepsiCo, Inc. He also led the initial
public offering of The Pepsi Bottling Group, Inc., where he served
as chairman and chief executive officer from March 1999 to January
2003. Mr. Weatherup also serves on the board of directors of Macys,
Inc.
B. Top Management JOHN CULVER, who leads the companys
international business and president of the China and Asia Pacific
region.
CLIFF BURROWS, president of Starbucks United States, heads the
Americas region, which encompasses the United States, Canada,
Mexico and Central and South America.
MICHELLE GASS, president of Seattles Best Coffee, president of
Starbucks Europe, Africa and Middle East region.
III. EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREATS (SWOT)A.
Natural Physical Environment: Sustainability IssuesStarbucks is
facing some environmental challenges with respect to its business.
These are the growing scarcity of potable water, inadequate supply
of quality green coffee, and spreading growth of coffee plant
diseases and pests such as Coffee Leaf Rust, Coffee Berry Disease,
Bacterial Blight, Nematodes, and Leaf Miner. However, the
environmental threats to the company is not only limited to these
specific challenges enumerated above. Starbucks is also continually
faced with the inconsistency of the physical environment which can
be felt by everyone, including those in different industries.
B. Societal Environment EconomicOpportunities are booming in the
industry because of the globalization. Starbucks is benefited from
this due to the eventual standardization of the raw materials of
the industry. However, this will also enable possible competitors
to enter into the market and gain a market share which may be
detrimental to Starbucks. TechnologicalA great trend today is the
green technologies which make consumers have preference over
companies which apply them. Starbucks is known for its unique and
charitable causes. Green technologies is also another factor which
the company to utilize in order to gain more consumers and an
advantage against other competitors. Starbucks may do this because
of its high profits that enables it to invest in expensive new
technologies, unlike other small competitiors. Political-legalThe
rules and regulations created by the politicians had significant
influences on the cost of running businesses and the way it can
market products and services. This may be an opportunity for
Starbucks to show their support to particular parties which the
management deems appropriate based also on the response of their
market. SocioculturalSociety is losing touch with social nuances,
cultural values, and the characteristics of traditional society
because of the growth and development of information and
communication technology. Since the market today is generally open
to new ideas and possibilities, as well as willing to spend more in
products or services which they deem relevant, the company can be
confident that any appropriate introduction of products and
services in the market will have a particular level of support.
C. Task EnvironmentNot only this but also, Starbucks organizing
activities such as neighbourhood clean-ups and walk-a-thons. Many
examples are available on theweb site ofthe company. Policies that
also have been implemented are the buying policies, which only
allow the company to purchase from those other businesses
(suppliers) who follow thesame environmental strategy as Starbucks.
This may push the company to lose an opportunity of good deal,
because the supplier doesnt follow the company environmental
policies.Finally, to integrate these policiesto new employees,
Starbucks has employed the services of a few partners which
congregate together to create a Green Team, which installs the
environmental views into trainees as well as coming up with
inventive ways of helping the environment.
D. Summary of External FactorsEFAS
OpportunitiesWeightRatingWeighted ScoreComments
New Markets with Low Investments0.2040.8New markets for coffee
such as India and in other nations are beginning to emerge.
Coffee Market Growing0.1350.65A lot of people are into coffee
today
New distribution channels (delivery)0.0740.28People can get to
the products easily.
Product range is more diversified (more food and non-food
items)0.0940.36New products and services are available.
Co-branding with other manufacturers of food and
drink0.0530.15To help them get to their customers.
Threats
Boycotting for Political reasons (Middle East)0.1450.7Will
greatly affect the operations of the company.
Financial Crises and Recession0.1140.44Will determine the amount
of revenue they will be acquiring
Increase in Domestic Competition0.0430.12Others will choose
lower cost products.
Volatile coffee and dairy products0.0330.09The coffee and dairy
products depend on the scarcity or being abundant of the
products.
Consumer tends toward more healthy ways and away from
caffeine0.1440.56Consumers will choose healthier drinks other than
coffee.
Total14.15
IV. INTERNAL ENVIRONMENT: STRENGTHS AND WEAKNESSES (SWOT)A.
Corporate StructureStarbucks Coffee Company announced a new
corporate structure that took effect by the end of September 2011.
This new structure of the company is believed to accelerate its
growth strategy.Starbucks split the organization into three
separate regions in order for it to have a better handling of their
operations and keep their customers satisfaction. A president for
each region, who answers to Starbucks Global, oversees the
company-operated retail business, working closely with both the
licensed and joint venture business partners of the company. In
order to continue building out Starbucks brands and channels in
each region, Starbucks will also be working closely with Starbucks
Global Consumers Products and Foodservice team. Also, the regional
managers will allow the company to meet consumer-specific needs in
each region while maintain the overall mission of Starbucks which
is to inspire and nurture the human spirit one person, one cup and
one neighborhood at a time. This new structure employed by
Starbucks is a matrix system which is an organization form in which
there are multiple lines of authority and some individuals report
to at least two superiors. The fact that Starbucks is an
international company, it can be considered as a company having a
worldwide matrix. The three regions which Starbucks is divided will
be China and Asia Pacific (all Asia-Pacific markets and China),
Americas (United States, Canada, Mexico and Latin America) and EMEA
(Europe, U.K., Middle East, Russia and Africa).While Starbucks
successfully operates under a matrix structure, as far as its
products are concerned, also works under a divisional structure.
The products of the company are divided into five main groups,
namely: (1) Coffee blends and single-origin premium Arabica
coffees, (2) Handcrafted Beverages fresh-brewed coffee, hot and
cold beverages, Frapuccino, smoothies, Tazo teas (3) Merchandise
brewing equipment, mugs and accessories, packaged goos, music,
books, (4) Fresh Food bakes pastries, sandwiches, oatmeal, and (5)
Consumer Products coffee (whole bean and ground, instant coffee and
ice cream). Having the new organizational structure, Starbucks is
able to focus on specific regions that it serves. In addition, this
causes a much more effective operation than delegating the
responsibilities of managing and overseeing only to the CEO. Given
the fact that Starbucks uses the matrix structure and divisional
structure, its decision-making authority is decentralized for each
regional division president is assigned to manage a specific
region. They oversee regional groupings of stores. These regional
managers report directly to the Starbucks Corporation. At each
store, a store manager acts as the chief. Under this store manager
are a collection of shift supervisors who act as managers on duty
when the store manager is out. Below the shift supervisors are the
rest of the employees, referred to as baristas.On the other hand,
given the current organizational structure of Starbucks, the
leaders tend to disregard the operations of specific stores and be
too cross functional. Although it split the organization into three
separate regions to be able to reach out to locations outside
market, the company lacks stores in suburban areas. Thus, Starbucks
is only able to serve people that are residing in the city. Because
most of its cafes are located in the US, the business risk that the
company faces is not widely spread. Regarding its product, the
company is mainly dependent on its main competitive advantage,
which is the retail of coffee. This makes them slow to diversify
into other sectors should the need arise. Furthermore, Starbucks
refuses to guarantee that the products it provides, such as milk,
beverages, chocolate, ice cream and baked goods, which are sold in
its stores are free of genetically-modified ingredients.
B. Corporate CultureOrganizational culture is a structure of
values, beliefs, and assumptions deemed appropriate in thinking and
acting inside an organization. Being shared by the organizations
elements, culture helps solve and understand extrinsic and
intrinsic problems. Neglected notions, stable and long-lasting
beliefs on significant matters and understandings of the
relationship between objects and concepts all contribute to the
culture at work, so the members accept their validity and are
influenced by the same regarding the peoples perspective, thoughts,
feelings, and behaviour within the organization.Aside from
providing extraordinary coffee, Starbucks has made a business out
of human connections, community involvement and the celebration of
cultures. The company commits itself to upholding a culture where
diversity is valued and respected. As a guiding principle,
Starbucks views diversity as an integral part in everything that it
does. An equation is used by the organization on how it defines
diversity. This is Diversity = Inclusion (human connection and
engagement) + Equity (fairness and justice) + Accessibility (ease
of use and barrier free). Partners, customers, suppliers and
communities are the four areas that their diversity strategy
focuses on. For Starbucks, it believes that its workers are very
valuable. Thus, it calls its employees partners. Starbucks seeks
partners who are as diverse as the communities that it serves. From
the individual who makes the coffee to the person to whom a
customer pays and exchange a smile, all Starbucks workers are
partners in the company. Though each worker occupies and performs
different tasks, each task is deemed important for the companys
effective and efficient operation. The term partner is intended to
make clear how integral Starbucks employees, no matter how low on
the chain, are to the company's success. Starbucks also has in its
heart the development of each of its partners by educating and
giving them ample training. It enjoins all new employees to
consummate twenty-four hours of training to learn the operation of
espresso machines, the customer service reflective of their mission
statement, and the processing and production of coffee beans. As a
result of this training, the workers can transfer what they have
learned to the customers. Training programs offered by Starbucks
nurture consistency for all employees and empower the organizations
public image.Although Starbucks provides excellent customer service
due to their loyal and dedicated employees, they do this at a cost.
They pay their employees more than restaurants and retailers.
Furthermore, they offer benefits to full-time and part-time
employees. This results in high costs for the company.The company
extends the Starbucks Experienceto all customers by recognizing and
responding to their unique preferences and needs. Starbucks take
into consideration the values of the culture of each nation that
the firm operates. The firm ensures an exceptional customer
experience by connecting with the customers in a culturally
relevant way. When it says that it is fully engaged, according to
their mission statement, we connect with, laugh with, and uplift
the lives of our customers even if just for a few moments. It is
not simply giving an assurance that a perfect beverage is offered
but its work goes far beyond that. Its really about human
connection. However, limited products are offered to certain
locations. Thus, not enabling the customers outside the main branch
of Starbucks experience such products. Also, the organization has a
strong presence in the US, with more than of their cafes in the
home market and lacks international presence. The company is also
criticized by pressure groups for not using free trade products.
Contrary to their mission of extending the Starbucks Experience to
customers, the firm is having a decline in the satisfaction that
these people get from the company as observed from the comments of
MyStarbucksIdea.com. Another area that the company focuses on is
its communities. Investing and supporting in local neighborhoods
and global communities through strategic partnerships and economic
development opportunities is one thing that Starbucks believes to
be one of the keys to its success. Starbucks treats every store in
every part of the world as part of a community. Keeping in mind
that it can be a force for positive action, it strives to bring
together its partners, customers, and the community to contribute
every day. A larger responsibility is perceived by Starbucks for it
supposes that the world is looking to Starbucks to set the new
standard in the industry that it operates. The fourth area is the
companys suppliers. The company states in its mission statement, We
are a trusted and welcoming company for suppliers through
oursupplier diversity program that works to increase our pipeline
of minority and women owned suppliers. From the statement, it can
be inferred that the firm is not only considering suppliers that
are prominent or owned by men but it opens its operations to have
supplies from starting, small ventures and women-owned businesses.
Not only does Starbucks give importance to the four areas stated
above but it also cares about the environment. It helps on
encouraging others to share the same belief that the planet is a
very essential place. Developing more environment-friendly cups,
reducing the waste it creates by recycling programs, using
renewable energy source, evaluating store design, equipment and
operations to identify ways to continue to reduce the amount of
water it uses, designing its stores as green as it can by using
responsible building materials and energy efficient designs to
reduce its impact on the environment and pursuing strategies
addressing problems that poses a threat to the worlds
coffee-growing regions and helping farmers mitigate the impact of
such problems are the activities that Starbucks does in order to
demonstrate their stand on taking care of the environment because
it believes that as a company that relies on an agricultural
product, it makes good business sense.Hence, Starbucks position on
important issues facing the corporation such as productivity,
quality of performance, adaptability to changing conditions and
internalization is directed towards positivity and success.
C. Corporate Resources1. MarketingThe underlying marketing
problem that Starbucks has lies in its failure to see that its
marketing strategies do not necessarily meet its marketing
objectives. Its desire to expand failed to take into consideration
that it has not been meeting the market. Market profile was
shifting to characteristics that the brand was not originally
marketed for and a high-end priced product in a seemingly expensive
place did not match the market that was becoming lower economic
bracket, less educated, and younger.The whole packaging of
Starbucks was targeted towards a high-end market. It would
naturally see a lower growth rate amidst a market base that is
shifting to low-end. Younger and less educated people will not sit
it out on a lounge chair to sip coffee, read, or talk about issues.
The prices are high compared to competitors like Dunkin Donuts and
McDonalds. The market perceived Starbucks as merely concerned with
growth in the number of stores and profits because the companys
executives failed to see the fact that if it wanted to saturate the
market, its product and service offerings must be really meeting
the characteristics of the market. . The wide potential market base
did not see Starbucks as concerned with their needs.Nevertheless,
the company's aggressive "Starbucks on every corner" strategy has
allowed Starbucks to dominate local markets. Starbucks is the
world's largest coffee chain, with approximately 20,000 stores in
60 countries, 12,937 of which are located in the United States
alone. Another, the companys popularity makes it easy for its
managers to penetrate newly identified markets because the name
Starbucks is already established in the market. Starbucks does not
heavily invest in marketing. Instead, it relies on the
word-of-mouth achieved through the high quality of products and
high level of customer services. However, occasional marketing
activities initiated by the company involve sampling of new
products that are usually conducted within areas nearby the
stores.
2. FinancialStarbucks has been able to establish strong
financial picture. EPS, net revenues, comparable store sales,
operating income and margins were all up and CPG Revenue grew 45%,
driven by increasing share of premium coffee category.Two of the
main goals of effective management of working capital are
maintaining a balance of inventories, accounts receivable, cash,
and other forms of revenue to provide profitability and making sure
that a company can remain operational after paying off current
assets. These are the two goals that Starbucks most likely focuses
on when it comes to the effective management of working capital. It
seems as though Starbucks has been working towards achieving these
goals. Starbucks seems to understand the importance of effectively
managing its net working capital, which is why they employ over 500
employees on their finance team, which includes everything from
accounting, auditing, corporate development and more other
functions. Starbucks can be perceived to be able to pay its
liabilities seeing the noticeable improvement in net working
capital from 2010 to 2011. Also, having working capital in excess
of $977 million demonstrates that Starbucks is very liquid and
maintains healthy balance sheets along with accounting measures.3.
Research and Development (R&D)The research and development
department of Starbucks conducted a research to develop sensory
preference map which helps the company identify what customers
prefer."If I know a little bit about you, I can tell what you
drink, when you drink it, how you drink it, why you drink it, and
whats important in your life." In simplest terms, the sensory map
shows what the global universe of coffee drinkers prefer--mild or
bold; smooth or biting; woody or acidic. Starbucks drinkers, the
dark roasters, fall within a certain small area of this map. But
40% of U.S. coffee drinkers prefer lighter, milder roasts. As
Wagner explained, "This is huge. So we looked at it as a big
opportunity to offer something for everybody." Blonde, in other
words, represents the companys big--that is, huge--long-term
ambitions and appetite for growth.The company strives to get the
best mix of ingredients in order to serve the customers demands by
using coffee science, new technology available, using equipment
that produces high-quality coffee. The company continues to develop
its product and menu to assure customers quality coffee.
Conversely, too much focus on developing its coffee makes Starbucks
forget about its operating efficiency.
4. Operations and LogisticsValue chain analysis allows the firms
to understand the parts of its operations that create value and
those that do not. Understanding these issues is important because
the firm earns above-average returns only when the value it creates
is greater than the costs incurred to create the value (Hitt et al,
2009, p.84).With regards to Starbucks, its inbound logistics
involve company agents choosing coffee beans producers mainly in
African continent, communication the standards related to the
quality of coffee beans, establishing strategic relationships with
suppliers and organizing the supply-chain management. While its
outbound logistics has traditionally involved selling its products
through its stores without any intermediates. However, starting
from recent, a range of Starbucks products such as 3-in-1 coffees
in sachets are being sold through a set of leading supermarkets.
Starbucks operations are conducted in more than 50 countries in two
ways: direct operation of the stores by the company and licensing.
Currently there are 8870 company-operated stores globally, whereas
8139 stores operate on the basis of license (Starbucks Company
Profile, online, 2011).Leaders at Starbucks have provided a
structure that allows partners to infuse themselves into their
work, so they can inspire customers in legendary ways. The leaders
call this the Five Ways of Being (Be welcoming, be genuine, be
considerate, be knowledgeable and be involved). The company also
has product and brand consistency that lets customers get what they
expect from the company. However, too much focus on the expansion
of its operations, Starbucks already lacked internal focus.
5. Human Resources Management (HRM)Starbucks depend mainly on
their employees to manage their operation, thus, they focus on
training employees as they are the mainasset in thecompany.
Starbucks paid considerable attention to the kind of people it
recruited. The company hired peoplefor qualities like adaptability,
dependability and the ability to work in a team. Benefits for
employees/partners like health insurance for 20-hours-per-week
employees, offered stock options, extensive training in product
knowledge, guiding principles of success, personal empowerment, and
the importance of creating warm customer experiences are granted to
the employees of the company. However, this policy of the company
generates a large cost for Starbucks. Employee turnover rate,
according to some reports, is 120% less than the industry average.
This means that the partners of the company have a longer tenure
than those of the competitors. Furthermore, according to a book
called Workforce Management, Starbucks employees have an 82% job
satisfaction rate. It is perceived by Starbucks that its workforce
is duly perceived to be the most valuable resource by Starbucks.
Accordingly, a wide range of training and development programs are
available for them and they are motivated by both, tangible and
intangible incentives.
6. Information Technology (IT)Information is considered as one
of the most important and vital aspects of any business and
organization. This is due to the fact that it plays a significant
role in the process of decision-making. On the other hand, due to
the different influence and impact of globalization as well as
technology, primarily, the Internet, there are different problems
that can be encountered by companies in handling and using the
information that they need. That is the reason why more and more
organizations and businesses are jumping into the bandwagon of
Information Technology or IT in managing their data and information
gathering, processing, sharing as well as analyzing.Processing and
recording the financial management is a rigorous function that
needs the assistance of information technology. Just like any other
companies, IT plays an important role in such task. Employing
information technology helps in improving the relationship with
customers by being able to deliver effective and efficient services
and goods to them. This is applied by Starbucks in terms of their
inventory as well as point-of-sale that is considered as the most
important and initial part of the whole financial and product flow
in the company. By applying IT in such part, it enables the company
to know the buying behavior and patterns of their customers, in
specific stores, that can help them forecast the demand of their
customers in terms of decision-making in the stock of different
products and improving their services. This will help each and
every store to know their client, thus will help to maintain the
position of the company in the global market. The company is also
one of the first organizations that applied WiFi in their stores.
This had been done in order to attract more customers (Starbucks
Coffee 2008).
D. Summary of Internal FactorsIFASStrengthsWeightRatingWeighted
ScoreComments
High Brand Equity0.2051Well-known for its products and services
offered in the market
Coffee Market Growing0.0240.08They have these rewards that
motivates their employees
Exclusive coffee products0.1550.75They claim that they offer the
finest coffee in the world
Great number of purchaser0.0940.36They target many consumers
Strong financial foundation0.0430.12They will continue creating
and growing the coffee culture
Weaknesses
High prices0.1850.9Common complaints of their customers
Over dependency on coffee and coffee related
products0.2040.8Customers have limited choices
Lack of internal focus (too much focus on
Expansion)0.1740.68Affect its brand image
Cross Functional management0.0430.12Common practices in their
daily operations
Stores open near each other0.0940.36Competes with its own
goal
Total15.17
V. ANALYSIS OF STRATEGIC FACTORS (SWOT)A. Situational
AnalysisStrengths High visibility locations to attract customers.
Company operated retail stores, International stores.
Valuedandmotivated employees, good work environment. The
organization is dependent on a main competitive advantage, the
retail of coffee. Starbucks Corporation is a very profitable
organization. Starbucks has a reputation for new product
development and creativity. Starbucks has a highly developed brand,
logo, copyrights, trademarks and website. The Starbucks brand name
is famous for its intense customer loyalty and innovative
products.
Weaknesses Very few food options The company also faces an
increasing number of competitors, especially niche competitors.
Companies like Coffee Bean & Tea Leaf andBoss coffeeare carving
out a comfortable space for themselves in the margins of the
premium coffee market. No form of any advertising.
Opportunity The company has the opportunity to expand its global
operations. New markets for coffee such as India and the Pacific
Rim nations are beginning to emerge. Co-branding with other
manufacturers of food and drink, and brand franchising to
manufacturers of other goods and services both have potential.
Technological advances Emerging international markets Continued
domestic expansion/domination of segment
Threats Increased competition from coffee shopsandothers
(restaurants, street carts, supermarkets) Who knows if the market
for coffee will grow and stay in favour with customers, or whether
another type of beverage or leisure activity will replace coffee in
the future. Financial crisis and recessions.
B. Review of Mission and Objectives One of their objectives
seems to appear as a goal. To establish Starbucks as the most
recognized and respected brand in the world Their mission appears
to be possible. It is not that hard for them to achieve.
VI. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGYA. Strategic
Alternatives1. Starbucks should continue in their existing
marketing strategy for promotion and advertising because they
should make strategy of goodprice reduction strategy.Pros: To enter
newmarkets and maintain current customers.Cons: Additional cost or
expenses.
2. Continuous improvements: To empower functional teams to
improve their performance or services and evaluating their
performance.Pros: To avoid any accumulative losses and to takequick
corrective actions. To improve their productivity as the customers
satisfaction will increase also.Cons: Problems might occur among
workers in different departments or divisions.
3. Giving more focus to their Research and Development. Pros:
Because of their original and famous products, they will continue
to be the leader in coffee shops. Cons: Expensive and time
consuming.
B. Recommended StrategyWe recommend the third alternative course
of action, giving more focus to Research and Development.To have a
competitive advantage against other coffee shops, the Company must
make use of the technology; they must conduct a survey to secure
the capacity of their product if it will be saleable in the market,
they should produce a product with healthier ingredients. The
company must have such strategy where it can be useful to adapt the
changing environment, and in order for them to make sure of what
the customers wants.VII. IMPLEMENTATIONA. What Kinds of Programs
Should Be Developed to Implement the Recommended Strategy?The
Research and Development Department may perhaps start innovating
new products that they could come up with and introduce it to the
consumers quarterly. They should carry on to make innovative
products so that they could have specific new products to
compromise, and search for more eco-friendly products. A flavor of
the month could be one of the marketing strategies that they can
use to draw consumers.
B. Are the Programs Financially Feasible? Can Pro Forma Budgets
Be Developed and Agreed On? Are Priorities and Timetables
Appropriate to Individual Programs?The programs are financially
feasible since funds are already allocated in each of the companys
departments, especially in the Research and Development Department.
Pro forma budgets can be developed and agreed on, and priorities
and timetables are appropriate to individual programs for the
company to monitor improvement on the implementation of such
programs.
C. Will New Standard Operating Procedures Need To Be
Developed?New standard operating procedures may be developed
depending on the program newly implemented. If such program needs a
different standard operating procedures, then new standard
operating procedures must be developed.
VIII. EVALUATION AND CONTROLA. Is the Current Information System
Capable of Providing Sufficient Feedback on Implementation
Activities and Performance? Can It Measure Strategic Factors?The
current information system is capable of providing sufficient
feedback on implementation activities and performance because it is
designed to expedite reporting information. It quickly collects and
edit data, summarizes results, and be able to adjust and correct
errors promptly. Based on the ability of the current information
system, it can also measure strategic factors.
B. Are Adequate Control Measures in Place to Ensure Conformance
with the Recommended Strategic Plan?Adequate control measures are
in place to ensure conformance with recommended strategic plan.
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www.starbucks.com 32