Uploaded by alvinmguloy

Starbucks-WAC-Business-Strategy-Analysis-Project-report

advertisement
1
TABLE OF CONTENTS
Sr. #
Description
Page #
1
Introduction
2
2
Mission Statement
3
3
Objective & Goals
6
4
PESTEL Analysis
7
5
Porter's Five Forces Model Industry Analysis
9
6
The Strategy Formulation Analytical Framework
7
Stage - I, The Input Stage
8
Stage - II, The Matching Stage
9
14
SWOT Analysis
17
SPACE Matrix
18
BCG & IE Matrix
20
Stage - III, The Decision Stage
22
SPACE Matrix
QSPM
10
Value Chain
23
11
Recommendation
28
Business Strategy & Policy, Summer 2010.
2
Introduction
Name
: Starbucks Corporation
Headquarters
: Seattle, Washington, U.S.
Revenue for 2003
: US$3.3 billion
CEO
: Howard Schultz (Founder of Starbucks coffeehouse)
Total Stores
: 5886
Company started
: In 1971 in Seattle, Washington
Positioning
: Starbucks positioning itself as a “third place”
Products sold include
:
- Beverages
- pastries
- Whole coffee beans - coffee-related retail items
Starbucks, the coffee production and serving company took its exceptional name from a
character of the novel “Moby Dick” and have its roots in Seattle, Washington. Here you
can still find the very first coffee shop at the pike place market, which has been opened
since 1971. In 1987, Starbucks was bought by Howard Schultz and ever since has been
exploring all over the United States. Today Starbucks is the most known chain of
coffeehouses around the world. Starbucks is the largest coffeehouse company in the world,
with 5,886 stores in 40 countries, including around 1312 in the United States. Starbucks
sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, snacks, and
items such as mugs and coffee beans. Through the Starbucks Entertainment division and
Hear Music brand, the company also markets books, music, and film. Many of the
company's products are seasonal or specific to the locality of the store. Starbucks-brand ice
cream and coffee are also offered at grocery stores. Starbucks’ Italian style coffee, espresso
beverages, teas, pastries and confections had made Starbucks one of the greatest retailing
stories of recent history and world’s biggest specialty coffee chain.
Business Strategy & Policy, Summer 2010.
3
Mission Statement
Mission Statement:
Not provided in Case study also not in website
Mission Statement (Original)
“Establish Starbucks as the premier purveyor of the finest coffee in
the world while maintaining our uncompromising principles while
we grow.”
The six principles are:
1. Profitability is essential to our future success.
2. Provide a great work environment and treat each other with respect and dignity.
3. Embrace diversity as an essential component in the way we do business.
4. Apply the highest standards of excellence to the purchasing, roasting and fresh
delivery of our coffee.
5. Develop enthusiastically satisfied customers all of the time
6. Contribute positively to our communities and our environment
Analyzing the Mission Statement Component
It is the analysis of mission statement of Starbucks in we examined the 9 elements rather they are
or not in this company provided mission statement.
NO
COMPONENT
YES/NO
1.
Customers
Yes
2.
Products or services
Yes
3.
Markets
Yes
Business Strategy & Policy, Summer 2010.
4
4.
Technology
No
5.
Concern for survival, profitability and growth
Yes
6.
Philosophy
Yes
7.
Self-Concept
Yes
8.
Concern for public image
Yes
9.
Concern for employees
No
It is the good mission statement which provided by Starbucks but its have not described 2
components among 9 components of Mission statement those are Technology and Concern
for employees. Company should must to discuss the technology factor in its mission
statement to let know to its stake holders about its concern about technology and also
about its employ those could be its competitive advantage by providing good services.
Proposed Mission Statement
“Establish Starbucks as the foremost provider of the deluxe coffee in the
world and also to be established as the most employee appreciated
company even as maintaining our uncompromising principles as we grow
mutually with hi-tech advances.”
The six principles are:
1. Provide a great work environment and treat each other with respect and dignity.
2. Embrace diversity as an essential component in the way we do business.
3. Apply the highest standards of excellence to the purchasing, roasting and fresh
delivery of our coffee.
Business Strategy & Policy, Summer 2010.
5
4. Develop enthusiastically satisfied customers all of the time
5. Contribute positively to our communities and our environment
6. Recognize that profitability is essential to our future
Business Strategy & Policy, Summer 2010.
6
Objectives and Goals
Objectives of Starbucks
Most recognized and respected brand in the world:
Company is having objective to establish Starbucks as the most recognized and respected
brand in the world.
Is to recognize that every dollar earned passes through employees’ hands
Starbucks will always appreciate the employee as the revenue which is increasing every
year is by the efficient and hardworking employees. This drastic increase in profit is not
recognized without the support of the employees who attracts the customers to a long term
relationships with the coffeehouse.
Market expansion:
Starbucks’ objective is to provide its services at the foot step to its valuable customers for
this Starbucks developing its market expansion and going into new markets and cover the
customers by lowering its price and providing good quality better then perception of its
customers.
Operations to Achieve Objectives:
For achieving its objectives Starbucks plans to continue to rapidly expending its retail
operations. And grow its sales and other operations.
CURRENT STRATEGIES USING
●
●
Market Penetration
ORGANIZATIONAL STRUCTURE
N/A
PESTTLE
Business Strategy & Policy, Summer 2010.
Product Development
7
PESTEL Analysis
Political:
Globalization nowadays has changed worldwide trend of doing business. Companies find
it difficult to stay alive by relying solely on home market. The borders between various
countries are getting invisible. Companies are these days developing business in various
countries without boundaries. Advertisements are all over the world for many products.
Company strategists find it not an easy task to expand the business outside borders. The
basic need for globalization is to learn the different cultures of the country they plan to
start business. Taking all aspects including tax rates, law and legislation is important in
globalization. But in the case of Starbucks did not discuss as such any political factors
those can influence on Starbucks other then

Allowance for the Direct Dealing with the growers after bypassing many of the
middle market which is eventually be the point of exposure for Starbucks
politically
Economical:
People are these days looking for more earnings to continue their luxurious life. The
number of two income households is getting increased all over the world. People are
looking forward for products which reduce their time to be spent on. Improved customer
service, immediate availability, trouble free operation of products is becoming more
important. Since the world is facing crisis, people are looking forward for cheap and
quality products. Price is becoming priority to customers but Starbucks having a threat
from its competitors that they are providing low priced products and services then
Starbucks which can make negative thing for Starbucks. Increase in the inflation rates and
increase in unemployment is also a factor for demand in lower priced products.

Unwillingness to help improve the economic condition of the coffee growers
themselves by Starbucks
Business Strategy & Policy, Summer 2010.
8

250 Pre Harvest and 650 Post Harvest financing to the Coffee growers and farmers
by the Starbucks in 2005 which more than 1.2 B Pounds
Social:

Supporting Relief Organization such as CARE

Providing Direct Support to the farmer and farm community around the world

Contribute $43,000 in 2001 for construction of the Health Clinic and School in
Guatemala

Providing the Varity if ways of improvement of Coffee Processing facilities in a
number of countries in the world
Technological:
Mass communication and high technology are creating patterns of various cultures
worldwide. Ground-breaking technological changes and discoveries are having a dramatic
impact on organization. Internet is the world information spread machines that have
covered an interaction from one user to another user. In contrast, advertising through have
brought high achievement into marketing strategy. Starbucks discusses technological us in
this case study just about its one brand “shade Growth Mexico coffee’s” Online selling
throw its website Starbucks.com but its not provided information about any other use of
technology in this case study other then just about this one bran but Starbucks can take
advantage of use of technology. Advancement of the technology can cause increased in the
distributing of the products. High technology of the Machineries can increased the supply
of the products while achieve a better profits for the Starbucks.
Ecological:
Cultivated under the Company of shade Trees in Organic product
Legal:
N/A
Business Strategy & Policy, Summer 2010.
9
PORTER FIVE FORCES INDUSTRY ANALYSIS
Threat of new Entrant
Determinants
Defining Question
Economies of
Does successful entry
require that companies have
significant economies of
scale or experience
Scale and
experience
Brand Identity
Product
Differentiation
Switching Costs
Capital Required
Access to
Distribution
Cost advantage
Government
policies
Expected
Retaliation

Assess the power of Buyers
Circle one of the following.
1 = low, 5 = high, or N/A if
it doesn’t apply to your
industry.
1
2
3
4
5
N/A
Do new companies need to
spend heavily on brand
identification?
Do new entrants need to
differentiate by spending
heavily on advertising,
customer services or product
differences to over come
existing customer loyalty?
Does the buyer have to pay
to switch from one supplier
product to another?
1
Does the new company need
to invest large financial
resources?
Does the new comer have
access to distribution
channel for product or
services?
Established companies have
cost advantages over new
rivals.
1
Government policies can
help to preserve or limit
competition.
If industry leaders retaliate
more for new entrants then
threat for new entrants will
be high.
1
2
3
4
5
4
5
4
5
4
5
4
5
4
5
4
5
4
5
N/A
1
2
3
N/A
1
2
3
N/A
2
3
N/A
1
2
3
N/A
1
2
3
N/A
2
3
N/A
1
2
3
N/A
Threat Of new Entrants:
(Four 4’s, Two 2’s, One 3s, One 1’s, one 5’s) So the threat of new entrants is High
Business Strategy & Policy, Summer 2010.
10
Intensity of Rivalry
Determinants
Defining Question
Industry growth
How slowly or quickly is the
industry growing? Intense
fight among rivals for market
share
Does your business have a
high fixed cost?
Fixed Cost
Product
Differentiation
Switching Costs
Intermittent
Overcapacity
Brand Identity
Concentration
and balance
Diversity of
competitors

Assess the power of Buyers
Circle one of the following.
1 = low, 5 = high, or N/A if
it doesn’t apply to your
industry.
1
2
3
4
5
N/A
1
3
4
5
4
5
4
5
4
5
4
5
4
5
4
5
N/A
Is your product commodity?
The closer the product is to
being a commodity the
higher intensity of rivalry.
How costly is it for your
buyer to switch between
providers?
How frequently is there a
problem of excess capacity
in your industry?
1
Is branding critical for your
Rival’s success? Brand
identification by buyer
reduces the threat of rivals.
1
Are there a large number of
firms of equal size and
power, all chasing after the
same customer?
Are there competitors with
different strategies and frame
of reference? When
competitors are diverse it is
more difficult to establish the
rules of game
1
2
3
N/A
1
2
3
N/A
1
2
3
N/A
2
3
N/A
2
3
N/A
1
Intensity of Rivalry:
(Three N/A’s, Three 2’s, One 3’s)
The rivalry is very intense and Low to Moderate.
Business Strategy & Policy, Summer 2010.
2
2
3
N/A
11
Bargaining power of Buyer
Determinants
Defining Question
Concentration
Buyer is fragmented because to
industry covers all
Demographic segments.
Product Cost
versus Total
Purchases
Product
Differentiation
Switching
Costs
Backward
Integration
Impact on
Quality/
N/A
!Unexpected End of
FormulaDoes your product
buyer’s purchase represent a
significant fraction of the
buyer’s cost? If so, buyer
bargaining power is typically
high.
Product is standard or
undifferentiated bargaining
power is high.
1
If buyers face few switching
cost there bargaining power is
high.
1
Profits with in the industry for
buyers are if high then buyer’s
power is high.
Can they make what you make
themselves?
Profits
Assess the power of Buyers
Circle one of the following.
1 = low, 5 = high, or N/A if
it doesn’t apply to your
industry.
1
2
3
4
5
2
3
4
5
4
5
4
5
N/A
1
2
3
N/A
2
3
N/A
1
2
3
4
5
N/A
1
2
3
4
5
4
5
4
5
N/A
Is the product you offer
important to the quality of the
buyer’s product or services?
1
Does the buyer have complete
information on the product he
may purchase?
1
2
3
N/A
Performance
Buyers
Information

Bargaining Power of Buyer:
(Four 4’s, One 1’s, Two2’s One 5’s)
The bargaining power of the buyer is High
Business Strategy & Policy, Summer 2010.
2
3
N/A
12
Bargaining power of Suppliers
Determinants
Defining Question
Concentration
Are your supplier are
Assess the power of Buyers
Circle one of the following.
1 = low, 5 = high, or N/A if
it doesn’t apply to your
industry.
1
2
fragmented or highly
3
4
5
4
5
4
5
4
5
4
5
4
5
4
5
N/A
concentrated?
Presences of
Are there any substitutes for
Substitute
your supplier products?
1
2
3
N/A
inputs
Product
Is the supplier’s product or
Differentiation
service commodity?
Switching Costs
How costly is it for you to
1
2
N/A
1
2
switch from suppliers product?
Importance
Is your industry an important
Relative to
customer the supplier group?
3
3
N/A
1
2
3
N/A
Customer.
Forward
Can the supplier produce the
Integration
product you make?
Impact on
Is your supplier product
Quality/
essential to the quality or
Performance
performance of your business?

Bargaining Power of Supplier:
(Three 4’s, Three 2’s, One 5,s)
So the Supplier power is HIGH
Business Strategy & Policy, Summer 2010.
1
2
3
N/A
1
2
3
N/A
13
Threat of Substitute
Determinants
Defining Question
Price
Does the substitute offer a
Assess the power of Buyers
Circle one of the following.
1 = low, 5 = high, or N/A if
it doesn’t apply to your
industry.
1
2
3
4
5
performance
better price performance?
N/A
Switching Cost
Is it costly for buyer to switch
1
2
to the substitute product?

3
4
5
N/A
Threat of Substitutes:
(One 2’s One 3,s)
So the threat of substitute is Low to Moderate
INDUSTRY COMMENTS:
As there are three high forces and Two Low to Moderate force so the over all industry is
very attractive and growth is expected to be there in the industry
Business Strategy & Policy, Summer 2010.
14
The Strategy – Formulation Analytical Framework
STAGE 1: THE INPUT STAGE
Company’s Strengths, Weaknesses, Opportunities & Threats
Strengths:
 Expansions in retail operations
 Product Development
 New distribution channels
 Employees stock ownership plans
 Market development
 Perceive premium product
 Product differentiation
 Peaceful atmosphere (Especially service with music)
 Proper customer guidance by providing wide ray of coffee selection & 0pportunities.
 Evaluation of companies business lines (Assembly of experienced professionals
increasing growth)
 Quality of service
 Employees training benefits
Weaknesses:
 Lack of employee compensations and benefits
 Critical parking place at busy streets of North America
 Sales saturation
 Less spending on advertising
 Employees overworked/under paid.
 Decrease in sale of per store.
Business Strategy & Policy, Summer 2010.
15
Opportunities:
 Direct relationships with coffee farmers
 Providing ready access to consumer
 Unroasted beans
 Market Expansion (Pacific, Northwest & California, Boston, Washington)
 International Expansion (more to Asia, Europe & Latin America)
 Joint ventures (for achieving the target of more then 500 branches till 2003)
 New product placement at existing coffee
 Espresso bar Concept
 Providing Organic products
 Buying in long term contracts (By less spending on cost)
 Coffee of the day (Fair Trade Coffee in North America)
Threats:
 Anti Globalization movements
 Plummeting pressure of Coffee Prices
 Labor & real estate prices
 Imports & Brokers (Sale to mass Market)
 Less profit from joint ventures
 Cash out from the business
 Substitutes
 Misuses of brand names
Business Strategy & Policy, Summer 2010.
16
STAGE 1: THE INPUT STAGE

EXTERNAL FACTOR EVALUATION (EFE) MATRIX

COMPATITIVE PROFILE MATRIX (CPM)
N/A
We know that the Competitive Profile Matrix (CPM) constructed on the basis of
critical success factor of the organization that give organization the competitive
advantage against it competitors in sustaining market and getting profits. But in
this, Starbucks, case no such information give about such critical success factors
and the competitors of the Starbucks. That’s why, it is not possible to construct the
Competitive Profile Matrix.

INTERNAL FACTOR EVALUATION (IFE) MATRIX

FINANCIAL ANALYSIS
In Excel Sheet
Business Strategy & Policy, Summer 2010.
17
The Strategy – Formulation Analytical Framework
STAGE 2: THE MATCHING STAGE
SWOT Analysis
Strengths
Weaknesses
S1:Expension in retail operations
S2:Product Development
S3:New distribution channels
S4:Employees stock ownership plans
S5:Market development
S6:Perceive premium product
S7:Product Differentiation
S8:Peaceful atmosphere (Specially
service with music)
S9: Proper customer guidance by
Providing wide array of coffee selection.
S10:Evaluation of companies
business lines (Assembly of
experience professionals increasing
growth)
S11:Quality of service
S12:Employees training benefits
W1:compensations and benefits
W2:Critical parking place at busy
streets of North America
W3:Sales saturation
W4:Less spending on advertising
W5: Employees overworked/
Under paid.
W6: Decrease in sale of per store.
SO Strategy
Opportunities
O1:Direct relationships with coffee
farmers
O2:Providing ready access to consumer
O3:Unroasted beans
O4:Market Expansion (Pacific, Northwest
& California, Boston ,Washington)
O5:International Expansion ( more to Asia,
Europe & Latin America)
O6:Joint ventures ( for achieving the target
of more then500 branches till 2003)
O7:New product placement at existing
Coffee
O8:Espresso Bar Concept
O9:Providing Organic products
O10:Buying in long term contracts (By
less spending on cost)
O11:Coffee of the day (Fair Trade Coffee
in North America)
W 6 & O7 :
S 5 , S 7 & O 8:
Use espresso bar concept in world
Can increase sale of per store by
market which will ultimately
placing out some new product at
differentiate the product from
existing coffee
other coffee provider.
S 11 , O 2 & O 9:
We can create customer loyalty
through adding benefit to the
product.
ST Strategy
Threats
T1:Anti Globalize movements
T2: Reducing pressure of Coffee Prices
T3:Labour & real estate prices
T4:Imports & Brokers ( Sale to mass
Market)
T5:Less profit from joint ventures
T6:Cash out from the business
T7:Substitutes
T8:Missuse of brand names
WO Strategy
WT Strategy
S4 & T8:
Can avoid the misuse of brand
W4 & T1:
name by employee stock
anti globalization movements
ownership plan( employee loyalty)
Business Strategy & Policy, Summer 2010.
Can reduce the threat of
by advertisement.
18
SPACE MATRIX
Internal strategic position
X-Axis
Y – Axis
Competitive analysis
External strategic position
Industry strength
-2 Product quality
+6 Profit potential
-3 Market capital share
+5 Growth potential
-4 Technological know how
+5 Financial stability
-2 Control over distributors
+5 Ease of entry into market
Average= -2.75
Average= 5.25
Financial Strengths
Environmental Stability
+4 Cash flow from operations
-4 Price range Competing Products
+5 Liquidity
-2 Barriers to entry
+5 Leverage
-2 Competitive pressure
+6 working Capital
-5 Barriers to Exit
+4 Cash Flow from Operation
-3 Risk involved in business
Average= 4.8
Average= -3.2
Total X-axis score= -2.75 + 5.25 =2.50
Business Strategy & Policy, Summer 2010.
Total Y-axis score= +4.8 – 3. 2 = 1.6
19
SPACE MATRIX (Graphical Presentation)
The Space matrix results show Aggressive response of the company. In this position, the
company has to adopt the following strategies.

Backward, Forward & Horizontal Integration
 Market Development
 Product Development
 Market Penetration
 Diversification (Related or Unrelated)
Business Strategy & Policy, Summer 2010.
20
STAGE 2: THE MATCHING STAGE

B C G Matrix
N/A
BCG Matrix is also not applicable because the company’s portfolio’s share with
respect to its competitor not available.

INTERNAL EXTERNAL (IE) MATRIX
The IFE total Weighted Scores
IFE
4.0 Strong (3.0-4.0) 3.0 Average (2.0-2.99) 2.0
High
Weak (1.0-1.99)
I
II
III
IV
V
VI
VII
VIII
IX
3.0_4.0
3.0
Medium
EFE
2.0_2.99
2.0
Low
1.0_1.99
1.0
 IFE score 2.86
●
Business Strategy & Policy, Summer 2010.
EFE score 3.09
1.0
21
GROWTH AND BUILT

Forward , backward, Horizontal integration

Product development

Market development

Market Penetration

GRAD STRATEGY MATRIX
N/A
Grand Chart matrix describes the company’s competitive position against its
competitors and company’s market growth rate based on the results of Competitive
Profile Matrix (CPM) and BCG Matrix. But in this case, both matrixes are not
implementing due to non availability of sufficient information about the competitors as
well as the company’s products portfolio. That’s why Grand Chart not constructed.
Business Strategy & Policy, Summer 2010.
22
The Strategy – Formulation Analytical Framework
STAGE 3: THE DECISION STAGE
1. POSSIBLE STRATEGIES (Strategies Selection Table)
Excel Sheet
2. QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)
Excel Sheet
Business Strategy & Policy, Summer 2010.
23
Value Chain of STARBUKS (Interlink Activities)
 Currently Adding Value represented by (+)
 Loosing value represented by (-)
 Potential to add value represented by (P+)
Primary Activities:
 Inbound Logistics:

Starbucks bypass the much of the middle market +

Starbucks Developed expertise and relationship with coffee growers themselves +

Taking out cost of its supply chain +

Joint venture with sazaby that had expertise in both retail and estate. +

Starbucks is giving direct support to the coffee growers. +

Company had purchased Peet’s Coffee and Tea, a Berkeley, California, Coffee roaster
and distributor, straining the company’s management and financial capabilities. +
Business Strategy & Policy, Summer 2010.
24

Company can pursue the opportunity of leverage the brand by introducing new
products and development of new distribution. (P+)

The New York “C” coffee prices remained at near record lows, decreasing
sourcing costs and increasing gross operating margins. (P+)
Operations:

Between 1995 and 1998 Starbucks had averaged $0.69 million per store. +

Company was continuing expand international operations at breakneck pace. +
Outbound Logistics:
Additional to its retail stores: +
1. It sells through specialty sales groups
2. Direct response business
3. Supermarket
4. Online selling at starbucks.com
Marketing and Sales:

Company is still spending less than $20 million per year on advertising.

Products type offering: +

Also sells bottled frappuccino coffee drinks & line of premium ice-cream through
P+
its joint venture partners. +

Also offers a line of innovative premium teas produced by its wholly owned
subsidiary, Tazo Tea. +

$215 M profit on $3.29B sales in 2002 & expecting 25% growth in 2003. +

` New stores cannibalizing existing stores. (-)

Too many number of stores did created barriers for the competitors +

But this huge number of store owing led to downward trend in sales per stores. (-)

Before entering in any new country, the company first takes a complete research +
 “Commitment to Origins” company program. +
Business Strategy & Policy, Summer 2010.
25

All the three coffees under “commitment to Origins” program was 20-25% more
expensive compared to Starbuks traditional blends. +

Starbucks introduced Fair trade coffee in North American stores and promoted it
through various brochures and promotions. +

Company can offer “Coffee of the day” per week rather than per month. P+

Corner locations, the hallmark of early growth store provided high visibility. +

It expanded all facets of the industry as distributed through traditional supermarket
distribution systems. +

It has three-legged stool for global development which are retail coffee and
assorted specialty items, specialty sales and Frappuccino coffee drinks and
specialty coffee ice creams sold through retailer globally. +

It can enhance its marketing decide under the leadership of Howard Schultz. +

R&D for new markets in which it has to enter.+
Services:

The perceived premium was both in the products’ quality and in the method of its
delivery. +

Starbucks believe and actively giving superior services by giving the sense of
discovery and excitement and loyalty that bend the customer to Starbucks. +

It had evolved into its own Americanized version of specialty coffee provider of
coffee shop services. +

Special pastries and music provided an atmosphere of both warmth and comfort. +

Starbucks is providing ready access to consumer foot traffic such as commuting
routes. +

Employees are trained to provide wide array of advice on coffee selection and
appropriateness to potential customer. +

Internet Selling. +
Business Strategy & Policy, Summer 2010.
26
Explanation:
The company owns a good repute in the global market which gives it the best strength. The
company owns 5700 total number of stores globally. As it works in with other business
partners under the contract of joint venture, the number of total stores adds up to 5886 out
of which 1312 is owned outside US market. The company offers a variety of products in
different shapes and ways which are related to their core offering (coffee) to the customers.
The company gives importance to its employees and it trains them for enhancing their
performance. They consider their employees as their partners and offer them stocks to
make them feel as they are the part of organization. This adds their morality in work. There
is a big objection to the company that, it is not giving benefit to their employees who are
over working and most of them are under paid. Due this objection the purpose of adding
the benefit doesn’t support their strategy of retaining their employees.
Stores are located in pivotal positions for consumer recognition and access. All stores were
owned by the company in domestic market inside US market. This helped the company to
increase its availability aspect in the eye of the customer. But unfortunately, this strategy
wasn’t helping the company to increase the sales per store. Infect, the stores introduced
was cannibalizing the sales of the existing stores. The company uses multiple channels for
providing the product to the end customers.
Starbucks is creating good relations with their suppliers. This helps the company to gain a
good quality product on a low price as compared to the market rates. The company gives
benefits to the as well so they can improve their economic stability.
Infrastructure:

Starbucks used two basic structures for international expansion that were company
owned and licensing agreements. +
Business Strategy & Policy, Summer 2010.
27
Human resource management:

Howard Schultz joined the company as member of marketing team. +

In decade of 1990s, Starbucks expand its talent pool on the most senior levels +

Starbucks is focusing on employee training. +

Company also giving health care benefits to the employees (more then 20
hour/week). +

First time Starbucks gave stock ownership to its employees. +

Starbucks bought all foreign managers to its Seattle offices for 13 day training. +

It can start employee benefits and motivation programs. P+
Business Strategy & Policy, Summer 2010.
28
Recommendations
Recommendations for Improvement:
1) Revamp the employee reward system
2) Tighten focus on creating the “Third Place” environment
3. Focus profitability measures on profitable sales, not just reduction in staffing
1) Revamp Employee Reward System:
 Large percentage of the staff are under the age of twenty
 Benefits package focuses on medical, dental, and vision care, as well as the
employee stock options
 Outside of hourly wage, and semiannual raises, there are few monetary rewards
2) Improve “Third Place” Environment
 Site has a very high employee turnover rate
 Manager “promoted” to a another store in hopes of improving their poor
performance
 Site has very poor handicapped accessibility
 Condition of restroom in each of our visits was poor and had no baby changing area
3) Focus Profitability Measures on More Than Just Staffing:
 Store is underperforming on some high margin product segments
 Too high a focus on minimizing direct labor as a key to achieve profitability
 Focus on high-margin items and profitable add-on sales
 By increasing pastry sales by 33%, store would realize a $16K increase in
contribution
Action Plan For Improvement
 Decrease employee turnover rate
–
Focus on hiring older employees where benefits package is more appropriate
–
Base raises on performance rather than maximizing raises for economic reasons
–
Develop and actively maintain a reward system for employees (i.e. employee of
the month)
Business Strategy & Policy, Summer 2010.
29
–
Develop a system of regular employee communications / meetings
 Improve site accessibility and cleanliness
–
Upgrade front door and restrooms for handicapped accessibility
–
Add a baby changing station
–
Redesign restroom to separate cleaning supplies from bathroom or move
cleaning supplies to another location
–
Focus employee attention on restroom cleanliness
 Enhance Starbuck’s differentiated atmosphere
–
Utilize entertainment budget to hire outside entertainers, have book / poetry
readings, etc.
–
Display the store’s collection of games and activities more prominently
–
Make the location more of a “scene”
Impacts
 By focusing on the initial recruitment and hiring stage, and by rewarding
employees based on merit current turnover rates will be reduced.
 By focusing on site accessibility and cleanliness, the physical facility will not
detract from atmosphere.
 By improving Starbucks’ atmosphere, it will become a more attractive place to go.
Potential Risks
 Customers may not react positively to the changes being made
 Not enough available employees to meet re-aligned hiring needs
 Claims of age discrimination and negative affect on sales in youth demographic
 Costs associated with planned change
Business Strategy & Policy, Summer 2010.