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Operations Strategies adopted by Schultz as CEO of Starbucks Essay


Executive Summary

Quality management in terms of services, products and operations management is a critical aspect in business sustainability and development. This paper analyzes the experience of Starbucks in order to emphasize the notions of control and management as well as competent operations.

The most eminent practice of Howard Schultz was his consideration of all needs and desires of customers by introducing additional quality products and coffee varieties into the menu. Besides, Schultz concentrated on employee training. Further, Schultz reviewed the supply chain of the Company in order to cut costs and enhance efficiency. The paper concludes that the operations strategies adopted by Schultz brought numerous changes to the Company.

Before the crises between the years 2006 and 2008 Starbucks offered its customers coffee with the grand experience (Burks 2009). The Company had knowledgeable, sociable baristas that provided coffee in a trendy environment where people could socialize, unwind, operate their laptops, etc (Michelli 2007).

Nevertheless, the situation changed when the USA experienced a financial crisis, thus, forcing citizens to reduce the amount of money that they usually spent on luxuries. Consequently, Starbucks experienced a lessened demand for its costly coffee drinks as well as a striking decline in the value of its stock.

Howard Schultz reappeared as the CEO of Starbucks in 2008 at the time when both the corporation and the nation were experiencing a crisis. The annual sales of the Company experienced a percentage decline of 467% between 2006 and 2008 (Burks 2009). Schultz attributed this fall to rapid expansion, which compromised the quality of its products and services.

The quest for growth had obstructed the Company’s core business of offering comfortable places for people to relax while taking sumptuous cups of coffee. Hence, Schultz realized that quality management was essential in restoring Starbucks to its initial upward course.

After Schultz took his position as the Company’s CEO, the first thing that he accomplished was to shut down 600 coffee shops that performed poorly at that time. Besides, he visited many Starbucks’ outlets in order to establish the needs and desires of customers. Schultz solicited for customers’ views through direct contact.

Schultz then used customers’ requirements to design quality and reliable drinks as requested by customers. Schultz considered all needs and desires of customers by introducing additional quality products and coffee varieties into the menu.

In addition, Schultz focused on meeting customers’ needs for quality and value through aligning the prices of its commodities to its Company strategy. Since its foundation, Starbucks maintained high price on its products because of supposed premium image that became associated with its brand.

However, after Schultz reoccupied his seat as the Company’s CEO, Starbucks began offering a bottomless 8 oz cup of coffee at $1 with infinite top ups which cost about 50 cents less than all other products of the Company. Moreover, Starbucks has adopted value strategies that stress more on economical and cheaper coffee products, though initially they are supposed to be high-priced.

Another perspective that Schultz concentrated on was employee training so as to meet the needs of customers. For instance, Schultz closed all Starbucks’ outlets in America for three hours in order to train employees on how to make the ideal espresso drink.

Schultz recognized the value of equipping employees with competent skills that would enable them to make products that meet customers’ standards. Thus, Schultz spent more time on training employees and less time on advertising, which was every beneficial. He recognized that Starbucks‘s employees were the most appropriate people to convey the passion and knowledge to customers.

Further, Schultz focused on intensifying profits in existing stores through enhancing technology investments and operational efficiencies. By doing so, Schultz recognized that the improvements of the quality of customer service in terms of factors such as time and resources are due to use of technology. For instance, the Company proclaimed its focus for entertainment business on digital strategy in 2008 (Paryani 2011).

Since 2008, when Schultz returned as the Company’s CEO, Starbucks services extended from coffee and pastries to smoothies and wraps, which enabled the Company to maintain competition and meet all consumer needs. In addition, Schultz launched new products, for instance Starbucks VIA™ Ready Brew Coffee, food offerings with no artificial flavors, corn syrup or dyes.

By doing so, the Company was able to grow its consumer products, and thus, exploiting their brand responsiveness and setting up themselves as the most acknowledged and appreciated brand in the world to their intended market. Schultz, also, made strategic investments in chief strategies through concentrating on controlled, global store extension in main markets. He identified some key zones that could be fit for expansion, while closing outlets that did not seem necessary.

In 2008, Schultz took time to review the supply chain of the Company, in order to establish irregularities that cost the Company too much. The assessment revealed that the supply chain had expanded rapidly through outsourcing. However, outsourcing had as well caused cost inflation (Jacobs & Chase 2011). Reacting to those results, Schultz structured a supply transformation plan with three phases.

The organization of Starbucks’ supply chain, which was the first step in the plan, began towards the end of 2008. This entailed taking a compound arrangement and splitting it so that each work became grouped under the four central functions of supply chain including sourcing, planning, manufacturing and distribution (Boyer & Verma 2010; Stevenson, 2009).

For example, all persons who participated in planning and introduction of new products became categorized in planning. Similarly, all workers involved in customer service and delivery became consigned to the delivery category.

The second part of the plan was to cut down costs and enhance efficiency (Pearce & Robinson 2009). To complete this step, the sourcing group set up strategies that would establish the cost drivers that were making prices go up (Russell & Taylor 2011).

In addition, the manufacturing group came up with a competent model for supplying coffee beans to its manufacturing plants as part of the plan with the objective of making productions in areas where the commodity got sold. The merits of this strategy were seen immediately, since regionalizing its coffee manufacture made Starbucks lessen its costs for transportation.

In conclusion, the operations strategies adopted by Schultz have brought numerous changes to the Company in the last few years. Schultz concentrated on providing quality services to its customers, which enabled the Company to maintain its position as the most acknowledged and appreciated brand in the world. Further, the supply transformation plan introduced by Schultz enabled the Company to cut down costs while at th same time enhancing productivity and efficiency.

References

Boyer, K & Verma, R 2010, Operations and supply chain management for the 21st century, Cengage Learning, London.

Burks, M 2009, Starbucks, Santa Barbara, Greenwood Press.

Jacobs, F R & Chase, R B 2011, Operations and supply chain management, 13th edn, McGraw-Hill Irwin, New York.

Michelli, J A 2007, The Starbucks experience: 5 principles for turning ordinary into extraordinary, McGraw Hill, New York.

Paryani, K 2011, ‘Product quality, service reliability and management of operations at

Starbucks’, International Journal of Engineering, Science and Technology, vol. 3 no.7, pp.1-14.

Pearce, J P & Robinson, R 2009, Strategic management: formulation, implementation and control, McGraw-Hill, New York.

Russell, R S & Taylor B W 2011, Operations management: creating value along the supply chain, 7th edn, John Wiley & Sons, New Jersey.

Stevenson, W J 2009, Operations management, 10th edn, McGraw-Hill Irwin, New York.

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IvyPanda. "Operations Strategies adopted by Schultz as CEO of Starbucks." April 8, 2019. https://ivypanda.com/essays/operations-strategies-adopted-by-schultz-as-ceo-of-starbucks/.

References

IvyPanda. 2019. "Operations Strategies adopted by Schultz as CEO of Starbucks." April 8, 2019. https://ivypanda.com/essays/operations-strategies-adopted-by-schultz-as-ceo-of-starbucks/.

References

IvyPanda. (2019) 'Operations Strategies adopted by Schultz as CEO of Starbucks'. 8 April.

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