Starbuck Corporation: Competing in a Global Market Report

Company’s Overview and Background Information

Starbucks Corporation is an American based company that was founded in 1971 with the headquarters being situated in Washington DC. Fundamentally, the company deals with coffee products. It thus undertakes to purchase, roast and sell whole beans mainly coffee beans and a wide range of high quality coffee beverages both in America and international markets such as Japan, China and Brazil through a well established local and international retail outlets¹.

Since its inception in 1971, Starbucks Corporation was known as a seller of packaged premium specialty coffee. However, the company has emerged as a leading and most popular destination of coffeehouses, where customers can obtain a wide range of high quality coffee products that includes and not limited to beverages and food items as well as packaged whole beans and ground coffee².

Over the years, the company has gained unmatched popularity and credit in the heart of many American and world customers for its exceptional quality products that have transformed the way the latter view and use coffee products. Ideally the company is a corporate success a factor that has enabled it to gain massive attention in the global industry. Starbucks success can also be seen in the growth path that it has taken since its establishment.

Going by the fact that it started as a small firm, Starbucks is a management success story that is greatly attributed to the exceptional managerial environments that has continued to prevail in the company. In fact, it has been rated as one of the fastest growing companies in the United States of America. In the decade 1992 to 2002 for instance, the company’s net profitability soared by a net compounded rate of 20% to reach $3.3 billions in 2002. Similarly, the net profits increased by a compounded rate of 30% in 2002 setting a record in the profitability of Starbucks history.

The company’s merchandise including the four splits have grown in leaps and bounds over the ten years between 1992 and 2002 soaring by a record 2200% and greatly beat other world successful firms such as Wal-mart, general electrics, Pepsi-cola coca cola, Microsoft, and IBM in terms of returns³. Since 2003 to date, the excellent growth late has been to a greater extent maintained irrespective of the setbacks of the falling economic conditions especially from 2006.

The growth of the company has been greatly heightened by the company move to diversify into the international markets. The company has since extended its operation to the European, Middle East, Asian, Australia and New Zealand and Latin America although amid daunting challenges⁴. In addition, Starbucks continues to explore the South American markets a move that one can use to predict future growth in the company profitability.

The Company Mission, Principles and Goals

Starbucks operations are greatly entrenched in its clearly outlined mission statements that set the goals and principles which guide every aspect of the company’s internal and external operations. The company’ mission statement (which is Starbuck’s mission) is to inspire and nurture the human spirits – one person, one cup, and one neighborhood at all times.⁵ It is this mission statement that guides all operations at Starbucks. The company’s CEO Howard Schultz stresses greatly on the mission statement attributing much of the Starback on the mission statements and the associated guiding principles which are.

Quality

Starbucks has always aimed at and stressed on offering the highest quality coffee products, to achieve this objective the company greatly boast of its ability to source the best raw materials (coffee beans), its unmatched and well controlled, roasting and processing processes and strains on ethics with an ultimate aim of transforming the life of the raw materials suppliers or rather the coffee farmers. Concerning the coffee quality, the objective of the company aims at providing the best quality coffee products to the world wide markets via ethically sourcing the best quality coffee beans and roasting them with great care, while transforming the life of the people who are involved with their growth.

Employees

At Starbucks the employees are referred to as partners⁶. The company does not treat employees as mere workers but has taken its workforce as having an entrenched stake in the organization and a very vital constituent and contributor to the organizational success. The goal of the organization is to create a management environment where relationships between employees and management as well as all the constituents of human resources are optimally maintained and where employees are treated as equals all of which are guided by this principle “here employees are partners because in Starbucks they are not just employees, it is their passion to work at Starbucks”.

The company aims at embracing its human diversity to create an environment of freeness and where every individual is himself or herself and where every person is treated with ultimate respect and dignity and upholds each other to those standards⁷. As such, the industrial relations in the companies have been at the highest with the employees enjoying unmatched levels of satisfaction highly motivated workforce and exceptional commitment in achieving the firm’s goals and objectives.

Customers

Howard Shultz believes in the customers especially after recognizing that they form the pedestal on which the organizational success rests on. On the basis of this principle the company aims at offering the highest value to its customer not only through providing the highest quality coffee products but also enhancing close and passionate relations with the customer with the company aiming at transforming the lives of the customers.

When the company is fully engaged, it connects with the customers, laughs with them and uplifts their lives even if for a few minutes. This process starts with a promise to the customers of being provided with a perfectly processes beverages and extends to greater heights more fulfilling to the customers expectations. There are enhanced levels of human connections at Starbucks⁸. As such, Starbucks customers are maximally satisfied and passionate in using the company’s products and experiences.

Stores

The company goal here is to make its stores to be the best place for the customers to be in. Having solicited customers pride and passion to belong and consume starbucks products, the company knows very well that by enhancing its store, its going to win customers loyalty to the company and its products, the guiding principle or aim here is to make the customers feel a sense of belonging and pride to associate with the company thus making Starbucks stores to be their haven and a break from the outside unpleasant experiences, a social place in which friends can meet and socialize while spending some great times⁹. Making the stores offer unmatched enjoyment to the customers and that which are always full of humanity.

Social Responsibility

Starbucks ensures that its business operations are greatly integrated into the community and always uphold good relationship with the community in which it is situated and who forms its reliable market. As a result the aim of the organization is to take its responsibility as a good and socially responsible firm to its immediate community. The company takes social responsibility seriously and thus is welcomed in all the places in which they do business. As a result, the company is able to force positive action from the community and bring together its partners, customers and the community to contribute to the organizational success. Starbuck recognizes this as the basic responsibility and realizes its potential to assure even greater success for the organization. As a result, Starbucks main objective concerning this has been to be the leader in social responsibility and integration with the immediate society.

Shareholders

Starbucks has all through its operation maintained at delivering the best value to it’s investors through maintenance of the highest profitability and returns to the investors. As management at Starbucks carries on with their daily activities at the organization they have the stakeholders in their mind to ensure that they enjoy the kind of success that rewards the company’s investors in the best way possible. The aim here is to ensure that the firm remains accountable in streamlining the operations so that the organization and all its stakeholders can endure and thrive in the best way possible.

In order to support the achievement of the mission and goals, the actions and operations of all constituents at Starbucks are guided by a clearly stipulated business ethics and compliance program that helps the organization in its culture and organizational favorable reputation by providing employees with resources to help them make ethical decisions while at work¹⁰. Howard Shultz and the whole of the Starbucks believe that conducting its business ethically and ensuring that right things are done at all times are imperative to the company’s success.

On top of the above mission, Starbucks has an environmental mission. The environmental mission statement of the company is “we are committed to a role of the environmental leadership in all facets of our business”. Based on this mission statement the company has set several related environment goals that aids in the achievement of the mission¹¹. The company’s environmental objectives are:

• To closely understand the environmental issues and share the information with all the organizational employees or partners
• To continuously develop innovative and highly flexible solutions to bring about changes in the environmental issues.
• To always buy, sell and use environmentally friendly products and raw materials
• To recognize that the fiscal responsibility is vital to the organizational environmental future
• To closely measure and monitor the progress of each project to ensure that they are consistent with the environmental missions’ goals.
• Come up with incentives and means of encouraging the employees to integrate as a unit in the achievement of the environmental mission.

In meeting the mission i.e. both the general corporate and the environmental mission, the company is geared toward the objective of establishing Starbucks as most recognized and respected brand in the globe.

The Internal Analyses

Organizational structure

The current Starbucks organizational structure is unnecessarily tall. The top management is made up of the chairmanship of Howard Schultz who is also the chief executive officer, chief vice president, the vice president and the chief financial officer, a host of line managers, supervisors and business development leaders in all the countries that Starbucks is represented. Apart from the top team management in Washington DC, the company has the countries branch managers to facilitate the company’s operations in the overseas markets¹².

The tall organizational structure that Starbuck has is both strength and weakness to the company. For instance, the structure greatly slows decision making and implementation costs as well as increasing the company’s administration costs. However, it makes the company’s administration and implementation of strategies easier. Also, it enhances, the rate of the company’s expansion and business environment for instance in the overseas markets.

Products

Starbucks greatest pride and strength is greatly entrenched in the wide range and superior quality of the company’s products¹³. Currently, the company is a market leader and is highly recognized for its high quality coffee products. The company purchases and roasts high quality whole coffee beans which it trades along fresh, rich brewed, Italian style espresso, beverages, a wide range of pastries and confections, coffee related accessories and equipment.

In addition, the company produces and sells bottled Frappuccino coffee drink and a line of premium ice cream and provides a line of innovative premium tea through its fully owned subsidiary Tazo Tea Company. In addition the company buys high quality coffee beans, carefully roasts them and sells them as whole coffee beans through the world-wide specialty sales groups and supermarkets. It is the superiority of its products that has given Starbucks a competitive edge over the other rivals in the industry as well as a favorable position in the market place that is sustainable in the long run as long as the firm maintains this suitable product quality levels.

The Suppliers

The high quality products that Starbucks continues to offer its customers originates from the effectiveness in the sourcing of raw materials and the reliability of the suppliers in offering a continuous and reliable supply of raw materials. The company purely uses Arabica coffee in the production of all coffee related products whether processed coffee beverages or whole bean¹⁴. For starbucks, its 100% Arabica unlike many competitors whose coffee products are made up of coffee blends.

In order to acquire a steady and reliable supply of Arabica coffee and other useful high quality raw materials therefore, the company has entered into strategic partnerships with suppliers especially farmers in Brazil and other coffee producing regions. Apart from the partnerships, the company’s purchasing workforce is involved in the active and professional search of the finest quality raw materials especially in search of Arabica coffee.

In 2002 for instance, Dave Olsen, Starbucks then senior vice president and the chief coffee purchaser in the company navigated the highlands of Kenya, Indonesia, Guatemala and many other places looking for supply sources of the much needed Arabica coffee beans. The formation of strategic partnerships as well as the characteristic integrations with the suppliers of raw materials and other inputs ensures not only steady production of high quality products, but also enables just- in- time productions at Starbucks

The Marketing Systems

The company distributes its products via a wide network of well established and organized marketing channels which ensures that the products are not only efficiently transmitted to the world wide customers but also works best in presenting Starbucks as a leading and respected brand throughout the world markets. The marketing channels have so far worked in increasing the company’s market presence not only in the United States of America but also in the other global markets in which it is continuously diversifying into¹⁵. In Starbucks the products are distributed mainly through the company owned stores, franchisees, or independent retail outlets such as supermarkets.

For instance, the company sells its roasted coffee beans together with fresh, rich-brewed, Italian style espresso beverages and a wide range of pastries and confections, coffee related accessories and equipment through company owned and operated stores, in addition the company sells whole coffee beans through a specialty sale group and supermarkets and produce and sells bottle packed Frappuccino coffee drink and a line of a premium ice creams through its franchised organizations. In addition Starbucks sell a line of highly innovative premium teas via a fully-owned producing and selling subsidiary known as Tazo Tea Company.

The employees

While the company continues to stress on exceptional quality of coffee products and services the organization has maintained an unequalled employees’ policy that is characteristically laid back and exceptionally supportive. In fact like it is mentioned earlier in the case analyses, employees at Starbucks are refereed to as partners. By referring to them as partners, Schultz aims at encouraging employees to think of and carry themselves as partners. In the organization the employees are treated exceptionally enjoying a host of highly attractive benefit schemes, recognition and respects with a lot of freedom to exercise what is right for the organizational success.

According to Howard Schultz, happy and committed ‘partners’ are vital for the organizational competitiveness, growth and overall success. He says that the organization cannot achieve its strategic objectives without the employees who are as equally committed to the achievements as the organizational management. Starbucks sustainable competitive edge is also entrenched in its exceptionally high quality workforce.

The company has also established a national retail company through creation of unmatched pride and stake in the outcome of the company’s workforce. In addition, the partners (employees) at Starbucks are taken through rigorous and high quality development and training programs. For instance, a new employee of the company must go through a week long quality training programs. In addition, the old partners are often taken via day long training and complimented by occasional seminars and workshops aimed at upping up their skills.

The External Analyses

Competition

Starbucks Corporation has managed to a greater extent to position itself favorably in the market place through its exceptionally high quality products and coffee services that gives its loyal customers a differentiated experience all together. Ideally the company has succeeded in attaining near market leadership with a commanding market share especially in the US¹⁶. However, the competition in the coffee industry market especially in the United States continues to soar every other day a factor that presents a daunting threat and a challenge in maintaining its current favorable market position.

One of the organizations that continue to pose a threatening competitive challenge to Starbucks is the Green Mountain Coffee Roasters which nears the company in term of market share. As a result of the ever-increasing competition threat therefore, the company has to adopt a kaizen and kaiban strategy or rather continuous improvement of the products and services quality through enhanced research and development.

Technological Environment

Starbucks operates in a technological environment that is dynamic and that requires the organization to change with it. The ability to adopt and effectively incorporate the state-of- the art technology into the company’s strategy and operations is key to the organizational competitiveness and operational success¹⁷. Technology can be a strategic source of competitive edge for the company. Up to and until 2002 starbucks had not incorporated sophisticated and highly efficient technological processes in its operation especially in the production process. However, traces indicate the company as having launched the Starbucks purchases card and online sales outlets recently.

With the rivals moving fast to adopt such technology, Starbucks cannot afford to sit back and watch otherwise it would be risking being competed out within no time. Technology also shapes the company’s research and development, ideally therefore, the dynamisms of the technological environment presents Starbucks with challenges in terms of additional capital expenditure, threat due to the rapid changes and competitor’s match as well as opportunity in terms of its potential to creating a distinctive edge for the company.

The Economic Environment

The dynamisms of the economic environment in which Starbucks Corporation operates present a great threat to the company. The economic environment fluctuates through the economic cycle i.e. the boom, recession, depression and the recovery which may affect the operations of an organization either positively or negatively. A boom enhances the business performance while recessionary and depression situations have adverse effects on the company performance. To and until the onset of the global economic crises in 2006 Starbucks returns were on the increase with the company experiencing steady growth¹⁸. The falling economy however has since halted this trend making the company to face stunted growth in the fiscal years between 2006 to date (2009)

The Social Cultural Factors

Starbucks Corporation has not been spared by the challenges of the social cultural aspects especially where it is involved in the diversification to the new markets¹⁹. When moving to new markets especially in the international scenes the company’s main challenge is to solicit products acceptance in the same rate as in the United States which is hindered greatly by the social-cultural barriers.

The political- legal variables

Political – legal factors has also posed a challenge to the company’s expansion into the overseas markets especially in the European, afro – Asian countries middles east and North America. The company has been faced by the rigid anti-globalization laws, restrictions as posed by the various political alliances and trading umbrellas among others²⁰. The politics behind globalization have particularly set a daunting challenge to the Starbucks expansion/ growth strategy especially outside the United States of America. In addition, the country law that governs foreign direct investment may hinder Starbucks from venturing into another countries market.

Recommendations

It is recommended that the company takes it technological advancements a notch higher so as to be a leader as far as technology is concerned. This is vital if at all Starbucks is to be competitive and market leaders (that they currently are) with future sustainability.

It is important for the company to realize that technology is the lee way to effective and efficient research and development and which is crucial for the company seeking to continuously improve its products for distinct competence, favorable market positioning, socially responsible and highly responsive to the environmental concerns with the raw materials, production processes. In addition, technology is vital for the company to conduct frequent market research, market intelligence and also on establishing information communication systems in the company for effective management decision making and implementation of strategies.

Starbucks should use local natives as the business development leaders in the new markets especially the cross-border market ventures. This is because the locals have an upper hand as far as the local cultural variables are concerned. Consequently the natives are in a better position to evade the barriers presented by the cultural variable hence moving into such markets will be easier. For instance, the company should use Indian management in case it wishes to establish a subsidiary or a branch in India because such understands more of the Indian culture.

The organization should consider shortening its organizational structure by abolishing some of the unnecessary managerial hierarchies that increases bureaucracy in the company and which is a major hindrance to a speedy decision making process at Starbucks Corporation. For instance, it is not of any importance to have the president and the chief executive office, chief vice president and the vice president among other unnecessary posts characteristic in the Starbuck organizational structure.

References

Gordon Bowker et al. (2004) Starbucks Corporation: Competing in a Global Market. Web.

Starbucks Coffee: Company’s Fact Sheet (2008). Web.

Starbucks coffee: Company’s timeline. Web.

Starbucks Coffee (2008): Company’s Profile. Web.

Starbucks Coffee (2008): Company’s Recognition. Web.

Stewart Allen (2004), Starbucks, monoculture, and American Imperialism idea. Web.

The official company website (2009). Web.

UW business school (2003) Starbucks Corporation: Competing in Global market- Case. Web.

Footnotes

1. Gordon Bowker et al. (2004) Starbucks Corporation: Competing in a Global Market. Web.
2. UW business school (2003) Starbucks Corporation: Competing in Global market- Case. Web.
3. UW business school (2003) Starbucks Corporation: Competing in Global market- Case. Web.
4. Starbucks coffee: Company’s timeline. Web.
5. The official company website (2009). Web.
6. Gordon Bowker et al. (2004) Starbucks Corporation: Competing in a Global Market. Web.
7. The official company website (2009). Web.
8. Starbucks Coffee: Company’s Fact Sheet (February 2008). Web.
9. The official company website (2009). Web.
10. UW business school (2003) Starbucks Corporation: Competing in Global market- Case. Web.
11. The official company website (2009). Web.
12. Gordon Bowker et al. (2004) Starbucks Corporation: Competing in a Global Market. Web.
13. Stewart Allen (2004), Starbucks, monoculture, and American Imperialism idea. Web.
14. The official company website (2009). Web.
15. Stewart Allen (2004), Starbucks, monoculture, and American Imperialism idea. Web.
16. Stewart Allen (2004), Starbucks, monoculture, and American Imperialism idea. Web.
17. Stewart Allen (2004), Starbucks, monoculture, and American Imperialism idea. Web.
18. UW business school (2003) Starbucks Corporation: Competing in Global market- Case. Web.
19. UW business school (2003) Starbucks Corporation: Competing in Global market- Case. Web.
20. Gordon Bowker et al. (2004) Starbucks Corporation: Competing in a Global Market. Web.