Starbucks is a leading coffee and coffeehouse company. It has outlets in more than 55 countries. Jerry Baldwin, Zev Siegl, and Gordon Bowker on March 30, 1971 opened the first Starbucks outlet in the United States of America. This paper aims to criticize a case study by Ariff Katchra in 1997on Starbucks Coffee Company.
Mission
According to Howard Schultz and Orin Smith letter to shareholders in 1996, the mission of the company is “to assume leadership in the coffee industry in the world by offering memorable experiences to our customers”.
Objectives
- To be the leader in coffee industry in the world by increasing its presence in different countries an offering high quality coffee to customers
- To innovate new measures to catch the attention of potential customers and diversification of business through strategic alliances
- To develop a platform for more innovations in the future and develop global logistics and marketing strategies
- To respect its employees and offer a pleasant environment for innovation as the company grows the wealth of its stakeholders.
Strategies
To attain the set goals and objectives, the company has set some strategies to assist it. These strategies are:
- Maintaining an effective supply chain management, this ensures the company get quality and quantity coffee when it needs them. The company supply’s team maintains healthy relations with its suppliers. Quality is tested at delivery where in every 250 bags, three samples are taken for quality test.
- The company have good internal processes that ensure that quality coffee is roasted at the right temperature and desired blending is done accordingly. It has embraced research and development to come up with ways to ensure that their coffee is managed in the best way possible.
- The company has well trained staffs who offer quality customer service and make products satisfactory to the customers’ needs. The company has diversified in different parts of the world; it ensures that it chooses its location well. It understands its target customers and identifies the changes in the market for better planning and decision-making.
External opportunities and threats and construct the relevant matrices
External opportunities
The company’s operations and success has been geared by internal management processes, which take advantage of opportunities offered by the external environment. The company took the advantage of high quality coffee grown in America, East Africa and Pacific Rim. This high quality coffee is crucial in creating a strong brand of the company.
There is low barrier to entry in the coffee industry so the company was able to diversify its products to different countries. The world offered different levels of technology that the company tapped for its benefit. Technology ensured that coffee beans are roasted to desired taste at an appropriate cost.
People entertainment pattern had changed where they has moved away from home, bars and restaurants entertainments to coffee shops. They needed pleasant environments to enjoy and chat. Coffee had been established as one accompaniment of this new strategy of meeting. This resulted to an increased demand of coffee.
Threats
The company faces competition from other players, since there is low barriers to entry in the coffee industry, there were many players both large corporations and private ventures. Another competition came from substitute beverages like tea, cocoa, soft drinks and alcohol.
External strengths and weaknesses matrixes (Fred, 2009).
Internal strengths and weaknesses and construct the relevant matrices
Internal strength
The company has a well-experienced management team lead by its president and chief executive officer Howard Schultz. He started his career in hospitality industry at Starbucks. His creativity and innovativeness has assisted in developing a robust team.
Human resources in the company are well managed a move that have made them inventive and innovative. The management respects the inputs made by all staffs as they are in direct contact with the customers thus they can make informed decisions.
The interaction among employees despite the rank is from a partnership angles, this facilitated good communication among staff and management. To increase the expertise of its staff, the company organises various training opportunities. They have a wage rate higher than the market average rate.
The company has a positive organisational culture that provides a good working environment and facilitates diversity of the company. The company has a blueprint of its organisational culture principles that included the need to enthusiastically, satisfy its customers, provide positively to the external environment and embrace appropriate strategic approaches to different issues in the company.
The company has a well-structured logistics and supplies team. They ensure that the company have a constant delivery of coffee. The supply team is composed of experienced experts who are able to predict demand for coffee and make timely ordering. The system is well integrated with the manufacturing and production department to ensure that there is constant supply. To maintain an efficient supply chain, the company have developed good relations with its supplies, adopted a just in time delivery system, have a strong value determination policy and pays its supplier without fail and at a higher cost.
The company has a strong production and manufacturing team. They are highly trained and have wide experiences on how to produce different tastes. Roasting is an important stage in coffee industry thus quality from production team is crucial. The company has adopted high technology in its processes right from supply management to customer delivery and marketing. This has enabled the company to produce effectively and market its goods appropriately.
The firm has a strong brand name; the brand name assists the company when making international ventures and strategic alliances. The company has a strong financial strength that enable it tap opportunities as they come. This has assisted it to diversify its processes to different economies.
The company has a strong financial strength; the strong financial strength has enabled it to diversify in different sectors. Since 1994, the company’s current ratio and quick ratio has been above the standard two for a health country. This shows the company can meet its financial obligation as they fall due. A company that meets its financial obligation effectively maintains good relations with its creditors.
The company’s earnings per share (EPS) have been $0.46, $0.7, $1 and $1.3 in 1996, 1997, 1998, and 1999 respectively. This is show of a company with well-managed resources and capital. The increase in EPS is a show of increased effectiveness in resources employment. The company has had an increased net income for the period of 1996 to 1999, the incomes has been $10,206, 26,102, 42,128 and 57,700 respectively. The increased is a show of a company that is effectively managed. It is a show of competitiveness in the company.
The company has adopted unique way of doing business where it works directly with its exporter and goes a step further by providing them with training for better production. This strategy ensures that the company gets quality and quantity coffee beans always. The company is making strategic alliances in its efforts to remain a market leader. For example it has made alliance with Dreyer Ice cream and Pepsi for ice creams and Frappuccino (ready-made coffee) respectively. The new unique strategies by the company led to a growth of its coffee sales between 1994 and 1999 by 2.5%.
Internal weakness
Though the company is operating well and it is a leader in coffee industry, it has a weakness of having only one area of specialisation. It forgets that a customer taking coffee may be interested in an accompaniment of which though they are available in different outlets, they are not much focused on. There are chances that they are of poor quality or the company loses some customers as a result.
The company employs people with different cultural background; this brings some issues in managing and blending the staffs together to have a common objective that supports the company. People from diverse backgrounds report differently to issues and they has delayed appropriate decision-makings at times.
Change in an organisation is inevitable; however, the nature of human beings is that they resist change. The company has had some problems in implementing strategic changes.
Internal strength and weaknesses matrix (Fred, 2009).
A list of plausible strategies for the organization
The following are strategies that the company have developed that can be applauded:
- Supply and logistics strategies
- Human resources management strategies
- Positive organisational culture strategy
- Use of information and communication tools
- Quality management strategies
- Good customer surface
- Location strategy
- Efficient production and manufacturing sates
Strategies matrix (Fred, 2009).
Recommendation
It is a high time that the company invests in diversification of its products. The company is doing well in the coffee industry, it has trademarked some of its products however it should recognise that at an ideal situation customer have an accompaniment with coffee. Whether they are simple biscuits or cakes, they affect the experience that the customer gets from Starbucks coffee joints. The company should establish which snack they will make and trade mark to be taken with their branded coffee.
The second strategy that the company should implement is undertaking regular impromptu visit to outlets it has franchised. This will ensure that the standard of the company is kept and maintain customer loyalty and increase satisfaction.
Justification
When a customer is taking coffee, the experience gotten will not be limited to the coffee only but even the taste and the quality of the accompaniment taken. If the coffee is of the right quality and the accompaniment is not, then the level of customer satisfaction is limited. Having high standard coffee and its c accompaniment will increase customer loyalty.
Howard Schultz experiences at Breweries Coffee Shop, which sold Starbucks products was not pleasant. The coffee was of average quality. There are high chances that there are outlets not producing the required standards. A close monitoring is thus crucial to maintain high standards (Fred, 2009).
Implementation of the suggested strategies
When diversifying its products, Starbucks should ensure that it does not undermine its original coffee business. The new venture should be made hand in hand. If necessary, the company can develop a sister company to venture into accompaniment segment and leave Starbucks concentrate with coffee. When implementing close monitoring strategies, the company should check on its expenses when conducting this process.
Reference
Fred, D. 2009. Strategic Management (12th Eds.). London: Prentice Hall.