Executive Summary
This
is a report that highlights the strategic decision making and operational
decision making, that includes Michael Porter five forces model, SWOT, PEST and
the Original Generic Strategy of Starbucks. The aim of this report is to understand
the involvement of the CIO of Starbucks that can have a significant impact on
all the shareholders. In addition the report is based on analyzing the
operational decision making of Star bucks for determining recommendations. This
has been done to reflect on the understanding of strategic and generic
strategies adopted by other organizations as well.
Table of Contents
Introduction
The
strength of Starbucks lies in the customers who are satisfied by the fine taste
and quality of every coffee product that they are offered. The brand name of
star bucks is at its peak due to which the financial state of the organization
has consistently been improving. Starbucks seeks towards following strategies
that are revolving around consistent ethical values under strong leadership
gestures in an environment where all the facets for the organization are
available.
As
a CIO, it is evident that in order to suppress its weakness which is the price
as compared to other coffee shops in the market, Starbucks decided to make use of
its reputation and work in collaboration with other manufactures of food in
order to make an entry into the international market. The sales might get
affected from time to time as recession sets in but Starbucks is aware of that
fact and aims its strategy towards the target customers who would always remain
loyal to it. In the international market also, there certainly are competitors
but Starbucks overcomes its limitation by showing success in those business
markets as well. This is called Brand Power (Madden 2005).
In
addition to this, Starbucks has always focused on the business ethics while
handling any of its options of strategies. The ethics which is economical of
Starbucks supports the goals and missions designed for the organization. Due to
this the reputation of the organization remains protects and the culture
remains secured as the resources help the partners of Starbucks to take
decisions ethically.
Along
with this, the present working culture of the Starbucks is the element of its
success. The organization takes the responsibility of training the Roman staff
that it hires making them learn the operations of all the machines by
compliance of various programs. These programs in turn add up to the best
quality of service offered by Starbucks
The
problem with Starbucks is dealing in a threat situation of competition. There
are various coffee shops renowned in the international market offering their
services at a lower rate. But in this regard Starbucks basically adopted a
strategy to focus on its functional areas. The structure that it adopted was to
accomplish best out of its brand name. The renowned brand name offered
Starbucks to increase over its efficiency in the market (Friend 1992).
Strategic Decision Making
For reflecting on the same, the following
has been conducted:
SWOT
|
Strength
|
|
v Motivation in staff
|
|
v Starbucks focuses on creating a situation that
encourages every team working there to collaborate, hence, the affects go on
to the managers as well which leads to following their motto of personality,
and work on the skills. Through which, an outstanding customer services is
provided to the customers that makes them coming back.
|
|
|
|
Weaknesses
|
|
v Over reliance on the US market:
|
|
v The managements’ decision on keeping the focus on
the home-market makes it a weakness.
|
|
|
|
Opportunity
|
|
v Growth Coffee Market
|
|
v As the coffee drinks are now moving to the more
expensive organic coffee which is estimated to $1.3 billion in the imports.
Considering the social factors that are recognized in the external analysis,
will be favorable for Starbucks upon increasing the customer support as there
will be an opportunity of great profit margins.
|
|
|
|
Threats
|
|
v Competition
|
|
v McDonalds’ the main competitor of Starbucks. As it
has been found lately, that McDonalds sells specialty coffee for lower price
|
PEST
|
Political
|
|
v
Stability in Government
|
|
v
Consideration of the stability in government is essential when planning
to expand, for e.g.: Starbucks was forced to shut down all the operations in
Israel due to the political instability that affected Starbucks’ strategy to
expand.
|
|
|
|
Economical
|
|
v
Exchange Rates
|
|
v
The depreciation in the rates of dollar in comparison with other
currencies that can harmfully affect the imports. Hence, there is a
possibility of increase in the cost and forwarded to the consumer
|
|
Social
|
|
v
People love to gather socially and have light meals sipping there
coffees and Star bucks offers them the same
|
|
Technical
|
|
v
IT Influence
|
|
v
Continuous technological advancements have been taking place faster
than ever now. Hence, organizations should pace up with the new
implementations, such as: the new phone payment system that helps in cutting
the long queues in the peak times of the day
|
5 Forces model of Michael Porter
This
analysis is being reviewed as a CIO of the company, there
are five components that are accounted for the five forces analysis using the
Michael Porter’s model are consumers, suppliers in the industry, potential new
entrants, competition between the organizations that are existing and the
products that are substitute.
v Rivalry
in the industry
v New
entrance possibilities
v Substitute
in the products
v Bargaining
power of Supplier
v Buyers’
bargaining power
|
Rivalry in the industry
|
|
Drawing a line between the substitute in products that is offered by
the rival organizations and the competitors that are established
|
|
|
|
New entries possibilities
|
|
As a CIO it was important to prevent the new companies to enter into
the industry to which higher barriers were set
|
|
|
|
Substitute in the products
|
|
The primary substitute of Starbucks are the Pepsi and Coca-Cola since
they are producing the caffeinated soft drinks. These companies are dedicated
to soft drinks that are caffeinated and are available to the consumers at a
lower cost. The threat is not great as there is a significant different in
the quality of basic coffee and the specialty coffee
|
|
|
|
Bargaining power of suppliers
|
|
The primary threat from the suppliers would be to increase the cost of
the Arabica beans that is required for producing the dark roasted coffee, or
by dropping the quality or the quantity of the Arabica beans as there is no
alternative of these beans for the production of the specialty coffee
|
|
|
|
Buyers’ bargaining power
|
|
Consumers are capable of brining the price down or to ask for a
products or services of higher-quality, and chose a different organization
for the same services. However, the consumers in the industry of specialty
coffee do not buy in in large quantity, the power of bargaining was reduced
at the buyers’ end. Moreover, the cost of buying the products or services
from the specialty coffee industry did not affect the consumers’ cost of
living, that factor reduced their bargaining power even further as the
importance of and customer service was increased.
|
|
|
Operational Decision Making
For
success, Starbucks has the best operational decision making unlike others.
Independent
Coffee Shops
There
were various coffee shop established in U.S by the year 2006 out of which
almost 60 per cent were the ones owned independently. These shops
differentiated themselves from Starbucks by coffee served by Baristas and were
usually those which has coffee much more expensive than Starbucks. Originally
Starbucks served coffee as a premium coffee shop but these independent shops of
coffee were producing coffee that were not only expensive but had coffee better
than Starbucks.
Smaller Chains
Many chains, including Peet’s Coffee and Tea and
Caribou Coffee mirrored Starbucks’ pre-expansion business model, complete with
manual espresso machines and hand-scooped coffee. Further complicating matters
for Starbucks was the fact that customers perceived these smaller chains as independent
coffeehouses while Starbucks was often perceived as a heartless corporate
predator (Garthwaite, Busse, & Brown, 2012).
Large fast food
outlets
In addition to smaller
chains and independent locations offering higher quality, more expensive coffee
than Starbucks, large chains such as Dunkin’ Donuts and McDonald’s began to
offer premium coffees which were less expensive than Starbucks’ while offering
similar taste and quality; Schultz described the competition from both
independent and large chains as Starbucks being “squeezed into the middle, and
that is an undesirable place for us to be” (Garthwaite, Busse, & Brown,
2012).
“Starbucks
Effect”
Many of the changes in
the coffee industry arose as a result of the success that Starbucks
experienced, dubbed the “Starbucks Effect.” Starbucks has given all coffee a
new cachet (not just its own brand) and the company’s creativity has set off a
chain reaction of innovation in a once sleepy industry
Strategic Map
and Operation Analysis
In
order to deal with the above mentioned competitive contexts developed
eventually, Starbucks took over the following systematic approach as its
strategic map.
In
understanding the key concepts of Starbucks on which the activity system map
depends is a two way process. These are called as two basic routes. First route
is the process way which is mentioned as the mainline under which Starbucks
handles its basic projects and the second route is for the simpler projects
known as the Express way where reprinting and re organizing of resources in
Starbucks takes place. Under the mainline route it can be said that this is
where the concepts of Starbucks take its heights. Here all the concepts
underlined for Starbucks are presented followed by an approval. Those processes
that are approved get passed on to the phase which is downtown phase. In the
downtown phase of the mainline route, the design becomes implemented and the
approvals are finalized in order to obtain a mapping series so that work can be
commenced (Madden 2005).
From
here starts the work of the expressway projects or the second route. This is
where after the implementation of the approved design, the production of
products and services takes place. This can be known as the final stage where
the owners of the projects completely sign the work off. The printing processes
along with making of packages as well as resource production are all managed in
this process.
The
life cycle projects of Starbucks range from lasting a few weeks to lasting
around 72 weeks. These projects involve the mechanism of concept to deliver but
it is only in the phase of production when most of the time is taken. Along
with this there is a combined integration of the printing that takes place off
and on shore along with suppliers that manufacture and those designs are
printed which last long in order to increase the effectiveness of cost. This is
how Starbucks outsources itself.
The
key concepts on which Starbucks is dependent upon are following:
Selection of theme: The design begins by planning the process
of strategy where key concepts, several themes and palettes are identified for
the following year. The stores often have season based themes and a creative
team which is global in nature works together along with the design team of the
store as well as the stakeholders of top level. All of them together are
responsible for deciding a common theme which is a result of the group
encircled by trends as well as the insight of the customers.
This
is further followed by requirement of complete materials. Establishment of
theme paves way to design projects which are individual. The managers of the
projects work in collaboration in preparing a brief where the budget and a
proper time table is analyzed.
Development of Concept: The beginning
of the process of design initiates from a creative scrum. This is where all the
members of the department of creativity meet together to generate clear ideas
and club the decisions together. The meeting is followed by final approval of
concept after which a designer generates a draft of the layout. The review of
each draft is considered only after which the costlier aspects of the whole
project such as advertisements are tackled and completed for a final
evaluation.
Approval:
Nowadays, the approval takes place only after a presentation of the processes.
The decisions again require being review. The team responsible for review
ultimately approves the concepts that are made ready for production entering
into the manufacturing step.
Evaluation: This is the
step where the staff in the front line and the feedback from the customers is
taken. Both these steps are crucial in the design process of Starbucks. The
success of the project is only accessed from the feedback of the staff of
Starbucks as well as the customers.
In
this way, Starbucks has managed to effectively develop mechanisms by which the
brand development can directly be linked to the experience of the customers.
This Starbucks does by focusing on the communication which is internal focusing
on the customers who are directly connected to the brand. The feedback from the
customers is in direct connection from the insight of the customer which
involves either talking directly to the customers or even making them to fill
forms after their experience. This mechanism of feedback is completely
sophisticated by which the feedback collection also becomes simpler and
eventually acted upon in order to improve. These feedbacks do not only mean the
consideration of products and services offered at Starbucks but also if a
consumer has an issue with the type of
design at the store of Starbucks then they will also be attended to. The
creative team is responsible for this feedback where they will explain to the
customer the logic behind the choice of design.
The
result of such mapping involving the key concept which are completely inter
connected and followed after the other as already seen from above, Starbucks
has been able to open shops around 12,440 in different countries with an aim of
maintaining the opening of outlets to a certain level every year (Friend 1992).
Strategic Design
Matrix
For
instance, in the case of Deloitte, an accounting firm, a view of all wisdom on
planning, budgeting and forecasting must be determined while offering various
services financially to businesses. However, the executives of the company
believed that the possibility of effective planning and strong insights into
the financial future of the company increases when the supporting, planning,
budgeting and processes are fitted to the organisation.
In
the case of Jack, who works with Jack Doheny Companies, implementation of ERP
system was made. These implementations lead them to loads of advantages. The
use of Oracle assisted them to stay aware of every single thing from stock to
accounting to sales to locating equipment and status. But, if the salesmen and
executives are not interdependent then the implementation of ERP system is
pointless.
In
1950 cloud computing was first traced, it hit its obstacle with Amazon Web
Services in 2006, especially Amazon’s Elastic Computer.
For
example, in 1960, EDS started to handle various services of data processing for
Frito-Lay and Blue Cross & Blue Shield. However, the deals of outsourcing
were very small in that time that soon changed by 1980s.
According
to the report by USA today, the latest LTE network is fast, it will help
subscribers to consume more data. Plan of Verizon is to herd all the consumers
into pay-as-you-go which will create more revenue for the expenses of the new
network.
When
compared to other coffee shops, the structure and position of Starbucks seems
to be varied on the service design matrix. This is because it undergoes a
franchise system as well as the difficulty along with complications that are
associated in creating and distributing this creation worldwide with the size
of such a big brand. These together need to be maintained focusing on the
deliverables and the customer needs which are qualitative.
The
position on the service Matrix of Starbucks is such that it is outlined by the
wants of the customers in a repeated sequence. There is a decision power in the
customers due to which Starbucks has to be customizing the products. The
technique used here depends on customization of mass with a limited use of
pathways.
Because
of these very reasons, the position of Starbucks in the matrix design falls on
the co-routed section of service offering choices moderately with application
of standard processes which are also moderate (Smith 2004).
(Friend 1992)
The
service approach at Starbucks is holistic in nature which means following of
ethical practices along with responsibilities. This approach also takes care of
the quality of the product which means that all coffee produced at Starbucks
must be consistent with the standard of the brand, meeting the accountability
of economics which means that transparency in the economics if important. There
should be evidence in terms of the payments made, responsibility towards the
society which means that a third party is involved which takes care that
Starbucks is using safer and very humane conditions of working in order to
protect the rights of the customers and the workers. Along with this, Starbucks
also complies to the laws and regulation of human rights and the environment
offering the customers that which is evidently healthy for their health and is
refined by considerable evaluative means. With strict compliance of this
approach, Starbucks continues to offer excellence in terms of its products and
services (Brown 1997).
Conclusion and
recommendation
Keeping
in view the above analysis, it is evident that the various operation systems
under the supply chain management are fulfilled by the organization of
Starbucks. Without much hassle, starbucks continues to gain success out of the
approaches and its verified key concepts. According to the above analysis, it
is evident that the delivery processes of Starbucks are quiet in sync with the
aim of the organization. However, a few recommendations would definitely enhance
the brands name, which are:
Ø The
delivery time of Starbucks to its customers is 2 minutes and 40 seconds which
proves a failure at the time of peak hours. This can be improvised by enlarging
the staff members and increasing the coffee machines so that more work can be
completed within seconds. This would help manage the rush hours and make
customers happy.
Ø Starbucks
deals with the problem of protocol which can be rectified by an improvised
network
Ø More
outlets would increase the brand power (Ainscow 1991)
References
Ainscow, M., (1991), An insight of operations
management, Fulton publications,
London
Baker,
T., (1995), p 33-56, The effects of
supply chain, Educational Leadership,
Paris
Brown,
D., (1997), p 44- 56, Full success at
Starbucks: Challenges and issues, Journal of Instructional Psychology, Paris
Friend,
M., (1992) , The new mainstreaming--How
it really works, Instructor, London
Madden,
A., (2005) , p 519-569, The revolution of
lean manufacturing, Review of Educational Research, Virginia
Rogers, J., (1993), The Starbucks Revolution, Bloomington, Phi Delta Kappa.
Smith, M.,(2004),
Knowing the change: Experience Starbucks, Author House, London
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