Assignment 2: Evaluation of Business Operations

Hakim Callahan

Argosy University

Introduction

Starbucks Corporation was started in the year 1971 by Zev Siegl, Jerry Baldwin, and Gordon Bowker who were inspired by their mentor Alfred Peet to sell roasted coffee and equipment. Subsequently, they bought Peet’s stores and later on sold the stores to Howard Schultz, a former manager in their stores, who grew the company to the current juggernaut it is in the coffee cafes segment (Gopalakrishna, et. al., 2016). During Schultz’s period at the helm of the company from 1987 to 2016, he successfully launched its Initial Public Offering (IPO) and successfully expanded to several countries in the world (Gopalakrishna, et al., 2016). Kevin Johnson, the current Chief Executive Officer (CEO) of the company, plans to increase the number of Starbucks locations from approximately 26,000 to 37,000 by 2021 (Starbucks, 2016). It is such gusto that has led to the success of the company over the years amid troubling financial times and emerging competitions.

Company Mission Statement: “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” (Gregory, 2017).

Company Vision Statement: “To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow ’’(Gregory, 2017).

Company Goals and Objectives.

The main goals of Starbucks are derived from their mission statement. The company aims at reaching every employee and customer individually to create a warm ambience that nurtures their human spirit. On the other hand, the objective of the company is to maintain the standing of Starbucks as one of the most renowned and esteemed brands in the world.

Company Tactical Plans

The tactical plans that the company has identified to aid in their growth and to maintain a firm hold of their position in the coffee business include the addition of 12,000 stores globally by 2021 especially in the Asian markets (Starbucks, 2016). Additionally, the company plans to extend its global leadership in the at-home coffee and ready-to-drink segments. Innovation is in their plans, and they demonstrated this by launching the Nitro Cold Brew to select markets in the world (Starbucks, 2016).

Impacts of Management Functions on Starbucks’ Goals and Objectives

Planning

Starbucks ability to plan for the future will enable it to become the leading coffeehouse in the world. Some of the strategies that the company has come up with, including the embracing of mobile technology, will ensure that the company taps into the large pool of millennials who form a huge chunk of the customer base.

Organizing

The company has a functional structure where that CEO is at the helm aided by leaders at the human resource (HR), finance and the Marketing departments. Each of these units has clear-cut roles in ensuring that the company meets its objectives. Additionally, the company has been divided into three major geographical divisions to create the feeling of closeness to their customers. In the Starbucks stores, teams deliver goods and services to the consumers. The company is actively present in social media presence where consumers can lodge complaints and make recommendations to the company. This is in line with their goal of nurturing the human spirit.

Leading

The CEO of the company makes major decisions aided by the board and top executives. Howard Schultz, the current executive chairman of the company, motivates the CEO to lead the company to even greater heights than he achieved during his over 20-year reign at the helm. Schultz presence at the company, albeit in a different capacity, also motivates the employees to become better. Schultz once increased the pay for Starbucks employees by 5% (Lebowitz, 2016). The motivation creates infectious happiness that spreads from the executives to the employees and consequently to the customers.

Controlling

The culture in Starbucks encouraged constructive dissent and debated from the staffers to the executives about how the company can be improved. Additionally, Starbucks tends to poach top executives from other fortune 500 companies (Lebowitz, 2016). Furthermore, there is a performance standard for all employees to ensure that do not deviate from the company's mission.

Ethical Implications of Starbucks’ Policies Concerning:

Market expansion- Some of the countries that Starbuck’s intends to open are plagued with corrupt governments and institutions that may require Starbucks to bribe their way into the market. This will interfere with the organization’s Global Anti-Bribery Standard hence hindering their penetration into new markets (Starbucks, 2018).

Human Capital Management- The company’s Global Human Rights policy may not augur well with third world countries where human rights are a privilege thereby becoming a nuisance as some governments may want to interfere with the employees’ rights which the company guarantees to protect.

Environment- The company’s decision to use environment-friendly products will ensure that there is perfect ambiance for nurturing the human spirit in their stores.

Internal and External Assessment of Starbucks

SWOT analysis

Strengths- Starbucks Corporation is a well-established company with a strong brand name. The company operates efficiently and has a robust financial growth fueled by a strong customer base.

Weaknesses- The company depends almost solely on coffee as their product. Additionally, most of their profits depend on the American market with a high price point.

Opportunities- The growing economies of some Asian, Middle-Eastern and African countries provide ready markets that Starbucks can penetrate into. Additionally, the company can diversify their product-mix, and their already strong customer base offers a market.

Threats- The rising number of low-cost coffee sellers threatens to derail the stranglehold of Starbucks. Additionally, the increasing cost of coffee beans will push prices up thus encouraging consumers to take coffee from their homes since it is cheaper than at Starbucks.

Starbuck’s Product Portfolio Analysis Using the BCG Matrix

Stars: Starbucks coffee has a high market share in a high growth segment

Question marks: tea at Starbucks has a low market share in a high growth market sector, and this is mainly due to tea not being the company's primary beverage.

Cash cows: mugs sold by Starbucks have a significant market share in a segment that has low growth

Dogs: coffee beans sold by Starbucks have a low market share in a low growth market.

Environmental Scanning of Starbucks

The company has a top-down organizational structure headed by the CEO. The CEO is aided by Senior Vice-Presidents and Executive Vice Presidents and CEOs of different divisions of Starbucks globally. As earlier stated, employees are free to make suggestions and constructive criticism to the management and fellow employees (Lebowitz, 2016). The CEO is obligated to make annual reports to the shareholders and provide information that they need about the welfare of the company.

Starbucks faces competition from low-cost coffee houses and other big fast food joints like McDonald’s that have begun selling coffee recently. The coffee industry is facing a growth due to people's awareness of the dangers of alcoholic beverages. Farmers have better equipment and information on coffee farming to aid in increasing their yields. However, the price of coffee is rising thereby threatening the growth of coffeehouses.

References

Gopalakrishna, P., Victor, R., & Fleischmann, D. (2016). Starbucks In India. Journal of Case Studies, 34(2), 92-101.

Gregory, L. (2017). Starbucks Coffee's Vision Statement & Mission Statement. Retrieved February 12, 2018, from http://panmore.com/starbucks-coffee-vision-statement-mission-statement