Problem Solving, Creativity and Solution Setting

UTS Business School

MANAGEMENT DISCIPLINE GROUP

21854 – Problem Solving, Creativity and Solution Setting ASSIGNMENT COVER

Subject Name: Problem Solving, Creativity and Solution Setting Subject No: 21854

Tutor: ___ Dr Ece Kaya ___________ Tutorial Day & Time: __Thursday 12:00 _____

Family Name: ____Xia____ Given Name: ________ Manni________

Student No: _____13011731______

Phone No (H): ___0410770704____

Topic: ____ Starbuck’s Survival Strategy______

Date Submitted: __21/10/2020___ Submitted on time? Yes ( ☒ ) No ( )

If not submitted on time give details of approved extension or attach approval:

_____________________________________________________________________

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Referencing – APA referencing format

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☒ All direct quotes have page numbers in their in-text reference

☒ All references in text have been included in the final reference list

☒ Final reference list is in alphabetical order by author

ORIGINAL AUTHORSHIP STATEMENT:

I have carefully read, understood, and taken account the UTS policy on plagiarism and guidelines for assessment and referencing in the subject outline. I affirm that this assignment is my own work, that it has not been previously submitted for assessment, that all material which is quoted is accurately indicated as such, and that I have acknowledged all sources used fully and accurately according to the requirements. I am fully aware that failure to comply with these requirements is a form of cheating and could result in resubmission, loss of marks, failure and/or disciplinary action.

Signature: _____Xia Mani_______________ Date: ___21 October 2020____________________________

Introduction

Organizations in the food and beverage industry have to ward off many challenges to remain relevant and profitable. The organizations are mainly under the threat of new entrants who promise new foods and beverages that are healthy and beneficial to consumers. In this era of technology, food and beverage companies have had to introduce services that complement what they offer. For example, fast food stores are offering WIFI services to attract and retain customers. An example of an organization in the food and beverage industry that has found itself in trouble is Starbucks. In 2007, a leaked internal memo by its Founder Howard Schultz indicated that the company intended to close 600 of its stores in the United States. By studying the problems leading to the stores' closure, it is possible to recommend disruptive solutions or creative opportunities that the company can adopt to attract new customers and retain its existing customers.

This report will investigate and analyze this case, find out the root cause of the decline of Starbucks brand value, and use creative tools and methods to find out three possible ways. Then, put forward a final solution, to help Starbucks out of trouble.

Problem statement

As early as 2007, Starbucks was experiencing challenges in its operations. As much as the company had many stores worldwide, the expected returns from the stores were not being met. The stores were not serving as many people as they had planned. Consequentially, the company was finding it hard to operate using the existing model.

In a leaked internal memo in 2007, Howard Schultz indicated that the company planned to close 600 stores in the United States. Shultz believed that his strategy had changed the company's stores into merely a chain of stores instead of warm neighborhood stores that people craved to visit. In reference to the memo by Schultz, the company tried to add value by adopting innovation. Starbucks started offering wi-fi services and also started selling its music. Recently, the company tried to put the focus back on coffee by revitalizing the quality of its beverages and also by updating its menu (Kelly, 2018). It merely seems that the company is a mass brand attempting to command a premium price for an experience that is no longer special.

Despite the challenges that Starbucks has faced, the company has experienced growth in revenue and presence worldwide for the last three decades (Leduc, 2017).

Analytical Tool:

This article will use mind mapping, analysis, and problem-solving tools to analyze and suggest Starbucks' problems. By using mind maps, the brain will provide us with elegant and powerful solutions. This is because mind maps contain all the elements of a problem visually, highlighting where the real focus should be. These colors and images appropriately stimulate our brains to complete the task at hand, thus giving us better mental tools to solve problems. Mind maps also encourage divergent thinking, offering endless options instead of closed thinking.

However, the change of Starbucks' organizational culture raising concerns can potentially disrupt Starbucks' growth and success，and I will focus on analyzing this problem and offering solutions.

· An analysis of Starbuck’s organization culture

By analyzing the evolution and the growth of Starbucks, it is quite noticeable that Howard Schultz had a significant role to play. Schultz visited Milan in an attempt to understand how coffee shops are run there. While there, he came up with the espresso concept and implemented it in the United States. The results of the concept of the United States were terrific. The concept led to an upsurge of revenue growth due to customer growth. Because of the espresso concept, Starbucks was able to open as many stores as possible not only in the United States but all over the world.

Schultz's formidable leadership did not end with the implementation of the espresso concept. Schultz came up with effective management strategies supported by an excellent organizational culture (Beehner, 2020). Schultz led by example and, as a result, engineered the development of meaningful partnerships of Starbucks employees and their customers. Also, Schultz cultivated a culture in which all workers of Starbucks worked as a single unit. Furthermore, Schultz emphasized the need for Starbucks to be a welcoming place. As one of Starbucks' prominent leaders, Schultz created an organizational culture that emphasized the production of quality products to exceed the expectations of customers (Pathiranage, 2019).

The year 2000 saw Schultz resign as Starbucks ' CEO, and Orin Smith took over. Smith served well for five years and retired in 2005. After Smith, Jim Donald took over as the organization's CEO. Donald came up with policies and strategies that were quite different from what the organization's vision was. It was after Donald's take over that the first major issues of Starbucks were noted. The issues were so bad that Schultz had to step in and be the company’s CEO once again. The takeover by Schultz saw the company get back to its profitability ways (Leduc, 2017). All through, it can be noted that it is the values and cultures enshrined by Schultz that have played the most significant role in Starbuck’s success story (Page & Schoder, 2019).

With Schultz's recent exit from Starbuck’s management, there is the general assumption that those who have taken over will not be able to enforce Starbuck's organizational culture as set up by Schultz. The likely results will be a decline in the number of customers to Starbucks stores and a change in the organization's operational structure with a strong possibility of a drop in the organization's revenue, dipping of the organization's profitability.

· Starbucks stiff competition

For the longest time, Starbucks has had only to wave off competition from other coffee outlets, which is both in the US and other nations. The organization has successfully topped in its industry for a long time; however, things look to change unless the organization readjusts its strategies. With the rise of many people working from home as well as with the rise of the on-the-go culture in America and most developed nations, Starbucks is facing competition from relatively new foes; ready to drink coffee and other beverages that do not take time to be made (Azriuddin et al., 2020). Most supermarkets are stocked with nitro-infused cold brew coffee that serves the same purpose as the coffee brewed by Starbucks. To make matters worse for Starbucks, the alternative drinks are cheaper than the products offered by Starbucks, and they are also ready to drink.

The advancement of technology is not necessarily playing to Starbucks' advantage as more and more people can access the internet and brew coffee from the comfort of their homes just like Starbuck's barristers. Also, there are many espresso machines available worldwide that can brew good coffee which and the machines are quite affordable for home use. With the above changes globally, Starbucks is on the verge of losing a considerable chunk of their loyal customers to alternative coffee drinks and other beverages.

Possible solutions for Starbucks

There are three possible alternatives that Starbucks might opt to take to counter the threats facing their profitability if not their existence:

1. Starbucks coming up with their ready-to-drink coffee that can be sold in the supermarkets.

2. Emphasizing the importance of retaining the organization culture by ensuring that the company's management fully adopts the policies and guidelines of Howard Schultz.

3. Using a management strategy that advocates for individuals who have been with the organization for a long time and qualified to take up managerial posts rather than hiring for managers outside the organization.

Through coming up with their ready-to-drink coffee, Starbucks adopts a strategy that ensures that they counter their competition. The above strategy can be quite useful for Starbucks since they have an already established customer base compared to the companies offering the ready-to-drink coffee. The strategy will also diversify further the products that Starbucks is offering.

As of the moment, Starbucks is only offering in-store products, and for that reason, can only rely on the customers that visit their stores to purchase their products. By including ready-to-drink coffee in their product list, Starbucks can capture a new clientele, a clientele that does not visit Starbucks coffee shops. Starbucks will increase their customer base with the above strategy if adopted.

Since it is quite clear that the organizational culture inspired by Howard Schultz is the backbone of the company, then it is of utmost importance that the company's organizational culture is maintained (Mason, Cole&Goza, 2017). The first way of maintaining the culture is to fully comply with the company's policies, new hires, and existing management.

The second way of maintaining Starbucks' current organizational culture is having the organization freeze hiring the management of the company from outside the company. They can do so by relying on an in-house promotion strategy. The use of an in-house promotion strategy will ensure that the organization is led by a manager who understands the organization's culture and a manager who owns the company's mission and vision. As a result, few changes in the organizational culture will be introduced.

Analysis of solutions

Mind mapping is a tool used to visually organize information. The tool shows relationships amongst pieces of a whole. The technique is ideal as it shows the relationship between the organization goals and objectives. Through mind mapping, the organization can link the solutions to the benefits they offer. In addition, it can show the collaboration needed for the solutions to be fruitful. Through mind mapping it was possible to analyze the second recommendation (see appendix 1).

Appendix 1

Recommendations

Based on the issues that are likely to affect the profitability and, in extension, the existence of Starbucks, I would highly recommend the adoption of the strategy that emphasizes the importance of retaining the organization's culture by ensuring that the company's management adopts the policies and guidelines of Howard Schultz fully. The company's success can be credited to the organization culture set up during Howard Schultz's tenure as the company's CEO. Schultz took on the responsibility of ensuring that all Starbucks' partners or stakeholders were carefully and correctly managed and handled. By adopting the recommended strategy, there are four potential advantages that the company will benefit from.

Top on the list of the benefits is that the company will maintain its loyal customers. Most customers of Starbucks have stuck by Starbucks because of the values that the company holds. Customers love the excellent services they receive from the organization's employees as they get their orders, and they also love the values that the company holds dear, such as supporting small scale coffee farmers and supporting charitable organizations (Wu, 2017).

The second benefit is that the company will diversify its products to counter the threat of ready-to-drink coffee. The organizational culture of Starbucks encourages the employees of the organization to be ready for change, and the company's strategy can see this by employing young people to carry out most of the company's operations. By ensuring that Starbuck's organization culture is maintained, the organization ensures it is equipped to counteract any change that may threaten its existence. The third benefit is that the strategy will ensure that the company continues receiving all the support it has been receiving from all over, e.g., from other nations because of their culture of supporting charitable organizations.

Solution Implementation

· Project Plan

To implement the above recommendation, several things will have to happen. The first is that the organization will have to restructure its recruitment strategy. Since it is already noted that the introduction of personnel from other organizations, more so from organizations that do not value the values that the Starbucks organizational culture emphasizes, causes a change in the organizational culture, it is best to limit the number of new hires that come in for managerial roles. Also, the top management of Starbucks will be gotten from the already serving workforce of the organization. The above will ensure that the organizational culture of Starbucks is not distorted.

The second activity that will help ensure that Starbucks' organizational culture is not lost is having annual refresher training on the values and the importance of the partnerships to the organization. The organization can make it a mandatory requirement that every employee of the organization attends annual refresher training on the organization's mission and vision. The above will ensure that both new and old employees of the organization are aware of the values that Starbucks holds dear and that they are aligned with the organization's mission and vision.

The last action that can be done to ensure that the organizational culture of Starbucks is not lost is to have the current CEO of Starbucks as well as the chairman emeritus, Howard Schultz, carry out random store visits every month for the next two years to motivate and interact with Starbucks employees. The above action may increase the CEO's duties, but it will most definitely help build the partnership between the management and the junior employees of the organization. Also, the two executives will help cement the values that the organization values.

· Performance Indicators for monitoring progress

As far as measuring the effectiveness of the implemented solution, three of the program's six objectives will be reviewed. The three objectives are improving managerial competency, creating an inclusive and diverse culture, and talent retention. To measure the effectiveness of the program, seven key performance indicators will be used. In talent retention, three key performance indicators will be used. The three critical performance indicators employee engagement, retention rates, and employee satisfaction. The objective will be to measure whether the implemented solution effectively improves job satisfaction and, overall, the program's effectiveness at reducing employee turnover in the department.

For the second primary objective of creating an inclusive and diverse culture in the department, three key performance indicators will be used. The first indicator is employee perception of the organization. The second and third key performance indicators are retention rates and advancement rates. The proposed solution is geared at encouraging employees in the department to embrace each other despite the differences that may exist within the employees. Through creating an inclusive culture, it will be possible for employees to build good relationships amongst themselves.

For the third main objective of the program, three key performance indicators will be used. The first indicator will be the expertise based on competency assessment before and after the program. The second indicator will be improved job ratings, and the fourth indicator will be internal promotions within managerial ranks.

To assess the effectiveness of the implemented solution, the organization's employees will first take part in a test that will gauge their expertise and knowledge in the company's products and customer relationship management. The test will be conducted just before the proposed solution is implemented. The results of the test will be used as the baseline scores for the program. After the first six months, Starbucks ' employees will take part in a second test. The test will gauge whether the employees' expertise has improved or not. The test results will be a reflection of the effectiveness of the failure of the implemented solution.

Lastly, to monitor the progress of the implemented strategies, the organization can note the number of customers it serves or the number of drinks it sells over a year. An increase in the number of customers or an increase in the number of drinks that Starbucks sells will indicate that the strategy is effective. Any other results will indicate that the strategy is not effective. For proper monitoring, the organization's management can carry out quarterly reviews.

· Work breakdown Schedule

The work breakdown for the Starbucks survival strategy is divided into four sections (see appendix 2). The first section is the project initiation section. The section is concerned with three main things; the appointment of a project manager and a project management team, the definition of the strategic goals and the assessment of the feasibility of the strategy.

The second section is the planning section. The section has four main activities; a risk analysis of the strategy, coming up with a schedule for the strategy's tasks, budget setting and establishing the communication channels that will be used to update the stakeholders on the progress of the implementation of the strategy.

The third section is the execution section. Just like the initiation section, the execution section has three main activities; the status updates, the comparison of the strategic plan and the actual progress and strategy documentation. The last section of the work breakdown schedule is the closure of the project. The section has two main activities; performance tracking and project reporting.

Appendix 2

· Gantt Chart

The initiation of the strategy will take place in the first month. The planning section of the strategy will take a month, just like the initiation section. The execution of the strategy will take six months. After the six months’ execution period, the closure of the proposed solution will be done. A report detailing the implementation of the strategy will be prepared and shared with Starbuck’s executive management (see appendix 3).

	1st Month	2nd Month	3rd Month	4th Month	5th Month	6th Month	7th month	8th Month	9th month
Initiation
Planning
Execution
Closure

Appendix 3

· Risk Management Plan

There are three primary risks that Starbucks is at risk of: high employee turnover, loss of customers, and the failure of the proposed solution in meeting its goals (see appendix 4). High employee turnover is unlikely to happen, and in case it happens, it will have a low effect on the company's success. The loss of customers can happen, and the effect it will have on the company is moderate. The proposed solution's success is not guaranteed, and if the proposed solution fails, it will have a high effect on the company. To reduce the risk of it happen, the organization's management should pay particular emphasis to the tasks of the proposed solution.

	Rare	Unlikely	Possible	Likely	Almost certain
Catastrophic
Major			Failure of the proposed solution
Moderate			Loss of customers
Minor		High employee turnover
Insignificant

Low effect

Moderate effect

High effect

Extreme effects

Appendix 4

Appendix 4

Recommendations to management

For the successful implementation of the solution, Starbucks's management must be actively involved in the solution. They must ensure that the goals of the company are being met through the implementation of the solution. The management must also participate in the training to ensure that its culture is retained and taught to all employees.

Since the company is a mass brand attempting to command a premium price for an experience that is no longer special, the management must ensure its customer service is worth premium charges to make the company’s products appealable.

Conclusion

For Starbucks to stand a chance at remaining profitable in the food and beverage industry, the company must do three main things. The three activities are meant to solidify why customers must pay a premium price for an experience that is no longer special.

The first thing is that the organization will have to restructure its recruitment strategy. The second activity that will help ensure that Starbucks' organizational culture is not lost is having annual refresher training on the values and the importance of the partnerships to the organization. The organization can make it a mandatory requirement that every employee of the organization attends annual refresher training on the organization's mission and vision. The above will ensure that both new and old employees of the organization are aware of the values that Starbucks holds dear and that they are aligned with the organization's mission and vision.

The last action that can be done to ensure that the organizational culture of Starbucks is not lost is to have the current CEO of Starbucks as well as the chairman emeritus, Howard Schultz, carry out random store visits every month for the next two years to motivate and interact with Starbucks employees. The above action may increase the CEO's duties, but it will most definitely help build the partnership between the management and the junior employees of the organization. Also, the two executives will help cement the values that the organization values.

References:

Azriuddin, M., Kee, D. M. H., Hafizzudin, M., Fitri, M., Zakwan, M. A., AlSanousi, D., ... & Kurniawan, O. (2020). Becoming an International Brand: A Case Study of Starbucks. Journal of the community development in Asia, 3 (1), 33-43. Retrieved from http://ejournal.aibpm.org/index.php/JCDA/article/view/706

Beehner, C. G. (2020). Servant Leadership as a Pathway to a Sustainable Future. In New Horizons in Positive Leadership and Change (pp. 65-82). Springer, Cham. Retrieved from https://link.springer.com/chapter/10.1007/978-3-030-38129-5_4

Debra Kelly, (2018). The real reason Starbucks is closing 150 stores. Retrieved from https://www.mashed.com/126946/the-real-reason-starbucks-is-closing-150-stores/?utm_campaign=clip

Leduc, C. (2017). “Onward How Starbucks Fought for Its Life without Losing Its Soul” Book Review.

Leduc, C. (2017). “Onward How Starbucks Fought for Its Life without Losing Its Soul” Book Review. Retrieved from https://core.ac.uk/download/pdf/303926367.pdf

Mason, A., Cole, T., & Goza, N. (2017). Starbucks: A Case Study Of Effective Management In The Coffee Industry. Journal of International Management Studies, 17 (1).

Page, L., & Schoder, J. (2019). Making change last: leadership is the key. Journal of Business Strategy. Retrieved from https://www.emerald.com/insight/content/doi/10.1108/JBS-01-2018-0003/full/html?af=R

Pathiranage, J. (2019). Organizational culture and business performance: an empirical study. International Journal of Economics and Management, 24(2), 264-278. Retrieved from https://www.researchgate.net/profile/Yasas_Pathiranage/publication/333918023_Organizational_Culture_and_Business_Performance_An_Empirical_Study/links/5d47264f92851cd046a25a34/Organizational-Culture-and-Business-Performance-An-Empirical-Study.pdf

S. Lock. (2020). Number of Starbucks locations worldwide 2003-2019. Retrieved from https://www.statista.com/statistics/266465/number-of-starbucks-stores-worldwide/

Wu, H. C. (2017). What drives experiential loyalty? A case study of Starbucks coffee chain in Taiwan. British Food Journal, 119 (3), 468-496.

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