Starbucks Project Management Plan

Southern New Hampshire University

June 26, 2019

Abstract

The following paper provides a well thought discussion about the operationalization Starbucks’ business opportunity that involves introducing alcoholic beverages mixed with coffee to the existing portfolio. The discussion identifies the potential cost for operationalizing the business opportunity after outlining the different types of costs that are likely to be expensed. It also describes the work breakdown structure, key milestones, potential obstacles, risks, and risk mitigation strategies. Diagrams have been used to give a clear picture of the initiatives that would be involved in pursuing/implementing the business opportunity.

Potential Costs

The cost of operations for Starbucks’ introduction of alcoholic coffee will include almost all the costs involved in brewing and retailing normal Starbucks’ coffee. However, the company will incur additional expenses that include the initial investment in the alcoholic line of business, marketing/advertising costs and other ongoing expenses. The initial costs will include the cost of creating secluded spaces within the existing cafes where alcoholic coffee will be served. Additionally, the costs incurred in purchasing the best quality of alcohol, new machines/equipment and hiring staff/ experts in alcohol-coffee quality will be part of the initial investment. Starbucks will have to incur compliance costs before the new product can be sold to consumers

For ongoing expenses, additional occupancy and store operating costs will be attributed to the introduction of a new input (alcohol) in the operations Starbucks. In addition, the supply chain costs will increase owing the introduction of new suppliers and intermediaries. High advertising costs will be incurred given that this will be the first time for the alcoholic coffee to be advertised. The company will expense more advertising costs as it strives to penetrate the wider market in the United States and abroad. It will incur costs in connection with launching more cafes that can serve alcoholic coffe. Administrative costs and the cost of insurance are also probable ongoing costs.

The cost estimates for Starbuck’s diversification to offer alcoholic coffee are detailed below. The initial costs, including compliance costs add up to $250, 000. The total advertising costs are $5500 while salaries and wages associated with the new activities amount to $50000 in the first year of operation.. The insurance costs within the first year will be about $7500 while the total administrative cost will be $6000. In general, the total cost for the new operation (offering alcoholic coffee) will be $ 319000 for the first year. Given that Starbucks will start by launching the alcoholic coffee in 10 cafes, the total cost will be approximately $ 3,190,000

The following are the risks and benefits if Starbucks moves ahed with this business opportunity

Risks include:

· Low customer acceptance due to the high costs associated with the new offering

· Increase in labor costs imply that regulatory actions regarding wages in foreign countries can have a huge impact to the operations of the company

· Government actions which raise the legal drinking age from 18 to 21 can have a huge impact on the company’s customer base

· The high possibility of new entrants to this line of business

· The entry into the alcoholic beverage sector can cause adverse competitive reactions by established alcoholic brewers

· Imposition of additional taxes on the alcoholic coffee by the various jurisdictions where the company operates

Benefits include:

· The alcoholic bevarages mixed with coffee will tap unmet demand by providing quiet and comfortable spaces where customers can enjoy alcoholic beverages that are perfectly mixed with coffee.

· The new offering helps Starbucks in pursuing the goal of expanding the market share

· The new product will also serve as a source of competitive advantage by promoting diversification.

The pilot program for the new product will be conducted in the United States where the “alcoholic coffee” will be offered in 10 cafes located in 10 different States. This pilot project will run for 1 year before the new product can be introduced in overseas Starbucks’ establishments. Within this year, Starbucks expect to sell about 3million units of the “alcoholic coffee”. For successful implementation of this project, the top management will collaborate with project teams, the marketing advisory team, and lcustomer relationship management team to determine the work breakdown structure.

The work breakdown structure is used by organizations to create a framework for identifying the key activities required in the completion of a project (Stevenson, 2018). Figure 1.1 presents the work breakdown structure for Starbucks.

Narrative

On the other hand, the marketing function will be tasked with managing initial and ongoing advertisements to introduce the new product to customers and ensure that the target market is actively engaged. Advertising will account for a significant portion of the budget to popularize the alcoholic coffee and to make it the preferred beverage among the target population. Slogans that resonate with the market needs will be created for use in both the digital and traditional media. The marketing team will ensure that initial and ongoing advertising costs fall within the budgetary limits. It will also conduct market research to establish the priorities of customers in the context of alcoholic coffee. For example, market surveys will be conducted to determine the target market’s preferred alcoholic content, flavors and other additives that should accompany the new product.

The customer service function is responsible for ensuring that customers who visit Starbucks’ alcoholic coffee brewhouses get the best service. The team monitors the experiences of customers and the buying habits in order to tailor services to the needs of customers. It will also monitor digital customer feedback available in company’s blogs and the complaints issued via word of mouth to enhance continuous improvement of the alcoholic coffee. Through the intervention of the customer service function, the employees of Starbucks (referred to as partners) will also be trained on brewing methods, customer service and retail skills (Nelson, 2000). The aim will be to ensure that customers can continue getting high quality services that create value for their money. In line with Starbucks training philosophy, managers will be trained for 8 additional weeks on various areas such as performing performance appraisals, recruiting and coffee knowledge 101 (Nelson, 2000).

Key Milestones

While milestones are key events that communicate the progress of a project, deliverables are the specific indicators of completion of the milestone (Project-management-basics, n.d.). This implies that deliverables actually govern the milestones.

For Starbucks’ coffee brewhouses, the first milestone would be the completion of project planning. This entails; (1) establishing the business requirements of the opportunity which include licenses and other regulatory aspects, (2) forecasting the total cost of the project along with delivery timelines and a list of deliverables, (3) determining the necessary resources and creating a sustainable strategy for obtaining them, and (4) bringing everyone on board and getting the approval of the top management to proceed to the next stage.

Prior planning of the project is considered a key milestone because it sets the pace for implementation and makes it easy to take action.in every aspect of implementing the business opportunity will be guided by a sound plan. In this context, the deliverables are the top management guidelines and regulatory requirements. The project plan must adhere to the needs of the top management in order to get their approval. On the other hand, food safety and regulatory requirements by the FDA along with licensing requirements for brewing and retailing alcoholic beverages will also be key deliverables.

The second milestone is the set up and staffing of alcoholic coffee brewhouses and the creation of secluded spaces within existing cafes where alcoholic coffee will be offered. The importance of this step cannot be ignored as it positions the company closer to market entry. In this context, the deliverables would be quality checklists and employee performance measurements. The design of the alcoholic coffee brewhouses must meet the quality standards of the FDA. The company will also offer training to new employees to ensure that they meet Starbucks’ expected measures of performance.

The third milestone would be the creation of relevant advertisements to introduce the new offering to the target market. This is important in making sure that customers conceptualize the attractive and unique characteristics of Starbucks’ alcoholic coffee. The deliverables for this milestone are the projected sales with the first year and the market surveys’ reports detailing the customers reception.

Of course, the project will require the human resource to plan and implement the various processes involved in brewing and retailing laconic coffee. All the teams involved in this ordeal (project team, marketing and customer service management) must be have the right expertise to enhance success. Other than the specified teams, the introduction of alcoholic coffee brewhouses requires a project manager, quality manager, HR manager and a customer relationship manager. The success of the ProJet will also be depended on the availability of monetary and support infrastructure.

The milestones discussed above along with the deliverables and resource requirements will be key in ensuring that Starbucks meets its scope, time, and cost objectives (Weinkauf & Hoegl, 2002). If any of these areas was inadequately addressed, Starbucks’ pursuit of the new business opportunity may be halted by the underlying obstacles in the implementation phase.

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Potential Obstacles

Obstacles refer to impediments that slow down or completely stall the process of project implementation. For Starbucks, budgetary limits could hinder the implementation team from exploring a various adverting strategies. In this case, the advertising budget is limited to a specific number of dollars meaning that only selected media will be used. Secondly, the company might face compliance problems especially when trying to acquire certifications on brewing and selling alcoholic coffee. Another problem that’s closely related to compliance emanates from reports of underage drinking that might put the company at loggerheads with the authorities. Fourth, the company migh have to deal with reported health cases and contamination issues related to the new offering. Other potential obstacles include; poor market reception and the potential of encountering court battles with existing alcoholic beverage companies

If I were to rate the obstacles on basis of severity, the following order would apply;

· Budget limitations

· Compliance problems

· Poor market reception

· Health risks related to alcoholic coffee

· Negative reputation due to underage drinking

· Court battles with existing alcoholic beverage companies

Risk Mitigation

Risk mitigation involves taking proactive steps to reduce the aforemention obstacles and risks. First of all, the problem of budget limitation in advertising can be mitigated by using advertising themes that feature on Starbucks existing products portfolio. This strategy is not only inexpensive but also ensures that customers can easily identify the brand values of the new alcoholic coffee (Linton, n.d.). Starbucks can use the same media that it has used for existing products since these would match the budgetary allocation by management.

For compliance problems, the company can engage the the Retail Food Safety (RFS) team which enforces compliance with safety standards. In addition, Starbucks can use lobbyists and other political actors to negotiate for policies that favor the growth of alcoholic coffee market. On the other hand, to address the problem of poor market reception, starbucks can use the market reserch information to tailor the new product to the changing needs of customers. For example, the marketing team can use different packaging sizes for alcoholic coffe to satisfy customers’ needs. Atltenatively, the company’s customer service team can contact customers directly to determine their unique needs (Linton, n.d.).

The health risks associated with alcoholic coffee may addressed by introducing different brand of the same. For example, it is imperative to launch a “low sugar brand” to target populations that adhere to healthy eating. On the other hand, underage drinking may be addressed by not only using slogans such as ‘not for sale to persons under the legl drinking age” but also implementing strategies to ensure that children do not access the alcoholic coffee drinking spaces. Starbucks should also avoid the infringement of the intellectual properties of other companies to evade litigation and costly court battles.

References

Linton, I. Product Line Extension Strategy. Retrieved from https://yourbusiness.azcentral.com/product-line-extension-strategy-28398.html

Nelson, B. (2000). How Starbucks energizes its employees. Retrieved from https://www.bizjournals.com/nashville/stories/2000/06/05/smallb2.html

Project-management-basics. Project management - Milestones – Deliverables. Retrieved from http://www.project-management-basics.com/project_management/project_management_050_Milestones_part_2_Deliverables.shtml

Villanovau University. (2019). Five Phases of the Project Management Lifecycle. Retrieved from https://www.villanovau.com/resources/project-management/5-phases-project-management-lifecycle/

Weinkauf, K., & Hoegl, M. (2002). Team leadership activities in different project phases. Team Performance Management: An International Journal, 8(7/8), 171-182. doi: 10.1108/13527590210452095

Stevenson, W. (2018). Operations management 13th edition. New York, NY: McGraw-Hill Education.

Alcoholic Coffee brewhouses

Customer Service

Marketing

Project Management Team

Project Initiation

planning and execution decisions

Monitoring the process

Advertising

Establish/Manage budgets

Market Research

Monitoring customer experiences

customer feedback management

Training