Assignment 2: Evaluation of Business Operations

Assignment 3: Organizational Assessment

Linda Andrade

Argosy University

Professor Donnie Smith

December 2, 2015

Summary (Starbucks)

The coffee business is one of the fastest growing businesses in the world and is globally expanding rather quickly into other countries as they become more developed. So many people all over the world will walk into a Starbucks daily for one of their cups of coffee, but even though it is on the expensive side it is not just the coffee that people come in to Starbucks for. Starbucks brings many offers other than coffee and some of them are friendly staff who are willing to help customers with questions or problems they may have with either the coffee or the service they receive.

Starbucks:

Starbucks is an American coffee company chain that is centrally located out of Seattle, Washington. It is the largest company in the world that has over 20,000 stores in about 60 countries, and in the United States there are 13,279 and other coffeehouses in Canada, Japan and China, Mexico, Taiwan, South Korea, and the United Kingdom. Starbucks is also a member in the World Cocoa Foundation.

Starbucks serves both hot and cold drinks, and several different types of coffee for example whole-bean coffee, micro ground coffee which is an instant coffee, teas, snacks and pastries. In the evening Starbucks also serves different types of alcoholic products such as wine and beer and with them you can also get appetizers but not till after four in the evening. When it comes to the entertainment Starbucks also markets books, music, and films. These products are specific to the location of the store so they are different at each location.

Starbucks was founded in 1971 as a Seattle coffee bean roaster and retailer, they have expanded rather quickly. From 1987 until now Starbucks opened on an average two new stores daily. They are a local company who is very profitable in Seattle but in the 80’s they lost money when they expanded to the Midwest and to Columbia. Profits did not start until the years of 1989-1990, when they registered a small profit of a little over 800,000. When they finally expanded into California in the early 90’s they had become very popular. Tokyo was the first place they expanded to that was outside the United States and Canada which happened in 1996, and since then stores that are overseas make up a third of all Starbucks stores.

Mission Statement:

“Our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time”

Environmental Mission Statement

Starbucks is committed to a role of environmental leadership in all facets of business. Our Mission statement describes:

• To understand issues with the environment and sharing information with our partners.

• To develop innovative and flexible solutions to make change.

• To make every effort to buy and sell products safe for the environment.

• To know that financially we are responsible for our environmental future.

• Infiltrating our responsibility environmentally as a value corporately.

• To monitor and measure our progress in all of our projects.

• To give encouragement to all of our partners to share in our mission.

Organizational culture which is defined as a system of shared assumptions, values, and beliefs, which governs how people behave in organizations. These shared values have a strong influence on the people in the organization and dictate how they dress, act, and perform their jobs (McLaughlin, 2015).

Organizational culture is very important to Starbucks and starts with management of the company. Jim Donald, who is the CEO and president of Starbucks, describes himself as “fanatical about communicating.” He’s a very progressive thinker and this shows by his undivided attention to time management and attention to details. Starbucks Chairman Howard Schultz frequently talks about creating a coffee shop a place where people can come from home or the place they work to relax and even do some thinking. This is one characteristic that makes Starbucks high in values many people feel welcome, and comfortable which helps with being able to calm down after a long day at work or at home which a good way to relieve tension.

For a business like Starbucks it is extremely important to concentrate on the detail and the delivery of an environment that is relaxing and to also communicate this to their customers, and they do this by working together by making the product that is ordered and after the product is done they will personally call your name to get the coffee, tea, snacks etc.

Starbucks has loyal customers who are totally satisfied with the service they receive and this is because Starbucks is very focused on customer response. There is definitely something very positive about how they treat their customers, they go way beyond what is needed to please the customer and they also educate anyone who is interested in knowing what they drink and what might be popular by other customers that they feel you might enjoy.

The guiding principles of the company are:

· Always creating an experience for all customers

· Treat all co-workers with respect and dignity to make it a great place to work

· Always have high quality coffee

· As they grew as a company they would give back to each community including where they originated from

SWOT Analysis:

Strengths

The main and most important strength that Starbucks offers is its reputation of exquisite coffee and teas. It is also known for good customer service and even though they are overpriced and coffee is brewed with the best of the Arabica bean, most of the customers will keep coming back due to how they feel about the experiences they get from the company which is what Starbucks promises to all customers. Therefore the price for a cup of coffee isn’t an issue but the high quality from the workers is what draws the customers back (Motley, 2007). Starbucks has access to high quality materials, its Arabica beans come from plantations and their products are Fair Trade certified. They also have access to channels due to being located in strategic areas. Starbucks is also known for how they treat their staff and also paying them above market wages.

Weaknesses

One of Starbucks weaknesses is their coffee being overpriced, even though the company targets young, and old and executives for their primary market, customers will be sensitive to the prices of products (Velta, 2008). Customers may visit less because of the economy but Starbucks strategy of costs has to change.

Opportunities

Starbucks pursuit on products seems to be doing very well compared to its other segments, US segment and the international segment. Internationally the market is still showing progress. They are growing rapidly. The company can capitalize on growth by being aggressive with expansion in these countries.

Threats

Because of the large companies of McDonalds and Dunkin Donuts this brings a big threat to the dominance of Starbucks. These companies are capable of matching Starbucks channels and marketing activity. They are also able to equal Starbucks when it comes to financial resources. With the economic crisis posing such a threat to Starbucks which reflects in the financial report shows that their revenue and profits are decreasing because of the economy ( Burritt, 2007).

PORTER’S Five Force Competitive Strategy (BCG Matrix)

Porter’s five forces are an industry of competition/rivalry, the threat of new competition and substitute product, bargaining power of both suppliers and consumers. With these five forces a company can influence how a company strategizes. This strategy also shows a clear picture of all the external and contending forces that involve one particular industry.

Industry Competition

When it comes to the coffee business it can be divided into two different categories, the production based and the retail based. In 1987 when Michael Schultz bought Starbucks he was faced with competition among several different small business coffeehouse chains throughout Seattle and the whole US. For the most part these coffeehouses were small or medium sized owned by individuals or families. Even though there are many different competitors going against Starbucks they are still not ahead. One of these competitors which was founded in 1979 called Gloria Jean’s Coffee People, which is a chain store just in specific states but are planning to expand the same as Starbucks has. According to an online survey Gloria Jean’s is the one main competitor for Starbucks. 1n the mid 90’s a company named, Jireh International Pty Ltd which was founded by Nabi Saleh and Peter Irvine had made the purchase to franchise Gloria Jean's Coffees in Australia. Both men then opened the very first Gloria Jean’s Coffee in Miranda, Sydney, and then in East garden, Sydney, two week later (Wikipedia, 2008). In many ways both businesses are the same they both sell bottled coffee, whole grain beans and K-cups. Gloria Jean’s biggest rivals are Proctor & Gamble, Nestle, and Kraft. They have been in the business of selling packaged coffee for a long time as a matter of fact for more than a century. Starbucks also has to compete with products like soda, energy drinks like Monster, and many other non-alcoholic drinks. But unlike these products coffee is not based on price but the difference between each product, customer service, brand recognition and images of the company.

The Threat of Substitute Products

Substitute products, as explained by Porter (1998), are products delivered from other businesses that can present as a substitute product from the underlying company. Substitute products can be anything from a non-alcoholic drink like tea, soda, juice or even energy drinks. While there are many different types of substitute drinks, a good cup of specialty coffee is what most customers still purchase. Imaging does play an important role in the coffee business, and Starbucks not only offers specialty coffee but a very good experience with imaging as well offering a special place for its customers to relax and enjoy the coffee they purchased. Therefore there really is not a major threat with substitute beverages when it comes to a coffeehouse.

Bargaining Power of the Buyer

When it comes to the coffee industry or any business customers have a lot of power, putting pressure on the business to lower prices, be demanding to have better service, and they can also put one company against another (Porter, 1998). Customers have a big influence on the success of whether rates increase or decrease but in the coffee business it is based mostly on the individual buyer, and they don’t work in unison (Larson, 2008). The differentiation of the product is extremely high so consumers are looking more for where the product comes from and what the product costs so this makes there power to bargain lower.

The suppliers Bargaining Power

Now when it comes to having power with bargaining suppliers also apply influence on the coffee industry. They can increase their bargaining power and also be a threat in terms of profit. They can raise or lower how well the quality of products are in the business (Porter, 1998). But again because there are so many different places to get product this creates less power to bargain with.

To sum it all up the five force analysis, we can conclude with the coffee industry there is a general attraction and a lot of competition and in spite of the domination of Starbucks, the amount of small business coffeehouses out there has also grown in numbers as well. Both the consumers and suppliers have a decrease in bargaining power and substitute products is low. Therefore profits are highly focused on the industry player, especially Starbucks but with McDonalds and Dunkin also in the completion Starbucks control on the coffee industry is threatened.

References

• Baertlein, L. (2011, January 26). Starbucks sees higher 2011 coffee costs | Reuters.

• Business & Financial News, Breaking US & International News | Reuters.com. Retrieved January 29, 2011, from http://www.reuters.com/article/2011/01/27/usstarbucks-idUSTRE70P8DE20110127

• Burritt, C. (2007, September 12). McDonald's challenging Starbucks with cheaper coffee drinks. Seattle news, sports, events, entertainment | seattlepi.com - Seattle Post- Intelligencer. Retrieved March 26, 2011, from http://www.seattlepi.com/business/331318_coffeechallenge12.html

• Company Overview. (2009). Retrieved November 23, 2009, from http://www.starbucks.com/aboutus/overview.asp

• Gulati, R., Huffman, S., & Neilson, G. (2008, September 08). The Barista Principle -- Starbucks and the Rise of Relational Capital. Retrieved from http://www.relationalcapitalgroup.com/downloads/TheBaristaPrinciple.pdf

• Han, J. (2009, January 13). McDonald's Triggers Coffee War. The Korea Times. Retrieved December 01, 2010, from http://www.koreatimes.co.kr/www/news/biz/2010/04/123_37779.html