Influence of Starbucks Goals on Planning and Strategic Management Processes - Case Study Example

Written report (Starbuck: Planning) Name of the Student: Name of the Instructor: Name of the course: Code of the course: Submission date: Written report (Starbuck: Planning) Introduction Starbuck is a company which was founded in 1971 in Seattle, Washington in the United States. Since its establishment, this company has drastically expanded into becoming the number one retailer which specializes in coffee globally. The evidence of its enormous success is best epitomized by the fact that in September, 2007, Starbuck had more than 15,000 outlets in 44 countries worldwide and credited for being an employers to 170,000 people in its diverse operations. The epitome of this company’s success is exemplified by its capacity to in instigating the European coffee culture in the United States and then proceeding to expand its operations to take the business model to the global market. There are diverse factors which can be attributed to the success of this global brand, amidst others which can be credited to its gradual decline in the subsequent years, some of which will be comprehensively explored in this analysis. Against this backdrop, this report seeks to explore the various ways in which more uncertain environment in the contemporary world influenced decision making in this company. It will also analyze how the goals primed at Starbuck influence the planning and strategic management processes in this company. On the other hand, this report will explore the growth strategies which were put into utility in the 1900s and in the first half of 2000s aimed at expanding the business operations in this company as well as the competitive advantage which was utilized in the company to expedite this growth. Additionally, this report will investigate who the Starbuck’s strategies compare with those of the competitors such as McCafe and Gloria Jean’s and also examine whether the Starbuck’s brand has become too saturated. Lastly, this report will engage in a SWOT analysis of Starbuck as it aims to confront the challenges which have been posed by the changing environment as well as how this company utilizes planning tools like budgeting, forecasting and scheduling. Uncertain environment and decision-making at Starbuck The first environment is the dynamism of consumer needs. In this case, a situation whereby there is a change in the consumers’ needs or the consumers become dissatisfied with the Starbuck’s products poses an uncertain operating environment in this company. This can be viewed as the third category of change in an organization which is refers changing people (Robbins et. al., 2011). As a result, this has influenced the decisions made at Starbuck in the sense that the decision makers ought to adopt product design flexibility (Chang, 1993) aimed at ensuring that the products produced from this company to a large extent satisfy the consumer needs. In addition, the decision makers ought to be alive to the changing tastes of the consumers and focus their decisions in adapting to these changes and switch between different product designs with relative ease. Secondly, there is the uncertainty related to the prices of the coffee beans, dairy products among other products which are characterized by varying level of volatility. As a result, the decision makers at Starbuck ought to institute ideal mechanisms of developing outgoing relationships with its suppliers aimed at securing adequate supply of these products amidst volatility in their pricing. Thirdly, there is the uncertainty in the operating environment of Starbuck related to increasing competition, both at the domestic and international level. Consequently, the decisions in this company ought to be directed towards attaining sustainable competitive advantage in the market. Lastly, there is uncertainty which emanates from the special-interest groups, for instance, environmental, food safety, consumer and labour unions which attempt to influence the operations of this company. This influences the decisions at Starbuck in the sense that this company is obliged to institute policies which exhibit adherence to the standards and regulations set by these special interest groups. Influence of Starbuck’s goals on planning and strategic management processes It is worth noting that there exists a robust relationship between organizational goals and the planning and strategic management processes instituted in any given organization. This is evidenced by Afsar (2011) who determined that strategic management elevates the chances of an organization in the sense that it entails detailed planning of every variable of the organization which is core in assisting the achievement of diverse goals and objectives at the company. Starbuck has had extensive goals ranging from increased expansion, closure of underperforming company-operated stores as well as restructuring of Starbuck’s business in Australia. In this case, these goals have posed extensive influence on planning and strategic management processes in this organization. This is best epitomized by the fact that faced with the goal of extensive expansion/internationalization in the early 2000s, this company had to expand its strategic management and planning processes the first two-thirds of this period towards a greater focus on growing this company. On the other hand, faced by the goal of shutting down underperforming company-operated stores in the wake of the worsening US market, this triggered extensive alterations in the initial plans of this company, best exemplified by the fact that the number of new stores which had been planned to open in the market in 2008 drastically fell to 1175, a drop of 34% from the original plan. This phenomenon also influenced the strategic management processes whereby the company had to reduce the number of staff, an effort aimed at making the company more strategic and flexible as it continued to fortify its focus on the consumers in different regions. All the above examples point to the fact that the goals and objectives primed at Starbuck have for a long time and still do pose significant influence on the planning and strategic management processes in this company. Growth strategies in the 1990s and first half of the 2000s It is an apparent fact that Starbuck instituted diverse growth strategies in the 1990s and the first half of 2000s aimed at expanding its business operations. The first strategy was market segmentation whereby the company has found a way of appealing to practically every demographic category in the consumer market. This has been through tailoring various products to meet the specific needs in these consumer groups as well as targeting suiting advertisements and promotions to fit the various needs of these consumers both of which have been profound strategies to expedite growth in this company. The other growth strategy instituted during this period was expansion of its portfolio. This is whereby Starbuck has grown beyond coffee into other related businesses, for instance, coffee-flavored ice creams and ready to drink coffee beverages. This has been through extensive innovation according to Robbins et. al., (2011) is the process of seizing a creative idea and transforming it into a useful work method, product or service. This has been integral in meeting specific consumer needs which is central to consumer satisfaction. Additionally, Starbuck instigated a strategy aimed at increasing consumer focus which has generated a robust organizational culture in this company. This culture has been continued through socialization of new employees which according to Robbins et. al., (2011) helps them in adapting to the culture. On the other hand, there several competitive advantages which Starbuck has used to fuel this growth. In this case, competitive advantages can be perceived as those capabilities in an organization to perform in one or different ways that competitors find it hard to imitate now and in the future (Kahreh et. al., 2011). One of the major competitive advantages is brand image. This is whereby the consumers are able to identify the Starbuck brand and purchase it in different parts of the world which has fueled its growth. Additionally, Starbuck has both robust financial and human resource capital which has enabled it to expand to practically every region on the continent. Lastly, the fact that this company has had a ‘first mover’ advantage in some markets has inflated its market share as well as its gradual growth not only in these countries but also in the wider region. Comparison of Starbuck’s strategy and those of competitors It is imperative to note that there are some significant differences between the strategy adopted by Starbuck and those strategies adopted by other competitors, for instance, McCafe and Gloria Jean’s. In regard to the strategy of internationalization, Starbuck has been predominantly occupied with setting up its stores in different parts of the world which are its direct control and management. Nonetheless, other competitors like McCafe and Gloria Jean’s among other smaller competitors have adopted a different strategy based on franchising whereby these organizations gives other organizations the rudimentary right to use their operating methods as well as the name (Robbins et. al., 2011). In this case, Gloria Jean’s among other competitors operate through a franchising model when compared with the company-owned and operated stores of Starbuck, for instance, in Australia. However, the strategy of Starbuck can be perceived to be slightly similar with the strategies of competitors like McCafe and Gloria Jean’s. This is mostly based on the strategy of responding to the consumer needs and continuously elevating the quality of the product being offered to the consumers. This is one similar strategy between these competing firms which has enabled them to command significant market share around the globe despite the inherent differences in internationalization strategy. Saturation of the Starbuck brand Chelnev et. al. (2011) noted that brand saturation has great influence on the preference of that brand among the consumers based on three aspects. Firstly, there is the decrease of that brand’s personal relevance. Secondly, there is a decrease of that brand’s monetary valuation which is translated to the willingness amongst the consumers to pay for it and lastly there is the perceived similarity of this brand with other brands which erodes its differentiation. Nonetheless, it is a general feeling in this report that the saturation of the Starbuck’s brand has not been occasioned by its extension to too many different products. In actual sense, this has served the purpose of expanding its portfolio which is integral in meeting the consumer needs based on their demographic and psychographic characteristics in various markets around the globe. However, the saturation of the Starbuck brand can be perceived to be occasioned by its opening many stores in similar location which has tended ‘cannibalize’ its own stores. Additionally, it became too common among the consumers in locations which had several outlets which violated the economic principles of cultural scarcity and eventually its novelty wore off. This can be perceived as the key factor which culminated in the saturation of the Starbuck brand, mostly in Australia. SWOT analysis SWOT analysis can be viewed as the process through which decision makers in a particular organization engage in steady development of their awareness of the organizational environments with the core goal of influencing the performance both in the short and long-term (Naryanan & Nath, 1993). Al-Rousan and Qawasme (2009) cited that an explicit relationship exists between dimensions of competitive advantage and SWOT (Strength, Weakness, Opportunity and Threat) analysis. Strengths One of the strength of Starbuck is its human resource. This is whereby this company has an extensive human capital of around 170, 000 employees and an organizational culture whereby the employees are stationed based on their unique competencies. This is key towards creativity and innovation which are fundamental in dealing with the new challenges created by the changing environment. The other strength of this company is based on its widespread presence in practically all regions around the world, be it in the US, Asia, Europe and Australia among other regions. This tends to not only expand its global market share but also ideally respond to socio-economic and political turmoil which affect specific regions where it has operations, for instance, the Euro crisis or the Arab uprising in the recent past. In this case, operations in the stable region can support the operations in the regions affected by these volatile and dynamic occurrences. Weaknesses One of the key weaknesses of Starbuck is brand saturation mentioned in the preceding section, occasioned by overexpansion. This is bound to affect the willingness of the consumers to but its products based on the perceived commonness which is bound to affect its overall performance in some regions. Another weakness is its incapacity to conduct robust market survey on distinct consumer needs which can be attributed to its eventual failure to comprehensively capture the Australian market due to instigation of operations and products which had worked in the US market assuming they will succeed in Australia. Opportunities One of the opportunities that Starbuck has is adopting alternative internationalization strategies, for instance, licensing or joint ventures. This offers several advantages in the sense that it will not only limit the amount of capital needed to directly establish many stores in a given country but will also caution this company from uncertain and detrimental socio-economic conditions in a given region. Nonetheless, this will necessitate the institution of extensive control mechanisms which will be fundamental in ensuring that the partners and licensees follow the policies and practices that safeguard what the Starbuck’s brand name stands for. The other opportunity for Starbuck is to enter into highly unexploited markets which have limited competition and entry barriers, for instance, markets in Africa and Latin America among other region. These regions which have limited coffee consumption establishments offer an alternative strategy of increasing the market share of this company amid the increasing competition in the industry which is key in enabling the company to deal with the changing competition trends in the coffee industry. Threats There are several threats to the viability and feasibility of the Starbuck’s operations. The first threat is the increased competition in the market, mostly with new entrants continuing to get into this industry. This is bound to have negative impacts on the market share of this coffee giant as the new entrants seek to capture a sizeable market share. In this case, Starbuck ought to institute formidable mechanisms to sustain its already competitive advantage in the market. The other threat is economic turmoil, for instance, the global financial recession experienced in 2008. Such economic threats are bound to negatively affect the operations of this company in different parts of the world. Use of planning tools like forecasting, budgeting and scheduling at Starbuck These planning tools are utilized at Starbuck. This is best epitomized by the fact that the hot drink market was forecasted to grow with an impressive 10.9% between the years 2007 and 2010 which underpinned the operations of this company in the early part of this period. Nonetheless, the emergence of some economic uncertainties in 2007/2008 made some of these forecasts to be uncertain. In regard to budgeting, Starbuck not only plans but also allocates finances into its various operations around the world, for instance, expansion to other regions. In this case, when there is a plan to open a specific number of stores within a given period of time, a specific amount of finances is committed to this task, an undertaking which goes to the heart of budgeting as a planning tool. Lastly, this company also uses the planning tool of scheduling. This is best epitomized in its plans to open a given number of stores, for instance, fewer than 1000 new stores in the US market in 2009 or shut them down within specific timelines. This portrays an extensive utilization of scheduling as a planning tool. Conclusion From the preceding analysis, it is apparent that Starbuck which was founded in 1971 in Seattle, United States has recorded extensive success globally since its establishment. This report has also evidenced that uncertain environment, for instance, dynamism of consumer needs and prices of various products influence decision-making at Starbuck. Additionally, it has analyzed the influence of Starbuck’s goals on planning and strategic management processes as well as the growth strategies of this company in the 1900s and 2000s and what competitive advantages this company used to expedite this growth. On the other hand, this report has compared the Starbuck’s strategy and those of competitors, for instance, the internationalization strategy, as well as exploring whether the Starbuck brand has become saturated. Lastly, the report has undertaken a SWOT analysis of Starbuck as well as exploring the use of planning tools like forecasting, budgeting and scheduling in this company in the last section. References Afsar, B., (2011). Strategic management in today’s complex world. Business Intelligence Journal, 4(1): 143-149. Al-Rousan, M. & Qawasme, F, (2009). The Impact of SWOT Analysis on Achieving a Competitive Advantage: Evidence from Jordanian Banking Industry. International Bulletin of Business Administration, 243(6): 82-92. Chang, M.H. (1993). Flexible manufacturing, uncertain consumer tastes, and strategic entry deterrence. The Journal of Industrial Economics, 41(1): 77-90. Chelnev, A., et. al. (2011). Competing for Consumer Identity: Limits to Self-Expression and the Perils of Lifestyle Branding. Journal of Marketing, 75: 66 –82 Kahreh, M.S. et. al., (2011). Achieving competitive advantage through empowering employees: An empirical study. Far East Journal of Psychology and Business, 3(2): 26-37. Naryanan, V. K., & Nath, R. (1993). Organization Theory: Strategic Approach. USA: Irwin INC. Robbins, S.P. et. al., (2011). Management, 6th ed. French Forests, NSW: Pearson Education Australia. Read More