Starbucks: Design Module Answer 1: Starbucks Corporation is a US based company that specializes in production of coffee beverages and in processing of coffee beans that are then sold across US and global markets. The company is highly differentiated because it focuses heavily on innovation, selling an experience, product differentiation, brand recognition and awareness, innovation and creation of atmosphere that could entice potential customers towards Starbucks’ retail and specialty outlets. Indeed, the organization has unique organizational culture as well as involved in a transforming process since 2008 to become a truly competitive and distinctive seller of coffee products.
Everything, from logo to commercials advertisements, from store designing / display to employee management is different, which is the evidence that Starbucks believes in differentiation and constant improvement. Starbucks has around 6,700 - 6800 stores in 2010, while the numbers of employees hired is nearly 125,000. Hence, the company has three major operating business segments namely United States (US - 73% share), International (19% share) and Global Consumer Products Group (CPG - 8% share) (Annual Report, 2009). Indeed, the strategic planners have developed organizational design after analyzing the ways to control these operating segments simultaneously.
In short, the company has adopted a divisional structure to control and manage business operations in various regions. Also, the company has been transforming itself to adopt a matrix organizational structure after CEO Howard Schultz disclosures in 2008. This strategy is implemented to increase internal communication, coordination, collaboration, employee contribution, participation and learning, which would later facilitate in enhancing customer satisfaction level. To successfully implement the above, Starbucks has divided US market into four divisions namely “Western/Pacific, Northwest/Mountain, Southeast/Plains and Northeast/Atlantic”.
In addition, the company’s major functions endorse the strategies of US divisions and to accomplish the desired objectives. This is primarily because Starbucks is heavily dependent upon survival, growth and sustainability of US segment (Hitt, 2008). The major departments in the corporation are Sales and Marketing, Human Resources, Finance, Administration, Information Technology and Purchases. The workers in such departments are trained in a way they could actively participate in decision-making and problem solving as well as could provide recommendations to top management. The organization is not complex because employees (at stores, company’s regional offices and headquarters) could freely interact and build relationships.
In other words, it is relatively easier to understand other employees across Starbucks through informal communication channels. However, the company does not compromise over discipline; hence all key decisions are taken by top management to maintain control, decorum and stability across all major segments worldwide. Answer 2: Indeed, Starbucks has many core competences that provide it a competitive edge over rivals in the same industry. They are as under: Premium Quality Products offered under globally recognized brand name: The first core competence of Starbucks Corporation is that it always focuses on offering optimal quality food and coffee products to its customers at all retail outlets.
The quality standard has to be strictly followed by independent distributors because violation may lead to immediate termination of agreement. In this way, Starbucks not only enhances its brand recognition, market goodwill and reputation but also maximizes the monetary gains Internal Management – Matrix Structure: The global coffee retailer has adopted matrix organizational structure that permits employees to actively communicate, coordinate, experiment and participate in company’s business operations for timely accomplishment of defined goals and targets.
Indeed, Starbucks always values its employed personnel and applauds them if they portray optimal performance. The managerial structure also increases the responsibility and accountability that definitely benefits the coffee retailer. In other words, Starbucks strongly convicts that happy and satisfied employees put extra efforts to meet or exceed business targets by making customers happy and satisfied. (Annual Report, 2009) Focus on Emerging Markets: Starbucks has realized the fact that growth in its US operations has slowed; hence there is dire need to reduce dependency on core US markets.
Consequently, the Starbucks Company has quickly expanded its operations across top two emerging Asian markets such as India and China. Its ideas and products are widely accepted because the company follows localization and adaptation strategies in aforementioned markets. In short, sales have increased substantially over past few years, which provide Starbucks a competitive advantage over industry rivals. Answer 3: The strategic planners and top management of the organization seem to be well aware of new workplace requirements and challenges and thus they focus heavily to meet contemporary design challenges.
Indeed, the planners have chosen matrix structure to improve internal communication, participation, contribution, experimentation and continuous learning across Starbucks. The company has various departments and functional units in all subsidiaries established across different geographical regions and nations. The company has a decentralized structure as revealed from extensive research on Starbucks. Although, the Chairman and CEO are responsible for making key decisions, yet middle and lower management employees also contribute in highlighting pros and cons of certain policies.
Hence, in simple words, the divisional heads forward recommendations of their subordinates to directors of parent company after which policies are finalized for implementation. In short, the information flows from top-to-bottom in hierarchy and vice versa. There has been greater focus on formalization because instructions are provided in written through intranet or communication networks to divisional heads and other employees. Obviously, this is done to maintain decorum and ensure control / stability. (Thompson and Gamble, n.d) Indeed, there is greater attention on mutual adjustment and consent across Starbucks so that employees will communicate freely, share their ideas, opinions and concerns to meet mutual goals and objectives.
Employees are empowered because of delegation and authority at middle and lower managerial levels, which boosts their morale, trust and commitment. The organization does have teams and task forces and it could not be called as complex. (Annual Report, 2009) Answer 4: The analysis in last response enables the researcher to conclude that Starbuck conforms more to the organic model of organizational structure instead of mechanistic model.
There are various reasons that would support this conclusion. First, there is Joint Specialization and employees coordinate, collaborate and work with each other in the form of groups and teams. Decisions are taken with mutual consent because of participatory internal organizational culture. Second, the company is decentralized because employees at the bottom (first line) of hierarchy consult with their bosses at middle management level, who then forward the recommendations and concerns to top management. Third, the top management assigns and group tasks into departments where middle managers, accompanied with first – line managerial staff, pursue to achieve defined objectives and business targets.
In this way, the information flows from top – to – bottom and bottom - to – top because of decentralization. In short, the matrix structure enhances open communication, participation, teamwork, mutual adjustments and internal socialization so that employees build healthy and cordial relationships. to create a peaceful and discrimination free internal culture and environment. Obviously, inter – organizational conflicts (i-e among members) reduces productivity and efficiency that later leads to monetary losses.
Answer 5: Concluding the above, it is worthwhile to point out the fact that Starbucks Corporation has adopted both divisional and matrix organizational cultures to administer and control 6,800 retail and specialty stores. Indeed, the company should have to improve its reward system and to acknowledge employees’ performance because Starbucks, unfortunately, has high employee turnover rates. For instance, Starbucks has to offer greater extrinsic rewards to workers, which could help in retention and subsequent reduction of recruiting, selecting and training costs. At present, there are hardly any rewards such as periodic bonuses, commissions and promotions offered to workers, as most of the workforce only receives pay-increase facility.
References: Hitt, Jaimelynn “The Organizational Structure of Starbucks, Unilever, and Wal-Mart” Associated Content May 28, 2008 [Online] Available at http: //www. associatedcontent. com/article/782963/the_organizational_structure_of_starbucks. html? cat=3 Arthur A. Thompson and John Gamble “Starbucks Corporation”, The University of Alabama, n.d [Online] Available at http: //www. mhhe. com/business/management/thompson/11e/case/starbucks-2.html Glowa, Tim “Examining Starbucks utilizing the 7s method and less than perfect information” Glowa. ca September 15, 2001 [Online] Available at http: //www. glowa. ca/Starbucks_7s_Method. pdf No author “Starbucks Corporation” New York Times, May 25, 2010 [Online] Available at http: //topics. nytimes. com/top/news/business/companies/starbucks_corporation/index. html Starbucks Corporation “Annual Report 2009” Starbucks [Online] Available at http: //media. corporate-ir. net/media_files/irol/99/99518/SBUX_AR. pdf