The Current Position of Starbucks - Essay Example

 The Current Position of Starbucks The current strategic position of Starbucks stores is that it is on a decline in every aspect of its original mission, vision and goal. Starbucks has failed to put focus on its customers needs. Initially, Schulz paid great attention on what the customers viewed about their services and the quality of their commodity. Also, the original mission of the company was to appear unique; the way they delivered their services, the way they handled their workers, the relaxing atmosphere the customers got from every store belonging to Starbucks changed drastically (De Wit & Meyer, 2010) However, Starbucks uniqueness has changed. Though profit maximization, sales maximization makes the backbone of every company’s objective, Starbucks have over insisted on this and failed to maximize its quality management and customer needs. The replacement of comfy seats with stands, stylish coffee cups with general cups, stuffy environments and supply of sandwiches whose smell overpowered the sweet scent of brewed coffee is also another strategy that led to the drastic decline of the company’s sales. This shows a complete diversion of the company’s mission and goal. Waitresses and waiters have also been overburdened; they no longer appreciate their work. They feel that the goal they were working hard to achieve and sustain has suddenly changed (Mulcaster, 2009). Brewing of coffee was the major idea behind Starbucks formation. However this idea has changed to automatic making of coffee that customers complain about. The quality of coffee is not felt anymore and so is the social effect of the stores. The employees’ attachment with the customers has reduced due to the tall coffee making machines that destruct the customers view when coffee is made (Mintzberg et al., 2003). As if that was not enough the food crisis that hit US did not make things better, but made the problems faced by Starbucks more worse. Customers felt that coffee in Starbucks was quite expensive bearing in mind that their real income had gone down. They could not bear to spend more on coffee at Starbucks while elsewhere it was cheaper and well brewed. Starbucks management did not apply any emergent strategy to help them cope up with the food crisis problems, such as decreasing its prices, or even changing the type of cups to small ones that were affordable just like its competitors deed. Nonetheless, this company did not take into concern efforts made by its competitors. Many stores came up with new strategies to combat Starbuck’s increased sales. The strategy then employed by this company was to open even more stores in the US. However they failed to carry along their distinctive character with them, such as brewing coffee, presence of comfy seats, and ensuring that the sweet aroma of coffee was still intact. As a result the decline of its shares in the stock exchange was inevitable. This is because there is no one who would like to be associated with a declining firm which translates to low dividends due to the low profits and sales realized. Though Starbucks Company still has the capabilities and resources that can help it to still lead in the coffee world, the environment in which it is running its business is too tight. First the economy has changed. Food prices have hiked, meaning that the disposable income of the consumers is low. They will therefore not opt to take expensive coffee. In addition, its competitors are doing all they can to make sure that they also increase their sales and also penetrate the market just as Starbucks is doing. They are thus growing at the same level. The company’s employees are also getting tired of the introduction of new products. Not that it is wrong, but because their opinion is not taken into concern. They feel that they are not part of the company anymore. However, Starbuck Company can be able to reinstate itself once more and be on the lead in coffee roasting and retailing. It has a competitive advantage in its brand name and location of its stores. Being well established in its country of origin, this gives it more credit in its re-establishment. Thus, as Schulz says the glory of Starbucks can be re-established again through closing down of some of the non-performing stores and laying emphasis on restoring the firm’s original mission of maintaining its attractive services (Smart & Ilan, 1984). Since the firm knows where it has deviated from, forms a strong basis for its re-establishment and sustainability. Additionally the company’s brand name has continued to increase its revenue despite the decline in sales. This is a strong competitive advantage that the firm has against its competitors. Its revenue will still increase as many more people are willing to pay fees to use the company’s brand name. Also, the company is still on an advantage as its original manager still minds about the company, and is willing to take part in restoring the lost glory. This is a key issue to the company, knowing that the same manager was responsible in the establishment of the company, developing its goal, mission and vision. He also played part in its growth for several years. The introduction of new products portrays the company’s innovativeness. All it has to do is change the way it stores and delivers its commodities. Basing on this, it is quite clear that the company under study is ready to expand to greater heights and also penetrate the market with new products. It has the resources and all that is required is better management. Efficient utilization of resources is inevitable if the company is to regain its growth. This is however possible since the shortcomings have been identified, and there is enough human resource to put the company back on track. In conclusion, Starbucks might not be making profits at the moment, but it has a high potential of recovering from its crisis. Neither the revenue nor the sales have drastically failed. Its leadership is also intact. All the company requires to do is frequent monitoring, evaluation and analyzing of the company’s performance. Changes should be made whenever a mistake is detected. 2. Strategic issues presented in the case Some of the key strategic issues presented in this case study include, human resource strategy, emergent strategy processes, prescriptive strategy and branding (Lynch, 2009). Above all, Schulz named the coffee stores Starbucks, meaning an exclusive and mystic product, though American. To ensure that the exclusiveness of the coffee was maintained at all times, Schulz made sure that cooked food always stayed covered, employees did not use any perfumes or cologne and that smoke was always banned. In the human resource strategy, Schulz ensured that the waiters and waitresses were well dressed. They had a better remuneration package; that is better salaries, health care benefits to both full-time and part-time workers. Also, their ideas were always taken into account and all its employees were entitled to grants in terms of stock options (Gerry et al. 2009). Schulz also termed his employees as partners as he believed success of a company starts with its employees and not its consumers. He also added that, morale among employees boosted the sales and innovativeness. Another strategy employed in the case study is based on the care and concern given to Starbucks consumers. The stores were always clean, well fitted with comfy seats, and walls colorfully painted. Coffee was brewed as customers watched, employees were always requested to know the name of their customers and the request they made of their special coffee. Waiters and waitresses were to always accept every customer’s request. This made the customers name Starbucks stores as the third place they visited between home and working places. Customers were always served with fresh coffee to the extent that the company used flavorlock bags to ensure that freshness was maintained in the vast areas that the company was opening new stores. In addition, the company had really made a wise strategy choosing its customers. Starbuck targeted the educated people. Also, Schultz being the manager knew that to promote the brand of the company’s product advertisement was inevitable. Thus for its advertisement, they used the printed medium such as newspapers’ and magazines, through this Starbucks reached a wide range of people. Starbucks was also located in the open streets and opposite each store was another. This was another strategy that was employed as an advertisement tool. It created convenience to the customers that its reputation grew like world fire as a result of oral advertisement. In areas that the company opened new stores it relied on the loyalty of its mail-order recipients. It thus located its business in cities and neighbourhoods where its mail-order customers were located in large numbers. The strategy worked so successfully since about 1000 stores were opened without any closure being experienced. In addition, Starbucks located its store in areas where idealistic people were located. For example in New York, the company located its new stores in Westchester where it is believed that many opinion makers stayed. Generally, it shows that Starbucks had well identified its target group. It relied on the educated people, and situated its business stores to where it could reach them in a well convenient way. Alongside opening many stores, the company formed many partnerships with other companies. This was a strategy to increase the companies’ sales by forming a wider customer base. For example in North America it partnered with Pepsi. They manufactured and distributed coffee despite their differences in their target group. One of the products that were a success for both companies was Frappuccino a ready to drink beverage that gave Starbucks entry into the supermarkets. In addition, Starbucks went ahead and partnered with chain stores, airlines and hotel chains with an aim of reaching more customers and promoting its unique coffee brand. Other than relying on horizontal integration, Starbucks also got involved with vertical business integration. This was one of the unique characteristics that it enjoyed and differentiated it from other brand companies. The company was involved in the buying and distributing of coffee. The company did not also hesitate to go public once it had the urgent need to raise its capital. Also it had a chance to be registered in the stock exchange and this was a good idea to promote its product loyalty among its customers. Also having full control of the firm was an advantage that the company accrued. This is because they were able to maintain their policies and where need be they used licenses where by those that used their brand name paid for it. This meant more revenue for the company as they never incurred any costs. The company did not also take for granted its source of its raw materials. They sourced their coffee direct from the farmers and at a higher price. To ensure that the company did not face coffee shortages, it made long-term contracts with the farmers and also at a fixed price. Maintaining the quality of the firms coffee seeds was a factor that could not be ignored. This resulted to the issue of premiums to the farmers who kept up to the company’s task. Also it joined hands with CARE and Conservative International to promote the growing of coffee that met the environment safe. Through this employed strategies by the company, it was able to reach its long term organization strategy. Its maintenance of its uniqueness was a comparative advantage that it had attained. This is the best advantage it had over its rivals and competitors. Also the concern given to its employees and the best treatment it offered to them was also a wise strategy that they employed. Through this it was able to maintain its employees, and so were the company secrets, innovative mind and loyalty to its consumers. Its partnership with other companies and coffee producers helped the company to capture a wide range of customers and also in promoting the company’s brand globally. Also it used different techniques in the different areas it got to expand its stores. This helped the company promote its product in a way that was accepted by all people for Example the strategy employed in Tokyo and Japan. The company saw potential in every choice of partnership it engaged in and put its decision into action. Starbucks Company it’s a perfect description of the slogan, “we lead others follow”. 3. Suggestions to address the key issues Issues raised in effort to restore the lost glory of the company under study are cutting down the number of stores in the US, coming up with other new products, changing the appearances of the stores, and reopening of stores at a rather slower pace than before. All this would ensure that the customers need are focused on. In addressing the issues that this company faces, it is always wise for the company to have a strategy that gives room to the resolving of crisis. It is necessary to have a contingency plan which will help in the identification of alternative course of actions that can be taken incase problems arose unexpectedly (Coulter, 2010). This strategy also includes projects that will help the company to be always on progress once the unexpected crisis has been resolved. However to make sure that this issues are well implemented with the aim of elevating the companies position, the manager have to ensure that he well evaluates the environment in which his business is learning (Smart & Ilan, 1984). In this case, Schulz already knows where their problem lies. He knows that he is faced with an external and internal challenge. Thus reducing the number of stores in the US, that are not performing as expected, is a brilliant defensive strategy that will help the company to be able to defend itself from competitive forces that may lead to the loss of value and otherwise close down. It will thus be able to focus on only the attractive markets that will enable it to re-instate its lost glory. Also, this strategy will ensure that the company’s management is able to come up with decisions that are going to help the company compete with its competitors without loosing focus of the company’s objective. Frequent evaluation of the company always keeps the company updated of the changes taking place around. Close monitoring of the stores helps the management to get to know the kind of results that are realized, do they deviate from the company’s goal. Constant monitoring helps in analyzing the company’s performance and helps recognize where changes are necessary (Coulter, 2010). For example, a decision to change the appearance of the stores incase of Starbucks company will be related to change of the performance of the company. As a result customers will be attracted by the appearance of the store and also get the feeling of change. This will boost the sales of the company as well as satisfying the customers need. If frequent monitoring is done and the necessary changes are made, the company will always attain its goals and growth will be consequently registered. In addition, retaining the employees in the company helps to speed up and maintain the vision and mission of the company. Customers will always come back to be served by a worker who served them last as they are confident that someone understands their taste. Also managers work load is reduced as the workers have a clear understanding of what is expected of them. Employees’ loyalty and better remuneration is an advantage to the company as they are assured that top secrets of the company are maintained, and also encourages innovation. For example, initially Starbucks employees came up with an icy blend of dark roasted coffee that was named Frapuccino that generated about $52 million sales in a year at the national market. The employees will also be able to react to the changing environment to see that it does not affect the learning of the company (Smart & Ilan, 1984) Reopening of stores at a lower pace will ensure that the management does not loose focus of their goal; improving sales and attending to the customers needs. It also helps the company to reduce management costs while maximizing profits. Additionally the company will be able to focus in the introduction of other products into the market that will help in competing with their competitors. The management will also be able to work effectively and efficiently. They will be able to get the company’s functional areas to work in an amicable manner. However, such decisions will be effectively implemented when the company’s management has well evaluated the environment in which the business runs. Both internal and external factors, that are going to affect the company, can either be long-term or short-term (Gerry & Kevan, 2008). To handle this crisis too, there is need to choose a team that will handle the issues. This helps to save time as work is in progress (Smart & Ilan, 1984). This leads to specialization of work among the involved parties which leads to efficient utilization of time and resources. Specialization leads to innovation as workers get to appreciate their work and would like to learn and give more. As a result the company will always be on the safe side and with better strategies on how to improve the status of the firms and how they work for. In the long-run the companies will still run and at an increasing rate and also be in a better position to compete out its competitors (Whittington, 2011). The above strategies when employed ensure that the company’s organizational and implementation strategy does not deviate from the company’s organizational objectives (Porter, 1986). It also keeps the company updated of the changing environment from its rivals, to the change in the national and global economy. Also the company is able to detect and solve problems early enough even before the competitors get to analyze it. Thus, the company is able to adjust in a way that its goals are not altered at any one time. The shareholders, management and other employees get to have the full ownership of their company as everyone gets to play part in the growth and sustainability of the company. REFERENCE Coulter, M. 2010, Strategic Management in Action, 5th ed., London: Pearson. De Wit, B & Meyer, R, 2010, Strategy Process, Content, Context– An International Perspective, 4th ed. New Jersey: Cengage Learning. Whittington, Johnson, and Scholes, 2011, Exploring Strategy, 9th Edition, Essex: Prentice Hall. Gerry, J, Kevan, S, & Richard W, 2009, Fundamentals of Strategy, 1st ed., London: Prentice Hall. Gerry, J. & Kevan, S, 2008, Exploring Corporate Strategy, Text and Cases 8th ed., London: Times/Prentice Hall Lynch, R., 2009, Strategic Management, 5th ed., Essex: Prentice- Hall, Pearson Education Limited, Essex. Mintzberg, H., Ahlstrand, B. and Lampel, J., 2009, Strategy Safari Yourcomplete guide through the wilds of strategic management, 2nd ed., Essex: Prentice Hall. Mintzberg, H., Lampel, J., Quinn and Ghoshal, 2003, The Strategy Process – Concepts, Contexts, Cases, Global 4th ed.,Essex: Prentice Hall. Mulcaster, W., 2009 “Three Strategic Frameworks”, Business Strategy Series 10(1): 68 – 75. Porter M.E, 1986, Competitive Strategy and Competitive Advantage, London: Free Press. Smart, C. & Ilan, V, 1984, “Strategy and Environment, a study of corporate responses to crises”, strategic management journal vol. 5, pp. 199-213. BIBLIOGRAPHY Rahul J & Globalexperts 4U, 2011, Strategic Audit of Starbucks (Strategic Management Learning Resources Environmental leader, 2010.Starbucks Moves Ahead with ‘Green’ Strategy despite Cost available at :< http://www.environmentalleader.com/2010/10/11/starbucks-moves-ahead- with-green-strategy-despite-cost/ > [accessed on 18th April 2012] Starbucks Corporation, 1992, Starbucks Becomes a Public Company. Available at :< http://www.mhhe.com/business/management/thompson/11e/case/starbucks-2.html >[accessed on 18th April 2012] APPEDICES A regular coffee beverage, from a selection of Italian- style espresso drinks. (http://www.mhhe.com/business/management/thompson/11e/case/starbucks-2.html). A coffee beverage that Starbucks employees came up with.[ an employees innovation to provide the customers with a variety of coffee taste. (http://www.mhhe.com/business/management/thompson/11e/case/starbucks-2.html). Read More