Organizational Analysis of Starbucks - Case Study Example

? Group number number s submitted Organizational Analysis – Starbucks Organizational Overview Founded in 1971, Starbucks was created in love for coffee sipping. There were three major businesspersons involved in the formation of Starbucks namely as Gordon Bowker, Zev Seigl and Jerry Beldwin. These three gentlemen had a strong desire and infatuation for the coffee which compelled them to start off the coffee business in a small coffee shop located in Seattle. The coffee shop was named as Starbucks Coffee, Tea & Spice. After the initial launch of a small coffee shop in Seattle, the business started to grow but with a gradual pace, such that it expanded its coffee shops from 1 retail shop to 4 retail shops in ten years across the Seattle. In 1992, Starbucks experienced a tremendous amount of growth, which led to reaching up around 100 stores across United States. This was their major stimulus towards going to public and become a publically traded company. With the exceptional amount of growth in its business, Starbuck managed to satisfy on an average 35 million customer per week, which indicates the quality, taste and aroma of the coffee offered by Starbucks to its customers (Stanley, 2002). The mission statement of Starbucks provides a comprehensive insight to the overall purpose of the organization. Unlike the typical mission statements, Starbucks has strived to incorporate all those purposes which are extremely vital for existence of the business such as achievement of profitability, responsibility towards community and environment, product diversity and lastly but most importantly, fair and equitable treatment with its workforce (Hammers, 2003). Organizational Design Organizational design is influenced by the strategies that the top management of any organization designs for it as part of its future areas of operations. Other factors, which contribute in shaping up the good “fit” for organizational design, are nature of organization, its size life cycle, environment, culture, and technology (Daft, Murphy, & Willmot, 2007). There might be other factors as well but they vary organization to organization. Starbucks has implemented such a design structure in its organization, which helps facilitate the faster communication among employees and from customers to top management. The structure of the organization is developed in such a manner that it fosters meaningful and timely communication across the organization (Hitt, 2008). The top management of Starbucks controls the centralized decision making system of the organization from its headquarter located in Seattle. The other districts where the stores of Starbucks serve its customer are run under the district managers who are directly reportable to the top managers at the Starbucks headquarters. Under district managers, store managers keep the track of all the store activities. Apart from store managers, there are duty supervisors who take the charge in the absence of the store managers. Baristas are the coffee servers who report to duty supervisors and store managers (Hitt, 2008). In this way, the complete organizational structure of Starbucks stands and facilitates the appropriate communication and decision-making among the employees from top management to the lower-tier employees. This organizational structure of Starbucks allows the employees to work with coordination and collaboration rather than competition. Employees are assigned their specific roles but they are questioned for their tasks to which they are accountable. Adaptive culture is promoted at Starbucks however; the information sharing among employees follows a formal hierarchical chain, which is the bottom-line towards developing a centralized organizational structure. Organizational Effectiveness The effectiveness of any organization is mainly shaped as to how its major goals are being accomplished. However, there is no stringent tool to measure the organizational effectiveness. The broad way of measuring the organizational effectiveness is achievement of organizational goals, efficiency, productivity, internal health, and resource acquisition. Yet these tools are not suitable to measure the organization effectiveness of every organization (Daft, Murphy, & Willmot, 2007). There are various stakeholders which are somehow associated with Starbucks, however, mainly there are three types of stakeholders which act as integral participants in bringing organizational effectiveness in Starbucks namely as employees, customers and farmers. Partners (Employees) Employees are the most preferred stakeholders of Starbucks such that they are treated as “partners” by the Starbucks’ top management. No matter how low position an employee gets in Starbucks whether in the form of Barista or cashier, but to Starbucks, the employee is a partner. Starbucks carefully concentrates on the needs and requirements of its employees, and facilitates and motivates them by providing both extrinsic and intrinsic types of rewards. Customers Customers are the major stakeholders as they hold the key position in the eyes of the top management. It is in fact the employees, due to which, Starbucks has prospered and grew (Shultz, 2008). Starbucks also keeps a core focus upon its customers and takes care of the needs of their customers accordingly. Right from providing diverse products to cordial ambiance, Starbucks is deeply committed in providing the ultimate quality services to its customers. Farmers Farmers are one of the core stakeholders of Starbucks such that coffee and cocoa beans are purchased from these farmers. Starbucks tries to assist these farmers by paying them the most competitive prices so that they remain willing to provide best quality beans to Starbucks in future as well. It has been the major emphasis of Starbucks to meet the expectations of its stakeholders at all levels and providing them such value which forces them to work along with Starbucks in future times. Organizational Structure Through organizational charting, differentiating yet integrating the functions of the organization is referred as organizational structure (Daft, Murphy, & Willmot, 2007). The combination of the divisional and functional structures, Starbucks has developed a formal matrix structure in which the employees permanently work for their divisions as well as in temporary teams to perform their functional tasks. The overall organizational structure of Starbucks regards the organization as the mechanistic organization with high centralization, narrow span of control, greater formalization of roles, and increased level of standardization can be witnessed (Daft, Murphy, & Willmot, 2007). The main thoughts that worked out behind enforcing such organizational structure in Starbucks is its CEO, Howard Shultz who created such an organizational structure which allows free communication and information sharing even among low-tier employees and customers to the top management of Starbucks. Generally, it becomes very difficult to enable such level of communication and information sharing in the complex structure. However, with the virtue of matrix structure, Starbucks avoided the barriers of communication associated with vertical differentiation by making employees accountable to more than one reporting center. This matrix structure has enabled Starbucks in effectively enforcing all three levels of communication i.e. vertical, horizontal, and lateral communication. With the implementation of such complex structure, there are some apparent deficiencies such high cost, time-consuming activities, overburdened etc, but the level of output generated from implementation of structure surpasses all the associated deficiencies. Because of this, Starbucks has remained quite successful in maintaining effective communication, better customer satisfaction, increased product development, and enhanced production capacity. Organizational Relationship Organizations work in the open system due to which they have to remain consistently in touch with the outside factors, which are known as externals. An organization cannot take its decisions in isolation, as it has to consider those external elements in the process. In summary, the environment outside the organization play a substantial part in leading an organization towards taking a specific stance considering all the relevant stakeholders which might be affected due to such decisions (Daft, Murphy, & Willmot, 2007). Starbucks maintains good healthy relationships with not only its stakeholders but also with the environment. It carries out such strategies, which ensures the minimal effect upon the environment. Starbucks realizes and accordingly manages its responsibilities towards environment and values its ethical and social responsibilities in this regard (Schreiner, 2012). In order to promote its social and ethical responsibilities, Starbucks plays a profound role in strengthening the farmers economically as they work hard in order to generate coffee, cocoa, tea and other related products for Starbucks. Another trustworthy act of Starbucks is the financial assistance and the appropriate fair value of the Arabica beans which is quite hard to grow to those farmers. Starbucks has established Green stores where environmentally friendly products available. Not only this, Starbucks also tries to reduce the amount of waste by recycling and offering the reusable cups instead of disposable cups. In order to promote an eco-friendly environment, Starbucks does not throw away those coffee grounds which are already spent rather these grounds are spared for those customers who want to use these grounds as an acid to the soil in their gardens (Schreiner, 2012). These steps show how committed Starbucks is in promoting environmental protection. To maintain better relationships with the environment, Starbucks has started some community-based programs to increase the awareness regarding the environmental protection especially among the younger generation. Currently, Starbucks has engaged around 50,000 young people to promote such environmentally friendly prospects. Until 2015, Starbucks intends to increase this number to 100,000 people to serve their respective communities for environmental protection (Starbucks Corporation, 2010). Technology in the Organization According to Daft, Murphy, & Willmot (2007), there is an increasing tendency of using information technology in the current organizational dynamics such as decentralized organizational structures, network organization, improved coordination, better customer and supplier relationships etc. Starbucks have been consistently applying the most recent developments in its different areas of operations especially the technological factors. There are two types of technological advancements introduced by Starbucks into its organizational context. Firstly, the evolution of internet and mobile phone technology, have compelled Starbucks to align its business strategies with information technology (Adkins, 2012). Using internet, Starbucks have effectively utilized social media sites and other platforms to check its popularity level and developed strategies to boost its popularity. Through mobile phones, Starbucks have created especially designed mobile phone apps, which are supported by iPhones, Android and Blackberry (Gary, 2009). The mobile phone app is a convenient tool for the coffee lovers as they can make payments, check their balances and rewards in more than 9,000 outlets of Starbucks across the globe. Second important technological advancement made by Starbucks is the purchase of the company named as Coffee Equipment Co. in the year 2008 (Adkins, 2012). This company was small but of utmost importance to Starbucks as it produced single-cup coffee makers, which are known as “Clovers”. These clovers are kind of smart coffee makers because they act in a self-coffee making style. Clovers work by using a very precise technology along with self-monitoring algorithms that keep the check on the temperature as well as the flavor of coffee. The interaction between the coffee grounds and water are also controlled by the clovers. In short, Starbucks have remained ahead in adopting the most recent technologies in it core activities as well as a marketing tool. Organization Life Cycle Organizational life cycle is an important area highlighted by Daft, Murphy, & Willmot (2007) which holds that organizations also have a specific duration such that they are borne, live their life under different phases and ultimately they die. Those different phases involved are entrepreneural, collectivity, formalization and elaboration stages. Currently Starbucks operates in the extended maturity stage of its organizational life cycle under the broader elaboration stage. The company has emerged from private sector to public sector, expanded its operations from local coffee shops to global coffee cafes. The product line of Starbucks is set out as per the local requirements of the customers of the particular territory (Hawks et al, 2002). There are some major characteristics, which have consistently increased the organizational life cycle of Starbucks. For instance, the treatment of top management of Starbucks with its employees have enabled Starbucks to enjoy long extended times because of the support and assistance provided by their partners i.e. employees. Another important aspect that has boosted the organizational life cycle of Starbucks is the implementation of highly attractive but yet effective marketing strategies, which in fact have substantially increased the market share of the company as well as helped the company towards global expansion (Hawks et al, 2002). The characteristic of team working and collaborative practices in Starbucks also healed the company out of the critical times. Team working is encouraged as part of the matrix structure prevailing in the organization, which allows the small teams at a particular Starbuck store to fulfill the requirements of the customers as well as manage their own issues under the supervision of the store manager. Innovative ideas and concepts put forward especially by the employees also hold a substantial significance as they foster the long living of the organization as well as promote an adaptive style of following the recent trends and developments. Organizational Culture Organizational culture refers to the mechanism in which the organizational members are integrated such that their productive capabilities to external environment are adapted as well as the way they relate to each other (Daft, Murphy, & Willmot, 2007). Organizational culture at Starbucks is something that affirms the main objective and mission statement of the organization. The cultural values prevailing at Starbucks not only inspires the potential employees but also attracts the communities outside the organization. Some major characteristics have shaped up such an excellent organizational culture at Starbucks some of those are discussed below Strong brand appeal The brand Starbucks have gathered so much attraction for all the stakeholders that potential employees want to be part of Starbucks, coffee lovers want to be customers of Starbucks, coffee bean farmers want to be suppliers of Starbucks. Due to strong marketing communication strategies, Starbucks have become able to enhance the customer base but also became a platform where employees want to work. Values Starbucks strongly believes in its responsibilities towards society, which acts as the core value of its existence. Starbucks serves and assists numerous communities, which shows that a profitable organization does have some social responsibilities and Starbucks stands up front to fulfill them. Some other values, which Starbucks tries to ensure, are the diversity in its product ranges as well as in workforce, providing a dedicated work environment to its employees and strong commitment towards customer satisfaction. Adaptive Assessment In Starbucks, the organizational culture promotes the sense of adaption, innovation, and change. Employees are empowered and allowed them sufficient autonomy to deal with those tasks for which they are responsible. Innovative behavior is enforced and encouraged in such a way that employees are rewarded if their innovative ideas are workable in the best interest of the organization. Analysis and Assessment Decision-making process at Starbucks is of key importance. Decisions made are based on different perceptions, which act as a driving force towards making a particular stance towards a specific situation (Hitt, 2008). Starbucks have established a highly formalized decision making process, which is based on 6 steps which are as follows: 1. Identification of problem or dilemma 2. Consideration of the possible alternative solutions 3. Consideration of possible obstacles associated with alternative solutions 4. Searching adequate input from others 5. Determination of the best possible alternative 6. Follow up of the decision From the above decision-making steps, Starbucks have tried to shape a culture in which moral and ethical dilemmas can be resolved with least amount of grievances to be felt by the affected parties. Summary and Recommendations Starbucks have remained quite stable in carrying out its strategies that have boosted its expansion across the globe. However, it is recommended that Starbucks should adopt multi-domestic expansion strategy. This strategy would help Starbucks in gaining the domestic market share of the company in different territories. Starbucks needs to develop its product lines including various different flavors, which should align with the local taste of the coffee lovers. Along with the development of product line, appropriate marketing strategy is also required in order to attract those customers. Starbucks have been a brand, which used a differentiated strategy to offer its coffee menu to the customers, that shows that it avoids mass marketing and strongly believe in making its products differentiated from the other rivals. Because of this, it has been the legacy of Starbucks to charge the premium price from the customers. Therefore, it is again recommended that wherever Starbucks intends to expand, it should keep its differentiation strategy going along otherwise it would lose its brand image significantly in other parts of the world. References Adkins, A. (2012). Starbucks & Its Use of Technology. Retrieved December 03, 2012, from Chron Small Business: http://smallbusiness.chron.com/starbucks-its-use-technology-28272.html Anthony, W. P., Gales, L. M., & Hodge, B. J. (2003). Organization Theory: A Strategic Approach (6th ed.). Upper Saddle River, NJ: Pearson Education, Inc. Daft, R. L., Murphy, J., & Willmot, H. (2007). Organizational Theory and Design. Singapore: Cengage Learning EMEA. Gray, M. (2009). Starbucks Recipe for Social Media Success. Directory Journal. Retrieved from the Directory Journal Website on September 6, 2010:http://www.dirjournal.com/articles/starbucks-social-media/ Hammers, M. (2003). Starbucks is Pleasing Employees and Pouring Profits. Retrieved from the Workforce Management Website on September 6, 2010: http://www.workforce.com/section/benefits-compensation/feature/starbucks-is-pleasing-employees-pouring-profits/ Hawks, M., Kembell, B., Kembell, S., Olsen, L., & Perry, L. (2002). Catching the Starbucks Fever. Retrieved October 17, 2008, from http://www.academicmind.com/unpublishedpapers/business/marketing/2002-04-000aag-catching-the-starbucks-fever.html Hitt, J. (2008). The Organizational Structure of Starbucks, Unilever, and Wal-Mart. Retrieved from the Associated Content Website on September 4, 2010: http://www.associatedcontent.com/article/782963/the_organizational_structure_of_starbucks.html?cat=3 Schreiner, E. (2012). Starbucks & Its Organizational Design. Retrieved December 02, 2012, from Chron Small Business: http://smallbusiness.chron.com/starbucks-its-organizational-design-12857.html Shultz, H. (2008). Starbucks Makes Organizational Changes to Enhance Customer Experience. Retrieved October 22, 2008, from http://www.starbucks.com/aboutus/pressdesc.asp?id=831 Stanley, A. (2002). Starbucks Coffee Company. (case study). Tuck School of Business at Starbucks Corporation. (2008). Corporate Social Responsibility. Retrieved October 15, 2008, from http://www.starbucks.com/aboutus/csr.asp Read More