Strategic Recommendations for Starbucks Coffee Company's Information Management - Assignment Example

Running Head: Strategic Recommendations for Starbucks Strategic Recommendations for Starbucks Coffee Company's Information Management Name of Student) (Institution/School) Strategic Recommendations for Starbucks Coffee Company's Information Management Starbucks Coffee Company started its international operations in 1996 when it opened its first coffeehouse in Tokyo, Japan. To date, Starbucks has practically branched out to 37 countries with almost 3000 coffeehouses (Starbucks, 2006). Apart from having enough resources, culture and government policy is ought to be considered in planning an international business venture. If a government is closed to foreign investors, this will definitely affect the growth of an enterprise planning to explore business in that 'closed' country. But if the country exercises free trade, then there would be less trouble in putting up an expansion in the area. Instead, the company's efforts should focus on other cultural matters. 3. Cultural Differences Coffee is a universal beverage. As such, almost every country has established its own coffee company. Expanding a coffee business, as in all types of enterprise, in a new location would mean giving due consideration to the inherent culture of that area. 3.1 Language and Education Understanding and talking the language is the first step to better comprehend the business environment of the locality. I believe that communication is one of the fundamentals of business. It took quite some time and research before Starbucks management made its final decision to open its first coffeehouse in Tokyo, Japan in August 1996. In 1995, Starbucks Coffee International forms joint venture with SAZABY Incorporated to develop Starbucks coffeehouses in Japan (Starbucks Japan, 2003). The partnership enabled Starbucks to be aware of the trading atmosphere in Japan, the attitude of Japanese towards work, and the locals' appreciation of sprouting foreign business in the area. Japanese can also be categorised among the educated businessmen in the world. Education and stock knowledge of future partners on business and technology have to be considered, particularly those coming from developing countries where e-learning is few steps behind from fully developed countries. 3.2 Attitude The employees' outlook in work is vital. Workers of different nationality also vary in attitude towards their career. Stuart Duff, Head of Development at business psychologist firm Pearn Kandola, compared workers in Holland and the United Kingdom: "In the Netherlands research suggests that employees are more likely to seek long-term role security while in the UK employees will tend to look for more variety and changes in role through their career (Business Management Europe, 2006)." 3.3 Leadership Style Leadership styles also vary in some country. Gender matters in some member-countries of the European Union. Business Management Europe (2006) talked to Colin Meager, European Executive Committee member of Integra International. Meager says, "Certain EU countries have a more formal and rigid management structure and this can be exasperating to those who are used to more flexible and informal management systems." 3.4 Economy A country's economy is worth to be considered. Can the populace purchase our products Starbucks' target markets are the business class (traders and professionals) and the academe (teachers and students). These people abound in developed countries and going to a caf would be an ordinary routine. Whilst in developing countries like the Philippines, professionals as well as students from well-off families are excited to see international names among the cafes in the neighborhood. Turban, Rainer & Potter (2001, p. 4) wrote that in a global economy, "goods and services are produced profitable as dictated by competitive advantages that any nation might hold (e.g. expertise with certain technologies or low labor costs)." Labor costs differ from one country to another. Hourly Industrial Wages in Different Countries (in US $) Source: Based on data published by Institute for the German Economy (1998, quoted in Turban, et. al. 2001) Turban, et. al. (2001, p. 4) further wrote that whilst the hourly industrial wage rate (excluding benefits) is more than $15 in some Western countries, it is only $1 to $2 in many developing countries including those in Asia, South America, Eastern Europe, and Africa. The lowest labor cost for "industrial employees is in China, where the hourly wage rate is less than $1." 3.5 Resources and Government It is widely known in the coffee industry that Africa is the birthplace of coffee and produces arguably the most exotic taste profile of any coffees in the world. This year, Starbucks enters Africa with its first location in Cairo, Egypt. Egypt's Government is still on the process of reform which is sort of beneficial to foreign investors. In the past year, the "cabinet economic team has simplified and reduced tariffs and taxes, improved the transparency of the national budget, revived stalled privatisations of public enterprises and implemented economic legislation designed to foster private sector-driven economic growth and improve Egypt's competitiveness" (globalEDGE, 2006). 3.6 Information Infrastructure Information infrastructure practically plays a vital role in every business. But it has to be in collaboration between the competitive market, a telecommunications company, and the government. Organisation for Economic Co-operation and Development (2006) reports that countries are reviewing their "policies and regulatory requirements raised by information infrastructure" to support the rapid and efficient development of this system and multimedia applications. OECD argues that it is essential to "introduce competitive market structures, allow the process of convergence to take place between communication sectors, and implement appropriate regulatory frameworks for integrated communication infrastructures and new multimedia activities." OECD has 30 member countries which include Australia, Belgium, Canada, Finland, France, Germany, Italy, Japan, Korea, United Kingdom and United States. Debates on UK National Information Infrastructure (NII) started in the '90s where it is seen to be a "key technology driver to enhance competitiveness in information technology, telecommunications, software, entertainment and other industries, as well as to improve education, health care delivery and public involvement with government (POST, 1995). With the NII, delivery of government service to the populace and the business sector was made easier and accessible as information on the government became available via the Internet. This development has been an advantage to the Starbucks management. A thorough research on the people and the business environment is made prior to an ocular inspection of a prospective expansion in the UK. Starbucks saved on funds with information infrastructures. Instead of spending for a weeklong stay of five personnel in a prospective site, the team members were reduced to three and they stayed in the area for only three days. Subsequently, when the management saw the potential of having another site in the UK, the business application was delivered to the government, again, using the information infrastructure. A meeting was then scheduled with the Chairman and local government officials via the broadband. A personal visit to the area was made just to finalize the earlier talks. 4. Potential Benefits Having known the essential factors that contribute to the intricacy of operating business in other countries, the management must live to it by heart. Understanding the culture of the new area of operation will help the company survive. It will also help the group in-charge with advertising to design a promotional gimmick. The concepts vary in different areas. In a developing country where colonial mentality is still strong, the advertisement must show international artists patronising the product. The company can actually save on this since they will no longer spend cost in employing local advertising talents. Mastering the working attitude of the employees will also help the company in facilitating the specific programs for them. This will encourage the workforce to cooperate and perform well. Consequently, quality service is given to the customers - the lifeblood of the company. 5. Potential Risks It cannot be avoided to have a staff composed of different nationalities all working in one area. Sometimes the multi-cultural workforce would lead to a disaster. Mostly, the risk here is purely on personal attitude. Among the traits that commonly cause a conflict are envy, difference in religious and cultural beliefs, and the language barrier. Apart from possible conflict within a company, some workers would join protests on the street. Most of the reasons would be unfair labor practice, low compensation, and discrimination. Although in most cases, the remonstrations are thrown against government labor policies. In 1999, scuffles broke out in Turkey when 3,000 public sector employees staged a general strike against plans to raise retirement age (BBC News, 1999). 6. Recommendations The company has to anticipate workers' protests. It need not give in to all the workers' demands but a clear policy, code of ethics, and a contract will help. A contract or policy has to be specific and should vary, depending on the exact position and duties of an employee. Professor Stephen Nicholas, et. al. (2003) noted that one of the difficulties in assessing the impact of culture in international business is the inability to create accurate and reliable measures of culture and cultural difference. Hence, Nicholas and his team designed mental models to provide a new tool for business seeking to operate in culturally complex environment. Harnessing mental models, which are socially learned, educationally reinforced and experientially altered, allow business to interpret the world around them in new ways. Shared mental models enhance the ability of diverse group members to coordinate their activities, while divergent mental models increase the scope for conflict (Nicholas, et. al., 2003). Diversity management provides organisations with capabilities for managing in culturally-complex environments (Nicholas, et. al., 2003) Management Systems to Compete and Survive Being an international coffeehouse, Starbucks advantage over its counterparts and rivals is also equaled with a number of uncertainties. Product superiority, competitive workforce, and quality service are among the factors critical to this business. Starbucks, in its quest to become the largest coffee company in the world, must focus on these factors. Starbucks' Critical Factors to Lead in the Business A simple coffee bean roasted to perfection - we call it superior amongst other beans. However, apart from this process, product superiority can be achieved with competitive workforce at hand; and, a competitive workforce, fueled with passion for this business will surely give satisfaction to customers. A satisfied consumer will keep on patronising the product and even spread good words about it. Thus, profit grows. Being responsible to its commitment to the community also contributes to the company's gains. Since Starbucks targets global market, managing its vast coffeehouses plus information from disparate sources would require both managerial and technical skills. Various management systems had been developed and designed by experts. Turban, et. al. (2001, pp. 42-43) wrote about functional management information systems (MIS) that is able to access, organise, summarise, and display information for supporting routine decision making in the functional areas. Major Outputs of a Functional Management Information System Output Description Statistical summaries Summaries of raw data such as daily production, and weekly and monthly usage of electricity. Exception reports Highlights of data items that are larger or smaller than designated levels. Periodic reports Statistical summaries and exception reports provided at scheduled, regular periods. Ad hoc reports Special, unscheduled reports provided on demand. Comparative analysis Performance comparison to that of competitors, past performance, or industry standards. Projections Advance estimates of trends in future sales, cash flows, and market share. Source: Turban, et. al. (2001, p. 44) Apart from providing periodic reports and support to routine decisions, answering questions, and forecasting trends, MIS also includes summary reports for the current period or for any number of previous periods (Turban, et. al., 2001, p.43). MIS is used for "monitoring, planning, and control." Executive Information System (EIS) is also one of the systems that provide data to the managers without going through reams of paper. The strength of EIS is the way it organises and structures information (ECSI, 2004). With just the touch of a button you can: Break down your sales, GP$, GP%, returns, etc. by salesperson, locations, dates, customers, product category, etc. And, you can easily vary the data you see with just a click of your mouse. Examine the overall value of a particular customer - whether your interest is sales, gross profit dollars, gross profit percentage, or returns. Rank your inventory items (using simple ABC classifications) to see which items are generating the most gross profit, and determine whether you're over-ordering slow movers. Use pie charts and other simple graphs to quickly identify areas that are not meeting your objectives. View Turns, GMROI, on-hand quantity, on order quantity, GP%, and more by item or category of items (ECSI, 2004). In any company, sales and cash flow is important. Given that Starbucks has thousands of branches in the world, constant monitoring and audit is needed. The profit determines if the company is growing, if it can afford to buy new equipments, and the compensation it can give to its employees. But cash is not the only item that needs auditing. The company must constantly conduct due diligence audit, process audit, contract audit and product audit. Should anything go wrong, the management can easily make appropriate decisions. However, certain risks have to be anticipated like hacking and theft of software and hardware. In November, Starbucks lost four laptops containing the names, addresses and Social Security numbers of 60,000 current and former employees (Harris, C., 2006). Hacking is one of the Information Technology's risks. Hackers meddle and mess up with the company's information. Trade secrets and communication lines can be scythed by hackers. Apart from this, virus can taint the system. Hence, risk management must be outlined and stable policy must be established. Constant monitoring is also needed. Strategic Recommendations In its expansion programs, Starbucks has to keep in mind the factors critical in beating its rival coffeehouses in every area where it opens a new branch. Starbucks has to protect its product superiority, its competitive workforce that gives quality service to the customers. Each of these factors entails information: the secret blends, the information of each employee, and the company's profit. A number of software has been designed to protect this information. Among the latest is the ISO/IEC 27001:2005 or Information Security Management Systems, which is a systematic approach to managing sensitive company information so that it remains secure (BSI Americas, 2006). ISO/IEC 27001:2005 covers the following topics: = Security Policy - This provides management direction and support for information and security = Organisation of assets and resources - To help you manage information security within the organisation = Asset classification and control - To help you identify your assets and appropriately protect them = Personnel security - To reduce the risks of human error, theft fraud or misuse of facilities = Physical and environmental security - To prevent unauthorised access, damage and interference to business premises and information = Communications and operations management - To ensure the correct and secure operation of information processing facilities = Access control - To control access to information = Systems development and maintenance - To ensure that security is built into information systems = Business continuity management - To counteract interruptions to business activities and to protect critical business processes from the effects of major failures or disasters = Compliance - To avoid breaches of any criminal and civil law, statutory, regulatory or contractual obligations, and any security requirement (BSI Americas, 2006) Recently, the technology used in Formula One (F1) racing can already be used in the fast-paced world of business. Thomas Grose (2006, p. 37) wrote that McLaren and its partner SmithBayes Ltd. launched F1's "decision-engine" software. The software's potential corporate uses include measuring the risks and rewards of moving into new markets, bringing out new products, or making capital investments. These are existing programs but I believe it is best that the company formulate and design its own information management system to foster confidentiality. A separate MIS for administrative and financial concerns is also recommended to ensure the delineation between the sales, administrative, and human resource information. Information is the means of every company and organisation; hence, it has to be treated with utmost confidentiality. Bibliography British Broadcasting Corporation. (1999) World: Europe Riot police clash with Turkish strikers [Internet]. BBC. Available from: [Accessed 09 December 2006] BSI Management Systems. (2006) Information Security Management System [Internet]. USA, BSI Americas. Available from: [Accessed 29 November 2006]. BSI Management Systems. (2006) What is ISO/IEC 27001:2005 [Internet]. USA, BSI Americas. Available from: [Accessed 29 November 2006]. Business Management Europe. (2006) Feeling GILTy [Internet]. Europe, GDS Publishing Ltd. Available from: [Accessed 26 November 2006]. Enterprise Computer Systems, Inc. (2004) Executive Information System [Internet]. Available from: [Accessed 29 November 2006]. GlobalEDGE. (2006) Egypt [Internet]. Available from: [Accessed 26 November 2006]. Grose, T. (2006) Rapid Response. Time Magazine. Vol. 168, October, p. 37. Harris, C. (2006) Starbucks data missing. Seattle P-I [Internet], 4 November 2006. Available from: [Accessed 18 November 2006]. Organisation of Economic Co-operation and Development. (2006) Information Infrastructures: Their Impact and Regulatory Requirements [Internet]. OECD. Available from: [Accessed in 20 November 2006]. Parliamentary Office of Science and Technology. (1995) The UK National Information Infrastructure [Internet]. Available from: [Accessed 21 November 2006]. Starbucks Coffee Company. (2006) International Stores [Internet]. Seattle, Starbucks Corporation. Available from: [Accessed 26 November 2006]. Starbucks Coffee Company. (2006) Starbucks Outlines International Growth Strategy for Fiscal 2007 [Internet]. Seattle, Starbucks Corporation. Available from: [Accessed 26 November 2006]. Starbucks Coffee Company. (2003) Starbucks Timeline & history [Internet]. Japan, Starbucks Corporation. Available from: [Accessed 26 November 2006]. Turban, E. et. al. (2001) Introduction to Information Technology. New York, John Wiley. Read More