The History of Starbucks Company - Essay Example

Starbucks The Washington based American company; Starbucks Company is the world’s number one coffee retailer at present. Since the scope for expansion is limited in America, Starbucks is currently operating internationally and have operations in more than 50 countries at present with the help of around 16000 outlets. American market is already became a saturated one for them and they have to find alternate options to stay in the market. This paper analyses Starbuck’s short-term objectives and action plans, functional tactics, policies used to aid strategy execution, appropriateness and effectiveness of its executive bonus compensation plans etc. Usually Starbucks like firms have both long term and short term strategies to sustain its business in the market. It is difficult for a firm to rely entirely either on short term or long term policies to compete effectively in the market. Judicious implementation of short term and long term policies will help the firm to achieve its objectives and targets. Short term objectives should be specific, time bounded and accountable in order to become effective. Starbucks concentrated heavily on short term strategies to achieve success. Between 1987 through 1990 Starbucks entered new markets, and continued to grow. At the end of 1987, there were 17 Starbucks locations, and by 1990 there were 84. During this four year growth phase Starbucks entered the markets of Chicago, Vancouver, and Portland. In 1988 the company started a mail order catalog for it's fine dark roasted coffee beans and high quality coffee equipment (Kembell) Starbucks never tried to undertake a comprehensive expansion strategy. They focused on establishing few more outlets every year rather than establishing numerous outlets at different countries at the same time. This strategy helped them to give more attention to all the newly opened outlets till such outlets became profitable. The above short term strategy of establishing only few outlets every year helped Starbucks to achieve its long term objective of establishing outlets at different parts of the world and manage all of them with success. In other words, the short term strategies of Starbucks are linked to the long term objectives of the firm. They have given priorities to their short term strategy of establishing few outlets at a time and manage them well in order to achieve their long term strategy of establishing as many units in different countries and manage all of them well. Business strategies and functional tactics of a firm have direct relationships. In fact business strategies are usually implemented using different functional tactics. For example, coffee lovers always like variety while taking a coffee. They don’t like the same taste every time when they take a coffee. Starbucks know this consumer psychology very well and they have introduced many flavors in their coffee products. Starbucks introduced ‘walnut flavor of Colombia Narino Supremo, the creamy sweet Caf Verona and the smooth, buttery Sulawesi” (Kembell) etc as a result of their realization of the above consumer psychology. Some of the other functional tactics employed by Starbucks are the selling of coffee-related products, Expresso machines, stainless steel coffee filters etc. Through the selling of coffee-related products such as brewing equipment and accessories, many consumers can enjoy high quality coffee at home rather than traveling out of their way. The equipment available includes Expresso machines, stainless steel coffee filters, and Starbucks cleaner and canisters. This is another example of how Starbucks is meeting the needs of current customers as well as increasing its attractiveness to potential customers (Kembell) The above functional tactics helped Starbucks to spread the popularity of Starbucks coffee from its outlets to home. Moreover, these strategies helped Starbucks to polish its face more and to popularize its products more in the market. The name Starbucks is currently fixed firmly in the hearts of the coffee lovers because of the functional tactics adopted by them. Empowerment of employees is an essential requirement for successful strategy execution. If the employees know little about the strategies of the firm, it is difficult for the firm to implement those strategies successfully. In fact employees are the medium through which every firm implements its strategies. Each employee is required to complete an extensive training program that includes product expertise, a commitment to customer service, and well-developed interpersonal skills. Professional coffee bartenders for Starbucks complete up to 24 hours of training before entering their assigned store. This training gives them knowledge to answer any questions about coffee or the Company, and the knowledge to arrange sample tastings and demonstrations with any of the equipment in the store (Kembell) Customers of Starbucks may often curious in knowing the ingredients of Starbucks coffee products. If the employee knows nothing about such things, the customers may not be satisfied. Starbucks know the importance of customer servicing very well and they are taking every step to satisfy their valuable customers with the help of empowered employees. The training providing to the employees prior to their assignments in Starbuck outlets is effective and appropriate to establish relationships with the customers and to achieve the long term goals of the company. As a result of the comprehensive empowerment program, Starbuck employees are capable of; establishing control over their action, maintaining uniformity in their actions; providing standardized answers to customer queries; avoiding uncertainties in their activities etc. Only the satisfied employees will be able to deliver their 100% productivity. Starbucks know this fact very well and implemented a comprehensive bonus package for its employees. Each partner or employees (even part-time employees) is eligible to receive health care, participate in the Bean Stock program, and get a free pound of coffee each week. Under the Bean Stock program, employees are offered stock below the fair market value several times a year. Starbucks' employees also participate in a 401(k) profit sharing plan. Starbucks believes they are in the coffee business as well as the "people development" business (Kembell) Starbucks consider employees as their partners rather than workers. They are ready to provide ownership on company stocks to the employees and therefore the employees will consider the company as their own and will work hard for the growth of the company. Most of the organizations maintain an agency relationship in their business. The agency describes an agreement between two people where one will be a representative of another - the principal and the agent. In other words, the principal is a person who wants to achieve something and he/she hires an agent to help him/her to achieve it (Agency as business organization. Definition of Agency. Agent Duty. Agency Relationship) Starbucks do not believe in agency relationships. They always treat the employees as their partners as mentioned earlier. Firm strategy, executive compensation and the performance of the firm can be divided into different streams and fit between firm strategy and compensation system is one among them (Rajagopalan, p.4). Starbucks seems to be not much interested in implementing such strategies in its bonus packages. They treat all the employees well rather than differentiating them based on their abilities. Works Cited 1. “Agency as business organization. Definition of Agency. Agent Duty. Agency Relationship”. 2008. Web. 10 July 2011. 2. Kembell, Brent. “Catching the Starbucks Fever”. 2002. Web. 10 July 2011. 3. Rajagopalan, Nandini. “Strategic Orientations, Incentive Plan Adoptions and Firm Performance”.Web. 10 July 2011. Read More