Starbucks Corporation Analysis - Case Study Example

STARBUCKS CORPORATION ANALYSIS Table of Contents Introduction 3 Background 3 Critical success factors 4 Theory of constraints 6 Balanced Scorecard 7 Activities of the value chain 10 Concept of customer delivered value…………………………………………………….............12 Cost of controlling quality………………………………………………………………….........12 Conclusion……………………………………………………………………………………….13 References……………………………………………………………………………………….14 Introduction Starbucks Enterprise is a global coffee chain situated in Seattle, Washington, United States. Starbucks is the biggest restaurant organization in the world, with 16,120 stores in 49 nations, incorporating around 11,000 in the United States, 1,000 in Canada and more than 800 in Japan. Starbucks offers dribble prepared espresso; coffee based hot beverages, other warm and refreshing drinks, snacks, and things, for example, mugs, and espresso beans. Through the Starbucks Diversion division and Hear Music brand, the organization also markets books, music, and film. Starbucks Italian style espresso, coffee drinks, teas, cakes, and desserts had made Starbucks one of the most prominent retailing stories of the history and worlds greatest claim to fame espresso chain. In 2003, Starbucks made the fortune 50 (Wahlen et al., 2010). Background In 1971, three scholastics, English Educator Jerry Baldwin, History Instructor Zel Siegel and essayist Gordon Bowker opened Starbucks Espresso, Tea and Zest in Touristy Pikes Spot Showcase in Seattle. The three were propelled by the business person Alfred Peet (whom they knew by and by) to offer great espresso beans and supplies. The store did not offer newly prepared espresso by the glass; however, tasting examples were at times accessible. Siegel will wear a merchant’s overskirt, scooped out beans for clients while the other two kept their day occupations yet stopped by at lunch or after work to assist (Van, 2006). The store was a prompt accomplishment, with deals surpassing desires, incompletely in view of investment blended by the ideal article in Seattle Times. Starbucks requested its espresso bean from Alfred Peet however later on; the three accomplices purchased their utilized roaster setting up simmering operations in a close-by weak building and added to their mixes and flavors. By the year 1980s, the organization had four Starbucks Stores in Seattle region and had been beneficial consistently. Later on, Siegel left the group, and Jerry Baldwin took over everyday administration of the organization. Gordon Bowker stayed as a holder yet gave a significant portion of his time in his Outline Firm. In 1981, Howard Schultz, the VP of U.S operations for Swedish Creator of upscale kitchen gear and coffeemakers chose to visit Starbucks (Black, 2010). He attempted ordinarily till one day he was given an occupation of heading showcasing and supervising the retail locations (Wahlen et al., 2010). Critical Success Factors Skill Starbucks has invested in a superior workforce comprising highly professional baristas who are well equipped with knowledge and expertise of the product line. It enables them to be the knowledge privy when serving clients thus providing distinguished services that will guarantee customer satisfaction. The skill in the employees is necessary as they will be able to come up with innovative products as well as improving the current product line ensuring a wide variety of options are available for the customers to choose (Black, 2010). Organizational Capacity Starbuck as an organization possesses superior ability to implement information technology in its operations. The company is technologically advanced since it has deployed IT in almost all its functions, thus ensuring quality output. For instance, the company has implemented an online e-commerce used for online transactions. The move is not only meant to improve the service delivery to its clients, but it also improves the overall image of the company by enhancing its rapport thus attracting more potential customers (Lussier, 2008). Despite the coffee industry being very competitive with numerous market players the management team at Starbucks are knowledgeable enough since they have been able to employ the best policies and business strategies that have seen the company grow over a period. There are so many substitutes goods in the market that consumers can readily opt for but the sound management policies that management has implemented has created a conducive environment for the customers thus enhancing their loyalty to the company’s products (Van, 2006). Marketing The service industry is very selective, and the prominence of a company depends on its product and service quality. Starbucks has a team of courteous customer attendants who politely serves the clients with the utmost respect and friendliness to ensure they receive a holistic experience that will ensure they visit the outlet again. It is a strong marketing technique that has provided the firm maintains its market share for a long period. That notwithstanding, the company has diversified the product and service line at its outlets thus allowing consumers to enjoy a wide variety to choose. Starbucks stocks other kinds of products like snacks and it also offers a serene evening hangout ambiance by including beer and wine to its menu. The idea is to make Starbucks outlets an intermediary between work and home where people can visit to relax while enjoying their favorite beverages together with a cool musical ambiance. It gives the consumers a convenience to get served with their best drinks readily at designated points thus saving them the stress of having to travel for long to find the same products (Misra and Kings College London, 2003). Theory of Constraints The theory of constraints is a management technique that is meant to develop the best mechanism to overcome bottlenecks that hinder processes in an organization. According to the theory first you have to identify the constraints or bottlenecks that are impeding the smooth flow of processes in company then you develop techniques to solve that problem by allocating enough resources to the course to ensure the constraint is done away with, and the system’s processes can conveniently proceed. When analyzing the financial status of an organization using the theory of constraints, there are there basic parameters that should be taken care of they include; operational expenses, throughput and inventory (Black, 2010). An Operational cost is the amount of capital that a company utilizes in running its daily errands for instance it is the amount of money that is used to transform the inventory into revenues. Inventory, on the other hand, is the capital invested in stock or any other elements of trade for the purpose of generating capital out of them. Throughput is the frequency at which a business generates revenues through the sale of inventory. Every firm has the aim of increasing its performance so as to accumulate high profits for business expansion. In Starbucks, the main bottleneck that the company is facing in its operations is the customer queues and waiting time before service delivery. In the midst of its immense expansion program the company witnessed increased number of clients to its outlets in prime hours namely; morning, lunch and dinner breaks thus resulting in a situation where customers had to wait in a queue for several minutes before receiving services. It was indeed a constraint that impeded the company’s throughput, and the management moved swiftly to counter the situation in order to safeguard its revenues and customer loyalty. After a thorough analysis of the system, it was concluded that product complexity was the reason the waiting time, and long queues experienced in the company’s outlets. The reason being the business offered thousands of product combination thus it would take a considerable amount of time to serve a single client with the desired combination hence increasing the amount of time it takes to serve an individual customer. Starbucks opted to implement lean operations to offset this problem that was proving to be a major impediment to its growth strategy (Van, 2006). In going thin Starbucks has reduced the number of its product combinations to a manageable level while its employees have been assigned to a single duty to maximize efficiency and avoid the backlog that was occasioned by the same employee preparing the beverages and at the same time serving clients. That notwithstanding, the organization developed an algorithm that manages queues in its shops especially during peak hours thus avoiding the situation. The number of employees has been designed in a manner that it reduces unnecessary manpower. For instance during the peak hour the number of staff in that shift is increased but reduced during regular times to cut on any potential wasteful expenses (Misra and Kings College London, 2003). Balanced Scorecard The traditional financial analysis techniques failed to account for intangible assets in the organization, thus making their study inconclusive. Elements such as; customer relationship, product innovation, human capital, operational processes and information technology systems are not taken care of the previous methodologies. The balanced scorecard is an intelligent technique that seeks to incorporate all these elements in coming up with an all-inclusive analysis of organizations. The procedure implements four perspectives in its analysis namely; financial, internal business processes, product, customer and learning and growth (Lussier, 2008). Financial The Aggregate net income for the Starbucks demonstrates the company has consistently grown over time. A major growth was witnessed between 2003 and 2007 possibly because of the significant client interest and customer sovereignty for the firm’s items. However, the fiscal period 2005-2006 experienced a 10% drop in in net profits before bouncing back in 2006 -2007 when profits increased by 20% (Wahlen, Jones and Pagach, 2013). Financial reports indicate that from 2005-2007 employees’ payment increased steadily. The Working wage grew by 44% contributing to the fall in net profits witnessed that fiscal year (Wahlen et al., 2010). The company embarked on massive expansion in 2005-2008 and this affected its stock value as prices dipped between before increasing again in 2009 by a 4.6% margin. Customer The company emphasizes on giving its consumers the best experience once they visit its shops, it has been made possible by personnel who are courteous and friendly to the customers thus offering an incredible experience that entices the clients to visit the outlets repeatedly (Van, 2006). Any business strives to emphasize in the affairs of its customers since they are the reason the business thrives. The organization has created a friendly environment for its consumers by developing a homely ambience at the shops through music and wine sessions in the evenings that make it the perfect joint that connects people between their workplaces and their homes. Given the wide variety of products combination that the firm offers it is prudent to note that individual clients are served with customized products that best satisfy their individual needs. The exceptional services offered at Starbucks have enhanced the image of the organizational by making it a global brand with numerous loyal consumers behind it (Misra and Kings College London, 2003). Internal Business Processes Starbucks has leveraged from advances in technology by deploying the innovation in its operations to enhance customer experience with the company. For instance, the organization implemented an e-commerce site where its clients can make orders online to ensure convenience of services. In line with its mission statement Starbucks is always committed to providing the best specialty coffee to its customers to give them an exceptional experience a reason that has established it as a global leader in the provision of coffee. The quality attached to Starbuck’s coffee is indeed a mechanism of ensuring their clients receives the value of their money this is coupled up with the service they experience at the outlets while being served by professional personnel at Starbucks stores (Lussier, 2008). A review done by emerging organizations on the global front noted that Starbucks is one firm that has achieved in expanding its operations globally but remained committed to its environmental obligation both internally and externally. The business is committed to its customers through the provision of quality products and services while satisfying its employees with the best working conditions. Conversely, it is also engaged in fulfilling its corporates social responsibility to the communities where it operates through giving back to the society (Van, 2006). Learning and Growth The personnel at Starbucks is often encouraged to participate in fulfilling the mission statement of the organization. Since it emphasizes on quality, the organization offers its employees with vocational training opportunities to enhance their skill and make them relevant to the dynamics of the business environment. Activities of the Value Chain The primary activities in Starbuck’s value chain includes the following; inbound logistics, outbound logistics, operations, marketing and sales and service. Inbound Logistics Starbucks inbound logistics include organization operators picking espresso beans makers fundamentally in African mainland, correspondence the benchmarks identified with the nature of espresso beans, creating key associations with suppliers and sorting out the inventory network administration. Operations Starbucks operates in more than 50 nations in two ways: direct operation of the stores by the organization and permitting. As of now there are 8870 groups worked stores all inclusive while 8139 stores operate on the premise of permit. Outbound Logistics The outbound logistics for Starbucks has included offering its items through its stores with no intermediates. Notwithstanding, beginning from late a scope of Starbucks items, for example, 3-in-1 espressos sachets are being sold through a set of driving general stores. Marketing and Sales Starbucks does not vigorously put resources into showcasing depending rather on the informal accomplished through the high caliber of items and abnormal state of client administrations. Then again, periodic showcasing exercises started by the organization include testing of new elements that are typically directed inside territories close-by the stores. Services Giving prevalent level of client administrations is one of the Starbucks fundamental targets, and it is determined from the statement of purpose of the organization. In like manner, the organization staffs are urged to make an enormous effort so as to guarantee the abnormal state of consumer loyalty. Concept of Customer Delivered Value Starbucks worth suggestion is convincing because it puts the client, and the administration conveyed to the customer above everything else. Despite the fact that Starbucks is a retail coffee store, the worth suggestion is not about the espresso only yet about the espresso society and the experience of drinking espresso. With its esteem idea, Starbucks moves far from the unmistakable profits that the espresso offers, for example, taste, incitement, sharpness and focuses on the nature of its espresso and the impalpable profits of the experience of drinking Starbucks espresso. Starbucks quality suggestion is not about espresso it is about the experience of drinking espresso in a Starbucks store incorporating the item with the enthusiastic profits. Starbucks had around 150% increments in retail locations from 1998 to 2002. By topographically grouping markets, Starbucks was trading off the "climate" part of its esteem suggestion (Lussier, 2008). Cost of Controlling Quality Starbucks is notable to charging premium prices for its products and services; an issue its competitors have often used against it to gain a competitive advantage. However, the prices charged by Starbucks for its products are an accurate reflection of the quality and services experience that consumers receive while at its outlets. The company has invested a considerable amount of capital to select the best coffee bean for its clients thus making them enjoy the real taste of beverages (Black, 2010). That notwithstanding, the firm has invested in qualified personnel with relevant knowledge of the variety coffee brands thus making them ideal to choose the best combination for the clients to satisfy their needs. Despite vast sums of money being direct to controlling quality at the organization it has maintained its status as the premier coffee outlet that consumers want to be associated with for many years. The efforts by the company are indeed ideal since by maintaining the quality of service to its clients it has been able to attract and retain consumers thus building on consumer loyalty translates to increased revenues (Van, 2006). Conclusion Starbucks has achieved almost all its obligation as far as their success factors are concerned. Most of the factors have been leveraged and implemented, thus enhancing the performance of the business. On organizational bottlenecks, it is evident that long queues at Starbuck’s outlets are a major bottleneck that affects the smooth flow of operations. However, the constraint has been solved partially by hiring workers in shifts to ensure their services are maximized, and whenever the traffic of customers is high the number of employees is increased to serve them. On the balanced scorecard financially the firm is demonstrating an upward trajectory though it has been marred by some financial constraints at several points leading to a decline in its stock prices. Conversely, it has maintained a qualified team of personnel driven to provide the best services to their clients. Concerning the cost of controlling quality Starbucks has invested a considerable amount of capital in improving product quality. The move has led the company to charge higher prices for its departments. Despite the prices consumers are willing to pay for the experience, they receive from Starbucks is extraordinary. References Black, K. (2010). Business statistics: For contemporary decision-making. Hoboken, NJ: Wiley. Lussier, R. N. (2008). Management fundamentals: Concepts, applications, skill development. Mason, OH: South-Western/Cengage Learning. Misra, I., & Kings College London. (2003). an analysis of Starbuckss customer service practices and its perception amongst front-line workers and management. Van, V. N. M. (2006). Camping out in the coffee shop world: A sociological analysis of Starbucks and independent shops. Wahlen, J. M., Bradshaw, M., Baginski, S. P., & Stickney, C. P. (2010). Financial reporting, financial statement analysis, and valuation. Mason, Ohio: South-Western. Wahlen, J. M., Jones, J. P., & Pagach, D. P. (2013). Intermediate Accounting: Reporting and analysis. Mason, OH: South-Western Cengage Learning. Read More