Starbucks Corp - Clouds in Your Coffee - Essay Example

?Starbucks Corp " Clouds In Your Coffee" Case Study Executive Summary This research report considers a number of elements related to the Starbucks Corporation. The report provides a broad overview of the company’s history and evolution. In these regards, it notes that substantial changes were instituted in 1987 when Howard Schulz assumed ownership. The company came to develop an aura that has been referred to as the Starbuck’s Experience. The research report considers how this Starbuck’s Experience has come to play a critical role in the company’s current dilemma. It’s demonstrated that while the company enjoyed unprecedented success, recent years have posed a number of challenges. Most prominently the company has sought to rapidly expand while they balance efficiency measures with the Starbuck’s Experience. In addressing Starbuck’s dilemma a number of elements are considered and recommendations advanced. The company’s overarching operating model is examined. In these regards, it’s indicated that Starbucks has a number of unique aspects in comparison to franchises. For instance, Starbucks maintains ownership control of their stores. Other aspects include the way employees are treated and clustering mechanisms. Ultimately, it’s determined that Starbuck’s has become overly corporate-centric in image and must undergo significant structural changes to remedy this problem. In these regards, the report indicates that Starbucks must allow increased franchisee responsibility and greater decompartmentalization in-terms of store models. Background Starbucks Corporation faces a number of contemporary business issues in regards to their overall organization. Specifically, operational management concerns have posed a number of pressing concerns for the coffee conglomerate. A proper understanding of the issues the company is facing requires a brief background understanding of the company’s evolution. Three friends in Seattle, Washington formed the company in 1971. From the company’s earliest incarnations it engendered a close-knit aura of familiarity. In 1987 Howard Schulz purchased the company and enacted a number of structural changes. Of the primary changes Schulz instituted were the names of the coffee. After a visit to Italy where Schulz witnessed designer coffee shops with varieties of options he decided he wanted to institute this model with the Starbucks environment. As such, Starbucks adopted the tall and venti sizes, with a large variety of coffee options. These options coupled with the aura the original ownership had fostered constituted the company’s core ‘Starbucks Experience.’ From 1987 until the present day, this model was widely successful and the company witnessed substantial expansion throughout the country and, indeed, world. With the company’s rapid expansion and commodification a number of significant changes had to be instituted. Most prominently, the company instituted wide efficiency measures as a means of speeding coffee production and increasing bottom-line profits. While these efficiency measures served their purpose, a recent memo by company president Howard Schulz to key executives indicated that many of the efficiency measures have compromised the Starbuck’s Experience. For example, Schulz pointed out that in changing espresso machines the company achieved increased efficiency measures, yet lost the aroma and intimacy that constituted a particular Starbuck’s aura. Another challenge the company recognized was the increased demand for hot food while retaining the stores’ aroma and efficiency levels. In addition to balancing the in-store Starbuck’s Experience with the need for increased efficiency, the corporation’s has international expansion ambitions. Perhaps most prominently, the company has expanded into China through a hybrid partnership model with local stakeholders. This has posed challenges as in cooperating with the local stakeholders the company has had to give up a modicum of control onto internal store elements. Ultimately, Starbucks faces challenges of balancing the Starbuck’s Experience with the need for expansion and bottom-line profits. Problem Statement The problem Starbucks is facing is how the company can best balance organizational efficiency with maintaining the Starbuck’s Experience in a contemporary business climate that includes rapid corporate expansion, both domestically and internationally. Analysis In responding to the challenges facing the Starbucks Corporation it’s necessary to consider a number of operational models and general business perspectives before proposing a course of action. One of the overarching elements that must be considered is operating models. In these regards, Starbucks currently has a unique operating model when compared to other franchise organizations. Michelli (2006) notes that while other franchise organizations, notably Mcdonalds, sold ownership rights to stakeholders, Starbucks has maintained organizational control. This has given the company unique access to the institution of policy measures. One example of this is the widespread efficiency measures that were instituted in the company’s recent expansion measures. Another unique aspect of the company’s operating model is the approach to advertising. In large part, the company has gained their substantial market share without the advertising measures that have been a lynchpin of other franchises’ success. Moore (2006) also indicates that the company has achieved substantial success through their employee training approach. While outside organizations generally adopt a human resource model that treats employees as readily expendable inputs, Starbucks takes a more comprehensive approach to employee training. In these regards, employees are regarded as valuable aspects of the company and given substantial training and background information. Another prominent aspect of the Starbuck’s operating model is store placement (Henricks). While it’s been a long established practice of franchises to place stores in-close proximity Starbucks has taken this clustering to new levels. For instance, Starbucks is recognized for oftentimes placing a store directly across the street from another store to shorten customer wait times. In addition to the Starbuck’s operating model, there are a number of important considerations in regards to various business elements. In adopting an innovative business strategy Starbuck’s has entered into the music business, selling compilations in stores throughout their empire. This Starbuck’s music has constituted a significant element of the Starbuck’s Experience, creating a specific ambience within the stores. When considering a strategic course of action it’s important to note a number of important elements. As previously indicated, the primary challenge is the development of a corporate model that successfully balances the Starbuck’s Experience with efficiency measures that promote expansion. In achieving these ends, it’s clear that the company must undergo substantial structural reform. In large part it’s clear that the specific ambience that Howard Schulz has indicated has been lost is a direct part of the company’s size. The coffee shop environment has long constituted an element of society and culture that is opposed to rampant capitalism. It is an ambience that functions through a bohemian element and is informed by idealistic notions of artists and intellectuals writing novels and discussing pressing philosophical issues. While this is clearly an idealistic presentation it nevertheless is this ‘hipness’ that consumer is seeking to attain when choosing their designer coffee options; it is not the coffee the customer is paying $4 for, but this feeling of community and ‘with-it-ness’. It this feeling that Starbucks has lost through expansion and efficiency measures. Recommendations As a means of rectifying Starbuck’s current dilemma this report recommends the company undergo a large-scale structural change. One interesting fact about the Starbuck’s music program is that it emerged from a store manager that had began to play music in his specific store; customers soon began to ask about the music he was playing. In the current Starbuck’s operating model such local innovation has been all but eliminated. While such efficiency measures are successful for fast food companies, they fail with Starbucks because they have eliminated the company ambience. The company’s current expansion plans in China have given increased ownership responsibility to local stakeholders. While this has been viewed as a challenge of international expansion, it is precisely the structural change that is necessary. In allowing local stakeholders increased store control and input, Starbucks will in-effect be creating stores with particular local flavor. This specificity is an essential element of retaining the Starbuck’s Experience. While Schulz has focused his attention on inconsequential store changes, in reality the problem is the cookie-cutter aspect the stores have assumed. No longer do they have a vibrant community personality, but instead a sterile and corporate ‘big brother’ environment. Another important aspect of re-gaining the Starbuck’s Experience is developing a number of store models. The very nature of Starbucks as a multi-national corporate entity precludes it from maintaining the hip ambiance it once held as an up-start from Seattle. Rather than adopting the Mcdonald’s operating model of uniformity, Starbuck’s must unveil stores with different names and design layouts. While the stores will ultimately remain within the Starbuck’s empire, this increased decompartmentalization will aid the company in resisting its image as a corporate conglomerate and still allow them to operate under needed efficiency measures. Conclusion In conclusion, this research report has considered the current dilemma facing the Starbuck’s corporation. It has examined background elements, including the company’s history and expansion ambitions. The essay has analyzed a number of factors that are relevant elements in the company’s specific dilemma, including the operating model, and the loss of the Starbuck’s Experience. Finally, the report recommended that Starbuck’s undergo substantial structural change as a means of regaining the Starbuck’s ambience, while retaining efficiency measures. References Henricks, Mark. ‘Starbuck’s Business Model’ Entrepreneur. http://www.entrepreneur.com/magazine/entrepreneur/2007/february/17 3256.html Michelli, Joseph. (2006) The Starbuck’s Experience. New York: McGraw-Hill. Moore, John. (2006). Tribal Knowledge: Business Wisdom Brewed from the Grounds of Starbucks. New York: Kaplan Publishing. Read More