Crafting and Executing Strategy - Case Study Example

Name Class Unit Introduction Starbucks Corporation started in 1971 as a retail coffee shop by Jerry Baldwin, Gordon Bowker and Zev Siegl in US. At the moment, the company has spread to over 60 countries with about 18,000 stores. The coffee market is very competitive and is growing at a fast rate. At the moment, a lot of people are attracted to quality coffee being taken in a nice and relaxing atmosphere. The concept started in USA and has been adopted globally by a lot of coffee shops (Starbucks, 2015). Starbucks has been working hard to be recognised as the leading coffee house globally in comparison with the competitors (Gulati, Huffman & Neilson, 2002). This essay analyses Starbucks Corporation through PESTEL analysis, SWOT analysis, business strategy, HR strategy and lastly HR practices and policies. PESTEL analysis Political The major political factor that affects coffee is the raw materials sourcing. There have been a lot of issues associated with the supply chains leading to attention from the politicians in western countries and source countries. The company is expected to ensure that there is no child labour in their supply chain and also adhere to social and environmental norms. Starbucks Corporation is expected to follow the right sourcing strategies in its operations. The corporation is required to follow law and order in the countries where they buy their law materials. This is due to increased political awareness and activism. The use government has also been putting a lot of regulatory pressure. Global business based in US has been subjected to a lot of scrutiny in their processes. They are expected to follow tax policies and employment laws in their operation (Geereddy, 2013). As the corporation expands, the political stability of the host countries has a great impact on operations. Some of the governments such as Brazil have been encouraging foreign firms with an aim of increasing market for their coffee beans through local demand. When the political situation improves more foreign firms starts investing. The corporation is expected to engage in ethical sourcing practices to avoid being sued and losing their reputation (Geereddy, 2013). Economic Global economy has a great impact on the business. For example, the recent global financial crisis had a great impact on Starbucks and their profitability. When there is economic crisis, consumers tends to buy from the cheaper alternatives. The company has to deal with the rising costs of operations and labour. There is also inflation and reducing profits in the business. Monetary and fiscal policies that are in existence have an impact on the business environment. The ability of the government to control inflation has led to creation of a good business environment. When the economy is booming, it is a good opportunity for Starbucks Corporation to expand to the market. Other economic issues are current exchange rate and the level of taxation (Geereddy, 2013). Social As Starbucks expands in different countries, they want to expand their customer base to include the lower and middle income earners. This leads to the need for the company to offer cheap products which might lead to sacrifice on the quality. There have been rise in ethical and green consumers (Geereddy, 2013). This is a group of consumer who are concerned about the social and environmental impacts of the brands they use. This has made Starbucks to be socially and environmentally aware (Linton, 2008). As the baby boomer generation retires, their level of spending will be reduced. This implies that the number of old consumers will reduce. Starbucks will be forced to increase the number of generation X and millennial in their customer base to compensate for retiring baby boomers. The level of education and lifestyle also affects the consumption of coffee. Income distribution determines the number of customers who can afford coffee in a given market (Geereddy, 2013). Technological Starbucks have been utilising technology in their operation. Most of the machines and technology is sourced from US. The corporation has been enjoying the benefits of mobile wave. This is especially through use of mobile apps and partnering with mobile phone companies such as apple. Starbucks have already introduced Wi-Fi in their outlets (Elgan, 2014). This is due to fact that most of the customers like using the wireless connections. Customers can surf at Starbucks while sipping their coffee (Geereddy, 2013). This has helped in enhancing the customer experience. The corporation has been using mobile payments especially in their US locations (Fellner, 2008). Environmental The activities by Starbucks have been under scrutiny by activists and advocacy groups. Consumers have also been very concerned on the operations of Starbucks. This has led to the company taking into account their environmental impact of their activities. Each country of operation has own rules and regulations on environment. This implies that Starbucks has to follow them when doing business. The coffee producing countries are in some cases faced with environmental disasters. This includes global warming among other issues. Most of the coffee is grown in Africa and there have been a lot of efforts to carry out sustainable agriculture. This has been on the top of agenda for Starbucks (Geereddy, 2013). The corporation has been engaging in research to ensure that there is minimum environmental pollution and energy use. The company has been using cups and packages which are recyclable so that the consumers are aware about the environment (Linton, 2008). Legal Laws in the home market and sourcing countries must not be violated by Starbucks. There have been introduction of caffeine production and consumption policies through the health authorities which must be followed. Health issues related to caffeine has been a debatable topic over the years. Starbucks faces challenges in meeting the expected health and hygiene standards during preparation. Also, some of the medical journals have been claiming that coffee drinking is a major health hazard. Other legal factors affecting the company are; strict customs and trade regulations and the licencing regulators (Geereddy, 2013). Opportunities The global market is a major potential for Starbucks growth. There has been growth in the emerging markets which includes Russia, Brazil, India, China and South Africa. Expanding to the growing markets will help the company from economic meltdowns. The company can take advantage of quick expansion through strategic alliances. This will help in eliminating time wastage experienced during market penetration (Geereddy, 2013). The company can concentrate in creating a stable customer base and capitalise on first mover advantage. The corporation should increase their focus on healthy drinks through acquisitions. This is due to fact that the customers are moving away from aerated drinks (Fellner, 2008). Threats The company faces a lot of competition from companies especially through pricing. The main competitors who are a threat include McDonalds Corporation who has also been in global coffee market. The preparation procedure for coffee can be easily duplicated by the competitors. With the economic crisis occurring, there has been loss of jobs and reduction in customer spending. This has a negative impact on the coffee business (Elliott, 2001). Starbucks is required to carry out frequent market audits to counter the threats and know what the competitors are offering as well what the market needs (Geereddy, 2013). Competition will always be a threat and Starbucks has to use its marketing mix strategies and its strong brand image (Simon, 2009). This will help in creating a strong impression on the customers mind. The company must focus on differentiation. This is due to fact that when the products taste the same, the company will be highly affected by competition (Fellner, 2008). Goals Starbucks has to ensure that they have an ethical working environment. This is through ethical sourcing, agreeable working environment and embracing diversity. The corporation has to ensure that they apply the highest standards in purchasing, producing and delivering coffee to the final consumer. With the need for environmental conservation, Starbucks has to contribute positively to the society and environment. The company must come up with ways in which they will be capable of reducing competition in the industry to ensure success. The main goal is to be recognised as the greatest coffee chain globally. This is a goal that can be achieved through the right business strategy (Geereddy, 2013). Business strategy The Starbucks business strategy is based on customer experience through use of modern technology. The corporation has been utilising technology in producing new products and services which are aimed at enhancing customer loyalty and retention (Elgan, 2014). Through enhanced customer service and new products, Starbucks has been able to stay ahead of most of the competitors. An example is the mobile platform which has enabled the company to make a lot of mobile transactions. The platform has given Starbucks high efficiency in their service delivery, improved customer loyalty and increasing sales (Fellner, 2008). The company has also been highly engaged in environment protection. This is through use of recycled materials to make cups and packaging materials in their operations. The corporation is one of the most tech savvy in the industry (Simon, 2009). This has kept the business ahead of the major competitors and acted as one of the major strengths. The corporation has been using technologies to innovate and come up with the customer needs. This has made the company sustainable both environmentally and socially. Through this, it has been possible to reduce the weakness regarding its operations based on environment and other stakeholders (Fellner, 2008). Starbucks uses standardised procedures. This ensures that no matter where the customers are they are able to receive same products and services. The company products are unique and different to other competitors (Elliott, 2001). Use of differentiation has separated Starbucks from other competitors in the market. Starbucks has been trying to impress large variety of customers and has been very successful in this approach. Strengths Starbucks have a strong brand image. This is through their quality coffee which has a distinct aroma taste. The company has been using customer loyalty card which has enhanced repeat visits. The high profits from the corporation are used for global expansion which has led to steady earnings. The company has high financial strength and profitability as compared to most of the competitors. The company has employees who are knowledgeable and skilled. The employees are tech- savvy which helps in using technology to innovate (Simon, 2009). Through competent management and workers, Starbucks can fully implement their business strategy (Geereddy, 2013). Weakness The customers’ preferences have been changing over the years. The business has also been having loss making segments which increases the risk of losing their customers to the competitors. There has been increase in health awareness which threatens coffee sales. The company management and workers have been working hard to tackle this weakness at the tactical and operational level (Kjeldberg & Ostberg, 2007). HR strategy Starbucks HR strategy should be focused on technology. This is through ensuring that they have employees who are well versed with technology and can use it to innovate. This is due to fact that uniqueness of Starbucks is based on technology. Starbucks should create an environment which is capable of rewarding employees for their innovation. This will ensure that employees are motivated to innovate. The HR department is expected to formulate a strategy that is focused on employee reward system on their contribution through technology. Employees must be empowered to come up with critical decisions especially related to customer service (Drejer, 2009). The HR department must ensure that training offered to the employees is adequate and capable to enable in efficient service delivery to the customers (Moon & Quelch, 2006). Technology is the heart of Starbucks innovation (Elgan, 2014). This is as seen in STEEPLE analysis for the company. Through technology, the company has been able to enhance their products and services and create customer loyalty. The ability to use technology to create customer loyalty has given the company a competitive edge in the industry. The company HR strategy must focus on the employees who can help in innovation of products and services through use of modern technology (Simon, 2009). The HR department must ensure that they have improved the internal support system through use of information technology (Elgan, 2014). This will help the company to share the information with the stakeholders more easily. The HR department must also strategize on acquisitions of new outlets. This is through ensuring that the new acquisitions have low operational costs and are adaptive. The process of acquisitions should be driven by the demand and directly linked to the company inventory. The HR department must ensure that there is high level of openness and accepting feedback from the customers. This will help a lot in meeting the company goals. The HR department has to ensure that the employees are trained on sustainability to ensure that they are capable of minimising emissions and carbon footprint (Linton, 2008). The HR strategy must also ensure that they train on taste surveys. The company is expected to be conducting regular taste surveys in order to understand the consumer preferences. Through a strong HR strategy, it will be possible for Starbucks to meet the challenges in the market and redress their weakness. This will also ensure that the company has benefited from taking advantage of its opportunities (Kjeldberg & Ostberg, 2007). HR policies and practices The HR department is expected to come up with policies and practices that will make it possible to implement the strategy (Thompson, Strickland & Gamble, 2007). One of the areas the policies need to address is training. The training of employees must be carried out in a manner that ensures that they pick skills and competencies required for excellence service. This is through a policy that ensures all employees are trained using the latest technology and is well motivated (Elgan, 2014). For example, the training of employees should be carried out annually to ensure that they are well versed with current trends. The HR department must ensure that the employees are motivated and cheerful. This will make it possible for them to easily interact with the customers. This can be achieved through pay packages and additional responsibilities. The employee support by the HR department must be enhanced (Moon & Quelch, 2006). There is need for coordination of all HR practices in areas of operations. This is especially in the new markets where the company has opened stores. The HR department must be coordinated to ensure that there are consistent standards in all locations. The HR department must ensure that everyone knows about the coffee from the top employees to the lowest level. Having coffee knowledge is a critical aspect of the company success (Kjeldberg & Ostberg, 2007). The HR department must continue ensuring that they continue with college achievement plan. The policy has enabled the chain eligible employees to complete a bachelor’s degree. This is through full tuition fee and reimbursement for the seniors and juniors. The employees have been engaging through online degree programmes through organisation collaboration with international universities. Supporting their workers in education is the best investment that the company can make. This is through ensuring that the company have educated workers. Investing in talent will ensure that the company has a strong relationship with their employees (Thompson, Strickland & Gamble, 2007). It will also ensure that the workers are versed with the current trends and are capable of utilising modern technology. Other areas that HR practices should cover include equal opportunities for employment. This is through a non-discriminative policy that ensures workers from different backgrounds in education, nationality and capabilities are employed. Research has proved that diversity helps a lot in innovation. Ethical sourcing must be ensured in the whole of the supply chain. This is through ensuring that the company avoids child labour and there are no negative social impacts on their supply chain (Loureiro & Lotade, 2005). The company has a supplier code of conduct that must be enhanced and followed. This will ensure that they are operating in an ethical and responsible manner (Fellner, 2008). Conclusion In conclusion, Starbucks is in a good position in the growing coffee industry. The company has the capability to grow globally through their strategic human resource management. The company is taking the right steps in attaining their goals. The company has to be able to address the challenges brought about by the political, economic, social, technological and legal environment. This is through a business strategy that focuses on use of technology to overcome the challenges. The employees must be well versed with modern technology for them to be innovative and face the challenges. Technology will help a lot in addressing the weakness and threats faced by the company. This is through use of human resources who are well equipped with technology and excellent customer service. The company must also focus on differentiation in order to address competition. The HR strategy should also be technologically based. This is through training and development of employees on technology. The employees must also be well motivated. The HR department practices and policies must be capable of supporting the implementation of the business and HR strategies. 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Kjeldberg, D. & Ostberg, J. 2007. “Coffee Grounds and the Global Cup: Global Consumer Culture in Scandinavia.” In: Consumption, Markets and Culture, Vol. 10, No. 2, pp. 175- 187. Linton, A. 2008. “A niche for sustainability? Fair labor and environmentally sound practices in the specialty coffee industry.” Globalizations, Vol.5, no.2, p.231-245. Loureiro, M. L., & Lotade, J. 2005. “Do fair trade and eco-labels in coffee wake up the consumer conscience?.” Ecological Economics, Vol.53, no.1, p.129-138. Moon, Y., & Quelch, J. A. 2006. Starbucks: delivering customer service. Boston, MA: Harvard Business School. Simon, B. 2009. Everything but the coffee: Learning about America from Starbucks. Univ of California Press. Starbucks, 2015, company information, viewed 6th November 2015 from, http://www.starbucks.com/about-us/company-information Thompson, A. A., Strickland, A. J., & Gamble, J. 2007.Crafting and Executing Strategy: Text and Readings. Boston, MA: McGraw-Hill/Irwin. Read More