Starbucks Culture as per Hofstedes Cultural Dimensions - Essay Example

? Starbucks Introduction The Starbucks chain of coffee stores has a long history, which began in 1971. It was then a humble, single store founded by three partners: Jerry Baldwin an English teacher, Zev Siegel a History teacher and Gordon Bowker a writer. These three scholars were influenced by Alfred Peet, a Dutch immigrant and importer of Arabica coffee. The main drive for setting up business was the mutual love for fine coffee, and yearns to establish a clientele with a similar taste (Thompson and Gamble 1997). The location for the first store was, in Seattle in the “touristy Pikes Place Market”. The name of the store was Starbucks Coffee, Tea and Spice. The setting of the store was to quote the website “modest, hand-built nautical fixtures”. On one wall was filled with whole bean coffees while another had shelves of coffee products. Peet owned a store called Peet’s Coffee and Tea. It was in this store that Peet thought of how these three would-be founders of how to brew the coffee beans in a manner that brought out their flavour (Thompson and Gamble 1997). In the beginning, according to the official company website, the method of brewing this coffee was the European way. This method was chosen because it brought out the full flavour of the beans. In addition, the name of the company was drawn from a character in the Moby Dick who loved coffee. The company logo was in continuance of this romantic ideal which was a two-tailed mermaid encircled by the company’s name (Thompson and Gamble 1997). Between 1982 and 1985, the company hired Howard Schultz as head of marketing and overseeing retail stores. By then, the company had four stores within Seattle. After a while of experience, a lot of a challenges, as well as, resistance from the top management, Schultz quit to form his own company called “II Giornale”. This was the company that in 1987 purchased Starbucks and by 1992 had established 161 stores. It was after 1992 that the company went public in a highly successful initial Public Offering (Thompson and Gamble 1997). Starbucks Culture as per Hofstede’s Cultural Dimensions Hofstede a Dutch social psychologist came up with four dimensions, which were later reversed upward to six (Piepenburg 2011). In his opinion, these dimensions influence human thinking, organizations and institutions in a certain, predictable manner (Piepenburg 2011). These dimensions are power distance, uncertainty avoidance, individualism/collectivism, and masculinity/femininity. According to Hofstede, the first dimension is Power Distance Index (PDI). In this dimension, the main focus is on how a society or organization is stratified. Equality or inequality is the major reference point of this dimension (Piepenburg 2011). Going back to the Starbucks, there is a difference in terms of the Power Distance. Under the original founding partners, the company did not seem to hold the employees in high esteem. A case in point was the request for the extension of healthcare to part time workers, which had been turned down. Under Schultz, the company took a different path. This involved extending the coverage to all employees working 20 or more hours, and it was similar to the coverage extended to the fulltime employees (Thompson and Gamble 1997).This was mainly driven by Schultz’s humble background and the desire to not let others go through what his father had to endure. Another dimension is Uncertainty Avoidance Index (UAI). This dimension is defined as the extent to which people within a culture feel threatened by uncertain or unknown situations (Thomson and Baden-Fuller 2010).Accordingly Uncertainty Avoidance Index is higher in countries that citizens are more emotional and motivated by inner nervous energy (Thomson and Baden-Fuller 2010). In this case, the UAI in the United States was lower than it was in France when Starbucks was making a foray into this country. This indicates that the general French conservative citizens preferred their traditional coffee houses to the new ones that Starbucks was introducing. As indicated above, there was a lot of misapprehension from the older French clientele. This, therefore, prompted Starbucks to target the youthful clientele. The coffee chain hoped that the desire to break free from the norm and the chance for them to practice their English speaking (Thomson and Baden-Fuller 2010). The low UAI means that the Starbucks management was willing to risk entry into a foreign market and make profits. UAI in the U.S at the same time did greatly influence Starbucks’ investment decisions. The company was, for example, more willing to try the Asian market before they attempted the European market (Thomson and Baden-Fuller 2010). Another dimension that Hofstede espoused as an influence on culture was Individualism/Collectivism (IDV). This means that there is a sort of conflict between serving personal and family interests only in contrast to belonging to group or community (Thomson and Baden-Fuller 2010). In the case of Starbucks, the original founders were more interested in focusing on traditional coffee and location of the coffee stores in Seattle only. Attempts by Schultz to alter this were met with strong resistance. Upon taking over the helm of the coffee store chain, Schultz was more flexible and willing to concede to the wishes of the customer (Thompson and Gamble 1997). In early 1990,Schultz organized a top-management retreat, which aimed at reviewing the company’s mission statement. In this retreat, one of the decisions that were reached was to do with the need to build “a company with a soul” (Thompson and Gamble 1997). This means that the top management wanted to encourage the employees from all levels to always speak up when they felt something was going wrong. This shows a company that was built with all members from the clientele to those serving at the counters all the way up as one organic unit could not function if there was discord (Thompson and Gamble 1997). The fourth dimension that Hofstede stated was the Femininity/Masculinity (MAS). This is the dimension that categorizes countries according to their abrasiveness and competitiveness (Thomson and Baden-Fuller 2010). A masculine country is one where the men are dominant, abrasive and highly competitive. The women, on the other hand, are tender and generally meek. A feminine society would be one where the two genders are modest, tender and more concerned about the quality of life (Hofstede 1998). In the case of Starbucks, a lot of positive things in terms of promoting a space for open expression of one’s mind on company matters. There is also the nature of how the business is run in the context of the feminist dimension and the role played in the operations of the company. There is, for example, the matter of health care. The management of this company has attempted to cover the employees as much as they can to the extent that the CEO was recognized by non-other than President Clinton in 1994 (Thompson and Gamble 1997). Corporate Social Responsibility at Starbucks Starbucks has engaged in a lot of corporate social responsibility (CSR). Among the contributions that this company has managed include its healthcare program. The program is in line with the core foundations of the behavioural management theory that seek to establish that a company’s employees are to be recognized as individuals having basic and concrete needs. This plan saw the inclusion of all employees working above 20 hours in a week, and this was inclusive of part-time employees. This is an achievement that saw the company gain recognition from the then US President Bill Clinton. This endeavour was driven by Schultz’s rational that treating the employees well translates to customer satisfaction (Thompson and Gamble 1997). The reason why this is a good show of CSR is that it was driven in a humane manner. When a manger in the company walked into the CEO’s office and announced that he was HIV positive. Since the company did not have a cover for this illness, Schultz proposed to the board that the company should adopt coverage that would cover all terminally ill employees in the company. As a result, this employee known as Jim got coverage, which saw his medical bills paid in full until his passing (Thompson and Gamble 1997). Accordingly, this policy ensures that the employees in the company will receive coverage until they can be covered with government programs. It is usually a twenty nine month program (Thompson and Gamble 1997). Still on the employees, Starbucks has stock options. This allows the employees have the choice of converting some of their wages into these stocks. By doing so, the employees will have a feeling of ownership of the company and hence will be motivated to work harder for overall well-being of the company. By giving their employees stock options the management has found a crucial method of increasing performance and better management of the employees assigned roles as a result of the acquired sense of ownership of the company. The increased performance and better management of individual employee’s tasks is seen to be in line with the main objectives of the classical management theory. According to Schultz, this was one of the ways to ensure that the company had a soul. There was a need to ensure that the employees were looked at as ‘partners’ and not mere employees (Thompson and Gamble 1997). This was envisioned by Schultz as a means of cementing the bond between employer-employee. It was also a means in, which to share in the success of the company (Thompson and Gamble 1997). Another aspect of corporate social responsibility that the company has undertaken is that of improving literacy levels within the areas that the company has branches. Thompson and Gamble 1997 state that the employees are encouraged to recommend or apply to the Starbucks Foundation for grants that would benefit the local community literacy programs. This meant that the company was not only seeking to make sales from the communities, but they were also interested in uplifting these communities. Literacy was also upheld thanks to the company selling Oprah’s book club selections. The profits were then donated to a Literacy Fund supported by the Starbucks Foundation (Thompson and Gamble 1997). Corporate social responsibility also has been seen by the generous contribution that Starbucks makes to CARE. This is a non-governmental organization that sponsors health, education, as well as, other development issues in the third world (Thompson and Gamble 1997). This means that by, extension, Starbucks plays a very vital role in ensuring that a lot of lives in the developing world are improved. In addition to contributions, Starbucks also sells CARE, related commodities in its stores, and the proceeds from the sales are donated to CARE. In the markets where Starbucks sources its coffee, there were projects to improve the wellbeing of the coffee growers. This involved financial assistance to agriculture, as well as, establishing a coffee code of conduct for the growers (Thompson and Gamble 1997). This has seen the welfare of the farmers improve, as a result, of the better prices that come from better quality coffee. In Guatemala, Starbucks has partnered with Appropriate Technologies International in a bid to improve welfare of small-scale coffee farmers. This collaboration saw the farmers able to access markets, as well as, coming up of a processing facility for their coffee (Thompson and Gamble 1997). Starbucks also plays an active role in the communities that it operates. This ranges from donations of books, free drinks to proceeds from store-opening benefits. At the same time, the murder of three Starbucks employees in George Town, Washington DC saw the establishment of the Starbucks Memorial Fund. This Fund provides grants towards the campaign against violence and its victims (Thompson and Gamble 1997). The Strategic Management Theory Starbucks has applied the Strategic Management Theory in its operations. This is evidenced in the company’s attempt to return to profitability after a slump in 2008. By then, the company’s profitability had fallen from 21% to a mere 8.6%. At this point, the Chairman Schultz fired the CEO and resumed this role (Hill and Jones 2012). The aim of the new CEO was that of rebuilding the competitive advantage hence its profitability. This was already in practice within the company as seen in its decision to offer medical coverage to all employees working above 20 hours a week as well as offering the employees stock options. It was therefore not a foreign strategy when it was applied in 2008.The management sought to cut on spending on commodities like pastries. This was seen when the number of sandwiches offered was reduced as these tended to affect the aroma of the coffee. The baristas were also retrained as a means of reorienting them on how to make coffee. At the same time the management was given more say on the design of their stores which were designed anew. Those underperforming stores were shut down and at the same time the CEO took advantage of the closures to renegotiate rent on the remaining stores (Hill and Jones 2012). As seen above the company was able to save a lot of money this way since the spending was reduced. The company also enhanced the customer experience which involved more interaction between the customer and store workers. This was done by making some simple changes like placing those commonly ordered syrup flavours closer to where the coffee was made (Hill and Jones 2012). This made the baristas who were the people serving coffee more efficient. The end result was a profitability jump to 24.19% in 2010. As seen above the strategic management theory on the part of Starbucks involved exploiting those aspects of itself that were unique and which gave it an edge over its competition. The company for example invested on its employees to make them more productive as well as ensuring that the customer experience was upheld. Conclusions It can be noted that under Schultz, Hofstede’s cultural dimensions were adhered to which resulted in better employee relations, the company’s foray into the youth coffee market in France, the growth of the company into new target market areas. These changes sweeping changes under Schultz, who played a pivotal role in their adoption, have helped fuel the growth of Starbucks to the reputable company it is today. The company has involved itself in a lot of corporate social responsibility. This means that a lot of people and organizations have benefited a lot from the initiatives that Starbucks has been involved in. This has seen the employees get health coverage and the improvement of their wellbeing through the stock options that are offered. This not only helped improve the employee’s welfare, but it also solidified the employer-employee bond. On the surrounding environment, the initiatives have enabled the company to make many improvements. On the one hand, literacy in these surrounding communities was improved. Other equally noble activities such as campaigns to alleviate violence in the community and also looking into the plight of the victims of violence have gained a boost thanks to the efforts of Starbucks. This has created a lot of goodwill, and, as a result, sales have been enhanced. Outside America, the developing world has gained from funds coming from Starbucks (Thompson and Gamble 1997). The value of this company is, therefore, immense, and its impact on the surrounding communities is equally invaluable as has been shown above. Bibliography: Hill, C. W. L. and Jones, G. R., 2012. Strategic Management Theory: An Integrated Approach. Ohio: South-Western Cengage Learning. Hofstede, G., 1998. Masculinity and Femininity: The Taboo Dimension of National Cultures. California: Sage Publications. Piepenburg, K., 2011. Critical Analysis of Hofstede’s Model of Cultural Dimensions: To what Extent Are His Findings Reliable, Valid and Applicable to Organizations in the 21st Century? Santa Cruz: GRIN Verlag. Thompson, A. A. and Gamble, J. E., 1997. Starbucks Corporation. Columbus: McGraw-Hill Companies. Accessed on 26th August 2012 from: http://www.mhhe.com/business/management/thompson/11e/case/starbucks.html. Thomson, N. and Baden-Fuller, C., 2010. Basic Strategy in Context: European Text and Cases. West Sussex: John Wiley & Sons Ltd. Read More