Strategic Analysis of Starbucks Coffee Company - Case Study Example

? Strategic Analysis of Starbucks Coffee Company 3 February Strategic Analysis of Starbucks Coffee Company Description and Size of Organization As coffee started to be introduced in European world, it was known for both its taste and its sociability. A concept of coffee houses became prevalent all over the Europe. Crossing the Atlantic Ocean in the mid of seventeenth century, coffee replaced beer and became the New York’s favorite morning beverage. Coffee has played a vital role as a beverage in the history of America. Howard Schultz, CEO of Starbucks, saw a world of opportunities and therefore came up with a distinct coffee brand and named it as Starbucks. In 1986, Schultz founded Starbucks in Seattle, Washington. The ambition plan of Schultz experienced tremendous success. He had this vision, which was quickly materialized. Schultz believed that many entrepreneurs have failed because of not having proper systems and planning to ensure the basis of implementing their entrepreneurial visions. The company met with its turning point in 1990s when a large number of customers in Chicago, Los Angeles and San Francisco started drinking coffee of Starbucks regularly. In this way, Starbucks began to experience long awaited benefits of word of mouth and traditional marketing campaigns. Employees played an important role in affecting the sentiments of the consumers. Consequently, Starbucks began to put more emphasis on satisfaction levels and employee morale. Since 1993, Starbucks began to continue aggressive expansion and due to such expansion, the company now operates more than 15,800 outlets internationally, which involves contribution and participation of around 140,000 employees. The annual revenue of the company grosses $9.4 billion. Starbucks competes with number of rivals. They come from both, within the specialty market of coffee retailers as well as outside the coffee specialty market. Some major competitors include Peet’s Coffee, Tully’s coffee, Caribou Coffee, Seattle’s Best Coffee and some small chains. Outside coffee specialty market, include Dunkin and Donuts, Folgers, Proctor and Gamble, McDonalds etc. Starbucks leverages its premium quality coffee, customer loyalty, employee retention and homely environment of its stores, which fend off the rivals. Starbucks’ Mission Statement Mission statement is a concise and brief statement, which determines the mission of the company or in other words, what the company values. Nowadays, every organization, big or small, formulates a mission statement, which translates the purpose of existence of the company. The mission statement of Starbucks states that; “Our mission is to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” According to Lao (2001), a good mission statement has 9 major components. They include: i. Product ii. Customers iii. Concern for employee iv. Philosophy v. Concern for survival vi. Self concept vii. Concern of public image viii. Location ix. Technology (Lao, 2010, p. 79) The company mentions how it lives its mission statements. It is highly concerned to delivering premium coffee. In addition to that, it values its partners, which are not only its legal partners but are all of its employees. Moreover, it values its customers by providing them first class customer experience. A mission statement is set to be a ‘complete’ mission statement if it shows concern for all the above-mentioned elements. The mission statement of Starbucks is somewhat precise and does not incorporate all the above-mentioned components. The HR of the company has profoundly emphasized the importance of customers (human spirit) but other stakeholders have been neglected. Even if it does not incorporate other secondary elements such as location, self-concept, philosophy and technology, yet HR department must show their concern for the survival, employees and public image of the company, which are integral components of a mission statement. HR Challenges facing by Starbucks In January 2005, Starbucks was rated as one of the best companies to work for. The reason behind such success of the company was its awareness that committed and motivated employees, which are key drivers behind the success of any company. Just a “Starbucks Experience” differentiated the employees of the company from its competitors. The phenomenon upon which the recruitment at Starbucks is conducted says “right people hiring the right people.” The core competencies of the employees lie in teamwork, adaptability and dependability. The company invests a large amount of budgets on training its employees. The training sessions includes rendering positive customer experience, coffee making skills and basics of retail business. Training is different for frontline employees and managers. The roots of the training program lies in a philosophy, which says “treat people like family and they will be loyal and give their all.” Starbucks has been known well for its relation and concern of for employees. The company has undergone very low employee turnover, which has also been proven by Fortune’s List of “Best Company to be worked with”. Starbucks also ensures that good wages are provided to employees since monetary factor is most important in motivating employees. Despite of being renowned due to its employee management, the biggest issue, which Starbucks faces, is diversity issues, which centers on people. According to Kuchinad, “If you take a moment and think about our workforce, we are a microcosm of United States for sure, but maybe even the world.” It is an ongoing struggle to keep such a varied group happy. “A high proportion of the company’s employee is under 25, which is highly diversified as well. How the company attracts them and meets their distinct needs is one of the biggest human resource challenge,” says Kuchinad. This challenge becomes even more significant in an age where there is ongoing battle among youngsters for talent rages and which continues to get harder with each passing year. Another issue, which the company faces, is low chances of growth. Many frontline employees leave the job because of not having future job security and continuity in the company. Frontline employees, who are serving the customers, must be given full surety that even in future they will be working with the company with chances of growth. Kuchinad clearly explains how efficiently the company tackles its biggest HR challenge, of keeping together such a large group of people. Starbucks not only keeps its employees happy but ensures that they stay committed and motivated with the organization. In order to do so, the company implements varying HR strategies. The company invests a great deal of thought in ensuring that all its partners (employees) are trained well and are engaged in their respective work. Coming towards the second issue, the company must make the frontline employees to feel that there is job security in the company. They must feel that they are an integral component of the organization. A large number of frontline employees are students, which work part time in the company. Therefore, the company must greet their frontline employees in the corporate positions of the company when these students have completed their qualifications and meet the requirements of the job. They must be given an edge over others, because of already have worked with Starbucks. The effectiveness of HR strategies depends upon how well the departments perform their duties. Looking at Starbucks, it can be said that the HR of the company is efficient in promotion, recruitment and catering for welfare of their workers. Apart from that, the company actively participates in training of employee’s development. When company sustains good relation with employees, they ultimately develop close relation and friendliness with customers. It can be concluded that health treatment of employees at Starbucks has translated to health relationships with customers, which leads to long-term relationship with customer and is called as customer loyalty. Reference Sheet Kuchinad, C.(n.d.). In challenging times you dig in deep, you stick to your values and you do the right thing. You take care of your people and that’s what we do. Retrieved from: http://www.hrmreport.com/article/In-challenging-times-you-dig-in-deep-you-stick-to-your-values-and-you-do-the-right-thing-You-take-care-of-your-people-and-thats-what-we-do/ Hinkin, T.R and Tracey, J. B. (2010). What Makes It So Great? An Analysis of Human Resources Practices among Fortune’s Best Companies to Work For. Cornell Hospitality Quarterly, 51(2), 158-170 Lao, F. (2001). Marketing Management. Florentino: Rex Printing Inc. Larson, R.C. (2008). Starbucks a Strategic Analysis. Retrieved from: http://coe.brown.edu/documents/StarbucksaStrategicAnalysis_R.Larson_honors_2008.pdf Starbucks. (n.d.). Our Starbucks Mission Statement. Retrieved from: http://www.starbucks.com/about-us/company-information/mission-statement Read More