Starbucks Strategic Management

Starbucks Strategic ManagementThe Strategic Management provide an indepth knowledge of the subprogram for developing and enacting bank line plans to reach a long- status goal that takes into account the internal variables and external factors in the business environment. It encompasses an integrated, future orientedmanagerial perspective that is come onwardly focused, forwards thinking and surgery based.Strategic managers identify long-range targets, scan their operating environment, evaluate theirorganization structures and resources, match these to the ch every last(predicate)enges they face, identifystakeholders and build aloneiances, prioritize and plan actions and guess adjustments to fulfillperformance objectives over time. This module pass on provide detailed explanation on how thebalancing of strategic precautions outward, inward and forward looking functions would beused to develop a vision and strategies to move forward. The five key facets of strategicmanagement namely, goal put inting, strategy analysis, strategy formation, strategyimplementation, and strategy monitor will be introduced in stages. These be the integralelements that, when applied in concert, would distinguish strategic management from lesscomprehensive approaches, such as operational management or long-term planning.In 1971 Starbucks opened operations in Seattles Pike Place Markets with the future aim ofproviding coffee berry tree to a number of restaurants and surrounding bars. With the recruitment ofHoward Schultz who led the marketing and retail efforts of Starbucks.* In 1982, the troupe as well ask a change in direction through the views of Schultz, who later onvisiting Italy tried to adapt the equal principles in order to a strong bar culture. Schultz thenutilized Starbucks ability to provide quality coffee beans and opened up a current lay in called IlGiornale, which brewed coffee from these set forthicular beans.* In 1987, Giornale had decided to take ov er the assets of Starbucks and overly, nurture changedits name to Starbucks Corporation. By the end of the year, Starbucks had increased the numberof stores to 17 and furthered its location span by come in Chicago and Vancouver.* In 1990, the company took further steps forward with refinement of the Seattle headquartersand an increase in resources with the rise of a new roasting plant. Relationships and otherwiseventures also took off during the early nineties as the company looked to studyorganizations to further its progress.*In 1995, the company very established its name with the opening of the 676th store as wellas increasing the products in store with the appendage of compact discs a result of a previouslypopular experiment with in-house music.* In 1996, the company kept on stretching its reach by entering into the market of Japan,Singapore and Hawaii. This was achieved through correlative ventures including the one(a) formed withSazaby Inc., which pushed through the development of coffee houses in Japan.In 1971 Starbucks opened operations in Seattles Pike Place Markets with the future aim ofproviding coffee to a number of restaurants and surrounding bars. With the recruitment ofHoward Schultz who led the marketing and retail efforts of Starbucks. In 1982, the company took a change in direction through the views of Schultz, whoafter visiting Italy tried to adapt the resembling principles in order to a strong bar culture.Schultz then utilized Starbucks ability to provide quality coffee beans and opened up anew store called Il Giornale, which brewed coffee from these particular beans. In 1987, Giornale had decided to take over the assets of Starbucks and also, furtherchanged its name to Starbucks Corporation. By the end of the year, Starbucks hadincreased the number of stores to 17 and furthered its location span by entering Chicagoand Vancouver.* In 1990, the company took further steps forward with expansion of the Seattle headquartersand an in crease in resources with the opening of a new roasting plant. Relationships and otherventures also took off during the early nineties as the company looked to developmentorganizations to further its progress.*In 1995, the company significantly established its name with the opening of the 676th store as wellas increasing the products in store with the addition of compact discs a result of a previouslypopular experiment with in-house music.* In 1996, the company kept on stretching its reach by entering into the market of Japan,Singapore and Hawaii. This was achieved through joint ventures including the one formed withSazaby Inc., which pushed through the development of coffee houses in Japan. authoritative detailThe current international situation for Starbucks seems to be an emerging part of their businessand the reorganization of this is proved by their aim to become a leading spherical companythrough qualification a difference in peoples lives all around the world. This goal is quite close tobeing achieved as proved the Starbucks current locations in international markets and the achieverfulness of these ventures. The current countries in which Starbucks argon located in argonAustralia, Bahrain, Canada, Hong Kong, Israel, Japan, Kuwait, Lebanon, Malaysia, NewZealand, Oman, Peoples Republic of China, Philippines, Qatar, Saudi Arabia, Singapore, SouthKorea, Switzerland, Taiwan, Thailand, United Arab Emirates, Egypt, United Kingdom, and theUnited States.Current performanceOverall, the aim of becoming a worldwide global brand seems to be take ining in favor of thecompany and is helping it to attract the financial aid of numerous major companies who would like tosh are a partnership. This is all positive news for the company because it provides a strong basisfor future development of international markets, which further strengthens the mission tobecome one of the leading specialty coffee retailers in the world.However, the net revenuesincreased 3 percent to $2.5 one million million for the fourth quarter of 2008, compared to $2.4 billion forthe fourth quarter of 2007. For the 13-week period ended September 28, 2008, Starbucksreported net income of $5.4 million, which included $105.1 million of restructuring chargesand other transformation strategy costs. Net income was $158.5 million for the same period ayear ago. The company actions announced in July of 2008 to close approximately 600company-operated stores in the U.S. and 61 company-operated stores in Australia, and reduceapproximately 1,000 open and fill positions within its leadership structure and non-storeorganization.Strategic posture1- missionTo inspire and nurture the human spirit- one person, one cup, and one neighborhood at atimeThe mission of Starbucks is to establish Starbucks as the premier purveyor of the finest coffeein the world while honouring our uncompromising principles while we grow.None of this success would have been executable without a set of goals that t he company aimedto achieve and a set of principles, which governed the decision making process. The sixprinciples of Starbucks are stated as1-Provide a great work environment and treat each other withrespect and dignity.2-Embrace diversity as an requisite component in the way wedo business.3-Apply the highest standards of excellence to the purchasing.4-Roasting and fresh rake of our coffee.5-Develop enthusiastically satisfied customers all of the time.6-Contri unlesse positively to our communities and our environment, and recognize thatprofitability is essential to our future success.Application of these principles can be used as a guidepost for all employees from managers toworkers to aim to achieve the companys goals, while maintaining a certain type ofstandard. However, the net revenues increased 3 percent to $2.5 billion for the fourth quarterof 2008, compared to $2.4 billion for the fourth quarter of 2007. For the 13-week period endedSeptember 28, 2008, Starbucks reported ne t income of $5.4 million, which included $105.1million of restructuring charges and other transformation strategy costs. Net income was$158.5 million for the same period a year ago. The company actions announced in July of 2008to close approximately 600 company-operated stores in the U.S. and 61 company-operatedstores in Australia, and reduce approximately 1,000 open and alter positions within itsleadership structure and non-store organization. This mission statement along with the set ofguidelines provides a focus for employees as they make strategic decisions. It non but supportsthe employees, but supports the customers as well, making a note that they should be satisfiedall of the time. The mission shows alignment with the vision by stating how the company plansto reach the broad goals set by the vision statement. Another supporting sentence in the missionstatement is that the company applies the highest standards of excellence to the purchasing,roasting and fresh delivery of its coffee. This statement supports the stem thatStarbucks usesthe best forthcoming resources to give it a recognized and respected name.Objectives StrategiesHere are the following objectives ofStarbucksOur umberIt has always been, and will always be, about quality. Were enthusiastic about ethically sourcingthe finest coffee beans, roasting them with great care, and improving the lives of people whogrow them. We care deeply about all of this our work is never done.Our PartnersWere called partners, because its not just a job, its our passion. Together, we embracediversity to create a place where each of us can be ourselves. We always treat each other withrespect and dignity. And we hold each other to that standard.Our CustomersWhen we are full moony engaged, we connect with, laugh with, and uplift the lives of our customers even if just for a fewer moments. Sure, it starts with the promise of a perfectly madebeverage, but our work goes far beyond that. Its really about human co nnection.Our StoresWhen our customers feel this sense of belonging, our stores become a haven, a rend from theworries outside, a place where you can meet with friends. Its about enjoyment at the speed oflife- roughlytimes slow and savored, sometimes faster. Always full of humanity.Our NeighborhoodEvery store is part of a community, and we take our responsibility to be good neighborsseriously. We want to be invited in wherever we do business. We can be a fury for positiveaction- bringing together our partners, customers, and the community to contribute every day.Now we see that our responsibility-and our potential for good-is even larger. The world islooking to Starbucks to set the new standard, and again. We will lead.Our ShareholdersWe know that as we deliver in each of these areas, we enjoy the kind of success that rewardsour shareholders. We are fully accountable to get each of these elements right field so that Starbucks-and everyone it touches-can endure and thrive.From all what mentioned above that Starbucks is aiming to success through quality of product,diversify in business and place, to satisfy customers and shareholders, through pleasant andnice world nearly to everyone.Financial AnalysisThe general financial performance for Starbucks in 2008 was declining from the previous yearsdramatically. The following analysis will show this fact.Investment Returns % community IndustryReturn On equity 12.6 25.8Return On Assets 5.6 13.2Both the ROE and ROA are lower than the industrys average, which means that the companyis not using some(prenominal) the equity and their assets properly to increase their revenue.Profit margins % Company IndustryGross Margin 16 27Pre-Tax Margin 4.4 13.2Net Profit Margin 3.03 8.5Starbucks margins are lower also that the industrys average,especially in 2008 where the net profit margin reduced to 3.03 from 6.3 in 2007.Financial Condition Company IndustryDebt / Quity Ratio 0.4 0.46Current Ratio 0.8 1Quick Ratio 0.48 0.7Starbuc ks generally manages their debs and liabilities wisely, and this considers a financialstrength for the company.Year 2008 2007 2006 2005sales 10383000 9411497 7786942 6369300Net income 315500 672638 564259 494467Corporate presidential termBoard of conductorsAs part of Starbucks mission they are committed to maintain their uncompromising principleswhile they grow. In this regard, their Board of Directors has adopted governance principles andcommittee charters to lead Starbucks governance practices. Currently, the panel has 9directors, a substantial majority of whom meet all of the independence requirements ofNASDAQ and the U.S. Securities and Exchange Commission. Of the nine members ofStarbucks board, one is Latino, two are African American (one of which is female), and oneother female also serves on the board. Starbucks president and CEO Howard Schultz chair theboard.In Starbucks there are well-defined criteria for the selection of new board members, maidenbeing a clear demonstrat ion of their own personal integrity and ethics. Board diversity issought in terms of members personal and professional backgrounds, gender, race, ethnicity orother differentiating characteristics, enabling a wider range of opinions and perspectives to beconsidered. This criterias of selection affected the company in a very good way that gave it theopportunity to copy in the international market. That the diversified background, education,culture and gender in the board was one of the greatest Starbucks strong points.There are trinity committees of the board are comprised of independent directors and havespecific charters Audit and Compliance,Compensation and Management Development andNominating and Corporate Governance. In November 2007, the board amended thecompanys bylaws to include majority voting to allow shareholders to lead a more meaningfulrole in the election of directors. Director nominees must receive more for than againstvotes to be elected in an uncontested election. Additionally, the term of a nominee who doesnot receive a majority of the votes cast will end on the earliest of either (1) 90 days after thedate election results are certified (2) the date the director resigns or (3) the date the board ofdirectors fills the position. This change demonstrates Starbucks ongoing commitment to strongcorporate governance practices.Shareholders and partners (employees) can provide recommendations and feedback to theboard through the Business Conduct Helpline and the Audit line. In addition, writtencorrespondence can be sent to the board, an individual director or to any of Starbucksindependent board committees.Committee charters, governance principles, director nominations policy (including criteria forboard membership) and profiles on each board member are available in the corporategovernance section of Starbucks.com.Starbucks formed a constitution Governance Council in fiscal 2006 to oversee and approvegovernance tools at the global enterprise level, and to ensure they are well-defined, consistentwith each other, current, stored for easy retrieval, and effectively communicated to partners.The Council is comprised of company leaders who represent multiple business units andfunctions, and is supported by Starbucks Policy Office and staff.Starbucks stakeholders includepartners (employees), customers, suppliers, farmers, shareholders, governments, communitymembers, environmental groups, activists and many others. The company engaged them to beable to understand their concerns and gain their input on topics of mutual significationance. outer surroundOpportunities and ThreatsStarbucks international operation was one of the major aspects of their success. , in the mid1990s, with the market reaching saturation, Starbucks could no longer depend on the U.S.market for growth. To maintain its growth rates and to boost revenues, Starbucks had toventure abroad. Starbucks international presence is now in more than 25 countries and theUnited S tates of America. This presence is formed in three modes in gate that are Jointventure, licensing and wholly ownedsubsidiaries. This became a burden on the mother company in a later stage. That those types ofentry moods need a lot of training, supervising, management assistance and technology transferfor the partner. This is along with inability to engage in global strategic coordination. However,the success of Starbucks is not only to its aggressive expansion but also to its productinnovation. Starbucks came out with new products to attract customers on different periods.Also diversification was one of the factors that Starbucks started to present even on a smallinitiated base. That along with serving coffee, Starbucks also sold merchandise. In 1995, itstarted selling CDs of its famous in-house music program. It also entered into alliances withvarious players such as Canadian Airlines, United Air Lines, Starwood Hotels, and Barnes Noble, Inc., to serve Starbucks coffee.Michael Po rters five forcesMichael Porter defines five forces impacting a firms competitiveness- threat of substitutes,threat of new entrants in the industry, bargaining antecedent of suppliers, bargaining power ofcustomers, and the intensity of competition within the industry. A firms strategic decisions torespond to these five forces are a source of risk also.The company is veneer a real threat of substitution from many other companies that producingthe same product that is satisfying the same need. This is in its domestic market and even in theinternational market specially Europe and Middle East.Also Starbucks is facing a real problem of rival competition collect to its uncompetitive equipment casualty allover the world and even in its domestic market.Also the taste of Coffee had been judged by customers as an artificial taste especially in Japan.Suppliers bargaining power is really represent a threat for Starbucks. That they decided to hired manwith a 51% women or minority owned supp liers. Also they are not dealing with suppliers whodont follow the same environmental ethics that are for Starbucks. This may lead themto lose a good opportunity or deal with a supplier that they will not deal with him. Also dealingwith small suppliers instead of dealing with limited number of big power full suppliers is notgiving them real good deals for facilities and prices.Societal EnvironmentEconomicsEconomic factors are an importeeant aspects that concern the nature and direction of theeconomy in which a firm operates Starbucks also faced criticism from Non GovernmentalOrganizations(NGOs) that urged the company to acquire certified coffee beans,ensuring that those coffeebeans were grown and marketed under certain economic and social conditions. Furthermore,Starbucks faced problems due to economic recession in countries such as Switzerland,Germany, and Japan in the early 2000s, where it experienced declining sales and revenues.Moreover, a real expectation of huge recession dur ing the next year due to the worldwidefinancial crisis may affect the companys results badly.TechnologicalStarbucks is continuously searching for ways to intermit a customersexperience. With theintroduction of the Starbucks account for example,the Company has created the opportunity to improve customer service, shorten lines and makea customers visit at Starbucks quicker and more convenient. close to if not all Starbucks locationhas WI-FI for consumer needs.Political/LegalIncreasing tensions between the United States and the rest of the world, the businessenvironment, especially in the Middle East and southeasterly Asia, was becoming increasinglyvolatile. After U.S. declaration of war on Iraq in early 2003 matters became worse for thecompany. This created serious problems for Starbucks. In July 2002, Arab students called for aboycott of American goods and services, due to the alleged close relationship between theUnited States and Israel. The boycott targeted U.S. companies incl uding Starbucks, BurgerKing, Coca-Cola and Estee Lauder 2-In addition to these incidents, Starbucks topped the list ofcompanies to be boycotted due to Schultzs alleged closeness to the Judaic community. Tillnow in the Arab countries Middle East a lot of rumors that Starbucks is sponsoring theJewish community against Palestiniancrises. Due to increasing security threats, Starbucks closed shine its six stores in Israel.Starbucks had two class action suits pending since 2001. The lawsuits entitled Carr vs.Starbucks and Sheilds vs. Starbucks are challenging the status of Starbucks California storemanagers and assistant managers as forgive employees under California wage and hour laws.Starbucks is denying all liabilities in these cases, however the company has agreed to thesettlement in order to take care of all of the plaintiffs claims without having to get involved inany protractedlitigation.Starbucks only imports all their coffee beans, so possible threats could include a change i nimport laws. A change in the status quo as far as imports go could greatly affect numerousareas of production for the company. For example, if it costs more to import or the process ismade more awkward the result could ultimately be a change in price, which would affect thelevel of consumption for Starbucks coffees. fond/CulturalEnvironmental Mission Statement(Starbucks is committed to a role of environmental leadership in all facets of our business)As a result of Starbucks close following their objectives, the companyhas installed a list of principles that further outline the companys willingness to make sure thatits affect on the environment is as positive as possible. These principles are stated as1-Understanding of environmental issues.2-Sharing information with our partners.3-Developing innovative and flexible solutions to bring about change.4-Striving to buy, sell and use environmentally friendly products.5-Recognizing that fiscal responsibility is essential to our environme ntal future.6-Instilling environmental responsibility as a corporate value.7-Measuring and monitoring our progress for each project, and encouraging all partners toshare in our mission.Those can only be seen as a positive for the image of the company and shows that they arewilling to utilize their resources in order to more than satisfy requirements.Task EnvironmentNot only this but also, Starbucks organizing activities such as neighborhood clean-ups andwalk-a-thons. Many examples are available on the web site of the company.Policies that also have been implement are the buying policies, which only allow thecompany to purchase from those other businesses (suppliers) who follow the sameenvironmental strategy as Starbucks.This may push the company to lose an opportunity of good deal, because the supplier doesntfollow the company environmental policiesFinally, to integrate these policies to newemployees, Starbucks has employed the services of a few partners which congregate togetherto create a Green Team, which installs the environmental views into trainees as well ascoming up with inventive ways of helping the environment.Summary of External factors TOHowever, it was plunge that the success of Starbucks was due to its profitable domesticoperations. It was reported that most of Starbucks international operations were running intolosses. In May 2003, Starbucks Japanese operations reported a loss of $3.9 million (Japanconstituted the largest market for the company outside the United States), and the companyalso performed badly in Europe and the Middle East. Analysis pointed out that Starbucksinternational operations were not as well planned as its U.S. operations. It was also observedthat the volatile international business environment made it difficult for the company toeffectively manage its international operations.Internal Environment Strengths and WeaknessesCorporate StructureStarbuck has no formal organization chart and does not work with power structure st ructure. Itconsists of to main departments, functional department consists of marketing, supply chain,operations, financeand human resources, and cross functional teams, consisting of local store marketing andmarketing campaigns. The decision making process in Starbucks is bottom up process, wherethe employees are empowered even to take decisions without referring back to themanagement. There is a conflict in the corporate structure where some employees are reportingto two different divisions which in some cases causing confusion and over lapping.Corporate cultureThe Chairman of Starbucks, Schultz decided to treat employees as family, and called thempartners. Both full time and part time employees could benefit from training and healthinsurance. Starbuckspaid some more salaries than competitors to gain highly qualified employees.Starbucks relied on its baristas and other frontline staff to a great extent in creating theStarbucks Experience which differentiated it from competitors.E mployees had option to stock chare according to their base salaries.Also Starbucks had shared determine with their employees who made them proud to work in suchsuccessful company, and this created good culture. Schultz decided also to be open and honestwith his employees, and let them share in the decision making process. He gave extensivetraining to employees especially barista employees to give careful attention to customers.Environment was important to Starbucks. Using this concept Starbucks gave good attention totheir suppliers by helping them technically and financially as part of their corporate socialresponsibility. Also it encouraged all partners to share in the companys mission. Starbuckshas deep understood knowledge, which is difficult to be imitated by competition.Functional strategiesMarketingThe main marketing strategy and position for Starbucks is for customers to consider it as theirplace after home and work, this will guarantee customers visiting the shops several times.However it alsocustomizes its positioning for each store individually according to the specific location it is in.Another important part of Starbuckspositioning over competition is that they are environmentally friendly. Starbucks does notgenerally offer promotional prices on its products. It has a reputation for having pricey drinksfurthermore, Starbucks brand is too expensive. The company mainly depends on the brand fortheir high revenues, which could be risky from competition. However it seems to be the marketleader when it comes to new products and ideas.Starbucks has found more success advertising on a local level rather than to the nation as awhole. The Company advertises a lot through print mediums, as Starbucks target market tendsto be educated people who do more reading than the average person. In 2005, Starbucks spent$87.7 million on advertising, or 1.4% of revenues. Starbucks also market itself asenvironmentally friendly and focus on its corporate social responsibil ity, one example isbuying Ethos-Water Company and they also plan to give $ 10 million to help countries underdeveloped lacking clean water.RDThe RD role in Starbucks is to make a RD mix and mainly consists of the followingactivitiesCoffee ScienceNew TechnologyEquipment TechnologyProduct DevelopmentMenu DevelopmentCoffee Quality AssuranceSensory ScienceThe introduction of the Starbucks Card for example, Starbucks has created the opportunity toimprove customer service, shorten lines and make a customers visit at Starbucks quicker andmore convenien. Starbucks is continuously searching for ways to better a customersexperience. The company spent 7.2 Million in 2008 for new technologies related to food andequipment.Operations and logisticsThe main operation for Starbucks divided into local operation in ground forces and internationaloperation. Starbucks depended mainly on their employees to manage operation, thats why theyfocused on training employees as they are the main asset in the c ompany. They are managingall stores in USA, however, they are in the international operation sometimes manage theirstore, or give licenses, or get into joint ventures with existing companies.But they focus on their operation on the quality of their coffee Starbucks deals withinternational small suppliers. Starbucks made good deals with their suppliers to supply coffeewith fixed prices rather than using the honorable Trade Coffee.They mainly use non-smoking restrictions in their stores, however in some countries becauseof culture conflicts they had to have either smoking rooms or smoke areas in the air. One of themain advantages Starbucks has is the accumulative experience of their employees in operation,this is due to the low turn over they have and their focus on employee satisfaction.Human ResourcesStarbucks paid appreciable attention to the kind of people it recruited. So the company hiredpeople for qualities like adaptability, dependability and the ability to work in a team. S tarbuckswas one of the few retail companies to