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Starbucks is a coffee producing company that came into inception in 1971, in the streets of Washington. It is 20 years later that the company became the first privately owned company in the United States that offer coffee products. It is Starbucks mission to inspire and bring up the free human spirit. The company thrives in food processing industry, and hence, everything is about quality. Starbucks are often very passionate about availing the best coffee products in the markets. They are passionate about treating everyone with respect and dignity, which explains why one of their main objectives is to provide the best coffee to their consumers. Starbucks insists on giving their clients drinks of the best quality. It is presumed by the entire Starbucks staff that it is more than just the coffee, it goes beyond that. It is about human connection at different levels beyond the physical. The company also makes great emphasis on positive relations with its employees and makes it a favorable place of work. It provides so many benefits, like full health insurance, days off as well as better payment terms. This ensures employee satisfaction, creating a sense of belonging. Starbucks also donates to the non-profitable or charitable organizations. This is as estimated ten dollars for every hour worked by its employees. The extra profits are channeled into services that benefit the employee, like footing their gym bills, paying for their training, where they travel to new coffee production sites and pick one or two applicable things. It is also, the companies’ mission to increase the value of their shareholders by making sure that their returns are worthwhile. They encourage accountability when issuing dividends to their stakeholders as well as publish their annual performance analysis.
Starbucks also has ensured that their clients get the privilege to get their coffee in stores near them. It also provides its venues to the public for meeting over a cup of their exquisitely produced coffee. The core competencies of the company lie firstly in its human resources. The company highly regards its employees by giving them benefits and providing them career-enhancing opportunities, like offering trainings. The coffee Starbucks is highly acknowledged all over the world, which is an intangible resource. It has a good reputation. It also runs a chain of coffee houses, which is also a competence linked to the company.
Various issues are involved in the strategic planning. First is mission statement. This defines what the organization plans to do, how it will do it and for what benefits. It actually addresses the “what” questions. It states the preferred future of the organization. It creates a reference centre for all the major decisions. Secondly is the strategic analysis. It is a thorough analysis of all the factors that have an impact on the existence of the business in the near future. It is, therefore, very important to unearth all the relevant information regarding the business and make sound judgments that will see a gradual improvement in the financial placement of the company. This makes use of tools like the SWOT analysis, PESTEL analysis as well as the value chain analysis. These are important tools, when carrying out an analysis. The third step is the strategy formulation. It focuses on how the company will get to where it should be from its current placement. It addresses the key issues that face the organization in accomplishing its stated missions and objectives. Next is setting the long-term objectives. These statements tend to move the organization closer to its mission. Then finally, is the implementation stage. This, where a comparison between the current and proposed plans, are compared and contrasted. They are closely scrutinized and the major changes are brought by the new plan are foreseen and accounted for. These are, with regard to financial implications, changes in organizational structure, it should necessitate as well as many other issues later discussed in this paper (Campbell, Stonehouse & Houston 2002).
There are different strategic planning techniques that Starbucks can use in its strategizing. There is the first technique known as the PESTLE analysis. This tool can help an organization in accurately foretelling the future of the environment in which it thrives. These are the immediate external factors, affecting the organization, which influence its success or failure. The P stands for political, E economic, S social, T technological, L legal and E environmental factor. Political factor includes issues like taxation policies, deregulation, international trade regulations and tariffs, government stability as well as international stability and employment laws. Economic factors are issues regarding the interest rate, the general rate of economic growth, current inflation rates and competitors pricing. Social factors include income distribution, population demographics, working conditions, location, and age distribution. Technological issues involve IT development, new materials and processes, software upgrades and the rate of technological changes. Legal factors involve the employment laws, trade and product restrictions, and health and safety regulations. Environmental concerns are those that involve pollution problems, work disposal and environmental pressure.
There is yet another efficient tool for strategy planning. It is known as SWOT analysis. S connotes Strength, W weaknesses, O opportunities and T threats. Strengths are those organizational factors that the company are the best in, and contribute to its good performance. Weaknesses are those factors that tend to compromise in its mission attainment venture. They are obstacles that have to be worked on. Opportunities are the avenues that provide a chance to the business to thrive and trade well in its area of specialization. Threats are the situations that are harmful to the business and affect its existence in the end. There is also the value chain tool for strategic planning. It evaluates the whole value chain system, which deal with supplier chain value, firm chain value, as well as buyer chain value. It serves to ensure an element of value in everything that the company undertakes, and being it with its clients or the stakeholders. These are vital links in the creation of companies’ products or services.
These tools or better techniques help in providing an organizational audit of Starbucks. I will begin with the SWOT analysis. Starbucks has a couple of strengths that are so obvious. It has an excellent product diversification, well known to many as the product mix strategy. It deals with a variety of coffee brands to caked items as well as compact discs. Its brand is also a well-developed one that has a copyright and patents. It operates many company-operated stores around the world, in places that are very visible to their customers. This is also strength.
When it comes to its employees, the company treats them with dignity, which makes them feel valued and is motivated to produce better results in their places of work. Starbucks also develops and maintains high standards of relations with its clients. This ensures a customer’s repeat purchase. The company is not a franchise but privately owned. This is an advantage in itself. The company also boasts of diverse distribution channels, which are inclusive of the grocery stores, convenience stores as well as departmental stores. It would be impractical to say that Starbucks has no weaknesses, since it is not an independent entity. Evidently, the coffee outlets are overcrowded due to aggressive growth strategies, which have lead to cannibalization of profits and sales. The company also has overdependence on coffee and coffee related products. This is not healthy at all. It has also over relied on the United States Markets, instead of venturing into other underserved markets. The company has allies, through which it can improve its business involvement. These are the opportunities, which include worldwide resources for their exquisite beans. It has also good contact with foreign exporters. Starbucks also has the opportunity to expand globally to markets that they have not exploited yet (Blumenthal 2007).
The company has threats that include saturation in the coffee market. This comes from stiff competition from nationally acknowledged brands as well as the new entrants in the market of coffee production. The current economic recession is a major threat that cannot be overlooked. The choice of consumers to use less of caffeine is also a threat, since many clients are lost due to health issues. There are political issues, affecting Starbucks. These include taxation, in which case Starbucks pays more when buying coffee from countries that impose high taxes on coffee products. International stability also affects the company, like the way its sales slumped after the 9/11 attacks.
The employment laws also affect the legal entity and the way it associates with those it employs. Economically, the rate of growth also affects the company, since a slow economic growth denoted low disposable income, making that cup of coffee a luxury and not a necessity. This affects the sales. Inflation rates also affect the company. A high inflation rate means a high cost of acquiring raw materials, which reflects in the price increment by the organization. This affects the business. Competitors pricing is also an issue of discussion. This affects the companies’ price list for it to maintain their share of the market. The exchange rate also affects the company in international dealings, since they import and export their products. A high exchange rate translates to fewer earnings. Legal forces affect on how the company operates. An increase in the import would greatly affect the companies’ pricing. Technological advancement is one of the factors too. The rate of technological advancement affects the way the company produces its coffee by replacing the old techniques with new ones as well as installation of new machines to match the production changes. This also affects the company. This encompasses the software upgrades that will require replacement. There are environmental factors to be considered. They include pollution. This affects how the company operates, since it has to keep its pollution levels within certain limits, above which the company would be forced to shut down (Baye 2000).
Starbucks also has a value chain system. The firm’s value chain system consists of the firms planning, quality control, information management and finance. This is where the quality of coffee is insisted. In human resource management, the company provides its employees with good and ample working conditions. They offer good wages too. They also ensure job security. As to the technologies, the company has also embraced the use of the internet, where it has a website that enables clients to order and pay for their products on the internet. It also uses software for efficient inventory management. On the services, this deals with how Starbucks staff deal with their clients. Starbucks makes emphasis on good customer treatment through friendliness and efficiency of the staff while delivering the companies’ products. Starbucks uses this to purchase their products. The company generates an idea of the target market needs, if, for example, its students, and step in to provide customized solutions. It uses this strategy when obtaining retailing sites. On the customer value chain, Starbucks ensures that there is a value in the product, the customer gets. This ensures that its quality products are delivered with high standards, in such a way that the client will get value for the money spent. This is the customer value chain.
Starbucks also has improved on operations. It has improved on its marketing and the clients are actually coming to buy the coffee right from where it is produced. Starbucks also gives some home brewing tips on how to select the best beans, how to effectively grind them, what machines to use and the mixing processes. This has added the value to the companies’ services. Starbucks organization is divided on the functional and product divisions. It avoids a hierarchical structure that is hard to maintain the chain of command. This has also benefit to their organizational business undertakings (Mondy, Noe & Gowan 2005).
In providing an environmental audit, I will begin with competition. A large number of competitors are selling high quality beverages at a lower cost. This has attracted some of Starbucks customers, which has adversely affected the companies’ sales. In 2008, McDonalds introduced the McCafe where customers could purchase espressos and cappuccinos at a relatively lower price than Starbucks. This influenced negatively on Starbuck, since clients found a product of the same quality but at a cheaper price. Looking at the Macro Environment, issues like the current recession also affect Starbuck. Faced with such harsh economic conditions, customers are left with a smaller portion of disposable income, and are left with less to spend on luxuries, of which at such times, Starbucks coffee will be considered a luxury. This drives the clients to less costly competitors such as McDonalds.
Political stability is also another important environmental concern. The relation between the United States and the areas where the coffee is procured from is very essential for the purposes of trading. Negative grounds of relations in issues like war, terrorism and labor disputes paralyze Starbucks operations. The supply and price of the beans are affected by the political stability of the countries, producing it. There are legal forces that affect Starbucks, like changes in import and export laws. Changes in tariffs directly affect prices that will be felt in the finance offices of Starbucks (Schultz & Gordon 2011).
The rate of market growth also affects Starbucks. With the current level of saturation, the rate of growth is currently stagnating because the market is fully served. There is no niche that is underserved for. The international market is still growing but the local markets are fully saturated. The consumption trends also have an impact on Starbucks. A majority of its consumers are urban dwellers, majorly students and educated working professionals. These trends are affected by competition from all the other beverages, the economy, wellness benefits and the consumers’ income level.
Starbucks has quite a large number of stakeholders. The clients are the first stakeholders. Analyzing this class of stakeholders enables the company to produce the best quality of coffee and coffee products that they will enjoy down to their soul. This gives a sense of belonging to clients and will always make purchases due. The company also ensures that the clients are treated with dignity, receive high quality products as well have a good customer service. The second class of stakeholders is the employees. The company analyses their needs and makes sure that they are humanely treated and well paid. This comes alongside a benefits package. This motivates the employees and gives them the morale to do the effective work. This improves the workers output, which will reflect in the sales turnover.
The third class of stakeholders is the shareholders. The company analyses their need, which are profits in return for every dollar invested. By analyzing their needs, the company acts to make sure that they get attractive returns, which will make them a happy lot and reinvest in Starbucks. This analysis is important, since it will guide the company on what course to take that will maximize the revenues and increase the net worth of the stakeholders.
There are also the non-market stakeholders. Such is the ethical practice. It is imperative that Starbucks is involved in healthy eating campaigns that will see the sprouting of a healthy nation. It also does the analysis of the environmental responsibility. It makes sure that it does not pollute the environment in which it thrives. This is of prime importance, since it enhances a favorable environment for business (Gilbert 2008).
There are certain alternative strategies that Starbucks can put into place. First, it can launch a campaign advertising on the in home coffee. This is where it encourages home brewing coffee by offering tips on the best preparation techniques. The companies may as well stop focusing on the quantity factor to quality factor. This regards the issue of the numerous numbers of coffee outlets in a single location. This greatly affects the profits and sales margins. They should reduce the number of outlets and improve on the quality of products. The company should seek other unearthed markets and stop focusing too much on the already existing and very saturated markets.
On the diversification strategy, Starbucks should also develop other products apart from relying heavily on coffee alone. This ensures an efficient product mix, where clients can purchase more than one product from Starbucks. For instance, Starbucks can venture into selling items like candy, bagels and other food related products. This will reduce dependency on coffee alone. On internal growth strategies, the company can invest in developing other modes of advertising their products; improve their product line that will reflect high earnings. In addition, Starbucks should move to countries that are still unexposed to the coffee frenzy. This will help the company to reduce dependence on the United Kingdom market and sales. This will help to beat competition in leaps and bounds.
The best strategy appropriate for Starbucks is product diversification. This means the development of many lines of products from the companies’ factories. Starbucks, as it is well known for its coffee, should venture into multi product line of business. This includes, for example, milkshakes for kids, yoghurt for adults as well as bakery items. With such diversification the company should strongly focus on advertising its new path in order to attract the market that was left out when the company was only specializing on coffee. This will be connoted as an increase in the clientele base, which will improve the companies’ revenues. When effecting product diversification, the company should cater for all the age groups depending on their calorie requirements, for instance, it should consider those who are keen on ingredients, like caffeine. The company should diversify and cater for the market needs of their target clients. This will definitely see an increment on the customer numbers on the already existing Starbucks premises.
The role of my suggested strategy implementation is to increase Starbucks market share. By product diversification, the market that was previously not Starbucks will be grasped. These include those who do not take coffee but takes another product that the company produces. This will see more penetration into the market niches that were previously not served, hence, an increase in the customer base (Burks 2009). My strategy also aims to increase Starbucks revenues by increasing the number of clients through product diversification. It also serves to reduce losses by discouraging the rapid expansion of the business, by promoting product diversification instead. This principle works on the fact that the outlets remain the same in number, only that more products are availed. This will positively work for the company. It will be responsible for the organizations success.
In order to effectively implement this strategy, there are a number of benchmark traits that need to be met. First off, there has to enough financial resources in order to effect product diversification. This is the capital needed to acquire the manufacturing items and convert them into finished products. This requires high sources of the capital. It is of prime importance that this issue cannot be assumed in order to start the implementation process. Secondly, the organizational structure has to change for it to conform to the new changes. It involves the creation of more departmental divisions, which will alter the organizational structure. The committees have to deal with this thrust. Consequently, the company has to overhaul its whole information system. Since Starbucks will be diversifying, it is imperative that it has to install a new inventory control system that accommodates all the new areas. This is particularly sensitive, since the acquisition of the latest inventory control systems is very costly, and hence, should be put into consideration (Armstrong 2000).
The new system should be the latest in the market and include all the relevant products and services offered. In the process of implementation of new products, it is also required that the people who will implement these changes be there for them to take effect. This is with regard to the people who have vital responsibilities in the production of the goods and services, there has to be recruitment of new staff that will produce the diversified products. This is a major requirement as well. A system that measures the quantifiable results should also be put into place. This will monitor how the implementation process is fairing at pre-determined spans of period, as well as pinpoint the areas that need to be scrutinized. Some criteria for evaluation should be put into effect (Michelli 2007).
The targets of this strategy will be to double the revenues earned by Starbucks UK through product diversification. This should be achieved by the end of 2014. The strategy will take up to six months to implement, and as such, by mid 2014, the revenues should have doubled. The number of clients is also projected to increase because of the diversification effects. An increase in both the clients and sales indicate a positive trend in the new strategy implementation. There are certain ways in which Starbucks can monitor the progress of the strategy implementation. They can ask the clients on their personal views on issues regarding the diversification. A positive feedback denotes that the progress is effective and that it was not all in vain. Starbucks can use some essential accounting ratios to measure effectiveness of strategy implementation. They include the current ratio, a ratio of the current assets and liabilities. It should indicate that the assets are increasing more than the liabilities. Second is the gross profit margin, which is an efficiency measure. The wider the margin, the more efficient the strategy is. Lastly, the Total Asset Turnover measures how efficient a company is in using its valuables to generate revenue. The trend should show an increase in the asset turnover and show the success of implementation process.