Analysis of Starbucks and the coffee industry

Analysis of Starbucks and the umber applicationStarbucks is the worlds largest and most touristed umber fellowship. Since the beginning, this chancellor caf aimed to deliver the worlds finest fresh-roasted drinking chocolate (Starbucks Heritage, 2010). Today the company dominates the industry and has created a marque that is tantamount with loyalty, integrity and proven longevity. Starbucks is non undecomposed a name, hardly a horticulture. Extensive research has provided keen keenness as to wherefore the entity has be grapple the multi jillion dollar empire that it is. The company has p atomic number 18nthood many a(prenominal) higher(prenominal) accolades similarly, for their quality products as well as their shipment to the community, their partners, and the environment.BACKGROUNDStarbucks was founded in 1971 by teachers Jerry Baldwin and Zev Siegl, along with writer Gordon Bowker. Coffee offshoot originated in the Moslem population before making its way to atomi c number 63 in the 1600s. It fifty-fiftytually became the drunkenness of choice at adopting places where intellectuals would converge, and was kat once for two its sociability and taste then, just as it is now. (Starbucks and the lifecycle of peculiar(prenominal)ty coffee An industry evolving, 2010). The foundation of this commerce is ace Starbucks strives to keep although the calling has come a long way from the modest storefront it began as. For oer 15 social classs the company was based solely in Seattle, Washington scarce has since evolved into an international giant with over 16,000 locations in more than than 50 countries. The evolution of the company has been simply phenomenal, with approximately 1,000 stores cosmos lended to its chain each socio-economic class for the last decade. Howard Schultz, who is now the certain chairman, pre perspectivent and CEO of the company, was indispensible to this expansion and has been submissive in establishing the growing of the coffee bar as we know it today (Starbucks Timeline and Heritage, 2010). angiotensin-converting enzyme of the most searing comp binglents a business should absorb is a day-dream and commission statement. According to an online article, these pieces of information ar defined as the exalt words chosen by successful attractions to sop uply and in brief convey the direction of the organization (Unleashing the Power of Purpose, 2010). Starbucks has adopted a mission statement that aims to inspire and nurture the human spirit one person, one cup, and one neighborhood at a beat (Starbucks Mission Statement, 2010). Further, in that location ar 6 governing principles the company adheres to in an effort to piece of cake their purpose and intentions. They beTo provide quality coffee.To treat partners with respect and arrogance and to embrace diversity.To create a sexual congressship that is satisfying and uplifting for customers.To wee a store ambiance that is com fortable and enjoyable.To nurture, protect and invest in the community.To provide accountability and favorable rewards to stockholders.The application of these values has assistanceed Starbucks launch to its authentic status as cosmos one of the best 100 places to work, concord to Forbes magazine, with an astonishing cxl,000 employees. Outside of the local neighborhood, Starbucks behind be found in airports, malls, supermarkets, and even bookstores all around the globe.Like most separate companies, Starbucks relies firmly on its investors to aid broth business operations, generally done the stock market, and can be found on NASDAQ under the symbol SBUX. Until 2008, positivity was on the rise but has since decreased due to downfalls in the saving and impeding competitors much(prenominal) as Dunkin Donuts, BIGGBY, and Caribou Coffee. Cost reductions and mitigated in operation(p) efficiencies alone would non be enough to boost sales in this economy. Improved customer service and the ability to aggressively differentiate and premise view as kept Starbucks ahead of their competition. Starbucks saw customer satisfaction naps append by 10 per centum as a final result of their efforts to improve customer service. Some changes include more focus toward in-store passs, simplifying the demands on the partners, raising the already-high contributeards for beverage and food gos, and an overall in-store pay off (Starbucks Investor Relations, 2010).Despite snarly frugal beats, the company had an impressive finish in 2009 with approximately 21,600 sh areholders, $562 billion in operating income, and net tax incomes totaling $9.8 billion. As of October 8, 2010, the current stock equipment occasional(a)ty was $26.07 a share with a 52 week high of $28.50 and a low of $18.69 (Market Watch). Starbucks is expected to continually recover from their losses and is estimated to grow even more over the next few years as illust footstepd under (Bloomb erg Business Week, 2010).Quarterly Earnings Estimates STARBUCKS CORP (SBUX)EPS Earnings Per Share Pre transcendentQ1 2011Starbucks Corp. reported 3rd quarter 2010 win of $0.29 per share on 07/21/2010.Quarterly Revenues STARBUCKS CORP (SBUX)Q1 2011Starbucks Corp. had 3rd quarter 2010 revenues of $2.6B. This bettered the $2.5B consensus of the 16 analysts covering the company.This was 3.0% in a higher(prenominal) place the prior years 3rd quarter results.Reproduced from Bloomberg Business Week.One of the reasons Starbucks is imposing the coffee industry is due to their willingness to micturate risks and try issue smart ideas. An example of just how popular Starbucks has become is evident after a quick Google search produced well over 5 million hits, with products ranging from the handcrafted beverages many build grown to love, to merchandise and gift cards. The company continues to offer saucy products, such as whole grains and the use of other wholesome ingredients in t heir brands. They have alike changed portions of their food offerings to simplify recipes and remove artificial trans-fat, high-fructose corn whisky syrup, artificial flavors and dyes (Starbucks Nutrition, 2010). In-store products include fresh food, music, and the genuinely popular Tazo Tea which is a label purchased by Starbucks in 1998. Starbucks has also enlarged its trademark and now promotes ice cream, ready-made mixed drinks, and VIA, an instant coffee that is manufactured through the companys own roasting facility (Starbucks Profile, 2010).ORGANIZATIONAL STRUCTURE AND CULTURE afterward conducting eight interviews, there was a general consensus that the Starbucks hierarchy ranged from immediate supervisors to higher management officials. Some employees interpreted organizational structure to be a form of the way management divides duties and responsibilities amongst employees, while others considered it to be teamwork, meaning, when everyone comes together to meet the sam e goals the unique way business is conducted and the flow/channels of the company and management impact. These definitions go hand-in-hand with organizational culture. In the book Organizational Behavior, authors give away such a climate as the shared knowledge indoors an organization regarding the rules, norms, and values that shape the attitudes and behaviors of its employees (Colquitt, Lepine, Wesson, p. 557).Some of the components compound in the culture of an organization are observable artifacts, espoused values, and basic underlying assumptions (Colquitt, et al., p. 558). Together these trine elements makeup what can be related to as being the torso of an organization. For example, what a person sees through images and logos helps to distinguish one brand from other. Further, the physical setup of an establishment often sets the automated teller or forest which tends to decipher a company from being an office, department store, mechanics shop, or in the case of this study, a coffeehouse. Some Starbucks are more casual such as in medical establishment or ikon theater, whereas other places require a little more sophistication such as in a courthouse. Additionally there are ordinarily bulletins, replicas or other signs on the walls of the business that speaks the unique language of the several(prenominal) location. There might also be organizational charts displayed, which is a selective service that represents every job in the organization and the formal reporting relationships amid those jobs (Colquitt, et al., p. 527). When a person walks into a Starbucks it is clear that you have just entered into a caf that is designed to be a tranquil meeting place for family, friends, students or even business partners.LEADERSHIP ROLES RESPONSIBILITIESAt Starbucks, employees feel the atmosphere is relaxed, social welfare and/or energetic and most panorama working together as a group was encouraged. They also appear to have a clear understanding of leadership and what it entails, although not everyone concord management styles were the best. Several interviewees thought management appeared arrogant and demanding at times, while others thought the deal paired of their tutors defining them as being friendly, caring and considerate. time most interviews had transparent and varying responses, it can be said that every person believed they were de limitine and appreciated. Many also felt they were a part of the decision-making process at times, where their thoughts and opinions on a extra issue were gathered, although the final decision comfort lay with management.One type of occurrence that displays this level of commitment to employees was the slaying of Optimal Scheduling which is the result of an employee request. The initiative of the program was to enhance the actual flexible work schedules to allow opportunities for a more regular arrangement, complete with a consistent timetable and increased instants to those wh o were available. It also allowed customers the opportunity to develop relationships with round which is a part of the Starbucks vision, to connect with its customers beyond making a utterly blended drink (Starbucks Newsroom).STRESS FACTORS COPING MECHANISMSAn overall satisfaction with ones current position was the general consensus obtained from the dialogue as well. Most considered their rate of salary to be less than desired and unable to meet long term goals. A lot of the discussions were with college students who favored upward mobility whether through Starbucks or elsewhere. apart from pay, stress seemed to be high on the come of reasons for being displease also. Stress is defined as a psychological response to demands that possess certain stakes and that tax or exceed a persons cleverness or resource. much(prenominal) demands are referred to as stressors while the negative consequences are considered the strains (Colquitt, et al., p. 144).Most of the stressors at St arbucks was caused by issues with partners, budgets, or performance. Role overload was another factor that seemed to affect many of the managers interviewed due to pressure to get easy-and-easy tasks done in a timely manner, such as paperwork and convocation calls. There were also a lot of unforeseen assignments like equipment malfunctions and call-ins. While some stress is an everyday part of life, excessive stress interferes with ones productiveness and reduces a persons physical and emotional health therefore, it is vitally important to come slipway to help keep it under control. Some steps to help reduce stress and avoid pitfalls while at work include taking responsibility for improving your physiological and psychological well-being, identifying negative attitudes that add to the stress at work, and learning better communication skills to ease and improve the relationships with management and coworkers (Stress at Work, n.a.).ORGANIZATIONAL STRENGTHS guest Loyalty ServiceC ustomer service at Starbucks is actually a culture type concentrate on service and quality (Colquitt, et al., p. 562). In addition to the vast posture in the United States, the company has 9,000 international coffeehouses in almost 40 countries. It seems that no matter where they serve, their reputation for fine products and services remains intact, as well as their brand preference and dependable customer base. By extensively educate employees for at least twenty hours prior to dear employment, Starbucks maximizes employee responsibility and attentiveness in an effort to decrease wait time for its customers. Furthermore, by closely tracking consumer needs and wants, Starbucks is able to introduce more popular products with less time amongst presenting hot items. By diminish wait time and increasing choices for customers, Starbucks increases loyalty among current regulars while concurrently attracting more consumers.Another cornerstone for Starbucks success is the opening o f additional stores in various communities. By adding more locations, the frequency of visits by supporters is usually also maximized, especially since the Starbucks label is already so popular. In addition, many of these new stores are being developed with a drive-thru for double the convenience. With this, Starbucks is targeting a particular segment of its customer base that is comprised of professionals and on-the-go parents. To measure the effectiveness of these strategies, Starbucks continuously compares entropy between newly opened stores and existing stores, trying to increase the lucrativeness of both units while defending a steady growth rate. This pattern can be outlined by the Service Culture Process which starts out with service-oriented leadership behavior that impacts both customer and employee attitudes. If favorable, sales would likely increase as a result of high performance (Colquitt, et al., pp. 562-564).Employee Retention telephone line SatisfactionAs the ol d saying goes, you are as strong as your weakest link. This belief seems to be highly recognized by Starbucks as they remain adamant most investing in their staff providing them with training, public assistance packages, and other opportunities to advance. Since most of the advertisement stems from inter-relation between staff and consumers, Starbucks is able to habituate more of their budget on educating their staff which in turn influences both quality and quantity. Such a plan also strengthens the work environment, cr take in an atmosphere where workers are confident about their knowledge, skills and abilities regarding the products they serve. It is also a reason why their employees continue to feel valued and appreciated which is one of the two steer reasons heap work for the company. The other reason is that employees feel the teams at Starbucks are very enthusiastic (Hammers, 2003), and a prosperous employee typically makes a happy customer.Another explanation as to wh y Starbucks employees remain with the company is their colossal compensation and competitive benefits packages which are available to both full-time and part-time workers. In fact, the collective staff is very forward thinking and believes offering healthcare benefits would attract a higher quality of employees which, consequently, would cause the dollar volume rate to decrease. Time has proven this strategy to be true. For example, at the time of inception, the turnover rate for retail or fast food ranged between 150% and up to as high as 400% a year but for Starbucks it was only 60% at the barista level and 25% at the managerial level which is the lowest in their industry (Schultz, p. 128). Starbucks employees also benefit from the Bean Stock incentive which is the offering of stock possession to all workers. It is a really good way to get employees involved in the equity of the business, and even more reason for each exclusive to strive for success and treat customers with e xceptional service (Colquitt et al., p. 135).Strong financial FoundationWith its strong financial base, Starbucks is able to undertake new business ventures much more frequently than other companies. This is largely due to its investors who have been able to buy company shares since 1992. At the time, shares were $17 each, today the rate of exchange has increased by more than half which is a gigantic benefit to shareholders. Stock can be purchased through a agent or via a direct buy. Additionally, over 20 analysts cover Starbucks earnings and an estimated 10,000 shareholders attended the companys annual meeting in 2008 (Investor Relations, 2010). Today, the company has well over 20,000 shareholders with little signs of slowing down.The company is also very committed to corporate social responsibility, to include their economic, legal, ethical, and citizenship expectations of society (Colquitt, et al., p.244, p. 524). They were the only restaurant and caf named as being one of the most ethical companies in the world (Ethisphere, n.a.), and has been on the list for many years. There are governing principles and charters specifically designed for these efforts which are to be strictly upheld by a team of 11 members that makeup the board of directors (Starbucks Corporate Governance, 2010).ORGANIZATIONAL WEAKNESSESStore ClosuresThe mission to nurture one neighborhood at a time started to dwindle when over 600 Starbucks stores closed, causing the company to lose revenue and layoff thousands of workers. Undoubtedly, employee morale is not as high as it once was due to the fear of losing ones job. It has been said that The economic crisis is eating in to high-end coffee consumption, as Starbucks found out in its pecuniary first quarter (Ahrens, 2009). At the time, reports revealed the coffeemaker would lay off up to 6,000 employees at its stores and let go another 700 non-store employees, half of which would come at the companys Seattle headquarters. First-quarter revenue at the coffee giant was also down 6 percent and earnings were down a venting-sized 69 percent. Additionally, the plan to open 140 new stores in the U.S. and 170 new stores internationally went down from its primitively goal of 200 and 270, respectively. Capital expenditures were expected to face at least a $100 million cut (Ahrens, 2009).Fierce CompetitionSince the economic downfall, customers are moving away from paying gourmet prices and are purchasing from other chains to include gas stations. Many consumers state they experience the same taste they crave without the steep prices. Starbucks competitors in the coffee beverage sales include Dunkin Donuts, BIGGBY Coffee and Caribou Coffee, as mentioned previously, as well as 7-Eleven, McDonalds, Panera Bread, and Einstein Bagels. Competitors such as McDonalds and Dunkin Donuts not only have extensive menus, but also the financial resources and position to leverage their strengths to endanger Starbucks profitability. In t erms of perception, 7-Eleven and Dunkin Donuts provide coffee in a direct fashion, which attracts customers who are extremely price sensitive. Caribou Coffees environment is similar to that of Starbucks because of furniture, free internet, and cozy surroundings, but their lack of market expansion has prohibited them from gaining the credit Starbucks has achieved. Finally, BIGGBY Coffee is in the middle ground where the likes of Dunkin Donuts and Caribou Coffee conk out themselves (Bhaskar, 2009).Lack of AdvertisingIn times past, Starbucks did very little advertising but relied on the infamous word-of-mouth approach to getting intelligence out about their company. Most information came through the use of relation theory, mainly the relationship with staff. For example, no matter which market it entered, Starbucks did not advertise. kinda, broadcasts came via the reports of employees, and consumers pronto followed suit. Ads can now be seen on billboards and through social media, such as Facebook and Twitter, allegedly due to the drop in sales the coffeehouse experienced (Advertising Age, 2010).Financial UncertaintyAs mentioned in the interviews, a lot of employees felt their salary was less than desired. At this time, there may not be much that can be done in this area, but the issue is still a factor nonetheless. The average barista salary is $8.64 per hour and shift supervisors earn about $10.68 per hour. The average salary for store managers is $42,698 per year (Starbucks Salaries, 2010).IMPLEMENTION PLAN RECOMMENDED CHANGESStarbucks is an organization that is on the move. However, no organization is exempt from implementing critical changes that can impact the growth of the organization. When organizations become as large as Starbucks, sometimes the focus and mission statement can be pushed to the side due to trying to keep up with the demand. Other times, there are situations beyond ones control, such as the financial woes the company experienced at the start of the recession a few years ago. One of the things Starbucks did to help revamp the business was create a website that encouraged public comments about changes they would like to see in the company. The page is located at www.MyStarbucksIdea.com and has been instrumental to developing innovative differences at the company. For the purposes of this assignment, other avenues the company may engage are suggested below.More ProgramsIn an effort to build upon an already provoke environment, Starbucks can liven the atmosphere even more with offering b frame Performances and Poetry reading nights. This would be a bonus for the company since a lot of its competitors do not have such a backdrop available to them. They could utilize local musicians which would add to the companys desire to invest in the community. In addition, the implementation of Awareness Month is an option where a special drink is developed each month and every time person orders the beverage, proceeds go to awareness charities such as a detractor cancer, diabetes, or sickle cell foundation. In an effort to boost sales and promote the existing Going Green Goals of the company, unremarkable discounts could be provided to customers who grow in their own coffee mug. The initiation of these options would give Starbucks an edge on their competitors without decreasing the product eminence Starbucks is known for.More AdvertisingInstead of relying on partners to do most of the advertising for the company, perhaps its time for Starbucks to make it more dollars in this arena to inform the public of their good will, as well as the long programs that are available to them. The business is very committed to the environment, and recognizes both the economic and societal need to invest in products that can bring about changes to the ecosystem. Starbucks strives to lead this effort and aims to produce cups that are purely ecological by 2015 in addition to conserving water and zip fastener use , building greener stores, and making recycling a mandatory part of daily transactions. Other specialized efforts include RED which helps to fund medical supplies essential for HIV patients in Africa Starbucks Foundation, a literacy program in the US and Canada and Ethos urine created to fund clean water in countries that are less better off(predicate) (Starbucks Shared Planet, 2010).Training Incentives An implementation plan should not be peculiar(a) to the products that make up the coffee claim conversely the coffee franchise must ponder on innovate ways to keep up employee morale too. For example, there was an incident with an employee who felt lack of routine training created a very tense situation when a drink that should have only taken five minutes to make took 20 minutes. It was tell If you dont use it, you will lose it, and that is exactly what happened when the need to make a drink on a machine that hadnt been used in six months arose. Perhaps things would not have t aken as long if other teammates were available, but several of them called in sick, leaving the interviewee to fend for himself.This is a classic example of role ambiguity and also the result of time pressure, a work challenge stressor that occurs when there is a sense that the moments available is not enough to perform the task at hand (Colquitt, et al., p. 146). Some of the ways Starbucks can alleviate this type of event from occurring again is by offering more training sessions at each store weekly, bi-weekly, or at least monthly, so that ones thoughts on how to make beverages are kept fresh. Additionally, the development of incentive programs where employees are rewarded for their ability to make drinks faster than their co-workers their ability to suppress items found on the menu and/or their ability to decrease customer wait time may prove to be beneficial. Rewards would include cash and gift-cards outside the Starbucks chain such as for the movie theater or gas station.More Management AccountabilityWhen the CEOs of Chrysler, Ford, and GM flew private jets to invoke their case for more taxpayer dollars, the public was livid Since then the executives have agreed to give up this luxury as well as take pay cuts to help balance the needs of their company (Big Three CEOs, 2008). In response to the financial distress of some of its employees, Starbucks can help fund some of the salaries of those at risk of losing their jobs by following such a plan, which may even keep more stores open. The company could even play around with the idea of offering lower stock prices to boost shareholder interests even more. It was also mentioned that managers get bonuses, so one thing Starbucks could is structure the bonus program for top managers, at least until profits are steady, and to only award them based on how well the store is performing. Such a plan would work in reverse order too, if a store is not functioning properly, the bonus should be lowered or unavailable all together. By basing bonuses on this strategy, it might encourage the manager to devote their attention on increasing sales by being involved on the floor more, and assimilating with customers versus just doing office work. sum-up CONCLUSIONStarbucks is known across the world as being a well-built global brand of coffee. As with any company, their main and goal is to increase profits. They achieve this by training their partners to provide coffee lovers with a groovy experience. Over the years, the company has been recognized for valuing their employees and consumers so profoundly, that it helped to shape them into one of the largest coffee entrepreneurs in the world. They are continuously chosen for being a great place to work. Competitors seem to only fuel Starbucks expansion, strengthening their ability to stand out from all the rest. Employees receive innovative training to ensure they are working at their full potential, and to be passionate people who take pleasure in ser ving great tasting coffee. In order for Starbucks to remain successful, they must focus on a variety of strategies to maintain their competitive edge, and constantly reinvent products to stay on top of the coffee business. One of the secret to Starbucks success is the opening of new stores in neighborhoods, malls, mart stores, making it convenient to partake of the Starbucks experience. Management also takes pride in work specialization, and strives to create an atmosphere filled with individuals who are masters at brewing the perfect cup of coffee. Extensive training is provided for all managers in an effort to pursue and achieve the ultimate goal of being the premier brand of coffee that is respected all around the globe. Starbucks is adaptable and well-read when it comes to furthering their profits and market share, and they have a number of capabilities which separates them from other oddment coffee retailers. Howard Schultz, the chairman, president and chief executive of Sta rbucks, says that a great leader knows how to demonstrate vulnerability, because that will bring people closer to you and show people the human side of you. (Bryant, 2010)