STARBUCKS 2012: EVOLVING INTO A DYNAMIC GLOBAL ORGANIZATION
Apply the Five Forces Model, identify the issues.
Competitive rivalry within an industry- Starbucks is in competition with both large and small-scale coffee product producers. Some of the major competitors include Dunkin Donuts, Caribou Coffee, and McDonald’s among others (Larson, 2008).
The threat of new entrants- New entrants experience challenges accessing the distribution channels and choosing from the highest quality beans. It is due to the dominance of large companies such as Starbucks.
The threat of substitute products- The threat is low except the caffeinated soft drinks produced by Coca-Cola and Pepsi. Substitutes pose little threat to the premium coffee industry (Thompson, 2012).
Bargaining power of suppliers- It increase as more restaurants and companies begin purchasing directly from premium coffee farmers to prepare their wide range of products. Its increase is also due to the companies’ competition to produce the highest quality coffee for success.
Bargaining power of buyers- It increases due to the availability of information on market variables. Buyers have several options to choose from due to the presence of many competitors in the coffee industry.
Complete a financial analysis on their performance compared to their competitors.
Starbucks’ total net revenue has increased between 2007 and 2011 despite the stiff competition in the industry. Its performance faces challenges in the highly competitive market due to the entrance of new competitors over the years. It competes with several manufacturers and distributors of coffee products. Despite its superior marketing, financial, and distribution resources, it faces significant competition from McDonald’s Corporation, Kraft Foods Inc., Caribou Coffee Company Inc., Nestle USA Inc., and Mondelez International Inc. among others.
Identify and explain the meaning and strategic significance of each of the following term in relation to Starbucks:
Related diversification- It involves a company’s addition or expansion of its existing market or line of products to penetrate a new market. Market expansion occurred when Schultz began an initiative to market Starbucks coffee in airlines, restaurants, hotels, hospitals, universities, offices, and country clubs in the mid-1990s (Thompson, 2012).
Unrelated diversification- It involves the addition of unrelated product lines to penetrate new markets. In 1997, Starbucks adopted the sale of tapes/CDs. It also provided the option of downloading songs from the company’s song library. Its partnership with Apple’s iTunes in 2008 led to the Pick of the Week music card (Thompson, 2012).
Strategic fit- It is when a target company, product, or project in the external environment is in line with the organization’s overall objectives. Starbucks’ cooperation with Unilever in 2008 to market, manufacture and distribute Starbucks-branded ice cream in Canada, and the USA was a strategic fit.
Economies of Scope- They are cost advantages the company gets from providing a range of products instead of specializing in a single product. Starbucks offers a wide range of coffee, spice, and tea products.
Encouraging employees to challenge existing ways of doing things, and to be creative and innovative in proposing better ways of operating, requires the company to create a supporting environment. In many firms, this means empowering their employees. What is meant by the empowerment of employees? How does it differ from the delegation of authority? In what ways can empowerment of employees aid the cause of good strategy execution? How have these strategic initiatives contributed to the success of Starbucks?
Empowerment of employees involves the shifting of responsibility and authority to the employees at lower levels in an organizational hierarchy (Ghosh, 2013). The handover of authority from manager to an employee can occur when an employee has worked long enough to acquire the needed skills and experience. The essence of empowerment is to facilitate the use of employees’ experiences, knowledge, initiative, and wisdom. It involves assigning authority, responsibility, and decision-making power to employees and ensuring they are accountable. Delegation involves assigning a manager’s work to an employee so the manager can focus on other jobs. Empowering employees ensures they are motivated and have high levels of commitment to Starbucks. It takes advantage of the employees’ skills and experience to accomplish tasks. The initiative contributes towards the success of Starbucks by enabling the employees to develop their skills in product preparation and service provision. It encourages the personnel to do their best by utilizing their full energy, potential, competencies, and abilities to gain authority, recognition, and responsibility among others. It ensures quality work, employee satisfaction, and collaboration. It also ensures an increase in productivity while reducing the costs.
How would the Interruption of Starbucks supply chain impact their business?
Interruption of the supply chain would create a domino effect affecting all aspects of Starbucks’ operations. An interruption in the company’s supply chain is a major risk that is beyond its control. The interruption can be in the form of interruption of roasted coffee supply due to loss of a roasting plant or failure of third party suppliers. It can also result from problems of carriers shipping the goods in the distribution channels. It affects the time, cost, and quality of product preparation.
Ghosh, A. K. (2013). Employee Empowerment: A Strategic Tool to obtain Sustainable Competitive Advantage. International Journal of Management, 30(3). Retrieved from http://host.uniroma3.it/facolta/economia/db/materiali/insegnamenti/522_7511.pdf
Larson, R. C. (2008). Starbucks A Strategic Analysis: Past decisions and future options. Brown University Economics Department. Retrieved from http://www.biu.ac.il/soc/sb/stfhome/bijaoui/891/case/2009/starbuck08full.pdf
Thompson, A. A. (2012). Starbucks in 2012: Evolving into a Dynamic Global Organization. Case 24. University of Alabama.