Starbucks Case Study
Part I: Defining the Manager’s Terrain
1. What has made Starbucks’ culture what it is? How is that culture maintained?
Every organization has a culture, a way that those in the organization interact with each other and with their clients or customers. A strong culture will influence what employees can do and how they conceptualize, define, analyze, and resolve issues.
In order for Starbucks to reach and maintain a highly strong culture, which is a culture in which the key values are deeply held and widely shared, we have to analyze the source of this organization’s culture which is the reflection of the vision or mission of the organization’s founder. Starbucks mission and six guiding principles, as stated in the company’s webpage are the following:
Our mission: To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.
Here are the principles of how we live every day:
Our Coffee, Our Partners, Our Customers, Our Stores, Our Neighborhood, Our Stakeholders.
Howard Schultz and other Starbucks senior executives are responsible to maintain culture as it is in Starbucks, they have worked hard to introduce the key values and guiding principles into the Starbuck culture. That is the reason why no matter which Starbucks store you go to, in the world, there is a strict quality control of Starbucks products which is a common culture to all stores.
Starbucks culture is emphasized by keeping employees motivated and content. Partners as they are called are a key value for the Organization and this unique relationship of Top Management with their employees has created a strong socialization process in which new partners adapt and learn the
Organization’s way of doing things effectively.
It is important to appraise culture through the seven dimensions of organizational culture. In many organizations, one of these cultural dimensions often is emphasized more than the others and essentially shapes the organization’s personality and the way organizational members work. For instance, at Starbucks the focus is an example of people-oriented culture, this means the degree to which management decisions take into account the effects on people in the Organization. As mentioned above, Starbucks really cares about their relationship with their partners, Howard Schultz is consumed with his vision of Starbucks that means showing the good that a corporation can do for its workers, shareholders, and customers. Starbucks is a great example of a people-oriented culture, Starbucks provides all employees with health care benefits, stock options, and many other benefits.
2. Describe some of the specific and general environmental components that are likely to impact Starbucks.
Any organization will interact with its environment, either specific or general, and these forces will play a major a role in shaping managers’ actions.
The specific environment includes those external forces that have a direct and immediate impact on managers’ decisions and actions and are directly relevant to the achievement of the organization’s goals. The main ones are customers, suppliers, competitors, and pressure groups.
Customers: Organizations exist to meet the needs of customers. Customers obviously represent potential uncertainty to an organization. Their tastes can change or they can become dissatisfied with the organization’s products or services. Starbucks business philosophy is don’t just give customers what they ask for or what they think they want. Starbucks responds to customers changing demands by offering more than 30 blends and single origin coffees, besides that you can get Starbucks merchandise, fresh food, among other products in their brand portfolio.
Competitors: All organizations have one or more competitors. In Canada you’ve got Tim Hortons as a major competitor, and another example would be Shangahi Xing Ba Ke coffee shops which was imitating Starbucks creating customer confusion in the Chinese market. These type of situations will arise with competitors trying to imitate your product, same example happened in Santa Cruz, Bolivia when a small book store started brewing Starbucks coffee, they had the Starbucks logo, same products, even the napkins said Starbucks, but it was an imitator, it was a major success in the Bolivian market, a month later Starbucks headquarters heard about it and stated they had no official licensed coffee shop in Bolivia, so that bookstore which transformed into a coffee shop soon changed its name in order to avoid a potential lawsuit. The coffee shop experience was a clear niche in the Bolivian market waiting to be exploited, that is why Starbucks in now opening their first official Coffee shop in Santa Cruz Bolivia, and as soon as that news came out, a major competitor also announced the opening of their official Juan Valdez coffee shops right besides Starbucks.
Public pressure groups: Public pressure groups also influence the actions of Starbucks. That is why Starbucks contributes positively to communities and environment through their CSR programs that also includes general environment components. Starbucks works and involves their partners to build stronger communities and conserving natural resources. Starbucks donates to local charities, gives health benefits to employees, introduced recycled paper cups, provides assistance to coffee farmers, all this actions are a response to general environment conditions that might affect the company, like socio-cultural and technological conditions.
Part II. – Planning
1. Make a list of Starbucks’ goals. Describe what type of goal each is. Then, describe how that stated goal might affect how the following employee do their jobs:(a) a part-time store employee- a barista-in Winnipeg (b) a quality assurance technician at one of the company’s roasting plants; (c) a regional sales manager; (d) the senior vice president of new market; and (e) the president and CEO.
Long Term Goal is set to expand to 15,000 US stores and 30,000 stores globally. Total Net revenue growth of 20 percent and earnings per share growth between 20 and 25 percent. Help define society’s pop culture menu.
These three goals mentioned in the study case are financial, growth, and expansion goals. They are centered in elevating the customer experience and into investing in new stores and expecting for a high productivity in sales of these new Starbucks which will elevate revenue by their expected goal percentage.
Part-time store employee – a barista in Winnipeg. – The barista is the face of Starbucks so, in order to achieve Starbucks goals these baristas have to be adequately trained to maintain the highest quality possible in beverages. Quality Assurance Technician at Roasting Plant.- Coffee beans need to be inspected through-out the roasting process, the smell and color have to be according to Starbucks standards. In order to achieve stated goals above, production will increase and quality may not stay uniform, which is why these technicians will have to pay special attention. Regional Sales Manager. – In order to increase net revenue sales department will have to develop action plans that will yield these results. Senior Vice-president of New Market.- A new market will have a different demographic, that is why strategies will have to be adjusted to these new markets, and probably add some special flavor or ingredient that will identify that culture with the Organization.
President and CEO. – Their major objectives should be to review results and whether goals are being met, according to new information make changes to plans.
2. What competitive advantages do you think Starbucks has? What will it have to do maintain that (those) competitive advantages?
The competitive advantage is what sets an organization apart; that is, its distinct edge. Starbucks has created a cultural phenomenon, and that explains why millions of customers buy an overpriced coffee every day. Starbucks has found a way to appeal to every customer demographic, creating customer loyalty. Having conquered the coffee business, Starbucks continues and will continue to grow worldwide and will maintain their competitive advantage just by giving the customer a product and service they want before they even know they wanted it.
Part III. – Organizing
1. What examples of the six organizational structural elements do you see discussed in the case?
Organizational structure is the formal arrangement of jobs within an Organization. When managers develop or change the structure, they are engaged in organizational design, a process that involves decisions about six key elements: work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization.
As Starbucks continues its global expansion and pursues innovative strategic initiatives, managers must define what work needs to get done and create a structure that enables work activities to be completed efficiently and effectively.
The first organizational structure mentioned in this case study is Work Specialization. This term refers to the degree to which activities in an organization are subdivided into separate job tasks. Like many start-up businesses, Starbucks organized themselves as a simple structure based on each persons’ unique strengths. Zev Siegl was the retail expert, Jerry Baldwin took over administrative functions; and Gordon Bowker was the dreamer. Starbucks grew and Jerry recognized that he needed to hire professional and experienced managers, that’s when Howard Schultz joined the company, bringing in his skills in sales, marketing, and merchandising.
As Starbucks had expanded, its organizational structure had to change to accommodate that growth, that is why Schultz relied on Departmentalization, which means that job tasks are grouped together in a coordinated way, every organization has its own way of classifying and grouping work activities, and Starbucks has a clear Functional Departmentalization in its central headquarters in Seattle Washington, it counts with a President of Starbucks US, president of Starbucks Coffee International, 4 executive vice-presidents, and 29 senior vice presidents. In addition to the president of Starbucks Coffee Canada, Colin Moore, the senior vice-president positions include senior vice-president of finance, senior vice-president of coffee and global procurement, and senior vice-president of corporate social responsibility.
Now, it is also clear that Starbucks does work with a Geographical Departmentalization as well, the zone offices oversee the regional operations of the retail stores and provide support in human resource management, facilities management, account management, financial management, and sales management. The link between the zone offices and each retail store is the District Manager who oversees 8 to 10 stores apiece, which is down from the dozen or so stores they used to oversee. Apparently, the span of control has decreased in order for managers to work efficiently and effectively.
The chain of command in Starbucks retail stores are under the direction of assistant store managers and store managers. These managers are responsible for the day-to-day operations of each Starbucks location. Decentralization is also present in Starbucks, we have to keep in mind that an organization is never completely centralized or decentralized, this concept is relative, not absolute. There is a clear example in how District Managers are working out in stores, and mobile technology allows them to spend more time in stores and still remain connected to the office.
2. Give some examples of the types of communication taking place at Starbucks.
Communication within an organization is often described as formal or informal. Howard Schultz visits at least 30 to 40 stores a week, which gives partners a chance to talk with the top guy in the company. Jim Donald also likes to get out in the field by visiting the stores and roasting facilities. This is an example of formal, upward, and downward communication happening at Starbucks.
Despite these efforts, communication needed improvement, which created Starbucks Broadcast News, an internal video newsletter that conveys information to partners about company news and announcements. Another implementation was an internal communication audit which asked randomly selected partners for feedback on how to make communication in the company more effective, this is another example of Formal, downward, upward, lateral communication.
As in any other company, Starbucks will also have an informal communication which is not defined by the structural hierarchy. This is when employees talk to each other, this is very important as it fulfills two purposes in any organization which are social interaction and by creating more efficient channels of communication.
IV – Leading
1. Describe in your own words the workplace environment that Starbucks has tried to create. What impact might such an environment have on motivating employees?
Starbucks has worked hard to create a workplace environment in which employees or as they call partners are encouraged to and want to put forth their best efforts. Howard Schultz says we all want the same thing as people- to be respected and valued as employees and appreciated as customers.
Starbucks centers employee relationship as a key for success, it demonstrates this called relationship through an attitude survey which gives employees an opportunity to give their opinion about their overall satisfaction, to what degree they feel that they are connected to the company. Starbucks states that they want their employees to be adaptable, self-motivated, passionate, and creative team players.
Analyzing Starbucks workplace environment, it starts at the beginning of the Human Resource Management Process, in which Starbucks makes sure that competent employees are identified and selected, they provide up-to-date training and then ensure to retain competent and high performing employees. Schultz knows that Starbucks success is heavily dependent on customers having a positive experience in its store, so that is why the partners are the most important asset as any other organization where the employees play an important role in organizational success.
The challenge is keeping these employees motivated, in order to keep having an environment where people want to work for Starbucks, Starbucks must motivate employees with a good compensation and benefits. Having loyal and happy employees makes them more committed thus offering higher levels of customer service.
2. Describe Howard Schultz’s leadership style. Would his approach be appropriate in other types of organizations? Why or why not?
Leadership is the process of influencing individuals or groups toward the achievement of goals. Howard Schultz says that being a great leader means finding the balance between celebration success and not embracing the status quo. Being a great leader also means identifying a path we need to go down and creating enough confidence in our people so they follow it and don’t veer off course because it is an easier route to go.
Howard Schultz has led Starbucks since 1982, he has allowed the company to successfully grow and meet and exceed its goals and to do so ethically and responsibly. He is clearly a transformational leader who stimulates and inspires his employees to achieve extraordinary outcomes. It is evident that Schultz is a transformational leader as Starbucks recognizes the importance of having individuals with excellent leadership skills throughout the company. Starbucks offers many leadership training programs for upper-level managers as well as to hourly employees to develop leadership skills. Schultz’s leadership style has given Starbucks higher level of productivity, employee satisfaction, creativity, goal attainment, and follower well-being.
Schultz’s approach might not be effective or appropriate in other Organizations. The belief that a certain style will be effective in other organizations is a belief that is not always right, because leadership may not always be important. Research has shown that in some situations, any behaviors a leader exhibits are irrelevant.
1. Robbins, S., Coulter, M., Leach, E., & Kilfoil, M. (2012). Management. New Jersey: Pearson. 2. Starbucks Case Study Sheets, Management Essentials Class.