VII. RECOMMENDATION19 VIII. REFERENCE21 IX. APPENDIX22 I. INTRODUCTION Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting the highest quality Arabica coffee in the world. Today, with stores around the globe, the company is the premier roaster and retailer of specialty coffee in the world. Through our unwavering commitment to excellence and our guiding principles, we bring the unique Starbucks Experience to life for every customer through every cup. To share in the experience, please visit us in our stores or online at www. tarbucks. com. II. ANALYSIS FIRM’S CURRENT SITUATION 1. Mission “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time. ” Starbucks mission is to provide the best coffee they ever had by using their innovation to “inspire and nurture the human spirit”. Moreover, Starbucks always want all customers feel enjoyable and satisfied about their products as well as its service. It is not only the place where people can meet their friends but it is also help customer reduce stress after hard-working hour when they enjoy coffee at Starbucks.
Besides that, the word “neighbors” in the statement stated that every store is part of community and they have to responsible for their actions in contributing their products and services 2. Vision “Establish Starbucks as the premier provider of the finest coffee in the world while maintaining our uncompromising principles while we grow. ” Starbucks’ vision is to become the best coffee shop in the world by applying the highest standards to the purchasing and develop enthusiastically satisfied customers all the time.
... mean that these people don! |t drink Starbucks coffee. To increase overall customer satisfaction, we should also incorporate a general ... sales from the stores that carry Starbucks coffee drinks, like Seven Eleven that carry only Starbucks coffee only. Starbucks reliance on the ... the United States, consumes one-fifth of all the worlds! | coffee (Global Exchange, 2004). The present industry is expanding. ...
Besides that, they want to provide a great work environment and treat each other with respect and dignity and they also recognize that profitability is essential to their future success. 3. Information of a firm’s current situation 4. 1 Current business strategy Starbucks Plans Aggressive Growth Strategy Starbucks CEO Howard Schultz announces plan to open 3,000 new stores NEW YORK—Coffeehouse chain Starbucks Corp. this week announced an accelerated growth strategy to open 3,000 new stores in the Americas by 2017.
In the recent year it has spent millions on acquiring new businesses to expand its product offerings. In the last 12 months alone, it has acquired juice maker Evolution Fresh for $30 million, La Boulange Bakery for $100 million, and this year, it hopes to complete its $620 million acquisition of Teavana Holdings Inc. , a leading tea seller. 4. 2 Marketing Howard Schultz prided himself on making sure that Starbucks never grows too fast outside its culture. The same goes for its marketing strategy. This culture consists of two key points.
The first is our image. When you walk into a Starbucks, a friendly face greets you. The color scheme is very earthy and warm. The same thing can be said about the smells. We want to make it a comfortable place for you to relax. It could even be where you and your wife met, or where you heard your favorite band for the first time. The second is, you are our culture. We want to make sure that you come first. This is why our baristas do their best to remember your regular drinks. And since our culture is you, we know just how to reach you.
Weather this be via a mobile phone app, our website, or in-store, we are there for you. 4. 3 Finance Fiscal Second Quarter 2013 Highlights: * Total net revenues increased 11% to $3. 6 billion * Global comparable store sales grew 6%, driven by a 4% increase in traffic and a 2% increase in average ticket, marking the 13th consecutive quarter of global comp growth greater than 5% * Operating margin expanded 180 basis points to a Q2 record 15. 3% * Consolidated operating income grew 26% to $544 million * Record Q2 EPS of $0. 1 per share included a $0. 03 non-routine gain on the sale of the company’s equity in the joint venture that operates Starbucks stores in Mexico; excluding this gain, EPS grew 20% * Dollars loaded on Starbucks Cards through both new card activations and reloads increased 32% over Q2 FY12 * Starbucks added 590 net new stores globally, including 337 Teavana stores * The company has raised its full year earnings per share target range to $2. 12 to $2. 18 from the previous target range of $2. 06 to $2. 5 “Starbucks record operating performance in Q2 continues to demonstrate the underlying strength and resilience of our expanding global business, and the increasing relevance of the Starbucks brand to consumers all around the world,” said Howard Schultz, chairman, president and chief executive officer. “Innovation and an enhanced customer experience drove strong comp sales and revenue growth, while a laser focus on improving efficiency and controlling costs enabled us to deliver record margins and earnings.
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Starbucks has never been better positioned to achieve the aspirational goal we have set of becoming one of the world’s most respected, admired and enduring brands. ” “Record second quarter results once again illustrate the power of the Starbucks business and brand,” commented Troy Alstead, chief financial officer. “Continued strength in our US operations, despite ongoing uncertainty in the macro environment, has fueled our performance and allows us to pursue long term strategic initiatives across our segments.
Given our performance in the first half of the year and the considerable momentum in the business as we enter the second-half, we are raising our full year earnings growth target. ” 4. 4 Operation Basic Structure The structure of the Starbucks Corporation is not an uncommon one. Starbucks executives oversee the company from its headquarters in the city of its birth, Seattle, Washington. Around the country, district managers oversee regional groupings of stores. These district managers report directly to the Starbucks Corporation. At each store, a store manager acts as the chief.
Under this store manager are a collection of shift supervisors who act as managers on duty when the store manager is out. Below the shift supervisors are the rest of the employees, referred to as baristas. 4. 5 Human resource Starbucks provides its employees generous benefits and an environment that respects their rights as individuals, regardless of their race, sex, color, or sexual orientation. Its community outreach programs and loans to farmers are ways in which Starbucks strives to protect the community from economic hardship.
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Starbucks works with its vendors to ensure that the rights of people are being protected, and in cases where those rights are not being protected, Starbucks seizes to do business with them. For example, in 2011 Starbucks assessed 129 factories and found 38 factories failed their zero-tolerance standards. As a result they discontinued 26 factories as Starbucks suppliers for standards issues. Starbucks was later able to begin business with 14 of those previously dropped factories III. CONDUCT ANALYSIS 1. Financial Analysis
Figure 1 Starbucks consolidated global revenues reached a record $13. 3 billion, a 14 percent increase, with revenue growth driven by a 7 percent rise in global comparable store sales and a 50 percent rise in revenue from Channel Development. Our operating income was $2 billion, a 16 percent increase, with our consolidated operating margin rising to 15 percent, up 20 basis points from last year. Starbucks record earnings-per-share growth continued, up 10 percent in 2012 to $1. 79 from last year’s $1. 62.
Through share repurchases and dividends, we returned approximately $1. 1 billion to shareholders. Stock Price : SBUX Figure 2. Starbucks stock price gain 49% over past year, the stock price recorded 64. 13 in May 2013. That is the signal for the rapid growing of Starbucks. During the economic crisis in late 2008, Starbucks stock price touch bottom when its price is 7. 86 USD less 8 times than current price. Follow the linear chart in figure 1, after the economic recession in late 2008 – early 2009, the market have recovered and that let the price rise up.
The price was doubled increase in next two years (2010 – 2012) and still keep growing trend till now. 2. Environment Analysis 3. 1 PESTEL 3. 2. 1 Political factor Taxation policy – high taxation imposed on farmers in those countries producing the coffee bean will usually mean Starbucks pay a higher price for the coffee they purchase. Any fluctuations in taxation levels in the industry are almost certainly ultimately passed on to the consumer. Recently (June 13, 2003) Tanzania’s Minister of Finance harmonized and rationalized ocal government taxation to boost rural productivity of the coffee bean. Tax was lowered for these ‘small holder’ farmers and this saving will have been passed on to purchasers of coffee like Starbucks Trade regulations – Trade issues will affect Starbucks predominantly when exporting and importing goods. When another country’s government imposes a tariff it not only results in an efficiency loss for Starbucks but large income transfers can become inconsistent with equity. This extra charge can turn bargain into a rip-off.
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Also, since 9/11, trade relations have been adversely affected between the USA and some other countries Governmental stability – Starbucks should thoroughly investigate the political stability of any country they plan to expand to. Changes in government can lead to changes in taxation and legislation. The forthcoming American elections may have an effect on Starbucks as new legislation or new or existing government may bring in taxes. Also, those countries in political turmoil or civil war (e. g.
Zimbabwe at present) should be approached with great caution when considering new ventures Unemployment Policy – A reduction in licensing and permit costs in those countries producing the coffee bean for Starbucks would lower production costs for farmers. This saving would in turn be passed on to the purchaser 3. 2. 2 Economical factor Inflation rate – A rise in interest rates means investment and expansion plans are put off resulting in falling sales for Starbucks and their suppliers. Also mortgage repayments rise so consumers have less disposable income to spend on luxury products such as coffee.
Low interest rates should have the opposite effect. Growth in spending power – If growth is low in the nation of location of Starbucks then sales may also fall. Consumer incomes tend to fall in periods of negative growth leaving less disposable income. Exchange rates – Starbucks are affected by exchange rates when dealing with international trade. If the value of the currency falls in the country of a coffee supplier this enables Starbucks to get more for their $ or L when importing the goods to their country. This saving can be passed along to the customer.
... Starbucks should diversify its complement products. Stores should offer new food products to go along with its coffee products. The food products should consist of high quality ... satisfy its customers. Approximately 21% of Starbucks customer base accounts for 62% of its transactions. This customer loyalty indicates Starbucks commitment to customer satisfaction. Starbucks depends on ...
Exchange rates are forever changing throughout the world in today’s market 3. 2. 3 Socio-cultural Age distribution – Research shows the average age of the population is getting older and birth rates are stagnating. Starbucks is presently aiming it’s product at young people but maybe these views will change in the long-term as the market proportion for young people diminishes. The most profitable way forward may be to widen their target market despite the risk of alienating present customers Education levels – When Starbucks are deciding upon new premises they must look at the standards of education and skills locally.
They must be sure there are people who live there with sufficient skills to ensure successful operation of the business, or at least the potential to learn that comes with a good education Income level – Where income is distributed is another factor that Starbucks should look at as this also demonstrates the ideal place to aim their marketing or to locate their stores. Coffee is more of a luxury product so it is those people/places with the most amount of disposable income to spend that should be targeted the most intensely.
Life expectancies – Those people with the most disposable income, e. g. Young single professionals etc. , will be accustomed to high standards. Starbucks must ensure its shops are clean and comfortable, service is of the highest order and health and safety issues are fully addressed 3. 2. 4 Technological Internet – Starbucks is always looking to develop and improve its Internet facilities. Starbucks launched its first-generation e-commerce Web site in 1998. In late1999, Starbucks decided the site needed a major upgrade to enable new functionality and prepare for long-term growth.
New technology affecting production processes – Developments in the technology of coffee making machines and the computers that Starbucks use to run their cash registers will enable their staff to work more quickly and efficiently. This will result in customers being served quicker and create the potential to serve more customers in a day. This will prevent customers from having to wait around for long periods thus improving customer relations along with increasing the customer base. 3. 2. 5 Environmental
... be a high quality brand. There was very little image or product differentiation between Starbucks and the smaller coffee chains. Problems Statement: Customer satisfaction is ... increasing at a CAGR of 40% Strengths Starbucks had company operated stores located in high-traffic, high-visibility settings. The employee turnover rate was ...
Waste disposal – Starbucks need to carefully consider the methods in which they dispose of their waste as there are strict laws in most countries to ensure a firm trading in their country disposes of the waste that is created in their business in a specific and efficient way. If they do not follow these laws they may find themselves being sanctioned, which not only affects them financially but also tarnishes the reputation of the brand name, as most of the waste created will bear the logo of Starbucks.
Pollution monitoring – Starbucks customers create a lot of waste as they often leave the shop with their cup of coffee and then dispose of it in the street. The packaging for this cup must be carefully considered to make it as biologically degradable as possible. Certain other materials can be very harmful to the natural environment 3. 2. 6 Legal Health and safety – Starbucks may find these regulations are not astringent or well enforced in certain countries. It would be wise though to enforce universally high standard of health and safety throughout all its shops to maintain good global image and ensure all laws are abided by.
Also, by not maintaining high standards they will be liable for a large amount of civil cases as it is a legal requirement for them to enable that their staff and customers are safe when they are in their stores 3. 2 Porter five forces’ competitive * Suppliers: MODERATE In general, the demand for coffee is high in global level and coffee beans can be produced only in certain geographic areas. However, there are some problems in lacking of coffee bean. That will make the price increase and also affect to the purchasing power of buyers. * Buyers: MODERATE – HIGH
This is very important for business. The force of the buyer’s bargaining power is proportional to the ability of buyers to force down prices, bargain for higher-quality products or more services, and this is the best way for organizations against one another in same industry as well as in the market. In addition, the cost of buying a cup of specialty coffee did not represent a significant fraction of any individual buyer’s cost of living, reducing the tendency for price shopping and increasing the emphasis on quality and customer service.
One of the primary differences between the basic coffee industry and the specialty coffee industry is the amount of differentiation involved in the specialty coffee industry and the lack of differentiation in the basic coffee industry. As mentioned before, the largest purchasers of specialty coffee are individual consumers, who face no switching costs. Therefore, this increases their bargaining power at Starbucks. Because the consumer does not have full information as the actual demand, market prices or supplier costs which greatly reduces their bargaining power.
Overall, the bargaining power of the buyers or customers of the special coffee industry which including a large of individual consumers, was not significant. * New entrants: MODERATE The specialty coffee industry does not put a high premium on economies of scale. Although, companies with national distribution in the coffee industry at large experienced some discounts through bulk purchases and superior infrastructures, their advantages were small. Products within the industry were greatly differentiated, with varying degrees of quality, convenience, customer service, and differences in the atmosphere and ambience of the retail stores.
The high differentiation within the specialty coffee industry made it possible to establish brands that could act as barriers to entry. * Rivalry: HIGH Nowadays, there are many famous coffee shops like The Coffee Bean, Highland, McDonald’s, and also some local coffee shops. Therefore, customers have many options to drink everywhere. Besides that, * Substitutes: HIGH There are many types of drinks as soda, fresh fruit juice, and other healthy drinks however, Pepsi and Coca-Cola are the primary substitute products. Because these drinks make help people refresh immediately with lower prices.
However, this is only true when comparing with basic coffee because basic coffee is considered to be of significantly lower quality. Besides that, Starbucks has many specific drinks like chocolate beverage, espresso beverage, Frappuccino, brewed coffee….. Each drink has its specific taste with different prices. Therefore, customers have many options to choose their favorite drinks. 3. 3 Value chain * Operations and Logistics Operation: Starbucks’ operations are conducted in more than 60 countries in two ways: direct operation of the stores by the company and licensing.
Currently there are 8870 company-operated stores globally, whereas 8139 stores operate on the basis of license. Inbound Logistic: Starbucks inbound logistics involve company agents choosing coffee beans producers mainly in African continent, communication the standards related to the quality of coffee beans, establishing strategic relationships with suppliers and organizing the supply-chain management. Outbound Logistic: The outbound logistics for Starbucks has traditionally involved selling its products through its stores without any intermediates.
However, starting from recent a range of Starbucks products such as 3-in-1 coffees in sachets are being sold through a set of leading supermarkets. * Marketing and sales Starbucks does not heavily invest in marketing relying instead on the word-of-mouth achieved through the high quality of products and high level of customer services. However, occasional marketing activities initiated by the company involve sampling of new products that are usually conducted within areas nearby the stores. * Customer service
Providing superior level of customer services is one of the Starbucks’ main objectives and it is driven from the mission statement of the company. Accordingly, the company staffs are encouraged to go to great lengths in order to ensure the high level of customer satisfaction. * Firm infrastructure Starbucks infrastructure includes a range of general support activities such as “management, planning, finance, accounting, legal support and government relations that are required to support the work of the entire value-chain” * Technology
Starbucks relies on technology for cost-saving purposes, as well as, ensuring the consistency of the quality of products and offering a high level of customer experience in general. For instance, with the introduction of computerized coffee roasters the consistent taste of Starbucks coffee was ensured and this has contributed to the level of customer retention for the company. * Procurement This involves purchasing items that are needed for the production of final products or offering services.
For Starbucks it would be coffee beans and raw food items, as well as fixed assets such as buildings, machinery etc. * Human resource management The workforce is duly perceived to be the most valuable resource by Starbucks. Accordingly, a wide range of training and development programs are available for them and they are motivated by both, tangible and intangible incentives. Specifically, in UK Starbucks staff is entitled to free drinks during the shift. 3. 4 SWOT analysis Strengths: Starbucks is the market leader in the coffee market.
Especially, it owns high brand name equity with a specific logo in the same industry. Moreover, all customers are satisfied with the quality and the taste of its coffee. Nowadays, Starbucks operate in 20,891 stores in 62 countries worldwide and there is huge number of employees (about 13,000 people) Weaknesses: The price of Starbucks’ drinks cost so high as compared to the competitors in the same industry. Besides that, they have to expense a lots for operating cost (materials, technology,…) Moreover, the business profits are also increase depend on their products.
Until now, Starbucks had closed many stores in different countries during year 2008-2009 Opportunities: Starbucks should emerge into international markets to attract more customers as well as increase their profit. However, they continue expand their business in domestic market to gain a stable customers. Besides that, they have to improve and update their technology for making drinks in order to create many different tastes for customers. Moreover, they have to use distribution channel to delivery their products for customers. Threats: There are many competitors compete to Starbucks as McDonald, Jamba Juice) in same industry.
Nowadays, US market saturated and many businesses have their own strategies as well as customers. Besides that, they have negative publicity from poorly treated farmers in supplying countries. Sometimes, they lack of coffee beans that will affect to their price as well as make customer dissatisfy about their products. Moreover, consumer trends toward more healthy way and away from caffeine as fruit juice, smoothies, and the most important problem is the cultural and political issues in foreign countries when they expand their business. IV.
DEVELOPING LT-ST OBJECTIVE AND STRATEGIES 1. Long-term Objective World’s biggest coffee company Starbucks Corporation ( SBUX – Analyst Report ) recently announced its long-term objectives pertaining to store expansion and growth strategies for each of its segments; its entry into the tea industry and its initiatives to boost consumer relations. The company plans to take the following steps to ensure growth in the upcoming fiscal years. Segment Specific Plans The Americas business has witnessed a substantial turnaround since the last couple of years.
The segment witnessed 9% growth in net sales to $2. 5 billion in the fourth quarter of 2012, driven by 7% growth in same-store sales and new store openings. The company intends to open more than 3,000 new stores and remodel many more in the next five years in order to capitalize on the strong demand for Starbucks products in America. By the end of 2013, Starbucks customers in the U. S will be able to enjoy La Boulange products and Evolution Fresh juices in company-operated stores. Starbucks has also been witnessing strong performance in the China-Asia-Pacific (CAP) segment.
In fact, net revenue grew 28% in the fourth quarter of 2012, driven by a 10% rise in same-store sales and new store openings. China, Thailand, Singapore and Australia all posted strong performances. The company believes China will become its second-largest market by 2014, surpassing Canada. The segment will have 4,000 stores by the end of 2013, of which 1,000 will be in Mainland China, 1,000 in Japan and 500 in Korea. China is one of the most important markets for Starbucks and the company plans to have 1,500 stores in 70 cities in 2015. Starbucks has opened its first three stores in India and plans to open a fourth store in early 2013.
The company also intends to open its first store in Vietnam. Europe, Middle East and Africa segment witnessed a 2% decline in net revenue to $283. 7 million in the fourth quarter of 2012, hurt by flat traffic and currency headwinds. However, revenue and profit is expected to improve significantly over the next five years. Also, the company intends to focus on brand building, generating more revenue from the existing stores and increasing licensing agreements. The Consumer Packaged Goods (CPG) (formerly known as Channel Development (CD)) segment includes the U. S.
Foodservice business and also sells whole bean and ground coffees, premium Tazo teas, a variety of ready-to-drink beverages, Starbucks VIA Ready Brew, Starbucks coffee and Tazo tea K-Cup packs, and Starbucks super-premium ice creams. This high-margin, high return on capital business reported 32% revenue growth in the fourth quarter of 2012, fueled mainly by higher sales of Starbucks branded K-Cup portion packs, which are fast gaining traction. The international footprint of this segment is expected to double by 2015. Starbucks plans to build 100,000 distributions centers in 20 countries.
A customer loyalty program, My Starbucks Rewards, will also be introduced in 2013. Plans Regarding Teavana Acquisition On November 14, 2012, Starbucks agreed to acquire Atlanta-based tea store chain Teavana Holdings, Inc. ( ) for approximately $620 million in cash. The acquisition will bring together Starbucks’ expertise in real estate, style and store management and Teavana’s competencies in global tea industry. Teavana operates through 300 mall-based stores, which Starbucks plans to expand as well as establish new standalone Teavana neighborhood stores domestically as well as internationally.
The acquisition will enable Starbucks to expand in the $40 billion global tea market and claim a leading position. Starbucks is constantly on the lookout for new additions to its product portfolio, other than coffee, like La Boulange products and Evolution Fresh juices. Teavana is another step in that direction. Connecting with Consumers Starbucks connects with its consumers through its social, Internet, mobile, loyalty and cards programs. Starbucks cards are now used for 25% of the transactions in the U. S and the money loaded on the cards grew over 20%.
The company expects 10% of the payments to be made using the mobile application by the end of fiscal 2013. We are positive about the company’s long-term plans. We appreciate Starbucks’ strong market position, new product launches, rapid growth in China as well as a solid turnaround in its U. S. business. Following the solid fourth quarter results, Starbucks upped its forecast for earnings, operating margins and global net new stores for fiscal 2013. However, poor sales in Europe due to depressed macroeconomic conditions keep us on the sidelines. Short-term Objective Starbucks has many stores in almost 37 countries.
Starbucks long term goal is 15,000 US stores and 30,000 stores globally and to earn a good amount of revenue of 20 to 25% from them. The company believes China will become its second-largest market by 2014, surpassing Canada. The segment will have 4,000 stores by the end of 2013, of which 1,000 will be in Mainland China, 1,000 in Japan and 500 in Korea. 2. The strategy hierarchy Core value The company’s values are highly publicized, and adorn the walls of stores across the globe, as well as in press releases and annual reports. Starbucks cornerstone value is “to build a company with soul”.
This value has been instilled since the company was created. Below are the company values: * Community Starbucks is the only major food and beverage chain to provide health benefits for both full-time and part-time employees. Many employers in the fast food industry do not provide health benefits to part-time employees. Also, each store’s employees are allowed to select which local charities they wish to promote through volunteer hours, products, and cash contributions. Community Service Goal: Mobilize SB’s partners and customers to contribute 1 million hours of community service per year by 2015.
Progress: SB increased their service hours in 2012, contributing nearly 40% more hours than the year before. For example, in April of 2012, Starbucks contributed 613000 hours of community service. The company also supports literacy programs and international relief efforts. Create Jobs for USA * unemployment won’t drop below 8% for at least the next year-> the longest stretch of unemployment above 8% in over 70 years * teamed up with the Opportunity Finance Network® (OFN) to create and sustain jobs Concerned about rising unemployment in the United States, Starbucks opened up a factory in Georgia, which created 200 manufacturing jobs.
Starbucks helps sustain coffee communities around the globe through its loan program. In 2011, Starbucks loaned a total of $14 million to 45,000 farmers in seven countries around the globe. On a larger scale, Starbucks not only helps the communities where the stores are located, but also helps to improve the lives of its suppliers. Community Stores SB is exploring new ways SB can be more directly involved with the communities SB serves. Their Community Stores are helping create engaged citizens through an innovative business model and partnerships.
Community Stores serve as the hub of their community service and training programs that promote leadership and job and life-skill development. Crenshaw Neighborhod, Los Angeles Harlem Neighborhood, New York City East End Neighborhood, Texas Youth Leadership At Starbucks, They continually look for innovative ways to help strengthen their communities. With Starbucks Youth Leadership Grants (Youth Action Grants in 2012) they hope to develop young people to become extraordinary leaders, by investing in the leadership skills required for the changing global economy.
Goal: Engage a total of 50,000 young people to innovate and take action in their communities by 2015. Progress: SB continues to exceed this goal by engaging more than 54,000 youth in community activities in 2012 Farming Communities Starbucks invests in programs designed to strengthen local economic and social development. SB is working collaboratively with nongovernmental organizations that have experience and expertise in working with farming communities. * Goal: Invest in farmers and their communities by increasing farmer loans to $20 million by 2015. * Progress: SB increased our loan commitment to $15. million with a $1. 3 million investment to the Fairtrade Access Fund. * Ethical Sourcing On their website, they also guarantee that “It has always been, and will always be, about quality. We’re passionate about ethically sourcing the finest coffee beans, roasting them with great care and improving the lives of people who grow them. We care deeply about all of this; our work is never done. ” Starbucks has always strived to have the highest quality coffee. They do so by buying the best beans, and continuing to make sure that the roasting of the coffee was done to perfection.
They also make sure that the small coffee growers Starbucks uses for their beans were able to have enough earnings to compete in the global market. Ethical Tea Partnership The Ethical Tea Partnership strives to help tea producers manufacture tea in an environmentally and socially responsible way that includes improving the lives of tea workers. Coffee Starbuck takes a holistic approach using responsible purchasing practices, farmer loans and forest conservation programs. Goal: Ensure 100% of their coffee is ethically sourced by 2015. Progress: 93% of their coffee was ethically sourced in 2012, including 90% through C.
A. F. E. Practices. Cocoa Like coffee, Starbuck’s approach to cocoa buying is designed to ensure a long-term, high-quality supply while contributing positively to the environment and cocoa-farming communities. Manufactured Goods Whether it’s the merchandise on their shelves, the furniture in our stores or the aprons worn by their baristas, they care how the products in our stores are made. Starbucks has a culture and reputation built around responsible, ethical business practices and building communities in areas where they do business.
From top down, they are committed to enhancing their ethical performance through strategic relationships with our global, regional and domestic suppliers. * Environment Starbuck is taking action because they believe it’s important to help care for our planet. As a company that relies on an agricultural product with the potential to be severely impacted by changes in climate, is committed to reduce its operating costs and increase shareholder value through energy and water efficiency, and believes they should reflect the values of their customers and their partners, they believe it simply makes good business sense.
Building Greener Stores By building environmentally sound stores and facilities, conserving the energy and water Starbuck uses and is purchasing renewable energy credits, Starbuck is pushing themselves to reduce the environmental footprint of their operations. Recycling & Reducing Waste Starbuck is working to shrink our environmental footprint and meet the expectations of their customers. Providing recycling in their stores and ensuring the recyclability of their cups are two of their foremost priorities. LEED® Certified Stores Goal: Build all new, company-owned stores to achieve LEED® certification.
Progress: Starbuck has achieved LEED certification for 116 stores in 12 countries and Starbuck is addressing specific geographic challenges in their high growth markets. Energy Conservation & Renewable Energy Goal: Reduce energy consumption by 25% in their company-owned stores by 2015. Progress: While extreme weather in 2012 contributed to just over a 1% increase in electricity consumption from the year before, they have plans in place to help us achieve their 25% reduction goal by 2015. Water Conservation Water is a precious natural resource.
Using it responsibly is essential to our company. Goal: Reduce Water consumption by 25% in their company-owned stores by 2015. Progress: Water consumption decreased slightly in 2012, bringing us to a total decrease of 17. 7% since 2008. Climate Change * Goal: Improve farmers’ access to carbon markets, helping them generate additional income while protecting the environment. * Progress: focused on providing agricultural best practices which will help farmers better respond and adapt to regional climate changes, and have expanded SB’s program to Brazil. Cup and Materials Goal: Develop comprehensive recycling solutions for their paper and plastic cups by 2012. * Progress: While they proved the recyclability of their cups in U. S. , Canada, UK and Germany, and continue to expand recycling in those countries, they are still working toward materials and/or infrastructure solutions for their remaining company-owned markets. * Customer Wellness Also, Starbucks provides wellness for its customers through quality products that contain no more than 500 calories and are free from unnecessary ingredients like high fructose corn syrup, artificial flavors, dyes, and artificial trans fats.
As for its customers, Starbucks provides quality products and healthy choices. SB strived to do so especially by creating the highest quality coffee possible by buying the best beans and brewing them to perfection. Starbucks goal has always been to make their locations are a pleasant place to visit. They are successful in doing this through the extensive training given to new employees to teach them customer service. SB has brought customers a whole new way to experience coffee. Starbucks Refreshers™ beverages are lightly caffeinated with Green Coffee Extract and real fruit juice. .
All large global corporations face a whirlwind of criticisms from many directions. Although our group believes Starbucks to be an ethical company, I know there are others who have a contrary view. During our research, we came across blogs and articles critical of Starbucks because it is so dominant in the market place and because of its adverse impact on smaller competitors. While Starbucks’ phenomenal growth may pose an economic threat to its competitors, it doesn’t make Starbucks unethical. Therefore, those core values make Starbuck can develop sharply and continuously in the food and beverage market.
V. THE KEY POLICIES, PRACTICES, BUSINESS PRINCIPLES, AND PROCEDURES Creating the great place to work Starbucks’s success is heavily dependent on customer having a very positive experience in its store. This means Starbucks need to have store employees who can deliver consistently pleasing customer service by having knowledgeable about the company’s products, passion, meticulous and fulfill costumer service skill . Therefore, the challenge to Starbuck is how to attract the store employee who fully satisfy customer and how to motivate and reward for its good performance.
Many businesses ignored the request to expand the company’s heath care because of the cost increasing however Shultz recognized that is the right things and it will be beneficial. In 1988 Schultz went to the board of directors with his plan to expand the company’s health care coverage to include part-timers who worked at least 20 hours per week and his plan was approved when he drastically proposal that is the main strategy to win the loyalty of employees. This strategy will honor company’s value and become one of the vital keys in maintaining talents.
As the great response for the good strategy, in 1994 Howard Schultz was invited to the White House for a one-on-one meeting with President Clinton to brief him on the Starbucks health care program. Another program to make positive and long-term impact on the success of Starbucks was release when Shultz present the plan, “dubbed Bean stock” to the board in May 1991. This is the program allow full time and par time employee buy company stock in proportion to their base pay. Schultz turned Starbucks employee into partner.
This program is continuing to now. Starbucks was able to attract motivated people with above-average skills and good work habits not only because of its fringe benefit program but also because of its pay scale. After six months, part time employees could expect to earn $8. 50 to $9per hour, well above the minimum wage. In 2009, experienced full time employee earned an average about $37,800/year and store manager is $44,400/year. Schultz was succeeded in creating Starbucks attractive environment workplace is more attract with his d daring plan.
Starbucks was really a great place to work. Training program for the best customer service Methodical training was set up to all level of employee for ensure the service quality to fully satisfy customer and accommodate the rapid store expansion. In order for someone to become and employee of Starbucks they must enter intensive training. Within the first few weeks of employment new employees are expected to complete at least 24 hours of training. They learn about coffee history, drink preparation, retail skills, and of course customer service.
There is also basic training on how to work the register, clean, set up equipment, and how to interact with customers. Within these trainings it is instilled in each new member that their service was invaluable in the quest for pleasing costumers. Managers go through much more extensive training which culminates in making sure that managers support increasing sales, instilling customer service values on new employees, keeping up with the company’s environmental mission, and overall creating a welcome environment for customers.
Values and Principles The keystone value in the effort “to build a company with soul” was that the company would never stop pursuing the perfect cup of coffee. Schultz remained steadfastly opposed to franchising, so that the company could control the quality of its products and build a culture common to all stores. He was adamant about not selling artificially flavored coffee beans—”We will not pollute our high-quality beans with chemicals”. Starbucks’ management was also emphatic about the importance of pleasing customers.
Employees were trained to go out of their way, taking heroic measures if necessary, to make sure customers were fully satisfied—the theme was “just say yes” to customer requests. Employees were also encouraged to speak their minds without fear of retribution from upper management—senior executives wanted employees to be vocal about what Starbucks was doing right, what it was doing wrong, and what changes were needed. Management wanted employees to contribute to the process of making Starbucks a better company.
Schultz’s approach to offering employees good compensation and a comprehensive benefits package was driven by his belief that sharing the company’s success with the people who made it happen helped everyone think and act like an owner, build positive long-term relationships with customers, and do things efficiently. The company’s employee benefits program was predicated on the belief that better benefits attract good people and keep them longer. Schultz’s rationale was that if you treat your employees well, they will treat your customers well. VI. The issues confront the company as of mid-2012.
After a Starbucks executive expressed it supports the legalization of same – sex marriage in January 2012. The National Organization for Marriage, a group of traditionalist Christian, declared that they will boycott Starbuck and they received 22,000 signatures of advocates. Beside that Starbucks also received support and thanking from 640,000 people. In October 2012, Starbucks faced with a tax avoidance scandal in the United Kingdom and some European countries. A Reuter’s investigation pointed out that although Starbuck earned 14 billion pounds in sales, it paid just 8. million pounds in corporation tax for 14 years; this scandal made Starbucks’ sales goes down at European market. Another issue that Starbucks had to face in 2012 was the boycott wave of Starbucks chain due to their gun policy, Starbuck allowed customers to carry weapons in its chain in the US. The National Gun Victims Action Council sent to Starbucks an open letter, asking the company revise its policy or they continue the boycott wave until the policy is changed. However, this policy also supported from gun right advocates.
Starbuck’s management should be worried about the harmful impact of the tax avoidance scandal on Starbucks’ reputation in UK and other EU countries. This scandal made Starbucks’ image become weak and European customers were angry and many customers did not want to use Starbucks’ products; Starbuck’s sales and stock price decreased. To recover the Starbucks’ image in the customers’ mind set, the company apologized for its illegal action and took responsibilities by paying extra tax in the UK and they agreed to pay more corporation tax in next years, the company paid 20 million extra tax.
Beside that Starbucks in the UK needs promotion programs to attract customers and social programs, activities to rebuild its reputation. Other issues like the boycott waves of chain related to same-sex marriage or gun polices are minor issues, they will not have much effect on Starbucks’ business in the US because Starbucks also receives support from advocates, it will help Starbucks overcomes those problems. VII. RECOMMENDATION * Price premium barrier: The only barrier prevent all level of customer take experience in Starbucks store is the price premium.
In spite of, Starbucks invest too much in building & delivering the great value of their product to customer, however it will be nothing when the price barrier make customer hesitate to enter Starbucks. Therefore, Starbucks should be careful that their new offering in the price will not negatively impact in their profitability. Alternatively if the management did not feel comfortable in doing this perhaps by offering new deals such as a buy one get one free offer during obscure hours for example, from 12-3pm on week days.
This would help increase the flow into Starbucks during the non-“rush hours”. This would also attract more consumers who perhaps have never tried Starbucks but are interested in the deal. When they taste the high quality of the brew they may be more willing to splurge on a good cup of coffee * International expansion: Keeping rapid expansion into international marketplace. Wisely in increasing the influence in international market share by using Hub strategy. Starbucks should ensure that financial capability enough for the aggressive expansion. Focus on the core: The rapid expansion strategy may be dilute the core value of Starbucks . In order to successfully implement any of these strategies the core of Starbucks’ business model: customer service, marketing, brand management, and technology must be strong so that they can successfully implement value additions. Schultz’s strategy that began in 2008 focused on this a lot, so continued actions should be taken to become more passionate about customer relationships and build up the brand name more. * Increase marketing and R&D spending: R&D is the important part in Starbucks strategy.
By doing good in R&D will help Starbuck’s product more close to what customer needs make the diversification of product for the purpose to fulfill satisfy customer. Originally, Starbucks didn’t spend a lot of money on advertising, because they relied mostly on word-of-mouth. That is the politic method but if we invest a reasonable amount of money to apply more channel in media advertising it will be better. VIII. REFERENCES John, T. (2012, April 08).
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