Starbucks

Starbucks Coffee Company is the world’s pioneer in “specialty coffee retailing.” It is a successful international organization with over 8,500 branches and franchises located in 25 countries around the world as of 2004. Its mission statement is to “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow” (Tripp, Siwapiragam, Rahim, & Horton, 2005). It is a typical small business enterprise that grew to become not only one of the most profitable companies in the world but also one of the most admired by sticking to basic, sound organizational behavior practices as well as by cultivating a strong organizational culture. Starbucks Coffee had an unobtrusive beginning in 1971. It started out as a single coffee store in the Pike Place Market in Seattle, Washington (Starbucks Coffee, 2007).

It remained a simple operation from 1971 to 1982. However, things changed when Howard Schultz became its marketing and retail operations director. He initially expanded the operations of the company by selling coffee to “espresso bars” and selected restaurants. In 1984, encouraged by what he observed as a brisk business enjoyed by Italian espresso bars, Schultz sought to serve the first “caffe latte” called Christmas Blend at Starbucks. The company started really experiencing rapid growth and expansion sometime in 1987 when Il Giornale, another company which was personally established by Schultz, took over the reins of the company. The new management renamed the company Starbucks Corporation. Almost immediately, outlets were opened in Vancouver, British Columbia in Canada, and Chicago in the United States. By the end of the fiscal year, Starbucks Corporation already had 17 stores. The growth had been very rapid ever since. Total Starbucks stores after only ten years already stood at 1,412. By the end of the fiscal year 2006, there were 12,440 Starbucks stores all over the world (Starbucks Coffee, 2007).

The success of Starbucks Corporation resulted from a highly effective and faithful implementation of the main concepts of organizational behavior. Obviously, the company scored high and is still scoring satisfactorily in such areas as organizational culture, motivation, communication, human resources practices, and organizational structure.

What the company did was to adopt six basic decision-making principles to guide its day-to-day activities. These principles are:

• Provide a great work environment and treat each other with respect and dignity
• Embrace diversity as an essential component in the way we do business
• Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee
• Develop enthusiastically satisfied customers all of the time
• Contribute positively to our communities and our environment; and
• Recognize that profitability is essential to our future success (Starbucks Coffee, 2007).

These principles are now deeply rooted in the organization including all its branches and franchises all over the world – in a way “institutionalizing” the company. The way Robbins (2005) described it “it [has taken] on a life of its own, apart from its founders or any of its members.” Indeed, Starbucks has now become synonymous with good coffee and a refreshing variety of “caffe latte.” This has resulted to the establishment of a dominant culture in the company, the essence of which has been effectively captured by successfully adopting at least five of the seven characteristics of organizational culture set down by Robbins in his book Organizational Behavior. These five characteristics are:

• innovation and risk taking,  the degree to which employees are encouraged to be innovative and take risks;
•  attention to detail, the degree to which employees are expected to exhibit precision, analysis, and attention to detail;
• people orientation,  the degree to which management decisions take into consideration the effect of outcomes on people within the organization;
•  team orientation,  the degree to which work activities are organized around teams rather than individuals; and
• aggressiveness, the degree to which people are aggressive and competitive rather than easygoing (Robbins, 2005).

The first and last characteristics, innovation and risk taking, and aggressiveness, has been aptly shown by the rapid increase in the number of company stores from the initial 17 when it embarked on its expansion activities in 1987 to over 12,400 in the year 2006. These two characteristics have also been clearly shown by its policy of persistently introducing new varieties of “caffe latte” or versions of espresso. For instance, after introducing the “Starbucks®Christmas Blend” in 1984, the company came out with “Eggnog Larre” in 1986. In 1995, Starbucks started serving “Frappucino® blended beverages” which was followed by “bottled Frappuccino® coffee drink” the following year. The year 1997 saw the company coming out with “Starbucks Barista®home espresso machine” which used ground coffee in producing espresso. During the same year, it started offering “Frappuccino®Low fat Ice Cream Bars” which was described as a “low fat decadent treat.” By 1998 a milder tasting, lighter blend of premium coffee called “Milder Dimensions” was introduced.

The company has likewise shown its aggressiveness when it kept on forming alliances with business organizations all over the world to expand its base of operation and widen its sphere of influence. Among these joint ventures were the ones Starbucks initiated with the “Canadian Bookstore Chain Chapters, Inc.” of Canada and the “Dreyer’s Grand Ice Cream” in 1995. In the same year, it also formed an alliance with “SAZABY, Inc.” of Japan to enable the company to have a foothold in the Japanese market. The “Seattle Coffee Company” of the United Kingdom, which had around 60 stores, was acquired by Starbucks in 1998, establishing its presence in the United Kingdom in the process, while at the same time forming a joint venture called “Urban Coffee Opportunities LLC,” another alliance this time with Johnson Development Corporation owned by NBA star Earvin “Magic” Johnson (Kramer, 2007).

During the same year, it also established its foothold in Taiwan, Thailand, Malaysia, and New Zealand. By 2000, Starbucks was already in Hong Kong and Shanghai in Asia, Qatar, Dubai, Saudi Arabia, and Bahrain in the Middle East, and Australia. The following year, the company opened its stores in Austria and Switzerland. By 2002, Starbucks invaded Southern China, particularly Shenzhen and Macau, Puerto Rico, Greece, Indonesia, Germany, Oman, Spain, and Mexico. Starbucks is now totally global with 12,440 stores all over the world, including Korea, the Philippines, Brazil, Costa Rica, and Romania (Starbucks Coffee, 2007). Even Russia was not spared from the Starbucks onslaught when their first store was inaugurated last September 6, 2007 near Moscow (Kramer, 2007).

Attention to detail, another characteristic of their culture, has been primarily responsible for the high quality of Starbucks coffee. This is being initially achieved by a course on “coffee education” granted to its new employees. This course focuses on their core product (coffee) and is being conducted to ensure that all employees fully understand everything there is to know about coffee. The company has also been adopting the policy of choosing its coffee bean with the greatest of care. As a matter of fact, its teams of tasters have to taste at least 150,000 cups of coffee every year in different parts of the world where coffee plants are grown in their quest for the “finest, richest and most interesting beans” (Starbucks Coffee Company Canada, 2005). Furthermore, quality control is outstanding. The company’s quality control personnel insist that only the “perfect beans” are chosen for sampling. These samples are then subjected to a special process which involves the roaster’s sense of smell, sight, and hearing, in combination with a computer program designed for the purpose. In cases where the samples fail the standard of perfection, the whole batch is rejected (Tran, 2003).

Starbucks is also people oriented.  First, management ensures that all employees are happy working for Starbucks Coffee by maintaining a highly motivated and perfectly satisfied workforce by coming out with every conceivable employee benefit programs. Then it came out with a “Supplier Code of Conduct” which ensures that their suppliers do not violate human rights and endanger the environment (Starbucks Coffee, 2007). To keep employees motivated, the company provides them with a compendium of benefits which include a “progressive compensation package, healthcare benefits, retirement savings plan, stock options and discount stock purchase plan, income protection plan, management bonus plan, adoption assistance plan, domestic partner benefits, referral programs and support resources for child and eldercare, discounted Starbucks merchandise, and a pound of coffee each week”(Starbucks Coffee Company Canada, 2005). Meanwhile, their code of conduct for suppliers require their suppliers to promise to uphold the “welfare, economic improvement and sustainability” both of the residents and the places where coffee is produced; observe “national laws and international standards” concerning the rights, safety, compensation, and treatment of their workers; and protect the environment (Starbucks Coffee, 2007).

According to Robbins (2005), Communication is essential to an organization because it performs four primary functions, namely: “control, motivation, emotional expressions, and information.” Starbucks’ performance in this area could be considered satisfactory. It has simplified and improved its inter-office communication through the use of an “Enterprise Resource Planning” system which has done away with memos and bulletin boards. Through this system, the company was able to incorporate and automate its “internal business processes and information systems” thereby making available to every department all activities being undertaken everywhere in the company. This communication system has simplified and facilitated contacts between departments such as accounting, human resources, sales, and manufacturing because department heads and supervisors do not have to cover the physical distance between departments to retrieve pertinent documents and data. This system has resulted to increased productivity and achieved efficiency (Tripp et al, 2005).

An organization’s human resource policies and practices represent important forces for shaping employee behavior and attitudes (Robbins, 2005). Starbucks believes in developing people. For this reason, every employee is required to undergo an extensive training program which provides them with an expert knowledge about their core product (coffee), enrich their inter-personal skills, and develop among them a deep commitment to customer service. For instance, their “coffee bartenders” are provided with the necessary knowledge about the company and its products so that he or she could be able to answer any questions asked by customers. He or she is also trained to fix samples for tasting and is taught how to operate all the equipment found in the store before being allowed to assume his or her duties as a coffee bartender (Kembell, Hawks, Kembell, Perry & Olsen, 2002).

One of the guiding principles of the company – Provide a great work environment and treat each other with respect and dignity – shows their commitment to look after the welfare of their employees. They believe that employees who are treated humanely are not only adequately motivated but could also be expected to stay loyal to the company. This is why they consider all their employees as “partners” and provide them with a very attractive benefit package mentioned earlier. Dave Pace, the executive vice president for partner resources of Starbucks, calls this “the value-and-treat-employees-right approach” which, according to him, is “rooted in an almost religious-like faith.” Pace revealed that his company has a committee tasked with “mission review.” This committee is periodically doing a reality check on the mission statement of Starbucks Corporation, in effect, ensuring that actual company practices are not veering away from its mission statement. He assured that any complaint lodged or voiced by an employee will be addressed by “the relevant manager” not later than two weeks. Contrary to comments from others that it is easy for Starbucks to look after their workers because it is raking in the profits, Pace said: “We don’t take care of our partners because we’re successful. We’re successful because we take care of our partners” (Stolz, 2005).

According to Robbins (2005), the relation between a company’s organizational structure and the performance, level of motivation, and satisfaction of its employees has not been clearly established, therefore, no general rule could be stated. For its part, Starbucks chose to avoid adopting a hierarchical organizational structure. As a matter of fact the company has no prescribed and set organizational chart. The “relaxed and supportive” culture within the company empowers its employees to use their discretions in making decisions without prior management approval. Since Starbucks believes in developing its people, it wants them to “think for themselves as an entity of the business.” In fact this is why the company calls its employees “partners” regardless of their employment status. This employee empowerment has did right with Starbucks and enabled the company to succeed as a retail organization with outlets not only nationwide but all over the world. Starbucks considers their employees as one of their most important assets and has developed them accordingly. It is convinced that the quality of their workforce is adequately high to be allowed enough leeway to make on-the-spot decisions responsibly considering that their goal is identical with that of the company – profitability and customer satisfaction (Kembell et al, 2002). Robbins (2005) observed that less centralized organizations “have a greater amount of participative decision making,” a factor which has been positively linked to job satisfaction. Evidently, the case of Starbucks just proved this linkage to be true.

Starbucks has been a fixture in the list of “100 Best Companies to Work For” published every year by Fortune Magazine. It was also ranked second among the most admired companies in the country in a survey which was conducted fairly recently among 3,322 company directors, executives, and securities analysts by Fortune in partnership with Hay Group (Fortune Magazine Online, 2007).

These hallmarks could not have been achieved by the company if not for its ability to effectively translate into practice the organizational behavior concepts as outlined by Robbins (2005) i.e., effective communication, a strong organizational culture, sound human resources practices, a very functional but less centralized organizational set-up, and a highly motivated workforce. All these combined to help the company achieve its goals and serve as models for other business organizations to emulate.

References

1. Fortune Magazine Online. (2007). Top 20 Most Admired Companies. Retrieved November 10, 2007, from http://money.cnn.com/galleries/2007/fortune/0703/gallery.mostadmired_top20.fortune/2.html
2. Kembell, B., Hawks, M., Kembell, S., Perry, L. & Olsen, L. (2002). Catching the Starbucks Fever. Retrieved November 10, 2007, from http://www.academicmind.com/unpublishedpapers/business/marketing/2002-04-000aag-catching-the-starbucks-fever.html
3. Kramer, A. E. (2007). After Long Dispute, a Russian Starbucks. The New York Times. Retrieved November 10, 2007, from http://topics.nytimes.com/top/news/business/companies/starbucks_corporation/index.html
4. Robbins, S.P. (2005). Organizational Behavior, Eleventh Edition. Prentice-Hall.
5. Starbucks Coffee. (2007). Retrieved November 10, 2007, from http://www.starbucks.com/
6. Starbucks Coffee Company Canada. (2005). The Starbucks Experience. Retrieved November 10, 2007, from http://www.starbucks.ca/en-ca/
7. Stolz, R.F. (2005). Tops of the Trade. Human Resource Executive Online. Retrieved November 10, 2007, from http://www.hreonline.com/HRE/story.jsp?storyId=5326448
8. Tran, T. (2003). Starbucks Corporation. Retrieved November 10, 2007, from http://mywebpages.comcast.net/ThuanTran/business/starbucks.pdf
9. Tripp, L., Siwapiragam, V., Rahim, N., & Horton, E. (2005). Project V – Industrial to Information Model of an Enterprise. Retrieved November 10, 2007, from http://homepages.wmich.edu/~v4siwapi/project.htm

When service failures occur, the service provider’s reaction can potentially either reinforce a strong customer bond, or change a seemingly minor distraction into a major incident (Hoffman, Kelly and Rotalsky, 1995). Sometimes, this major incident would cost a company dearly as with the case of Starbucks. The original problem was as simple as a defective coffee machine. However, the situation was exacerbated by the poor response of Starbucks and the company received negative publicity across national media. This report intended to demonstrate how companies could recover from their failures by recommending effective service recovery strategies for Starbucks.

Since service failures are inevitable (Hart, Heskett and Sasser, 1999), how customers perceive the organisations’ recovery effort plays an essential part in evaluating satisfaction. Many empirical researches have been done to explore customers’ responses to complaint (for example, Blodgett, Hill and Tax, 1997). The results increasingly support the proposition that consumers will evaluate satisfaction with complaint handling in terms of perceived justice.

This theoretical perspective suggest that the three dimensions of perceived justice, i.e. procedural justice (the fairness of the complaint procedures), interactional justice (fairness of the interpersonal communications and behaviours), distributive justice (fairness of the outcome) are the principal antecedents of customer evaluations (Schofer and Ennew, 2005). Having understood how customers evaluate satisfaction, Hart et al (1999) recommend the following actionable guidelines for successful service recovery: measure the costs of effective service recovery, break customer silence and listen closely for complaint, anticipate needs for recovery, act fast, train employees, empower the front-line and close the customer feedback loop.

However, the above research is rather separated and did not address the interrelationship between constructs. Smith, Bolton and Wagner (1999) contributed greatly to the understanding of service recovery by developing a comprehensive model of customer satisfaction. This theoretical framework is based on exchange framework that integrated concepts from both customer satisfaction and social justice literature.

Failure context (failure type and magnitude) and recovery attributes (compensation, response speed, apology and recovery initiation) were identified as independent variables which will influence the dependent variable: perceived justice (See figure 1), which in turn affect customer satisfaction. The recovery attributes are very similar to the elements suggested by Hart et al (1990), and they can have different impacts on the three dimensions of perceived justice. While identifying the relationship between them, Smith et al provided managers with useful guidelines for establishing the proper fit between a service failure and the recovery effort. The Cappuccino maker bought by the customer is defective; the employee replaced the machine but treated the customer rudely.

Recommended Action for Top Management

Anticipate the problem. Starbucks have sold thousands of cappuccino makers and should be familiar with the defective rates of the machine. Therefore, the management team should develop some guidelines for front-line employees to follow when customers return a defect machine. Selection, training and empowering of front-line staff. Front-line staff should be understanding and sympathetic to their customers. They must be trained to consider the problem from the customer’s perspective and show their willingness to help. In addition, they must have access to any resources they need to solve customers’ problem.

Fourthly, the threats of substitute product is very likely to be high as coffee, juices, soft drinks, tea and many more can be easily substituted. In the mean time, consumers can also choose to go to pubs and bars and spend their time or to meet up to substituted struck. Lastly, the threat of competitor rivalry of struck in high as there are many presence of strong impetigo with deep pockets like Mcdonald’s, coffee beans and dunking donuts. Not forgetting hundreds of small local coffee shops and houses fighting for the same market share. 7.

Recommendation Based on the SOOT, PEST and Potter five forces that is conducted, I have made several recommendations. We can use concentric diversification to further expend the firms by making or obtaining new product and services which are related to the business. This is good for the business because it will bring down the cost and the main competencies can be move the the new business. Struck can also choose to use acquisition or restructuring diversification process to purchase other firms Or even merge with other firms to gain market share or even expend into a new market.

Struck might also think of using differentiation strategy which involves conveying products and services that customers recognize as unique or special and must be better than what other people are doing in the same market. 8. Conclusion This is the completion of the environment analysis on struck in Singapore that have conducted. All in all with the SOOT analysis proves that struck s a very attractive company and struck is a very experienced company.

PEST analysis that is conducted also proves that Singapore is a very safe and reliable country to invest in. Although Potters five forces shows that the industry is not very adjective but it also have some big limitations in today’s market environment. Market environment sometimes changes as fast as we can anticipate but Potters five forces and other analysis can only serves as a guide to management to enable them to think as a beginning for farther analysis. And vie made three suggestions base on all the analysis conducted.

The UAE has become an international business hub. The open arms regulations developed by the UAE government in order to stimulate commerce and trade in the country opens a window for entry. The UAE food processing industry is among the most lucrative due to presence of tourists and a myriad of expatriates who have high disposable income. Potentially the competition from Al Rawabi and Al Ain Dairy-this has identified key processes that are core to improving efficiency and adding value to services offered to consumers. These processes include planning, purchasing, processing, and production, together with customer relations.

However, the diversified approach used by dairy firms in UAE has helped to keep away new entrants. This is because economically, the industry’s profits are normal (zero). The barriers to entry in the UAE dairy market are unique from the conventional economies of scale and high cost of entry. The argument is that prospective firms that are entering the UAE are big Multinationals with brand names. These include Jumbo inc. , McDonald and Starbucks among others. Such firms have financial leverage to enter this market. However, the heritage of Milco dairy is indelible.

The company can keep enhancing its brand name through distinguished business practices, in order to increase its competitiveness (Milco 2010). Force 3: The Threat of Substitutes This is so far one of the greatest threats that Milco faces in the dairy industry. Substitute products from its rivals are dependent on the measure of relative price-to-performance ratios of the alternative products or services which customers can consume. The threat of substitution is consequently affected by cost switching – this takes place in tandem with customer’s action of switching preferences (Porter 1980).

Milco’s has embarked on massive brand revamping which has come with a complete overhaul; these changes are conspicuous from Milco’s taste up to its packaging strategies and marketing approaches. The companies new look mirrors its brand’s imagery and real time positioning in order satisfy and beat to today’s consumers’ needs and continued demand for food that is both tasty and healthy. Through a team of experts, incessant development of new strategies and brand identity, the retailer’s dynamic approach guarantees high-quality products and a succinct marketing success (Milco 2010).

Force 4: Buyer Power Due to the demand for healthy food, Milco has introduced a variety of new delicious tastes across its product portfolio. The broad line of products includes fresh cow’s milk-available in as cream and low fat, yoghurt-available in low fat and full cream yoghurt, and fruit flavored yoghurts which may be low fat with real fruit or in full cream real fruit. The size of Milco’s consumers is relatively large. These consumers are spread across the UAE-low concentration. These customers are moderately informed since most of them are transitional.

In the UAE dairy industry the major competitors of Milco are Al Rawabi and Al Ain Dairy companies. This means that the industry is dominated by a few large players. This consequently increases the power of consumers. Milco’s success strategy is dependent on consumers’ preference. This can be interpreted as, the power of buyers in the dairy market is substantial and the company should be able to channel it positively so as to deliver high quality but at the same time remain profitable (Milco 2010). Force 5: Supplier Power The power of the Supplier is a mirror image of that of the buyer.

Hence, in analysing Milco’s competitive strategy it is imperative to initially focus on the relative size and the concentration of suppliers with regard to other industry participants. Milco is supplied by a variety of firms who are both small and large. The degree of differentiation of the supplied inputs is relatively high thus giving Milco the ability to discriminate prices with respect to value created for these consumers. It is imperative to note that the dairy industry exhibits relatively high supplier power with low buyer power; reason being, the presence of the collective bargaining among the suppliers.

Conclusion In analysing Milco’s completive advantage using Porter’s five force model, it is clear to note that completion in the dairy industry is greatly affected by the by the suggested five forces. The dairy industry has stronger supplier power and weaker buyer’s power which gives Milco the opportunity to use price discrimination to its advantage. The company has shown strength by utilizing its completive advantage in the areas of product differentiation in a market that has a very high degree of rivalry.

However, in analyzing Milco using Porter’s five force model, it is clear that this paper has not exhaustively identified the factors that determine how dairy firms in UAE will compete. The UAE has a unique structure – structure in itself plays a crucial role in completive behaviour and performance. Retrospectively, Milco has successfully gained a competitive advantage by focusing on delivery of quality products to its customers through a painstaking process of value addition.

References Milco (2010). “Milco unveils its success! ” Viewed from: http://www. milcodairy. com Porter, M. E. (1980) Competitive Strategy, Free Press, New York

Introduction

Starbuck is an organization which is multinational and deals with both production, storage and selling of such products.  For instance, the Starbuck multinational coffee and coffee house company which is based in United States.  This is termed as the largest coffee house company in the world with 8,505 company owned and 6506 licensed stores in 42 countries.  It sells drip brewed coffee, Expresso-based hot drinks, other hot and cold drinks, snacks and items like mugs and coffee beans.  Also through its Sawbuck’s Entertainment division and hear music brand, the company also markets books, music and films.

An organization like this one requires an aggressive competition to have high sales.  It should compete in an “out put en acing” pro-consumer way other than seeking to find ways to reduce output and rise price (Jackson K, 2004). Some of control mechanisms have been put in place to enhance these organizations run effectively.  Such include:

Monitoring of the employees.  In such an organization, there should be cost of monitoring the employees which prevent shirking.  This should be quite intrusive.  Replicability requires close monitoring which on the other hand arises the problem of incentives.  To ensure proper supervision, there should be provision of incentives.

Capital in such an organization plays a major role as a control mechanism.  The capital can be raised from public offering of stock.  Also when the capital is enough ensures provision of job security and health care for its workers.  The provision of products also ensures extra capital is invested which instead goes to  doing out gold-plated health care- no copays, no deductibles to workers and plumping up their pension fund.

Saving Environmentalism through markets is another mechanism which refers to mandate in regulation of policies to deal with green mantra. It shows world’s approach towards environmental policy making. Mostly, it stresses on rights over “commons” which include fisheries.  For instance these rights are abused because they belong to everyone and no one.  These policies have proved to work because of noted drop in over-fishing and limitation in emissions trading. Advanced environmental science has also been noted.

Provision of an optimal experience to the customer is another type of control mechanism.  For this case, when the customers learn for a certain   products in the market, they are assured every time of getting such products without having changes in t he brand.  This in turn creates more customers are assured of getting what he wants in the market.

In comparing and contrasting the control mechanisms identified, it is clearly noted that the organizations and companies which practice control mechanisms are doing well in production as compared to those which don’t apply.  For instance, the cause of employment monitoring, the organization which monitor the working of employees are more advantaged because workers perform effectively unlike those who are not monitored.  This in turn increases profits in employee monitored organizations due to full utilization of work time.

For capital provision, the organizations with high capital yield more profits which ensure effective payments to workers and carrying our of organization activities.  Unlike the ones which does not invest capitals. Environmentally wise, the organizations which apply measures of conserving environment have been well placed in the market place which increases their sales unlike the ones which don’t apply such methods. Also the organizations which practice optimal experience to the customers have been noted to do better than the ones which do not.  Generally, control measures in Starbuck have increased profits in organizations as compared to the ones which do not apply such (Jackson K, 2004).

Control mechanisms are important to every organization. It would be difficult to determine whether or not the planning, organizing and leading functions of management are effective and productive for the company. Although some mechanisms are used widely though out many organizations and companies, some mechanisms are tailored to fit a specific organization management must determine the most appropriate control mechanisms for the company.

 Reference

1. Jackson K, (2004). Building Reputational Capital: Strategies for Integrity and Fare Play That Improve the Bottom Line .New York.

In the community that this generation lives in today, there are numerous essentials that are now considered as a necessity. Coffee is somehow considered as an essential to the society. It is used by the people to either keep them awake or just to give them energy to hopefully last the whole day. One of the acknowledged coffee companies in the world is Starbucks. This coffee company started in the year of 1971 in Seattle, Washington. Various drinks were produced by Starbucks for the benefit of their customers. With this marketing maneuver, Starbucks was able to gain the trust and loyalty of its customers.

In the year 2000, Starbucks had branched out of United States and expanded into Australia. According to Brook (2016), Starbucks had opened for about 84 stores in the country. However, with the coffee company trying to enter the market in Australia, Australians were hesitant with the new company present in their market. Apparently, Starbucks had apparently “more than 70 percent of its underperforming locations, leaving only 23 Starbucks stores throughout the entire continent” (Turner, 2018). Moreover, Starbucks had accumulated a lost of $143 million that obliged Starbucks to close and pull out most of its stores in Australia (Hurst, 2014).

Another problem that Starbucks had encountered was the loyalty of the Australians because they are accustomed to the bitter-tasting coffee that their local coffee stores offer (Turner 2018). Since Starbucks sells and offered their customers a sweeter kind of coffee that is foreign to their taste, Starbucks was not able to gain popularity as compared to the popularity they have in other countries.

The starbucks company could use two (2) strategic analysis tool known as the S.W.O.T and the P.E.S.T analysis. With the aid of these strategic tools, the company may be aware of the risks and opportunities that they may encounter under certain circumstances.

The SWOT analysis is a strategic tool used for identifying the company’s strengths and weaknesses alongside with the opportunities and threats that may accompany it.

With the usage of the S.W.O.T analysis, the company would be able to identify their strengths and weaknesses, as well as the possible opportunities and threats that the company might face.

It could be noted that Starbucks had somehow disregarded the research and survey procedure for introducing new products to a new community. Instead, the company of Starbucks assumed that the goods and services they offer caters to everyone in the world– which, in this case, Australia was not delighted about. If the company of Starbucks had just researched more and surveyed more people concerning the sweet tasting coffees they serve, they would be able to identify that Australians prefer their coffees either brewed or bitter.

Since Australia is one of the countries to have a different preference in coffee– along with some parts of Europe, as compared to the rest of the world, Starbucks could have seen the risk of losing customers when entering the market of Australia as Australians were not as accustomed to Starbucks back in 2000.

Meanwhile, their decision to pull out 61 branches out of their 84 built establishments and leaving only about 23 establishments was a good call to somehow cut the overhead cost that they would have to pay such as rent, labor, and assets that in the end did not prosper. The company was somehow able to also salvage their name even though there are articles about their ‘failed endeavor’.

This could be seen as a learning opportunity to Starbucks as they would try to re-enter the market in Australia, and hopefully, by this time, as they have left some establishments in the Australian community, Starbucks would not have that much of a hard time as they would have known the strategies and preferences that Australians want. Moreover, since Australia is one of the tourist destinations of the world, people from all around the world would sometimes visit Australia and with Starbucks known internationally, this company would be the preferred coffee branch of these tourists.

Aside from S.W.O.T, another tool used for strategic planning is the P.E.S.T analysis.
PEST stands for Political, Economical, Social, and Technological factors that are being considered when planning for a business endeavor.

The P.E.S.T analysis is being used by businesses to identify the risks and opportunities of a business at a macro level as it not only determine the advantages and disadvantages of the business, but also the external aspects of the business.

It could be noted that Starbucks had a good relationship with its external factors like their suppliers, and some of the customers in their community because of the service they offer. However, when Starbucks had expanded their company in the year 2000, they also had to pull out most of their establishments in the year 2008, as the company noticed that they are no longer earning profit from the said branch. Moreover, there was a high turnover rate during this time as 700 hundred employees were left jobless after the pulling out of the branches. (Prepare for Australia, n.d)

In terms of the social factors that Starbucks might have considered is the preference of Australians with their coffees. As majority of the Australian population are somehow meticulous with the way they want their coffees prepared and served, Starbucks somehow was not able to impress their customers.

According to a statement of staff in Sydney’s Mecca Espresso named Tuli Keidar (2014, as cited in Hurst, 2014), “… Australia already had a well established cafe culture based on espresso when Starbucks arrived. It had to compete with cafes that provided a similar product of equal or better quality.” This means that Australians are very much accustomed to the local coffee stores in the country that they are able to identify which serves the best beverages in their town. However, aside from the country’s expertise in coffees and teas, they also take into account the ambience and atmosphere of the establishments.

In line with the two strategic planning tool that was used to assess the possible risks and opportunities of the Starbucks brand in Australia, it could be noted that in terms of internal assessment, it is best to use the SWOT analysis as it is mostly focused on the internal cases of situations that could be avoided or taken into account. The business could use this planning tool for its convenience and it still gets the work done. On the other hand, when a company would want to focus on the external factors as they would want to research on the country or community they are planning to cater to, it is best to use the PEST analysis as it is mostly focused on external cases with a hint of internal cases.

With the data gathered and analyzed with the aid of two commonly used planning tools in a business, it could be noted that one of the mistakes that Starbucks had done was that it barged in a competition without introducing itself to its customers and community. However, with the advancement of technology and the variations of the preferences of people, Starbucks may have a chance to gradually expand in Australia if they still wish to do so. If ever the plan for expansion would commence, the popularity of Starbucks would increase, alongside the increase in profit as people who travel or migrate to Australia might have been accustomed to Starbucks and somehow want a piece of home to remind them of their roots.

 The aim of this report is to find out the deep-seated reason for this depression of Starbucks and give a recommendation to the firm to deal with it. Furthermore, this report also suggests solutions to dismiss the panic of the staff and remains the excellent performance.

The key findings include: The over-expansion made Starbucks’ unique culture of the “Starbucks experience” devalued and seemed no difference with other fast food restaurants. This caused employees’ less well performance and therefore it lost customers’ loyalty as well. The employees felt dissatisfied with the rewards and treated customers with less effort while the unacceptable massive layoffs made a panic. The recommendations suggested by this report include:

Remove number of outlets away from each other and slow down the pace of opening new stores in the US or concentrate on the unexploited market space in other countries. Increasing the compensation given to the members asked to leave and suggesting them do some other suitable jobs. The firm can also make a promise that these employees would be considered first when hiring candidates in the future after the most difficult times. Furthermore, keep the employees’ payment stable and hold some activities inspiring to promote people to tide Starbucks over difficulties together.

This report describes the findings after applying theories to analyse the issue which claimed the trouble that Starbucks was facing. For years, Starbucks was famous for its consistent growing and expansion. However, the both share price and sales fell even three times than before since 2008. The “Starbucks experience” (Michelle, 2007) was widely supposed to have been diluted and the customers complained that the staff seemed to be less complaisant since they found Starbucks Ubiquitous.

A resource from MarketWatch: Global Round-up (2008) reported that Starbucks had been forced to close 600 US stores and axe 12,000 jobs which took almost 7% of its global workforce which had made negative effect on other employees. The aim of the report is to find out the deep-seated reason for this depression and give a recommendation to the firm to deal with it. Furthermore, this report also suggests solutions to dismiss the panic of the staff and remain the performance. Justification of key issues over-expansion caused culture devaluation and massive layoffs Fast-forward 20 years, Starbucks had more than 10,000 American outlets till 2008 from only 84 US stores in 1990 (Smale, 2008). This sharply increased number made Starbucks seem to be omnipresent like other fast food stores. As a result, this change took a negative effect that the members in this group feel less proud of their jobs in Starbucks which was famous for its unique culture and therefore had less passion to satisfy the customers.

From Schein’s (2004) theory of culture components, Starbucks fell to the basic level of culture instead of the highest one it got before. Starbucks finally cut over 10,000 jobs which were most in the US in the last two years during the reforming and also cut the employees’ compensation and holiday (Kiley, 2009). By Maslow’s (1970) “a hierarchy of needs”, Starbucks could not make staff satisfied by the physiological needs and de-motivated other members. The dissatisfied emotion would reflect on their performance.

Findings from analyzing issue over-expansion caused brand devaluation and massive layoffs Starbucks was famous for the unique culture that to give all the customers the relaxed feel and atmosphere as a third place out of home and office which called “Starbucks experience”. This culture is in the second and near the third level of the “components of cultures” with espoused beliefs and values and basic underlying assumptions which was identified by Schein (2004).

Starbucks published its beliefs and values to make the members love their jobs and enjoy the experience in Starbucks to treat customers with their heart and satisfy them and to attract new members or partners to join in the group through the unique brand culture. Guided by market, Yang (2010) has provided evidence that brand culture was aims at achieving the maximization of organizations’ profits obtained and customers’ loyalty by establishing common values which could influence the movements and behavior of the members within a company based on the amalgamation of consumers’ value and company.

However, the expansion without limitation made a trouble. Although the purpose at first was to make the “Starbucks experience” penetrate everywhere through the expansion, the company was making stores feel more like hip neighborhood coffeehouse which deviated from its original intention. Starbucks had lost it focus and made a dilution of the “Starbucks experience”. For the reason that the worth of a thing is best known by the want of it, the value of the culture and brand image went down.

The “cannibalising” (Smale, 2008) sales between branches only a short distance from each other made employees feel less honored to work in this firm or group and the less enthusiasm to satisfy the customers came as a serious consequence. According to Schein’s (2004) theories on culture components, Starbucks only reached the first level of the components “artefacts” which observed the decorative style and visible products to survive the situation with ubiquitous competition instead of making the ustomers always come first. The “Starbucks experience” was viewed same as McDonald’s and other fast food stores who also sold coffee through such a market saturation. Organizational culture sees culture comprising a number of variables, the combination of which lead to observable differences between organizations so that a company can have power to compete with others (Barry et al. 2000). To get back what made Starbucks successful Starbucks cut a great number of stores and announced massive layoffs for reforming.

However, this would make the employees undertake the responsibilities and suffer the pain. At the same time, the sudden occurrence as the adjustment in the contract with the employees is both inevitable and a source of trouble, especially it made employees feel that they expected far more than they got and worse off (Kolb et al. 1991, p. 6). According to the theory “a hierarchy of needs” which developed by Maslow (1970), individuals experience a range of needs and will be motivated to fulfill need which is most powerful at that time.

The first level is physiological needs and if this need is dominant for a person they can satisfy it by having a regular job which can keep consistent. But the employees forced to leave Starbucks could not be satisfied by the basic needs. Furthermore, the firm de-motivated the left members at the same time by cutting the employees’ compensation and holiday. Vroom’s (1964) expectancy model theory of motivation explicitly recognized that outcomes with high expectations and neutral or even unsatisfied achievements would reduce the amount of effort the staff is going to invest.

By understanding Vroom’s theory, the firm would get less contribution from its employees by the lower reward, which would reflect the staffs’ less enthusiasm when treating the customers. This also made every member in the firm feel upset and panicky. When the employees believed that they were not receiving payments commensurate with their performance, effort or ability then they worked less hard (Hauenstein and Lord, 1989), and became more selfish (Harder, 1992) and felt dissatisfied with their jobs in this firm (Carr et al. 1996).

Conclusion

To sum up, Starbucks faced the trouble that the unlimited expansion has made its famous experience culture diluted and lost a number of customers’ loyalty. To make the matter worse, a great number of layoff was claimed so that the firm also lost the loyalty of its members. The main aim of the report is to help Starbucks to revalue the culture and put Starbucks’ unique image back to high position into customers’ heart. In addition, suggestions are given to motivate employees. Culture is the soul of a firm which gives the company power to survive and compete with other business. Recommendations

For the first finding that the over-expansion made Starbucks devalue the unique culture of the “Starbucks experience”, a suggestion of “decentralization” can be given. Remove number of outlets away from each other and slow down the pace of opening new stores in the US or concentrate on the unexploited market space in other countries. The other finding that the employees felt dissatisfied with the rewards and treated customers with less effort while the unacceptable massive layoffs made a panic can be solved by increasing the compensation given to the members asked to leave and suggesting them some other suitable jobs.

The firm can also make a promise that these employees would be considered first when hiring candidates in the future after the most difficult times. Furthermore, keep the employees’ payment stable and hold some activities inspiring to promote people to tide Starbucks over difficulties together.

Reference

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