1 Strategy Formulation “Starbucks” Morrisa Hall MGT/498 September 11th, 2017 Dr. Susan Muhr Leister 2 Introduction In 1971, founders Zev Siegl, Jerry Baldwin & Gordon Bowker opened the first Starbucks store Seattle Store Market Place. Their first store was mostly known for selling whole bean and coffee ground, also tea and spices mostly for home uses. Soon after they opened the first few stores, they hired Howard Shultz as the director of the retail and marketing operations. Along with their other products, the owners envisioned their business idea to be a gourmet coffee shop catered towards coffee enthusiasts. Their inspiration came when Shultz was in Milan, and he came across Italian espresso bars, where the owners knew the customer’s name while serving them gourmet espresso. This led them to believe the personal relationship people could have with coffee, and they could create with their customers. After acquiring their assets and local investors, they had successfully launched the Starbucks Corporation. Long term Goals and objectives of Starbucks Having a number of stronger rivals within the marketplace, Starbucks conducts its business operations in a very competitive marketplace; hence, the team of management needs to figure out the operational and inherent risk for properly planning the Starbucks’ objectives and goals. Starbucks R&D department worked harder in numerous researches and announced newer products along with enhancing the other products’ quality for remaining front runner in the competition. Starbucks’ key objectives are to make the organization best coffee selling brand around the globe along with setting several principles that cannot be compromised throughout their achievements and growth. For attaining long term benefits, Starbucks is seeking to concentrate on consumer’s centric goals for the reason that in such a higher rivalry the customers will take the final decision ultimately for choosing the coffee brand of their taste and choice (Garthwaite, 3 2017). Therefore, management of Starbucks has made the decision for putting themselves into the shoes of customers along with focusing on demand of customers and recommendations from feedback given by the customers for achieving their long-term economic objectives. After the successful opening of Roastery and Tasting room, Starbucks has touches the heights of glory and success and customers appreciated its quality and taste. After successfully launching Roastery, now Starbucks is looking forward to expanding its business across the globe and set out a plan to expand its business of Roastery throughout the world and set their goal to open new stores in more than 1,500 new locations. Increasing the profit is the key objective of all businesses and Starbucks has also the same objective. Starbucks management has defined their goal that they are planning to raise their revenue in the upcoming 5 years only from the food industry in U.S to over $40 million, which is now only $20 million because all its operations and future planning are depended on the revenue they generate. In the example, generating more revenues will enable it to operate and allocates its resources more efficiently. For generating more revenues, Starbucks has planned to diversify its operations by extending the time of its evening operations, providing more recreational facilities to customers. Introducing new drive thru, launching entertaining facilities for kids and candy shops for them. Also, renovating their stores to catch the customers and offering discounts at their new cafes and on special events. Starbucks has also planned to expand the usage of its mobile application for ordering and payment purposes, which the analysts are calling a game changer plan. This enables the customers to place their order online before going to café to save their precious time. The customer can also pay their charges online through this application (Chua, 2013). After the success of mobile application and loyalty program now Starbucks has planned to launch remote 4 delivery services in selected areas, which will be expanded to more locations across the world over the time. By successfully achieving the creative goals and objectives set out by Starbucks management the company will be capable of sustaining its competitive edge and will capture the market. Business management Strategy The CEO, Howard Schultz, the strategy is to recruit the world best managing team and motivators, which will provide the best leadership to the company and for this, he selects the exemployees of top most companies in the world like Disney and Microsoft that possess extra visionary qualities and have a great track record. Starbucks is planning to diversify its operations and products. Management has a clear vision to adopt the culture and taste of the locality in which Starbucks start an operation like in China, Starbucks renovate its interior and adopt Chinese wooden style innovations. Likely Starbucks has clear strategy to introduce new brands that suit the taste and culture of the locality (Cole, 2008). CEO of Starbucks has also planned to adopt a flexible structure for its organization and delegate some authority to his highly competent managing team to play their role in planning and setting goals and objectives and monitoring the work of their subordinates. All these strategies were aimed to increase revenues of the company. Vertical integrations Strategy Starbucks has also implemented vertical integration strategy and has introduced Roastry stores, which buy and collects the world’s best coffee beans, roasts it and stores it. Then it supplies roasted beans to all Starbucks stores thus ensuring the world’s best quality and taste for its products, and this has considerably increased revenues of the company by reducing per unit cost of coffee. Research and development department are still working hard to enhance the 5 quality of the coffee and to produce the finest coffee beans so that they could achieve the long term financial goals as set by the company. Starbucks strategic alliance Starbucks strategic alliance has performed a great role in improving the quality of the Starbucks products and plays a key role in the company success. Starbucks has alliances with National Associations of the advancement of colored people, Kraft foods, United Airlines, PepsiCo, Barnes and Noble and Tata coffee (Cravens, 1993). All these alliances are aimed to generate more revenues from their products. In these alliances, not only Starbucks but the other companies of the group had also got much benefit. In future Starbucks is planning to enter an alliance with some other airlines and major companies to promote its business and generates more revenues. Starbucks competitive advantage Starbucks has sustained its competitive advantage over its competitors in the market by the creative thinking of its CEO and his team. Starbucks has produced world best coffee beans and launched customer’s loyalty program. Other differential qualities that give Starbucks competitive advantage over its competitors are the establishment of the Roastry and tasting room department, the internal organizational structure of Starbucks and customer’s centric policies. Starbucks has also launched reward card for customers by which customers can avail discounts and other bonuses. The combined effect of all above-mentioned points has given the Starbucks a considerable advantage over other brands in the coffee industry. 6 Organizational chart of Starbucks CEO International Retail president Legal and corporation affairs Finance Regional retail president Supply chain operations. CFO Executive vice president Customers services representative. Senior Vice president Legal advisor Marketing Human resources. Senior vice president Senior vice president Worldwide public affairs. Coffee Senior vice president. Senior Vice president 7 References Chua, A. a. (2013). Customer knowledge management via social media: the case of Starbucks. . Journal of Knowledge Management, 237-249. Cole, G. (2008). Cole, G. (2008). Grande Expectations: a Year in tGrande Expectations: a Year in the Life of Starbucks' Stock. Loughton: Piatkus 2007. Cole, G. (2008). Grande Expectations: a Year in the Life of Starbucks' Stock20081Karen Blumenthal. Grande ExpeManagement Decision, 673-675. Cravens, D., Shipp, S. and Cravens, K. (1993). Analysis of co-operative interorganizational relations. Journal of Strategic Marketing, 55-70. Garthwaite, C. B. (2017). Starbucks: A Story of Growth. . Kellogg School of Management Cases., 1-20.
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