Executive Summary
For any organization, profit maximization and brand growth are the main goals it aspires to achieve. However, this may not always be so as the business may employ the wrong steps towards achieving these objectives. It is therefore appropriate for the company to investigate the best strategies to ensure that it can achieve the maximum profit and attract as many customers as possible(Golembiewski, 2018). It is also important to investigate the underlying issues that are limiting the organization's growth and coming up with possible solutions. The paper focuses on Starbucks Company and the problems it faces as it seeks expansion. Customer welcoming is the primary hindrance to the firm’s growth. To analyze this issue and come up with a possible solution, the Starbucks’ mission, its SWOT and PESTLE analyses, and diagnostic model used are highlighted. The paper also features the structural dilemmas the organization faces and concludes by formulating a strategy to solve the problem.
Starbucks Corporation is an American coffee making and beverage chain shop that has it’s headquarter in Seattle, Washington. The firm majorly deals with roasting coffee berries to make hot drinks for coffee lovers. It has been in existence since 1971 when Jerry Baldwin, Gordon Bowker, and Zev Siegl formed it. Starbucks’ mission is based on nurturing the human spirit by serving each customer with a distinct coffee and seeking expansion, each at a time(Geereddy, 2015). This means that the company puts more emphasis on its existing customers or the current number of shops before embarking on more expansion.
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However, the unpleasant welcoming of new customers is the major challenge Starbucks faces as some of its strategies become unattractive to clients who would want to try their products. Some of these features include a complicated menu and using their language in customizing and sizing products which might be unfamiliar with new customers. To solve this problem, the business needs to come up with pamphlets and signage that clearly explain their menu to new customers who might face challenges understanding the existing ones. Starbucks also needs to train their baristas on the appropriate way of handling first-time clients and make them feel warmly welcomed. This strategy will go a long way in expanding the market segment leading to profit maximization.
Analysis
PEST Analysis
Political- The political class especial in the Western countries are greatly concerned by Starbucks' source of raw materials. Many politicians are advocating for more scrutiny and measures put in place to ensure that the company follows the set guidelines. Such rules may greatly impair the firm’s operations hence its performance.
Economic- as one of the established multinational, Starbucks is still recovering from the economic recession that occurred across the globe in 2008. This has greatly affected its profitability and growth in a great way(Sammut-Bonnici & Galea, 2015). Other economic factors that affect the operations of Starbucks include price-conscious customers and the rising cost of production.
Social-cultural- Starbucks has faced challenges as it tries to penetrate lower and middle social classes as many members of these groups associate the company with the elite citizens who occupy the upper class. The company is forced to employ different strategies in order to capture this market.
Technology- the rapid advancement in internet usage presents Starbucks with many opportunities it can use to maximize profit and ensure growth. An example of these opportunities is the creation of a mobile application that allows customers to check and buy various products offered by the company.
Key Success Factors for the Coffee Industry
Product- for any firm to succeed in the coffee industry, it must introduce unique products that offer them a competitive advantage over others. This includes producing coffee with a special blend, specially trained baristas, and certain berry roasting method.
Customer- the firm should be able to identify where coffee lovers are mostly found before opening a shop. This allows for better accessibility and minimal marketing costs.
Employees- they greatly determine the culture of the business and play a big role in marketing its products and services(Hasibuan & Dantes, 2012). To maximize their input, the firm needs to offer better employments terms meant to retain them.
Marketing- it plays an important role in attracting new customers and retaining existing ones. A firm needs to come up with innovative marketing strategies to gain a competitive advantage over other coffee makers.
Strength- the biggest strength of Starbucks is its ability to maintain a strong brand image all over the country. It offers unique products and services making it one of the most recognized multinationals. Other sources of strength for Starbucks include stronger financial ability, quick expansion, and acquisitions.
Strengths and Weaknesses
Weaknesses- high prices for their products and services remains to be one of Starbucks’ biggest undoing. There have been several coffee lovers who feel that the prices offered by the firm are too high for the common citizen to afford(Marketline, 2014). They have branded their products and services as targeting the elite members of the society thus discriminating against other citizens. Other weaknesses Starbucks faces include imitation by the competitors and complicated procedures in opening stores in different countries or regions.
6 Box Diagnostic Model
Purpose-Starbucks’ primary purpose is to provide the finest coffee to their customers as they maintain their business principles. This has led to the firm developing unique products and services geared towards maintaining their clientele. However, Starbucks has failed in developing strategies aimed at attracting and retaining new customers. They have complicated menu features that will be hard for new customers to adapt to. This might scare away first-time visitors limiting their growth. This will limit the overall sales and profit margin.
Structure-Starbucks’ organizational structure comprises of geographical, functional, product-oriented hierarchies, and teams. With such complex structures, decision making may take long thus hindering ideas innovation. New strategies meant to attract the first time customers may take long before being implemented.
Relationships-due to Starbucks’ complex organizational structure, communication between different players might be hard to achieve leading to poor customer service by baristas. They might lack appropriate approaches to new customers leading to slow growth.
Rewards-Starbucks has one of the most attractive reward systems that attract many workers. However, this system might make some employees less innovative leading to unsatisfactory customer services especially to new ones. This can affect sales greatly and the firm’s overall growth.
Leadership- senior employees have the responsibility of ensuring that every worker adheres to the set objectives to achieve the firm’s ultimate goal. Poor leadership leads to workers' confusion, poor performance, and failure to achieve the set goals.
Supporting Mechanisms-various policies and procedures may fail to work together leading to Starbucks missing the set targets in sales and overall growth.
Starbucks’ Structural Dilemmas
Differentiation vs. integration- the firm may be unable to choose between separating the business according to product or mode of operation and combining them. Differentiating may lead to better customer services due to the simplicity of operations while integration may complicate their style of operation scaring away new customers.
Gap vs. overlap-major responsibilities may not be clearly defined, creating gaps between different workers. This can lead to poor customer services as baristas may fail to give proper welcome to new customers. Contrary, tasks may overlap creating confusion and wasting efforts.
Underuse vs. overload- giving employees less work may give them time to give better treatment to new customers as opposed to overworking them.
Lack of clarity vs. lack of creativity-by not clearly defining the roles to be played by each employee may lead to confusion and in turn offering poor services to the clients. On the other hand, too much control may lead to customers lacking innovative ideas on how to attract new customers.
Autonomy vs. interdependence-autonomy involves allocating each employ specific work in an organization which greatly limits creativity while interdependence means workers relying on each other to perform certain tasks(Wirtz, Lovelock, Moon, & Quelch, 2016). Autonomy will lead to baristas and other workers having little concerns with new customers who might be unfamiliar with Starbucks’ tradition. Interdependence on the other hand allows each to play any role when need be.
Loose monitoring vs. tight monitoring- little monitoring of the workers can make them lack seriousness in handling customers while tight control may limit their creativity informing better ways of welcoming new customers.
Starbucks needs to put more improvement in the marketing and operations departments to attract and retain new customers. The firm has seen a lot of success in delivering quality products in the coffee industry. However, it needs to address the serious problem of complicated ways of handling new customers. Some of the strategies act to scare away first time customers thus losing an important market segment. They need to redesign their menu in a simpler format for new customers to understand. The second step needed is designing innovative advertisements that can tap into the low and middle-income earners clientele which view the company as targeting the elite members of the society.
References
Geereddy, N. (2015). Strategic Analysis Of Starbucks Corporation. Harvard University .
Golembiewski, R. T. (2018). Organization Development and Change. In Public Administration as a Developing Discipline . https://doi.org/10.4324/9781315089331-6
Hasibuan, Z., & Dantes, G. (2012). Priority of Key Success Factors (KSFS) on Enterprise Resource Planning (ERP) System Implementation Life Cycle. Journal of Enterprise Resource Planning Studies . https://doi.org/10.5171/2011.122627
Marketline. (2014). Starbucks Corporation SWOT Analysis. Starbucks Corporation SWOT Analysis .
Sammut-Bonnici, T., & Galea, D. (2015). PEST analysis. In Wiley Encyclopedia of Management . https://doi.org/10.1002/9781118785317.weom120113
Wirtz, J., Lovelock, C., Moon, Y., & Quelch, J. (2016). Starbucks: Delivering Customer Service. In Services Marketing . https://doi.org/10.1142/9781944659028_0031
