An organizational strategy is a process which is used by any organization to achieve their long-term goals and objectives. This method helps in the strategic planning for company. Organizational strategy must arise from a company's mission which explains why a company is in business. There is a huge advantage of organization strategy as it will help the company to focus on their vision and mission. It will also help them to set priorities and objectives for their employees to achieve. This will discuss about different strategies which are being applied by Starbucks in their management system to achieve their targets. These strategies will be related to their financial performances and company’s external and internal environmental factors. It will also explain threats of Starbucks' and how it faces them.
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1. Starbucks Strategy
Starbucks implement so much of strategies into their company which helps them to increase their services and production. The overall strategy is to build Starbucks into a destination which is loved by their customers. These strategies include services like food, music, books, and videos for their clients to enjoy their. Starbucks is also planning to diversify their business to include other ownership and management formats, some additional products into their production range and will use different channels for the distribution of their products and services in the target market. Some strategies which is implemented by Starbucks are as follows,
- Licensing Strategy:They are planning to start licensed coffee shops and kiosks which will help them to reach at maximum number of customers in different locations. The very first licensed deal of Starbucks was with Marriott hotel which is an organizationthat ownsfood and beverage concessions in several US airports (Serra and et.al., 2017).
- They are also planning to make tie ups with local companies which will help them to distribute their products more often into market. It will be achieved by selling their products through super-markets and other retail food stores.
- They have also licensed their products with big companies, for example, Pepsi Co and Unilever for their supply of products and services like, Frappuccino and Tazo Tea.
- Financial Strategies: These strategies include services like prepaid store card which was later combined with a Visa credit card. This card system helps their clients to get entry into the Starbucks's reward program which offers their customers to avail free drinks and some other benefits to their regular consumers. This will help them to retain their old customers but satisfying them through services and products.
- Employee involvement Strategies: It is very important for them to have strong employee engagement which can help them to build a good relationship with their customers.If company has a good connection with employees that it will be beneficiary for them as they will work hard more to complete the work in time.
- Customer's Relations and Social Purpose: Having a good and strong connection with their customers will help them to deliver services according to their preferences and needs. Providing food items by keeping in mind their choices in taste will have a positive effect on their customers. Their employees has to be well trained in dealing with the clients and they should be capable enough to solve their issues if any (Rantakari and Vaara, 2016).
- Design Strategies: The layout and design of Starbucks' stores were critical elements of the experience. Having an attractive environment helps to attract more customers to buy their services. The design should be so attractive and innovative which can help them to sustain their clients.
- Create Innovative Products : Introducing new products and offers for their customers. New food offerings which include hot breakfast items, lunchtime meals, and evening snack and alcoholic drinks.Bringing some innovative changes in their products and services will increase their chances to gain popularity among their consumers.
All these strategies help company to build a strong relationship with their customers. It also helps them to build a strong reputation in the market. As Starbucks's is at the top position in its target industry, it is very important for them to build leadership position in coffee marketing-environment. All these strategies help them to growtheir store's portfolio and increase the scale of Starbucks store footprint with disciplined expansion. The aim is to grow their services and production of packaged fooditems like coffee and ready-to-drink coffee beverages by 60% in the year 2019. They are also focusing on digital engagement for promoting their products and services. These can be done by through mobile commerce platforms. There are some new features to Starbucks mobile application which include advanced ordering of the food items and payment can be prior to pick-up at a Starbucks store. This has given them so much of popularity among youngsters as it is very convenient for them to use (Markus, 2017).
2. Starbucks’ strategy in relation with
A) Starbucks’ financial performance
The financial performance of Starbucks is quite stable in the market. Starbucks has always increased their net revenues from 2007 to 2015 in every factor. For example: in their costs of sales which includes store operating expenses, general and administrative rates and their net earnings and in total assets. Starbucks company faces financial crisis in the year 2008-2009 which was triggered by the slow growth of the same type of product sales and operating profits.For an effective marketing and sales of their products and services, Starbucks has planned two strategies which they can implement in their management system. These strategies are as follows:
- Retrenchment of Starbucks: To plan an effective financial strategy, company has cancelledtheir new store openings in different locations and revised the operational practices which can help them to improve cost efficiency forthe stores in industry (Park, 2015).
- Reaffirmation of Starbucks: In this method, company will revitalize their experience which will help them to reconnect with their customers to understand their preferences and choices in food and beverages. Making Starbucks a strong organization in the target market with the use of social commitment towards their employees and clients who plays a central role in their rediscovery process.
For Starbucks, reconnecting with their customers is a tough task which involves the extensive use of new digital media, as it is very popular now days. Starbucks was a leader as compared to their competitors in industry which uses Facebook and Twitter for doing their promotional activities which can help them in loyalty-building purposes. They have also pioneered some new payment methods in their system which help to facilitate transactions more effortlessly and build customer loyalty. With their operational efficiency in the management system, customer connections and improvement in their core values and principles restored helped Starbucks to increase in their growth in industry (Qian and Xing, 2016).
Illustration 1: Starbucks Financial Statement
Source : (Starbucks's Overview and its financial statement, 2015)
B) Overall coherence of Starbucks’ strategy with company’s external and internal environments
Starbucks's overall strategies are applied in their management system to control its external and internal environmental factors which have a great impact on their functioning. In thetime of financial crisis for their company, they have stopped opening of new stores as it will be too costly for them to manage their financial budget. To control it, they have improved marketing and promotional activities to gain attention of their customers to buy services and products. They have also encouraged employees who work for them which helped them to increase their production rate.Extensively meeting with their employees and partners to reignite their drive and enthusiasm and reinforce Starbucks' values in target industry helps them to increase their sales production (Penumarti and et.al., 2017).
They have also started to provide their services in grocery sector as well because this will help them to gain popularity and enhance their customer rate. By the use of this strategy, Starbucks can lead their sales through traditional grocery channels and became Starbucks “Blueprint for Profitable Growth”. The main strategy which helped them a lot is their expansion of business in different countries. For example: China, India, Morocco, Colombia, Vietnam, Monaco, Finland and Norway. In January 2012, Starbucks announced a 50/50 joint venture with Tata Global Beverages to establish a chain of Starbucks coffeehouses in India.
3. Starbucks operate in the interests of its shareholders or stakeholders
It is very important for Starbucks to improve its corporate social responsibility practices to address the concerns of different stakeholder groups. There are various shareholders and stakeholder who work them, such as, their employees which can includes staff members, their partners, for example, Barista, customers, suppliers, investors, government, etc. which has direct or indirect link with the company to operate efficiently in the industry. There are basically two types of stakeholders which works for the company, i.e., primary and secondary stakeholder. Primary stakeholder are those on which company relies for its proper growth in market, these includes employees, customers and suppliers (Aiello and Dickinson, 2014). In secondary stakeholders are those who are affected by organization directly or indirectly.
Starbucks operates its business as customer-oriented which helped them to deliver the best services. Their main objective of company is to satisfy their customers as well as their employees, partners, investor, etc. Stakeholder is greatly affected by the achievement of company's objective, for example, if Starbucks's is getting a good profit than ultimately its stakeholder's will also get benefit from this. To measure the effectiveness of the business, Starbucks's evaluate the personal behavior of employees, their motivation towards work and their job satisfaction which can give them information about them.
In Starbucks's as a stakeholder, their employees have rights to get a good working station with higher wages and they should ensure them the job security which will increase their confidence while working there. For this, in 2014, Starbucks has boosted their CSR performance for this stakeholders working with them by providing them scholarships to employees based on a partnership with Arizona State University. Company can improve their corporate responsibility by addressing issues which is related to their stakeholder and shareholders. This will also ensure that they are working effortlessly in the target industry and delivering the best quality coffee to their customers (Moutinho and Phillips, 2018).
Starbucks's consider their customers as a top most stakeholders as they are the strong pillar of their business. They try to manage and corporate a healthy and friendly environment from their employees to their customers. Apart from these, they have manged to work well with their supplier in proper manner. For example, company's supplier diversity program helps to ensure that more suppliers from around the world are included in the supply chain so that they can get the best quality of raw material foe their production in the organization. Starbucks has initiated a social responsibility programs to save the environment. They are effective in addressing their social responsibility properly.
Investors and government are the most important stakeholders who work with Starbucks's. Investors help the organization to have a good financial performance in the market. After financial crisis, company has somehow managed to gain their financial stability by implementing some effective strategies into their management system. Shareholders’ impact is significant for the company’s operations (Jackson, 2017). Working as leading company in Coffee industry it is very important for the Starbucks to maintain a good relationship between their stakeholder and shareholders to work effectively. They should ensure that they are happy while working with them. It is very important for the proper functioning of the organization that company manages its stakeholder and shareholders very accurately. For this they have applied many strategies.
4. Threats Starbucks faces and ways to counter these threats
Starbucks Corporation has dominated the coffee scene in UK for decades with 10,653 total number of licensed store operating in different location. It is very important to for them to compete with their competitor as they are also providing the same products and services which Starbucks is providing to their customers. Starbucks Frappuccino and Double-shot Cappuccino coffee are the top brands in the ready-to-drink coffee market which has helped them to stay in the market in good position (Organizational Strategy: Definition and Examples,2017).
There are some other factors as well which has to be considered by Starbucks, for example, they should ensure that they are not harming the environment and are using 100% recycled paper products to save environment. Often, the newest, most innovative products are very expensive. They are also risky because there is no guarantee customers will respond positively, employees must be trained frequently, and the system may have glitches. Social media advertising does not necessarily reach consumers of all ages. Companies need to be attentive on not to completely neglect all other areas for advertising their products in market, such as, print media, for example, newspapers, magazines, etc. and electronic media, for example, television, radio, internet, etc (Wahlen, Baginski and Bradshaw, 2014). There are so many threats which Starbucks's has to face, for example,
- Risks to Starbucks' brand reputation: It is very important for the company to maintain it reputation in the target industry as it plays crucial role to stay in top position and gain good revenue. For maintaining this status they have to work on their products and services and some other factors as well, such as, customer trust, privacy factor, quality of their products, etc. Improvement in all these factors will help them to maintain their brand image in the market and will also attract more customers towards them. They have to deliver the best quality of services to their clients which can make them happy to compete in this competitive environment.
- Saturation of the US market: Saturation in the market has a great impact on the business of Starbucks as it will directly affect the functioning of the company. Slowdown or decline in the cash flow can result in the reduction of Starbucks's cash flow rate (Kotabe and Helsen, 2014). This will ultimately result in decrease in their business which can affect their employees as well.
- Growing competition in all of Starbucks' markets: Today's world has a great competitive environment to run their business successfully. In US, there are large competitors present in the market which gives services their customers in a quick-service restaurant sector which is
selling their high-quality food items specially coffee beverages which can lead to decrease the customer rate and revenue of Starbucks's company. Apart from this, there are international competitors also which affects them a lot to decrease their overall growth. There are large new entrants in the market which provides their services at a very cheaper costs which can hinder their business. Additionally, declines in general consumer demand
for specialty coffee products for any reason, including due to consumer preference for other products, could have a negative effect on our business (Papanastasopoulos, Wahlen and Baginski, 2018).
- International markets: To get a good revenue from the business it is very important for Starbucks to expand their business in different countries, for example, China and Asia Pacific to increase their customer rate and profitability rate from the business. In international markets there is a huge risk of different factors, such as, political and regulatory uncertainties in the market. There are also various laws, rules and regulations as well which they have to follow properly to work effectively there. There are huge challenges for Starbucks in expanding their business due to difficulties in protecting their intellectual property (IP) and enforcing
contracts, they have reliance upon foreign partners to do their business. The most important challenge is to adapt the change in the customers taste's and preferences in food and beverage items.
- Other than these, Starbucks faces significant challenges because of its global supply chain and is subject to disruptions in the supply chain because of any reason related to either global or local conditions. The company faces threats from the rising prices of coffee beans and is subject to supply chain risks related to fluctuations in the prices of this key input. Further, the increase in the prices of dairy products impacts the company adversely leading to another threat to its profitability.
To overcome all these threats company has implemented new and effective strategies which can help them to resolve these issues and stay confident on the target market. Such as, to overcome the issue of competition in industry, Starbucks will work on their production range to produce new and innovative products into their menu which is completely unique as compared to their competitor's menu (3 Risks for Starbucks Investors,2017). They have also worked on their marketing strategies which will enhance their promotional activities to make aware customers about their products and offers which is provided by the company. Starbucks' growing diversification-both
its widening range of food and beverage products and its entry supplying the grocery trade as well.
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From the above report it can be summarized that organizational behavior is very important for any organization to work effectively and efficiently in the target industry. This reports explained different strategies which is being applied by the Starbucks's company to increase their growth and profitability rate, such as retrenchment and reaffirmation of Starbucks which helped them in their financial management. They have also manged to expand their business in different countries which can give them more revenue like China and India. It will also explain about the role of Starbucks in managing their stakeholder and shareholders who are working in the organization. They have to keep them happy as it is very important for their proper functioning because they are directly linked with them. This report also explains about issues and threats which arises in the industry for them, for example, brand reputation, saturation of the market, competition in the industry, international market, etc.
You May Like To Read: Influencing Organisational Strategy of Starbucks
- Serra, C.E.M. and et.al., 2017. Project governance, benefit management, and project success: Towards a framework for supporting organizational strategy implementation. International Journal of Project Management.35(8). pp.1658-1672.
- Rantakari, A. and Vaara, E., 2016. Resistance in organizational strategy making. Sage handbook of organizational resistance, pp.208-223.
- Markus, M. L., 2017. Datification, Organizational Strategy, and IS Research: What’s the Score?. The Journal of Strategic Information Systems. 26(3). pp.233-241.
- Park, R., 2015. Employee participation and outcomes: Organizational strategy does matter. Employee Relations.37(5). pp.604-622.