Shazia Khatoon

Reg Number -35005

Human Resource Theory & Practice - Assignment

Assignment Topic HR Organization Strategy

INSTRUCTIONS:

1. Attempt question on the same page.

Q1: https://www.youtube.com/watch?v=XUBeH7VQaFY

Watch the above YouTube link. The Case Study on “Starbucks”. According to your
understanding, explain with diagrams and examples, what are the strategies Starbucks
established to grow the business in all over the world. Also what are the challenges and
hurdles Starbucks faced geographically and how “You” will make the strategies to solve
those problems.

Introduction

The Starbucks Company was founded in Seattle in 1971 by Jerry Baldwin, Gordon Bowker and Zev Seigel
with a vision to educate American consumers about the fine coffee drinking experience. In 1987 Howard
Schultz took over the Starbucks Group, he wanted to create the Italian espresso bar experience in America
by creating a personal relationship between the customers and their coffee.

Just within a couple of years they grew from a small coffee business house to a multi-million dollar player
in the industry by buying only the best coffee available and providing the people with an unmatched store
experience. As standing, Starbucks is number one in the speciality coffee industry, with more than 12,000
shops in more than 35 countries.

Starbucks mission statement

Freshly brewed coffee is the main product offered by Starbucks along with other drinks which include cold
and hot teas, cakes and pastries. The Starbucks coffee comes in a many varieties each possessing a
different taste, aroma and flavour.

In addition to its extensive product offerings, Starbucks has many brands including; Starbucks Hear Music,
Tazo Tea, Starbucks Entertainment, , Ethos Water, Torrefazione Italia coffee and Seattle’s Best Coffee. The
successful management of all of these brands pulled together constitutes the Starbucks portfolio.
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Starbucks is also one of the most globally conscious corporations in the world. In 2006 Starbucks donated
$36.1 million in cash and products, volunteered 383,000 hours in local communities, required growers to
use strict environmental guidelines, used 20% renewable energy in stores, and actively recycled in almost
80% of stores in US and Canada. Starbucks has established itself as the coffee leader in the world and has
done so on a socially and environmentally conscious platform.

STRATEGIC ISSUES FACING STARBUCKS

The major challenge that Starbucks is dealing with is the current financial crisis in the world economy
forcing them to call closures of many stores around the world.

Another challenge that Starbucks is dealing with is competitors. There are numerous coffee shops all over
the world and being able to stand out to generate customers is important. Their main competitors are
Dunkin Donuts, McDonald’s, and Nestle in the US and brands like Costa Coffee and Caffè Nero in the UK,
the two major markets for Starbucks. It is important that for Starbucks to know their competitors and what
they are currently doing.

Also Starbuck coffees are priced higher than other market competitors because of Starbucks only
purchasing the highest quality coffee beans for their product, thus increasing the price of the drink giving
the competitors a cost advantage over Starbucks.

Also Starbucks inadequate marketing strategy on advertising is a hindrance in the business growth
opportunities. They prefer to build the brand by promoting the drinks cup-by-cup with customers. The
advertisement ends until they drink the coffee, reducing the chances to attract valuable customers.

Starbucks also does not emphasize on distributing their products to supermarket because of being
concerned with the quality of the coffee; if the coffees were packaged into plastic bags.

Also the rigorous expansion strategy followed by Starbucks can take a toll on the firms brand image. As
corporations grow there can be a tendency to focus too heavily on increasing output and locations, and
less focus on quality and brand image. Starbucks needs to stay with its values and ideals that have made it
successful.

Also Starbucks policy of not franchising can be a cause of concern for the firm. Franchising would allow the
company to open many new stores with less risk, and make considerable profits in doing so. Because of
this the firm’s research and development costs would fall making use of the franchisee knowledge of the
local market in terms of geographic, , psychographics, demographics, and the local country regulations.

Major Risks

The major Risks that the company face is saturating the market, competition and regaining the capital used
after development. Saturating the market is also a huge risk for any company who is trying to grow and
expand their business. Starbucks realized that they were saturating the U.S. market so deciding to globalize
was the step of the right direction. Competition is always going to be right next door, Starbucks on many
occasions had to compete with look likes internationally which is harder to be do because that look like is
already they are set up in market.
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Starbucks Corporate Strategy:

Starbucks into an already existing Starbucks. Competitors are it to be difficult to compete with broaden
their brand even with the difficult economy. Starbucks has one products that they have to sell in many
ways as coffee. Which they proven they can by improving the service, entering in specially drinks and
having others thinks to go with coffee. Although Starbucks has Starbucks with the food aspect in various
locations, they now have merchandize as well a selection of food. Starbucks has taken advantage of growth
rate of business in china, whereas the U>S is saturated and has a smaller growth rate. Starbucks has a
corporate Strategy of improving theme self of their quality, service and most of the important consumers. I
think that the price of Starbucks cannot be moved because of the it is assumed that Starbucks is higher
Quality.

Elements

Some controllable elements in any global markets are the product, the price, the place and the promotion.
Starbucks used benefits of their quality in their product directing the promotion. Starbucks used benefits of
their product as high end. Their product holds a sweeter taste and may not be liked by international has to
research the place where they want to globalize. Starbucks chose many overseas companies like japan,
Italy, Spain and Germany. They also considering moving into Mexico and Rico. With each of the place that
they wanted to expand to, they had to think about Factors such as their target market and there. With
having problems with their brand in 2001, they vowed to move on from the mistakes from the past but say
it’s difficult with overseas and local partners.
Some elements that are uncontrollable environmental factors such as social factors, legal matters, political
standpoints and competitors. Having to expand in other countries, Starbucks had to face local competitors
and locals who stay loyal to their local brand, even though Starbucks often came across as mystified and
cool, they have Struggled to get a new customer base. Other factors such policies and regulation were
thoroughly studied by

New Market strategy

Market Development:

Opening of stores all over the world. Expansion strategies into Brazil, Russia, Romania and India.

Diversification:
Music CD’s, Clothing, Coffee Mugs and other accessories.

Target Population

Identification of the target population at which Starbuck needs to aim their products is a significant factor
in the business operations. The marketing campaign undertaken would focus accordingly.

New Devlopment

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Starbucks launched its first-generation e-commerce website in 1998. As a result, scalability and
performance have improved, and the company now has the tools it needs to profile and target customers,
analyse site data, and deliver new features to the market in the shortest time possible.

New Processes

Technology developments in coffee making machines and the computer systems that Starbucks use to
operate their cash registers would enable the staff to work swiftly and efficiently. This results in customers
being served quickly thus creating potential for serving more people in the day.

RECCOMENDATIONS AND CONCLUSION

Starbucks has to effectively pursue a Focus-Based Strategy in conjunction with differentiation and a cost
leadership based strategy. Being a lower cost store will increase the difference between Starbucks and
provide it with a competitive edge. At present, Starbucks competitors are attempting to specialize in the
coffee business, therefore Starbucks must pursue focus strategy to increase its strength.

Starbucks must reduce their product price by producing a new product of coffee using cheaper beans or
can come out with special discounts and promotions to reduce cost, thus increasing sales enabling
Starbucks to enter new low cost markets and increase profitability. Also needs to focus on building
alliances in new markets/countries to reduce management focus and benefit from the local and experience
curves.

Should focus on advertising the brand through internet services for users to access, do road shows, hand
out brochures etc. so that consumers become more aware of the brand’s strong international presence
and brand name. Market penetration and market development will help increase the sales. Access
unexplored distribution channels like making available packaged Starbucks coffee for consumers by
displaying it nationwide in various convenience and shopping stores and not only Starbucks stores.

Starbucks must adopt twin policies of Product Development and Product-Market Diversification to counter
the stiff competition in international markets. It is important to understand this in the product
development phase as they would need to focus solely on making their existing products better. The
company can demonstrate product and market diversification through research and development coupled
with creativity and innovation. Product differentiation has proven an excellent defence against threats such
as bargaining power of buyers. Developing new products will offset such potential risks.

A strategy should be formulated to tackle the competition by entering into agreements, long-term
contracts, with the food service companies that they are competing against. This way their coffee would be
sold at these outlets and they would gain access to new markets and increase sales while decreasing
competition.

Starbucks should continue to be a first mover into markets with new products and ideas. Being a first
mover of new products into new international markets will be an excellent way for Starbucks to build
customer loyalty and uphold its image as an innovative company.

Starbucks should continue to locate their operations in high traffic areas, high visibility areas. The company
should continue to take excellent care in picking locations. It is extremely important that Starbucks’
international stores reflect uniqueness in their location and layout. Having locations in a variety of
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locations will ensure large market exposure.

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