Starbucks Corporation: Strategy Implementation Challenges

Introduction and Company Background

The challenges associated with the implementation of strategies among business organisations are numerous. The hurdles are especially prominent among multinational companies, such as Starbucks Corporation. The current study involves a thorough analysis of challenges related to strategy implementation with regards to management. The author identifies some of the ways through which Starbucks can identify these challenges. Practical recommendations are made to help the management in strategy implementation.

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Starbucks is a leading roaster, marketer, as well as retailer of specialty coffee globally (MarketLine 2013). The main business of the company revolves around coffee. However, the organisation creates a variety of value-added services. It also provides differentiated coffee-drinking experiences for its customers. Increasing competition in the industry might lead to price wars. The new developments might negatively alter the company’s market share. One of the main objectives of Starbucks is increasing profits over time. However, the company recently recorded a decrease in its earnings. The decline slowed down the company’s revenues (MarketLine 2013).

As indicated earlier, Starbucks is a multinational company operating in the global environment. In light of this, various factors may have contributed to the shortcomings in revenue growth. It is essential for the company to create, implement, maintain, and review a recovery and a growth strategy. However, it is important to note that the organisation has maintained a growth strategy over time in spite of the various setbacks. It is essential for the managing director to understand the underlying issues in relation to strategy formulation and implementation.

The situation in Starbucks brings to mind the arguments made by Hooley, Nicoulaud and Piercy (2011) about managers and implementation of strategies. According to Hooley et al. (2011), managers are trained to come up with plans and strategies. They are not trained to implement. To this end, the two aspects (strategy and implementation) are viewed as interdependent variables. The separation between the two is associated with the challenges facing the execution of strategic initiatives (Hooley et al. 2011, p. 446). The challenges identified by these scholars will be reviewed in the context of Starbucks Corporation. The report is addressed at the company’s managing director.

Strategy Implementation

There is no universal definition for the concept of strategy implementation. It is conceptualised from different perspectives. For example, it has been viewed from process, behaviour, and hybrid perspectives. However, definition from the hybrid perspective provides a clear illustration of the concept in comparison to the other approaches. According to Hrebiniak (2006), strategy implementation can be summed up as a dynamic, complex, and interactive process. It involves a series of activities and decisions. The activities and decisions are carried out by managers, as well as by employees. They are aimed at transforming strategic plans into actual results. The major objective is to attain the goals and mission of the organisation.

Successful implementation of strategies is a vital aspect of organisational management. The managers are expected to oversee the implementation of various strategies formulated to move the organisation forward. Regardless of whether the organisation is private, public, profit, or not-for-profit, the success of operations will depend on how effectively strategies are implemented. Successful implementation implies matching the plans with the resources in order to realise strategies (Aaltonen & Ikavalko 2002). Consequently, the aim of strategy implementation is the realisation of organisational objectives and goals.

According to Okumus (2003), the implementation is related either directly or indirectly to all facets of management. The process requires a holistic approach in the analysis and evaluation of the various complex issues related to it. According to Miller (2002), most organisations fail to implement 70% of their new strategic initiatives. It is important for the management at Starbucks to understand some of the challenges associated with this process to avert the problems.

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In light of the difficulties organisations face in implementing strategies, researchers have identified a number of problems affecting the process. The problems arise when firms separate strategy formulation from the implementation processes (Cespedes & Piercy 1996). According to Hrebiniak (2006), formulation is a difficult task for the management. However, implementation and execution of the plan is more challenging. A number of issues affect the process of realising strategic plans among contemporary organisations. Unlike formulation, implementation is a craft and not a science (Thompson, Strickland & Gamble 2007). As such, the implementation process is sometimes defined as eclectic and fragmented (Hooley et al. 2011).

Strategic Analysis and Strategic Imperatives at Starbucks

Starbucks needs to engage in specific activities to maintain its position in the global market. One of the major activities undertaken by the company is strategic planning and implementation of initiatives. The managing director (Howard Schultz) has played a vital role in the growth of the company. Currently, one of the strategic plans for the company is global expansion. The aim is to realise a large market share (Simons 2009). Enhanced access to global markets is the main motivating factor behind Starbucks operations. Understanding the context of international business is another strategy, which supports the first one.

The next undertaking at Starbucks involves gaining strategic competitive advantage in the global specialty coffee industry (MarketLine 2013). To this end, the company requires multinational flexibility to be able to manage the risks associated with the operations. In addition, growing competition from such companies as McDonald’s requires a strategic response (MarketLine 2013).

Starbucks enjoys tremendous success in its global operations. The success is attributed to effective implementation of marketing strategies. The management has also recorded significant success in the implementation of the company’s strategies. However, various challenges have come up. The impediments will continue to affect the implementation of the plans formulated by the organisation.

Issues and Challenges Surrounding Strategy Implementation

Some of the issues affecting the implementation of strategies at Starbucks are not industry specific. On the contrary, they are general challenges influencing many organisations in the global market. According to Okumus (2003), a major factor behind the failure to implement a strategy involves the nature of the management practices. The executives, supervisors, and managers may lack knowledge on theoretical and practical models of their actions (Thompson et al. 2007). The individuals fail to understand the various factors that should be addressed to ensure successful implementation.

Issues and challenges affecting execution can be divided into three broad categories. They include soft, hard, and mixed factors (Cespedes & Piercy 1996). The first category revolves around people oriented issues. They involve implementation tactics, strategy executors, consensus, and communication. On their part, hard factors are related to institutions. They are related to administrative systems and organisational structures (Lehner 2004). Mixed factors include such issues as the development and articulation of the strategy. Such issues as different strategy levels and relationships between various units are apparent in this category.

According to Hrebiniak (2006), vague and poorly formulated strategies can significantly limit implementation efforts. In spite of an effective execution process, it is hard to over the shortcomings of a poor strategy. Positive outcomes rely on effective and workable inputs (Allio 2005). A successful execution process requires a strategy that is fitting and consistent as far as the organisational objectives are concerned.

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The relationships between corporate business units, inter-functional processes and structures, and marketing policies significantly impact on strategy implementation (Walker and Ruekert 1987). Other issues include the independence of strategic organisational entities. They are likely to affect the outcome of execution processes. Additional factors involve functional competencies and clash between various units. It is also noted that resource allocation and coordination impact on the process variously.

With regards to the relationship between business units and departments, it is made clear that conflicts negatively influence strategy implementation. Effective communication between the departments, on the other hand, facilitates the process. The support of senior management also informs how the interdepartmental dynamics influence strategy implementation.

In addition, the skills of strategy executors affect the process (Cespedes & Piercy 1996). The executors include the top, middle, and low level management and non-management staff (Lehner 2004). The quality of these individuals refers to their sets of skills, capabilities, experiences, and attitudes (Thompson et al. 2007). Executors exhibiting poor qualities are likely to pose a major challenge to the implementation process.

According to Viseras, Baines and Sweeney (2005), the success of strategy implementation depends on the people or human side of project management. The dependency of the process on systems and organisation related factors ranks lower than reliance on human attributes.

Poor communication is another major challenge in strategy implementation. Research findings have shown that effective communication is a major requirement for successful execution (Lehner 2004). Such factors influence induction and spread of information during strategy implementation. Communication affects all aspects of the process. As such, it is inevitable (Lehner 2004).

However, sufficient communication alone does not guarantee success in policy execution (Thompson et al. 2007). Such factors as interpretation, adoption, and acceptance play a crucial role in this undertaking (Aaltonen & Ikavalko 2002). Failure to understand the strategy can severely impair the implementation process. The stakeholders involved need to understand the objectives of the whole process.

Implementation tactics have also been shown to pose challenges to the implementation process depending on their application. Lehner (2004) and Nutt (1989) have clustered these tactics into different categories. The classifications include intervention, persuasion, edict, and participation. Intervention entails strategy adjustments, such as the introduction of new practices and norms during the implementation process (Nutt 1989).

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Participation involves the articulation of strategic goals. It also involves the identification of the task force charged with the responsibility of proposing and developing corresponding options for implementation (Nutt 1989). The other dimension involves edicts. It encompasses issuance of directives. It relies on power and absence of participation. Persuasion relies on the ability of the participants to convince others to adopt the proposed course of action (Nutt 1989). The suitability of strategy implementation tactic used may raise queries at times.

Noble and Mokwa (1999) posit that the commitment of the various entities pose a major obstacle. For instance, lack of commitment from middle level executives can impede the process. The strategies may be created by top level managers, leading to these negative attitudes.

Three dimensions of commitment are explored in literature found in this field. They include strategy, role, and organisational commitment (Noble & Mokwa 1999). Individuals are expected to identify the values and objectives of the organisation. They should then work towards their accomplishment. The scenario is what defines organisational commitment. In this case, the determination disregards their beliefs towards the general strategy.

There are other challenges associated with strategy implementation that Starbucks general manager may encounter. The ones highlighted above are universal and likely to affect any organisation, including Starbucks. The recommendations provided in this report can enhance successful implementation at Starbucks.

Theories of Strategy Implementation

Several theoretical frameworks have been reviewed by numerous scholars in relation to successful implementation of strategies. The theories place emphasis on various issues related to this process. They include agency, social learning, and organisation theories (Govindarajan & Fisher 1990). Other theoretical frameworks include the social system, psychology, and the expectancy theories (Judge & Stahl 1995).

The expectancy theory addresses the issue of motivation among managers and other employees. The factors that encourage individuals to be committed to the strategy implementation strategies are reviewed in this theory. Three sources of motivators are identified. The first involves the belief that the strategy may not succeed. Others include beliefs that the outcomes may fail to satisfy the goals of the individuals.

Procedural justice judgments, considered as psychological phenomena, have been used to evaluate strategy implementation in relation to the impacts of social and legal settings (Kim & Mauborgne 1993). The theory reviews how procedural justice influences the implementation and decision making processes. An analysis of these theories reveals that execution falls under numerous theoretical underpinnings that are interdisciplinary in nature.

It is important for the general manager of Starbucks to understand these theories. The comprehension will help them to guide the process. The theories provide managers with invaluable insights and foresights in relation to implementation of strategies. In addition, the theories analyse and reveal the factors influencing successful execution.

Recommendations for Successful Strategy Implementation at Starbucks

The challenges highlighted earlier indicate that most of the strategies are implemented without the establishment of a proper fit between the process and the plan itself. What managers need to understand is the genesis of the strategy implementation process. It is the only way through which they can enhance its success. Problems brought about by one variable affect the success of the others. What this means is that one variable can impact on the success of the entire implementation process. However, in most cases, the combined effects of all the variables determine the nature of the execution undertaking.

Internal organisational dynamics affect the implementation of strategic decisions. They may lead to success or failure of the same. As such, focusing on the execution process alone is bound to cause many complications. It is not advisable to disregard the external forces. Ignoring them may lead to the failure of the implementation process. The reason is that the manager lacks a clear picture of the whole undertaking, including the challenges associated with it.

According to Okumus (2003), successful implementation requires detailed and comprehensive conceptual models. Lack of such models is cited as one of the major causes of failure. As already indicated, strategy implementation encompasses all aspects of management. As such, a sound framework requires the adoption of a holistic approach in tackling the various issues affecting the process.

The goals and objectives of the various organisational units are crucial to the strategy implementation process. The general manager of Starbucks should establish a link between the various strategies and organisational objectives. In addition, the compensation system of the company must be aligned with the requirements of strategic change (Aaltonen & Ikavalko 2002).

The other aspect of implementation that will require the attention of Starbucks’ general manager is communication. For strategic change to take effect, the desired situation must be communicated clearly (Aaltonen & Ikavalko 2002). The expected roles of Starbuck’s employees must be clearly revealed. They should be informed whether they need to think strategically or just follow a set of outlined rules (Hooley et al. 2011).

Most of the studies conducted on strategy implementation are not clear on the relationship between the various variables influencing the success of the process (Okumus 2003). The link between commitment, consensus, and communication are especially not clear.

According to Hrebiniak (2006), communication is actually considered as a premise in the realisation of commitment and consensus. However, frequent vertical communication has been shown to enhance strategic consensus (Cespedes & Piercy 1996). The frequency of this form of communication at Starbucks should be enhanced to facilitate strategic harmony. Ultimately, organisational performance will be enhanced, which will reflect successful strategy implementation.

Several authors have advanced various frameworks and models in relation to effective strategy implementation. For instance, Okumus (2003) postulates the similarities between earlier execution frameworks. Most of the frameworks highlighted the fact that multiple factors require simultaneous consideration during strategy development and decision making processes. Some studies combined several elements in one factor (Okumus 2003). Others regarded particular strategy implementation issues as key factors.

Okumus (2003) developed a comprehensive framework that is suitable for Starbucks. Previous frameworks provided partial explanations regarding the interaction between various factors. However, the framework by Okumus is unique. It helps the managers to address strategy formulation and implementation as a single process.

Analysis of the numerous strategy implementation frameworks reveals that four major factors affect the entire process. They include the content and context of the strategy, as well as the process and the outcome of the entire undertaking (Okumus 2003). The categorisations provide a comprehensive strategy framework. Any given organisation can realise success in the implementation process if the framework is executed effectively.

Strategic content entails the development of the strategy. It also involves revealing the ‘whys’ and ‘hows’ that necessitated the formulation of the plan (Okumus 2003). Strategy context, on the other hand, entails the internal and external environments of the organisation. External context involves the environmental uncertainties. Internal situation, on its part, involves organisational leadership, culture, and structure (Hooley et al. 2011).

Operational processes involve planning for activities and allocation of resources. It also involves people factors, communication, and control of the implementation process (Okumus 2003). The outcomes revolve around the evaluation of both intended and unintended results. The four categories of strategy implementation framework brings on board the findings of numerous models. They strengthen the efficacy of the proposed approach.

Aaltonen and Ikavalko (2002) echo the importance of a mixed factor framework for successful strategy implementation. At the beginning of the process, strategy formulation is regarded as an interpersonal and institutional undertaking. Formulation involves gathering data and varying viewpoints. The ultimate outcome of the undertaking is strategic decisions. The decisions impact on both the outcomes and the success of the strategy implementation process. Okumus (2003) proposes the outlined framework, which combines strategy formulation and implementation processes.

Communication is important. It addresses such issues as commitment and consensus. It secures the support of all the stakeholders. Hard strategy implementation factors, such as administrative systems and organisational structure, influence the process dialectically. Soft factors, such as commitment, communication, executors, and consensus, have the same impacts on the process. The factors require consistent emphasis using the comprehensive framework proposed.

The general manager of Starbucks should realise that the ultimate success of strategy implementation in the company depends on direction and delegation in relation to other administrative entities. Implementation of the framework proposed by Okumus (2003) will enhance the success of the process in the company. The framework should be supported by the inclusion of the other administrative entities and strategy executors.

Conclusion

As a multinational corporation, Starbucks is regarded as a high performer. In addition, it controls the largest market share in the specialty coffee industry. However, increasing competition and declining profits indicate a need for effective strategy implementation. To remain competitive in the industry, the company should embrace the proposed models to ensure successful implementation.

Aspirations for growth are consistent aspects of contemporary organisations. As such, it is important to address strategic goals on a regular basis. In addition, formulation of strategic policies should address implementation issues to enhance effectiveness of the whole process. If Starbucks fails to pay attention to these realities, it may be outperformed by strong rivals, such as McDonalds. Competition is expected to increase in the contemporary deregulated global markets. It is only the healthy companies that will succeed. Successful formulation and implementation of strategies will play a vital role in the success or failure of any company in the world today.

References

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