The need for organizations to make their operations relevant pushes managers to devise various ways of ensuring that employees make maximum use of the available resources to ensure their level of production is enhanced and that their organizations generate reasonable profits (Ross 31). This paper presents a case study that explains how Starbucks struggled to return to profitable growth after experiencing financial difficulties between 2008 and 2009.
Starbuck is a reputable multinational company that specializes in producing specialty coffees. It was founded in 1987 in Washington, D.C., and had become the world’s best roaster and producer of this brand of products (Shah and Thompson 334). The financial performance of Starbucks between 2008 and 2009 will remain a dark spot in the history of this company. It registered very low sales and its share price in the stock market plummeted backwards by 3% and 55 in 2008 and 2009 respectively. Employees were sacked and some assets were disposed of at very low prices.
Reasons For Writing this Paper
The aim of writing this paper is to establish the relationship between effective organization management and performance. This involves examining the strategic issues that Starbucks used to change and improve its management and increase the efficiency of its systems.
This paper intends to answer the following questions.
Why is Starbucks considered an effective case study for improved performance and strategic company positioning?
- Is it possible to introduce changes that can transform the performance of a company even though it registers poor sales?
- Is there p[ossible solutions that can transform the operations of an organization?
- What expectations do managers have when their companies perform poorly?
Key Issues and Opportunities
Starbucks specializes in producing consumer goods and this means that there is the need to ensure the quality and safety of its products are guaranteed. Its mission is to ensure that it achieves its objectives of becoming the best coffee, spice, and roasters producer and distributor in the United States, Australia, and other European nations (Shah and Thompson 337). Its vision is to become a reputable and responsible organization that focuses on the needs of its consumers, uses legal and ethical production and marketing processes, and adopts the use of technology to enhance the quality of its products. Starbucks places a lot of emphasis on the need to offer good working conditions for its employees and ensuring there is a healthy relationship between the company and its publics.
Howard Schultz has never been asleep since the establishment of this company in the late 1980s. He has been in a constant move towards offering excellent managerial and financial support to ensure the operations of this company achieve their targets. However, things have never been smooth on his side because of the challenges that this company has experienced since its establishment (Shah and Thompson 341).
It is necessary to explain that most policies established by the management of this company aim at ensuring that it continues to grow and expand its operations beyond the national boundaries of America and Australia. Therefore, Howard Schultz has always been forced to spend sleepless nights thinking about how to make this company a reputable profit-generating and quality producer of coffee and its products. The following strategies have been adopted by this company over years to ensure it improves its capital base to generate reasonable profits.
Identification of Strategic Plans
Howard Schultz realized that capital is an important aspect of any investment. Therefore, he devised methods like borrowing loans, merging or acquiring other companies, and signing production agreements with other companies. These strategies enabled this company to generate additional capital and expand its operations. In addition, the plan of opening new branches in other countries became successful until 2008-2009 when the financial performance of this company started to plummet backwards. The opening of new branches shows that a company is generating good income and high profits that are ploughed back and invested in the business (Ross 49).
However, this company was forced to reduce the number of new branches that were supposed to be opened by 200 between 2008 and 2009. Schultz decided that it was time to focus on the existing branches and ensure they perform well before investing in new ones. This strategy was important in ensuring that the company stops investing in additional branches yet the existing ones were not performing well. Therefore, managers had time to focus on the already established branches, and think of how they will be improved instead of opening new ones and creating more problems. This careful expansion plan was important in ensuring Starbucks regained its earlier performance record and starts to register high sales and growth.
Secondly, this company embraced corporate social responsibility strategies that ensured it participated in environmental conservation. There was the need to do so because this company relies on the environment for its raw materials and thus the value of its products depended on how the local community took care of its vegetation (Shah and Thompson 351). This was done through partnering with organizations like Conservation International’s Center for Environmental Leadership and Coffee and Farmer Equity to ensure the environment was protected from misuse and pollution. In addition, this enabled the company to work with farmers to ensure they produced high-quality coffee.
Thirdly, Howard Schultz introduced training programs for staff to ensure employees gained new knowledge and experiences on various processes. The period between the 1980s and 2000s saw the world adopt new technologies in different sectors and thus this company needed to ensure that its employees took advantage of the new skills and techniques of production. Schultz realized that the company had to acquire and use new technologies if it had to remain relevant in this industry.
In addition, he chaired a committee that ensured there was the restructuring of the roles of top managers in this company. The process started with his resignation as CEO of the company, but he retained his chairman to offer opportunities to other people to develop the company. Decentralization of managerial and leadership roles helped this company to improve its performance because all workers played important roles in determining the success of its activities. Managers were given more powers in terms of making independent decisions and exercising authority over employees under their n departments. In addition, this strategy ensured the company identified its weaknesses based on the needs of each department; therefore, it was easy to know to detect weaknesses and know how to solve them.
The purchasing, marketing, and procurement processes were transformed to ensure the company uses its resources. First, the coffee supplying regions were equipped with modern technology and skills that ensured they produced high-quality harvests. In addition, the company started using client-based advertisement approaches that focused on the needs of consumers. Lastly, marketing expenses and considerations were equated to the returns expected from different regions. A balance was created between the market demand and advertisement strategies used to promote the popularity of this company’s products.
Starbucks regained its position as a reputable multinational company even though it was displaced as the largest producer of coffee, spice, and tea. The strategies developed by Howard Schultz and other managers enabled the company to identify its weaknesses, work on them, and develop measures that will ensure it does not sink into the financial crisis of 2008.
Ross, Jeanne. Enterprise Architecture as Strategy: Creating a Foundation for Business Execution. Massachusetts: Harvard Business Review Press, 2006. Print.
Shah, Amit J. and Arthur A. Thompson. Starbucks’ Strategy and Internal Initiatives to Return to Profitable Growth. New York: McGraw-Hill, 20-12. Print.