Impact Of Change On Starbucks’ Performance, Strategies, And Operations: An Analysis
Starbucks’ Operational Strategies
Starbucks Corporation is a well-known multinational coffee brand. It is an American coffee corporation and this network contains large number of coffee chains. It was founded by Jerry Baldwin Zev Siegl and by Gordon Bowker in 1971. From that period, organization has developed a unique image at the global level. Starbucks is not just famous for its coffee joints, the atmosphere provided by the Starbucks is so unique which cannot be created by any other brand. Along with the treasured coffee served by the Starbucks to its consumers, they also provide the treasured atmosphere and the exclusive comfort level through which organization has developed a distinctive image. The primary offerings of the café are newsstands; varieties of coffee along with numerous flavours, Wi Fi facility, and the like are various facilities which make the Starbucks unique from other coffee parlours.
Starbucks provides various food items, cold drinks and tea products in order to attract the large segment of the audience. But their major concern is providing dark roasted coffee to its consumers in order to maintain the distinctive image as the superior coffee joint across the globe. Motive behind the Starbucks’ operations are inviting people to spend the quality time with their loved ones, for providing the treasured experience to the people through which an effective image has been developed. Chain of Starbucks is situated in approximately 26,000 store locations along with the 200, 000 employees across the all locations. Its headquarters is situated in Seattle, Washington, U.S. With its effective operations, organization stands on the 3rd position across the globe in terms of fast food restaurant chain network. Handcrafted smoothies and beverages, fresh brewed coffee and other fast food items such as cakes, pastries and sandwiches are some of the major attractions for the store (Starbucks Corporation, 2018).
The primary aim of the report is to analyse the impact over the organizational performance due to changes in the business environmental conditions. Along with this, impact over the organizational strategies and on the operations will be determined with affect to large scale changes. The next phase of the report will include the barriers which influences the decision making of the leaders in order to mould the outcomes of the organization on the basis of the requirements.
This task will cover the various ways through which change impacts over the performance, strategies and over the operations of the organization. Apart from this, this task will also include the information regarding the impact of drivers of changes on the behaviour and the workplace environment of the organization (Cannoy & Salam, 2010).
Changes which Could Affect the Starbucks’ Performance
The major effect over the organizational performance is created by the introduction of the new rules and regulations by the government authorities, with the effect of natural calamities and with the effect of strategies implemented by the competitors. In order to attain the effective results, Starbucks has implemented crucial strategies through which the expansion related objectives could be attained adequately. According to the case study, in 19978, Starbucks entered the European market with the help of acquisition with 65 Seattle Coffee Company based in UK. 65 Seattle Coffee Company in UK and Starbucks in America, both are known for delivering high quality coffee along with comfort and ambience. Merger of these two companies helps the Starbucks to establish an effective position in the European market and this lead the organization to attain its goals and the objectives in relation with setting up the effective presence in the global market (Chang, Chen & Lan, 2013).
There are numerous ways through which change in any strategy, environment’s conditions or in the policy of the government could affect the business’ performance in various manners. Change could affect the organizational working procedures, strategies as well as the operations. This may affect the productivity; loss of customer base as well as the position in the market would also be affected with the change in the above mentioned factors (Hajli, 2014).
- Expansion in product offerings: Starbucks’ main motive is to enhance its product offerings in order to provide huge range of products and beverages for satisfying the target audience’s needs. Apart from this, this strategy is also useful in relation with the accomplishment of the desired targets. Starbucks has appointed a team which mainly executes the functionalities such as marketing analysis, consumer’s demand and requirement and the team is also responsible for analysing the latest trends, consumer behaviour and their preferences. With the help of this analysis, organization is able to determine the crucial objectives in relation with the consumer’s demand through which the appropriate strategies and the plans could be made with regards to accomplish the goals. Providing a large choice to the consumers with regards to their choices, organization would be able to enhance their revenues as well as the profitability. Apart from this, organization has also adopted the strategy under which distribution units and the channels of the company will be expanded. This will help the target audience to get their desired products and services easily and effectively. For the same reason, organization has opened their outlets in various attractive locations in the market. Along with this, they had opened their outlets in the reputed hotels, cafeterias of theatres, flights such as United Airlines and United Airlines, and the like (Huotari & Hamari, 2012).
These are certain effective strategies which have been adopted by the Starbucks to enhance their market base, market share and to increase the growth opportunities. These strategies are also useful for effectively approaching to the people as well as for developing a unique image in the target audience’s mind-sets.
- Introduction of new products and services: Starbucks has also implemented the strategy of introducing the new products and services in the target market with the motive to enhance the customer base. Organization has increased their menu range and in relation with the product line extension, tea beverages, varieties of local food and other attractive things have been launched for increasing the customer base. This has helped the organization to gain the market share along with developing a unique image in the target market. Seattle’s best coffee and the Ethos water are also been included in the menu list of Starbucks with the motive to enhance the demand of their products and to expand their business in the international market. For increasing the menu range, Starbucks has done several agreements with reputed brands such as Kraft, PepsiCo and Tazo Tea. This has also helped the organization to attract the large number of customers along with increasing the revenues and the profitability. Along with this, the strategy of introducing the new products for providing the variety of offerings to the consumers, Starbucks has signed agreements with PepsiCo and Kraft to serve their products in their café. Along with the distribution of wide number of products, organization will be able to attain its goals and the objectives and it has also helped them to attain the competitive advantage in the target market (Krishnamurthy, SivaKumar & Sellamuthu, 2010).
- Quality:Quality and the taste have been the most important parts of the Starbuck’s coffee and other products served in the café. These factors are useful for increasing the customer base, satisfying the customer base as well as it is also useful in the process of increasing the satisfaction level of the consumers. Providing qualitative products and the services is useful in relation with the retention of the potential consumers along with gaining the new segment of the audience. This is the major reason; organization is being able to open more than 26,000 stores worldwide along with a huge customer base. In the fast food industry, quality of products served to the consumers plays crucial role in the success and the failure. Thus, in order to attain the goals and the objectives, Starbucks has implemented this strategy (McKenzie-Mohr, 2011).
- Pricing Strategy: Prices of the Starbuck’s products and services are bit high in comparison with the other brands available in the same industry. Still the customer base of Starbucks is huge in comparison with the other brands’. The major reason behind this is the goodwill created and developed by the organization in their customer’s mind-sets’ through serving them appropriate qualitative products and services. Along with this, it is important for the organisation to understand the target audience’s needs and requirements and Starbucks has implemented this strategy in order to accomplish is goals and the objectives in addition with satisfying their needs. Starbucks has implemented the cost leadership and product differentiation strategy in order to maintain their product’s effectiveness and the demand. Strategies implemented by the organization are quite effective in relation with increasing the demand of the consumer’s products as well as it is effective in order to distinct their products with its competitors’. With the help of these strategies, organization is being able to uplift its performance in the international fast food industry; hence, they are the third largest fast food chain worldwide (Schultz, 2012).
Apart from these strategies, organization’s operations are planning, implementing, analysing, controlling and the measuring. Operations of the organization are quite similar with other ventures but the standards and policies developed by the management helps the organization to make their unique and distinct position in the market. Changes in the external environmental conditions affect the business’ performance because its operations get affected. With the effect to influence of change over the organizational performance, their desired goals and the objectives will be affected.
- New Entrants: The factor which could affect the organizational performance is the entry of new companies in the fast food industry. This will affect the business of the Starbucks as well as it will also affect the demand of their products. Customer base and the market share of the organization will be affected along with its strategies and the operations. Change is also required for adopting innovation and for increasing the effectiveness of the existing products and services. Change is the factor which directs the organization to build more effective strategies in relevance with the new entries in the industry. This will help the organization to maintain their distinctive image in the target market along with this; it will also help them to ascertain the opportunities in order to attain the goals and the objectives (Udo, Bagchi & Kirs, 2010).
- Market risks: This is another crucial factor which could affect the business performance. Market risks such as inflation, deflation, recession and other situations which could affect the performance of the organization in financial terms. When these situations occurs, organizational strategies and their operations may get affected which directly affect the profitability and the revenues. When economic condition of a country declines, purchasing power of the consumers and other related authorities decreases and this will affect the business of the organization. Starbucks is an expensive outlet in the fast food industry in comparison with the other outlets and in the critical situations such as decline in the economic conditions of the target market, reduction in the purchasing power of the consumers, etc. will directly influence the Starbucks’s performance. It has been analysed that people spend over leisure, comfort, quality when their economic conditions are good and in such conditions where consumer is not able to buy the necessity goods for survival, demand for the expensive goods, services and for other luxurious items decreases (Ugbomhe & Dirisu, 2011).
- Competitors and their strategies: Major and primary competitors of Starbucks in UK are Costa Coffee Café Nero where, Costa Coffee is the leader in the particular market. It has been observed that the demand of the coffee in UK is rapidly increasing by 10% annually and with this effect, number of coffee shops and parlours are also increasing rapidly. But as Starbucks, Cost Coffee and Café Nero are premium coffee stores, hence, their business do not get much affected by local and small coffee shops or stores. Costa Coffee has approximately 2000 outlets in UK and 200 were set up in the last year only with the motive to increase thee revenues and a 15% hike in the revenues were detected. Starbucks and Café Nero have developed their unique presence in the UK market but the leader of the industry is Costa Coffee. Starbucks and Café Nero have 700 and 900 outlets respectively in the target market and both the stores stands on the respective positions after Costa Coffee (Wilson, et. al., 2012).
The challenges which lead to the innovation for overcoming with the challenges and for increasing the organizational performance are known as drivers of change. Drivers of change could be internal as well as external. Following are certain important external drivers of change which affects the organizational behaviour:
- Customer based drivers: This factor includes the change in the customer’s taste, preference and in their demand. This could affect the organizational performance as well as the behaviour within the workplace will also be affected. Thus, it is required to adopt certain dynamic strategies which could be moulded on the basis of customer’s requirements and on the basis of outcomes originated from the market analysis. Customer’s requirement changes on the basis of various factors such as trends of the market, product offerings by competitors, and the like (Penumarti, et. al., 2017).
- Technology based drivers:Improvement in the technology may also affect the business performances and especially those businesses whose operations are majorly based on technological factors. In order to cope up with the market’s requirements and for meeting up with its target audience’s demands and the needs, it is required to adopt the latest technologies as it will also help the organization to enhance its performance (Mann, Byun & Li, 2015).
- Competitors based drivers:Strategies used by the existing competitors to attract the target audience and entry of new entrants could affect the Starbuck’s performance and these actions generate the opportunities to adopt the innovation in order to maintain their separate place.
- Government based drivers:Amendments in the government’s policies, rules and regulations may affect the organizational functionalities. For instance, introduction of a new rule under which tax rates on the coffee seeds and over the coffee products will be raised to 30% from 15%. This will increase the cost of the production for the organization and along with this, it will also lead the organization to increases the final price of their products. Due to increase in the prices of the products, demand of the coffee may decrease and the revenues of the organization will get affected. Thus, it is required to adopt certain effective strategies through which organization could be able to provide its products and services at affordable rates (Reinhard, 2015).
· Starbucks has more than 6500 stores in approximately 29 countries with more than 200,000 employees.
· Wide range of products along with the exclusive quality (Rossing, Johansen & Pearson, 2016).
· Effective brand image in the overseas fast food industry (Sisson & Bowen, 2017).
· Well established goodwill and majorly known for providing varieties of coffee, beverages and other food items along with ambience and comfort.
· Organization has strong ethical values and it follows the motive of “Starbucks is dedicated to a role of environmental leadership in all sides of our business.”
· Due to premium coffee store, organization’s target audience is limited.
· Cost of production of the company is bit high in comparison with its rivals and this is the major reason for high selling process of their products.
· Organization is known for introducing innovative products and services but sometimes, organization get failed to do so which leads to dissatisfaction to its audience (Campbell & Helleloid, 2016).
· The major opportunity of the company is to expand its business in the overseas market.
· Living standards of the countries are increasing rapidly and in those countries, Starbucks could easily set up its position.
· Invention of new technologies through which the coffee and other products could be served with in an effective manner in order to fulfil the consumer’s demand effectively.
· Entry of the new companies with effective strategies.
· Delivering appropriate qualitative products and services by consumers at cheaper rates by its competitors.
· Imposition of taxes over coffee and its related products will affect the demand of the Starbucks’ products (Ferreira, 2017).
· Aggressive promotional strategies used by its primary competitors such as Costa Coffee and Café Nero.
Influence of Drivers of Change on the Organizational Behaviour
This tool has the efficiency to determine the external factors’ impact over the organizational behaviour. Following are some of the elements which act as the external drivers for change which affect the organizational behaviour:
- Political: In order to maintain the same quality of its beverages and food products, Starbucks purchases the raw materials from its source country but due to political rules and regulations, operations of the organization get affected. With this effect, organization needs to follow those policies, laws and regulations in order to buy the raw materials (Leigh & Pershing, 2006).
- Economic:Economic factors such as local currency exchanges rates, economic conditions of the domestic markets and the taxation level affect the organizational pricing strategies and this leads the organization to invent certain effective strategies in order to match up with the dynamic economic conditions.
- Social: Social factors plays crucial role in the Starbucks’ success as it is a part of fast food industry. These factors are consumer’s preferences, lifestyle of the target audience, and the like. Organization needs to ascertain the innovative ways in relevance with enhancing the performance of the organization along with gaining the competitive advantage (Mason, Cole & Goza, 2017).
- Technology:improvements in the technological factors, invention of new methods and products, and other inventions help the organization to increase its effectiveness along with accomplishment of the desired targets (Uysal & Katipoglu, 2015).
From the aforesaid information, it could be concluded that the Starbucks strategies and operations are effective enough to ascertain the strategies for increasing their effectiveness. This has helped them to gain a large customer base across the globe and along with this; they are known for delivering the best quality coffee and other food materials to its target audience. In this report, organization’s strategies, operations and other factors are discussed. Apart from this, the report also concluded the influence of drivers of change over the organizational functionalities. The last part of the report included the strengths, weaknesses, opportunities and threats of the organization through which the opportunities could be extracted in order to enhance its performance in the target market.
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