Organizational challenges at Starbucks: quality, expansion, and employee relations

¶ … BRAINSTORMING IDEAS OR EXPERIENCES ARE MOST ACCEPTABLE. Thanks

Discerning the Root Problem

a) Situation Overview

Provide a brief explanation of the organizational context

Starbucks is a multinational corporation that began as a single, Seattle-based coffee company designed to provide an Italian coffee shop experience to Americans.

What prompts the proposed change?

Starbucks has over-expanded, diluting the value of its brand name and compromising the perceived quality of its coffee (Gross 2007).

Starbucks has difficulty communicating the unique value of its premium coffee brand. Domestically, consumers are complaining about the quality of the service and beverages. Internationally, it wishes to expand to untapped markets but must do so in a manner to suit the tastes and preferences of these 'international' neighborhoods.

b) Organizational Context

Describe the organization

Starbucks is a multinational company. It tailors its coffee offerings to suit the needs of international consumers by engaging in joint partnerships with local businesses rather than using standardized franchises. It customizes its American offerings, but it also strives to provide a certain degree of standardization to consumers (Starbucks case study, 1997, McGraw-Hill: 3)

Mission

"To inspire and nurture the human spirit -- one person, one cup and one neighborhood at a time" (Mission statement, 2012, Starbucks).

Purpose

To serve high-quality coffee and to provide a high-quality customer experience at a coffee shop that feels both elite and friendly at the same time.

Evolution

Starbucks began as a small firm but has pursued a slow, steady expansion strategy and has begun to extend its outreach internationally. East Asia, particularly China, is deemed to be a particularly desirable future target market,

c) Variables of Influence

Starbucks has problems on intrapersonal, interpersonal, small group and organizational levels.

Intrapersonal: motivation of employees

Its greatest problem is its ability to sustain quality while not missing out on international expansion opportunities. It has struggled with its employees, who have complained about poor working conditions despite the fact the company offers benefits to part-time employees (Starbucks bucks unionization, 2009, UPI).

Small group: unionization

Starbucks has resisted unionization, and the demand to unionize Starbucks employees has been a source of negative publicity which is particularly damaging for a company with a green reputation.

Interpersonal: Relations with customers

Customers, conversely, have complained about baristas' ability to provide high -- quality coffee, which required Starbucks to institute much-needed, day-long organizational retraining sessions.

Organizational: Expansion vs. quality

Starbucks has sought to expand its operations to become an international company and take advantage of expanding market opportunities in China but rapid expansion has lead to standardization of the product in some stores which compromises coffee quality and the store's neighborhood feel.

d) Potential Impact

External influences: Starbucks is likely to be undercut by cheaper competitors (such as Dunkin Donuts) with similar offerings, if customers do not perceive Starbucks to be giving them value.

Internal influences: Starbucks could struggle to sustain profitability if it cannot support its current volume of stores.

e) Variables

Fixed Variables

Price of coffee, labor, operating costs

Fluid Variables

Number of stores, types of drinks and food

f) Measurement

Symptoms to measure: Profitability, customer satisfaction, retention of employees

Measurement type: Quantified variables such as sales and retention figures combined with more subjective measured variables such as customer satisfaction on questionnaires, 'chatter' on the company's Facebook page, and feedback from customers and employees.

g) Ultimate Goal

Sustained profitability, regaining reputation as a high-quality coffee shop, and not missing out on expansion opportunities in China while creating a more lean domestic profile.

f) Risks Affiliated with the Proposal

Associated risks: Changing a franchise can disturb customers who like a consistent product. This is a shift from Starbucks' previous super-saturation strategy of opening as many stores as possible. Employees will require retraining and perhaps higher salaries depending on what is being served at more customized Starbucks.

Type of risks: Interpersonal (customer and employee attitude) and financial (closing stores, creating more personalized Starbucks reopening new ones abroad).

Severity of risk: Moderate, given Starbucks continues to be a profitable company with high brand loyalty

Potential consequences: Generating new 'buzz' about the product, versus the risk of changing the formula (or readopting the old formula of less generic Starbucks).

g) Evaluative Measures

How will you assess: Improved sales, improved customer comments on quality

Indicators, trends, or other components: Increased traffic at domestic Starbucks, high levels of adaptation in new Starbucks opened abroad.

Tangible: Increased sales

Intangible: Praise for improved Starbucks quality