Starbucks Organizational Structure and Management Analysis
This paper examines Starbucks Corporation's organizational structure, business profile, and management practices. It describes the company's geographic divisional structure, its position as a top-three U.S. quick service restaurant by revenue, and its differentiated premium brand strategy. The paper then applies the four core management functions — planning, organizing, leading, and controlling — to Starbucks' operations, highlighting the high degree of centralization under CEO Howard Schultz. Finally, the paper offers three recommendations: developing a stronger leadership pipeline, restructuring divisions to reflect emerging business units and growth markets, and investing in training and quality control to preserve brand standards during rapid expansion.
- Company Overview and Business Profile: Starbucks size, structure, revenues, and store network
- Competitive Position and Key Resources: Competitors, brand strength, and target market positioning
- Planning and Organizing Functions: Centralized planning and regional organizing at Starbucks
- Leading and Controlling Functions: Schultz-centered leadership and internal control systems
- Recommendations for Management Improvement: Succession, restructuring, and training investment proposals
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What makes this paper effective
- The paper grounds its analysis in concrete operational data — store counts by region, revenue figures, and ownership percentages — giving its claims an empirical foundation that lifts it above pure opinion.
- It follows a clear analytical framework (the four management functions) and explicitly maps each function to Starbucks' actual practices, making the structure easy to follow and evaluate.
- The recommendations section connects directly back to weaknesses identified in the analysis, ensuring the paper's argument forms a coherent arc from description to critique to prescription.
Key academic technique demonstrated
The paper demonstrates applied organizational analysis: taking a standard management framework (planning, organizing, leading, controlling) and systematically applying it to a real-world corporation. This technique requires the writer to move beyond describing what a company does and instead interpret why those practices exist and what their trade-offs are — for example, explaining that Starbucks' centralization reflects Schultz's visionary leadership but simultaneously stunts the development of a leadership pipeline.
Structure breakdown
The paper opens with a general description of Starbucks' business profile, covering ownership structure, store counts, revenue mix, and target market. It then addresses the competitive landscape and key resources. The analytical core applies the four management functions to the company's hierarchy, distinguishing which decisions occur at the corporate, regional, and store levels. A final recommendations section offers three actionable improvements — succession planning, divisional restructuring, and training investment — each linked to a specific weakness identified earlier.
Company Overview and Business Profile
Starbucks is a successful coffee chain operating in the quick service restaurant (QSR) industry, where it ranks as the third-largest firm in the United States by revenue (Oches, 2014). Formally named Starbucks Corporation, the company is publicly traded on the NASDAQ under the ticker symbol SBUX, with a 97.33% float and 2.74% inside ownership (MSN Moneycentral, 2014).
The company employs approximately 191,000 people. It was incorporated in its current form in 1985, though its antecedent traces back to the early 1970s. The modern company was organized after Howard Schultz adopted the Starbucks name and applied it to his coffee chain vision. Today, Starbucks operates in 65 countries around the world (MSN Moneycentral, 2014). Of its 19,767 total stores, 10,194 (52%) are company-owned and the remainder are franchised. In the Americas, 60% of stores are company-owned. In Europe and the Middle East, 57% are franchised. In Asia-Pacific, 77% are franchised. Starbucks also operates stores in other segments, such as juice and tea, most of which are company-owned (Starbucks 2013 Annual Report).
Most of the non-coffee stores are Teavana locations, a brand the company acquired in 2012 with the goal of leveraging its core competencies in coffee to roll out a teahouse concept (Choi & Skidmore, 2012). The company also acquired a juice business, part of a broader effort to diversify within the beverage category (Jargon, 2011).
The major growth markets for Starbucks are China (206 new stores in 2013) and the United States (193 new stores). Canada, Mexico, and South Korea are also significant growth markets. Revenue is divided as follows: 74% beverages, 20% food, 3% packaged coffees, and 3% merchandise and equipment (Starbucks 2013 Annual Report).
Beyond its retail stores, Starbucks has other revenue streams, including its K-Cup single-serve product and a licensing agreement with Pepsi to produce Starbucks-branded beverages. These non-store businesses generated approximately $1.42 billion in revenue and $415 million in net income in 2013 (Starbucks 2013 Annual Report). Overall, the company earned $16.447 billion in revenue in fiscal year 2014, with net income of $2.068 billion — a significant improvement over 2013, when a $2.7 billion charge related to the termination of a distribution deal with Kraft weighed heavily on results (Schultz, 2013).
The Starbucks customer base is generally middle class, and this profile holds more or less consistently around the world. The company competes with a differentiated strategy, marketing its goods at a premium and using branding, service, and unique experiences to justify higher prices. This approach created what might be described as a market for "affordable luxury" — a premium service experience delivered within the framework of a mainstream quick service company. The target customer tends to be of middle income or higher, is likely a repeat buyer with strong brand loyalty, is of working age, and has a college education or is pursuing one.
Starbucks appeals to both urban and suburban consumers and has a growing presence in rural areas. However, the QSR model's dependence on high transaction volume means the company must locate in high-traffic areas, making real estate a critical success factor. The company's aspirational positioning allows customers to associate Starbucks with class belonging, differentiating it from lower-priced competitors. This positioning, which was genuinely novel when Starbucks first expanded in the 1990s, now faces replication attempts from numerous competitors.
Competitive Position and Key Resources
Competitors fall into two broad categories: independent "mom-and-pop" shops that compete on the basis of not being a chain, and regional chains that attempt to emulate the Starbucks model. Starbucks is substantially larger than any of these. Within the coffee QSR segment, the most serious competitor is McDonald's, particularly since the introduction of its McCafé concept (Lim, 2014). Although McDonald's is far larger than Starbucks overall, its coffee business is considerably smaller. Dunkin' Donuts and Tim Hortons are also competitors in the QSR top 50, but both operate in the donut shop and coffeehouse model, which targets a more mainstream consumer than Starbucks and seldom captures customers who identify with the Starbucks brand experience (Lim, 2014).
The key resources for Starbucks are its brand, its people, and its products. The brand is arguably the most important of these. In the quick service business, a brand is a promise of consistent product and experience. When that experience is reliably replicated across locations, it reduces consumer risk — customers know what they are getting. This consistency is also what makes the brand franchisable, enabling faster expansion.
Starbucks has generally been able to create its own markets, demonstrating strong management skill and market insight. The company introduced coffee shop culture where it was limited (the United States) and where it was effectively absent (Japan, China). Notably, Starbucks has struggled in markets where a strong coffee culture already existed before its arrival — it has very few stores in Australia and none in Italy.
Training has historically been a strength. Starbucks recruits people who might otherwise not pursue quick service careers by offering superior benefits and a better working environment than most industry peers. This enables the company to attract stronger candidates, train them more thoroughly, and deliver a higher standard of service than lower-end competitors. However, maintaining this standard becomes more difficult as the company scales, a tension addressed further in the recommendations section.
Starbucks has a geographic organizational structure. The three primary operating divisions are the Americas; Europe, Middle East, and Africa; and China/Asia-Pacific. Other business segments — such as Teavana and the juice business — are small enough that they do not yet require major structural recognition. Strategy for the geographic divisions is largely set at the Seattle headquarters, reflecting the company's preference for centralized command over resource deployment.
Planning and Organizing Functions
Planning at Starbucks is predominantly centralized at headquarters in Seattle. This applies to strategic planning — market entry, acquisitions, and brand extension — rather than operational planning such as staff scheduling or materials ordering. Starbucks operates its stores in largely the same way worldwide, which reduces the need for significant planning at lower organizational levels.
The centralized nature of planning is evident in major strategic announcements. When the company identified China as a critical growth market, it was the CEO who communicated this publicly, and headquarters reinforced the priority by renaming the Asia-Pacific division the China Asia-Pacific division (Sandholm, 2014). Head office was similarly involved in the push into breakfast, including decisions as granular as what type of cheese to use in food items. Regional planning is more operational in nature — local offices may determine the specific cities or neighborhoods where stores will open within a market that headquarters has already prioritized. This division of labor allows headquarters to allocate resources strategically while leveraging local knowledge for on-the-ground execution.
Franchise decisions are also made at headquarters. When Starbucks entered Japan, it sought a franchise partner capable of driving rapid growth by owning nearly all local franchises. Later, when the company decided to buy back franchise-operated stores in China, that too was a strategic decision made centrally (Tang, 2011). This pattern reinforces the highly centralized character of planning throughout the organization.
The organizing function, by contrast, operates more at the regional level. Once plans are set and resources allocated, local units handle much of the organizing work: local marketing, franchise management, store site selection, and supply chain oversight. Most of these decisions are made at the national or sub-national level.
Store layout decisions, however, are not made regionally. Starbucks maintains a small number of standard layout archetypes developed at headquarters. An individual store's layout is adapted from one of these archetypes by the local manager, bypassing the regional office. This reflects two principles: first, that replicability is a core value driver, requiring centrally established design standards; and second, that site-specific adaptation is best handled by the person most familiar with the individual location.
The organizational structure, as noted, is primarily geographic. Because Starbucks' stores are broadly similar in their operations, geography is the most logical basis for subdivision. The structure is hierarchical, with fairly clear delineation of responsibility at each level. Store management handles human resources, ordering, and strategy implementation. Regional and head offices are responsible for product mix and store location decisions. Corporate headquarters sets human resource policies and makes resource allocation decisions.
References
Choi, C. & Skidmore, S. (2012). Starbucks buys Teavana Holdings for $620 million. Huffington Post. Retrieved December 12, 2014 from
Jargon, J. (2011). Latest Starbucks concoction: Juice. Wall Street Journal. Retrieved December 12, 2014 from http://www.wsj.com/news/articles/SB10001424052970204358004577030112155716538
Lim, P. (2014). Dunkin, Mickey D's, or Starbucks? The surprising winner of the coffee war. Money. Retrieved December 12, 2014 from
Michelli, J. (2007). The Starbucks experience: Leadership tips ebook. Joseph Michelli. Retrieved December 12, 2014 from
MSN Moneycentral: Starbucks Corp. Retrieved December 12, 2014 from http://www.msn.com/en-us/money/stockdetails?symbol=SBUX
Oches, S. (2014). The QSR 50. QSR Magazine. Retrieved December 12, 2014 from
Sandholm, D. (2014). Finally, Starbucks has breakthrough in China. CNBC. Retrieved December 12, 2014 from http://www.cnbc.com/id/101867508
Schultz, E. (2013). Starbucks ordered to pay $2.7 billion in dispute with Kraft. Advertising Age. Retrieved December 12, 2014 from http://adage.com/article/news/starbucks-ordered-pay-2-7-billion-dispute-kraft/245241/
Starbucks 2013 Annual Report. Retrieved December 12, 2014 from
Tang, Z. (2011). Starbucks buys back control of stores. China Daily. Retrieved December 12, 2014 from http://usa.chinadaily.com.cn/us/2011-06/03/content_12634555.htm
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