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.
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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