Recommendations for improvements of Starbucks

in its organizational design for better performance and long-term success.

Olatunde Daniel Obadaye

MBA, Nexford University

BUS 6110

5th August 2024

Starbuck’s Company Background

Starbucks Corporation is one of the world's largest coffee roaster, marketer, and retailer of

coffee. In 1971, three entrepreneurs, Jordan Bowker, Zev Siegel, and Jerry Baldwin opened first

Starbucks store in Seattle, WA. In 1982, Howard Schultz joined Starbucks as a marketing director.

Starbucks is a renowned global coffeehouse chain that has established itself as a leading player in

the specialty coffee market. With its diverse range of beverages and food options, stylish and

comfortable ambiance, and strong focus on customer satisfaction, Starbucks has become

synonymous with the modern coffee culture.

Industry

Since its inception in 1971, Starbucks has been known for its commitment to providing high-

quality coffee products sourced from sustainable and ethical suppliers. This dedication to

responsible sourcing and environmental sustainability sets Starbucks apart from many other

companies in the industry.

Size

Starbucks is one of the largest coffee franchises in the world. With over 26,000 stores in 64

countries, the company has the right to brag about this. One of the problems which Starbucks is

currently being faced with is the brand being watered down by over expansion and a too diverse

product mix.

Starbucks Current State Analysis

ORGANIZATIONAL STRUCTURE

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 Starbucks employs a matrix organisational structure that integrates various functional and

product-based divisions. This results in multiple overlapping divisions and reporting structures

within the overall organisation, which is logical given its vast size and global footprint.

Ultimately, Starbucks is governed by a board of directors and the overarching functional hierarchy,

which is one of the three main components that constitute Starbucks’ overall structure. The other

two components are product-based divisions and geographic divisions.

CEO

CIO executive VP and

CFO and International
G Manager of Digital Marketing Supply Chain Human Global Development
Administration Operation President
Venture Resource

Development and
Coffee and Greater China
Partner
Snr. VP,G Manager Global
Senior VP, Finance Resources(HR)
Procurement
U.S Retail
Snr.VP
International
Development

Support
Development

SWOT Analysis

Strong Brand Image

Starbucks Corporation is a popular and strong brand in the food and beverage industry.

Impressive Financial Performance

The company has historically shown it is a stable business through consistent revenue growth and

profitability figures.

Growth in Stores

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Extensive International Supply Chain

Starbucks is known to have an extensive global network of suppliers developed over the last two

decades.

Acquisitions

Starbucks has acquired and integrated several other companies, including Seattle’s Best

Coffee, Teavana, Tazo, Evolution Fresh, Torrefazione Italia Coffee, and Ethos Water.

Moderate Diversification

Starbucks has also diversified its business operations by introducing innovative merchandise and

food items.

Starbucks Weaknesses – Internal Strategic Factors

High Prices

This premium price limits the customer pool as many prospective customers will look to its less

pricey competitors to purchase their coffee.

Generalized Standards for Most Products

Some of its product offerings are not aligned with the cultural standards of other markets

Worst holiday drink

According to a poll carried out by Mashed, more than 21% of coffee lovers absolutely hate

Starbucks’ “Iced Latte.” Starbucks premiered it as a festive Christmas holiday drink. But sadly, the

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drink turned out to be a downer. A lot of people said the Starbucks’ iced latte leaned too much on

the sweet side and was absolutely not worth the steep price.

Recall of Products

Over the years, Starbucks has recalled a lot of in-demand products. This can negatively affect the

brand image of the company and lead to the loss of its customer base.

PROCESSES

Key business in Starbucks company:

1. Coffee sourcing and procurement: Starbucks sources its coffee beans from various regions around

the world and has a complex supply chain to ensure quality and sustainability.

2. Store operations: This includes customer service, product preparation, inventory management,

and cleanliness of the store.

This includes budgeting, forecasting, and managing expenses across the organization.

Inefficiencies in Starbucks company:

1. Overly complex menu options leading to inefficiencies in product preparation time and potential

confusion for customers.

2. Inconsistent quality across different locations due to variations in store operations.

3. High employee turnover resulting from inadequate training or poor working conditions.

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Improving these inefficiencies could help streamline operations, enhance customer satisfaction,

reduce costs, improve employee retention rates, and ultimately contribute to overall business

success for Starbucks

CULTURE

The corporate culture of Starbucks Corporation is characterized by its empowerment of

employees through the encouragement of sharing and pursuing new ideas. This positive work

environment fosters a proactive approach, which in turn facilitates efficient decision-making

processes. The culture also promotes collective responsibility in decision-making and problem-

solving, as well as the sharing of expertise and knowledge among employees. Furthermore,

employees are granted the freedom to direct and manage their own performance, adding to the

overall sense of empowerment within the organization. Communication is at the core of Starbucks'

organizational culture, serving as a key operational tool that enables good planning and

organization. The company emphasizes open and honest communication both within its team

members and with external partners, demonstrating a commitment to fostering strong relationships

within its corporate network. ( Mateusz Brodowicz 2024)

CHALLENGES

Starbucks faces a range of internal and external challenges. Internal challenges include

managing a large workforce, maintaining quality control across global locations, and adapting

corporate strategies to local markets. External challenges encompass competition from both

premium coffee brands and affordable options, fluctuating commodity prices, and changing

consumer preferences towards health or sustainability. Additionally, economic downturns and

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global supply chain disruptions may impact operations. For a detailed situational analysis, it's

advisable to review specific case studies or reports on Starbucks ( Mateusz Brodowicz,2024)

RECOMMENDATIONS FOR IMPROVING STARBUCKS ORGANISATIONAL DESIGN

Structure

1. Flattening the organizational hierarchy: Reduce the number of management levels to promote

faster decision-making and greater communication between employees and management.

2. Implementing cross-functional teams: Create teams that bring together employees from different

departments to work on projects, fostering collaboration and allowing for more diverse perspectives.

3. Encouraging employee empowerment: Give employees more autonomy in their roles, allowing

them to make decisions and take ownership of their work, which can lead to increased motivation

and productivity.

Process

1.0 Streamlined supply chain management

This is crucial for the success of large-scale operations such as Starbucks. With thousands of stores

worldwide and a complex supply chain network, the company relies on an ERP system to effectively manage

its processes from sourcing raw materials to delivering finished products. By doing so, Starbucks can

efficiently manage inventory levels, reduce lead times, and minimize stockouts, ultimately ensuring that their

stores are consistently well-stocked with the products demanded by customers. This level of efficiency is

essential in meeting customer demands and maintaining a competitive edge in the global market.

2.0 Integrated Financial Management

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 This is imperative for multinational companies like Starbucks, as it allows for seamless consolidation

of financial data across various regions and currencies. By implementing an ERP system, Starbucks can

effectively monitor its financial performance in real-time, make informed budget decisions, and

ensure compliance with global regulatory standards. This centralized platform not only streamlines

the company's financial processes but also enables it to adapt to the complexities of operating in

diverse markets.

3.0 Technology

Furthermore, the implementation of CRM technology allows Starbucks to better understand

customer preferences and anticipate their needs, ultimately leading to a more personalized and

seamless experience for each individual. This level of attentiveness not only fosters greater

customer loyalty but also provides valuable insights that can inform strategic decision-making and

improve overall business performance. In essence, the integration of CRM into Starbucks'

operations exemplifies the company's dedication to enhancing customer relationships and

underscores its commitment to delivering unparalleled service.

Culture

1. Clear and consistent communication: Establish clear and concise communication channels to

ensure that all employees are well-informed about the company's goals, values, and expectations.

2. Training and development programs: Invest in comprehensive training initiatives to ensure

that all employees appreciate the significance of customer service, quality products, and the overall

Starbucks culture.

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3. Performance management system: Create a performance management system aligned with the

company's values and goals, providing regular feedback to employees on their performance and

areas for improvement.

4. Employee recognition program: Set up a formal employee recognition programme to

acknowledge individuals who exemplify the Starbucks culture through their work ethic, customer

service skills, teamwork, and more.

IMPLEMENTATION PLAN

Understanding a customer relationship strategy

At the heart of Starbucks’ success is their ability to foster a sense of community and

belonging among their customers.

Innovating in-store experiences

Starbucks excels at making customers feel at home in their outlets by providing comfortable

seating and creating a soothing atmosphere. The music, lighting, and decor all contribute to an

ambiance that patrons find appealing and relaxing. By blurring the lines between home and work

environments, they create a desirable “third place” where customers can feel at ease, whether they

are making a quick routine stop or settling in to work remotely in a vibrant and social setting.

The role of baristas in building relationships

Baristas play a crucial role in creating a positive customer experience. They are trained to be

friendly, attentive, and knowledgeable about the products. A focus on customer service and people-

oriented hiring makes customers feel welcome and valued. Offering the ability to personalise and

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customise most, if not all, menu items goes a long way in making the customer feel like their order

is being made with care, just for them. A simple gesture like including a customer’s name on their

beverage provides another opportunity to connect in ways where other retailers may fall short.

Exclusive events and promotions

Creating exclusive events and promotions gets customers excited and interested in the

company. These events can range from launching new menu items to music concerts and art

exhibitions. Typically, these promotions are exclusive for rewards members, which makes it even

more appealing to join the programme.

By being involved in local initiatives in the areas where they operate, the company partners with

local non-profits, schools, and organisations to create impactful programmes for their communities.

This involvement allows Starbucks to build personal connections with its customers and

intentionally strengthen its brand.

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REFERENCES

https://www.123helpme.com/essay/Schultzs-Case-Study-A-Brief-Background-Of-770669

( Mateusz Brodowicz,2024)External and Internal Analysis of Starbucks: Case Study

https://aithor.com/essay-examples/external-and-internal-analysis-of-starbucks-case-study

S.G Gupta 2024 Starbucks SWOT 2024 | SWOT Analysis of Starbucks

https://bstrategyhub.com/swot-analysis-of-starbucks-starbucks-swot/

2023How Starbucks builds customer relationships to improve bottom-line figures

https://www.retaildive.com/spons/how-starbucks-builds-customer-relationships-to-improve-bottom-
line-figures/651999/

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