Starbucks Coffee Company
The paper is about the Starbucks coffee company. It focuses on the four key aspects of the market for its products, the financial position or strength of the company, the organizational structure or management model and its appropriateness and the future prospects of the company. Then the last part is the summary. It takes the following arrangement
This part explains the historical beginnings of Starbucks as a company, the nature and range of products that it handles as well as the places it has been able to reach with its products.
This part is a segment of the body of the paper. It mainly focuses on the key groups that are customers to the company and the ones that are elusive. It also examines the various strategies the company has tried to sue to capture this groups of customers.
This segment is also part of the research paper body and it focuses on the financial position of the company. It makes use of the business ratios in determining whether the company is strong
Management Structure and its Appropriateness
Here, the paper talks about how the leadership of Starbucks is structured. The position of president and chief executive, the vice presidents and the presidents are talked about. The impact of this structure is also talked about in this section.
This section of the paper is about how the future of Starbucks looks like based on its current standing. The current financial strength as well as the products it has in the market are used to make this forecast.
This is a conclusion of the entire paper. It contains the brief form of all that was covered as well the inferences and reflections
Founded in 1971 in the United States of America by three partners who were inspired by a seller of coffee beans, Starbucks stands out as the world’s biggest company in the field of coffeehouse business with approximately one hundred and forty two thousand employees (Moore, 2006, 10). It has numerous stores in several parts of the world but as expected, the country of origin, which is the United States of America has the highest number of stores. The number of stores in the Unites States is estimated to be more than ten thousand with more than six thousand in the hands of the company. The others are managed on a franchise basis. The company is concerned with the selling of snacks that can be either hot or cold and hot drinks that are based on the popular drink called espresso. It also sells coffee that is produced as a result of careful deep brewing.Starbucks has also expanded its business range to such items as coffee mugs and coffee beans. It is also worth noting that Starbucks is now participating in a new area of business that is rapidly growing in the market. This is the Starbucks entertainment wing which has the responsibility of marketing films, and books. It also markets music and provides entertainment during outstanding company events such as annual general meetings. In the field of coffee brewing, it is in competition with local and regional entities such as Java, Caribou Coffee, New World Coffee and Coffee Station. Heat also comes in from McDonalds and Dunkin Donuts who deal in the same line of business as Starbucks.
As an international company, Starbucks is found in more than thirty five countries .It is found in most parts of the United States of America, Canada, and Japan as well as the United Kingdom. The only continent that has the smallest representation of Starbucks stores is Africa. It is only in Egypt where there are a number of Starbucks stores. The company however has plans of putting up more stores in the continent as part of its market expansion strategy. From these locations of Starbucks stores in the world, it is evident that Starbucks is ready to access a wider market through taking the products of the company to more people in the world. A careful look into the location of the specific Starbucks’ stores in these countries also disclose another careful hand as far as selection is concerned. The stores are strategically located at places where people frequent thus ensuring that more people are able to access their coffee as well as the company’s other products.
The company also approaches the market aspect from another perspective. By just locating their stores in all or more countries in the world, it is not guaranteed that they are going to be able to sell their products to the people in these countries if they do not come up with the best approach to take their products to specific members of the population in a specific way. Demographic considerations have played a key role in the market strategies that are being employed by Starbucks in selling their products. As a beverage, coffee is a popular commodity that cuts across the ages in terms of preference. It is possible to find a fifteen year old child who is fond of coffee just like a seventy six year old man. But the convenience that comes with taking coffee from an outside outlet is always considered highly by older people who are fond of holding business meetings in such outlets. This therefore means that this particular group of people is not so hard to get when it comes to trying to get them to buy the products of Starbucks(Gaudio,2003,pp 659-691).The problem comes when it comes to young people who are not frequent in such places and chances of them going there are slim. In regard to this phenomenon, the company decided to come up with other youth friendly areas such as its entertainment wing that markets music, films and books. It also partnered with Apple, a partnership that has seen the loading up of Starbucks music into the Apple electronics such as iPods. As a strategy for targeting young people, it is likely to bear fruits given that there is nothing that captures the attention of young people in the current world as adequately as entertainment does. This can therefore be declared a smart marketing strategy on the side of Starbucks.
Leaving the above a side, Starbucks has also considered demographics in its line of products and it seems to be focused on getting more of the young people into its market capitalization. The focus of attention on snacks is a clear indication that the company understands that young people are a key segment of the market and all needs to be done to get them to their products. It is highly likely that a young person will get to a store to purchase a hot or cold snack. But the same may not be true for a cup of coffee. The emphasis laid on snacks by this company therefore shows that they are aware of the concerns of the youth or young people and in order to get them to buy their products; they have stocked what can drive them into their stores (Clark,2007,p.11-16). These snacks are magnificently arranged in these stores as a way of attracting these young people.
Another market feature that is evident in the operations of Starbucks is the consideration of cultural and linguistic aspects. The company has made it a norm to take up the local name of their product as soon as they get into a new market .The most outstanding example of this feature is the fact that Starbucks coffee has an Arabic name by which it is identified in its Arabic market just like there is a Japanese name for the same. An additional aspect of culture that is worth mentioning is the fact that the company uses the indigenous architectural designs for its stores. The effect of all these is that it makes the local populations comfortable with the stores since they can easily identify them with their culture and this makes them more ready to patronize them. It is not surprising to go to Dubai for instance and find a Starbucks store that is designed with a touch of the Islamic traditions in architecture and decoration or design.
Due to the above pragmatic and realistic market approaches, the Starbucks coffee company has maintained its position as the largest coffee company in the world. It has the greatest share of the market and its competitors such as McDonalds and Dunkin Donuts pale in comparison when it comes to market capitalization. Other strategies that may have helped expand or enlarge the company’ s market are the dedication to product quality and the buying out of other companies.Also,the allowing of franchises has helped put the name of the company on more people’s minds thus taking the company to more people. Like in politics, the more a name is mentioned to the listeners, the more the listeners are likely to look out for it when they will be doing their shopping.
Far from market concerns, the financial position of a company is major concern for the company as a business entity. It is the best way to estimate the strength of the company.Starbucks is an international company and given the rapid expansion it has experienced in the recent past, it is expected to be in a healthy financial position. Far from speculation, at a liquidity ratio of one point three, this is higher than the industry average that is below one (Zenobank, 2009). This is a clear indication of a strong financial position for the company (Rogow, 2009, p 3). The price to earnings ratio is also high, an aspect that has been attributed to the increased opening of outlets or stores by the company both in and outside the United States .The gross margin and the return to equity are however low and the negative show of the company’s stocks is related to this. But with the new management of the returned Chief Executive Officer, Howard Schultz, the company looks bright once more with a shiny financial future.
Leaving the financial aspect aside, the organizational management of Starbucks as a company has so much to tell us about the company. Despite the immense powers of the President and Chief Executive Ofiicer, the system is opened up and decentralized (Campbell and Fuhr,2004). There are four presidents who run specific dockets, three executive vice presidents, two senior vice presidents and a global chief marketing officer. These are part of the twelve members of the top management organ of the company. From their job descriptions, it is evident that the company has given them powers to carry out their functions without being disturbed by the president and chief executive officer (Starbucks Corporation, 2009). The company also has store officers who have powers to take actions that work to the betterment of their stores and the workers are given training from time to time so as to ensure that they are able to deliver services to the customers’ satisfaction. They also have the freedom to join unions and most of them are members of the Starbucks Workers Union and Industrial Workers of the World.
What does the future hold for Starbucks? This is always a hard question to answer given the nature of the business world. But with the robust financial position of the company, the re-energized management and the taking up of a new strategy, there is a possibility that things can only get better (Fellner, 2008, p.26). The current financial meltdown has hit every business in all parts of the world and Starbucks has not been spared. So this is not something that is uniquely affecting Starbucks.But the rapid expansion that has led to losses due to high running costs as well as the involvement of the company in acts that give it bad publicity such as the rumors that it is in support of the Israel military against Palestinians must be contained if the smooth operations are to be maintained and improved. Expansion is not necessarily bad given that Starbucks uses less than one percent of world coffee (Ramirez-Vallejo, 2002,pp 26-27).All that is required is careful expansion so as to avoid employee harassment in a bid to make them sell unsellable products(Berfield,2009,p33) (Krinsky,2007,p 6-11).
In summary, it is evident that Starbucks is a market leader in the coffeehouse business. Its workforce of more than one hundred thousand employees and stores in more than forty countries in the world is something to be applauded. The company’s management has had to adopt a variety of strategies to access a greater percentage of the market and these have included the adoption of youth friendly styles such as entertainment- centered stores and foods that are preferred by young people such as snacks. The financial position of the company is strong given its standing in comparison to industry averages but this is not a source of pride due to losses incurred in other areas. Both the returns to equity and the gross margin are below average and this is a source of worry for the management. But with good leadership, prosperity is possible again. The decentralized leadership system characterized by a president who doubles as the chief executive officer, assisted by four other presidents, five vice presidents and a global chief marketing officer gives the company a competitive edge (Tobin and Petingell, 2008). Proper treatment of the company employees through such incentives as training and good renumeration is strength for the company. All these point to a bright future for Starbucks.But this can only be so if rapid expansion and e involvement in controversial issues such as the Israeli-Palestinian conflict are avoided. Success is sometimes the beginning of failure in instances where the handling of success is not done properly. And so it can be for Starbucks.