Millions of Americans these days depend on the glorious caffeine rich nectar provided to them daily by the local Starbucks chain store. With its humble roots firmly planted in Seattle, Washington, this little coffee shop has turned from a novel idea, into a veritable necessity for Americans on the go. The amazing success of Starbucks can be attributed, in part, to operational planning. Starbucks has become a well-known company for selling the highest quality coffee beans and best tasting coffee products. It was one of the first companies to realize that the real money to be made was in beverage retailing, not just coffee beans. Starbucks created a coffee for the coffee connoisseurs, and exhausted all resources to acquire only the highest quality of coffee beans. It was through operational planning that the management team behind Starbucks was able to be so wildly successful. By utilizing their strengths, and capitalizing on trends, as well as periodically evaluating weaknesses and threats, this little coffee house has become America’s most enjoyable place to get coffee.
To understand operational planning, a basic background in the planning process is required. Corporations today use a top down approach to map an organizations future.
Strategic planning or Top-Level management are the executives of a company and are responsible for the long-term goals and strategies. Tactical planning or the middle level managers take the long-term goals and classify them to smaller more specific goals. Finally, operational planning or the frontline managers are responsible for developing plans to accomplish short term objectives that in turn accomplish goals identified from upper management.
Operational Planning 2
Starbucks’ executives have defined their business with the mission statement to “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow” (Starbucks mission statement). Starbucks Corporation is a very profitable organization, earning in excess of $600 million in 2005. It is a global coffee brand built upon a reputation for fine products and services. It has almost 9000 cafes in almost 40 countries. Strategic planners have also proved the significance of their work force by providing benefits and implementing programs such as the “Bean Stock” program. By offering employees the opportunity to own stock within the company, every member of the staff has a stake in the success of the Starbucks organization. All of these examples show the commitment of top executives to their people. However, the most astounding commitment comes from the hiring of remarkable operational managers. This majority of front line managers are truly one of the Starbuck’s organizations strengths. Operational managers are the individuals who shoulder the responsibility of making a profit. Fortified with the company mission statement these supervisors make use of company programs by creating action plans as well as encouraging and instructing their team to employ them to meet operational and organizational objectives. These supervisors, train, coach and provide direction to their staff in order to meet customer demands while maintaining renowned customer service. A measure of the efficiency of these managers is Starbucks position in Forbes “100 best companies to work for” for seven of the last eight years. The company is a respected employer that values its workforce. The organization has strong ethical values and an
ethical mission statement as follows, “Starbucks is committed to a role of environmental leadership in all facets of our business.” (Starbucks mission statement)
Starbucks is a common spoken coffeehouse name; still Starbucks must keep in mind that to stay atop the coffeehouse market, they must realize their business’ weaknesses. One of Starbucks weaknesses is, they need to listen to the consumer’s feedback, and after all do they really want to be labeled as the McDonalds of coffeehouses? With consumers making statements like, “Starbucks is the box-store effect”, “Starbucks is another sign of the homogenization of American life” some of these small coffeehouses have gone so far as to post flyers or signs within their own businesses saying, “Friends Don’t Let Friends Drink Starbucks”(The Missoulian, Pg B1). Starbucks must listen to the consumer, an image and venue change is absolutely necessary for them to continue to stay competitive in the coffeehouse market. Starbucks has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter over time. The organization has a strong presence in the United States of America with more than three quarters of their cafes located in the home market. It is often argued that they need to look for a portfolio of countries, in order to spread business risk. The organization is dependant on a main competitive advantage, the retail of coffee. This could make them slow to diversify into other sectors should the need arise. Weather, world events, and oil prices all can affect the sale of coffee. Striving to expand, manager at all levels are responsible to resolve this issue. Operational manager’s role in resolving this concern is to encourage their teams to come up with new and innovative ways to expand the Starbucks Empire. Also by
soliciting customers for there needs, it allows top-level management a form of market research that does not require an outside source.
Starbucks is very good at taking advantage of opportunities. In 2004 the company created a CD-burning service in their Santa Monica (California USA) cafe with Hewlett Packard, where customers create their own music CD. The company has the opportunity to expand its global operations. New markets for coffee such as India and the Pacific Rim nations are beginning to emerge. Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential as well.
One of the threats of Starbucks is who knows if the market for coffee will grow and stay in favor with customers, or whether another type of beverage or leisure activity will replace coffee in the future? Starbucks is exposed to rises in the cost of coffee and dairy products. Since its conception in Pine Place Park, Seattle in 1971, Starbucks’ success has lead to the market entry of many competitors and copy cat brands that pose potential threats. In 1984 the first Starbucks coffee house served a cafe latte. At that time the term coffee house was unknown to Americans. Today Starbucks has 4,666 locations in the United States and opens three to four new locations a day worldwide. The enormous growth and success the franchise as accomplished, competition is inevitable. With the threat of losing customers, operational managers must analyze reports and identify any trends. Using all resources and guidance from upper management, these dynamic managers must plan, incorporate, and maneuver their teams accordingly.
The trend in our society has become more fast pace and on the move. With the decline of the traditional family, the country’s culture has become one of convenience. Society wants more drive-thru restaurants, banks, and drycleaners, and Starbucks capitalized on it. They introduced bottled Frappuccino coffee drinks a person could purchase at almost any store or gas station. Starbucks became a place teens wanted to hang out and where businesses professionals could casually meet and conduct business. However, Starbucks wasn’t the only place that was providing this casual atmosphere. Barnes ; Noble was replacing the traditional library and was also a hang out spot. Starbucks’ strategy was to provide those readers the same convenience and atmosphere offered at their own locations and introduced their first co-located store in 1993. They introduced high-speed Internet access allowing customers to surf the web, conduct business or Instant Message their friends while enjoying their beverage and pastry. Starbucks Operational Managers have proven their effectiveness on a global scale. Today Starbucks was ranked “100 Most Valuable Global Brands” by Business Week magazine (Starbucks Awards & Accolades).
The popularity of Starbucks has been tremendous, and thanks to the operational planning abilities of the management team behind Starbucks, this little coffee house has become an overwhelming sensation. With careful planning, and dedication to its products Starbucks now leads the pack, and remains #1 to coffee consumer’s nation wide. By staying in touch with the public, and their changing tastes, the Management team at Starbucks was able to capitalize on trends. Pair this with the ability to recognize possible weaknesses, and work around them, Starbucks was able to avoid failure. Now caffeine-
seeking consumers no longer wonder where to go for that morning kick, but instead ponder, tall or Grande at the counter of their neighborhood Starbucks.