Chapter 1: Introduction
Whenever people mention Starbucks, we will always think of the smell of coffee, big purple sofa, coffee in a big mug and so forth. As one of the executives of Starbucks actually said, “We’re not in a business of filling bellies; we’re in the business of filling souls.” Kotler et al (2005: p80). Starbucks emerged as one of the pioneer in premium coffee brand. First started in the United States, Starbucks now already have almost 6000 stores all over the world. According to the history of Starbucks Coffee; three Seattle entrepreneurs started the Starbucks Corporation in 1971. Their prime product was the selling of whole bean coffee in one Seattle store. By 1982, this business had grown tremendously into five stores selling the coffee beans, a roasting facility, and a wholesale business for local restaurants. Howard Schultz, a marketer, was recruited to be the manager of retail and marketing. He brought new ideas to the owners, but was turned down. Schultz in turn opened his own coffee bar in 1986 based on Italian coffee cafes, selling brewed Starbucks coffee. By 1987, Schultz had expanded to three coffee bars and bought Starbucks from the original owners for $4 million. For the first two years, Starbucks losses doubled as overhead and operating expenses increased with Starbucks' expansion. Schultz stood his ground and did not sacrifice long term integrity and values for short-term profit. By 1991, Starbucks' sales increased by 84% and the company were out of debt. Starbucks grew to 26 stores by 1988. By 1996 it grew to 870 stores with plans to open 2000 stores by the year 2000 (Tony Montana, 2005).
Starbucks environmental statement is committed to a role of environmental leadership in all facets of business. Mission is defined by Susan M. H. (2008) as a precise description of what an organization does. It should describe the business the organization is in. it is a definition of “why” the organization exists currently. Each member of an organization should be able to verbally express this mission. Starbucks Company fulfils this mission by a commitment to: Understanding of environmental issues and sharing information with partners, developing innovative and flexible solutions to bring about change, striving to buy, sell and use environmentally friendly products, recognizing that fiscal responsibility is essential to environmental future, instilling environmental responsibility as a corporate value, measuring and monitoring progress for each project and encouraging all partners to share in mission (Starbucks Corporation, 2008).
Want the background about why values are important in an organization? Values are traits or qualities that are considered worthwhile; they represent an individual’s highest priorities and deeply held driving forces. Effective organizations identify and develop a clear, concise and shared meaning of values, priorities, and direction so that everyone understands and can contribute. Once defined, values impact every aspect of organization. It is define how people want to behave with each other in the organization. They are statements about how the organization will value customers, suppliers, and the internal community. While, the Starbucks Company‘s values are Culture, Innovation, and Starbucks Brand and Quality Matters (Susan M. H., 2008)
Chapter 2: Analysis
Values - Culture
Organizational culture is defined by Brent Ruben and Lea Stewart (1998) as the sum of an organization’s symbols, events, tradition, standardized verbal and nonverbal behaviour patterns, folk tales, rules, and rituals that give the organization its character or personality. Ruben and Stewart note that organizational cultures are central aspects of organizations and serve important communication functions for the people who create and participate in them. These functions include providing employees with a sense of individual and collective identity, contributing to the establishment of structure and control within the organization, aiding the socialization of employees through learning about the customs and traditions of the organization, and fostering cohesiveness among employees.
Starbucks Coffee has always projected itself as a progressive and socially responsible business, touting its “Bean Stock” employee ownership plan, full medical benefits for even part-time workers, and an idealistic mission of contributing to society while also running a successful business. Starbucks’ unique culture was what led Howard Schultz to leave his successful appliance sales career and move his family one coast of the country to the other. As it has grown, the leadership has been careful to maintain and grow the company’s culture. All Starbucks’ employees who work more than 20 hours per week are eligible for benefits. The company also works with the farmers who grow the coffee beans to improve their lives, as coffee growing regions tend to be very poor and the cost of coffee has been depressed because of oversupply. Starbucks’ baristas tend to be proud of both the company they work for and the training they receive. Upper management is more diverse than most large companies in the United States. All of this has built the company’s reputation for being progressive, even liberal, for a large corporation (Starbucks Corporation, 2008).
Just as treating partners well was one of the pillars of Starbucks’ culture, so was contributing positively to the communities it served and to be environment. Starbucks had made this commitment not only because it was the right thing to do, but also because its workforce was aware and concerned with global environmental and poverty issues (Tuck School of Business, 2008). While employees clearly come first in the Starbucks culture, the customer is a close second. Starbucks’ fourth guiding principle is to “Develop enthusiastically satisfied customers all the time.” As an industry analyst recently noted, “the two things that make them great are real estate and making sure no one has a bad experience in their stores.” Schultz says this is because “our customers see themselves inside our company, inside our brand – because they are part of the Starbucks experience” (Starbucks Corporation, 2008).
One of the challenge was to maintain a high level of employee performance, and to attract and retain young people, two third of them working part time at Starbucks. In order for its customers to have a positive experience, Starbucks employees needed to be knowledgeable about the company’s products, be eager to communicate the company’s passion for coffee and have the skills and personality to provide upscale customer service. The employee’s request to have healthcare benefits extended to part time workers as a core strategy to win employee loyalty and commitment to the company’s mission. Improving the support to employees would build confidence, reduce turnover, and in turn would reduce hiring and training costs. Recruitment and training has also been an important key success factor to Starbucks. These plans, combined with an above average pay scale, allowed Starbucks to attract motivated people with above average skills and good working habits, and turned out to be successful; turnover rates were relatively low, and it was obvious that Howard Schultz’s approach, values and principles were having the intended effect on the company’s performance. This in turn had a positive effect on customers, and some of them asked if they could come to work at Starbucks (Herve, R., 2004).
Starbucks believes that their employees are one of their important assets in that their only sustainable advantage is the quality of their workforce. They have accomplished building a national retail company by creating pride in the labor produced through an empowering corporate culture, exceptional employee benefits, and employee stock ownership programs. The culture towards employees is laid back and supportive. Employees are empowered by management to make decisions without management referral and are encouraged to think of themselves as a part of the business. Management stands behind these decisions. Starbucks has avoided a hierarchical organizational structure and has no formal organizational chart. The company has both functional and product based divisions. There is some overlap in these divisions with some employees reporting to two division heads (Tony Montana, 2005).
Value – Innovation
Since the beginning, innovation has been a constant value at Starbucks: Schultz introduced the place-like-home between the home and the office, where people would gather around quality coffees and teas. Starbucks formed a “stores of the future” team in 1995 to study the next generation of store design; according to Thompson and Gamble (1999) he stated that: “an authentic coffee experience that conveyed the artistry of espresso making, a place to think and imagine, a spot where people could gather and talk over a great cup of coffee, a comforting refuge that provided a sense of community, a third place for people to congregate beyond work of the home, a place that welcomed people and rewarded them for coming, and a layout that could accommodate both fast service and quiet moments.”
The team came up with four templates, one for each of the four stages of coffee making, and combined colors, lighting scheme and materials. They also created the breviary, a store-within-a-store for supermarkets or office-building lobbies, a self-contained 8-square-foot space that could be moved from spot to spot. These innovations allowed Starbucks to significantly reduce the store-opening costs and match them with the sales that each store format would allow. Starbucks product line was also the display of its innovation capabilities. The company stores has offered a choice of regular or decaffeinated coffee beverages, Italian-style espresso drinks, together with a wide selection of fresh-roasted whole-bean coffees (Herve, R., 2004)
Value – Starbucks Brand and Quality Matters
For Starbucks, the brand had three elements: coffee, people and stores. Stringent control over the quality and processing of the beans assured that the coffee would be of the highest possible quality. Outstanding store personnel were recruited and trained in coffee knowledge and customer service. Store design, atmosphere and aroma all contributed to the “Starbucks Experience”. Almost all Starbucks stores were corporately owned and controlled. Starbucks prided itself on the “Starbucks Experience”, going beyond coffee to provide a unique experience for its customers (Rotman, 2008).
Starbucks has spent very little money on advertising, preferring instead to build the brand cup by cup with customers and depend on word-of-mouth and the appeal of its storefronts. The company was, however, engaged in a growing effort to extend the Starbucks brand and penetrate new markets. In addition to expanding internationally, venturing into ice cream with Dreyer’s and into Frappuccino with Pepsi, partnering with licensees, and developing specialty and mail-order sales, Starbucks had recently begun selling its coffees in supermarkets (Thompson and Gamble, 1999).
Schultz always kept in sight the quality of the products and services, and the perception of it from the customer’s point of view. Strict quality control was implemented all along the coffee process. Each store detail: fixtures, merchandise displays, colors, artwork, banners, music, and aromas were closely studied to enhance the mood and ambience of the store, and that it reflected the personality of the community and the neighborhood. Starbucks banned smoking and asked employees to refrain from wearing perfumes or colognes, and prepared foods were covered in order to keep the coffee aromas pure. The company was recognized for its sensitivity to neighborhood conservation with the Scenic America’s award for excellent design and “sensitive reuse of spaces within cities.” The company designers came up with artwork for commuter mugs, and T-shirt were created along with different cities personality (Herve, R.,2004).
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Whenever people mention Starbucks, we will always think of the smell of coffee, big purple sofa, coffee in a big mug and so forth. As one of the executives of Starbucks actually said, “We’re not in a business of filling bellies; we’re in the business of filling souls.” Kotler et al (2005: p80). Starbucks emerged as one of the pioneer in premium coffee brand. First started in the United States, Starbucks now already have almost 6000 stores all over the world. According to the history of Starbucks Coffee; three Seattle entrepreneurs started the Starbucks Corporation in 1971. Their prime product was the selling of whole bean coffee in one Seattle store. By 1982, this business had grown tremendously into five stores selling the coffee beans, a roasting facility, and a wholesale business for local restaurants. Howard Schultz, a marketer, was recruited to be the manager of retail and marketing. He brought new ideas to the owners, but was turned down. Schultz in turn opened his own coffee bar in 1986 based on Italian coffee cafes, selling brewed Starbucks coffee. By 1987, Schultz had expanded to three coffee bars and bought Starbucks from the original owners for $4 million. For the first two years, Starbucks losses doubled as overhead and operating expenses increased with Starbucks' expansion. Schultz stood his ground and did not sacrifice long term integrity and values for short-term profit. By 1991, Starbucks' sales increased by 84% and the company were out of debt. Starbucks grew to 26 stores by 1988. By 1996 it grew to 870 stores with plans to open 2000 stores by the year 2000 (Tony Montana, 2005).
Starbucks environmental statement is committed to a role of environmental leadership in all facets of business. Mission is defined by Susan M. H. (2008) as a precise description of what an organization does. It should describe the business the organization is in. it is a definition of “why” the organization exists currently. Each member of an organization should be able to verbally express this mission. Starbucks Company fulfils this mission by a commitment to: Understanding of environmental issues and sharing information with partners, developing innovative and flexible solutions to bring about change, striving to buy, sell and use environmentally friendly products, recognizing that fiscal responsibility is essential to environmental future, instilling environmental responsibility as a corporate value, measuring and monitoring progress for each project and encouraging all partners to share in mission (Starbucks Corporation, 2008).
Want the background about why values are important in an organization? Values are traits or qualities that are considered worthwhile; they represent an individual’s highest priorities and deeply held driving forces. Effective organizations identify and develop a clear, concise and shared meaning of values, priorities, and direction so that everyone understands and can contribute. Once defined, values impact every aspect of organization. It is define how people want to behave with each other in the organization. They are statements about how the organization will value customers, suppliers, and the internal community. While, the Starbucks Company‘s values are Culture, Innovation, and Starbucks Brand and Quality Matters (Susan M. H., 2008)
Chapter 2: Analysis
Values - Culture
Organizational culture is defined by Brent Ruben and Lea Stewart (1998) as the sum of an organization’s symbols, events, tradition, standardized verbal and nonverbal behaviour patterns, folk tales, rules, and rituals that give the organization its character or personality. Ruben and Stewart note that organizational cultures are central aspects of organizations and serve important communication functions for the people who create and participate in them. These functions include providing employees with a sense of individual and collective identity, contributing to the establishment of structure and control within the organization, aiding the socialization of employees through learning about the customs and traditions of the organization, and fostering cohesiveness among employees.
Starbucks Coffee has always projected itself as a progressive and socially responsible business, touting its “Bean Stock” employee ownership plan, full medical benefits for even part-time workers, and an idealistic mission of contributing to society while also running a successful business. Starbucks’ unique culture was what led Howard Schultz to leave his successful appliance sales career and move his family one coast of the country to the other. As it has grown, the leadership has been careful to maintain and grow the company’s culture. All Starbucks’ employees who work more than 20 hours per week are eligible for benefits. The company also works with the farmers who grow the coffee beans to improve their lives, as coffee growing regions tend to be very poor and the cost of coffee has been depressed because of oversupply. Starbucks’ baristas tend to be proud of both the company they work for and the training they receive. Upper management is more diverse than most large companies in the United States. All of this has built the company’s reputation for being progressive, even liberal, for a large corporation (Starbucks Corporation, 2008).
Just as treating partners well was one of the pillars of Starbucks’ culture, so was contributing positively to the communities it served and to be environment. Starbucks had made this commitment not only because it was the right thing to do, but also because its workforce was aware and concerned with global environmental and poverty issues (Tuck School of Business, 2008). While employees clearly come first in the Starbucks culture, the customer is a close second. Starbucks’ fourth guiding principle is to “Develop enthusiastically satisfied customers all the time.” As an industry analyst recently noted, “the two things that make them great are real estate and making sure no one has a bad experience in their stores.” Schultz says this is because “our customers see themselves inside our company, inside our brand – because they are part of the Starbucks experience” (Starbucks Corporation, 2008).
One of the challenge was to maintain a high level of employee performance, and to attract and retain young people, two third of them working part time at Starbucks. In order for its customers to have a positive experience, Starbucks employees needed to be knowledgeable about the company’s products, be eager to communicate the company’s passion for coffee and have the skills and personality to provide upscale customer service. The employee’s request to have healthcare benefits extended to part time workers as a core strategy to win employee loyalty and commitment to the company’s mission. Improving the support to employees would build confidence, reduce turnover, and in turn would reduce hiring and training costs. Recruitment and training has also been an important key success factor to Starbucks. These plans, combined with an above average pay scale, allowed Starbucks to attract motivated people with above average skills and good working habits, and turned out to be successful; turnover rates were relatively low, and it was obvious that Howard Schultz’s approach, values and principles were having the intended effect on the company’s performance. This in turn had a positive effect on customers, and some of them asked if they could come to work at Starbucks (Herve, R., 2004).
Starbucks believes that their employees are one of their important assets in that their only sustainable advantage is the quality of their workforce. They have accomplished building a national retail company by creating pride in the labor produced through an empowering corporate culture, exceptional employee benefits, and employee stock ownership programs. The culture towards employees is laid back and supportive. Employees are empowered by management to make decisions without management referral and are encouraged to think of themselves as a part of the business. Management stands behind these decisions. Starbucks has avoided a hierarchical organizational structure and has no formal organizational chart. The company has both functional and product based divisions. There is some overlap in these divisions with some employees reporting to two division heads (Tony Montana, 2005).
Value – Innovation
Since the beginning, innovation has been a constant value at Starbucks: Schultz introduced the place-like-home between the home and the office, where people would gather around quality coffees and teas. Starbucks formed a “stores of the future” team in 1995 to study the next generation of store design; according to Thompson and Gamble (1999) he stated that: “an authentic coffee experience that conveyed the artistry of espresso making, a place to think and imagine, a spot where people could gather and talk over a great cup of coffee, a comforting refuge that provided a sense of community, a third place for people to congregate beyond work of the home, a place that welcomed people and rewarded them for coming, and a layout that could accommodate both fast service and quiet moments.”
The team came up with four templates, one for each of the four stages of coffee making, and combined colors, lighting scheme and materials. They also created the breviary, a store-within-a-store for supermarkets or office-building lobbies, a self-contained 8-square-foot space that could be moved from spot to spot. These innovations allowed Starbucks to significantly reduce the store-opening costs and match them with the sales that each store format would allow. Starbucks product line was also the display of its innovation capabilities. The company stores has offered a choice of regular or decaffeinated coffee beverages, Italian-style espresso drinks, together with a wide selection of fresh-roasted whole-bean coffees (Herve, R., 2004)
Value – Starbucks Brand and Quality Matters
For Starbucks, the brand had three elements: coffee, people and stores. Stringent control over the quality and processing of the beans assured that the coffee would be of the highest possible quality. Outstanding store personnel were recruited and trained in coffee knowledge and customer service. Store design, atmosphere and aroma all contributed to the “Starbucks Experience”. Almost all Starbucks stores were corporately owned and controlled. Starbucks prided itself on the “Starbucks Experience”, going beyond coffee to provide a unique experience for its customers (Rotman, 2008).
Starbucks has spent very little money on advertising, preferring instead to build the brand cup by cup with customers and depend on word-of-mouth and the appeal of its storefronts. The company was, however, engaged in a growing effort to extend the Starbucks brand and penetrate new markets. In addition to expanding internationally, venturing into ice cream with Dreyer’s and into Frappuccino with Pepsi, partnering with licensees, and developing specialty and mail-order sales, Starbucks had recently begun selling its coffees in supermarkets (Thompson and Gamble, 1999).
Schultz always kept in sight the quality of the products and services, and the perception of it from the customer’s point of view. Strict quality control was implemented all along the coffee process. Each store detail: fixtures, merchandise displays, colors, artwork, banners, music, and aromas were closely studied to enhance the mood and ambience of the store, and that it reflected the personality of the community and the neighborhood. Starbucks banned smoking and asked employees to refrain from wearing perfumes or colognes, and prepared foods were covered in order to keep the coffee aromas pure. The company was recognized for its sensitivity to neighborhood conservation with the Scenic America’s award for excellent design and “sensitive reuse of spaces within cities.” The company designers came up with artwork for commuter mugs, and T-shirt were created along with different cities personality (Herve, R.,2004).
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