Established in 1971 as a coffee store by three friends who were later joined by Howard Schultz in 1981, Starbucks has revolutionized the art of serving high quality coffee and other drinks across the globe. Nowadays, Starbucks is synonymous with urban life in different parts of the world with more than 21,000 stores worldwide. Over the years, Starbucks has remained true to its mission of serving high quality coffee aiming to provide customers with an excellent service in a pleasant environment. This has helped Starbucks remain a top ranked company. The purpose of the current paper is to provide the reader with special insight into Starbucks foundations, the coffee companys environment and its strategy and organizational structure.
Foundations of Starbucks Coffee Company
Since 1996 when the first Starbucks coffee store had been opened in Tokyo, Japan, the company continued its aggressive expansion strategy opening more stores across the globe. Outside America, Starbucks has major stores in Canada, China, the UK and Japan. According to Lanteigne (2005), the countries where Starbucks operates have shown willingness to abide by the international law to help their respective economies grow.
It is also worth noting that the major countries where Starbucks operates have a functioning judiciary and embrace globalization. Brazil, for example, is an emerging powerhouse and the biggest economy in South America. The country has enacted a number of legislations to promote globalization. Brazil also heavily relies on globalization and has made several attempts to reform its judiciary which has been subjected to political pressure. Although it is seen as being quite transparent, Brazil needs to align its policies with the global trends to be an efficient global player. According to Roberts, Schreiber and Scissors (2012), Brazil needs to build trust among corporations like Starbucks by strengthening its judiciary and ensuring that corruption and other crimes are curtailed. Trinkunas (2014) asserts that Brazil has embraced international institutions in order to establish global relations as it continues to enact policies by borrowing some of them from countries like the US. For example its anti-corruption policies, which have been recently enacted , are aimed at demonstrating that it is a transparent and corrupt free country ready to protect businesses and their interests including property rights (Riel-Carden, Slavick & Eckstein, 2014).
In regard to its operations in the UK, Starbucks interests are well served with a strong and independent judiciary so that the UK is seen as transparent with a strong and stable political climate. As a strong crusader of globalization, the UK has helped implement policies in support of free trade within the boundaries of the UE as well as fair trade in developing countries. Velde (2006) asserts that these laws have been formulated to promote global business across the world.
China has been previously perceived as a country that follows anti-globalization trends, but it has recently started embracing globalization policies. The countrys business and political ideologies have undergone metamorphoses as it seeks to strengthen its export markets. Nevertheless, the political pressure in China can still sway the judicial decisions resulting in the lack of trust among corporations like Starbucks operating there. According to (Lapres & Yuejiao, n.d.), Chinas judiciary has been moving from political coloration since 2001 when it joined the WTO. China is also shifting its focus from state ownership as its leaders focus on embracing globalization. The current regime, for example, has enacted policies that make it easier to invest in China as well as protect property rights.
Although Starbucks mainly operates in the business of brewing coffee and other related beverages, the company also specializes in selling sandwiches, fresh juices, and pastries (Starbucks, 2015). The tariff rates imposed on these items depend on the country Starbucks operates in. For example, in Brazil which is a coffee growing country, Starbucks has managed to navigate the countrys complex tax system by using local raw materials and saving about 10 percent tax along with exporting some of the coffee grown there to the UK and US tax free (Rahman, 2014). The same strategy is also employed in China where it consists in using the countrys domestic coffee supply as it navigates lack of transparency. According to the United States Trade Representative (2015), even the UK faces certain obstacles like the requirement to label every item that is imported. There is also the issue of fluctuating tariffs on the imported goods affecting Starbucks profitability.
Starbucks is a member of several trading blocs like NAFTA and MERCOSUR. The company benefits from trading freely with other member states belonging to the above blocs and hence reducing import levy. Generally, Starbucks would be better off if a multilateral trade liberalization system existed as it could result to greater profitability in countries with complex tax systems like Brazil. But such a system only exists in an imaginary world and Starbucks has to work with the existing trading and regional blocs.
Because Starbucks operates in countries with different cultural beliefs compared to the US, it is imperative for its employees or expatriates negotiating on behalf of the company to understand the etiquette culture. For example, in China, one needs to understand Mandarin and try never to be offensive. This is true for many other stores outside the US apart from the UK and Australia whose cultural views are similar to those of the US. Information about the same can be obtained through a simple Google search or by asking a friend staying in the respective countries.
Starbucks Coffee Company Environment
Starbucks carries out operations in more than 66 countries and related territories worldwide. With more than 21,000 stores spread across the globe, Starbucks presence worldwide continues to grow day after day. The other major countries where Starbucks has stores are in Canada, China and Japan. According to Geert Hofstede (n.d.), the different countries have different cultural beliefs in terms of dressing and greeting etiquette. For example, women are not allowed to wear short skirts in Dubai, while in China employees need to follow specific etiquette when talking to customers.
Although Starbucks carefully selects countries where it opens its stores, it still operates in several countries across the globe, so there is a likelihood of political and economical upheavals in the countries of its operation. In Brazil, for example, there is economical interference by the government in relation to the countrys tax code and monetary policy. Chinas political leaders are also known to interfere with the countrys political processes making foreign investments vulnerable to meddling (Cervo, 2010). The majority of all 66 countries where Starbucks operates are countries with common laws which allow the judiciary to play an active role in the court system. This enables Starbucks to carry on with its operations with little fear of business interferences as long as it follows the right channels to carry on with its business (The World Factbook, n.d.).
As a private company and an OPIC member, Starbucks benefits because OPIC aids members willing to invest in emerging markets or into the sphere of addressing developmental challenges. According to the OPIC website, the insurance mobilizes private capital from different companies to help overcome these challenges (OPIC, n.d.). As an international company, Starbucks has been subject to imitation especially with the companys logo. This has forced the company to employ legal means towards people or companies infringing on its property rights. The companys patents are renewed twice a month as they are crucial for its operations while its trademarks usually expire only once a year. To recover losses as a result of trademark infringement, the company sues along with making issuance of its licenses cheaper (Starbucks, 2015).
Some of the above countries where Starbucks operates have high corruption perception index (CPI), while others have a relatively lower index. For example, the US and Mexico have a big difference in their CPI. Mexico is seen to be very corrupt with an index of 74 while the US has a score of 30. This is because Mexico has been involved in a number of high profile corporate scandals like the one with Wal-Mart when it used inducement to achieve market dominance. This is an indication that Mexico can be compromised by means of corrupt deals that would benefit its leaders (Transparency International, n.d.). Corruption lowers the countrys reputation, especially in relation to the foreign investments.
Starbucks Coffee Company Strategy and Organization
Starbucks entry and exit strategies depend on the country it currently invests in. Nevertheless, Starbucks entry is mainly carried out in two ways, namely joint venture and non-equity. Starbucks is able to enter the market through joint ventures whereby they wholly own a subsidiary or through equity. The other entry mode is carried out by signing off contractual agreements or by exporting of Starbucks products to the countries in question. For Starbucks, entry through exports seems to be the best model because it is associated with little economical and political tension between the countries involved (Starbucks, 2015).
For exit strategy, Starbucks ensures that it has thoroughly studied the market before entering it as it is expensive to leave the market because of some unnecessary costs. Consequently, Starbucks strategy is to stay in the market but it is never rigid in assessing the prevailing market conditions for its operations. If the conditions require that Starbucks ceases its current operations in the given location, the company will hike prices to enable it to get out of that market (Starbucks, 2015).
For Starbucks to remain afloat in the different countries of its operation, the company ensures that it embraces working ethics in order to have a competitive advantage. The company operations are also eco-friendly as it has gone green with the use of recyclable cups and mugs (Starbucks, 2015). This is guided by the companys mission statement which states the following: To inspire and nurture the human spirit one person, one cup and one neighborhood at a time (Starbucks, 2015). In regard to this mission statement, it is worth noting that Starbucks concentrates on providing the best services to its customers in a settling atmosphere for them to have a great experience at their coffee stores.
Starbucks concentrates on following the stakeholder orientation rather than the shareholder model. This is achieved through focusing on providing its customers with quality products rather than concentrating on gaining profit. The model has enabled Starbucks to expand its customer base and hence continue opening more stores worldwide. Starbucks is a multinational company with the stores spread all over the globe, so that the company is said to be a stateless corporation (Davidson, 2014). Starbucks organizational structure implies using the matrix structure which mainly focuses on providing the customers with efficient services. Unlike the hybrid structure than can hinder the companys growth, the matrix structure is more affable to Starbucks operations especially in terms of its foreign market presence enabling it to continue opening more stores worldwide (Claver-Cortes, Pertusa-Ortega & Molina-Azor?n, 2012).
Managing Starbucks Coffee Company
Managing such a business is an enormously overwhelming task for Starbucks management team. However, there are a number of measures that could be taken to help management run the company smoothly. For example, although the employees in Starbucks are allowed to be members of labor unions, currently the company has no employees who are members of any labor unions. Starbucks has policies that allow its members to join labor unions if they are required to. Starbucks has formulated policies that allow their employees to be members of labor unions if it meets their preferences. Fridell (2006) asserts that Starbucks strangles any efforts by its employees to join such unions by refusing to negotiate with them.
To manage some of its overseas stores, Starbucks uses expatriates to guarantee that such ventures in foreign countries remain afloat (Allison, 2007). Gradually, Starbucks makes its partners acquainted with its operational processes by training the new staff on its procedures. The company also trains its new employees on cross culture communication and foreign languages they need to use in the countries where they are operating (Starbucks, 2006). With advancement in technology, Starbucks uses the internet to train its employees and provide them with new policies and new recipes through its intranet portal (Evans and Hansen, 2010).
The types of products sold in the international market by Starbucks vary depending on the country or region. Starbucks popular products sold almost universally include drinks, food and equipments necessary for making drinks and food. The products are sold to serve the specific market demands (Peterson, 2014).
To remain popular with its customer base in the international markets, Starbucks organizes a number of promotions that are modified to fit the particular countrys purchasing habits. According to Starbucks (2013), Starbucks partners are allowed to make a decision on the kind of promotion that best suits its market needs.
Starbucks has a complex supply and distribution channel that it uses to ensure that its goods reach the intended sellers on time. According to the data available on the US Department of State (n.d.), more than 85,000 deliveries are done weekly by Starbucks. The process starts when Starbucks buys raw coffee beans from the farmers, sends them to the relevant factories for roasting, packs and distributes them to the wholesalers across the globe (Brink, 2013).
For the raw materials that are sourced across countries, Starbucks carries out global procurement with ethical considerations in mind. For example, to source its raw materials from the farms, Starbucks has partnered with farmers to form the Coffee and Farmer Equity (CAFE) program that ensures that raw materials are sourced ethically. Some of the countries to which Starbucks sources its raw materials include Ethiopia, Rwanda, Brazil, and Timor (Starbucks, 2016). This is referred to as global production as the raw materials are sourced from all over the globe. The raw materials are then transported to the companys five factories located in the US or the one in Netherlands for processing and packing them (Burnson, 2002).
Until recently, Starbucks used to outsource some of its services like the production of mugs or cups to the overseas companies. In the recent past, however, most of these outsourced jobs like manufacture of coffee mugs and cups have been brought back to the US (Grgurich, 2012). Some of the jobs are outsourced as a result of the companys strong desire to open more stores worldwide requiring Starbucks to employ more workers which HR business process services are mandated to do (Young, 2007).
Because it is involved in the export and import of goods, fluctuation in currency may affect Starbucks business in various ways. For example, Starbucks may experience shortages in the importation of new materials as the dollar will be weaker compared to the manipulations of China through devaluing the Yuan.
Starbucks is a leading global company with presence in more than 66 countries and territories. Due to its unique customer experience, the company has expanded its customer base operating more than 21,000 stores worldwide. The company has managed to use a very simple strategy of connecting employees and instilling respect for the company by treating them with respect so that the employees in their turn provide great services and quality goods to customers. The customer first motto has also helped the company to concentrate on offering its customers the best services rather than focusing on the maximization of profits. Starbucks has achieved phenomenal growth by reducing costs in procuring its raw materials, delivery and stock management. Starbucks offers not just coffee and drinks, but also its ambiance, peculiar mugs and the special music at their stores. The company has also leveraged on ethically procuring its raw materials from the source countries which minimized court cases and increased its profitability.