Innovative assignment about Starbucks

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  • 1. Matilda Söderberg Innovation Management Assignment nr1
  • 2. Matilda Söderberg Innovation Management Assignment nr1 STARBUCKS CORPORATION I have been postponed this assignment for some days now, not because I haven’t understood it, but because of all the companies that are out there I found it very hard to choose just one. When I wanted to write and get to know everything about all of them. Finally I chose Starbucks Corporation. Why? Well I tried to think about a company that has some kind of an impact on me on a daily basis, and it hit me, I drink Starbucks coffee about five times a week, but why do I do that? -Because it’s the best. So let’s find out now, why they are like they are and how come they make such a strong impact on people from all over the world. To initiate this essay I start to tell a quick version of the Starbucks Corporations history. Three friends, Jerry Baldwin, Zev Siegel and Gordon Bower who all shared their passion for quality coffee, initially founded Starbucks. They opened their first store, “Starbucks coffee, Tea and Spice”, in Seattle WA in 1971. It grew very popular almost instantly and by the year of 1980 they had expanded to four stores within Seattle, unfortunately the rapid expanding had made Zev Siegel burned out which made him leave the company shortly after. A year after a young and energetic man named Howard Schultz (who was working for a Swedish manufacturer, Hammarplast, that constructed stylish kitchenware) crossed ways with the two founders and instantly got very excited about the Starbucks idea and tried to convince them to expand nation wide, and if they didn’t do this move in the near future they would be eaten by some company much bigger then them. As early as 1982, Howard had quit his old job and was working at Starbucks. Howard is the person who have implemented ideas like putting the customers name on the cup to make them feel more like home, an idea he got from a house ware show in Italy. Howard tried to push Jerry and Gordon into expanding their company and to take it to another level, but they weren’t on this level of thinking and they both had a more narrow vision then Howard had. So come only three years later Howard left the Starbucks to start his own coffee shop/café business, Il Giornale he named it, and he also had Jerry investing in his new, fresh concept. But the year 1987 Jerry Baldwin and Gordon Bower decides to sell Starbucks and Howard Schultz was there quickly to buy it from them. So he became the new CEO/ President of Starbucks Corporation. And it is now that things started to happen seriously within the company since Howard is a truly visionary. What Starbucks do to foster their internal innovation is something that they have been working on from their start in 1971. Or to be frank, didn’t work on until they noticed that the loyalty from the staff was one of the key objectives they needed in able to be successful (this is when Howard Schultz has taken over the company) When Starbucks first started to expand their business, something wasn’t in order. They thought they did everything right, but they had forgotten a major part in the business of running a working coffee shop, the employees who are the faces out to the customers. They were not happy with their situation and
  • 3. Matilda Söderberg Innovation Management Assignment nr1 felt that they have been forgotten whilst the expanding started to take of, all of this showed of in the early performance reports of the new wider ranges of Starbucks. To manage to run a more successful business they first had to deal with this issue. And they did, very well for that matter to. The first thing they did when they noticed the problem was to make sure that no one felt left behind, so they started to send out quarterly performance reports of how the company where doing in general and if there was anything the staff felt they could improve. So with the report they send out some questions to be answered by the store manager and also a part where the manager with his staff could writhe down things that they weren’t pleased with to be able to air out the bad energy they kept within them up until that time to bring in new energy. But this issue was just one to be solved until another one came along, cause when you have a staff you really have to make sure that they are pleased with what they get back for doing the hardest work. Myself have felt many times within different workplaces I have had that what you get in return for the work you have done isn’t nearly enough to have the staff willing to go beyond just precise what they have to do. And that isn’t a sustainable situation if you want a chance to be the best company on a competitive market. So what the board from Starbucks did next was to take the satisfaction of the employees to the next level. They had noticed for a long time that the part-time workers weren’t given the same amount of effort as the fulltime workers did. (I absolutely understand why, the fulltime staff had full health care benefits covered whilst the part-time workers didn’t have any at all. And as you might know, the health care is very expensive in America if you don’t have a good cover.) So to “fix” this miss satisfaction they started to give healthcare benefits to the part-time workers as well. With that they won over all the employee loyalty and commitment they could, because it made the employees feel more confident which quickly lead to great turnover numbers quarterly, as well as they reduced the time they normally spent on hiring and training costs (the training is being given by Starbucks Coffee School in San Francisco, where they get to learn the coffee´s history and knowledge about the coffee, drink preparation, customer service and also retail skills), cause the new employed staff were much more willing to learn everything faster to be able to get out in the stores and build up a good client base etc.This made people coming in from all over literary begging for an employee at the Starbucks. The year of 1991, the board of Starbucks came up with a “stock option plan” for all of their employees which enabled them to choose to put up to 12 % of their base pay into Starbucks stocks for a highly reduced price, which made the stock grown and harder for new people buying the stock cause it´s value had raised so strong after this proposal to their staff. With this new opportunity Schultz started to call his employees “partners” to make them feel even more appreciated and part of the company. “Starbucks is committed to a role of environmental leadership in all factors of our business”, is the quote that follows from Starbucks Environmental Mission
  • 4. Matilda Söderberg Innovation Management Assignment nr1 statement. Ever since Starbucks internal policies regards to the environment was established they developed specific programs with instructions to be followed in how to go about with their partners, all the way from the board members down to the last barista, on how to make them understand that they are accountable for their commitments to their internal environment and to a positive atmosphere. The statement also lead to a new team within Starbucks who’s mission is to meet every quarter with each other to discuss how internal goals related to the environment are being followed up andhow they are achieved. They also discuss if there are any other issues or information they need to discuss further to be able to solve and to put more effort in. I have chosen to write the closure of this essay with and SWOT analyze. S- The biggest strength Starbucks has is their brand name that is so know worldwide. And the name is associated with good emotion, both internal and external. Their size is also a strength cause you can find Starbucks almost everywhere which helps the positioning of them on the market. People just know them everywhere. W- As the size of Starbucks if one thing that makes them so strong on the market is also a thing that makes them weaker at the same time. I feel, based on my research that the situations when the staff has a lack of focus is when they have been forgotten in certain situations because the focus has been so narrow in expanding that they sometimes forget what they have and that they have to care of that even more. O- Opportunity’s are to be taken by them who seizes them. By that I mean for example, with regards to the fact that Starbucks offers their employees a stock opportunity that are ought not to be wasted. Especially not during the hard times that keep hitting our world with financial crisis around every corner. They should push more for their employees to buy in especially now when, with regards to all the crashing share holding companies, Starbucks actually is increasing the price of their shares. T- their main threats are without a doubt their competition, Dunkin´Brands Group, McDonalds Corporation and Nestle SA. Who are all working within a wider area then Starbucks, they are already well known on the European market, which Starbucks yet isn’t very well established on. But Starbucks is also a threat to it self, because of their mass expansion over the world Starbucks lowers the personal contact they have had with their employees to a worse situation, I haven’t found any concrete knowledge of this problem, but I definitely think this will turn into something negative if the management isn’t taking this actions more carefully. So finally I want to justify that not only I think that Starbucks, without any doubt, is the best take-away coffee existing at the moment with the fact that Starbucks have been on the list of the worlds 100 most powerful brandsaccording to BrandZ ranking lists for over a decade. Their position 2011 is nr. 72, it is a bit lower down then they have been before, but still, I can almost say that they have a fixed position on the list if they just keep up and on their work. All this because they have a running internal innovation that they try to
  • 5. Matilda Söderberg Innovation Management Assignment nr1 develop as much as possible to stimulate their employees to reach long term commitments, a long with coming up with new concepts to take their business to new areas and develop stronger concepts at all time.Sources:http://www.calarosbay.com/files/StarbucksCaseStudy.pdfhttp://www.mhhe.com/business/management/thompson/11e/case/starbucks-2.htmlhttp://www.businessweek.com/interactive_reports/most_innovative.htmlhttp://en.wikipedia.org/wiki/Starbucks_Corporation#Logohttp://en.wikipedia.org/wiki/Starbucks_Corporationhttp://www.scribd.com/doc/3972739/Starbucks-Swot-Analysishttp://www.mcafee.cc/Classes/BEM106/Papers/2008/Starbucks.pdfhttp://www.scribd.com/doc/3972739/Starbucks-Swot-Analysishttp://seekingalpha.com/article/42408-international-opportunities-could-give-starbucks-its-kickhttp://marketingteacher.com/lesson-store/lesson-swot.htmlhttp://www.wec.org/news/starbucks-coffee-company-to-receive-2005-world-environment-center-gold-medal-for-international-corporate-achievement-in-sustainable-developmenthttp://www.greenatworkmag.com/gwsubaccess/05julaug/starbucks.htmlhttp://moneycentral.msn.com/investor/charts/chartdl.aspx?symbol=SBUX