Critical Analysis on Starbucks

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Craig Kostka

Mrs. Marasovic

BOH4M-01

02/10/12

Starbucks Case Study: The Analytical Approach

I. Summary of the Facts.
- Starbucks Mission Statement: “to inspire and nurture the human spirit – one person, one cup and
   one neighbourhood at a time.” (1)
- One of the “World’s most Ethical Companies.” (1)
- Starbucks “values its employees and acknowledges that it could not have achieved the competitive
   advantage that it currently enjoys without them.”(3)
- “Starbucks opened its first location in Seattle’s Pike Place Market in 1971.”(3)
- “Five ways of Being” are all “Be” statements that employees are encouraged to follow: Be
   Welcoming, Be Genuine, Be Considerate, Be Knowledgeable, and Be Involved. (3)



II. Statement of the Case.



III. Assumptions.
Starbucks is a successful organization for various reasons. In order to be successful there must be certain
types of approaches the company has taken on their employees, customers and services.

Starbucks is a company that “values its employees and acknowledges that it could not have achieved the
competitive advantage that it currently enjoys without them.”(3) Here, McGregor’s Theory X and Theory
Y can be applied to Starbucks’ approach on their employees. Starbucks management certainly falls
under Theory Y as managers assume their employees are dedicated to work and responsible. Thus,
employees feel free, comfortable, and are more involved in their work. This behavioural approach is
critical as managers need to focus on the social needs of employees.

In another point, Schultz says, “Starbucks is not in the coffee business but, rather, in the people
business, and that its success is attributed to the successful creation of an emotional connection with
the consumer.”(3) This quote continues to prove Starbucks’ customer service experience contributes to
their success as Starbucks wants to serve coffee, but even more so create relationships with their
customers. In relation, the human relations movement, as studied in class, proves that managers whom
develop good human relations with employees will see maximum productivity from their employees.
Hawthorne’s concept applies to the employee to customer relationship as well because when
employees engage in relations with their customers; this will create an “emotional connection”
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potentially increasing sales. For example: when an employee remembers a customers’ name and their
favourite order, this usually makes the customer feel like part of the Starbucks community.

The upside-down pyramid concept is evident in Starbucks’ management. For instance, a Starbucks
located in a predominantly Jewish community contacted a Rabbi to identify products that were kosher.
Here, the new age management concept was taken into practice as employees must have taken external
feedback and passed this information from manager to manager. This management approach puts
customers and employees at the top of the pyramid, allowing for better store efficiency and community
awareness. Also, cultural relativism is taken into perspective as Starbucks adapts their ethical behavior
based on cultural context. In addition, at this same location, there was a customer request to stop
playing Christmas music in the store; as a result, an employee must have informed their manager to
accept this person’s request. Overall, Starbucks works as an open system, taking customers inputs and
transforming them into finished goods, services, and any other form of output.

Starbucks success over competitors would not be accomplished without total quality management. This
form of management ensures constant improvement, product quality, and customer satisfaction.
Employees are trained to meet customer needs at any given circumstance, providing customers with a
positive experience every visit. Therefore, employees went through vigorous education and training
where they developed skills and knowledge such as brewing the perfect cup of coffee to retail skills.

All employees were “drilled in the Star Skills, three guidelines for on-the-job interpersonal relations:
maintain and enhance self-esteem, listen and acknowledge, and ask for help.”(4) These guidelines are
derived from a scientific management approach as workers are carefully selected and trained in order to
meet the specific job requirements while improving efficiency. However, Starbucks did a great job of
merging both classical and modern management approaches to their organization which is critical in
overall performance efficiency and effectiveness.

Business becomes more challenging when incorporating ethical decision making. Starbucks seems to
almost make ethical decisions such as ethical sourcing, environmental stewardship, community
involvement, while being one of the most sustainable organizations in the world. Maintaining ethical
behavior throughout the organization could potentially jeopardize profits as it is expensive and difficult.
Ethically, Starbucks guarantees that all of their coffee beans will be attained using ethical behaviour as
they hope to reduce their environmental footprint. As a result, Starbucks is recognized as “One of the
World’s most Ethical Companies”(1). Starbucks has both utilitarian and moral views on ethics as they try
to satisfy the common good for the majority while maintaining moral rights.
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- Relationships(McGregor’s Theories, emotional connection with the consumer)
- Scientific, Behavioural
- Requirements
- Quality
- Open system(kosher products, cultural conditions)
- TQM (product quality, continuous improvement, customer satisfaction)
- Ethics (ethical sourcing, one of world’s most ethical companies, environmental stewardship,
  community involvement)
- Quantative(simulations)
- HMO, health insurance for part time employees



IV. General Ideas and Recommendations.

    For the most part, Starbucks has excelled in terms of management. However, sky is the limit for any
    organization in terms of profit and proper management concepts will certainly contribute to a
    company’s progress. In order for Starbucks to continue its success they must continue doing an
    excellent job of satisfying employee needs by providing them with mostly every level on Maslow’s
    hierarchy of needs -excluding self-actualization needs. For instance, Starbucks should continue
    providing part-time employees with health insurance as part-timers need to be financially and
    physically stable. Howard Schultz strongly believes in health insurances for his employees as he
    relates to his upbringing without health insurance; however, the board of directors must continue to
    approve of this even after Schultz will one day leave the organization.

     Additionally, managers should continue having a positive influence on an employee’s psychological
    state as the Hawthorne studies proves that this increases productivity and keeps healthy
    relationships within the workplace.



- Quantative approach
- Continue, HMO, health insurance for part time employees, MEETING NEEDS for employees MASLOW
- Do not become a bureaucracy
- -stay café based, don’t bring in a stream of products
- Entertainment?
- Keep having a positive psychological influence on employees as hawthorne studies prove that if
  managers focus on social/human concerns keys to productivity.
- Innovation based on customer preferences

Globalization, concerns: imperialism, cultural laws and differences

- In order to sustain the company's growth and make Starbucks a strong global brand, Schultz
  believed that the company had to challenge the status quo, be innovative, take risks, and
  alter its vision of who it was, what it did, and where it was headed. Under his guidance,
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management was posing a number of fundamental strategic questions: What could
Starbucks do to make its stores an even more elegant "third place" that welcomed, rewarded,
and surprised customers? What new products and new experiences could the company
provide that would uniquely belong to or be associated with Starbucks? What could coffee
be—besides being hot or liquid? How could Starbucks reach people who were not coffee
drinkers? What strategic paths should Starbucks pursue to achieve its objective of becoming
the most recognized and respected brand of coffee in the world?