Introduction
Globalization and technological advancements have the tremendous impact on organizations from various perspectives. Internationalization of supply chains, automation of the operational processes, international mobility of individuals and changes in the sales and marketing strategies are some of the most obvious outcomes of the technological progress and globalization. It is not a secret that individuals are becoming more flexible in their choices and brand preferences as they have greater access to information and increasing the choice of competitive and substitute products (Johnson, 2006). With that companies, must seek for innovative ways to compete in the increasingly complex market. This competitiveness comes from strategies, which go beyond product or service superiority but are entered on customer experience, continuous improvement and total quality management (Sadler, 2003). The purpose of this essay to examine the impact of globalization and technology on a specific company, Starbucks Corporation over the period of the last ten years.
Company Background
Starbucks Corporation is an American multinational company, sourcing, roasting and distributing whole-bean, micro-ground and other types of coffee. Besides, the company produces teas, pastries and other products that accompany the Starbucks experience for the clients. The company operating in over 23,000 locations worldwide, with own and franchise operations in the US, Europe, Japan, Canada, China and other countries. Importantly, inspire of the scale of the operations, licensed stores account for only 10% of the total revenue. The total net revenue for 2016 is USD$ 21 million, which represents 10.5% increase relative to the same period 2015. Operating profit declared for the last year is USD$ 4.1 million, indicating an increase of 13.8% since year closure 2015.
Technology and Globalization
Globalization and technology have influenced Starbucks dramatically. The opportunities that came with the globalization and potential for business internationalization signalized to the company that international supply chain is the right response to the market reality. Starbucks has an aggressive growth plan, which involves not only market penetration in setting up locations but market entry to new countries, such as Italy (Starbucks 2012). With that technology and operational effectiveness are central to Starbucks. Today the company highly relies on technology in the upstream of its operation to ensure that the sourcing and roasting processes, outsourced to over 100 upstream partners is uniform and meets the Starbucks quality requirements. The company uses an integrated global supply chain system to build on transparency and quality control at all stages of the operations (Starbucks, 2014). The focus of the new supply chain strategy is to reduce the cost and increase effectiveness in serving the stores. The compandors newest demand forecasting system and storage and distribution interfaces.
Earning Above Average Return
Industrial Organization Model
Industrial Organization Model (IOM) suggests external focus, based on the following assumptions: (1) external environment places constraints and pressures on the strategy; (2) firms in the same environment control similar set of resources and have comparable strategies; (3) resources, utilized for strategy implementation have high level of mobility in the industry (4) executive management always acts in the best interest for the firm. At Starbucks, this model can be applied through the focus on the supply chain cost, as the company recognizes that growing competition will place pressure on price and will reduce consumers’ switching costs. With that, Starbucks can achieve above-market returns by reducing the costs and increasing headcount productivity, which will bring economies of scale and increase profit margin in the competitive market with low product variety (Sadler, 2003).
The Resource-Based Model (RBM)
The RBM suggests that each company is a unique mechanism with rare resources. That said, over time firms can compete based on the unique and innovative capabilities, as resources are not always highly mobile across firms. Per RBM, the internal resources are critical to determining the strategy. Taking an example of Starbucks, it is possible to see the RBM focus in the company's HRM strategy. The company aims at building on employee ambassadorship and create the business model, which places people in the center of organizational strategy as the inimitable resource. Motivation and commitment to the company's culture will increase retention rate and productivity and create higher switching costs for employees. This will reduce their mobility and guarantee above average returns to Starbucks (Porter, 2008). To conclude, Starbucks focuses on Talent Management and people-oriented Corporate Social Responsibility to create strong internal expertise in customer service and quality management, which makes human capital the rare asset (CSR)
Mission and Vision Statement
Starbucks Company’s vision statement is “to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.” This mission statement underpins the company’s overall focus on leadership in coffee industry and in the CSR (Starbucks, 2012). The vision statement outlines the objectives that the company sets for the long-term future and helps to build transparent and clear Brand for the internal and external stakeholders. The current mission demonstrates that Sustainable business model is central to the success of the strategy as this sustainability builds Brand equity and highlights the role of people and community.
The mission statement is “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time”. This mission statement outlines the attitude of the company and the ways it approaches relationships with the external environment. Inspiration and sense of belonging, therefore are two guiding principles of organizational culture and the success of the strategy depend upon the ability of the Starbucks management to deliver this message to the public, which includes its employees. Moreover, the mission statement indicates the focus on customer experience, as a critical success component of the day-to-day business (Starbucks 2016).
The final observation that derives from the analysis of the mission and vision statements is the strategic focus on Global Thinking, but Local Acting approach, which in Starbucks interpretation means gradual business growth with the focus on understanding the local culture and personalizing its offer to the realities of the chosen demographics.
Stakeholders’ Impact on Organization
Starbucks deals with a great number of primary and secondary stakeholders. The most critical relationships, however, are developed between the company and (1) customer, (2) employees, (3) local authorities, (4) stockholders, (5) community. With that, each relationship is a “two-way” street. Customer experience is central to the company. Starbucks does not only offer the product but sells the entire coffee experience to its client, including ambiance, sales proposition, and unique product attributes. Employees should be both, customers and ambassadors of the organization. The mission statement already embodies the important role of employee to the success of the companies. Employees have the tremendous impact on the organization as they deliver the message to the external client about the values of the company and contribute towards the entire proposition and culture of the organization. Moreover, the performance of this stakeholder on individual level determines the collective productivity of Starbucks and, thus, its profitability. Local government and authorities constitute significant external force as they determine formal and informal regulations in the industry, which directly affect the company. Public Relationships (PR) and lobbying are critical to the success of the company as they determine the power of negotiation and easiness of conducting the business in each country. Stockholder is a primary stakeholder of the company. Satisfying the needs of this party is essential, as the goal of any private business is to generate the profitable return to the shareholders (Bowen, Newenham-Kahindi, and Herremans, 2010). The lack of engagement of stockholders may result in the lack of funding and limited decision-making power of the executive management. Finally, community engagement is essential to Starbucks as its supply chain and quality proposition depend on the relationships and engagement of the community businesses, such as coffee plantations and producers and other upstream suppliers. The community provides a company with business partners and potential labor force, moreover, it builds on the image of the company and contributes towards the reputation of Starbucks globally, as Starbucks implements its CSR policies and strategy (Starbucks, 2014).
Conclusion
Starbucks is an exemplary company, which integrates “green thinking”, CSR and people-oriented approach to its long-term strategy. While some elements of the IOM model are evident, it is possible to conclude that Starbucks adopts mostly the Resource-Based Model approach to the development of its long-term strategy. This argument is based on the assessment of Starbucks CSR strategy and it's evident through the message that company sends to its stakeholder in mission and vision statements. As a public multinational corporation, diversity impacts an organization in many ways. That said government, stockholders, customers, employees, and community are the core stakeholders that influence the success of the company.
References
USSEC (2016). Starbucks Corporation Annual Report 2016 Form 10-K. United States Security and Exchange Commission. Retrieved 12 January 2017, from https://www.sec.gov/Archives/edgar/data/829224/000082922416000083/sbux-1022016x10xk.htm
Sadler Ph. (2003). Strategic Management. 2nd Edition. London: Kogan Page Limited
Johnson, M.E. (2006). Supply Chain Management: Technology, Globalization, and Policy at a Crossroads. Interfaces, 36(3), 191-193.
Starbucks (December 2014). Starbucks Details Five-Year Plan to Accelerate Profitable Growth. Starbucks News [Online]. Retrieved 13 January 2017, from https://news.starbucks.com/news/starbucks-details-five-year-plan-to-accelerate-profitable-growth
Porter, M. (2008). Competitive Advantage. Creating a Sustainable Superior Performance. Berlin: Simon and Schuster.
Starbucks (2012). Business Ethics and Compliance. Standards of Business Conduct. Starbucks Official Website. Retrieved 12 January 2017, http://www.starbucks.com/aboutus/SoBC_FY09_eng.pdf
Bowen, F., Newenham-Kahindi, A. and Herremans, I. (2010). When Suits Meet Roots: The Antecedents and Consequences of Community Engagement Strategy. Journal of Business Ethics, 95(2), 297-318.
