Principles Of Management

Assignment # 2
Star Bucks Case Study

Case Summary
Starbucks started off with three friends who did not want to create any giant business venture but
only the love and passion for premium coffee led them towards the establishment of Starbucks.
Then Howard Schultz took over with a vision in mind of building a business empire as he was
inspired by the coffee business and is the visionary behind Starbucks.

Schultz approach towards work was known as an “unconventional” as he gave high preference of
the business to his partners (employees) and customers, because he feels that the employees are
valuable assets for the business.

Schultz has always emphasized on keeping the employees motivated and maintaining a good
relationship with them and providing them with equal importance to the customers as “They are
the heart and soul for the success of the business.” Starbucks has more than 115,000 employees
all over the world who everyday come across wide range of customers to whom they can either
satisfy or disappoint. That’s why Starbucks carry a unique relationship with their partners
(employees) providing them with health care benefits and bean stocks option to have their
involvement and ownership in the business which gives Starbucks highly motivated and
beneficial employees and that’s why Starbucks has the lowest level of employees turnover.
Keeping in mind about the company’s future Starbucks has kept itself involved in developing the
environment through social causes and activities.

Starbucks operates in more than 40 countries outside US but it earns 85% of the revenue from
the US market. The company has targeted four markets for future global expansion: China,
Brazil, India and Russia. For successful operation it has to be concerned with the quality of
product as well as the staffing issues. Top level management believes that these lands are rich in
heritage culture and untapped resources which helps in improving the social economic situation
of the country.

Starbucks has contributed positively to the environment and the communities which is also in
their mission statement of the company which includes donation to local charities, 401(k)
benefits eligibility for part-time employees, work in protection of rainforest, recycled content
paper cups, assistance to coffee farmers and their families. Top level employees have signed a
code of Ethics that’s affirms commitment of balancing, protecting and preserving stakeholders
interests and created a system for employees to raise complaints concerning questionable and
internal accounting controls

Question and Answers

Q1) What do you think of the company guiding principles? Describe how the company’s
guiding principles would influence how a barista at a local Starbucks store does his or her
job. How these principle would influence how one of the company s top executives does his
or her job.

Answer: Starbucks guiding principle clearly describes the mission and purpose of Starbucks
existence. They describe that Starbucks is not just selling Coffee and earning profit, Starbucks is
all about providing people with a second place between their home and work where they can
enjoy quality coffee and a sense of community life. It is a place where the employees are not just
employees but defined as Partners in business. Every partner of the company understands that he
or she represents Starbucks. Employees act as if the Starbucks franchise was their own business,
Starbucks accepts and embraces diversity from various regions and motivate employees, no
matter from where they belong.

“We aren’t in the coffee business, serving people. We’re in the people business, serving coffee”

“We know that our people are the heart and soul of our success.”

That’s the philosophy of Howard Schultz that has shaped and continues to shape the company.
The six guiding principles of Starbucks or we can say the six pillars for the success of Starbucks
also puts a lot of emphasizes on customer satisfaction and treating their partners (employees)
well and fulfilling their corporate social responsibility. Their guiding principles clearly reflect
their philosophy. The important thing that Starbucks realizes is that they can be extremely
profitable and competitive and at the same time be respected for treating their employees well. I
think that these are the guiding principles that can be and should be applied to all the businesses.
These are the six keys to success for any organization if applied.

These guiding principles affect barista’s(bartenders) working at Starbucks in a positive manner.

This influences barista to deal positively with customers. As the guiding principles state that:
“Develop enthusiastically satisfied customers all of the time.” So he will ensure to provide the
best quality service in order to satisfy the customer each and every time. Also another guiding
principle: “Provide a great work environment and treat each other with respect and dignity.”
This guides him to treat his fellow employees well and to treat them with equal respect and
dignity.

These principles guide top management to maintain high moral among employees and ensure
greater customer satisfaction. And realize their responsibility towards the environment and
society and assume responsibility for their actions and to contribute positively towards the
community. These principles would also lead the top management to embrace diversity as an
essential component.

Q2) Do you think Howard Schultz views his role more from the omnipotent or from the
symbolic perspective? Explain.
Answer: The Role of Schultz in Starbucks was more of an “omnipotent” one because he was the
one who lead the organization towards its goals. He was directly responsible for the major
decisions making. His vision and ideas clearly reflect what Starbucks working principles are and
his values continues to shape what Starbucks is now.

He gave the basic principles around which revolves the whole organization. His ideas about the
great work environment, diversity and higher standards of excellence, providing a second home
to his customers resulted in the phenomenal success of Starbucks and it vividly shows that he
was directly responsible for its success and failure.

We cannot say that Howard Schultz views his management roles as being completely omnipotent
or symbolic, his view also shows glimpses of a symbolic view. As he claims that “We know our
people are the heart and soul of our success.” He totally relies on their employees as he calls
them partners in business. He believes that a strongly and knowledgeable workforce can be the
reason for the company’s success. Also we can observe that despite of not liking the process of
legislative lobbying for lowering of trade barriers and health befits cost personally he went
forward with it because it could prove beneficial for the company’s future.

Q3) What has made Starbucks culture what it is? How is that culture maintained?

Answer: The culture of Starbucks is a combination of written and unwritten values, beliefs and
codes of behavior which influence employees to perform their duties and the way they behave
with people (employees & customers) in the organization. The culture of Starbucks is greatly
influence by the three founders of Starbucks & Howard Schultz, their mission, vision and their
values as coffee business was their passion. Its culture encourages innovation and risk taking is
less aggressive, predicatively stable and highly customer oriented . Starbuck treat employees as
their partners and employees are also given training for 24 hours, to properly educate them about
Starbucks guiding principles and ethical codes, when they join Starbucks initially and this
practice has become part of their culture.

Starbucks maintained their culture by:

• Communicating their culture to their employees (partners).

• The behavior of top management clearly reflects the beliefs and values of the founders,
their ethical values and communal beliefs and sets examples for the employees

• Keeping track of employees consistent with organization culture.

• When new recruitment take place those people are given preference who share same
values as that of organization.
Q.4) Does Starbucks encourage a customer responsive culture? An ethical culture?
Explain.

Answer: Starbucks highly encourages “customer responsive culture.” They believe that
customers are the heart and soul of their success. They give preference to their customers by
creating such an environment where their needs and wants are considered and fulfilled. They
work for the satisfaction of their customers.

• They hire the employees (customer service people) who are very outgoing and vivacious.
They are extrovert and can treat the customers nicely.

• Employees are given powers and full freedom to take their decisions.

• They should have good listening skills to listen and understand the messages sent by the
customers and to make them more responsive.

Starbucks also takes its ethical commitments very seriously. Starbucks believes in contributing
and developing the communities wherever it operates and making the world a better place to live
in. Each top level manager signs a “code of ethics” that affirms his commitment to stakeholders’
interests. All store employees (partners) have resources to help them doing their jobs ethically
and the company created a process for employees to raise complaints and concerns they may
have over questionable accounting and an internal accounting control.

Q5) Describe some of the specific and general environmental components that are likely to
impact Starbucks?

Answer: Components that effect Starbucks environment are:

Specific Environment

i) Customers: Customers are very important to Starbucks and they can influence
Starbucks if their needs and taste changes or their income falls.

ii) Suppliers: Supplies provide material and equipment to stars bucks. They can also
influence Starbucks if their barraging power increases. Starbucks have to maintain
good relationship with their suppliers.
 iii) Competitors: Competitors can also impact Starbucks if competitor provides better
quality products at low price and have more varieties of products than Starbucks.

General Environment

i) Economic Conditions: Economic condition also impact Starbucks adversely. If

inflationary pressure rises the price of raw materials will rise. If interest rate rises, or
if the disposable income of consumer fell it will also create adverseness.

ii) Political/Legal Conditions: Political and legal conditions can also effect Starbucks.
This could be increase in taxes by government, ban imposed by government on
import of certain raw materials, any unfavorable condition i.e. political uncertainty
etc.

iii) Technological Conditions: Technological updates may also affect Starbucks. This
include introduction of new technology in coffee making which is quick and
inexpensive while providing the same excellence in quality level.

Q6. How would you classify the uncertainty of the environment in which Starbucks
operate? Explain

Answer: The term environment refers to both the internal and the external forces that affect the
organizations performance in a direct or an indirect manner. Environmental uncertainty is the
degree of change and complexity in the organizations environment. If we analyze the
environment of Starbucks we will observe that Starbucks faces less number of emerging new
competitors and the environment is subject to steady change as Starbucks continues to grow its
operations and faces few technological and social upheavals from the many components of its
environment. Also to be the best in the market, it requires great deal of environmental knowledge
to know about customers tastes and preference and the availability of quality sources of coffee
beans and their producers. The analysis of the above facts leads us to conclude that Starbucks
environment is more of a Stable and Complex nature.
Q7. What stakeholders do you think that Starbucks might be most concerned with and
why? What issues might each of these want Starbucks to address?

Answer :

“Every day, we go to work hoping to do two things: share great coffee with our friends and help
make the world a little better. It was true when the first Starbucks opened in 1971, and it’s just
as true today.” Howard Schultz

Stakeholders of an organization can be defined as persons, groups, organizations, or systems

which affects or can be affected by an organization's actions. The Government of the place
where the organization is doing business, shareholders, creditors, customers, employees etc. are
some of its examples. If we consider the words of Howard Schultz we will realize that the
primary concern of Starbucks is not just selling coffee but providing quality, values and sense of
belonging to its customers while positively contributing towards the betterment of society. The
essence of Starbucks business is its customers and the key to happy customers is happy and
satisfied employees. Starbucks refers to its employees as Partners implying that they are equally
responsible for the success of Starbucks as its owners. At Starbucks its employees are treated
with respect, care and dignity which translates automatically into customers getting better then
the best at Starbucks and also in turn they work voluntarily in the community development
programs and services, dedicated to the betterment of society at large, taking place wherever
Starbucks operates. Its stakeholders might want Starbucks to address the issues which every
organization faces like working with ethics involved, providing services to the community,
having no compromise at the quality, working for employee rights and benefits etc. which
Starbucks greatly adheres to and continually works for the benefits of all its stakeholders.
What mangers can learn from this case
study?

There are a lot of things that we as managers can learn from this case study, let us highlight a
few:

Don’t Just Give Your Customers What They Ask For

“Every company must stand for something; don’t just give customers what they ask for or
what they think they want; and assume that your customers are intelligent and seekers of
knowledge.”

This was the philosophy of the founders of Starbucks. They were committed to world class
coffee and dedicated to educating its customers, one on one, about what great coffee can be.
Most of the time businesses assume that their customers are already knowledgeable about
everything and we have to deliver only what they ask for. But that’s not true! Many times we
need to educate them so that they can understand better about their actual needs and which
products can satisfy them.

The Six Pillars of Starbucks

The six pillars behind the success of Starbucks are the principles that guide the decisions and
actions of company partners from top to bottom:

 Provide a great work environment and treat each other with respect and dignity.

 Embrace diversity as an essential component in the way we do business.

 Apply the highest standards of excellence.

 Develop enthusiastically satisfied customers all of the time.

 Contribute positively to our communities and our environment.

 Recognize that profitability is essential to our future success.

These are the guiding principles that can be and should be applied to all the businesses. These are
the six keys to success for any organization if applied.
Employees are the Heart and Soul

The most important thing for Howard Schultz is the relationship he has with his employees. He
treasures those relationships and feels that they are critically important to the way the company
develops its relationships with the customers and the way it’s viewed by the public. He says “We
know that our people are the heart and soul of our success.” He even doesn’t call them
employees rather he calls them partners, this is the importance he gives to his people.
Organizations should focus on keeping their employees motivated and content because they are
the ones who are in direct contact with the customers, they can either satisfy them or disappoint
them. If the employee’s morale and productivity is high they will deliver quality service and
make sure to keep customers satisfied and content each and every time. The experience that the
customers have with the employees will ultimately affect the company’s relationships with its
customers.

“Take time to appreciate employees and they will reciprocate in a thousand ways.” – Bob
Nelson

Good Coffee is Important to Starbucks, but Equally Important is Doing Good

Starbucks website states: “Corporate Social Responsibility:. It’s the way we do business”. We
all are aware of individual social responsibility that we all should contribute our part to make the
society a better place for everyone around as. This involves taking care of others, the
environment and the resources that we use (energy, water etc). Unfortunately many of the
organizations have yet to realize their corporate social responsibility and are working for their
own self interest and also harming the interest of others in the society and the environment.
Organizations should take responsibility of their actions and take appropriate measures to ensure
not to harm the environment and make proper use of the resource and not to waste them. They
should also contribute back to the society by helping in raising the standards of living.

“Business has a responsibility beyond its basic responsibility to its shareholders; a

responsibility to a broader constituency that includes its key stakeholders: customers,
employee, NGOs, government - the people of the communities in which it operates.”

“Stakeholders want companies to make a profit, but not at the expense of their staff and the
wider community.”