Starbucks was founded in 1971 in the Pikes Place Market district of Seattle, and experienced exponential growth in the ’80s and Ð”90s until it grew into the conglomerate it is today. As November 2007 Starbucks had grown to 8,505 company-owned stores worldwide, 6,793 of them in the United States.
Add in the licensed outlets, and the company has over 15 thousand presences worldwide. (wikipedia, 2008). The challenge for Starbucks has been remaining true to their roots and maintaining a small-store feel while remaining profitable and expanding into a worldwide entity. The company is obviously aware of this challenge, as evidenced by their mission statement: “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow.
“This paper will examine the company’s struggle to maintain their principles while growing to a world-wide success, and determine whether the company has been successful. To do this, we will examine the six guiding principles that Starbucks provides to steer themselves towards accomplishment of its mission statement.
Starbucks first guideline is to “Provide a great work environment and treat each other with respect and dignity.” Starbucks would seem to be successful at meeting their first directive, being a perennial presence on Fortune magazine’s “Best company to work for” list.
In 2005, the company was number two on the list, with hourly employees earning an average of over $35,000, and benefits such as medical, dental and vision care, stock options, tuition reimbursement, and benefits for same-sex partners. (workforce, 2008). There have been some complaints from part time employees about inequality of benefits and illegal termination, and there have been some attempts to unionize in New York and other locations (NoSweat, 2007), but the majority of workers are happy and well reimbursed.Starbucks is successful with their first guideline towards their mission statement, but does the strategy align with that of a company trying to grow? Wal-Mart is one of the world’s most successful retailers and is notorious for its poor treatment of employees.
The difference being that Walmart hires unskilled labor and targets those trying to save money. Starbucks baristas require training and skill. Once a barista is trained it is in the company’s interest to keep them in the fold. In addition, Starbucks charges a steep fee for a premium product, meaning they cater to those who are middle to upper class.
A higher wage must be paid in order to ensure that good employees with excellent customer service skills are retained. Starbucks compensation plan and workplace environment may be different from Wal-Mart’s, but the landscape is different as well.
The next guiding principle is “Embrace diversity as an essential component in the way we do business.” The benefits of diversity in the workplace are well documented, and Starbucks is taking actions to ensure a diverse corporation and workplace.
Twenty-four of their corporate officers are women and thirteen percent are people of color. This is well above the fortune 500 average of thirty-one and four percent respectively. (Snowden, 2005). Starbuck’s results show their commitment to ensure a diverse workplace, which is in line with their stated goals, and the goals of a company trying to be a global success.
Standards of Excellence
;Starbuck’s third guiding principle is to: “Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee.” This is an area that a growing company might be tempted to sacrifice in an attempt to save money. As the scale of coffee purchases increases with the expansion of the company, it would be very lucrative to accept a slight slip in quality in exchange for elevated profits. This is the first guideline that could present a conflict between strategy and the stated mission statement.
The company was founded on the basis that there was a market for quality product, and the company has managed to charge high prices based on that quality. What happened instead was that the bar was raised: McDonald’s hired baristas at some locations; gas stations started grinding their own beans; and the public began to expect a premium coffee experience. Starbucks fought back by going against their Italian espresso bar roots and installed drive through windows and hot breakfast sandwiches. While the company may not sacrifice coffee quality, it has sacrificed the atmosphere that gave it the beloved character.
Obviously satisfied customers is goal of any business no mater the size. Therefore, Starbuck’s goal to “Develop enthusiastically satisfied customers all of the time.” is one that fits both the original incarnation of the company, and the multinational conglomerate that exists today. The motivation to keep customers happy is a large one.
A study of Starbucks customers revealed that the satisfied customer visits 4.3 times per month, spends $4.06 and is a customer for 4.4 years.
While, the highly satisfied customer visits 7.2 times per month, spends $4.42 and is a customer for 8.3 years.
So a highly satisfied customer is worth $3,169.67 over the span of their 8.3 year customer life, versus a satisfied customer worth $921.78 over the span of their 4.
4 year customer life. (Schier, 2006).The company knows satisfied customers are crucial to their success, but what are the strategies being implemented to keep customers happy? One way was extra staffing. As the popularity of the chain grew customers found they were waiting in line for their favorite beverage for longer periods of time.
Knowing the importance of highly-satisfied customers, Starbucks made the decision to increase staffing despite the huge cost.
Community and Environment
The next guiding principle is one that has been perhaps the biggest source of conflict for Starbucks as they have grown worldwide: “Contribute positively to our communities and our environment.” In order to judge the success of this guideline, and whether it is in line with the company strategies, it is necessary to define what type of contributions the company makes. Starbucks opponents claim that the chain swoops into communities and forces locally owned alternatives out of business.
Similar claims are made against Wal-Mart, and other chains that have canvassed the nation. While this may be true, Starbucks will point to the increased tax revenue for towns, the increased sales of neighboring businesses, and the added jobs brought to a community.But Starbucks goes farther in their attempt to serve a community. Starbucks has contributed millions to the development of the South American and African nations that supply their coffee beans.
This is a great public relations move, but also protects the company’s future interests. If coffee growing regions remain stable and healthy, the cost of coffee bean production will remain low, meaning higher profits for the organization.
;The final guideline to success for Starbucks is an obvious one: “Recognize that profitability is essential to our future success.” Shareholders, employees, and customers alike all want Starbucks to be successful.
Shareholders want to see financial gain from a stock price increase, employees know a successful company means job security and better wages, and customers know that if the company is successful they will not be subject to price increases or inconvenienced by store closures. All of these parties should be excited to learn that Starbucks posted an 18% rise in profits for the first quarter of fiscal year 2008. (marketwatch, 2008).
Starbucks is a unique company that found a niche in the 1990’s combining the Italian espresso bar experience to the American fast food culture.
This paper examined the mission statement of the Starbucks Corporation and analyzed whether their goals were aligned with their strategies. We did this by examining the six guiding principles that Starbucks uses to guide their decisions. First was “Provide a great work environment and treat each other with respect and dignity.” The next guideline was: “Embrace diversity as an essential component in the way we do business.” Followed by: “Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee.” The next guideline is: “Develop enthusiastically satisfied customers all of the time.” Followed by: “Contribute positively to our communities and our environment.” And finally: “Recognize that profitability is essential to our future success.”As we saw in this paper the guidelines Starbucks has established are in line with their initial philosophies, while still being compatible with that of a fortune 500 company that is trying to grow into a worldwide superpower.