Starbucks Coffee

Starbucks Coffee Company is the world’s pioneer in “specialty coffee retailing.” It is a successful international organization with over 8,500 branches and franchises located in 25 countries around the world as of 2004. Its mission statement is to “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow” (Tripp, Siwapiragam, Rahim, & Horton, 2005). It is a typical small business enterprise that grew to become not only one of the most profitable companies in the world but also one of the most admired by sticking to basic, sound organizational behavior practices as well as by cultivating a strong organizational culture. Starbucks Coffee had an unobtrusive beginning in 1971. It started out as a single coffee store in the Pike Place Market in Seattle, Washington (Starbucks Coffee, 2007).

It remained a simple operation from 1971 to 1982. However, things changed when Howard Schultz became its marketing and retail operations director. He initially expanded the operations of the company by selling coffee to “espresso bars” and selected restaurants. In 1984, encouraged by what he observed as a brisk business enjoyed by Italian espresso bars, Schultz sought to serve the first “caffe latte” called Christmas Blend at Starbucks. The company started really experiencing rapid growth and expansion sometime in 1987 when Il Giornale, another company which was personally established by Schultz, took over the reins of the company. The new management renamed the company Starbucks Corporation. Almost immediately, outlets were opened in Vancouver, British Columbia in Canada, and Chicago in the United States. By the end of the fiscal year, Starbucks Corporation already had 17 stores. The growth had been very rapid ever since. Total Starbucks stores after only ten years already stood at 1,412. By the end of the fiscal year 2006, there were 12,440 Starbucks stores all over the world (Starbucks Coffee, 2007).

The success of Starbucks Corporation resulted from a highly effective and faithful implementation of the main concepts of organizational behavior. Obviously, the company scored high and is still scoring satisfactorily in such areas as organizational culture, motivation, communication, human resources practices, and organizational structure.

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What the company did was to adopt six basic decision-making principles to guide its day-to-day activities. These principles are:

• 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 to the purchasing, roasting and fresh delivery of our coffee
• Develop enthusiastically satisfied customers all of the time
• Contribute positively to our communities and our environment; and
• Recognize that profitability is essential to our future success (Starbucks Coffee, 2007).

These principles are now deeply rooted in the organization including all its branches and franchises all over the world - in a way “institutionalizing” the company. The way Robbins (2005) described it “it [has taken] on a life of its own, apart from its founders or any of its members.” Indeed, Starbucks has now become synonymous with good coffee and a refreshing variety of “caffe latte.” This has resulted to the establishment of a dominant culture in the company, the essence of which has been effectively captured by successfully adopting at least five of the seven characteristics of organizational culture set down by Robbins in his book Organizational Behavior. These five characteristics are:

• innovation and risk taking,  the degree to which employees are encouraged to be innovative and take risks;
•  attention to detail, the degree to which employees are expected to exhibit precision, analysis, and attention to detail;
• people orientation,  the degree to which management decisions take into consideration the effect of outcomes on people within the organization;
•  team orientation,  the degree to which work activities are organized around teams rather than individuals; and
• aggressiveness, the degree to which people are aggressive and competitive rather than easygoing (Robbins, 2005).

The first and last characteristics, innovation and risk taking, and aggressiveness, has been aptly shown by the rapid increase in the number of company stores from the initial 17 when it embarked on its expansion activities in 1987 to over 12,400 in the year 2006. These two characteristics have also been clearly shown by its policy of persistently introducing new varieties of “caffe latte” or versions of espresso. For instance, after introducing the “Starbucks®Christmas Blend” in 1984, the company came out with “Eggnog Larre” in 1986. In 1995, Starbucks started serving “Frappucino® blended beverages” which was followed by “bottled Frappuccino® coffee drink” the following year. The year 1997 saw the company coming out with “Starbucks Barista®home espresso machine” which used ground coffee in producing espresso. During the same year, it started offering “Frappuccino®Low fat Ice Cream Bars” which was described as a “low fat decadent treat.” By 1998 a milder tasting, lighter blend of premium coffee called “Milder Dimensions” was introduced.

The company has likewise shown its aggressiveness when it kept on forming alliances with business organizations all over the world to expand its base of operation and widen its sphere of influence. Among these joint ventures were the ones Starbucks initiated with the “Canadian Bookstore Chain Chapters, Inc.” of Canada and the “Dreyer’s Grand Ice Cream” in 1995. In the same year, it also formed an alliance with “SAZABY, Inc.” of Japan to enable the company to have a foothold in the Japanese market. The “Seattle Coffee Company” of the United Kingdom, which had around 60 stores, was acquired by Starbucks in 1998, establishing its presence in the United Kingdom in the process, while at the same time forming a joint venture called “Urban Coffee Opportunities LLC,” another alliance this time with Johnson Development Corporation owned by NBA star Earvin “Magic” Johnson (Kramer, 2007).

During the same year, it also established its foothold in Taiwan, Thailand, Malaysia, and New Zealand. By 2000, Starbucks was already in Hong Kong and Shanghai in Asia, Qatar, Dubai, Saudi Arabia, and Bahrain in the Middle East, and Australia. The following year, the company opened its stores in Austria and Switzerland. By 2002, Starbucks invaded Southern China, particularly Shenzhen and Macau, Puerto Rico, Greece, Indonesia, Germany, Oman, Spain, and Mexico. Starbucks is now totally global with 12,440 stores all over the world, including Korea, the Philippines, Brazil, Costa Rica, and Romania (Starbucks Coffee, 2007). Even Russia was not spared from the Starbucks onslaught when their first store was inaugurated last September 6, 2007 near Moscow (Kramer, 2007).

Attention to detail, another characteristic of their culture, has been primarily responsible for the high quality of Starbucks coffee. This is being initially achieved by a course on “coffee education” granted to its new employees. This course focuses on their core product (coffee) and is being conducted to ensure that all employees fully understand everything there is to know about coffee. The company has also been adopting the policy of choosing its coffee bean with the greatest of care. As a matter of fact, its teams of tasters have to taste at least 150,000 cups of coffee every year in different parts of the world where coffee plants are grown in their quest for the “finest, richest and most interesting beans” (Starbucks Coffee Company Canada, 2005). Furthermore, quality control is outstanding. The company’s quality control personnel insist that only the “perfect beans” are chosen for sampling. These samples are then subjected to a special process which involves the roaster’s sense of smell, sight, and hearing, in combination with a computer program designed for the purpose. In cases where the samples fail the standard of perfection, the whole batch is rejected (Tran, 2003).

Starbucks is also people oriented.  First, management ensures that all employees are happy working for Starbucks Coffee by maintaining a highly motivated and perfectly satisfied workforce by coming out with every conceivable employee benefit programs. Then it came out with a “Supplier Code of Conduct” which ensures that their suppliers do not violate human rights and endanger the environment (Starbucks Coffee, 2007). To keep employees motivated, the company provides them with a compendium of benefits which include a “progressive compensation package, healthcare benefits, retirement savings plan, stock options and discount stock purchase plan, income protection plan, management bonus plan, adoption assistance plan, domestic partner benefits, referral programs and support resources for child and eldercare, discounted Starbucks merchandise, and a pound of coffee each week”(Starbucks Coffee Company Canada, 2005). Meanwhile, their code of conduct for suppliers require their suppliers to promise to uphold the “welfare, economic improvement and sustainability” both of the residents and the places where coffee is produced; observe “national laws and international standards” concerning the rights, safety, compensation, and treatment of their workers; and protect the environment (Starbucks Coffee, 2007).

According to Robbins (2005), Communication is essential to an organization because it performs four primary functions, namely: “control, motivation, emotional expressions, and information.” Starbucks’ performance in this area could be considered satisfactory. It has simplified and improved its inter-office communication through the use of an “Enterprise Resource Planning” system which has done away with memos and bulletin boards. Through this system, the company was able to incorporate and automate its “internal business processes and information systems” thereby making available to every department all activities being undertaken everywhere in the company. This communication system has simplified and facilitated contacts between departments such as accounting, human resources, sales, and manufacturing because department heads and supervisors do not have to cover the physical distance between departments to retrieve pertinent documents and data. This system has resulted to increased productivity and achieved efficiency (Tripp et al, 2005).

An organization’s human resource policies and practices represent important forces for shaping employee behavior and attitudes (Robbins, 2005). Starbucks believes in developing people. For this reason, every employee is required to undergo an extensive training program which provides them with an expert knowledge about their core product (coffee), enrich their inter-personal skills, and develop among them a deep commitment to customer service. For instance, their “coffee bartenders” are provided with the necessary knowledge about the company and its products so that he or she could be able to answer any questions asked by customers. He or she is also trained to fix samples for tasting and is taught how to operate all the equipment found in the store before being allowed to assume his or her duties as a coffee bartender (Kembell, Hawks, Kembell, Perry & Olsen, 2002).

One of the guiding principles of the company – Provide a great work environment and treat each other with respect and dignity - shows their commitment to look after the welfare of their employees. They believe that employees who are treated humanely are not only adequately motivated but could also be expected to stay loyal to the company. This is why they consider all their employees as “partners” and provide them with a very attractive benefit package mentioned earlier. Dave Pace, the executive vice president for partner resources of Starbucks, calls this “the value-and-treat-employees-right approach” which, according to him, is “rooted in an almost religious-like faith.” Pace revealed that his company has a committee tasked with “mission review.” This committee is periodically doing a reality check on the mission statement of Starbucks Corporation, in effect, ensuring that actual company practices are not veering away from its mission statement. He assured that any complaint lodged or voiced by an employee will be addressed by “the relevant manager” not later than two weeks. Contrary to comments from others that it is easy for Starbucks to look after their workers because it is raking in the profits, Pace said: “We don’t take care of our partners because we’re successful. We’re successful because we take care of our partners” (Stolz, 2005).

According to Robbins (2005), the relation between a company’s organizational structure and the performance, level of motivation, and satisfaction of its employees has not been clearly established, therefore, no general rule could be stated. For its part, Starbucks chose to avoid adopting a hierarchical organizational structure. As a matter of fact the company has no prescribed and set organizational chart. The “relaxed and supportive” culture within the company empowers its employees to use their discretions in making decisions without prior management approval. Since Starbucks believes in developing its people, it wants them to “think for themselves as an entity of the business.” In fact this is why the company calls its employees “partners” regardless of their employment status. This employee empowerment has did right with Starbucks and enabled the company to succeed as a retail organization with outlets not only nationwide but all over the world. Starbucks considers their employees as one of their most important assets and has developed them accordingly. It is convinced that the quality of their workforce is adequately high to be allowed enough leeway to make on-the-spot decisions responsibly considering that their goal is identical with that of the company – profitability and customer satisfaction (Kembell et al, 2002). Robbins (2005) observed that less centralized organizations “have a greater amount of participative decision making,” a factor which has been positively linked to job satisfaction. Evidently, the case of Starbucks just proved this linkage to be true.

Starbucks has been a fixture in the list of “100 Best Companies to Work For” published every year by Fortune Magazine. It was also ranked second among the most admired companies in the country in a survey which was conducted fairly recently among 3,322 company directors, executives, and securities analysts by Fortune in partnership with Hay Group (Fortune Magazine Online, 2007).

These hallmarks could not have been achieved by the company if not for its ability to effectively translate into practice the organizational behavior concepts as outlined by Robbins (2005) i.e., effective communication, a strong organizational culture, sound human resources practices, a very functional but less centralized organizational set-up, and a highly motivated workforce. All these combined to help the company achieve its goals and serve as models for other business organizations to emulate.

References

1. Fortune Magazine Online. (2007). Top 20 Most Admired Companies. Retrieved November 10, 2007, from http://money.cnn.com/galleries/2007/fortune/0703/gallery.mostadmired_top20.fortune/2.html
2. Kembell, B., Hawks, M., Kembell, S., Perry, L. & Olsen, L. (2002). Catching the Starbucks Fever. Retrieved November 10, 2007, from http://www.academicmind.com/unpublishedpapers/business/marketing/2002-04-000aag-catching-the-starbucks-fever.html
3. Kramer, A. E. (2007). After Long Dispute, a Russian Starbucks. The New York Times. Retrieved November 10, 2007, from http://topics.nytimes.com/top/news/business/companies/starbucks_corporation/index.html
4. Robbins, S.P. (2005). Organizational Behavior, Eleventh Edition. Prentice-Hall.
5. Starbucks Coffee. (2007). Retrieved November 10, 2007, from http://www.starbucks.com/
6. Starbucks Coffee Company Canada. (2005). The Starbucks Experience. Retrieved November 10, 2007, from http://www.starbucks.ca/en-ca/
7. Stolz, R.F. (2005). Tops of the Trade. Human Resource Executive Online. Retrieved November 10, 2007, from http://www.hreonline.com/HRE/story.jsp?storyId=5326448
8. Tran, T. (2003). Starbucks Corporation. Retrieved November 10, 2007, from http://mywebpages.comcast.net/ThuanTran/business/starbucks.pdf
9. Tripp, L., Siwapiragam, V., Rahim, N., & Horton, E. (2005). Project V – Industrial to Information Model of an Enterprise. Retrieved November 10, 2007, from http://homepages.wmich.edu/~v4siwapi/project.htm

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