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Running Head: IV & V STRATEGIC AUDIT FOR STARBUCKS

IV & V STRATEGIC AUDIT FOR STARBUCKS

George Salazar

Cornerstone University, Cohort: LSMT-04

January 20, 2011

BUS-MGT-438

Pray, David James

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IV Internal Environment: Strengths and Weaknesses (SWOT)

A. Corporate Structure

1. How is the corporation structured at present? In recent news, Starbucks has rearranged their

organizational structure to better accommodate customer satisfaction. The CEO of Starbucks

announced expansion of their matrix organizational structure last month. They will operate under

four U.S. divisions including Western/Pacific, Northwest/Mountain, Southeast/Plains and

Northeast/Atlantic (Shultz, 2008).

http://www.associatedcontent.com/article/782963/the_organizational_structure_of_starbucks_pg

2.html?cat=3

a. Is the decision-making authority centralized around one group or decentralized to

many units? The decision-making authority is decentralized to many units.

b. Is it organized on the basis of functions, projects, geography, or some combination of

these? Yes, it is organized on the basis of functions, projects, and geography.

2. Is the structure clearly understood by everyone in the corporation? Yes, everyone in the

corporation is clear of the structure and is very much understood.

3. Is the present structure consistent with current corporate objectives, strategies, policies, and

programs, as well as with the firm’s international operations? Yes, the present structure is

consistent with current corporate objectives, strategies, policies, and programs.

4. In what ways does this structure compare with those of similar corporations? They focus on

customer service and similar corporations work into their mission statement, service.

B. Corporate Culture

1. Is there a well-defined or emerging culture composed of shared beliefs, expectations, and

values? The Starbucks culture has infiltrated almost every part of American society as the most
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successful coffee chain in the nation. However, it isn't just the fact that Starbucks is another

brand name that has dominated the industry just like other company giants have dominated their

respective industries. Their shared beliefs, expectations, and values all derive from the minute

they walk into Starbuck, Customers enjoy the satisfaction of their product.

2. Is the culture consistent with the current objectives, strategies, policies, and programs? Yes,

the culture is consistent with the current objectives, strategies, policies, and programs.

3. What is the culture’s position on important issues facing the corporation (i.e., on productivity,

quality of performance, adaptability to changing conditions, and internationalization)? The

culture’s position on important issues facing the corporation is that of ethical decisions and core

values.

4. Is the culture compatible with the employees’ diversity of backgrounds? Yes, the culture is

compatible with the employee’s diversity of backgrounds.

5. Does the company take into consideration the values of each nation’s culture in which the firm

operates? Yes, the company takes into consideration the values of each nation’s culture.

C. Corporate Resources

1. Marketing

a. What are the corporation’s current marketing objectives, strategies, policies, and programs?

Starbucks marketing objectives are as follow;

1. Maintain positive, steady growth each quarter.

2. Experience a growth in new customers who are turned into long-term customers.

3. Realize an increase in occupancy each subsequent year.

Financial objective include:

1. A double-digit growth rate for each future year.

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2. Reduce the variable costs per guest.

3. Continue to decrease the fixed costs.

http://www.oppapers.com/essays/Marketing-Objectives-Strategies/116312

i. Are they clearly stated, or merely implied from performance or budgets? Yes, they are clearly

stated, not merely implied from performance or budgets.

ii. Are they consistent with the corporation’s mission, objectives, strategies, policies, and with

internal and external environments? Starbucks mission statement is as follow; our mission: to

inspire and nurture the human spirit – one person, one cup and one neighborhood at a time. Yes,

they are consistent along with internal and external environments.

b. How well is the corporation performing and marketing mix (product, price, place, and

promotion) in both domestic and international markets? Starbucks focuses on change and is

producing different flavors for their main seller, (coffee, espresso, etc). What percentage of sales

comes from foreign operations? 20% of sales come from foreign operations. Where are current

products in the product life cycle? Current products are out in the market for sale.

i. What trends emerge from this analysis? Trends to invest in India and merge with Tata Inc.

ii. What was the impact of these trends on past performance and how might these trends affect

future performance? The impact of the trends were not seen, but the affect for the future

performance will be rewarding to the stockholders at Starbuck.

iii. Does this analysis support the corporation’s past and pending strategic decisions? Yes

iv. Does marketing provide the company with a competitive advantage? Yes
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c. How well does this corporation’s marketing performance compare with that of similar

corporations? Starbucks marketing performance compares well with other similar corporations.

They focus on revenue, community, relationships, and performance.

d. Are marketing managers using accepted marketing concepts and techniques to evaluate and

improve product performance? Yes (Consider product life cycle, market segmentation, market

research, and product portfolios.)

e. Does marketing adjust to the conditions in each country in which it operates? Yes

f. What is the role of the marketing manager in the strategic management process? To over look

and cover all strategic management processes. Report to the CEO of the company and give

reports of statistics.

2. Finance

a. What are the corporation’s current financial objectives, strategies, policies, and programs? The

current financial objectives, strategies, policies, and programs are to focus on profits, remain

competitive, and customer loyalty.

i. Are they clearly stated or merely implied from performance or budgets? Yes, they are clearly

stated.

ii. Are they consistent with the corporation’s mission, objectives, strategies, policies, and with

internal and external environments? Yes

b. How well is the corporation performing in terms of financial analysis? (Consider ratios,

common-size statements, and capitalization structure.) How balanced, in terms of cash flow, is

the company’s portfolio of products and businesses? Starbucks is ding well, and looking at

signing with Tata Inc in India.

i. What trends emerge from this analysis? To be able to buy coffee in India.
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ii. Are there any significant differences when statements are calculated in constant versus

reported dollars? No

iii. What was the impact of these trends on past performance and how might these trends affect

future performance? Well, there was no Starbucks in India and now they will enjoy Starbucks in

India.

iv. Does this analysis support the corporation’s past and pending strategic decisions? Yes

v. Does finance provide the company with a competitive advantage? Yes

c. How well does this corporation’s financial performance compare with that of similar

corporation s? Fair

d. Are financial managers using accepted financial concepts and techniques to evaluate and

improve current corporate and divisional performance? (Consider financial leverage, capital

budgeting, ratio analysis, and managing foreign currencies.) Yes

e. Does finance adjust to the conditions in each country in which the company operates? Yes

f. What is the role of the financial manager in the strategic management process? The role of the

financial manager in the strategic management process is to overlook all financial reports and

submit them to the CEO.

3. Research and Development (R&D)

a. What are the corporation’s current R&D objectives, strategies, policies, and programs?

Starbucks objectives are to be the number one leading coffee supplier in the world. Research and

development strategy deals with product and process innovation and improvement and Starbuck

has improved in areas of the company.

i. Are they clearly stated, or merely implied from performance or budgets? Implied from

performance.
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ii. Are they consistent with the corporation’s mission, objectives, strategies, policies, and with

internal and external environments? Yes

iii. What is the role of technology in corporate performance? Technology is important to

Starbuck because they now accept payment via phone.

iv. Is the mix of basic, applied, and engineering research appropriate given the corporate mission

and strategies? Yes

v. Does R&D provide the company with a competitive advantage? Yes

b. What return is the corporation receiving from its investment in R&D? New customers

c. Is the corporation competent in technology transfer? Does it use concurrent engineering and

cross-functional work teams in product and process design? Yes

d. What role does technological discontinuity play in the company’s products? The role that

technological discontinuity plays in the company’s products is that it disrupts the current market.

e. How well does the corporation’s investment in R&D compare with the investments of similar

corporations? How much R&D is being outsourced? The corporation invests in R&D and invests

similar to other corporations. R&D is outsourced to different countries.

f. Does R&D adjust to the conditions in each country in which the company operates? Yes

g. What is the role of the R&D manager in the strategic management process? To lead and direct

all research and development projects. The R&D role in Starbucks is to make a R&D mix and

mainly consists of the following activities: Coffee Science, New technology, Equipment

Technology, Product Development, Menu Development, Coffee Quality Assurance, Sensory

Science.The introduction of the Starbucks Card for example, Starbucks has created the

opportunity to improve customer service, shorten lines and make a customer’s visit at Starbucks

quicker and more convenient Starbucks is continuously searching for ways to better a customers’
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experience. The company spent 7.2 Million in 2008 for new technologies related to food and

equipment. http://www.scribd.com/doc/9913996/Starbuck-strategic-analysis-term-paper

4. Operations and Logistics

a. what are the corporation’s current manufacturing/service objectives, strategies, policies, and

programs? The main operation for Starbucks divided into local operation in USA and

international operation. Starbucks depended mainly on their employees to manage operation,

that’s why they focused on training employees as they are the main asset in the company. They

are managing all stores in USA, however, they are in the international operation sometimes

manage their store, or give licenses, or get into joint ventures with existing companies. But they

focus on their operation on the quality of their coffee.

i. Are they clearly stated, or merely implied from performance or budgets? Yes

ii. Are they consistent with the corporation’s mission, objectives, strategies, policies, and with

internal and external environments? Yes

b. What is the type and extent of operations capabilities of the corporation? How much is done

domestically versus internationally? Is the amount of outsourcing appropriate to be competitive?

Is purchasing being handled appropriately? 20 % of all revenue comes from foreign countries.

Yes, the amount of outsourcing is competitive. Yes, purchasing is being handled appropriately.

i. If the corporation is product-oriented, consider plant facilities, type of manufacturing system

(continuous mass production, intermittent job shop, or flexible manufacturing), age and type of

equipment, degree and role of automation or robots, plant capacities and utilization, productivity

ratings, availability and type of transportation.

ii. If the corporation is service-oriented, consider service facilities (hospital, theater, or school

buildings), type of operations systems (continuous service over time to same clientele or
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intermittent service over time to varied clientele), age and type of supporting equipment, degree

and role of automation and use of mass communication devices (diagnostic machinery,

computers), facility capacities and utilization rates, efficiency ratings of professional and service

personnel, and availability and type of transportation to bring service staff and clientele together.

c. Are manufacturing or service facilities vulnerable to natural disasters, local or national strikes,

reduction or limitation of resources from suppliers, substantial cost increases of materials, or

nationalization by governments? Yes

d. Is there an appropriate mix of people and machines (in manufacturing firms) or of support

staff to professionals (in service firms)? Starbuck is a diverse company that has a mix of people

and machines and staff to professionals.

e. How well does the corporation perform relative to the competition? Is it balancing inventory

costs (warehousing) with logistical costs (just-in-time)? Consider costs per unit of labor,

material, and overhead; downtime; inventory control management and scheduling of service

staff; production ratings; facility utilization percentages; and number of clients successfully

treated by category (if service firm) or percentage of orders shipped on time (if product firm).

The corporation performs to the best of their ability and their inner strength is getting to know

their people.

i. What trends emerge from this analysis? The trend that emerges from this analysis is that of

customer satisfaction and the willingness to survive in the market.

ii. What was the impact of these trends on past performance and how might these trends affect

future performance? The impact left on past performances is those that have been addressed and

implemented throughout the cycle of continuous improvements.

iii. Does this analysis support the corporation’s past and pending strategic decisions? Yes
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iv. Does operations provide the company with a competitive advantage? Yes

f. Are operations managers using appropriate concepts and techniques to evaluate and improve

current performance? Consider cost systems, quality control and reliability systems, inventory

control management, personnel scheduling, TQM, learning curves, safety programs, and

engineering programs that can improve efficiency of manufacturing or of service. Yes

g. Does operations adjust to the conditions in each country in which it has facilities? Yes

h. What is the role of the operations manager in the strategic management process? The role of

the operations manager is to over see all and report all and make adjustments to meet the

objectives, strategies, plans of the company.

5. Human Resources Management (HRM)

a. What are the corporation’s current HRM objectives, strategies, policies, and programs?

Starbucks paid considerable attention to the kind of people it recruited. So the company hired

people for qualities like adaptability, dependability and the ability to work in a team. Starbucks

was one of the few retail companies to invest considerably in employee training and provide

comprehensive training to all classes of employees, including part-timers Company depends on

their personnel in their high revenue, which is very risky as if they lost some of the key persons.

Early 2000s, the company began to show signs that its generous policies and high human

resource costs were reflecting on its financial strength. Although the company did not reveal the

amount it spent on employees, it said that it spent more on them than it did on advertising While

the industry turnover rate is about 200 percent, Starbucks maintains a turnover rate of only 60

percent. Due to this low turnover, Starbucks has lowered their training time and costs.

Furthermore, 82% of the partners rated being “very satisfied” and 15% as “satisfied” with
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their jobs when asked by outside audit agencies. http://www.scribd.com/doc/9913996/Starbuck-

strategic-analysis-term-paper

i. Are they clearly stated, or merely implied from performance or budgets? Clearly stated

ii. Are they consistent with the corporation’s mission, objectives, strategies, policies, and with

internal and external environments? Yes, consistent

b. How well is the corporation’s HRM performing in terms of improving the fit between the

individual employee and the job? Consider turnover, grievances, strikes, layoffs, employee

training, and quality of work life. Starbuck has the lowest rate when it comes to retention.

i. what trends emerge from this analysis? The trends that emerge form this analysis are trends of

retention and stability.

ii. What was the impact of these trends on past performance and how might these trends affect

future performance? The impact of these trends on past performance was lowering the retentions

of employees and focusing on values.

iii. Does this analysis support the corporation’s past and pending strategic decisions? Yes

iv. Does HRM provide the company with a competitive advantage? Yes

c. How does this corporation’s HRM performance compare with that of similar corporations? It

does not compare because a lot of corporations have a different look at HRM.

d. Are HRM managers using appropriate concepts and techniques to evaluate and improve

corporate performance? Consider the job analysis program, performance appraisal system, up-to-

date job descriptions, training and development programs, attitude surveys, job design programs,

quality of relationship with unions, and use of autonomous work teams. Yes
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e. How well is the company managing the diversity of its workforce? What is the company’s

record on human rights? The company is managing the diversity of its workforce with dignity

and integrity.

f. Does HRM adjust to the conditions in each country in which the company operates? Does the

company have a code of conduct for HRM in developing nations? Are employees receiving

international assignments to prepare them for managerial positions? Yes

g. What is the role of the HRM manager in the strategic management process? The role of the

HRM manager is to hire the best candidates for the job.

6. Information Systems (IS)

a. What are the corporation’s current IS objectives, strategies, policies, and programs?

i. Are they clearly stated, or merely implied from performance or budgets?

ii. Are they consistent with the corporation’s mission, objectives, strategies, policies, and with

internal and external environments?

b. How well is the corporation’s IS performing in terms of providing a useful database,

automating routine clerical operations, assisting managers in making routine decisions, and

providing information necessary for strategic decisions?

i. what trends emerge from this analysis?

ii. what was the impact of these trends on past performance and how might these trends affect

future performance?

iii. Does this analysis support the corporation’s past and pending strategic decisions?

iv. Does IS provide the company with a competitive advantage?

c. How does this corporation’s IS performance and stage of development compare with that of

similar corporations? Is it appropriately using the Internet, intranet, and extranets?

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d. Are IS managers using appropriate concepts and techniques to evaluate and improve corporate

performance? Do they know how to build and manage a complex database, establish Web sites

with firewalls, conduct system analyses, and implement interactive decision support systems?

e. Does the company have a global IS and Internet presence? Does it have difficulty with getting

data across national boundaries?

f. what is the role of the IS manager in the strategic management process?

D. summary of Internal Factors (List in IFAS Table 4.2, p. 72)

Which of these factors are core competencies? Which, if any, are distinctive competencies?

Which of these factors are the most important to the corporation and to the industries in which it

competes at the present time? Which might be important in the future? Which activities or

functions are candidates for outsourcing?

Internal Factors IFAS

Internal Factors Weight Rating Weighted Scored Weighted Comments

Strength

1 Quality of Product .20 4 .80

2 Retention of employees .15 5 .75

3 Global Products .15 4 .60

4 Quality of Service .15 4 .60

Weakness

1 Price .10 3 .30

2 Lack of Customer Service .10 4 .40

3 Competitors .15 3 .45

Total 1.00 3.90

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V ANALYSIS OF STRATEGIC FACTORS (SWOT)

A. Situational Analysis (List in SFAS Matrix, Fig. 5.1, p. 79)

What are the most important internal and external factors (Strengths, Weaknesses, Opportunities,

Threats) that strongly affect the corporation’s present and future performance?

Internal Factors Weight Rating Weighted Score Comments

Strength

1 Quality Brand .20 4 .80

2 Employee Retention .15 5 .75

3 Global .10 4 .40

4 Relationship with Customer .15 4 .60

Weaknesses

1 Price .15 3 .45

2 Lack of Customer Service .10 4 .40

3 Competitors .05 3 .15

4 Products .10 3 .30

Total 1.00 3.85

External Factors

Opportunities

1 Expand .20 4 .80

2 Product Line .15 5 .75

3 Go Green .10 3 .30

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4 Billboards .05 3 .15

Threats

1 Law suits .15 3 .45

2 Competitions .10 4 .40

3 Prices .15 4 .60

4 Locations .10 4 .40

Total 1.00 3.85

B. Review of Mission and Objectives

1. Are the current mission and objectives appropriate in light of the key strategic factors and

problems? Yes, Starbucks should keep their mission statement as it reflects the current situation

as well, expect for changing the product scope to include products more than the coffee for good

diversification. Objectives: The Company can keep the same current objects as it

serves the current situation of the company. Just one object should be added which is:

Invest in other product for either related or unrelated business to maintain the success.

http://www.scribd.com/doc/9913996/Starbuck-strategic-analysis-term-paper

2. Should the mission and objectives be changed? If so, how? No

3. If changed, what will be the effects on the firm? No change

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Reference

http://www.scribd.com/doc/9913996/Starbuck-strategic-analysis-term-paper

http://www.bloomberg.com/

http://www.starbuck.com/