Starbucks Corporation is identified as an American coffee company founded at Seattle Washington in 1971. The main products of the company include “hot and cold drinks”, “whole-bean coffee, micro ground instant coffee” and “Teavana tea products”. The company generally brings the coffee beans from “Latin America, Africa and Asia” to the United States in ocean containers. Depending on the location of produce the regional warehouses supports the entire operation of the company (Starbucks Coffee Company 2018). Some of the many aspects of the report has been discussed with conducting a critical analysis using “Porters’ Value Chain, of the management of tangibles, intangibles and information within the global supply chain”. Additionally, the report will include outsourcing strategy from the global, national and local perspectives and evaluate the backward and forward growth in the supply chain by considering the merger and acquisition activities. A critical analysis for the discourse with support how the company has been successful in managing global, national and local risks by considering the agile and flexible supply-chain. In addition to this, the critical analysis is assimilated to a logical argument and reason conclusion. Some of the major ability of undertaking comprehensive research is identified with both academic and organizational materials thereby showing a suitable breadth and depth of sources considered for the research study.
In the recent times, a growing need of managing intangibles is discerned with showcasing dynamic capabilities. Particularly referring to Starbucks, it has been discerned that it follows a direct interaction with the production team and adheres to the social responsibility standard thereby making the suppliers feel to be having an integral role in the strategic management decisions. Moreover, a close relationship and frequent complication among the suppliers has always ensured that there are no major disruptions leading to workforce shortage or overplanting.
In order to maintain efficient supply-chain relation, Starbucks applies vertically integrated SC strategies which is present all along the supply-chain process. This is depicted with from procurement of the coffee beans to the coffee cup sold to the consumers. The use of vertically integrated system is directly relevant to more than 300000 coffee growers situated worldwide. Additionally, the company also trusts that direct interaction with the farmers that ensure that all the coffee beans will be able to attend same flavor and quality standards (Contributor 2017).
The application of Porter’s Value Chain in this context is considered with inbound logistics functions, which involves Starbucks agent choosing coffee beans producers maintain African continent thereby establishing strategic relationships with the suppliers. The operations are conducted in more than 50 countries currently owning 8870 company operated stores and 8139 globally operated stores. The outbound logistics function is taken into account with selling the product in the stores without involvement of any intermediaries. However, the company proposes to launch coffee sachets products such as 3 in 1 coffee to be launched in leading supermarkets. The service function is seen with customer service as the main objective driving the mission statement. The marketing and sales does not rely on word of mouth but depict the achievements via quality products and customer services. The infrastructure includes general support for activities such as government relations, planning, financing, management and working for in entire value chain. The HR management is recognized with this training and development programs which ensures that stops are always motivated with both tangible and intangible incentives. The different aspects of technological improvement include technology for cost-saving purposes. The procurement function constitutes of production of final offering services or products (Starbucks Coffee Company 2018).
As stated by Chua and Banerjee (2014), the research study “Customer knowledge management via social media: the case of Starbucks” some of the major findings associated to redefining the information management by deploying wide range of social media tools for CKM. Firstly, the information management through various social media sites and other online blogs have been able to reveal to have been able to act as an effective marketing instrument for the company. Secondly, Starbucks has been able to redefine the customer roles by using such platforms and transforming “passive recipients of beverages to active contributors of innovation”. Some of the other major findings has suggested that the use of the strategy by Starbucks and alleviated customers reluctance pertaining voluntary knowledge sharing and promoting better engagement in the social media sites. The knowledge strategy of the company is also identified with placing themselves in the market and accessing their current brand and products offered. It is also to deploy information sharing by learning about customer buying behavior (Hugos 2018).
As discussed by Chen (2014), the mechanics of value chain is understood with integration of material management, procurement, logistics with functions relating to HR, finance and IT leading divorce and enhanced customer value. The integration process at Starbucks has been taken into account with ERP system which is mainly identified with the use of “Microsoft Dynamics 365”, which is an enterprise resource planner and customer relationship management software application developed by Microsoft. Such a system is able to bring together various functions such as “finance, accounting, human resource, manufacturing, supply-chain management, project management along with customer relationship management” (Libby 2014). The use of such an application has been able to ensure that the company is able to procure the products at best possible price and at the same time associate the costs, personal requirements and production units under the secondary department is identified as finance, accounting, human resource and manufacturing. In addition to this, the value chain mechanics by using such a software is also depicted when the company’s accounting for supply-chain costs and identifying various effects in the relevant accounting department, production department and HR department (Kapp, Latham and Ford-Latham 2016).
The application of contingency and institutional theories has been conducive in overall operations of the company. The contingency and institutional theories are identified as application of lean approach the supply-chain and JIT. The depictions of previous research is an application of JIT in case of Starbucks has been conducive in improving the overall consistency in the service. Starbucks uses “just-in-time inventory” for performing some of the vital functions such as “forecasting, scheduling, ordering, and delivery of goods”. Despite of the significant benefits of this approach, in the short run cost concerns associated to the implementation of JIT has been a major issue for the company. Some of the immediate and long-term benefits are however is associated to reduction in cost and improvement in overall efficiency (Customwritten.com 2018).
The implementation of “total quality management” in Starbucks has supported better employee training, supply of products, improved raw materials (roasted coffee beans), bonding with the customers, joint ventures, mail-order sales, license stores and specialty sales. The implementation of Lean approach in Starbucks is particularly viewed with reducing the wastes which affects the environment over time. In order to ensure that the company is able to create a minimum carbon footprint and attain better value for the organization, it aims at promoting reusable cups and greener cups (Starbucks Coffee Company 2018).
The main operations of the company include outsourcing off coffee beans from “Latin America, Africa and Asia” to the United States in ocean containers. The final storage is further dependent on availability of warehouses in the designation location. At the port of entry “beans are trucked to six storage sites, either at a roasting plant or nearby”. In addition to this, the beans are packaged, roasted and transported to the regional distribution center ranging from 200,000 to 300,000 square feet in size. It is worth noting that the company operates in five regional distribution centers across the United States among which two are “company-owned” and the other three are depicted to be owned by “third-party logistic companies” or (3PL) (Supplychainquarterly.com 2018). In addition to this, the four main supplies and functions performed by the company are recognized in terms of planning, delivering, sourcing and manufacturing. The sourcing activities of the company is depicted to be grouped into “coffee and non-coffee procurement”. Starbucks has been designed to spend more than USD 600 million on coffee every year. The various purchasing activities like “baked goods, store furniture and paper goods” are worth more than $ 2.5 billion.
The backward integration of supply-chain of Starbucks has been identified with the following factors”
The forward integration of the company is identified in areas such as:
The analysis of Porter’s five forces in Starbucks is depicted below as follows:
Threat of new entrants
Due to its present brand-name, to a new business trying to disrupt the operations and challenging the profitability of Starbucks is improbable in nature.
Threat of substitutes
Starbucks is not seen to be having much substitutes. The offerings of the product such as fruit smoothies, coffee and juices make it difficult for the customers for other alternatives (Investopedia. 2016).
Bargaining power of customers
Due to the low value per transaction the customers do not hold much power in terms of buying the products. In addition to this, the small cost per transaction creates big similarities among the buyers (Duke 2017).
Bargaining power of suppliers
The company’s supplier is seen with a wide base which is located in more than 23000 regions around the world. In addition to this, the company serves “other beverages as well, from tea to fruit smoothies, and food items, but coffee is its main business”. Henceforth, the suppliers don’t have much bargaining power.
Industry rivalry
The company faces broad range of rivalry from its competitors. Some of the main competition for the companies identified with similar coffee chain such as Caribou Coffee (Rothaermel 2015).
As discussed by Hugos (2018), the supply-chain cost and performance of the company is evaluated with identifying the cost drivers associated with the products. In addition to this, the company uses scorecards to keep track of the current performance and outline the activities of the customers and third-party relationships. The use of frequent scorecards is conducive in tracking the indicators to emerging problems in the latter stages.
Starbucks significantly considers risk management program protect its supply-chain activities. In an effort to safeguard its global brand, has been identified to use “enterprise risk management program (ERM)” to identify the emerging trends which may influence the supply-chain activities. The ERM considers macro trends which helps in evaluating the factors interrupting the supply-chain and service provided to the customers. They enterprise risk management program is critical to the company for tracking of early risk exposure involvement thereby providing a tactical roadmap for considering future risks. The program has further addressed the key is factors in SCM associated to “supply interruptions, financial volatility, and geopolitical events” which may significantly hamper the overall “supply chain operations”. Another risk mitigation aspect maintained by the company is recognized with creating center of excellence which is headed by the experts and critical to the success of the company. These centers are conducive in assisting regional and local operations by providing industry consulting and analytics. These centers are also beneficial in providing the necessary assistance during a situation of crisis (Supplychainquarterly.com 2018).
Conclusion
The study has been able to state that main operations of the company include outsourcing off coffee beans from “Latin America, Africa and Asia” to the United States in ocean containers. The final storage is further dependent on availability of warehouses in the designation location. At the port of entry “beans are trucked to six storage sites, either at a roasting plant or nearby”. Various types of strategic management theories have been conducive increasing the overall performance of the company.
References
Chen, T., 2014. Teaching Model Innovation of Production Operation Management Engaging in ERP Sandbox Simulation. International Journal of Emerging Technologies in Learning (iJET), 9(3), pp.59-63.
Chowdhury, M.E., 2016. Textbook To Reality: Using Corporate Earnings Reports As An Effective Teaching Tool For A Business Capstone Course. American Journal of Business Education (Online), 9(4), p.147.
Chua, A.Y. and Banerjee, S., 2014. Customer knowledge management via social media: the case of Starbucks. Journal of Knowledge Management, 17(2), pp.237-249.
Contributor, G. (2017). Supply Chain Putting the . [online] Digital and content marketing. Available at: https://www.fronetics.com/supply-chain-putting-star-starbucks/ [Accessed 9 May 2018].
Customwritten.com. (2018). Executive Summary – Just-In-Time (JIT) Inventory Management in a Restaurant (example paper). [online] Available at: https://customwritten.com/example-papers/jit-inventory-management-restaurant-paper [Accessed 9 May 2018].
Duke, D., 2017. Porter’s Five Forces and the Coffee Industry. Management Teaching Review, p.2379298117726765.
Hugos, M.H., 2018. Essentials of supply chain management. John Wiley & Sons.
Hugos, M.H., 2018. Essentials of supply chain management. John Wiley & Sons.
Investopedia. (2016). Analyzing Starbucks’ Threat of Substitutes | Investopedia. [online] Available at: https://www.investopedia.com/university/starbucks-porters-5-forces-0/analyzing-starbucks-threat-substitutes.asp [Accessed 9 May 2018].
Kapp, K.M., Latham, W.F. and Ford-Latham, H., 2016. Integrated learning for ERP success: A learning requirements planning approach. CRC press.
Libby, T., 2014. Theorizing literacy in the service industry: A starbucks case study. Oklahoma State University.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Starbucks Coffee Company. (2018). Recyling & Reducing Waste | Starbucks Coffee Company. [online] Available at: https://www.starbucks.in/responsibility/environment/recycling [Accessed 9 May 2018].
Supplychainquarterly.com. (2018). From bean to cup: How Starbucks transformed its supply chain – Procurement – CSCMP’s Supply Chain Quarterly. [online] Available at: https://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/ [Accessed 9 May 2018].
Supplychainquarterly.com. (2018). Starbucks adds risk management program to help protect its supply chain – CSCMP’s Supply Chain Quarterly. [online] Available at: https://www.supplychainquarterly.com/news/20140226-starbucks-adds-risk-management-program-to-help-protect-its-supply-chain/ [Accessed 9 May 2018].
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