April 23, 2014  
 
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The Starbucks Business Plan - Howard Schultz and Starbucks

Written by Richard San Juan for Gaebler Ventures

Starbucks is a coffee corporation that employs operations in multiple countries around the world. Established in 1971, Starbucks currently has 15,011 stores worldwide and has seemingly become synonymous with the word "coffee." Transforming a coffee shop on a corner in Seattle to what it is today would not have been possible without its strong operations management and innovations.

What made Starbucks hugely successful?
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The dramatic explanation of Starbucks' prevalence in today's society says their success was due to the creation of a so-called "Third Place" culture.

In reality, it was because an entrepreneur who believed in strong operations management and having a central focus for everyone in the company to follow.

This was the long-term vision of Howard Schultz. He was well aware that developing this coffee culture successfully involves not only utilizing an impactful marketing strategy but also managing an efficient operating management system as well.

The Starbucks business plan, along with its organized functional plan, helped Starbucks create a near monopoly in the coffee industry.

With the variety and uniqueness of their products, Starbucks had such a commanding lead over its nearest competitor (yes, they have competitors).

The majority of the competitors consisted of small-chain coffeehouses, restaurants/diners, and coffee manufacturers who were picking up on the growing popularity of specialty coffees and had installed machines to serve espresso, cappuccino, latté, and other coffee drinks to their customers.

Caribou Coffee is the most prominent among the small-chain coffeehouses while McDonald's and Dunkin' Donuts are established eateries that recognized the trend of higher specialty coffee consumption. Kraft and Nestle are competitors that manufacture and sell their products primarily in grocery and retail stores.

What separated Starbucks from those other coffee competitors and drove their revenues was that the corporate strategy was pervasive throughout the entire company whether it is in operations, marketing, or financial management.

Setting objectives and charting the path to achieve those objectives are essential in bringing about the kind of growth that Starbucks had. Every corporate strategy begins with a mission statement.

Their mission statement states the following: "Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow." This mission statement helps executive management and Starbucks' partners to maintain the highest quality with respect to the operations process. It also allowed for Starbucks to be adaptable to changes in market trends and new regulations.

The meaning of the mission statement is the central focus of the organization and helps the operations function at Starbucks to implement business strategy. Once implemented, that same drive is used to sustain the energy level needed to maintain the business strategy, as well as everyday operations.

These everyday operations can range from top executives creating financial reports for decision-making purposes to the frontline employee who is preparing one of Starbucks many drinks. Upon close examination of exactly how everyday operations at Starbucks compel profitable growth, one can see that the concentration on quality and innovation is a part of every aspect of each step in the Starbucks progression.

This has permitted Starbucks to stay ahead of competitors and position itself to take a large market share in the coffee industry. The large market share is clearly evidence of an overall operating system that is performing at an efficient rate.

When determining how key operational processes of Starbucks contribute to the overall business strategy, one must first look at the employees or "partners," as they are called at Starbucks. Executive management believed that partner satisfaction leads to customer satisfaction. Satisfied partners and "baristas" (hourly-wage employees) mean that most routine operation activities such as taking orders and doing monetary transactions are running competently and at a rate to maximize revenue.

A content workforce leads to fewer partners leaving the corporation. In turn, having less partner turnover tends to increase manager stability which enables the store to do a much better job of recognizing regular customers and providing personalized service. In addition, incentives such as promotion from within the company and continued training help enhance stability as well. Starbucks stores that retain the same managers and baristas have the ability to offer a more personalized service to regular customers and will be familiar with the appropriate procedures to create the drinks requested.

Knowing how to keep a customer satisfied is particularly important in the service industry. For this reason, Starbucks emphasizes training in not only the "hard skills" of making the various coffee drinks, but also the "soft skills" involved in interacting with customers. It could be as simple as creating eye contact or smiling.

To go even further, a "legendary service," according to Starbucks, involves remembering regular customers and sometimes even their usual drinks. Being more service oriented, there is a high degree of visibility and customer contact from the point of order. Therefore, it benefits Starbucks to provide continued training to their employees in an effort to better serve regular and casual customers, since Starbucks is strongly dependent on the capability to handle high volume traffic.

Learning from the Starbucks Business Plan

Individuals who yearn to be entrepreneurs and build a big corporation should look to Howard Schultz as a model. He knows that the key to any company's success, especially one in the service industry is operations management.

In order to maximize profits, entrepreneurs need to understand how to make something as fast as possible while minimizing errors. Moreover, it is also essential that entrepreneurs have the ability to utilize the limited resources efficiently and creatively to achieve success.

Richard San Juan is currently pursuing an MBA degree with an emphasis in Finance from DePaul University in Chicago. He is particularly interested in writing about business news and strategies.


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