HR strategy for Starbucks

CONTENTS

1.     Introduction                   ……………………………………………………..3

2.     Basic competitive strategy for Starbucks   ………………………….3

3.     Work force requirements         ……………………………………………….4

4.     Specific HR policies and activities    ………………………………….6

5.     Suggestions ……………………………………………………………..8

6.     Conclusion ……………………………………………………………...8

7.     Attachments         ……………………………………………………………...9

1.    Introduction

Starbucks Corporation is the largest coffee house in the world and it is a very profitable organization. It is a global coffee brand which provides different, creative products and fine services. It has around 16 600 stores in around 50 countries. Starbucks emphasize positioning its stores in high traffic areas, including mini-stores located in hotels, upscale grocery stores, shopping mall food courts, and other ventures which are not free-standing. The organization depends on a main competitive advantage, retail of coffee. Some of Starbucks products are beverages (coffee, tea, Tazo, soda, juices), pastries, whole coffee beans and merchandise (mugs, CDs). The company has also adopted a highly aggressive globalization strategy to capitalize upon European tastes and interest in American coffee products. Equally significant, according the company's emphasis on Starbucks' in-store experience of customer service. Company executives believe that this orientation has been the key to the firm's success in world wide. They use internet to provide customers with online opportunities to purchase coffee and other food products as well as a growing range of kitchen and beverage accessories.

2.    A basic competitive strategy for Starbucks

There are three types of competitive strategies. They are, cost leadership, differentiation and focus. The most suitable competitive strategy to introduce Starbucks is Differentiation.

Starbucks serve coffee or any other beverages in their own way. For example, they serve coffee with ice cream, and also they put ice cream with a design. They serve their pastries and every other product with a different look, other than every other coffee shop. They serve niche buyers than rivals.

They focus high class customers than the mid and lower level customers. So there are focus competitive strategy also. They serve as customer need, but it also in a range.

3.    Workforce requirements at Starbucks

·         Replaces a reactive approach (reduce headcount across the board, cut labour costs by x%) with more precise interventions

·         Decisions are based on clearer understanding of critical factors and relationships –in effect, a ‘risk audit’

·         Which roles or jobs have biggest business impact?

·         Which will be hardest to fill internally and externally in the future? Which have the steepest or longest learning curve?

·         Which skills and competencies will become increasingly or decreasingly valuable to future performance?

·         Which talent segments need to be protected as feeder pools?

Organisations can model alternative scenarios to compare long-term consequences for talent supply.

To obtain those requirement they use the following for more strategic.

• Retail forecast tools
• Dashboard analytics
• Ad-hoc analysis
• Environmental scanning
• Talent segments
• Pivotal roles
• Planning workshops
• Action planning and progress monitoring.

In these sessions, Starbuck’s planning workshop leadership team consider:

• The environmental scanning reports shown above (what affects my workforce?)
• The current state (where am I now?)
• No change future state (where am I heading if everything remains the same?)
• Scenario planning (what are my ideas about vision given different operating climates?)
• Targeted future (what is my targeted or likely future?)
• Action planning (how do I get there?)
• Setting up progress monitoring (is my plan right? am I on track?).

 A key issue at the moment is, understanding ghost turnover.

The team look at,

• Demise of a Competitor
• Unionization of Workforce
• Distribution Optimization
• Process Teams don’t have the right capabilities
• Full Automation of Production Lines
• Failure to open 5th Roasting Plant at 75 mm pounds
• Store of the future.

New employees get 25 hours of in-store training, themselves in information about coffee and how to meet, greet and serve customers. Full health-care benefits (medical, dental, vision and alternative services) are offered to all employees, including part-timers who work at least 240 hours per calendar quarter. The EAP is available to all employees. Employees share in the company’s growth via "Bean Stock" (stock options) of up to 14 percent of their gross pay, and a stock-investment plan allows them to buy shares of Starbucks common stock at a discount (85 percent of fair market value) through payroll deductions. The company also matches employees’ contributions to their "Future Roast" 401(k) plans, adding from 25 to 150 percent of the first 4 percent of pay, depending on length of service.

As a result of such measures, Starbucks employees have an 82% job-satisfaction rate. This compares to a 50% satisfaction rate for all employers and 74% for Hewitt’s "Best Place to Work" employers. Though the company won’t release specific numbers, it also claims that its turnover is lower than that of most fast-food establishments. But it’s not just the benefits that attract employees. Another company survey found that the top two reasons why people work for Starbucks are "the opportunity to work with an enthusiastic team" and "to work in a place where I feel I have value."

Starbucks encourages its employees, who are called partners, to keep in mind its mission statement, monitor management decisions, and submit comments and questions if they encounter anything that runs counter to any of the six points.

·         After they train employees, they give black aprons displaying the title ‘coffee master’. This apron worn by employees, who have completed the coffee master course which educates employees in coffee toasting, growing regions, roasting and purchasing.

4.    Specific Human Resource (HR) policies and activities necessary to produce these work force requirements

The specific HR policies are called ‘SWOT’. SWOT analysis means “S” for Strength, “W” for Weaknesses, “O” for Opportunities and “T” for Strength. 

Starbucks SWOT Analysis are as follows.

·         Strengths

Starbucks Corporation is a very profitable organization, earning in excess of $600 million in 2004.The company generated revenue of more than $5000 million in the same year.

It is a global coffee brand built upon a reputation for fine products and services. It has almost 9000 cafes in almost 40 countries. Starbucks was one of the Fortune Top 100 Companies to Work For in 2005. The company is a respected employer that values its workforce.

The organization has strong ethical values and an ethical mission statement as follows, 'Starbucks is committed to a role of environmental leadership in all facets of our business.'

Starbucks is the leading retailer and roaster for brand specialty coffee in the world. Strong brand image with the motto ‘The Starbucks Experience’. Starbucks is a global organization with more than 16.000 retails in 48 countries in the entire world. One of the strongest franchises in the world with more than 6500 licenses shops in the world. Starbucks is known for providing superior products and services. Have loyal customers in all of Starbucks’ existing countries. Have a consistent high quality of service.

Outlets positioned in high street locations, malls, within other businesses areas like offices building. Wi-Fi Internet service in all of Starbucks retails. The process of preparing the product does not need highly sophisticated technology. They have limited number of strong competitors. They have high market share and market growth. Welcome all questions, comments and feedback where customers could send it by email, sms or just inform it in Starbucks retails. Have a Starbucks Workers Union which helps employees to inform their thoughts to management.

·         Weaknesses

Starbucks has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter over time. The organization has a strong presence in the United States of America with more than three quarters of their cafes located in the home market. It is often argued that they need to look for a portfolio of countries, in order to spread business risk. The organization is depen on a main competitive advantage, the retail of coffee. This could make them slow to diversify into other sectors should the need arise.

High pricing which cost not all kind of market could buy Starbucks’ products. Starbucks considered ‘American Global’ which cost sentimental issue for customers in some countries. Too focus on US domestic market. Starbucks refuses to guarantee that milk, beverages, chocolate, ice cream, and baked goods sold in the company’s stores are free of genetically-modified ingredients. Because of its perfectness of employees service, some employees complaints about the management which push them to always be perfect. That is why they make Starbucks Workers Union.

·         Opportunities

Starbucks are very good at taking advantage of opportunties. In 2004 the company created a CD-burning service in their Santa Monica (California USA) cafe with Hewlett Packard, where customers create their own music CD. New products and services that can be retailed in their cafes, such as Fair Trade products. The company has the opportunity to expand its global operations. New markets for coffee such as India and the Pacific Rim nations are beginning to emerge. Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential.

The potential employees are educated people which make it easier to train them. Customer is not price sensitive. Could be able to change negative image of coffee into positive one. High consumerism in Indonesia. Easier to penetrate market because what it sells is the fulfilment of self esteem and need to be love or to belong to community which is the major reason why peoples buy a product. Strong financial support. High growth of economy and market in Indonesia, especially in urban areas. The democratic economy policies in Indonesia make it easier for Starbucks to expand their business. Peoples in Indonesia positioned Starbucks places as one of the best meeting point. Could diverse their product not only in coffee. Many of Starbucks coffee are using organic beans. Some of Starbucks beans are harvested in Indonesia island of Sumatra and Sulawesi. Starbucks purchasing high quality beans in these island at premium prices to help farmers to support their families and invest in a sustainable production. Starbucks paid an average price of $1.20 per pound against the commodity average price of $0.40-0.50 per pound

·         Threats

Who knows if the market for coffee will grow and stay in favor with customers, or whether another type of beverage or leisure activity will replace coffee in the future? Starbucks are exposed to rises in the cost of coffee and dairy products. Since its conception in Pike Place Market, Seattle in 1971, Starbucks' success has lead to the market entry of many competitors and copy cat brands that pose potential threats. Global financial crisis which make peoples tend not to spend too much money. Low income in Indonesia makes it hard for Starbucks to penetrate more market segmentation. Sentimental issue to the bad effect of coffee from society. Some people believes that Starbucks turning the world into a giant corporate generic mess. Critics said that it exploits farm workers in third countries.

It said that Starbucks domination driving small cafes out of business. Issues stated that Starbucks exploit their workers by paying a very minimum wage with a very high standard of work they need to fulfill. Threats of substitute products and services include other drink items such as colas, teas or juices that are sold in retails.

5.    Suggest for metrics you could use to measure the success of the Human Resource strategy

There are three possible competitive strategies planning. They are, cost leadership, Differentiation and Focus.

1.      Cost leadership,

Star bucks target high class customers. It is good and currently the strategy running well. But I suggest to make some facilities to fulfill mid class customer satisfaction by reducing price or reducing conditions. May be possible, if reduce conditions and create low condition stores under the Starbucks name. Because the name, now is very popular in the market. And also the mid level customer also willing to get their services.  

2.      Differentiation

Consumers must be can recognize that different Starbucks stores have different menus, other than the standard menu. This make the customer feel fresh when they enter in to any store, with new food items. Especially at the coffee shop they need to do many changes regarding what they make every day. This is a way that we can attract the consumers and also we need introduce different food items and drink items.

3.      Focus

Starbucks target high class customers. It is possible. But I suggest to target mid level customers also. It is very fruitful decision to establish these kinds of organization nearly to mass population areas. Especially, inside the shopping malls and in the cities.

6.    Conclusion

According to above details, can get an idea about Starbucks and its competitive strategy, their workplace requirements, how they train the employees and after the training what the employees get, HR policies of Starbucks. Finally I suggested some ideas to Starbucks.