International Management of Starbucks - Case Study Example

Starbucks throughDifferent Challenges of International Management Company Background Starbucks, the coffee company, is the perfect example of a product that could have gone the route of a shallow brand. After all, what is so special about serving coffee As the Starbucks brand proves, this is a question that other retailers would have benefited from asking. Starbucks is full of warm, rich colors and shapes and is set up so customers have a lot to look at while waiting for their order. It is visually stimulating in a way that is pleasant to most people. Compare this to a typical coffee shop, where the customer is often subjected to bright, harsh lighting and is often in the way of traffic flow, making him or her feel vaguely uncomfortable. Accommodating fast growth also meant putting in systems to recruit, hire, and train baristas and store managers. (Student Resources:2005) Starbucks' is simply looking for passionate people who love coffee, diverse workforce which reflects their community and who enjoys what they're doing and for whom work is an extension of themselves. 16 Some 80 percent of Starbucks employees were white, 85 percent had some education beyond high school, and the average age was 26. All positions are filled internally about 60-70%. Automated staffing services between hiring managers and staffing teams and Starbucks has a user friendly field sourcing and selection tools in place. Internal movement processes and systems in place and broadly understood. (Student Resources:2005) Campus recruiting are also in place for all major areas of the company and also place intern programs to early identify future talent. Management also relocates benchmarked at or below industry averages. Moreover, cutting edge technology and processes employed for candidate pre-screening because of well defined department metric in place and continually improving. The Starbucks Corporation does not allocate money to its stores for hiring janitors. Every aspect of the cleaning process in Starbucks stores is carried out by the baristas. (Student Resources:2005) The same people who make the drinks are scrubbing the bathroom floors. The baristas of each store work in different shifts throughout the day, usually divided two ones, morning and afternoon, or three morning, afternoon and evening. Each shift is consisted of usually of three or four baristas, the number may change, depending on customer flow of the specific store, who share different duties throughout the shift. Usually, a store is internally divided between floor, where the baristas work and serve customers and the back, usually referred to the storage room, bathrooms. Unless very small, the store usually also has a caf section, where the customers can sit down with their coffee. Starbucks during Global Expansion The global expansion of Starbucks was not an overnight success especially in Asia. There have been numerous challenges that Starbucks have to encounter in penetrating the Asian Market (Culpan, 2002). For example in China and Japan, they had a difficulty in creating a coffee market niche because of the prevailing tea market in China and Japan for over 50 years and yet Starbucks have to create Chinese and Japanese Starbucks to suit the taste of the coffee market in these countries . Starbucks also have to worry of the national based coffee shops in the Asian countries, such as Japan based- Manave Coffee, Taiwan based Dante coffee, Mocha Blends in the Philippines and even Mc Caf of McDonalds. Another difficulty that Starbucks faced during their expansion is that opening a coffee in a country needs different strategic orientations, organizational structures and management process because it does not mean that Starbucks in the United States since it's the father branch, it reflects the same characteristics as the other countries. At the same time, Starbucks also has to evolve its principles from being an international company into a transnational company because they have to undergo a lot of changes in the global business environment (Culpan, 2002). According to Bartlett & Ghoshal, there are two dimensions in a global expansion and this is what Starbucks implemented during their international expansion (Culpan, 2002). These are global efficiency and integration and local responsiveness. With this kind of perspective, Starbucks considers the domestic markets of the countries where they expand as their limbs. As a result, the main branch of Starbucks utters the strategic directions by giving drafts of the policies and operational guidelines and assigning expatriate managers to overseas posts. Starbucks gives importance to the international markets and commits itself by giving the peculiarities of the domestic market (Culpan, 2002). This led Starbucks to respond to the needs of the local market and at the same time face the local competition. Consequently, it adjusts its strategy, products, and even management practices country by country. Its fundamental strategy evolves around having a number of national subsidiaries sensitive and responsive to each national market. As an extension of this strategic approach, each subsidiary is run autonomously by making its own entrepreneurial decisions concerning the new initiatives. To achieve worldwide efficiency, a global company like Starbucks sets up its production facilities in selected countries and distributes its products across countries (Culpan, 2002). The underlying assumption of the global company is that worldwide consumer demand is similar, and therefore there is no need to modify its product country by country. Since Starbucks is a transnational company they combine both the benefits of production efficiency and local responsiveness. This type of company aims at accomplishing production efficiency while making necessary changes in product design, manufacturing, and distribution because of the local market conditions. That is, it combines multinational and global strategic mentalities into a single strategic orientation. There are several factors have contributed to the emergence of Starbucks' transnational patterns: host government demands, consumer behavior, and volatility in inter national economic and political environments (Culpan, 2002). Many host governments have developed an opposition to export-oriented strategies of global companies and imposed on them increasing constraints. Moreover, Starbucks' consumers without giving up on high quality and low cost have expected homogeneous products for their needs. Volatility in economic and political environments has increased considerably. Particularly rapid changes in exchange rates have had a negative impact on the performance of companies engaged in a centralized global strategy. All these conditions together called for a new approach toward a transnational solution combining the characteristics of multinational and global companies. Although some of the requirements of multinational and global strategies are incompatible, companies such as transnational firms are the ones that can respond effectively to this challenge. Although Bartlett and Ghoshal's typology of international, multinational, global, and transnational strategic mentalities academically sounds good and grasps the evolution of mindsets of managers in internationalization process and strategy development, as the authors admitted, it is necessarily over-generalized and undoubtedly somewhat arbitrary. In practice, of many companies that have international operations, only a few fall into the purely international, multinational, global, or transnational categories (Culpan, 2002). Attributes of international companies are often so diverse and complex that it becomes difficult to categorize them appropriately. Culture Dimension of Starbucks The first dimension is power distance. As defined by Hofstede (1991), power distance "is the extent to which the less powerful members of institution and organizations within a country expect and accept that the power is distributed unequally" (Hofstede, 1991, p28). Therefore, according to Hofstede (1991), power distance indicates to what extent the society accepts the centralized power from the superior, it distinguishes the relation between subordinate and superior. Countries such Japan and other Asian countries are having a high power distance. Whereas countries such as USA and UK are having a lower power distance. The chart above indicates that Asian countries are having high power distance compared to UK. (Cited in Hofstede, 1991) The second dimension of culture is Individualism/collectivism. This dimension refers to the role of the individual and group whose interest prevails over the others. The collectivism culture is usually observed in high context communication countries similar as the one proposed by Hall (1976), where employee and employer relationship is defined in moral terms. Whereas the individualism countries have low context communication, and the relationship between the employer and employee is passed on mutual advantage. According to Hofstede (1991), collectivism is likely to appear in high power distance countries, and the collective dimension is refer to the "we" group in the source of identity, loyalty and dependent relation (Hofstede, 1991). In this cause the people in this culture integrate into strong cohesive groups who protect themselves and demand loyalty throughout lifetime. The collectivism culture can be found in Ecuador, Pakistan, Arab countries etc, where there are large families, close relationship, and where conflict is minimized. Therefore people who deviate from this norm are considered as a bad or weak character. Therefore, individualism dimension distinguishes countries in which employees are determined by their individual action. Thus individualist can be found in a small power distance. Since USA ranked as the highest individual culture and Britain third; accordingly individualism in the USA and UK branch of Starbucks prevail as "pertains to societies in which the ties between individuals are loose". Moreover, in the individualist culture the interest of the individual is over those of the group. As they are characterized by individual and personal characteristics rather than group, the ties between individuals are very loose, and everyone is expected to look after him/herself. In this cause, the individualism culture is more regarded to assertiveness, trust and high conflict, and the self actualisation is the goal, as shown in the chart that Asian countries scored an average of (38) compared with USA scored of (91). (Hofstede, 1991). Starbucks developed a three-year geographic strategy that targeted areas which not only had favorable demographic profiles but which also could be serviced and supported by the company's operations infrastructure. (Kennedy: 2000) For each targeted region, Starbucks selected a large city to serve as a "hub", teams of professionals were located in hub cities to support the goal of opening 20 or more stores in the first two years, Starbuck created zone vice presidents to direct the development of each region and to implant the Starbucks culture in the newly opened stores. Starbucks had notable success in identifying top retailing sites for its stores. The company had the best real estate team in the coffee-bar industry and a sophisticated system that enabled it to identify not only the most attractive individual city blocks but also the exact store location that was best. The company's site location track record was so good that of 1997 it had closed only 2 of the 1,500 sites it had opened. Starbucks utilizes the four views of leadership: Power view, transformational, Paradigm shift and social views. (Datamonitor: 2005) The power view is characterized by the ability to face the world with a strong sense of mission and to accomplish what is necessary in a confident, clear, Starbucks way. Any number of leaders may come to mind, some more or less.(Fandt and Quirk:2005) While the transformational view focuses on leaders who have idealized influence, inspirational motivation, intellectual stimulation and individualized consideration. The leader constructs a culture that is dedicated to and supports a creative and empowering vision. The Paradigm Shift view has an element similar to the Transformational view but also includes scanning the environment for new opportunities, as well as taking risks about new ways of doing things and conducting business.(Fandt and Quirk:2005) The Paradigm Shift view moves beyond what is possible in the current realm of things and looks for an entirely new order, taking on an entrepreneurial focus. The third culture dimension is masculinity/femininity. Hofstede (1991) refers the masculine dimension to "male achievement" as it emphasizes assertiveness characteristics which associated with high earning, recognition for a good job, advancement and challenge to have personal accomplishment. As illustrated by the Hofstede research, societies where gender roles are clearly distinct, material success, progress and money are the most dominate values. The top two ranking masculine countries are Japan (95) and Austria (79). Consequently, in these countries, men are supposed to be assertive, ambitious, and tough where women tend to take care of relationship. However, Hofstede refers the feminine society as having a modest characteristic where there is a good working relationship and cooperation. Similarly, in this dimension, there is a desirable living area for family and employment security, and the roles are merged between both men and women. Hofstede ranked Sweden and Norway as the most feminine society. In these countries, the dominating value is caring for others and the relationships seem to be more important. As a result there is less conflict in the society and everyone seems to be modest. Most of Starbucks employees are dominated by women although they also hire men especially in Asian countries. The final culture domination identified by Hofstede is uncertainty avoidance, which he defines as "the extent to which the members of a culture feel threatened by uncertain or unknown situation" (Hofstede, 1991). There are two types of uncertainty avoidance culture: either strong or a weak. The strong uncertainty avoidance creates high anxiety. Hofstede (1991) suggests that an "uncertainty avoidance" society tends to believe that there is one truth, and show its emotions to others by expressing itself. This kind of society is aggressive. Such culture can be found in Israel and Asian cultures like those of Japan and Taiwan. As a result, countries with high power distance and collectivistic tend to be high on uncertainty avoidance. On the other hand, the week uncertainty avoidance culture is not inclined to express their emotions and aggression. So this society has a low anxiety level and according to Hofstede (1991), a significant number of people in this type of culture suffers from heart diseases due to their repressed feelings. In addition, they consume high amounts of caffeine (i.e. tea and coffee) to reduce stress, as is highly evident in UK and Sweden. Works Cited Allen, C. What is Strategic Marketing Planning, Electronically retrieved 28 March 2006, from http://www.allen.com/cgi-bin/gt/tpl.h,content=125, 2006. Crouch, A. Fast-Food Business Strategy. The Raw Prawn Blog, C1,C4, 2004. Culpan, Refik. Global Business Alliances: Theory and Practice. Westport CT, 2002. Datamonitor Starbucks Corporation. http://www.datamonitor.com/0620e38a74d54ea7ad28976ad8c15d1a/companies/company/pid=E8, 2005. 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