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Friday, 09 May 2014 18:54

Strategic Plan for Starbuck Company Featured

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Strategic Plan for Starbuck Company


Strategy Selection

The environmental scan revealed that Starbuck is a strong organization operating in markets that have many threats. However, the market still has high opportunities for growth due to globalization. In reference to the grand strategy matrix, an organization that is in a strong competitive position and is operating in a market with a high potential for growth has the following strategic alternatives; market development, market penetration, product development, forward integration, backward integration, horizontal integration and related diversification (Zheng, 2007). In this case, the company chooses to pursue the market development strategy. Market development strategy entails taking the company’s existing products to new markets (Ansoff, 2004). Since the company is facing threats in its Europe and North American markets due to the prevailing economic conditions, Starbucks intends to extend its operations in emerging markets, specifically the African market. This geographical region has been recording tremendous economic growth and a rapid expansion of the middle class. This market presents immense opportunities for Starbuck.       


Implementation Plan

Starbuck intends to establish its presence in the African market. Unlike the European market, African economies have recorded tremendous economic growth rates within the last decades. This continent is home six of the ten world economies that have had the fastest growth rate between 2001 and 2010 (Kristof, 2012). This economic trend has seen many members of the African society being lifted into the middle class status. Similarly, the African population is young and growing. This means that the economy of these nations is likely to continue to grow. The market will also continue to expand due to the growing population. Despite this market showing tremendous opportunities, it remains relatively unexploited by multinational companies. Many players within this market are independent players who have limited capacity to serve the growing market. This presents an opportunity for Starbuck to grow it sales and revenues by expanding into the untapped market. The long term goal of this strategy is open 2000 new outlets in different African cities in the next 6 years. It is also Starbuck long term objective to increase its share in the African market to 40% in the next 6 years.


Short Term Objectives

  1. To establish 100 new outlets within African with the next 1 years.
  2. To increase the company’s share of the African markets to 10% in the next 1 year.
  3. To increase the customer retention rate to 70% in the next two years.

Functional Tactics

The first functional tactics entail establishing new outlets within the African. Starbuck intends to open 100 new outlets within the next two years. This mean that the Starbuck has to make all the logistical plans to ensure that these outlets are up and running. These include establishing the physical facilities, creating the supply chain and hiring new employees. Starbuck will use a partnership approach in order to speed up the process of establishing these new outlets. The company will establish good working relationship with local governments, suppliers and other businesses.


Starbuck also intends to increase its share in the African market to 10% within the next 1 year. Thus, the firm will need to undertake an aggressive campaign for popularizing the company’s brand and products. Various promotional strategies will be used including advertising, internet marketing, publicity, and direct selling. The company will sponsor various community events for publicity purpose. Price will also be an essential element of our marketing strategy. Starbuck will adopt a penetrating pricing approach entail lowering the cost of the company’s product at initial stages in order to attract new customers.


The third short term objective entails increasing customer retention rate to 70%. Starbuck intends to retain its customers by delivering services of the highest quality. This implies getting the best raw material and training employees in order to ensure that they deliver exceptional services. Starbuck will also use relationship marketing tactics such as tangible rewards, personalized communication, direct mail, and preferential treatment to increase retention rates (Rezaei & Khajei, 2010).  For instance, repeat customers will be accorded preferential treatment in order to promote repeat visits.


Action Items

The first action item entails identify suitable locations for the new outlets. In order to establish 100 new outlets, there is a need for the implementation team to identify the location for these items. Various factors will be considered including the political climate of the locations. The second action item entails identifying suppliers. Since these are completely new market, there is a need to create reliable supply chains. The third action item entails hiring employees. Starbuck will need thousands of employees to work in the new location. The implementation team needs to ensure that these employees are hired.  


A number of action items will also be executed so as to achieve the second short term objective. The first action item is to design advertising messages. Since this is a new market, new messages need to be designed so as to reflect the characteristics of this market. The second action item entails rolling out the advertising messages through media including mass media and social media. Starbuck will also need to identify community events that need to be sponsored within these markets.  


Starbuck will also need to do an evaluation of suppliers in order to ensure that it gets raw materials of the highest quality. This will ensure that Starbuck is able to maintain high standards of quality when it comes to its product offers thus increasing retention rates. Starbuck will also need to develop a training program and train newly hired employees so as to make certian that they can deliver the expected standard of customer service. Starbuck also need to establish media and technologies for managing customer relationships.


Milestones and Deadlines

Date

Milestone

01 November – 01December

Find locations for new outlets

01 December- 31 December

Identify suppliers

02 January- 28 February

Hire employees

01 February-28February

Design advertising messages

01March- 15March

Roll out advertising messages

15March- 31March

Identify community events

01March- 01 April

Evaluate suppliers

01March- 01April

Train employees

01April- 15 April

Establish CRM infrastructure


Tasks and Task Ownership

Task ownership is a critical element for improving employee performance. It makes team members accountable for the implementation of tasks. It also develops a sense of employees’ ownership of the project. Below is the tax ownership matrix;

Task ID

Task Name

Task Owner

1

Identifying locations for new outlets

Robert Smith

2

Identifying suppliers

Faith Luvergeon

3

Hiring employees

Theodore Burns

4

Designing advertising messages

Robert McGinn

5

Rolling out advertising messages

Ruth Korologos

6

Identifying community events

Peter Miles

7

Evaluating suppliers

Judith Buchmann

8

Training employees

Robert Smith

9

Establishing CRM infrastructure

Armando Ibarguen

In this case, the task owner takes full responsibility for the implementation of the task. He or she will coordinate the activities related to the tasks.


Budget and Resource Allocation Matrix

Strategic Function

Output

Allocation in US$

Identifying locations for new outlets

Conduct research and establish 100 suitable locations for the new outlets

1000,000

Setting up new establishment

Establish physical establishments within the identified location

50,000,000

Identifying and Evaluating suppliers

Come up with a list of suppliers who will meet the needs of the new establishments

1000,000

Designing advertising messages

Conduct a market research and identify the communication needs of this market

1000,000

Rolling out advertising messages

Roll out the advertising messages through various media

5,000,000

Hiring employees

Recruit and select employees who will meet the organizations needs.

5000,000

Training employees

Train employees on service delivery and about the values of the organization

1000,000

Sponsoring community events

Identify and make arrangement for these publicity exercise

10,000,000

Establishing CRM infrastructure

Establish the infrastructure that will facilitate management of customer relationships

1000,0000

 

Total

75,000,000


Change Management Strategy

This strategy implementation process will not require Starbuck Corporation to make major adjustments to its ways of operation. The mission of Starbuck Corporation is to nature and to inspire the human spirit. This mission remains relevant to the company’s new strategic plan. This mission will be communicated and reinforced within the new establishments. Starbuck will also seek to maintain the existing culture, which has raised the innovativeness of the company to new heights. Starbuck seeks to reinforce this culture to the new establishments. The current organization structure will, however, need to be reorganized into to facilitate the introduction of the new geographical market. An extra division will be added to the organizational structure to incorporate the new operations within Africa. In terms of competitiveness, the company will continue creating its competitive advantage through the differentiation of it products. The company intends to take its high quality products to the newly established markets.


Key Success Factors

Cooperation between different units and different strategy levels is a critical success factor in the strategy implementation process (Li, Gouhui & Eppler, 2010). Starbucks has several business units, which assume significant roles in the process of implementing this strategy. For instance, the financial division will be responsible organization all the financial logistics while the marketing division will be responsible for coordinating the marketing activities. Lack of cooperation among the business units will lead to strategy failure.


The second critical success factor in the strategy implementation process is the quality of the executors (Li, Gouhui & Eppler, 2010).  Executors are the people involved in the implementing the strategy. The success of the implementation process will depend on the skills, capabilities, attitudes and experiences of the executors. Thus, it is essential for Starbuck to select a team that is highly competent and fully committed to ensuring the strategy is implemented.


Availability of resources is also critical success factor (Li, Gouhui & Eppler, 2010). The strategy implementation process requires resources including human and financial resources. The implementation process cannot succeed without these resources. Consensus between the different stakeholders of the business will also be critical in ensuring the strategy is implemented successfully (Li, Gouhui & Eppler, 2010). Starbuck has to deal with various stakeholders including shareholders, employees, national and local governments, local communities and financiers among others during the strategy implementation process.


Risk Management Plan

The demographic and economic trends make African an attractive business destination. However, this market is full of risk. These risks can be categorized into; market risks, credit risks, labor risks, liquidity risk, physical risks and legal risks. Market risks are associated with changes in interest rates, prices of commodities, foreign exchange and inflation rates. Credit risks are associated by failure by debtors to pay their debts. Physical risks include fires, earthquake, theft, and floods among others. Legal risks are associated with law suits that are instituted against the company.


 Starbuck has established various strategies for managing these risks. The first strategy is risk transfer. This strategy entails transferring the impacts of risks to another party (Dimitriadi, 2007). Starbuck will use approaches such insurance and contracting to transfer risks. Insurance ensures that impacts of risks are transferred to insurance companies. Contracting ensures that the impacts of risks are transferred to the contractor. For instance, Starbuck can outsource cleaning services in order to transfer labor risks to the cleaning company.


Starbuck will also use the risk reduction strategy to manage risks. Risk reduction entails reducing the probability of the risks occurring or reducing the impact of risks in the events of the occurrence of the risks (Dimitriadi, 2007). For instance, Starbuck can reduce the probability of theft by selecting secure locations for its outlet. Risk of fires can be reduced by developing an effective preventive and response measure. Credit risks can be minimized by setting aside a contingency fund. Labor risks may be reduced by hiring employees through recruitment agencies.


The final risk management strategy that Starbuck intends to use is risk retention. This entails voluntary accepting the occurrence of the risks and its impact (Dimitriadi, 2007). This strategy will be employed on risks whose impacts are negligible to justify any action by the organization. For instance, Starbuck may choose to retain the risk associated with changes in prices of input if records indicate insignificant fluctuations in prices of inputs. 


References

Ansoff (2004). Strategies for Diversification. Harvard Business Review

Dimitriadi D. (2007) Risk Management Strategy. October 3, 2013. http://www.gcu.ac.uk/media/gcalwebv2/theuniversity/supportservices/financeoffice/Risk_Management_Strategy.pdf

Kristof N. (2012). Africa on the Rise. October 3, 2013. http://www.nytimes.com/2012/07/01/opinion/sunday/africa-on-the-rise.html?_r=0

Li Y. Gouhui S. & Eppler M. (2010). Factors Influencing Strategy Implementation. October 3, 2013. http://www.knowledge-communication.org/pdf/making-strategy-work.pdf

Rezaei A. & Khajei R. (2010). The Impact of Relationship Marketing Tactics on Customer Loyalty. International Journal of Business Administration. 2 (3): 83- 93

Zheng W. (2007). Analyzing Company Strategy. October 2, 2013. http://edissertations.nottingham.ac.uk/1110/1/Management_Project_-_EMC_Strategic_Analysis-Final.pdf


 

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