Starbucks understands the important role each participant

strategy Management Case studies

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Stirring Things Up

Summary

Starbucks understands the important role each participant in its value chain plays. Starbucks offers a selection of coffees from around the world. There are many potential challenges in “transforming” the raw material into thubte quality product and experience that customers expect at Starbucks. Weather, shipping and logistics, technology, political instability, could potentially impact what Starbucks is in business to do. Although those are significant operations management challenges, the most challenging issue facing Starbucks today is balancing its vision of the uniquely Starbucks’ coffee experience with the realities of selling a $4 latte.

Starbucks’ products have become an unaffordable luxury for many. As revenues and profits have fallen during the economic downturn, CEO Howard Schultz realized that “the company needed to change almost everything about how it operates.” The recession and growing competition forced Starbucks to become more streamlined.

At one of the first stores to implement the “lean” techniques , (a Japanese methodology designed by Saki-chi Toyoda), the store manager looked for ways for her employees to be more efficient with simple things like keeping items in the same place, moving drink toppings closer to where drinks are handed to customers, and altering the order of assembly. After two months under the new methods, her store experienced a 10 percent increase in transactions.

Discussion Questions

1. Starbucks’ uses a combination of production/operations technology in its retail stores. Would you describe this technology as unit, mass, or process? Explain your choice. How does its production/ operations technology approach affect the way products are produced?

2. What uncertainties does Starbucks face in its value chain? Can Starbucks manage those uncertainties? If so, how? If not, why not?

3. Go the company’s Web site, www.starbucks.com, and find the information on the company’s environmental activities from bean to cup. Select one of the steps in the chain.

Describe what environmental actions it is taking. How might these affect the way Starbucks “produces” its products?

4. Research the concept of lean manufacturing. What does it mean? What benefits does “lean” offer? How might a business-like Starbucks further utilize the concepts of being lean?