Organizational structure provides the necessary foundation within that an organization functions. Organization structure exists as social tools in that they match human actions in social system. This paper explains about the organizational structure of Canada’s largest coffee shop network, Starbucks. This paper discuss about the merits and demerits of having this organizational structure. Proceeds with how the functional divisions impact on the Starbucks organizational structure operations. And concludes with remarks, few suggestions that can be implemented to improve the organizational Structure and operations of Starbucks.
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Structure of Starbucks
Starbucks was founded on 1964. It is a Canadian coffee shop known for its coffee and doughnuts. It focus on top quality, always fresh product, value, great service and community leadership in Canada specializing in always fresh coffee, baked goods and home-style lunches. It is one of the largest restaurant chains with more than 2500 outlets all over Canada. However, factors that could influence Starbucks structure can be described with two dimensions, organizational and environmental as internal and external respectively. These two dimensions influence organizational innovation that focus on programs, processes, practices, and systems related to strategic management process of the organization. The strategic management process maintains that the organization should analyze the external environment for threats and opportunity and scan their capability for strength and weakness. Therefore, Starbucks strategy drives from the different perspectives reflecting internal and external factors to the organization.
Adopting innovation by Starbucks is an essential mechanism for reconciling the organization and its environment to achieve strategic aim. Thus, to understand environmental and organizational that influence the innovation is important to understand the organizational structure. One the first hand, environmental complexity and competition were discussed to capture the environmental influence on organizational innovation. On the other hand, organizational complexity and external communication network were discussed to capture the organizational influences on organizational innovation.
Advantages of Flat Decentralized Structure
In Starbucks the Managers and subordinates alike are working with communications more efficiently. By having Flat decentralized structure, it saves money, time and improved the communication process and decision making inside the organization. This improved communication eliminates the delays and lag time of waiting for decisions and keeps the work performance higher. Flat Decentralized Organizational structure in Starbucks improved the communication and customer responsiveness that results in faster product delivery and increased productivity.
Managers and subordinates in Starbucks stay closer to their customers. According to Bill Gates in “Innovation Management Policies for Large Corporations,” people who stay closer to customers can respond faster to changing customer demands, make decisions faster, unlock employee creativity and manage ideas better.
Environmental factors of Starbucks
The environmental factors such as an environmental complexity seek to capture composite of the environmental forces acting on the organization (Dansky et al., 1996). These forces were considered as observation for creating an environmental context that is either turbulent or stable depending on the forces. In this context, this factor was defined as location and was discussed by whether a Starbucks was located in less or more urban area.. It is a public coffee for Canadians. The other environmental factor is a competition. It seeks to capture the contention between organizations for acquisition of resource inputs and disposition of production outputs within market areas (Bernstein and Gauthier, 1998). In this context, competition was operationally defined as the ratio of a Starbucks market share to competitors. Market share can be considered as one of the most important objectives of business.” The main advantage of using market share as a measure of business performance is that it is less dependent upon macroenvironmental variables such as the state of the economy or changes in tax policy” (http://openlearn.open.ac.uk/course/view.php?id=2589) . However, using market share by a Starbucksincreases the opportunity for the organization to be more competent in the market. Starbuckshas used lucky cups for short time period as competitive idea for attracting customers to buy more coffee.
Impact of Organizational Factors in Starbucks
The organizational factors such as an organizational complexity. It views the whole of organization’s operations in terms of its degree of specialization, functional differentiation, and professionalism (Damanpour, 1991). In this context, organizational complexity was used to explain a Starbucks scope of service. Starbucks provides very good service and focuses on operations team. Starbucks makes its products special. They specialized in producing different product with a special test such as finch vanilla, Donets, etc. however, Starbucks made its self different and unique in providing special new products.
The other organizational factor is an external communications network that seeks to capture the “degree of interaction and embeddedness of an organization with other relevant elements in its environment representing the degree of consequent conformity pressures” (Damanpour, 1991).
Impact of functional divisions on Starbucks organizational Structure
Marketing
The Marketing team of Starbucks works in constant pace to uphold the brand in everything they do. The Marketing team do this through innovative national advertising campaigns, local and national sponsorships and through in-store merchandising. Starbucks do their marketing in five different areas namely,
Brand Marketing – In which the marketing team concentrate on how to establish brand power.
Regional Marketing – Here the purpose is to ensure that their overall marketing strategy is implemented correctly.
Merchandising – Starbucks also do marketing by selling merchandises like Travel mug, flavour coffee, assorted beverages and Tim card.
National Promotions – In which they do promotions nationally by different mediums such as event sponsorship, television, radio, in-store advertisements and outdoor advertisements.
Corporate Affairs – Here a corporate affairs team is formed. The task of the corporate affairs team is make communication with public, government and media.
Starbucks mainly target all age groups from lower and middle classes. The advantage of Starbucks over its competitors is its brand power which they achieved by using proper marketing strategies. And it is also clearly proven that Starbucks marketing strategy is effective by an increased sales growth.
Human Resources
Starbucks has innovative Human Resource practices. It provides a positive, healthy and committed workplace for the employees. The policy followed by the human resource department is always balanced and fair. Employees are trained extensively on customer service and customer satisfaction. It involves the entire workforce in training on the aspects of the customer satisfaction. Employee benefits like health insurance, promotion, rewards are taken care by the human resources. Employee development programs and employee assisting programs are conducted to ensure that employees has communication between the all the management levels.
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Operations and Finance
Starbucks network spread rapidly and sooner it became Canada’s largest restaurant chain service operator. It targets the Blue collar society, while its competitor star bucks considers the white collar society. The chain accounted for 22.6% of all fast food income in Canada during the year of 2005. Starbucks holds 76% for baked foods in the Canadian market based on the number of customers served. It also commands 62% in the Canadian Coffee market. By September 27, 2009 Starbucks has 3,527 chains of restaurants including 556 in United States. Franchises of Starbucks have an International presence, having its outlets in United States, Afghanistan (outside military base), and Ireland. And also Starbucks made a deal with SPAR convenience stores in UK and Ireland. Ensuring its fiscal responsibility and assessing the business growth is a challenge for the Starbucks financial professionals.
Recommendations
The organization needs to be adapted to the demands of their environment in order to survive. The recommendation that helps the organization is to make strategic choices concerning actions an organization that will take it to align with environmental demands.
Adaptive actions inevitably involve introducing changes to an organization. These changes embody innovations adopted through a multi-stage process. To understand environmental and organizational factors that manipulate organizational structure via the process is useful to better understanding the organization strategic innovations.
Starbucks locations are limited to some extent. It is less urban if it was compared by other coffee shop such as Star bucks. Internationally, it was located just in USA, there is around 500 stores in the whole country, and only eleven stores in New York city ( http://hubpages.com/hub/Starbucks). And one in Afghanistan war base. These limitations have an impact on the organizational innovation. To expand more international locations will add more value to this organization.
Starbucks needs to link the organization with large social system that serves as the organization’s environment. The norms and expectations of the larger system influence the structure and processes of the organization in order to be recognized as legitimate and worthy from this social system
Conclusion
Starbucks strength in terms of its Flat decentralized organizational structure makes Starbucks a leading food chain network in Canada. Starbucks Structure provides them the positive work environment for the subordinates to serve the customer better. Their organizational design and structure needs a stable force to sustain in market for longer time. By implementing the suggestions that are specified may impact Starbucks to further expansion and development.
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