_Starbucks ' Resources, Capablilities, and Core Competencies _
By: Gino
RESOURCES, CAPABILITIES, AND CORE COMPETENCIES "We can't achieve our strategic
objectives without a work force of people who are immersed in the same
commitment as management. Our only sustainable advantage is the quality of our
workforce. We're building a national retail company by creating pride in--and
a stake in--the outcome of our labor." --Howard Schultz Founder
and CEO of Starbucks According to this statement, the human resource is the
number one resource in Starbucks Corporation. Schultz believes that happy
employees are the keys to competitiveness and growth. In 1996, Starbucks
employed approximately 16,600 individuals, including roughly 15,000 in retail
stores and regional offices. * All of these "happy" employees help account for
another of Starbucks' intangible resources--the company's reputation for
providing quality and knowledgeable serviceStarbucks deploys their human
resources by requiring that each employee have at least 24 hours of training.
Classes cover everything from coffee history to a seven-hour workshop called
"Brewing the Perfect Cup at Home". This workshop is one of five classes that
all employees (called partners) must complete during their first six weeks
with the company. This workshop focuses on the need to educate the customer in
the proper coffeemaking techniques. Store managers teach the classes. These
classes are designed to teach the employees to make decisions that will
enhance customer satisfaction without requiring manager authorization.*
Another way that Starbucks ensures that its employees are content is by
offering a stock option plan called the Bean Stock Plan. After one year,
employees may join a 401K plan. There is a vesting period of five years; it
starts one year after the option is granted, then vests the employee at 20
percent every year. In addition, every employee receives a new stock option
award each year and a new vesting period begins. * Schultz believes that
without these benefits, people do not feel financially or spiritually tied to
their jobs. He argues that stock options and the complete benefits package
increase employee loyalty and encourage attentive service to the customer. *
Starbucks hopes to attain a sustainable competitive advantage by keeping its
employees happy and trained which in turn leads to superior customer service.
As of early 1998, Starbucks Corporation (with the exception of airport
locations) owns and operates 1,250 retail outlets worldwide. These outlets
include: company operated units, coffee connection outlets, and licensed
kiosks located in airports. It also operates three roasting and distribution
facilities. The stores range from 200 to 400 square feet, with new units
tending to range from 1,500 - 1,700 square feet. However, the intangible
resource associated with these physical resources is the ambience that each
store provides. The firm employs a staff of over 100 people whose job is to
plan, design and build the unique interiors and displays. Starbucks opens its
stores in those cities where its direct mail business is strong so it can
ensure a ready audience. * By owning and operating most of its outlets and its
roasting and distribution facilities, Starbucks has a broad range of control.
Store design, training and evaluation, promotional events, etc. are all
controlled by Starbucks. This equates to a competitive advantage over rivals
such as Seattle's Best Coffee (SBC) who franchises rights to its stores in
order to expand rapidly, but lacks total control of its own operations As
far as its other primary physical resource, coffee, Starbucks has a reputation
for obtaining some of the worlds highest quality coffee beans. In order to
make this work, Dave Olsen, the company's senior vice-president and chief
coffee procurer, scours mountain trails in Indonesia, Kenya, Guatemala, and
elsewhere in search of Starbucks' premium bean. His standards are demanding
and he conducts exacting experiments in order to get the proper balance of
flavor, body, and acidity. * This capability of attention to detail and
caliber is one way how Starbucks delivers a consistently high-quality product.
According to the 1998 S, Starbucks has a P/E ratio of 47.1. * This valuable
financial resource indicates that Starbucks is a fast growing and a relatively
low risk company for investors to invest in. Starbucks is taking advantage of
this resource by obtaining both short and long-term capital to finance its
rapid expansion both domestically and abroad Starbucks also has resources
within its company partnerships, and agreements with foreign growers and their
host countries. Partnerships with companies such as Nordstrom and Barnes
&Noble allow Starbucks to set up shop in arenas suitable to the Starbucks
experience. A joint venture with Pepsi has produced successful sales of
Frappucino within supermarkets. Developing relations with foreign countries
and growers have enabled Starbucks to obtain rights to the Narino Supremo
coffee bean - one of the highest-quality beans in the world. * These
agreements are providing opportunities for Starbucks to expand its product
line, obtain high-profile locations, procure reliable sources of quality
coffee beans, and penetrate foreign markets Starbucks' main core competency
is its ability to offer a quality cup of coffee served by attentive and
knowledgeable staff in a comfortable environment while continuing to grow at a
rapid rate. Presently, Starbucks does not have any rivals that can match its
reputation, nor its ability to grow.
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