qwertyuiopasdfghjklzxcvbnmqwerty uiopasdfghjklzxcvbnmqwertyuiopasd fghjklzxcvbnmqwertyuiopasdfghjklzx cvbnmqwertyuiopasdfghjklzxcvbnmq Starbucks and its Operations wertyuiopasdfghjklzxcvbnmqwertyui A comprehensive study opasdfghjklzxcvbnmqwertyuiopasdfg hjklzxcvbnmqwertyuiopasdfghjklzxc vbnmqwertyuiopasdfghjklzxcvbnmq wertyuiopasdfghjklzxcvbnmqwertyui

opasdfghjklzxcvbnmqwertyuiopasdfg hjklzxcvbnmqwertyuiopasdfghjklzxc vbnmqwertyuiopasdfghjklzxcvbnmq wertyuiopasdfghjklzxcvbnmqwertyui opasdfghjklzxcvbnmqwertyuiopasdfg hjklzxcvbnmrtyuiopasdfghjklzxcvbn mqwertyuiopasdfghjklzxcvbnmqwert yuiopasdfghjklzxcvbnmqwertyuiopas

By Pritpal Singh - 2011145

Operations Management The Business

The food-service industry in the United Arab Emirates, particularly the coffee shop sector, has witnessed an impressive growth in the past several years, in parallel with the growing number of tourists who go to Abu Dhabi (UAE Economy, 2009). The coffee market in UAE has been markedly flourishing in the past decades, leading to the sprout of the number of coffee shops in the city. The coffee drinking culture in the said country has been one of the most eclectic from gourmet to the local blends served in coffee houses (Mathias, 2005). To date, there are twenty-eight existing coffee shops in the Abu Dhabi area (Abu Dhabi Online Services, n.d.) catering to Emiratis, expatriates and tourists alike, whose main diversion nowadays is spending time in coffee shops. To this end, this paper aims to evaluate the operations management of StarbucksCoffee in Abu Dhabi, UAE. The business is specifically designed to cater to the clients hearts desires and whims and make their Starbucks coffee patronage worth repeating over and over again. The business aims to

establish competitive advantage through providing clients with a unique Starbucks Coffee experience each and every time they enter our coffee house.

The Company
The coffee shop industry in the Middle East is continually flourishing, as evidenced in the wealth of said establishments in the area. There are more coffee shops are in Abu Dhabi than in Al Ain, in fact, there are only eleven coffee houses in the latter (Abu Dhabi Online Services, n.d.). However, there are 447 coffee establishments in the whole of UAE (Abu Dhabi Online Services, n.d.), testament to the big industry in the emirates. Mathias (2005) observed that coffee houses are on every second corner in all the emirates as emiratis, tourists and expatriates alike spend a large portion of their time in coffee houses holding important meetings and social gatherings. The Business Manager of Starbucks Coffee Middle East Mike Hoff quotes that "Over hundreds of years a rich coffee culture has grown across the Middle East, and this reflects in the UAE coffee practices as well (Starbucks, 2009). Today, coffee has taken on a new dimension with a diverse range of flavors and atmospheres in which consumers can enjoy some of their favorite coffee beverages" (cited in Mathias, 2005)

Operations Management Processes When running a business project, it is important to understand the values and issues that stakeholders have in order to address them and keep everyone on board for the duration of the project (Burke, 2003). Stakeholders are not always keen to participate but engaging them at this early stage of the project will help ensure success. Here are the stakeholders of Starbucks Coffee in Abu Dhabi.

The Stakeholders General Manager (GM) The GM is the core of operations of Starbucks in Abu Dhabi, his management style should be with centralised decision making and supporting paternalistic regulation (Starbucks, 2009). He should always emphasize that a successful company need have competitiveness in the market and maintains a certainly high level of efficiency, effectiveness. Since coffee company is both product and labour intensive, the cost ofemployee is in high ratio of total expense. On his role of general manager, he should have to balance between the profitability of shareholders and the loyalty of employee. The GM is neutral on the scheme, we do keep communicate with him to understand his intention and raise his faith (Starbucks, 2009).

Senior Staff & Senior Manager They are advocates and supporters on the scheme, evidence collected with them which are (Starbucks, 2009): They should adjust working hour to accommodate with clients They should subordinate & themselves have a adaptive resting time for increasing energy and creativity It can achieve a healthy work-life balance, such as they can have breakfast with elder in the morning, foster children, send and pick up in-studying children They estimate it can boost their loyalty, productivity and collegiality, and enhance overall companys image They are the key stakeholder group in the scheme, there should be a good relationship with them to motivate them supporting and advancing the scheme. Involve them in each stage and decisions.

Local Staff & Overseas Staff Dispersed aptitude and opinion should be observed in this group. Some critics argue that (Starbucks, 2009): It can reduce their autonomy on their working time It cannot solve the problem of the long overtime working hour which is underestimated by managers increase their workload and affect their own performance if other colleague do not have good discipline Some of them can become our allies to influence others and neutralise the opposition.

Customer The market can be segmented into three target populations (Starbucks, 2009):

y y

Local Individuals: people of UAE that love coffee products. Families: a group of people, either friends or a group of nuclear relatives who love coffee drinking together.

Tourist: people that are not locally from UAE but prefer and enjoy drinking coffee products. The Starbucks Coffee's customers are coffee lover individuals between the ages of 21 and 50, making up

53% of Abu Dhabi (Starbucks, 2009). Age is not the most defined demographic of this customer base; all age groups except for kids less than 10 years of age enjoy coffee products. The most defined characteristic of the target market is income. Starbucks Coffee shops have been very successful in high rent, mixed-use urban areas. These areas have a large day and night population consisting of business people and families who have household disposable incomes over 10,000 dirhams (Starbucks, 2009). Combining several key demographic factors, Starbucks Coffee arrives at a profile of the primary customer as follows (Starbucks, 2009): Sophisticated families who live nearby. Young professionals who work close to the location. Coffee lovers who patronise the great blends of coffee.

Company Structure Starbucks Coffee developed the companys organisational structure to reflect the companys dedication to maintaining organisational morals, culture and processes. The Starbucks Coffee serves as the base of its corporate activities (Starbucks, 2009). As seen in the organisational chart, (see Appendix 1 for the organisational diagram) there is no line pointing down, indicating that the lines of communication can go in both directions (upward or downward), which implies that the organisation intends to adopt a culture in where communication doors are always open. Also, the chart is a defining figure of how the lines of authority should be followed, and its simplicity would enable all organisational members to comply with it easily. This hierarchical-oriented organisation promotes unity to all Starbucks Coffee management people and employees through adoption of a structure with hierarchical relationships between organisational members with the intention of disseminating corporate policy effectively and efficiently throughout the firm so that we could move in the same direction. The organisation formed a limited liability company, in where the owners would have limited personal liability for business debts, fringe benefits can be deducted as business expense and owners can split corporate

profits among owners and corporation and overall tax rate is lower, as compared to other organisational forms (Starbucks, 2009).

Internal and External Operations The coffee shop industry in the UAE is continually flourishing, as evidenced in the wealth of said establishments in the area. There are more coffee shops existing in Dubai and Abu Dhabi. As seen in the current condition in the area, the growth opportunity with specialty coffee distributorship is phenomenal. Basically, in United States of America, coffee is the second largest commodity, and it represents over $18 billion in annual sales. Meaning, if Starbucks sustains its development in UAE market, the company can also achieve similar growth to coffee businesses in USA. Actually, an online encyclopaedia stated that the specialty coffee portion is almost $6 billion and coffee is the number one beverage consumed in the world and it is a "recession proof" product.[1] From the given report and researches, Starbucks Coffee still needs to create an effective project plan for the business. In Starbucks Coffee, the leadership of project managers always involves attempts on the part of a project leader to affect the behaviour of a follower or followers in situation (Starbucks, 2009). In addition, their management abilities focus on the techniques and expertise of efficient organisation, planning, direction, and control of the operations of a business. In this ever changing global business environment Starbucks Coffee must be competitive and do everything it can to counter any threat from its competitors. Having a good project leader gives the company some edge in facing competition in the global business environment. Companies take part in strategic alliances to attain advantage over their competitors and for both companies to acquire benefits from each other. These strategic alliances wont be successful if there is no leadership. Leadership gives many things to the company. It is an important aspect of a company. Although leadership can come from core intellectual assets practical application is also vital for the success of the company and for the company to be competitive in the global business environment.

Target Market The main target market for the company is tourists who go to UAE to experience coffee in its finest in the region. The secondary target market will be the locals, who have sustained the growth of the coffee industry through their continued patronage of coffee houses in Abu Dhabi. Specifically, the demographic profile of the market to Starbucks Coffee will be the middle-aged generation of customers, from the 25 to 40 age bracket, as middle-aged people are known to have the most passion for coffee drinking and experiencing new specialty coffee flavours in the market. The beverage has been served in various ways thus making the market rather varied as well. It is also proposed that the target market on this context would also include the younger generations of coffee drinkers. Particularly, the drinkers from the age bracket of 21 to 50 years old should be

taken into consideration. A need to cater to a specific demographic has spawned the need to acquire a competitive advantage with the rest of the players in the market.

Marketing Operation Product Feasibility and Strategy The product that Starbucks Coffee offers are coffee served in cups with different variants (Starbucks, 2009). The names of the coffee variants are unique, so that customers may know that the products are uniquely Starbucks Coffee. Actually, before these variants were formally included in the official list of the business offerings, there were taste tests conducted in local supermarkets, and those that passed initial testing were given official names to establish identification. The cups were likewise pre-tested for their functionality and durability to withstand water heat (in case the beverage belongs to the hot variation. The tissues and utensil which would be used are manufacturer-guaranteed to be environment-friendly and safe for human use. The brewing machines and equipment to be used are likewise tested in order to bring only the best-tasting coffee that is worth every dirham (Starbucks, 2009).

Pricing Strategy The price of each serving of coffee depends on the variant. The prices are in par with those existing coffee shops in UAE, with the business relying on the shop ambience, quality of service, coffee taste and free massage to gain competitive advantage from rivals in the area. As seen, the pricing objective of Starbucks Coffee offers the best-tasting coffee in UAE at relatively affordable price ranges (Starbucks, 2009). With that in mind, the pricing strategy included the cost of providing coffee to the customer (electricity costs, labour costs, raw materials cost, etc.) The management team believes that Starbucks Coffee products have unique and defensible attributes which could support a high price (Starbucks, 2009). However, since a sector of the target market involves young people, who commonly do not have a source of income of their own, Starbucks Coffee strives to keep costs at the lowest level in order to maintain a cheap price offering for all their coffee variants. Also, since the Starbucks Coffee aims to promote an image of affordability and quality all rolled into one, this pricing strategy would definitely help build and sustain that target image.

Channels of Distribution and Promotion and Advertising The main promotion and advertising objective of the business is to be able to spread the Starbucks Coffee word without allotting too much on marketing costs (Starbucks, 2009). After all, what works well and what does not work at will depend mostly on the business, the product and service accompanying it, the community, the competition and the skills in how the marketing director promote the business.

Critical Issues

Although the overall operations management of Starbucks Coffee are quite expressive, its marketing operations is not-so-successful. With this regard, the critical issues are (Starbucks, 2009): Continue to take a modest fiscal approach; expand at a reasonable rate, not for the sake of expansion in itself, but because it is economically wise to.

Continue to build brand awareness which will drive customers to existing stores as well as ease the marketing efforts of future stores. Aside from these factors issues concerning high sales but big losses, popularity and market competition

on price and differentiation directly hit and dwarfed the success of Starbucks Coffee. From this and to understand it clearly, the following discussion shows the SWOT analysis of Starbucks Coffee.

SWOT Analysis The following SWOT analysis captures the key strengths and weaknesses within the company, and describes the opportunities and threats facing Starbucks Coffee in UAE (Starbucks, 2009).

Strengths Strong relationships with vendors that offer high-quality ingredients and fast/frequent delivery schedules. Excellent staff who are highly trained and very customer attentive. Great retail space that is bright, hip, clean, and located in an upscale mall, suburban neighbourhood, or urban retail district.

y y y

y y

High customer loyalty among repeat customers. High-quality food offerings that exceed competitors offerings in quality, presentation, and price.

Weaknesses A large marketing budget to develop brand awareness in the area. The struggle to continually appear to be cutting edge.

y y

Opportunities Growing market in Abu Dhabi, UAE with a significant percentage of the target market still not aware that Starbucks Coffees exists.

y y

Increasing sales opportunities in take out business. The ability to spread overhead over multiple revenue centres. Starbucks Coffee is able to spread the management overhead costs among the multiple stores, decreasing the fixed costs per store.

Threats

y y y

Competition from local restaurants that respond to Starbucks Coffee's superior offerings. Restaurant chains found in other markets coming to UAE. A slump in the economy reducing customer's disposable income spent on eating out.

Service Operations The service blueprint diagram is a simple representation of the flow of service delivery of the Starbucks Coffee (Starbucks, 2009). The blueprint presented in Appendix 6 presents the areas of operations of the coffee house. Specifically, it presents the areas of operations in which the customer could see as well as the unseen areas. This marks down the areas in which the coffee shop should look closely. Similarly it also provides the operational plan that the organisation should acquire the moment there are malfunctions in the operation. This is particularly seen in the delivery of the beverage to the customers. At this instance of failure, a return to the brewing step is in order. The diagram provides a representation of the process flow that the organisation intends to establish in its daily operations.

Starbucks Coffees Competitiveness

In this sternly aggressive business world, the goal of most firms is to establish distinctive or unique capabilities to gain a competitive advantage in the marketplace through utilising the most of their core competencies. Competencies refer to the fundamental knowledge owned by the firm (knowledge, know-how, experience, innovation and unique information), and to be distinctive they are not confined to functional domains but cut across the firm and its organisational boundaries (Lowson, 2002). Having a competitive advantage is having a difference, the choice of certain activities to deliver a unique value-mix to a selected market, thus the ability to perform particular activities and manage the linkages between activities is the key source of competitive advantage. The strategic task, then, is to create a distinctive way ahead, using whatever core competencies and

resources at its disposal, against the background and influence of the environment. Through these distinctive capabilities the organisation seeks sustainable competitive advantage. Competition in many domestic and international markets appears to be entering a new phase, in which product quality and performance are becoming more important to customers than price. In such markets, the effective management of the new product development process is the essence of competitive advantage.

Based on the previous details, operations management is a key resource of the organisation, together with people, finances and material assets. Thus, it is accepted to state that operations management is a business issue. The discussion above revealed that through effective operations management of the organisations resources and systems, organisation administrators can add value to the services delivered to customers, reduce risks in the organisations business, reduce the costs of business development and service delivery and encourage improvement in internal business processes and external service implementation. On the other hand, it is recommended that when developing a project, it is better to build a report that is ideal for a specific need then to make a report based on a predefined concession. The company is experiencing different problems with competitors and marketing operating but still they performed expressively. Given the proper use of the competitive advantage they have, the company can recover from such problems. The company has competitive advantage over other competitors. One competitive advantage of the company is its brand name. The company is known as one of the established toy outlets in the industry. People easily recognise the company and the different product it has. They can easily think about the company when toy selling is mentioned. Another competitive advantage of the company is its image with the clients. The company is known as one store that provides excellent service to the clients. This can be proven by the frequency of visit clients do to the companys store and other marketing venues. Moreover a competitive advantage of the company, even though it shows some disadvantages is its increasing venue of marketing their products. The company is taking steps to ensure that their products can reach more people at more locations that is why the company engaged in having more branches at different places. The company also made use of the internet and created a website that more people in the world can use to transact with the company. Lastly a competitive advantage of the company is the wide range of business venture they are engaging in. The company is currently engaging not only in coffee blends but in other food products like cakes and pastries.

Learning Evaluation The contemporary business environment is undergoing a metamorphosis as rapid technological innovations, competitive markets, diverse customer preferences, and extensive global operations prevail in it. To ensure continuous operation and survival in todays rigid business environment, a company has to be open to change and improvement. Business processes, services, products and operations should be consistently subject

to evaluation and refinement. The norm is to deliver quality service while maintaining flexible and effective operations. Ensuring quality operations is a vital concern for most businesses. Business organisations exist with an ultimate purpose to fulfil for the staff, partners, clients, shareholders and the society at large. In turn, these groups pose certain expectations from the organisation. The employees expect to have adequate opportunities to practice independence and creativity, and be compensated. Business partners and shareholders expect ample return for their financial support to the business. Clients bargain reliable and effective service or product from the company for the money that they pay. Still, the society expects the business to contribute to the general wellbeing of the community by providing employment opportunities and contributing taxes to the government. Hence, business organisations are constantly challenged to maintain successful and quality operations to fulfil various obligations. In the context of certain organisation i.e. Starbucks coffee, a product and service oriented organisation creates a management system that defines their business standard. In this type of business, quality management is very essential to the organisation since it covers the overall needs of their stakeholders that determine their progress. Customers need quality management to have an excellent experience when taking coffee in Starbucks. Employees need quality management in order to make them well motivated and empowered in doing their job. Starbucks administrators such as owner, stockholders, and branch managers also need quality management to maintain the status and integrity of the products and services they offer. In Starbucks Coffee, I believe that quality management system among its employees is very essential similar to quality management for customers and other variables in the business. There should be a system that defines the current status of the performance of its employees. With this regard, I suggest that the company needs to have feedback system as part of their operations management practices.