Case Study of McDonald’s Restaurant
Your case study should focus on a real organization. Ideally, you should know something about this organization. My paper will be about the current status of McDonald’s Restaurant. With the way the food industry is leaning towards healthy food. Their numbers are declining.
o Examine an organizational change process/problem occurring within the organization
o choose a theoretical model or models (from text) that frames the change process and its role in the organization (
o Discuss specific actions you would implement to facilitate the change process
o Develop recommendations that other organizations can learn from the organizational change that you have observed
Reference topics from chapters in your sources and supporting statements.
Don’t forget references (including text), bibliography, and examples
Use at least 5 references but more if needed
RUNNING HEAD: Starbucks
Starbucks: A Case Study
This paper is a discussion of the challenges currently facing Starbucks. Starbucks is recognized worldwide, and is known for its unique coffee drinking experience. In the past few years, Starbucks has faced store closings and lost revenue. By taking a look at Starbucks’ organization, its customers, its leaders, and its current downsizing compared to its overall effectiveness, we will bring further insight into how Starbucks lapsed into this current challenge.
Starbucks: A Case Study
We chose to focus our case study on Starbucks, as we both enjoy Starbucks coffee. For 16 years Starbucks had continuous growth. That changed in 2007, when Starbucks’ growth slowed, it lost revenue, it began downsizing by closing stores, and it realized lower consumer confidence (Starbucks, 2009). We initially assumed its current challenges are based on the current downturn in the economy. However, we found it is deeper than that. In this paper, we will look at how Starbucks arrived in the situation they are in today by looking at the coffee industry, its customers, its past and current organizational leaders, and Starbucks’ philosophy. We will then take this information and look at what initially made it effective and successful versus its current challenge, and how it may be able to regain their organizational effectiveness.
1. Discuss the organization type and the audience served.
Starbucks is a retailer of specialty coffees and teas, and a variety of food items and accessories. It sells through its retail stores and other venues such as grocery stores and warehouse clubs. Almost 84 percent of its revenue comes from their retail outlets (Starbucks, 2009). According to its annual report, Starbucks’ retail goal is to be the “leading retailer and brand of coffee” in the world (Starbucks, 2009, p. 2). The United States is its largest market. Its largest international markets are Canada, Japan, and the UK.
Starbucks’ has many competitors. Its competition consists of “quick-service restaurants and specialty coffee shops” and “wholesale and mail order suppliers” (Starbucks, 2009, p. 7). Starbucks’ competitive advantage is its high quality coffee, its convenience, and its focus on both customer service and its employees (known as partners). Starbucks markets to consumers who want high quality specialty coffees and teas at a value price.
2. Discuss the leaders and their perceived roles (and evidence of Magnificent 7 p. 25)
The leadership structure of Starbucks is very much like many international retailers consisting of a CEO, presidents and senior vice presidents of various divisions, a CFO and a CIO. What makes this leadership stand out from that of many other international corporations is Starbucks appears to actively encourage customers and partners to share ideas for improving the company. Many articles have been written regarding the leadership style of Howard Schultz.
An interview with a Starbucks barista provided insight into the leadership and how they manage over 11,000 stores. The leadership focuses on the ways to make the company better by empowering partners to submit ideas directly through the company intranet (portal). This empowerment creates a strong horizontally based company and moves decision making down to the lowest level where a competent decision can be made (Kreitner & Kinicki, 2008). Partners are eligible for stock options as long as they maintain a 20 hour work week (Connor, B., personal communication, June 20, 2009). In all, the leadership allows their partners to feel empowered not only through the liberal stock option plan, but also because of the willingness of leadership to listen to and implement the feedback offered by partners (Kreitner & Kinicki, 2008). Partners communicate directly with corporate leaders through its portal, and corporate communicates with the stores through the same portal. Corporate tells the stores where the company is going, the goals for the future, and provides barista training tools through this portal saving millions of dollars (Connor, B., personal communication, June 20, 2009).
Schultz’s vision was to make sure Starbucks growth did not dilute the company’s culture and the common goal of the company’s leadership to act like a small company. Schultz left Starbucks in 2000, and Orin Smith became CEO from 2000 to 2005. The new Starbucks leadership set a goal of opening 5 stores a day, 365 days a year (Michelli, 2007). When Jim Donald became CEO in 2005 it appeared Starbucks would continue to be successful. The customer base seemed to notice changes in the “Starbucks experience” they had grown to love. Many of the processes in beverage preparation were automated and, consequently, the quality of the product and the “Starbucks experience” suffered. Competitors such as Dunkin’ Donuts and McDonalds gained a share of the Starbucks’ territory (Visionary CEOs, 2008). Jim Donald was asked to step down after sales slowed down in 2007. Schultz returned to Starbucks with the intent to restore the “Starbucks experience” he felt had been lost during the rapid expansion during the years he left the company. Upon his return, Schultz closed down nearly all of the stores for 3-1/2 hours one evening for employee training (Mui, 2008). The purpose was to “revisit our standards of quality that are the foundation for the trust that our customers have in our coffee and in all of us,” said Schultz (Mui, 2008). Kreitner & Kinicki (2008) indicate the key to creating effective organizations is to prevent organizational decline when everything is going right. That did not happen, thus Schultz took action immediately upon his return to go back to the basics of what created the “Starbucks experience.”
The “Magnificent Seven” cited by Kreitner and Kinicki (2008) are exemplified throughout Starbucks’ leadership practices (p. 25). Starbucks leadership has continued to operate with humaneness, loyalty, honesty, fairness, autonomy, dignity and the common good toward customers and partners. This is evidenced in their participation in various projects including Hurricane Katrina relief, the sale of Ethos brand bottled water (a portion of the sales going toward clean water efforts in under-developed areas), Tsunami relief, as well as efforts to promote earth healthy business practices (Michelli, 2007).
3. Discuss evaluation techniques and evidence of organizational effectiveness
Starbucks started as a company focused on its partners and on customer service. It was focused on giving customers a great cup of coffee along with a “Starbucks experience” (Starbucks, 2009). In addition, it wanted its partners to feel like they were part of a team instead of just an employee (Young, 2005). New partners were trained by other partners within the store to create a team atmosphere. This in turn engaged partners to feel a part of the success, and also embedded the culture through this social connection. Starbucks created a mutuality of interests between its employees and the organization through this training. Mutuality of interests is imperative to “a strong sense of shared ownership in every employee, because otherwise an organization cannot do its best in the long run” (Kreitner & Kinicki, 2008, p. 433).
A determination of organizational effectiveness includes goal accomplishment, internal processes, resource acquisition, and strategic constituencies’ satisfaction (Kreitner & Kinicki, 2008). Kreitner and Kinicki (2008) stated the most common assessment is looking at goal accomplishment, and “how well the organization meets or exceeds its goals,” which is what we will focus on (p. 509). As we stated earlier, Starbucks’ goal is to be a leading retailer of coffee. Starbucks’ had reached this goal, but in 2007-2008 experienced organizational decline. Kreitner and Kinicki (2008) stated the time to start reacting to organizational decline is when you are in “periods of high success” as that is when “the seeds of decline are sown,” which Starbucks failed to do (p. 514). As Starbucks lost its focus on its main competitive advantage, McDonalds and Dunkin’ Donuts emerged as leaders in the coffee retail business.
Applebaum (2008) stated that Starbucks’ current challenges are more than financial. While it is recognized that declining sales are due to consumers having less discretionary spending, its current challenge can also be blamed on the pace in which it opened new stores and to its shift in focus to efficiency instead of on its customer and partners. By being over confident, Smith and Donald did not recognize that opening all of these stores created redundancies that “led to cannibalization of sales” (Applebaum, 2008, p. 23). Its new focus to increase its growth, hurt them. The more efficient coffee making machines took the “Starbucks experience” away from the customers, and changes in training took the team-building effect away from its focus on its employees. Financially, organizations need to continually look at “the degree of environmental uncertainty” (Kreitner & Kinicki, 2008, p. 514.) The economy in the U.S. and the world has been slowing for a number of years. Starbucks’ apparently did not take heed, and continued to open new stores at a rapid pace.
In order to recover from its current challenges, Starbucks is closing 600 stores in the U.S., and also brought back Howard Schultz to be the CEO. Schultz is taking the company back to its roots. Schultz cut management staff, realized Starbucks “became too big too fast,” and plans to “regain the brand’s old magic” by replacing the automated coffee makers back to the original manual ones (Applebaum, 2008, p. 23). Part of the “magic” was the entertainment around making a cup of coffee, which “changed the entire paradigm” when it was eliminated (Applebaum, p. 26). In addition, Starbucks realizes that the “breakdown in training,” and management being solely focused on growth are additional reason for the decline in its organizational effectiveness leading to their current challenges (Applebaum, p. 24).
Because Starbucks did not plan for organizational decline during the time of its success, it now is in the midst of that exact challenge. Starbucks, in its quest to grow, lost sight of its beginnings and what gave the organization its competitive advantage. Starbucks partner Burrows stated in Young (2005) that to remaining successful Starbucks must be “very clear about their values” (p. 16). Now, through new leadership, Starbucks is on a revitalized path to regaining its organizational effectiveness by putting the focus back on its customers and partners. Getting back to the basic practices of what made Starbucks a leader is a start in the right direction.