The Reason for the Worldwide Popularity of Starbucks

Introduction

Starbucks is an international company that operates on a global scale. Its organizational culture is influenced by the multinational environment and socio-economic changes. International staffing and development help to organize HR in accordance with the needs of the company. On the other hand, there is a positive impact of this culture on an organization expressed in low diversity levels and homogeneous culture shared by all employees. In spite of great criticism, Thesis Exceptional service and high-quality standards attract millions of customers around the world and help Starbucks create a core of loyal supporters.

Cause: Exceptional service

Exceptional service is the main priority of Starbucks supported by a friendly atmosphere and positive organizational climate. Starbucks gives some thought to how intercultural differences impede or enhance business success. Diversity has a great impact on the decisions of managers and is based on the removal of prejudice from the organization and the individuals it employs (Starbucks Corporation 1999). It has also been acknowl­edged that the managers of Starbucks have important obligations to a variety of stakeholders and not just the shareholders, and this should be reflected in the organization’s statements of purpose, such as mission statements. “The keystone value in the effort “to build a company with soul” was that the company would never stop pursuing the perfect cup of coffee” (Starbucks Corporation, 1999). Starbucks follows a conservative Strategy characterized by slow growth and a stable environment. Innovations as a part of organization culture require participative processes and result in the sharing of information across departments, functions, and organizational levels; team decision making; conflict resolution; and deference to the person with the best idea rather than the most senior title. Many people are struggling to determine the shape of the innovative organization (Starbucks Coffee Company, n.d.).

Effect: Unique ideology and philosophy

These policies lead to a unique ideology and philosophy followed by Starbucks for many years. At Starbucks, coffee pricing strategies are perceived in terms of the whole product line rather than in terms of each product. For example, some coffee products (including beverages) are priced to engender prestige for the rest of the line rather than to gain their sales. Other prices (for coffee beans) are set to permit “trading up,” to establish images, or to meet coffee price lines and price points. At Starbucks, price differentials are subject to administration scrutiny and regulation. They are set based on quantity, distribution level, geo-graphic area, and cash payment. Starbucks proposes distribution discounts instituted on a net or list basis according to distribution levels. Quantity discounts are cumulative or noncumulative and apply to part of a line or a whole line (Dobson and Starkey 22). Basing points, f.o.b. factory, and uniform delivered pricing are issues of geographic differentials. For Starbucks, legal issues, price discrimination can be defended on the basis of meeting competition in good faith, of cost savings in dealing with dissimilar customers, and of promoting and not injuring competition. It is the effect of price discrimination, and not the act itself, that determines legality. Though these legal constraints are significant in establishing price differentials, the realistic guidelines are confusing and the economic consequences are mixed since price favoritism can actually benefit society. In the USA, both the Federal Trade Commission and the Justice Department are interested in pricing practices, particularly in the administration of prices. In the administration of price differentials, marketing managers must be concerned with legal problems of collusion and price discrimination as well as the impact on sales, profits, and competition.

Cause: High-quality standards

High-quality standards create a positive image of the company and allow Starbucks to set a premium price for its products. Coffee pricing strategies consider both cost and demand conditions, and the dynamics of markets, thereby accounting for both internal and external variables. Though the determination of an optimal coffee price is usually impossible, a satisfactory one can be developed by market research. The major pricing decisions at Starbucks include determining prices for each product or service, discount structures, price relationships among coffee lines, and price maintenance levels. Problems encountered in establishing prices recount to the inability to determine costs exactly, the difficulties of dealing with expectations, and the variations in the impact of coffee policies on different products in a company’s product line. Marketing aptitude is a critical component of effective price determination (Drejer, p. 98).

Effect: Competitive position on the market

As a result, pricing strategies are adopted that tend to depress or invite competitors, that relate to the payout in research and development, or that generate images of qualities or bargains. Companies can decide to have high, low, or competitive prices. Starbucks’ followers or leaders use several bases for price variations: geographical coffee price discrimination (single and multiple points, f.o.b. factory, freight payment, and equalization, and zone pricing), discounts and allowances (quantity, seasonal, cash, trade, and advertising discounts), channel and service discounts, guarantees against price, and Starbucks prices over time (Fill, p. 41).

Conclusion

In sum, according to organizational analysis, the remarkable feature of Starbucks is ‘monoculture’ which affects all spheres of organizational performance and human relations. Starbucks is often criticized for this strategy that threatens individual differences. Exceptional service and high-quality standards attract millions of buyers and create a positive image of the company on a global scale. Starbucks’s pricing strategies are reviewed and overhauled, for they tend to become “baked in” and to mirror traditional approaches, especially in retailing.

Works Cited

1. Dobson, P., Starkey, K. The Strategic Management: Issues and Cases. Blackwell Publishing, 2004.
2. Drejer, A. Strategic Management and Core Competencies: Theory and Application. Quorum Books, 2002.
3. Fill, C. Marketing Communication: Contexts, Contents, and Strategies 2 edn. Upper Saddle River, NJ: Prentice Hall, 1999.
4. Starbucks Coffee Company. 2005.
5. Starbucks Corporation. 1999.
6. Starbucks’ Human Resource Management Policies and the Growth Challenge. 1999.