Welcome to MAN540 Strategic Management

This WordPress blog is the area where you can find all the information you need on your course MAN540 Strategic Management.

Over the weeks of the semester you will be able to find the course materials, the readings, the PowerPoint slides, your assignments, and special notes to get ready for the exams.



7 thoughts on “Welcome to MAN540 Strategic Management

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  2. Seebal Mahmoud , 20168055 , MBA

    Starbucks is the premier roaster and retailer of specialty coffee in the world and has become a truly global brand. From the beginning. Starbucks reputation for the finest coffee in the world, legendary customer service and the highest integrity is the direct result of our collective efforts. How external environment influence in regulation we will determine it as the following.
    1. Change within external environments is often caused by changing government regulations or legislation. Identify some government legislation, from the international community, that might affect Starbucks, and comment on the effect it could have on this international company.

    Change within external environment is often caused by changing environment regulations or legislation. Almost every industry will be affected due to changes in government legislation. Some of the industries like tourism and construction as main .These changes have both positive and negative impact on these industries. Tourism industry: these changes have attracted more investors to the industry as it was open for global investors. Construction: these changes have made this industry more challenging as a result in bringing workers from outside the country have been made stricter. Wars may effect also on the revenues for Starbucks.
    2. customer analysis, can we estimate the cost of lost customer?

    Starbucks Quality and Customer Protection Starbucks commitment to quality means that we take steps to protect our customers’ health and safety. The customer can play your part by following all proper procedures relating to the storage, handling, preparation and service of Starbucks coffee and other products by:
     Working to ensure clean
     Sanitary and safe conditions in all of our facilities
     By continually exploring ways to maintain and improve Starbucks quality standards and practices.
    A perfect example of high customer loss can be the connection between the customer and the labor or increasing the prices caused by wars. This will affect low of brand loyalty and customers switch their services over and over again.
    3. One common way of increasing organisational flexibility is to diversify the product range and the number of target markets. What are the risks associated with this strategy? Have Starbucks already exhausted this strategy?

    Starbucks actively creates and promotes an environment that is inclusive of all people and their unique abilities, strengths and differences, and promotes diversity as a strategic and competitive business advantage for the company. As Starbucks continue to grow, embracing diversity in every aspect of our business from the way we work together to the way we procure goods and services is vital to our long-term success. Starbucks goal is to be one of the most inclusive companies globally, working toward full equity, inclusion and accessibility for those whose lives we touch. Each branch in the world must know the traditions of the country like KSA is popular with the Arabic coffee so in KSA people prefer to order this coffee than the other kinds. Then this called flexibility Starbucks must do everything to get the customers comfort and increase the profitability. Risks may face in this strategy the foreign who came to KSA maybe they won’t prefer this kind coffee otherwise there are a different kind of coffee to try. I guess Starbucks didn’t use this strategy yet.

    4. What are the major opportunities and threats facing Starbucks?

    Opportunities: Expansion into Emerging Markets: The increase saturation and self-cannibalization of the US market makes its international strategy even more important. Starbucks has made good inroad into many countries, with India recently joining the list with a joint venture entry. Starbucks has a great growth potential in further expanding into the emerging and developing markets. They can leverage their size, experience, financial prowess and efficiencies to make new market share. Expanding Product mix and offerings: Starbucks recently started to expand their product mix by venturing into the Tea and fresh juice product offerings with a smart acquisition strategy. This provides significant opportunities for Starbucks.
    Expansion of retail operations: Starbucks currently sell its packed coffee products, iced beverages and merchandizes through large box retailers. This market’s potential is yet to be fully realized and this provides Starbucks great opportunities for the future to future monetizes their brand. Technological advances: Starbucks has leveraged the use of mobile applications and has an investment partnership with Square, a mobile payments app that is integrated with its Starbucks app. This creates an ease of use process for customers, aligns customer loyalty through reward programs. Starbucks has already set the bar in the industry with this advancement and about 10% of its transactions in the US have been made using mobile applications. This is a growing field and would drive more business to their stores as technology advances. New distribution channels: Starbucks introduced a beta version of a delivery system called Mobile Pour. This presents a great opportunity for the future by expanding their end product distribution systems and could drive more revenue if the implementation is successful. Brand extension: Starbucks carries a powerful brand image and it can leverage it to extend into horizontal lines of its business and also venture into product diversification with keeping brand dilution risk in check.

    Threats: Increased Competition: This is by far the biggest threat that Starbucks faces with the market being at a mature stage, there is increased pressure on Starbucks from its competitors like Costa Coffee, Gloria Jeans specialty coffee stores. Price Volatility in the Global Coffee Market: There has be significant fluctuations in the market prices of high quality coffee beans, which Starbucks can’t control. Developed Countries Market Saturation: Starbucks derives a significant amount of its revenue from the development markets and there is increased market saturation currently. Consumer tastes and lifestyle choices: The shift of consumers toward more healthy products and the risk of coffee culture being just a fad represent a threat for Starbucks going into the future.

    5. With further reference to Starbucks, how have they approached the buying decision process? What factors have they considered in creating a vertical chain of supply?

    The first stage that would lead a costumer into a Starbucks store is the need recognition of coffee. Since Starbucks belongs to one of the top coffee brands, people will automatically think of the company when it comes to satisfy the need.
    Because Starbucks belongs to the low-involvement product purchases, the customer does not exactly know what kind of beverage the person might want until he/she gets into the store. Therefore, Information search takes place while being at the store. The coffee brand provides in store promotion by eye catching advertisement of popular or new products (drinks or food) or having programs such as “one free coffee day” / “happy hours” to promote their coffee.

    Starbucks has recently implemented a strategy of backward vertical integration as they have just purchased a 600-acre coffee bean farm in Costa Rica. By doing this, Starbucks hopes to develop proprietary coffee varietals, which could lead to new blends in addition to the 55 blends that are currently being offered. Furthermore, the new farm will facilitate Starbucks with research and development to offer new hybrid coffee beans, and the opportunity to study specific diseases that are devastating coffee bean crops around the world.


    External Environment
    STUDENT NUMBER: 20166738

    Q1 :
    Change within external environments is often caused by changing government regulations or legislation. Identify some government legislation, from the international community, that might affect Starbucks, and comment on the effect it could have on this international company.
    AS :
    Changes in government regulations can have an impact on how a company does business. Newly mandated safety procedures can force a factory to change its production process to create a safer work environment. Businesses that make or distribute consumer goods such as food products might have to add more quality control measures to ensure consumer safety
    As a growing and increasingly more complex global business, Starbucks participates in the public policy arena, which includes direct and indirect lobbying at the local, state and federal level in the U.S. In all of our efforts, we strive to comply with all applicable laws and regulations, and work fairly and honestly with government officials and others in our communities. Starbucks policy forbids partners from offering or making payments or gifts on behalf of the company in order to influence a government official, or from representing their personal views as those of the company. Presently, Starbucks does not have a Political Action Committee established for our partners to make political contributions, nor did the company make any corporate political contributions in fiscal 2006.

    Q2 :
    In performing a customer analysis, can we estimate the cost of lost customer?
    AS :
    In fiscal 2006, Starbucks received more than 890,000 customer contacts. The majority of customer contacts concerned the use of a Starbucks Card or the service in a Starbucks store. Less than two percent of the total volume of customer contacts related to Starbucks social responsibility. Consistent with prior years, the areas of social responsibility that customers asked about most often pertained to Starbucks recycling policies and our ethical sourcing of coffee. Starbucks is devoted to acting responsibly in all areas of business practices and appreciate that customers share them concerns .
    So I don’t think to lose customers is a big problem for STARBOCKS because is a big and international compagny

    Q3 :
    One common way of increasing organisational flexibility is to diversify the product range and the number of target markets. What are the risks associated with this strategy? Have Starbucks already exhausted this strategy?
    AS :
    The risks of this strategy : When you diversify, you reduce the risk in your portfolio. Each individual investment carries a chance that it could be a great success, a great failure, or something in between. Spreading your money out limits your exposure to great failures. If you invest all of your money in a company that turns out to be a failure, you could lose all of your money.
    Exemple : If only 20 percent of your money was in that company, you’d still have 80 percent of it working for you.
    So Not only is Starbucks concentrating on expanding its footprint, but also changing its store mix. Instead of opening more dine-in restaurants, the coffee giant is concentrating on drive-thrus in the outer edges of urban and suburban areas. In addition, Starbucks is opening up express stores which essentially function as walk-thrus in New York, Boston, and Seattle. This strategy is aimed at increasing the company’s store penetration. However, a force that may counter the incremental growth from the new store openings is cannibalization. That said, Starbucks remains confident that it will see a minimum 5% comparable sales growth in the U.S.

    Q4 :
    What are the major opportunities and threats facing Starbucks?
    AS :
    Green companies are attractive to many consumers. Companies within the industry can take advantage of this by implementing several green techniques such as refillable travel mugs available for purchase, recycled paper products, emailed receipts, and reusable dishware.
    Although it has been found that financially stable Americans drink the most coffee, the potential market for customers includes all individuals who like coffee, have the income to purchase it at least occasionally, and have the ability to get to a shop.
    The price of coffee futures contracts is currently down 35% from 12 months ago. Therefore, it would cheaper for a new shop to purchase the coffee. These savings could be passed along to the customer, resulting in very competitive prices.
    Coffee imports are currently duty-free and the quota for purchases is unlimited. These factors, in addition to minimal government interference, make purchasing coffee from suppliers easy and less-cost
    *THREATS :
    Many green techniques are more costly to companies, for example 100% recycled paper products. Also, discounted refills for customers with their own travel mug from the shop could eventually prove costly for the company. If these costs must be passed along to the customer, some may not recognize the environmental benefits and choose to go elsewhere for their coffee.
    A purchase from a coffee shop is considered a luxury for most people rather than a necessity. These individuals will brew coffee at home when they do not have extra income.
    This industry is led by two major companies. Each has a very strong market share and loyal customer base. It would also be very difficult to compete with these companies on price and accessibility.
    Often, the newest, most innovative products are very expensive. They are also risky because there is no guarantee customers will respond positively, employees must be trained frequently, and the system may have glitches. Social media advertising does not necessarily reach consumers of all ages. Companies need to be cautious not to completely neglect all other areas of advertising, such as print and television.

    Q 5 :
    With further reference to Starbucks, how have they approached the buying decision process? What factors have they considered in creating a vertical chain of supply?
    AS :
    As a global business, Starbucks addresses decisions of operations management through different approaches , the company applies its Coffee and Farmer Equity program in supply chain management .
    Between this decisions there are :
     Design of Goods and Services : Starbucks emphasizes premium design for its goods and services. The premium character is linked to the company’s broad differentiation generic strategy, along with its premium pricing strategy. Other firms, such as manufacturers, are also involved in the design of some goods like Starbucks mugs. In this decision area of operations management, Starbucks ensures that its goods and services reflect the firm’s high-end brand image.
    Quality Management : Starbucks also uses the premium character in quality management. For instance, the company carefully sources its coffee beans from coffee farmers who comply with Starbucks quality standards
     Process and Capacity Design : Process and capacity efficiency is one of the contributors to Starbucks’ success. The company’s processes are highly efficient, as observable in its cafés. Also, Starbucks optimizes capacity and capacity utilization by designing processes to meet fluctuations in demand.
     Location Strategy : Starbucks’ location strategy focuses on urban centers, especially those with large middle and upper class populations. Most of its cafés are in densely populated areas. Also, Starbucks occasionally uses strategic clustering of cafés in the same geographic area to gain market share and drive competitors away.
    Maintenance : Starbucks maintains its physical assets through dedicated teams of employees trained for maintaining facilities and equipment, as well as third parties that offer maintenance services.


    1: Government regulations that might affect Starbucks
    Government legislations affect businesses in many ways, for example the government can pass a minimum wage law as a way to protect its citizens from being exploited by employers meaning that all employers will have to abide by that bill. In the US the government passed a bill, the Fair Labor Standards act, which is a law that is critically important to Starbucks because the employees with the Starbucks retail stores have a job in which wages are paid hourly. In order to adhere to federal regulations, Starbucks must pay all of its employees at least the federally mandated minimum wage. Prior to the passage of this law, employees working for Starbucks would be paid according to what the retail store deemed fair hence this law meant changes in the payroll bill. However, since this law was passed and is federally regulated, Starbucks must always make sure their hourly employees pay equals or exceeds minimum wage standards. Such a law affects firms such as Starbucks in that it becomes limited to the number of employees to employ as they have to abide to the minimum wage bill which doesn’t consider how profitable the business might be.
    Every country has environmental laws that firms should abide by, the purpose of these laws are to protect the environment from public or private actions that could cause damage. Environmental laws are all targeted at the reduction of danger to the environment and an increase in public health and awareness. This means that Starbucks before settling in a new country should understand these laws in order to avoid huge penalties should they be found wanting if their operations are considered to be destructive to the environment either in pollution or other stated ways.
    The US government passed a law, the Americans with Disabilities Act, which greatly affects Starbucks because it is a company that prides itself on employing a diverse group of people, including those with disabilities. In order to meet their standard of employing persons with disabilities, Starbucks has to make all of their retail stores accessible to those with a disability. However, after the passage of this law, Starbucks is now federally required to provide certain accommodations for any disabled employees it hires.
    Tax laws also are of importance to Starbucks as they have an effect on their income. If the government in which Starbucks operates increases tax rates, this means that the company will be affected as a larger percentage of their income will contribute to the government. It is also of great importance for Starbucks as an international company to understand tax laws of a country before they actually settle for operations. Some countries have strict and higher tax rates for international companies as a way to protect local businesses therefore before settling in any country Starbucks should understand fully the tax laws.

    2: The cost of losing a customer
    A lost customer means lost feedback and no opportunity to improve.
    Many companies use their existing customer base to research product improvement and development. However when a firm loses customers, it also lose their opinions, advice and criticism. Also, a lost customer is unlikely to want to communicate with the firm about the reasons for their departure
    A lost customer means lost sales and revenue.
    A lost customer means sales are reducing thus the revenue declines as well. The cost of replacing this revenue is much higher than the cost of retaining the business.
    A lost customer has a negative impact on the confidence of the entire organisation.
    The loss of a significant account doest not only affects the top management, but it can also have a devastating effect on confidence and self-assurance. It can also cause doubt about the validity of Starbucks’ service fulfillment and pricing strategies.
    A lost customer demoralises sales and marketing staff.
    Customer loss can be disheartening for the sales and marketing teams in particular, and may lead to all sorts of negative introspection about the products and services they are promoting.
    A lost customer may become an opportunity for the competition.
    When a customer defects to the competition, they are able to give them all sorts of information about Starbucks’ processes and products.
    A lost customer means a distraction from other important issues.
    While an organisation is bemoaning the loss of revenue, it may also be distracted from other important business needs, such as the question of seeking and retaining new customers.
    A lost customer can be the beginning of a bad reputation.
    A company may be known for losing customers, which could hinder its ability to employ the right people. It can also degrade its image and reputation in the marketplace. There may also be a serious retail backlash as a result.
    A lost customer can have a damaging impact on sales projections, cash flow, receivables, and payables.
    The impact on cash flow and profitability goes without saying, but a lost customer can cut volume and prohibit meeting buying commitments with suppliers and vendors. It can affect stock levels as you may be left with vast holdings of a product that you cannot move.
    A lost customer can trigger spending un-budgeted funds on marketing, research and new customer acquisition.
    It will require hard work to find new business, and a company may have to spend vast amounts of money to replace a significant loss with far more accounts to cover the same volumes of purchase. Companies will end up spending a disproportionate amount to replace the same revenue.
    3: Have Starbucks diversified their product range, what are the risks associated with diversification of product range
    Starbucks, which was originally created to provide high end coffee products, has continued to diversify their business from it’s inception in order to gain a competitive advantage. In addition to the coffee products that they provide, they also offer a large variety of different beverages ranging from bottled water to soft drinks.
    Additionally, Starbucks offers breakfast options, sandwiches, and wraps to compliment their high quality coffee. As a result, by bundling and sharing these related activities, these options have enhanced revenues for Starbucks as they are able to exploit their strong, positive reputation as it relates to their coffee products, and extend it to other items that Starbucks offers.
    Starbucks went a step further in diversification by offering speciality brewing methods, craft beer and fresh food with what it calls a coffee theatre, a new outlet in central London.
    The outlet, branded as the Starbucks Reserve bar, is to be the first of the US retailer’s UK outlets to serve fresh food such as pastries, salads and sharing platters of cheeses, meats and flatbread. An evening menu will offer beer and wine.
    Risks associated with diversification for Starbucks are that;
     It may result in slowing growth in its core coffee product business activities.
     Adding bureaucratic complexity. In addition to direct financial costs, there may be additional bureaucratic complexities necessitated by the need to coordinate and control core coffee product activities with additional activities.
     Losses may be incurred during market consolidation process resulting in some business units being subsidized by other profit making units.

    4: Major opportunities and threats facing Starbucks
    • Starbucks has the opportunity to expand its global operations. New markets for coffee such as India and the Pacific Rim nations are beginning to emerge.
    • As technology is continuously improving, new hardware and software can improve efficiency within Starbucks. For example, bar code payments on smart phones will reduce the payment time while customers using a touch screen ordering system will reduce the amount of employees needed.
    • Social media has improved advertising capabilities because it can reach more customers, faster and for less money.
    • Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential.
    • New products and services that can be retailed in their cafes, such as Fair Trade products.
    • Coffee imports to Starbucks are currently duty-free and the quota for purchases is unlimited. These factors, in addition to minimal government interference, make purchasing coffee from suppliers easy and less-costly.

    Threats facing Starbucks

    • The growth for the market for coffee cannot be guaranteed, it is unknown whether or not the market for coffee will grow and stay in favour with customers, or whether another type of beverage or leisure activity will replace coffee in the future.
    • Since its conception in Pike Place Market, Seattle in 1971, Starbucks’ success has led to the market entry of many competitors and copy cat brands that pose potential threats
    • Starbucks are exposed to rises in the cost of coffee and dairy products.
    5: How Starbucks have approached the decision buying process and the factors they have considered in creating a vertical supply chain

    The decision buying process consists of various stages that customers go through in the process of purchasing a product.

    The first stage is called need recognition; this is a stage whereby a customer realizes that he or she needs coffee or any of the products that are offered at a Starbucks retail store
    After a customer recognizes the need for a product the next stage is to look for product information. In this stage the customer seeks to know the information about products, seeks from others what they think of the products. In this stage a customer might want to know from a friend whether or not they have purchased Starbucks coffee.

    The next stage is called product evaluation, here the customer knows all the products offered at Starbucks but now needs to consider which one suits them the best in terms of prices the ones that are affordable to them.

    After evaluation of the products, the customer then makes a decision as in when, where and how purchase the product. In terms of Starbucks other retail stores attract more customers than the other depending on their location.

    After purchasing, a customer makes a post purchase evaluation which is where one considers whether or not the coffee and dairy products have satisfied his or her needs. If a customer is satisfied he or she will become a regular customer and if not, the customer will go through the same process in search of the best product that suits them.


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