Management Information System(MIS) - Starbucks

STARBUCKS CORPORATION A study on the Management Information System

Submitted to: Prof. Himanshu Joshi

Submitted By: Group no. 12 Ayush Sureka Manisha Jain Pulkit Gupta Steffi Annie Philip

Background Starbucks Corporation is an American coffeehouse chain. It was founded in Seattle, Washington in 1971. Back then, the company was a single store in Seattle’s historic Pike Place Market. From just a narrow storefront, Starbucks offered some of the world’s finest fresh-roasted whole bean coffees. The name, inspired by Moby Dick, evoked the romance of the high seas and the seafaring tradition of the early coffee traders. In 1981, Howard Schultz (Starbucks chairman, president and chief executive officer) first walked into a Starbucks store. From his first cup of Sumatra, Howard was drawn into Starbucks and joined a year later. A year later, in 1983, Howard travelled to Italy and became captivated by Italian coffee bars and the romance of the coffee experience. He had a vision to bring the Italian coffeehouse tradition back to the United States. A place for conversation and a sense of community. A third place between work and home. He left Starbucks for a short period of time to start his own Il Giornale coffeehouses and returned in August 1987 to purchase Starbucks with the help of local investors. From the beginning, Starbucks set out to be a different kind of company. One that not only celebrated coffee and the rich tradition, but that also brought a feeling of connection. Today, with more than 15,000 stores in 50 countries, Starbucks is the premier roaster and retailer of speciality coffee in the world. And with every cup, we strive to bring both our heritage and an exceptional experience to life.

Reasons for selecting Starbucks Since their first store opening in Seattle, this coffee chain has become the largest in the world. Following are the reasons for selecting Starbucks.  – Starbucks runs coffee all over the world. Behind the service of the drink so much appreciated by the consumer the American company has put in place a system based on the data of its users to optimize its performances. The ability to exploit them for commercial purposes has never been greater. Starbucks perfectly embodies this scenario, enabling it to retain the edge in its field. ‘’ This is the motto that could be adopted by the giant Starbucks which has put in place a

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process to better identify where to place its new points of sale.  – It is one of the largest food distributors and one of the most recognized brands. If Starbucks is here today, it's because it has created a unique "digital experience" around its stores.

At Starbucks, digital experience is at the heart of business strategy. It attracts more than 35 million visits per month thanks to its website, social networks and its mobile application.94% of Facebook users are either Starbucks fans or they own a friend who is a presence worthy of the greatest media. Starbucks uses social networks to build its reputation. With more than 54 million fans on Facebook, 3 million on Instagram, 7 million followers on Twitter and 500,000 on LinkedIn, it now has an exceptional number of points of contact with its customers. It uses social networks to drive product innovation For Starbucks, the customer experience is not limited to in-store experience. In the Malaysia, each store provides access to a unique platform, the Starbucks Digital Network, with free WiFi access. You can enjoy the Starbucks coffee by taking advantage of the international media (New York Times, The Economist, The Wall Street, etc.) and local media.

Main function of Starbucks – Planning  –

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 – External factors played a major role in Starbucks goal and mission statement. Planning for a new pattern of socialization, where people moved away from dance clubs to a cozy atmosphere allowed Starbucks to establish itself as a coffeehouse instead of a coffeemaker. Starbucks goals was to make coffee a necessity for a social experience. Starbucks strived to provide an inviting and reinvented place for individual to relax despite their demanding schedules.  – Starbucks focus on external factors when looking at globalization. One of the key aspects in globalization plans is to incorporate the surrounding environment into the design of the stores themselves. Starbucks has history of a poorly planned globalization strategy. When trying to build a market in Israel, Starbucks underestimated existing competitors and the threat of substitute products available to locals.  – With continued changes in technology Starbucks listens to their customer in their approach. This has led to improvements to payment related customer experience. Starbucks plans for providing free Wi-Fi. When first introduced Starbucks required several checks to allow the use of their WI-Fi feed.

Starbucks control  –

Starbucks establishes standards as a diverse company as they expand to their worldwide locations. The manager must adhere to companies’ goals and strive to reach the benchmark the company has set. They develop the organizational capability and hold each employee to

that standard by creating a team like environment. They use employee suggestions and feedback from climate surveys to gauge employees’ complaints and ideas for a better environment. Managers can take the responses and implement changes and new standards. This along with controls that are designed and executed properly, managers get better performance from their employees and are able to execute the company’s strategy better. They must weigh the cost and benefits from control, but control is crucial for the organizations success. Leadership  –

 – With leadership we have to understand that expanding is important of picking the right leadership when you are expanding so rapidly.  – Management Trainee Program started in 2013 to get people to work for the company that are highly educated.  – They do not pick candidates by race, age, sex, IQ. They pick by curiosity, innovation, emotional intelligence.  – Starbucks relies on image as they create an environment that involves maximizing performances while keeping a relation with their community. Organizational Function  –

Structure is a crucial part of an organization. It defines each department’s roles and how they are coordinated. Starbucks has a much-defined authoritative chain for reporting. Managers delegate to their subordinates the responsibility and their function of the job roles while meeting each customer’s need. Starbucks employs a decentralized type of organization. This type of organizational control is evenly dispersed across the country as a per store basis. This allows the c ompany to be more creative and independent but also carry the organization’s core values. HRM at Starbucks  –

Starbucks understands that their staff is one of the most important sources. The first leading rule in their objectives even places the Starbucks's feeling to staff supply a good work environment and behave each other with regard and self- regard. Organization realizes that their staff has so effective role in the development of the Starbucks. All staff at Starbucks are concerned to as mates, regardless what work situation they invade. The Starbucks's cultural measures give staff feeling of substance to their job even though it is just filling a coffee. Every mate even part time workers are qualified for getting attention of health, take part in Bean Stock program and get a free coffee. Under control the Bean Stock program, staff are advised stock the reasonable sector measures a few times in one year. The staff of Starbucks take part in a profit sharing plan. Employee relations, Motivation, Recruitment, Selection, Training, Career development, Performance appraisal, Benefits and rewards are some of the important functions of HRM at Starbucks.

Significance of the functions

Overall, the aim of becoming a worldwide global brand seems to be working in favour of the company and is helping it to attract the attention of many major companies who would like to share a partnership. This is all positive news for the company because it provides a strong basis for future development of international markets, which further strengthens the mission to become one of the leading specialty coffee retailers in the world. The success of Starbucks would not have been possible without a set of goals that the company aimed to achieve and a set of principles, which governed the decision-making process. The six principles of Starbucks are stated as: 1-Provide a great work environment and treat each other with respect and dignity. 2-Embrace diversity as an essential component in the way we do business. 3-Apply the highest standards of excellence to the purchasing. 4-Roasting and fresh delivery of our coffee. 5-Develop enthusiastically satisfied customers all of the time. 6-Contribute positively to our communities and our environment, and recognize that profitability is essential to our future success. Application of these principles can be used as a guideline for all employees from managers to workers to aim to achieve the company's goals, while maintaining a certain type of standard.

Key activities of Starbucks

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: The inbound logistics for Starbucks refers to selecting the finest quality of coffee beans by the company appointed coffee buyers from coffee producers in Latin America, Africa and Asia. In the case of Starbucks, the green or unroasted beans are procured directly from the farms by the Starbucks buyers. These are transported to the storage sites after which the beans are roasted and packaged. These are now ready to be sent to the distribution centres few of which are company owned and some are operated by other logistic companies. The company does not outsource its procurement to ensure high quality standards right from the point of selection of coffee beans. : Starbucks operates in 65 countries either in the form of direct stores operated by the company or as licensed stores. Starbucks has more than 21,000 stores internationally which includes Starbucks Coffee, Teavana, Seattle’s Best Coffee and Evolution Fresh retail locations. According to its annual report, the company generated 79% of the total revenue during fiscal year 2013 from its company operated stores while the licensed stores accounted for 9% of the revenue. : There is very little or no presence of intermediaries in product selling. Majority of the products are sold in their own or licensed stores only. As a new venture, the company has launched a new range of single-origin coffees which will be

sold through some leading retailers in the U.S.; these are Guatemala Laguna de Ayarza, Rwanda Rift Valley and Timor Mount Ramelau. •

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: Starbucks invests in superior quality products and high level of customer services than aggressive marketing. However, need based marketing activities are carried out by the company during new products launches in the form of sampling in areas around the stores. : Starbucks aims at building customer loyalty through high level of  customer service at its stores. The retail objective of Starbucks is, as it says in its annual report, “to be the leading retailer and brand of coffee in each of our target markets by selling the finest quality coffee and related products, and by providing each customer a unique StarbucksExperience.”

: This includes all departments like management, finance, legal, etc which are required to keep the company’s stores operational. Starbucks well designed and pleasing stores are complemented with good customer service provided by the dedicated team of employees in green aprons. : The company’s committed workforce is considered a key attribute in the company’s success and growth over the years. Starbucks employees are motivated through generous benefits and incentives. The company is known for taking care of its workforce and this is perhaps the reason for a low turnover of employees, which indicates great human resource management. There are many training programs conducted for employees in a setting of a work culture which keeps its staff motivated and efficient. : Starbucks is very well known for use of technology not only for coffee related processes (to ensure consistency in taste and quality along with cost savings) but to connect to its customers. Many customers use Starbucks stores as make a shift office or meeting place because of the free and unlimited wifi availability. The company in the year 2008 also launched mystarbucksidea.force.com as a platform where customers can ask questions, give suggestions and openly express opinions and share experiences. The company has implemented some of the suggestions given via this forum. Starbucks also uses Apple’s iBeacon System wherein customers can order their drink through the Starbucks phone app and get a notification when they walk in the store. : This involves procuring the raw material for the f inal product. The company agents travel to Asia, Latin America and Africa for the procurement of high grade raw material to bring the finest coffee to its customers. The agents establish strategic relationship and partnership with a supplier which is built up after reconnaissance and communication about the company standards. High quality standards are maintained with direct involvement of the company right from the base level of selecting the finest raw material which is coffee beans in case of Starbucks.

Roles and Responsibilities of employees The functional structure feature of Starbucks Coffee’s organizational structure refers to grouping based on business function. For example, the company has an HR department, a finance department and a marketing department. These departments are most pronounced at the top levels of Starbucks Coffee’s organizational structure, such as at the corporate headquarters. The corporate HR department implements policies applicable to all Starbucks cafe’s. The functional structure feature of the firm’s organizational structure facilitates topdown monitoring and control, with the CEO at the top

Starbucks Coffee’s organizational structure also involves geographic divisions. At present, the company has three regional divisions for the global market: (a) China and Asia-Pacific, (b) Americas, and (c) Europe, Middle East, Russia and Africa. This feature of Starbucks Coffee’s organizational structure supports closer managerial support for geographic needs. Each division head is given a high degree of flexibility in adjusting strategies and policies to suit specific market conditions

Starbucks also uses product-based divisions in its organizational structure. These divisions address product lines. For example, Starbucks has a division for coffee and related products, another division for baked goods, and another division for merchandise like mugs. This feature of the firm’s organizational structure enables focus on certain product lines. In this way, Starbucks effectively develops and innovates its products with support from its organizational structure.

Functioning of the IS select process that has been automated. Starbucks tapped into new technologies to create a more efficient, automated process. The Mobile Payment System helps check the card balance, monitor Starbucks • reward points and see nearby store locations on a map or list Starbucks also uses Oracle that assists important decisions by generate monthly • reports. Oracle’s Automated information system for manufacturing assists store managers in inventory control, distribution planning and manufacturing scheduling Intelligent Restaurant Information System (IRIS) helps compile and report all store • information By giving customers an online space to submit ideas and provide feedback on the • brand and their experience with it, Starbucks was able to use social technology to its advantage HighJump Software’s Internet-based Supply Chain Execution Software solution • helped automate Starbucks’ product distribution network

Technology Infrastructure In 2008, the technology infrastructure at Starbucks had become outdated due to which the company had faced a “technology debt”, resulting in inefficiency in processes and decrease of profits. To

revamp the aging infrastructure, Starbucks invested in a new point-of- sale program and implemented a new CRM system in 2011. Starbucks had built its point-of- sale data warehouse on Oracle technology. This foundation, along with the Oracle Exadata Database Machine, enabled Starbucks to scale and seamlessly migrate its existing Oracle-based data warehouse to Oracle Exadata to ex pand insight and facilitate decisions, even with explosive growth in data and the user population. It also equipped their computer systems with cloud-based collaboration tools. The new CRM system Siebel delivers a combination of transactional, analytical and engagement features to manage a ll customer-facing operations for retailers. It enables new options for analysing customer and product trends, thus paving way for more personalized marketing. Starbuck’s manages their technology with a corporate information office (CIO) and a  corporate technology division that manages every aspect of Starbuck’s information and technology needs. Starbucks also uses Microsof t’s Office 365 online service for store email and productivity apps, but runs corporate systems on premises. It uses s ome SaaS options, but for infrastructure needs, it relies nearly entirely on its own heavily virtualized data centre, rather than public cloud services.

Types of Information System being used Starbucks mainly uses four IS systems: : Starbucks has developed a well-organized Transaction processing

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system that collects the data and stores it in the multilevel data storage facility of the organization. Starbucks uses IBM TPS system to punch in every order and store information such as of sales, COGS, wastage, etc. It is used at the point of sale (POS) of outlets, that is, the location where goods are sold or where transactions occur. : Supply chain covers all activities from product development to

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production, to the information systems required to direct these actions. The supply chain management system at Starbucks helps improve their reporting system which further enhances their production process. Starbucks uses High Jump SCM system at the parent company in USA. : DSS is a computer program application that analyses business data and

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presents it so that user can more easily take their business decisions. Starbucks uses Online Analytical Processing (OLAP) to do the large-scale data analysis and statistical analysis that act as reference for decision making. A singular DSS system called Oracle is used at the parent company. Oracle generates monthly reports on which important decisions are based. •

: Customer relationship management (CRM) is a technology for managing all your company’s relationships and interactions with current and potential customers. The two ways Starbucks uses CRM is through social media and Starbucks Membership Card. These enable the company to have a better and deeper understanding of the market by regularly maintaining the customer data a nd the organisation itself.

A very modern technology that is used by Starbucks to help the strategic level decision making process is digital dashboard. In this, Key Performance Indicator (KPI) application is used by the top management that provides it information about the key performance of the organization. It s hows the performance by showing it on a digital dashboard that shows progress of the organization towards organizational goal.

Security of the Information Systems Starbucks has its operations in countries, having stores and approximately employees. The company also offers mobile application facility through smartphones for all its customers. But all these create a challenge to protect the data of all the customers and to make it accessible to all the stores worldwide. Also, it has to protect itself from the cyber thugs that can create alternative payment systems and intrude the financial institution’s system. Thus, the need is not only to create an information system that enhance the productivity and scalability but also develop a smart security system to safeguard the information systems. Starbucks protects the information of its customers by using technical, physical, and administrative security measures. By doing so, they are able to reduce the risk of loss, misuse, unauthorized access, disclosure or modification of the information. The highly sensitive and private customer information (including credit and debit card details) the customers provide through Starbuck’s website or mobile applications, it encrypts the transmission of that information using the Secure Sockets Layer ( SSL) protocol. While the company has employed security technologies and procedures to assist safeguarding customer’s personal information, no system or network can be guaranteed to be 100% secure.

Scope for intelligence reporting and business intelligence Currently, Starbucks uses its business intelligence to track which customer is purchasing what product. But from 10 to 15 years from now, with increasing competitions in the market and to maintain its market edge, Starbucks needs to use this information collected from the worldwide customers to decide its product-composition, formulas and sugar content so that they can provide a unique and distinguished product experience to its existing and newer customers. In the future, the internet will be much f aster. Also the people that have access to internet would tend to increase many folds. This in-turn will reduce the internet costs. As a re sult, the extranets with the suppliers of coffee beans will increase efficiency. Extranets between farmers and Starbucks will increase accountability and honesty. There will also be a need of increasing Starbuck’s staff  within its intelligent reporting and business intelligence so that it can adapt to the increasing extranet, ecommerce, and sophisticated management information systems. For this, Starbucks will need to enhance its partnerships with the companies like IBM or Google. Like many other companies, Starbucks is also the carrier of iTunes, and wireless fidelity. Starbucks needs to possess the knowledge and skillset of future technologies so that it can compete with other leading brands by providing unique services that are compatible with the latest technology. Also, Management information systems will need to expand so that it will be able to possess data regarding the technological services Starbucks is providing and the correlated profit or loss. Thus, it will be able to provide unique customer experience.

Overall IS help in meeting business objectives and the organizational strategies for the same The main strategies of Starbucks are as follows: •

Expansion of Domestic stores

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International stores expansion

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Employee training and recognition

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Store ambience

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Product line expansion

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Coffee purchasing strategy

For the execution of its vision and strategy, Information systems has contributed significantly. Starbucks has planned to install hundred thousand wireless chargers in m ore than seven thousand of its stores in next three years. While the Internet of Things is a somewhat distant promise for consumers, Starbucks is charging forward with it aggressively. Many of its store have super high-tech coffee machines, which connect to the cloud to communicate the performance of the machines and to track customer preferences. Through Information Systems, the company is able to track a ll its revenues, thus understanding each store’s performance against labour, visualize product performance during peak hours, align its sales targets, and also improve the sale margins. Starbucks is also working on smart refrigerators that track the expiration dates of milk and other items inside, smart thermometers, smart door locks, etc thus improving the inventory efficiency. Along with this, Starbucks is also working to be a leader in Wi-Fi hotspot technology provider.