Essay: Organisational Structures At Starbucks Coffee - A Case Study.

As an open and distance learner, you should be able to learn independently and optimise the learning modes and environment available to you. Before you begin this course, please confirm the course material, the course requirements and how the course is to be conducted.

By the end of this course, you should be able to:

4. Describe the basic concepts, functions and basic skills in management;
5. Describe the management of an organisation including employees, and physical resources;
6. Explain the changes in management and the current management practice of todayÊs business; and
7. Apply the principles of management to the work place.

Topic 1 gives an overview on management and the roles that must be played by the manager. The management skills required at different levels of management will also be introduced. Students will be exposed to the evolution of management thoughts that explains the thinking contributed by the main management thinkers over the years.

Topic 2 discusses planning as one of the most important functions in management. The processes involved in effective planning, types of planning as well as the advantages and disadvantages of planning are discussed.

Topic 3 discusses decision making – the process of identifying problems, generating alternative solutions, selecting and implementing the best solutions available. This topic also discusses the situations of decision making – certain conditions, uncertain conditions, and risky conditions – and the steps involved in rational decision making. The types of limitations in the process of decision making, which are bounded rationality, common mistakes and risky environment, will also be discussed. Finally, this topic also discusses the two methods to improve the quality of decisions to be made using specific rules and tests. Group decision making is also discussed.

Topic 4 discusses the design of an organisation. Several factors that influence the structure of an organisation such as strategies, size, environment and technology will be discussed. The types of organisations such as departmentalisation based on functions, products, customers, geographical location and matrix will also be explained. This is followed by management of organisations which involves authority, chain of command, span of control, delegation, centralisation and decentralisation. This topic will also discuss work design that involves work specialisation, job rotation, job enrichment and job enlargement. Finally, this topic will also explain the mechanistic and organic organisational designs and several other types of new structures.

Topic 5 focuses on human resource management. This topic discusses human resource planning, recruitment techniques and selection of employees. Also discussed is the importance of training, performance evaluation, remuneration and termination of employees.

Organisational structures

An organisational structure is an illustration that specifies the manner business activities are directed in an organisation to attain a defined goal and purpose and these activities mostly consist of roles, responsibilities and regulations within a firm. Also the organisational structure determines the manner information and line of command flows between different levels of hierarchy in a firm so as to ensure clarity and transparency of decisions at different levels. In this report the different types of organisational structures has been discussed with specific focus on Starbucks Coffee which is renowned across the world for their high quality of roasted coffee beans and high passion for coffee products. Starbucks offers their customers unique and fulfilling experience more than just coffee and provides a premium selection of tea, coffee beans, fine pastries and other delectable items to satisfy taste buds of consumers. Each of Starbucks store offers warmth, artistry and appeals customers with music and ambience where people can sit, relax and chat or even work.  Starbucks is highly committed to offer highest standard of quality in coffee throughout the world and engage their consumers and community with responsible business practices and approaches.  Starbucks has strong organisational structure that promotes their business activities to ensure global dominance in coffee industry and their structure impacts all their areas of business including management, leadership, communication, strategic change and implementation as well as other elements of business to ensure exceptional success by meeting business needs.   Starbucks has four types of organisational structures that involves intersections among different elements of their business. For instance Starbucks product structure intersect with the functional and geographic divisions which in turn intersect with other sections of the business. The main elements of Starbucks organisational structure includes functional structure, geographic divisions, product based division and matrix based structures.         

According to Shahabadi & Pourkiani (2014) the organisational structure specifies the manner in which a firm distributes their line of authority, accountability and arrange the responsibilities for people and their jobs so as to maintain clarity of work, performance and objectives to be attained. The organisational structure determines the possibility for acceptable behaviour of employees in a firm in alignment to their responsibility and reporting systems and even illustrates the firm’s relationship with their external environment to demonstrate their arrangement of group of jobs and pattern through organisational chart.  The organisational structure of a firm depicts both reporting and operational process and relationships and its components or building blocks consist of department or division, hierarchy of management, process, regulations and objectives and specific temporary building blocks like task force or committee.  These organisational structures shape and support in implementation of primary goals to promote their attainment in an effective way and hence presence of appropriate organisational structure helps to identify and address human and business realities so as to determine long term success.  Hence organisational structure effectively guides the behaviour of employees and teams so as to maximise their productivity, efficiency, flexibility and motivation to attain pre-established goals.  A strong organisational structure is build on key elements such as work specialisation which means a firm’ is divided into separate subdivision of jobs and their specialisation. The other element is departmentalisation where firm is divided into basis of job divisions (Lee, Kozlenkova & Palmatier 2015). Further organisational structure is grouped on basis of line of command which illustrates line of reporting and on basis of span of control which specifies the way a manager can effectively direct a group or individual. The other element of appropriate organisational structure is determining whether the firm would follow centralisation or de-centralisation to empower authority of decision and formalisation which ensures degree of rules and regulations to be directed to staffs and managers of firm.  An example of organisational structure followed at Starbucks is given below:

Functional structure: in this structure a firm is grouped according to purpose and it allows the division of firm based on specified function or area that empowers a specialist personnel to direct authority, line of command and control within specified and defined scope of authority (Syed, Azhar & Shahid 2013).  For example a firm can practise functional structure and divide responsibilities, line of command into functions like Sales & Marketing, Finance, Engineering or Production etc where each function is headed by specialist Vice President who are controlled by a Group President. Under each specialist VP like HR there exist functional managers who are empowered to take decisions and give instructions to other employees in their specified division so as to enforce control and command.  Like managers under HR function are authorised to enforce advice or decision in context to safety and labour rights, relations.

The organisation that practices functional structure features separate hierarchy for each function thus forming a large network of functional departments where each of the department is grouped on basis of job that relate to organisational function or specialist skills like marketing, production etc and chain of command in each department lead to a functional head who in turn reports to high level leaders like Chairman or President. Such functional structure facilitate operational effectiveness as well as improves quality of product due to specialist being engaged in every functional area and even resources are allocated by function rather than being disseminated across the firm (Gebauer & Kowalkowski 2012).  One of the demerits of functional structure is that it supports narrow specialisation instead of general management expertise as such functional managers do not qualify to lead top executive position. Secondly functional units are highly concentrated on their own area so they may lack responsiveness for entire organisational needs.                

According to Prange & Schlegelmilch (2016 the geographic organisational structure is practised in those firms that have their operations spread across wide regions or geographies and such structures ensures that all their business activities are operated in a region and managed together to leverage advantage by focusing on local business preferences. Geographic structure is followed in multinational firms as centralised coordination of different regional branches often becomes difficult so separate activities are organised and controlled according to geographic area. This kind of structure helps firms that have multiple units in different  regions to have separate reporting and functional system across different geographic location, operate different regions as per local demand and yet be directed under centralised business policies. Also based on size of firm, separate geographic location may report to each Business Unit head across different regions or may report directly to top executives located in business Headquarter and hence the reporting systems under geographic structure can adapt to size and industry of a firm. The geographic structure helps an organisation that has widespread national and international offices to have own internal structure, management for each region which allows them to operate independently (Guisado-gonzález, Wright & Guisado-tato 2017). Also it allows firms to use local, experienced resources to operate a firm’s activities and this is advantageous in overseas operations where firms need support in transitioning their operations to particular foreign markets or region.      

Example Starbucks Coffee’s organisational structure is even divided into geographic divisions that are based on different regions or areas where they operate business across the world. Starbucks mainly has three regional or geographic divisions across their global market namely America Division, Asia Pacific Division and Europe, Middle East and Africa (EMEA) Division.  The America Division of Starbucks organisational structure oversees business operations across US market and this further consist of geographic regions or divisions i.e. Western, Northern, Northwest, Northeast and Southeast. Each of these geographic areas of Starbucks has Senior Executive. In the structure of Starbucks each local manager reports to at least two senior heads like President of EMEA division (geographic head) and Corporate HR Manager (functional head) and this characteristics of Starbucks organisational structure ensures close managerial support to address geographic business needs. Further each geographic division head has flexibility to adjust and direct strategies as well as policies to suit to particular market situations or demands. As such it enables better operational and strategic leverages like strong communication with local supplier, customers, proper collaboration with teams at each location, better capability to serve local needs and customise approach as per local market condition, capability to encourage positive competition between various departments as well as geographic structure helps Starbucks operate each of their different business units in different geographies to operate adequately suiting to regional culture, norms, languages and preferences as well as regulations that exist in each geographic location to ensure better attainment of business goals particularly related to logistics, resource and staffing. Along with advantages some disadvantages that are associated with geographic structure includes likely conflict between local and central management as separate geographic division often may take larger autonomy. Other demerits may include possible duplication of efforts, resource and functions, loss of some economies of scale.        

According to Moodley, Sutherland & Pretorius (2016) Matrix organisational structure is a type of hybrid structure between divisional and functional structure and is mostly found in larger multinational firms and this structure permits the leverage of both functional and divisional structures to coexist together in one single firm. A matrix structure allows reporting levels at both horizontal and vertical level. Like for instance staffs may be part of functional group like delivery but may serve in teams that support new product development. This type of organisational structure usually has different members from numerous groups working together to develop new product line.  Example, in each Starbucks outlets there are teams that support to deliver products or services to customers and these front sales teams often work together with product innovation team to enable Starbucks to offer more effective and innovative product or service to consumers. The effectiveness of teams under matrix structure is a major driver of financial performance of Starbucks at different franchise locations and owned coffee stores where teams are better focused to meet customer needs efficiently through product development and high customer oriented team culture to build better service delivery to customers through use of  combined expertise and team work. Matrix structure enables Starbucks staffs to own more responsibility not only related to their department or function but also be responsible for organisational goals. Also matrix structure allows managers and employees of Starbucks to get out of their comfort area and work together in expertise areas to manage special business needs as specific to skills and hence this allows employees to focus on their best potentials and capabilities. Hence managers under matrix structure coach staffs to ensure well trained and competent resources are used to maximise performance and effectiveness of attaining specified goals of division which helps to maximise competency of resources. Further matrix structure ensure better communication not just from top down but also between divisions. In matrix structure staffs can interact with managers and further higher up the hierarchy level which ensures that everyone is involved in decision making and its implementation to attain functional and divisional objectives with better workplace coordination and communication (Král & Králová 2016). Hence matrix structure in Starbucks empowers their staffs by giving them more authority and higher sense of autonomy which helps them work effectively with strong inputs, ideas to foster creativity and better problem solving.  However a challenge in matrix structure occurs as staffs may find difficulty to follow line of command due to directions or instructions given from two diverse managers so employees are required to prioritise their work obligations to ensure effective attainment of goals.  

Fig: Matrix Structure

Source: Organisationalchart.com (2018)

According to Qiu, Wang & Nian (2014) the product structure is practiced in large diversified firms where division and related business activities are arranged as per product and all activities essential to manufacture and market a product or group of specific products are organised together. In product structure the senior level executives of the product group generally has significant autonomy over operation of product in given market  and the integrated business unit is departmentalised as per type of products and hence product structure is beneficial for large multinational companies where product extension, diversification, manufacture and marketing of products is the main concern. Further the common organisational policies are decided by the senior level executives within the philosophical principles of the firm and the benefit of product structure arrangement is that senior level executives and other teams or groups can oversee specific needs of their product line and become expert in its development, improvement, manufacture and distribution. Also under product structure employees are assigned to self-sufficient division as per specific product line or service that is produced, according to customers that are dealt with and as per geographical location that is served. The product structure has numerous layers of managers and staffs and each layer can have their own marketing or sales or other teams and the manager in product structure usually reports to Head of firm by product type such as division related to general items or products as well as to head of functional division centrally like HR or Finance heads. Product based structure has several advantage like it helps to focus distinctively on business activities related to specific product line and has specialised competence for a particular products’ manufacture and distribution. The business activities can be targeted to major customers that make substantial size of business and hence meet customer needs more appropriately with focus on particular segments (Verle, Marki?, Borut Kodri?, & Zoran 2014).  Also due to extended expertise within particular product line response to market condition or changes can be addressed more rapidly and with flexibility to encourage better competitive advantage and performance in each divisions. However there are certain disadvantages like difficultly to scale, potential of duplication of functions and resources like different sales teams for each division. Also other demerits may include over emphasising divisions goals over organisational goals, loss of central control over each division and conflict among different division.  

Example, in Starbucks the product based structure has three divisions that are focused on product lines like Starbucks has a division for Coffee and related products, other division for Baked products and third division for merchandise like mugs, general items etc. The characteristics of Product structure of Starbucks ensure them to oversee their particular product development and ensure its further improvement through innovation in product or services which supports organisational structure. These capabilities provide competitiveness to support business needs of Starbucks specifically by consideration of their strengths, weakness and opportunities. 

Fig: Product Structure

Source: Author

Conclusion 

Thus it can be concluded that use of different structures at Starbucks has enabled their employees ability to meet different roles and responsibilities and combination of different structure has ensured better control and coordination between both internal environment and outside with clarity of power and authority. It has even helped to ensure better flow of information between different levels so as to form capable and informed decisions backed with focused goal and approaches . Further it has even ensured better distribution of power amongst departments to ensure high level of interdependence as well as autonomy in decision  making to ensure higher effectiveness.

References 

Gebauer, H., & Kowalkowski, C. (2012). Customer-focused and service-focused orientation in organizational structures. The Journal of Business & Industrial Marketing, 27(7), 527- 537. doi:https://dx.doi.org/10.1108/08858621211257293

Guisado-gonzález, M., Wright, L. T., & Guisado-tato, M. (2017). Product-process matrix and complementarity approach. Journal of Technology Transfer, 42(3), 441-459. doi:https://dx.doi.org/10.1007/s10961-015-9435-6

Král, P., & Králová, V. (2016). Approaches to changing organizational structure: The effect of drivers and communication. Journal of Business Research, 69(11), 5169. Retrieved from https://search.proquest.com/docview/1822372165?accountid=30552

Lee, J., Kozlenkova, I. V., & Palmatier, R. W. (2015). Structural marketing: Using organizational structure to achieve marketing objectives. Journal of the Academy of Marketing Science, 43(1), 73-99. doi:https://dx.doi.org/10.1007/s11747-014-0402-9

Moodley, D., Sutherland, M., & Pretorius, P. (2016). Comparing the power and influence of functional managers with that of project managers in matrix organizations: The challenge in duality of command. Journal of Economic and Management Sciences, 19(1), 103-117. Retrieved from https://search.proquest.com/docview/1772108129?accountid=30552

Prange, C., & Schlegelmilch, B. B. (2016). Towards a balanced view of innovations.  Management Decision, 54(2), 441-454. Retrieved from https://search.proquest.com/docview/1773169333?accountid=30552

Qiu, J., Wang, Z., & Nian, C. (2014). An approach to filling firms' knowledge gaps based on organizational knowledge structure. Journal of Knowledge Management, 18(1), 1-18. doi:https://dx.doi.org/10.1108/JKM-05-2013-0191

Shahabadi, M. E., & Pourkiani, M. (2014). EXPLANATION OF THE RELATIONSHIPS BETWEEN DIFFERENT TYPES OF ORGANIZATIONAL STRUCTURE AND STRATEGIC CAPABILITIES OF EMPLOYEES: DESCRIPTIVE ANALYSIS.  Journal of Business and Management Review, 4(1), 96- 106. Retrieved from https://search.proquest.com/docview/1564432006?accountid=30552

Syed, S. H., Azhar, S. M., & Shahid, M. (2013). Strategic orientations and organizational types: A theoretical link. Journal of Organization and Human Behavior, 2(3), 17-31. Retrieved from https://search.proquest.com/docview/1478027462?accountid=30552

Verle, K., Marki?, M., Borut Kodri?, & Zoran, A. G. (2014). Managerial competencies and organizational structures. Industrial Management & Data Systems, 114(6), 922-935. doi:https://dx.doi.org/10.1108/IMDS-01-2014-0019