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Implementation, Strategic Controls and Contingency Plan- Starbucks

Introduction

In the previous paper, we have discussed the use of strategic planning and recommended some strategies for the company to meet their set goals. Each of the strategies were evaluated and then the optimal strategy was chosen for the company which we fetch the best possible results. After selecting a strategy, the next step is to create an implementation plan. In this paper, an implementation plan for the company has been developed keeping in mind the strategies and the objectives of the company. The implementation plan along with the financial budgeting has been provided in this paper.

Implementation, Strategic Controls and Contingency Plans

The main objective of Starbucks is to get respected and recognized as a brand name worldwide. It the way of maintaining its position in the market, the company is required to develop an effective and efficient implementation plan that can help them to achieve their objectives. For a long period of time, the company has been operating successfully with their marketing strategies (PEARCE, 2014). They have been providing their customers, a quality of service and doing their best to meet the prevailing consumer demands.

Starbucks can be considered as an important brand name that is being used by its consumers for a variety of purposes. Consumers use the Starbucks stores to meet their friends, conduct business meetings, and most importantly to take some time out of their busy schedules to relax. All these factors contribute a lot to make Starbucks a profitable and a successful brand worldwide. In order to implement a successful plan, the company has to first set the short-term objectives that will contribute to achieve the long term goals of the company. No one in this world can predict future, thus in order to be successful, it is important that long term goals should be laid down in such a way that it can be achieved in the long run.

In a post, Mr. Schultz reported that “Since 1985 we’ve rewarded our customers with a discount when they bring in personal tumblers, and we have a goal to serve 5% of the beverages made in our stores in tumblers and mugs brought in by our customers” (Schultz, 2013).  This type of implementation has been made as a part of the goals of the company so as to reduce the waste by using the reusable cups (Roby, 2011). This goal brought some progress as the percentage of the beverages that are being served in the personal tumblers marked an increase of 0.5% during a year (Starbucks, 2014).

The goal of the company is to offer its consumers with the coffee products of the finest quality along with other products. In order to remain competitive, and keep itself in the front of the competition, it is important for the company to develop some new products that will in turn expand the product line of the company.

Over 80% of the residents of America that are of 25 years old or more, may consume on an average of around 3.5 cups of coffee per day. This creates a need for the company to maintain their standards of quality because several other competitors like “Dunkin Donuts” and “Mc Donald’s” are offering a similar king of products at lower prices, which in result poses a tough competition for Starbucks (Samson & Daft, 2012).

It is also recommended that the Starbucks should also open some new stores and joints along with taking the user experience of the consumers as their top most priority.  It is matter of fact that consumers do not like waiting to satisfy their needs. In a similar manner, with the increase in the number of Stores, the company would be able to serve the needs of the consumers in a much better way. They are also required to increase their funds for advertising by allocating some of its resources towards the print media. Moreover, the Starbucks is required to bring some diversity in their products by offering partnership to the local stores and shops or by procuring new coffee beans from different parts of the world.

They must bring in some new lines of products for the non-coffee drinkers. These product lines may include organic tea products and organic beverages.  Starbuck can also change the atmosphere or the ambience during the holiday seasons. Last but not the least; the company can improve its global presence by providing its service through online portals and “drive-thru services”.

It is better here to mark some deadlines and milestones which should be achieved simultaneously so as to make our implementation plan more effective. Here, milestones should be created on quarterly basis and their performance should be analyzed after the completion of every quarter. Any discrepancies found should be immediately be taken care of so that there will be no deviations in the future.   Moreover it will help to know that if the set goals are being achieved and if they are beneficial for the company or not.

Financial Forecasting and Budgeting

Financial forecasting is very important for the prediction of the future financial performance of the company. Three steps can be proven useful for determining this. The first step that can be used is to estimate the revenues and the expenses that are relative to the period of current planning. This can be used to forecast the sales of the company. This method is referred to as (percent-of-sales method of forecasting financial variables).

The sales of Starbucks are expected to increase in the upcoming years. The major idea behind this increase is their innovation and customer service. It is anticipated by the company that their sales may grow by at least 4.5% in 2015, as it is expected that the economic crises may come to a halt. If the economic crises will come to a halt, obviously more people will have more jobs, and the earnings of a person will also increase, which equates that they will have more money to spend more on leisure activities and products. This may lead them to shift from cheap products to sophisticated products.

The second step requires the estimation of the investment the company would like to make in the fixed assets and the current assets that may help to meet the anticipated sales. An estimation of a sustainable growth rate can be very helpful here. The expenses that are faced by Starbucks in relation to the operations and functions in their stores need to be considered here.  Currently the company is operating with long-term debt, research and development expenses, advertising expenses, and several other expenses (Starbucks, 2014).  Starbucks also believes that their expenses might increase during the holiday season because people go out for shopping which will in turn increase the number of visitors in the store and they would like to buy the gift cards to present them to their acquaintances.

However, on the other hand, the company will experience an influx of people after the termination of the Holiday seasons as they would like to use those gift cards. It is also likely that they will be accompanied by any other individual as well, which will in turn results in more sales as they will have to spend more, while exceeding the limit of their gift cards.

The third step will help to identify the financing needs that are relative to the period of planning. This can be done by using the method of formulating cash budgets, as it will create a layout and a detailed plan of the receipts, cash reimbursements, new financing need, and the net changes in the working capital over a period of time.

While considering the break-even point of Starbucks, it is important to note that the company has forecasted average revenue of 12 billion for the next 3 years.  If the revenue of 12 billion and divided by $4.00 (an average price of a beverage at Starbucks), it will come out to 3 billion cups of the drink that will be sold every year for the next 3 years.  If an average variable cost of 5 million will be divided by the total sales, a variable cost of $0.40 cents per cup will be figured out.  Since the average price of a drink is $4 and we deduct the variable cost of $0.40 then a profit margin of $3.60 will be figured out (Possehl, Vankley, Ensing, & Roggow, 2010).

Now if a fixed cost of 15 million is divided by the profit per drink that is $3.60, we will get 4.10 million cups that needs to be sold out by the company to attain the breakeven point at the price of $4. The break-even point can now be calculated by using the following equation:  4.1 million cups X $4.00 = $16.4 million. Thus, Starbucks has to generate revenue of at least $16.4 million, to operate on the breakeven point.

In order to be successful, the company is required to keep their costs low while improving the quality of services, offering innovation by developing new products and providing the best quality of customer service to satisfy the consumers.

Risk Management Plan

As per my understanding, the plan is not risky. The company is trying to give priority to its consumers. The main aim of the company is to satisfy the needs and the wants of the consumers. The proposed plan helps the company to convey a message to its customers that what is their value in the eyes of the company. The proposed plan includes the opening of new stores, and this is the only area, where the company requires the allocation of resources. Even that cannot be considered as a risky investment. Hence, there is no need for a risk management plan and in case any risk arises, then I believe that the company is well eligible to overcome those risks.

Conclusion

The implementation plan provided above has a lot of worth to be executed in the company. The consumers usually measure the value of the products on the basis of the products as well as the intangible services provided to them along with the products. In this case, the company wants to make consumers aware that what is their value for the company and the company wants them to visit the store again and again. By communicating and providing the best of the services and that too at a reasonable price, the consumers would not mind to purchase the products.

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