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12 - Implementing Diversification - Starbucks

 Diversification add value to organization and investors but implementing diversification strategies require communication between managers of different functions, and with investors. An organization might pursue a strategy to implement in-house development of functions to achieve Economies of Scale only if that same resource is difficult to copy by outside investors and is cheaper to acquire.

In case an organization decides to go for the production itself, it would need financial and human resources to achieve the goals. Before any investor would invest, they might want to make sure that company and its managers are working towards maximizing shareholder value. Since investors does not interfere with organizations day-to-day activities, they some sort of tools and process for keep getting updates on progress of operations. Monitoring and Bonding are such two tools or processes.

Monitoring helps investors keep an eye on management decisions and progress, whereas Bondings are set of policies or investments decisions by manager to reassure investors. These tools help minimize the conflict of interest between managers and investors at lowest possible cost. Organization structure, management control system, and compensation policies all play an important role in monitoring and bonding activities.

Starbucks has implemented “M-form” organization structure at corporate, division, function, and country level. They have similar functions as many other consumer product-based companies such as HR, finance, Operations, Supply-Chain, Warehousing, etc. Each of these functions are led by specific function heads. Starbucks further organized into divisions geography-based and product-based division. Starbucks has business in (1) Americas, (2) China and Asia-Pacific, (3) Europe, Middle East, and Africa. Also, in the U.S. market, Starbucks Coffee’s organizational structure involves further geographic divisions: (a) Western, (b) Northwest, (c) Southeast, and (d) Northeast. Each of these divisions are headed by division heads. Starbucks also offers multiple product channels such as famous brewed coffee stores, un-brewed take home coffee and coffee beans at retail stores such as Target, Costco, etc, and bottled ready to consume cold coffee. At lowest level, it has Starbucks store, which is managed and operated by team of manager and brewing professionals.

https://stories.starbucks.com/leadership/

Starbucks release latest decisions in quarterly and annual earnings reports. It goes one step further by providing guidelines which might be used by board of directors to reduce the conflict-of-interest and minimize the cost of capital.

https://investor.starbucks.com/ir-home/default.aspx

https://www.starbucks.com/about-us/company-information/corporate-governance

 

Reference:

http://panmore.com/starbucks-coffee-company-organizational-structure#:~:text=Starbucks%20Coffee's%20corporate%20structure%20involves,%2C%20Middle%20East%2C%20and%20Africa.


 

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