Contemporary Issues in Strategic Management

This report discusses contemporary issues in strategic management, focusing on pre and post acquisition rationale, strategic alliances, and organisational culture. It analyzes the La Boulange acquisition by Starbucks, provides recommendations for success, and explores the rationale for Starbucks' entry into strategic alliances. The report also discusses the cultural web of Starbucks' organisational culture.

Contemporary Issues in
Strategic Management
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CONTENTS
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Analysis of pre and post acquisition rationale, application of La Boulange acquisition,
recommendation..........................................................................................................................3
Rationale for Starbucks entry to strategic alliance......................................................................5
Cultural web to articulate Starbuck’s organisational culture.......................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
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INTRODUCTION
Strategic management is defined as the process of continuous planning, analysing,
monitoring and assessment of all the required factors that support an organisation to meet with
its organisational objectives. Changes within a business require an organisation to continuously
assess the strategies and make changes accordingly for its success (Rothaermel, 2016). The
current report is based on Starbucks which is a large multination chain of coffeehouse which is
headquartered in America. The current report involve a discussion regarding the acquisition
performed by Starbucks and recommendation for maximising the chances of success. Other than
this it also involve a discussion regarding rationale of strategic alliance and ways of minimising
its risk. At last it involve a detail regarding organisational culture and success it provide by
optimising the changes in strategic alliance.
MAIN BODY
Analysis of pre and post acquisition rationale, application of La Boulange acquisition,
recommendation
Starbucks Corporation is an American Coffee chain which operates throughout the world in
around 30000 locations worldwide. This company mainly target the quality minded coffee
drinkers using their special and quality rich hand made coffee and now it started using some
automated espresso machine for providing more quality and tasty coffee as per the need of
customers (Fernandez and Jomon, 2016). By the end of fiscal year due to economic recession,
Starbucks had faced several issues. Then it decided to recover the profit of business by
expanding business with the help of acquisition strategy that support in dealing with the
economical deficiency generated due to recession period. Then it acquires the La Boulange café
& bakery which is a local coffeeshop, bakery or café of San Francisco. Both the brand shares
similar value and a common vision regarding offering of premium product in socially
responsible manner. The main reason behind acquiring La Boulage café is that it becoming more
popular among people due to its high-quality food and maintain a good customers base. So by
acquiring this, Starbucks going to be benefited in term of growing it sales by connecting with the
first class bakery and offering high quality food. But this acquisition failed and Starbucks have to
close its stores in order to shut off the unproductive stores that are result into loss of the company
as they are failing to generate sale or revenue.
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The main reason behind the failure of this acquisition is failure in it application, as
Starbucks planned to acquire the La Boulange in order to offer high quality snacks with its coffee
as the La Boluange café is famous for its snacks and food items it offers. But as it started
working it found that the quality of its sandwiches are not good and on the name of premium
product they are also charging high over its offering which is not equal to its quality as well as
taste.
The majority of organisations prefers to adopt merger and acquisition as a main strategy
to develop or expand their business (Glowik, 2017). Acquisition is mainly refers to the
purchasing of all the corporate assets in order to take control over a firm, gain synergy or
expanding business by opting another firms customer base. But not all the acquisition of a
company get successful as it can be relate with the Starbucks whose acquisition strategy get
failed with the La Boluange café. Hence in order to become success it is crucial for a business to
consider certain factors or characteristics of a strategy before adopting it so that decision brings
most positive outcome.
Characteristics of effective acquisition: -
There are some characteristics that Starbucks must consider in order to ensure the success
of its acquisition strategy which are mentioned below:
 Communication: - One of the most crucial factor that must consider is that there remains
a clear as well as frequent communication among the owner and employees of both the
organisation. As lack of information may affect the actions of employees to be performed
as they don’t get an idea regarding manner in which they have to proceed.
 Talented and qualified team: - By having a team of talented and expertise people it
become easier for the companies to deal with the issues that get arises due to combining
of two firms (Garthwaite and et. al., 2017). The transition team support both the
companies to learn to perform work all together and ensuring that they also remain
focused toward their goal.
 Legal representation is essential: - The action of merger and acquisition is quite
complicated matter and require lot of legal formalities to be done. So there remains a
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requirement of experienced person who can deal with all these attorneys related issues
and direct the businesses legally.
 Transparency in deal: - In merger and acquisition practices the transparency is crucial as
both the parties have to sign the non-disclosure agreement that help in limiting the risk.
Here it remains crucial that both the parties disclose their legal, financial or business
situation effectively and truly in front of one another.
These are some of the characteristics that Starbucks must consider while opting for a merger
and acquisition practices. This is so because when it enter into an acquisition agreement then
the market performance of both the brand get interlinked so an organisation must be aware
with the merits and demerits of the agreement so that strategies can be build up accordingly.
Recommendations
There are some of the practices that are not up to the standards and hence affected the
growth as well as performance of the Starbucks when it enter into an acquisition agreement
with La Boluange café which leads to its failure. There are certain prospects that it could
consider which may let it to success of this action,
 With acquisition of La Boluange café, Starbuck entered into a food sector where it
offer breakfast or other snacks with its coffee that could proves to be a most
successful combination (Lee, 2017). So, while entering into agreement the more
focuses must be toward providing high quality food which is rich in taste. So that it
attract more and more customers.
 It can also perform a market survey or take customer feedback regarding the kind of
improvement they need over food so that this acquisition become able to capture
market by offering the product as per the taste and preference of people.
 Other then this, for penetrating in market Starbucks could offer its food item of high
quality at low price so that it become able to capture the attention of people and then
gradually increase the price. This not only help in continuing the people to visit the
store and increase sale but also provide a duration to improve the quality of food
items along with setting up coordination between two firms so that they can respond
as per market condition.
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Rationale for Starbucks entry to strategic alliance
Strategic alliance is refers to a strategy which involve an agreement between the two firm to
enter into a partnership and share up all the resources with one another for fulfilling a particular
objective. After accomplishing that objective both the organisation get separated from the
partnership agreement (Fatehi and Choi, 2019). Starbucks always work toward expanding its
business within several different countries in order to enter into untapped market and take
leverage from them. For this Starbucks cooperated with several different organisations for
expanding its business such as Pepsi, iTunes, Barnes and many more. The main benefit that
Starbucks get with strategic alliance is the integration of management aspect as by combining the
management practices to two organisations it become quite easier and effective for the company
to perform operations in more effective manner that leads to achievement of competitive edge.
Growth strategy a sensible choice
The strategic alliance performed by Starbucks proves to be sensible as it get several
economic benefits. Additionally, it also supported in increasing the growth of its product by
combining them with the customer base which help in generating positive customer satisfaction.
This in turn increase overall sale as well as profit of the firm and help in catering the customers
by getting alliance with some of the most successful brands. But as each strategy involve certain
risk strategic alliance also brings some of the issues in front of Starbucks (Glowik, 2017). This is
so because when a company enter into a strategic alliance within a new market then it has to face
several issues such as cultural variation, inappropriate understanding of partner goals, differences
in manner operations are being operated, it become quite difficult for the brand to manage with
different issues associated with the worldwide alliance. These issues mainly arise as unlike
merger and acquisition, strategic alliance is consider both the partners as separate entity and
there remain a lack of information flow, partners face difficulties, incompetent administration,
inability of partner to make the market grow, partner can take leverage of its position etc. these
all may create issues for Starbucks. Though, Starbucks remain successful in its strategic alliance
and face very minor issues that are not much severe as they can be in case of strategic alliance.
Minimising the risk associated with strategic alliance
There are several risks that are associated with the strategic alliance at international level
that may affect the current growth of the company if not managed well. Hence, there are three
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main factors that must be consider by Starbucks in order to avoid the risk associated with
strategic alliance. These are mentioned below:
 Partner choice: - It is very essential for an organisation to choose right partner while
entering into an alliance agreement. As an effective partner supports a business in
achieving the strategical goals that may be related with getting access to market, sharing
the risk or costs or gaining access with the critical core competencies (Nevin, 2016). All
the strategical goals get accomplished if the partner have the capabilities that another firm
is lacking. Therefore, Starbucks must seek for a business partner that can rectify its
deficiency and help in creating value over new marketplace.
 Alliance composition: - There are certain principles that must be followed by Starbucks
in order to avoid the risk in agreement and composite the alliance. For this alliance must
be make it impossible to transfer the technology which must not be transferred.
Contractual safeguard must be their to guard against the risk of opportunism by a partner
and both the parties must get agreed upon some set of skills and technologies that they
will going to be share with one another for ensuring the equitable gain.
 Manage strategic alliance: - The main factor that ensure the success of alliance is the
maximum benefit it provide to both the parties. One of the major issues that Starbucks
may face while dealing with a partner operating in different geographical area or country
is the difference in their culture (Glowik, 2017). This in turn leads to difference in term of
management style that may create difficulties in managing the work within new culture.
Therefore, Starbucks must focuses toward building up trust among its partner and try to
accept the changes by learning it from partners so that it become easier for them to deal
with news culture and perform well in it.
Cultural web to articulate Starbuck’s organisational culture
Organisational culture is defined as the set of underlying belief, values, assumptions and
ways for interacting that support in creating a unique psychological as well as social environment
of an organisation. The culture of an organisation plays a significant role within improving the
p0erformance of an organisation by ensuring that the efforts of employees get aligned in right
direction toward the pre-decided strategies. Starbucks maintained a culture of happiness,
fairness, workers available for consumers, creativeness among the staffs etc. which all contribute
toward creating a working culture where employees love to work toward the goals of
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organisation (Voigt, Buliga and Michl, 2017). Other then this, it also helps in creating a concept
of cooperation among the staff members where they share their skills and knowledge with others
and perform work jointly. At the time of financial crises where other organisations are working
toward cutting HR cost, Starbucks invested in staff training in order to improve the performance
and be able to continue with their business run smoothly. All such culture practices supported it
in strengthen the business and exert a performance that results into greater success.
The organisational culture that Starbucks follows also plays a significant role by
supporting the operations of organisation when changes get anticipated due to adoption of
several strategies for expanding the business. The culture of Starbucks contributed a lot in
making it successful in optimising the changes in strategic direction. This become possible due
to cultural characteristics that Starbucks have such as,
Employee leadership: - Under this approach all the leaders, managers and supervisors put
their concentration over the employees so that each individual can grow within the company and
remain satisfied with their work. This caring behaviour of Starbucks toward staff members
support in developing a culture that results in increasing in morale of employees that further
motivate them to perform well and treat the customers effectively so that maximum customer
satisfaction can be achieved. Hence, this approach also supported company while its expansion
by keeping employees engaged within their work. This happen as effective leadership involve
assigning the employees over their day to day work and responsibility in order to direct them in
right direction so that they support organisation in dealing with challenges.
Relationship driven approach: - Starbucks also maintained the culture of warm and friendly
relationship that always attract people. This is so because the company operate over a vision to
work as a experience provider and became a third place for conviviality after home and
workplace (KURTULDU, 2016). The coffee shops are designed with such a culture where
people feel more comfortable and enjoy a friendly environment so they prefer to visit it again
and again for spending their time. As this culture influence more on relationship, Starbucks
develop the it as a global coffee culture which support in driving customer demand for the
company’s speciality coffee products. Additionally, by maintaining effective employee
relationship it become possible to keep their behaviour positive which in turn dedicate their work
toward improving customer experience while their visit in cafe.
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Inclusion and diversity: - Starbucks operates at a n anti discriminatory policy which shapes
up a positive organisational culture. Over this policy Starbucks maintain a workforce that
belongs to diversified background which in turn help in brining, innovation practices all together
so that best possible performance can be provide. This also support in expansion practi8ces of
company as it helps in making it quite easier to accept the new culture with the help of
employees belong to different culture.
These are some of the cultural characteristics that Starbucks have which form up its culture
which have a direct influence over the manner in which employees perform their work and
integrate within one another. Along with this it also influences the type of leadership followed
within organisation and management flow which is being followed by Starbucks.
CONCLUSION
From the above mentioned information, it can be summarised that strategic management is
consider to be a significant part of a n organisation practices. As the expansion of a business is
generally performed with the adoption of a particular strategy which help it in entering into a
new market. But as the new market consists of difference in t erm of culture, demand and several
other factors it become crucial for a business to continuously focuses toward managing I tr
strategy and mould it in a manner that it become able to deal with the threats present in external
environment. Despite of this the organisational culture also plays a significant role while
expansion of a business by managing the work and make employees capable to deal with the
challenges present in new market.
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REFERENCES
Books & Journals
Fatehi, K. & Choi, J. (2019). International strategic alliance. In International Business
Management (pp. 217-239). Springer, Cham.
Fernandez, A. & Jomon, M.G. (2016). The Impact of HIWP on Personal Control: Implications
for Workmen during Firm Acquisition. Vilakshan: The XIMB Journal of
Management, 13(1).
Garthwaite, C., Busse, M., Brown, J. & Merkley, G. (2017). Starbucks: A story of
growth. Kellogg School of Management Cases.
Glowik, M. (2017). 4.7 Case study: Starbucks. Global Strategy in the Service Industries:
Dynamics, Analysis, Growth, p.156.
Glowik, M. (2017). 4.7 Case study: Starbucks. Global Strategy in the Service Industries:
Dynamics, Analysis, Growth, p.156.
Glowik, M. (2017). Case study: Starbucks: You may think it is franchising only but it is not.
In Global Strategy in the Service Industries (pp. 156-164). Routledge.
KURTULDU, G. (2016). “STARBUCKS” İŞ MODELİ VE GLOBALLEŞME SÜRECİNE
KIYASLA BİR İŞ MODELİ OLARAK “KAHVE DÜNYASI” NIN GELİŞİMİ VE
GLOBALLEŞMESİ. Kırklareli Üniversitesi İktisadi ve İdari Bilimler Fakültesi
Dergisi, 5(2), pp.33-55.
Lee, J.S. (2017). The effects of brand identity of starbucks coffee speciality store on brand trust
of customers, brand attachment, revisit intention, and word of mouth intention. Journal
of Digital Convergence, 15(12), pp.159-167.
Nevin, M. (2016). The strategic alliance handbook: a practitioners guide to business-to-business
collaborations. Crc Press.
Rothaermel, F.T. (2016). Strategic management: concepts (Vol. 2). McGraw-Hill Education.
Voigt, K.I., Buliga, O. & Michl, K. (2017). Globalizing Coffee Culture: The Case of Starbucks.
In Business Model Pioneers (pp. 41-53). Springer, Cham.
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