Principles of Operations Management: Allocation of Resources and Strategic Risk Analysis for Starbucks

This report discusses the allocation of resources and strategic risk analysis for Starbucks, a renowned restaurant chain in the food and beverage industry. Learn about the importance of effective resource allocation and how to manage risks to ensure operational efficiency and sustainability in the market.

PRINCIPLES OF
OPERATIONS
MANAGEMENT (Part2)

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 3............................................................................................................................................3
P7 Plan for allocation of resources..............................................................................................3
TASK 4 ...........................................................................................................................................6
P8 Devising and implementing SRA for Starbucks....................................................................6
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Operations management refers to managing all the business practices so that highest level
of organisational efficiency can be achieved which will help the company in reaching to its goals
and fulfil its objectives. The business operations are related with conversion of all the potential
resources into goods and services so that maximum profits can be gained by fulfilling customer
needs and wants (Calandro, 2015). This report is based on the renowned restaurant chain
Starbucks which deals in food and beverages and is also a global coffee giant with more than
21,000 restaurants in 65 countries and generating around $15 billion revenue. This report will
discuss about allocation of resources and analysis of risks so that businesses can effectively
manage their operations and survive sustainably in the market.
TASK 3
P7 Plan for allocation of resources
Allocation of resources refers to assigning and scheduling all the available resources like
human resources, time, assets, skills etc. which are important for achieving the goals and
objectives of a project. Effective resource allocation is important so that right resources are made
available to the right activity which will help in effectively completing a project on time.
Starbucks operational strategy are aimed at providing a competitive advantage to the company
by improving its performance at five competitive components namely quality, speed,
dependability, flexibility and cost (Hosseinian-Far and et. al., 2018). The operational activities
performed by the company are setting location, designing the layout of restaurant, quality
management and supply chain management. The resource allocation plan for Starbucks so that it
can perform its operational activities efficiently is given below :
RESOURCES REQUIREMENT TASKS STARTING
DATE
DATE OF
PROJECT
END
Human
Resources
Infrastructure Infrastructure is the first operational
requirement so that Starbucks can locate
its restaurant at a place where it can
accomplish its goals and objectives in an
efficient manner. The human resources of
20th Dec,
2019
28th
June,
2020

the company play an important role in
searching for a location where the
restaurant can gain a competitive
advantage in the market.
Financial
Resources Layout
The layout of the restaurant requires huge
financial investments. The layout design
should be in such a way that it increases
the efficiency of staff members to work
efficiently, also the kitchen should be of
suitable size, eating area should be
designed in a way that enhances customer
experience (Kirchhofer, VCE Co LLC,
2016).
17th June,
2020
20th
August,
2020
Artificial
Intelligence
Technology
Quality
Within the food industry quality of food
plays an important role to make the
business successful. Starbucks can use AI
technology so that the quality of food can
be ensured and also the standards of food
management are followed in its
preparation.
25th Sept,
2020 -
Transportation Logistics
Logistics play an important role in
Starbucks so that food and beverages of
good quality can be made available to the
end consumers which can be done
through effective logistics and supply
chain management (Lee, 2017).
25th Sept,
2020 -
Strategies to support resource allocation plan with critical analysis

There are several strategies that can be followed by the organisation so as to support the
resource allocation plan which will increase the overall organisational efficiency. Some of the
strategies are explained below : Training and development : It is the most important strategy which help Starbucks to
enhance the skills of its human resources which can be used to increase their efficiency to
work which will in turn enhance company's performance. This also helps in building their
capability to think logically and critically analyse a situation before making decisions
regarding various aspects of managing a project. Choosing an appropriate location can be
possible through effective training programme so that Starbucks can be located at a place
that can give company a strategic and competitive advantage. The advantage of using this
strategy is that the productivity and competence of employees increases which helps the
company in efficiently achieving its goals. However, the disadvantage is that it is time
consuming and expensive which increases organisations overall cost (Munjal, Requejo
and Kundu, 2019). Capital budgeting : It is a process which help Starbucks in evaluating investments so that
the financial resources can be efficiently utilized and allocated in order to complete the
project in an efficient manner. The investment in land, machinery, equipments, logo,
product development etc. can be efficiently done and the expenses can be monitored in
order to complete the project successfully. The advantage of using this strategy is that it
helps Starbucks in evaluating risks involved in investment and choosing the best option
to invest so that profits can be earned by the company. However, the disadvantage of
using this is that wrong capital budgeting can affect long-term sustainability of the
company as the assumptions and estimations about the profitability of project is made in
terms of future perspectives which is highly uncertain. Total quality management : This strategy help Starbucks in maintaining the consistency
of quality of products and services that are provided to customers. Starbucks can use this
strategy so that highest quality of food and beverages can be sold to customers which
helps the company in gaining a competitive advantage. The advantage of using this
strategy is that better products can be manufactured at lower costs by improving the
processes and eliminating waste which helps in saving time and cost of the company.
However, disadvantage of this strategy is that it needs company-wide commitment by all

the members involved so that quality can be maintained. This needs effective training and
development so that overall commitment can be achieved which will increase company
costs.
 Just-in-time inventory management : This strategy help Starbucks to maintain sufficient
inventory levels so that it is able to absorb maximum market demand. JIT helps in
aligning raw material orders from suppliers in respect to production schedules. The
logistics of company can be made efficient by the use of this strategy as the raw materials
required by the company will always be maintained so as to meet the market
requirements. The advantage of using this strategy is that less space will be required to
maintain inventory, costs of managing stock can be reduced which helps the company in
reducing its costs. However, the disadvantages of this strategy is that there is a risk of
running out of stock which will increase the waiting time of customers and will shift their
interest of customers to other company which is not good for brand image of Starbucks
(Niknejad and et. al., 2016).
VRIO MODEL
It is one of the framework which is used by business organisation for the purpose of
determining the internal capabilities and resources so that additional advantages can be taken by
the company in future period of time. In context of Starbucks their manager will be able to find
the area where they are needed to improve so that future goals can be accomplished in
appropriate time period.
 Valuable: The first thing which is mainly focused is that whether the resources of
company adds the value or not by using suitable opportunities to defeat against the threat.
While talking about Starbucks they sell the coffee at a premium price but still customers
prefer to have a coffee from Starbucks which means it adds value to the organisation.
 Rare: The resources which are being used by Starbucks are rear in the market as there
are other organisation available in the market who can use the similar form of resources.
But, still it in necessary to understand that Starbucks have a huge market presence and
even they are utilising the resources effectively.
 Imitability: It simply means that whether similar form of business organisation can copy
them or not in future period of time. In context of Starbucks, they have been using

different advanced technologies due to which other companies are unable to match the
taste with them due to which it is not imitable in current scenario.
 Organisation: In current scenario, Starbucks is able to explore each and every resources
in a systematic manner and even company has build the strong brand image in the market
which not possible for the other organisation to copy at the moment. This allows
company to take competitive advantage in the market.
McKinseys Model
It is one of the business model which is used for the purpose of effectiveness that
explains that there are seven internal factors of an administration that need to be aligned and
reinforced in order for it to be successful. The seven factors have been classified as a hard and
soft elements. In context of Starbucks, McKinsey model will be helpful for them as it will help
them to bring up the effective results which can help them to accomplish their goals on specific
time period. The detail information about seven elements are mentioned below:
Hard Elements
 Strategy: Here company like Starbucks prepares the strategy which is based on product
differentiation in which they mainly focus that how they can provide the service which
are of high quality. They have made the strategy where they allow their customers to
make a spot where they can meet for meetings as well as gathering due to which
resources can be used properly.
 Structure: Here, company uses divisional organisational structure where they build
different strategy to expand their business at a greater platform. Although, it perform at a
greater platform but still it is necessary for every branch to deliver all of the reports to the
vice president of a company who manages most of the work for effective results.
 System: Company like Starbucks manages each and every work in a systematic manner
they follows the particular procedure. They have adopted the system in which employees
are being provided proper training due to which they are able to decide that how they are
needed to work for the purpose of accomplishing the goals of a company.
Soft Elements
 Shared Values: It is explained as the core values of an organisation. It simple guides
about the corporate culture and even general work ethics. In context of Starbucks, it is
necessary for their management to ensure that each and every employees are being

treated equally and even all of the services which are being provided to customers must
be of high quality.
 Style: Here, company like Starbucks has the option to adopt transformational leadership
style which will allow leader to perform their task as per the requirement of situation.
Even company will have the option where they can easily the goals of a company within
the short period of time.
 Staff: In any of the business organisation, staff plays the crucial to perform any of the
work in a systematic manner so that goals of a company can be accomplished. In context
of Starbucks, it is necessary for them to provide appropriate training to their employees
that how they are needed to work. Even company must motive their staffs by providing
them different rewards and benefits. It is will help to uplift the standard of motivation
among employees.
 Skills: In present scenario, the company like Starbucks mainly focuses on its brand by
providing better services to customers. It is necessary for company to hire the right
candidate who can work as per the requirement of situation for the purpose of
maintaining the brand image of a company.
Cost/benefit strategies helps the company to compare the costs that are involved in the
project with respect to the benefits that can be achieved on those projects. This helps the
company in strategically choosing the projects which can be profitable to the company. This also
helps the company to save its costs and resources so that investments is done only in profitable
projects. Starbucks thus use this strategy so that it can choose rationally among the projects
which are available for investment in relation with the profits that can be gained.
TASK 4
P8 Devising and implementing SRA for Starbucks
Strategic risk analysis (SRA) is a process which helps the company in identifying,
assessing and managing risks and uncertainties which affects the efficiency with which an
organisation perform in the market. This helps the company in developing effective plans so that
firm's performance can be improved. In the context of Starbucks SRA is discussed below :
RISK SEVERITY RESPONS
IBILITY CONSEQUENCES AREAS
AFFECTE

D
Equipment
Failure HIGH Quality
Manager
Equipments that are required at Starbucks
in order to prepare food and beverages if
fail then it can affect food quality and
will bring negative impact on company's
reputation. It can also risk the safety of
employees which will lower their
productivity.
R&D and
Manufactur
ing
Department
Changes in
Supply
Chain
Regulations
MEDIUM Inventory
Manager
This will affect the availability of
materials that are required to prepare
food and beverages. Change in supply
chain regulations will increase the cost of
company to acquire materials from
suppliers.
Logistics
Department
Employee
Disloyalty LOW HR
Manager
Employees play an important role in
increasing the organisational efficiency
and its performance. Disloyal employees
can either leave the organisation or can
sell the formula of food preparation of
Starbucks to other company which will
affect the competitiveness of business.
Further the cost of recruiting new
employees increases the overall cost of
company (Saurin and Werle, 2017).
Marketing,
Sales and
Manufactur
ing
Department
All the risks that are mentioned above can affect the effectivenesses and performance of
the business. This also bring negative impact on the brand image of company and affect its
competitiveness in the market. Starbucks is a well-known American coffee company know for its
dark roasted coffee. These risks need to be managed by the company so that the brand image can
be maintained and its competitiveness is not affected.

Contingency plans :
These are the plans which are devise by a company so as to deal significantly with a
future event or situation that might or might not happen. These plans are important to be made by
Starbucks so that any future risks can be efficiently managed and minimized which will help the
company in improving its efficiency and performance. Also the contingent or uncertain
situations can be handled in an effective manner (Slack, 2018). Contingency plan for Starbucks
is given below :
RISK STRATEGIES / ACTIONS PERSON IN-
CHARGE
TIME
FRAME
Equipment
Failure
For managing this risk it is important for the company
to implement in-house testing so that all the equipments
are regularly tested so that safety of employees can be
ensured along with maintaining quality of food. Also
the company can keep spare equipments so that in case
there is a failure the spare equipments can be used.
Quality
Improvement
Manager
1 Month
Changes in
Supply
Chain
Regulations
Starbucks must have contractual relations with multiple
suppliers in various locations so that if there is a change
in supply chain regulations in one location then
supplies can be brought from other locations. Also
maintaining strong and long-term relations with
suppliers can help the company in gaining supplies at
low costs along with the desired quality.
Public
Relations
Manager
6 Months
Employee
Disloyalty
This can be managed by maintaining healthy relations
with employees and providing them with safe and
friendly working environment which help in increasing
their work efficiency. Also performance appraisal can
help in gaining loyalty of employees towards the
company (Wang, 2018).
HR Policy
Manager 5 Months
Strategies and justifications

All the strategies discussed above helps the company in improving its efficiency by
minimizing the associated risks which will in turn enhance the company performance.
Justification of using these strategies in Starbucks is given below : Monitoring (operational level) : Monitoring on the operational level will help in
leveraging the efficiency of operations of the company so that its performance can be
improved. This will help the company to achieve it goals in an efficient manner as the
operations of the company will be well monitored so that sustainability of business in
competitive environment can be managed. In-house equipment testing (tactical level) : It is important for Starbucks to maintain the
condition of equipments that are required by the company to achieve its goals and
objectives. Hence, in-house testing of equipments should be regularly done so that
performance of the company can be enhanced.
 Contractual relations (strategic level) : Supply chain management is important for
Starbucks so that quality of food can be maintained and customers can be provided with
their orders on time without making the customers wait for food. Contractual relations
must be maintained with all its suppliers so that competitive advantage can be gained by
the company which will help it in efficiently competing in the marketplace. This will also
improve the competence and efficiency with which company perform in the market.
Risk Management Standard : ISO 31000 which is an international standard is used by
Starbucks so that it can strategically manage all its risks which helps the company in saving its
costs and other risks like financial risk, safety, project risks. These standards also help in
ensuring the safety of its employees along with maintaining the quality of products it provides to
its customers. This helps the company in building a string brand image in the market.
Benchmarking : It is a process of measuring the performance of a company's products
and services with the products and services of other business which is the highest performer in
the industry. This helps the company in identifying the ways in which its products and services
can be improved which will help the company in gaining a competitive edge in the market and
will also help it in becoming the industry leader. Starbucks can compare its performance with
highest performing company in the coffee selling industry so that it can improve its processes
which will help it in becoming the market leader.

Discussion On SWOT: It is explained as the analytical which can be used by the
business organisation for the purpose of finding the actual internal position of a company so that
more option can be developed for the purpose of accomplishing the goals. In context of
Starbucks they will be benefited just because of SWOT analysis because they will be able to
know that where they requires the changes. Below, there is the detail explantation about the
model in detail.
Strength Weaknesses
The main strength of Starbucks is that they
have a strong brand image due to which they
are able to accomplish the goals which are
willing to achieve.
The main weakness of Starbucks is that they
charge higher price for their product due to
which it is not easy for everyone to enjoy the
services of a company.
Opportunity Threats
Starbucks has the opportunity to expand their
business to new place as its brand image can
help to earn huge amount of profit from
different part of the world.
The main threats for company like Starbucks is
that they are needed to compete with the
organisation who sells company at very
amount of price.
SWOT analysis can be helpful the business organisation like Starbucks because they will
be able to determine that what are the changes which they requires so that company can earn the
profit. Even company will get the chances they how they are needed to compete with rivalry firm
in any of the situation.
Risk Mapping: It is one of the planning tool which can be used by the business
organisation for the purpose of dealing with any of the risk which may occur upon the business
organisation. This will allow company like Starbucks to overcome from any of the future
problem by doing appropriate planning as per the requirement of situation.
Discuss The Relationship
 Relationship between investors and risk : This relationship is a direct relationship in
which more the risk involved in investment, more will be the investors involved. This is
due to the fact that high risk involves high profits which means that many investors are
interested in investing in the company projects. Starbucks has high investors as the

company is growing at a high rate even when there are many competitors in the market.
This involves a lot of risk and thus high profits are generated for investors.
 Relationship between suppliers and risk : This relation demonstrates the risk of
selecting the supplier for getting access to quality raw materials required by the company.
The risk involves getting defective materials from suppliers, high prices charged by them,
monopoly of suppliers etc. For mitigating this risk Starbucks manages a strong supply
chain management so that quality products are available at reasonable rates for the
company.
 Relationship between customers and risk : This is the risk related to loosing customers
due to the presence of many competitors in the market. Also the risk of changing taste
and preference of customers affect the company strategy and affects the customer
relations.
CONCLUSION
From the above report it can be concluded that for an organisation to be successful in the
competitive marketplace it is important to effectively manage the operations of the company.
Resource allocation and risk analysis plays an important role in increasing the efficiency with
which an organisation perform. The allocation of resources appropriately is important so that a
project can be timely completed and the operational requirements of the company can be
efficiently met. Risk analysis on the other hand helps in analysing and managing any risk that
possess threat for a company's existence. This help in increasing the efficiency with which a
company function in the market by managing contingent and real risks.

REFERENCES
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