IHPR5025 Summer 2019: International HRM Practices at Starbucks

This report provides an analysis of Starbucks' international human resource management (IHRM) practices, organizational structure, and staffing strategies. It begins by outlining Starbucks' global presence and competitive landscape, followed by an examination of its organizational structure, including functional hierarchy, geographic divisions, product divisions, and teams, and evaluates its effectiveness in managing the workforce across subsidiaries. The report delves into the principles of IHRM, discussing different staffing approaches (ethnocentric, polycentric, geocentric, egocentric) and sources of staffing (internal and external), recommending the most appropriate sources for a new international operation. Furthermore, it explores international reward and compensation strategies, comparing the going rate approach, balance sheet approach, and local plus compensation strategy, recommending the balance sheet approach for Starbucks. Finally, the report emphasizes the importance of cultural awareness training for expatriates to navigate cross-cultural challenges, improve communication, and foster better relationships with international clients. Desklib provides students access to similar solved assignments and past papers.

Running Head: INTERNATIONAL HRM 0
International Human Resource Management
#04036
7/12/2019

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Table of Contents
Introduction...........................................................................................................................................2
Starbucks...........................................................................................................................................2
TASK 1.................................................................................................................................................2
Organisational structure....................................................................................................................2
International HRM.............................................................................................................................3
Sources of staffing.............................................................................................................................4
TASK 2....................................................................................................................................................5
International Reward and Compensation..........................................................................................5
Culture awareness.............................................................................................................................7
Conclusion & Recommendations...........................................................................................................8
Bibliography...........................................................................................................................................9
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Introduction
This report shall include the expansion and organisational structure of Starbucks. Later it
shall discuss about the International human resource management. It also includes sources of
staffing in Starbucks. This report shall also state the international theories and models of
HRM. As per recent reports, Starbucks is present in six continents and seventy eight countries
with 27,340 locations. The business is working against large and small coffee shops, food
facilities companies such as McDonalds, Dunkin Donuts, Wendy’s and Burger King(Nair &
Thomas , 2017).
Starbucks
Starbucks was established in 1971 in Seattle, Washington. It is an American based coffee
house chain. It has a slogan called ‘good to the last drop’. It is currently operating around the
globe in countries like Australia, Brazil, Canada, France, Malaysia etc. It is popular for its
dark roasted coffee and the services given by coffee venues in terms of taste, quality and
customer experience. Its other products also include caffe latte, caramel macchiato,
milkshakes and hot chocolate (Akingbola, Sean , & Alina , 2019).
Starbucks was first expanded in Midwest and British Columbia in 1980s. Then, it gained
prosperity with entry into California in 1990s.There are three types of MNC i.e. transitional,
parent, and foreign. Foreign MNC include subsidiary, associate and branches. The first
Starbucks site was launched in Tokyo in 1996. In 1999, Starbucks opened a restaurant chain
called Circadian, later it converted to Starbucks cafes (Gopalakrishna, Rajewshwari, &
David, 2016)
TASK 1
Organisational structure
Starbucks structure is largely governed by the Board of Directors, which conducts roles from
Seattle, Washington headquarters. The towns are divided with district executives into
regional jurisdictions. District executives take care of regional shops. As a indigenous boss,
the shop manager acts to oversee employees at the places. As a partner, the Starbucks team
works towards quality rules. It works on the objective of client satisfaction. It also looks after
the contribution of individuals and most of its clients are fan based (Kelly, 2019).
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Starbucks maintains its competitive advantages through its corporate structure. The
competitive advantages include the Porter Five Forces, with the design and development of
corporate structure. The following are the essential features of Starbucks corporate structure:
- Functional hierarchy; Geographic divisions; Product divisions; Teams.
Functional Hierarchy- It refers to grouping on the basis of business functions. There are
departments which include HR, finance, and marketing.
Geographic hierarchy- Starbucks corporate includes geographic divisions and physical
locations. America, China, Europe and Africa. In the US market, further geographical
divisions includes:- Western, Northwest, Southeast and Norteast. Each division has a senior
executives so each manager has to report to two superiors i.e. geographical and functional
head.
Product based division: - Starbucks has product based lines. The company has a separate
division for coffee, baked goods and merchandise. This feature helps in product development
through innovation in its products.
Teams: - Several teams are set up to provide clients with products and services. It helps in
providing resourceful services to customers. The more effective and efficient team the more
is its impact on financial performance (Khan, Murad , & Muhamamd , 2018)
Evaluate its effectiveness in managing the workforce throughout the subsidiaries of
Starbucks
The human resource has to be managed efficiently in order to achieve the objectives of an
organisation. In Starbucks, the Fayol’s five rules of management are combined into four and
are effectively applied. A proper planning is done in deciding the job roles and the specified
work to be allotted to whom. The activities are organized into working groups with the help
of resources, techniques and other services. A leader shall ensure a culture of motivation and
support between the workmen force. The activities are monitored to achieve the goals of
productivity. Controlling is done in order to measure performance and results. The CEO
spends more times planning and leadership functions whereas supervisors spend more of their
time in organising and controlling workforce (DeCenzo, Stephens , & Susan, 2016).
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International HRM
It can be described as a set of operations that are used to handle human resources at global
level to achieve the organization’s goals. It includes functions like recruitment, aligning,
training, checking of performance and global skills (Chi & Suthers, 2015).
IHRM handles human resources at international level and includes three types of workman-
Home country workmen- they are those who live in the same country where the company’s
headquarter is located. Like an Indian working for Wipro will be termed as home country
employee.
Host country workmen- they are those who live in the nation in which the company’s
subsidiary is located. \
Third country workmen- these are those workers who are not from home country or host
nation but employed at the headquarters of the company (Crews, Wilkinson, & Neill, 2015).
IHRM approaches
Ethnocentric: crucial positions are occupied by residents of parent company
Polycentric: host country residents recruited to handle subsidiary
Geocentric: finest workmen are selected irrespective of nationality
Egocentric: top workmen are selected where subsidiary is operative (Michael & Richard,
2018).
Sources of staffing
There are two sources of recruitment: internal and external sources as discussed below:-
 Internal Source- In this type of source workmen are selected from within the
organisation. Whenever a post is vacated in the organisation, it is firstly approached
by workmen who are on pay-roll of the company. It leads to motivation in the
employees who strive hard to acquire the deserved position. Such vacancy is informed
by notice board or internal advertisements. Internal sources includes:-
1. Transfers- it refers to shifting of jobs with no change in position.
2. Promotions- It refers to shifting in positions leading to higher prestige, money
and accountabilities.
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3. Present Employees-In this kind of internal source management do not have to
look for new candidates for the new positions. Some of the employees are
recommended by others internally also.
Some of the advantages of internal sources are increase in morale, upholds
loyalty and no training costs (Noe, John , Barry , & Patrick, 2017)
 External Sources- when existing employees are not appropriate company tend to look
outside for workmen.
1. Advertisement- it is given in newspapers and journals and applied by a number of
people.
2. Employment Exchange- It is used majorly for unskilled, semi-skilled and clerical
posts. The person looking for job and the job-giver are contacted via employment
exchanges.
3. School and colleges- Companies recruit directly from these places which is also
called placements.
4. Recommendation – Many a time’s candidates are recommended by the present
employees. Some rewards are also given for such recommendation if the
candidate is selected.
5. Factory gates- workers also come to factory gates to seek employment.
Some of the advantages are bringing of new ideas, new talent and innovation to
expand business.
The most appropriate source(s) of staffing for a new international operation
of Starbucks MNC in a new country: - Starbucks use external sources as a mode
for staffing in the company. It excels in staffing through advertisement in
newspapers and journals. It also goes for employment exchanges and takes into
account recommendation of employees working. Starbucks looks after the
recruitment very effectively as it is one of the most important factors in the
profitability of the company (Prabandari & Angela, 2018)
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TASK 2
International Reward and Compensation
Compensation refers to types of benefits that employees receive from the organisation they
are working in return of their work and labour. It is a very complex concept. International
compensation refers to an assignment which is an international work done by an employee
(Rees & Smith, 2017). The basic rate has to be determined and adjusted according to
fluctuations in exchange rates. The compensation approach includes following components to
decide base pay for expatriates:-
 Going Rate Approach-This approach is created as per local market rates. It compares
pay packages survey of local nationals, expatriates of same nation and expatriates of
all nations.
Some of the advantages of this approach are: treating local nationals equally, equality among
different nationalities. There are some loopholes with this approach like difference in
assignments of same employees, rivalry between expatriates of same nationality when they
are assigned to certain nations, potential issues with re-entry into the home nation.
 Balance Sheet Approach- This approach is a scheme intended to equalize workers’
buying power at similar rates residing overseas and in their home countries and
provide incentives to offset qualitative difference between job places. The
fundamental goal is to maintain the home country’s living norms plus economic
induction.
Some of the advantages of this approach are: the equality between projects and expatriates of
same nationality, assist in re-entry of expatriate, stress-free communication to employees.
There are some disadvantages of this approach also like it can lead to significant disparities
between expatriates of various nationalities and between expatriates and local residents,
administering owing to altering financial circumstances, taxation, etc. can be quite
complicated.
 A local plus compensation strategy is generally described as an strategy whereby
businesses pay their foreign employees according to the local wage framework( host
nation) plus extra compensation components that are not typically given to local
citizens (such as transportation, accommodation, education of dependents, etc.) due to
the particular status, specifications and other aspects of the assigned.
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There are some pros and cons of this approach like legal issues, risks of faulty logic,
negotiable and granting number of exceptions. The advantages include enabling degree of
localization, it leads to savings and cost controls, it leads to degree of local flexibility.
The best approach which can be recommended for Starbucks is Balance Sheet Approach; it is
used in expatriate compensation to guarantee that staff can retain their domestic purchasing
power while on global temporary task. It helps in maintaining the standard of living or the
same lifestyle. It makes the communication very easier to the employees. This approach
provides for goods and service outlays of basic amenities, provides for all major costs of
housing to employees, it provides for contributions relating to pension, education
expenditure, social security taxes etc. Balance Sheet Approach is the most effective strategy
to run a restaurant chain as it looks towards employees in its best way. Rewards are mainly of
two types: intrinsic rewards refer to satisfaction in the process of action performed and
extrinsic rewards refer to bonuses and promotions (Akhter, Huma , Aqsa , Adeel , & Nazish ,
2016).
Culture awareness
This approach is the need of the hour as this practise is adopted as expatriates face challenges
in assignments of cross cultural. It discusses about challenges and roles of assignee to do an
assignment. The companies have still not realised the importance of culture awareness. It is a
need to cope up with the relocating employees in order to have scope for international
expertise. Starbucks cultural awareness training programmes to motivate expatriates in
international assignments adopted by giving training to employees to deal in working with
different global economy. There are some loopholes in relocating for assignments as it
develops issues for employee’s families, partner’s carrier, child education which in turn leads
to leaving behind the assignment in between (Kim, 2015).
These training include communication, etiquettes, and marketing and negotiation skills. It
helps in bridging a gap between communication skills to get the deal done. Proper techniques
are adopted in training the employees in case dealing with international clients who do not
know to speak in English like sticking to the point, using of short phrases, clarifying through
a skilled translator. Starbucks teach employees to say words like thank you and please as
these are important words to be used in a business conversation. To crack a deal it is
important to be patient, polite, dedicated and show a caring nature. It emphasize on
employees to celebrate festivals of other culture to connect with cross culture employees or to
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host dinners in the workplace. The foremost rule is to accept and be sensitive to cross culture
and difference in time zones. Culturally literate people lead to better communication,
productivity, resourceful for an organisation also in dealing with foreign clients a mistake
cannot be committed as it shall lead to deal breaker (Kealey, 2015).
The culture awareness will motivate expatriates in International assignments adopted by
Starbucks as these programs help in adapting to set of norms and being comfortable in the
new environment. It helps in reaching the productivity level through engaging the family of
employees to the life of foreign country.
Cultural Shock is the sense of disorientation that someone experiences when they are
subjected to an unfamiliar society, lifestyle or set of attitudes. It has generally four stages i.e.
honeymoon i.e., frustration, adjustment and acceptance. These stages define what an
individual feel when they move to different cities with their families.
Conclusion & Recommendations
The report helps in concluding that IHRM is an important element in expansion and growth
of an organisation. To remain in the competitive environment and excel in the market, the
workforce has to be managed properly through different staffing sources. It also discusses
about the organisational structure of Starbucks and the impact of differences in corporate
culture while taking international assignments. Various modes have been adopted to clear the
issues relating to culture differences. It can be said that Starbucks is one of the top MNC to
look after the human resource diligently. Starbucks competence in the style of stores and
creative coffee drinks has made a brand name globally. It also maintains superb quality
products and fabulous customer services.
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