Starbucks: Outsourcing Strategies, Risks, and Performance Objectives

This report provides an in-depth analysis of Starbucks' outsourcing strategies within its logistics and operations management framework. It begins with a detailed logic map, determining which aspects of the business, such as store design, logistics, production, and menu, should be outsourced versus kept in-house. The report then explores five key performance objectives—cost, quality, speed, dependability, and flexibility—that influence these outsourcing decisions. Furthermore, it identifies and examines the various risks involved in the decision-making process, including financial, strategic, operational, and legal risks, and proposes strategies to mitigate these risks, such as adapting to market trends and diversifying business ventures. The report underscores the importance of strategic alliances, cost management, and maintaining product quality to ensure Starbucks' competitive advantage and brand reputation.

Logistics and Operations
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1 Detailed Logic Map to indicate what.............................................................................1
should be outsourced and what is to be kept in-house in Starbucks.....................................1
LO2: 5 Performance objectives that influence your decision to outsource or to remain in-
house.......................................................................................................................................3
LO3: Risks involved in the process of decision making and strategies to remove them.......5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Outsource is the process of contracting the different business processes, operation and non
core activities to the other company which is specialised in the particular field. For this report,
Starbucks company have been chosen, which is American coffee chain company which is
represented as the Second wave coffee. The company is trying to distinguish them from the
competitor on the basis of quality coffee products. The report includes Outsource decision matrix
which help the company to decide which segment is to be outsourced and which is to be build in.
the organisation outsource their store design and logistics and kept in house are their production,
packing and their menu.
Products of the company: They serve hot and cold coffee and whole-bean coffee which includes
espresso, caffe latte, full- and loose-leaf teas including Teavana tea
LO1 Detailed Logic Map to indicate what should be outsourced and what is to be kept in-house in
Starbucks
Decision logic is the evaluation of related cost and different benefits that are related to the
outsourcing of resources, material, service or products of the company so that it reduce the cost and
expenses. Decision logic model is created and explain on the basis of two components that are make
or buy decision for the products and service by any organisation (Dixon and Knauft, 2016). The
main motive of analysing and applying this model is to reduce the cost of the company as well as
reducing the investment cost and generating high profit. In case of Starbucks, company is making
decision for outsource on the basis of some question, that are as follows:
 The organisation should outsource their call centre of customer feedback?
 Logistics and transport should be outsourced by the company? Or,
 They may hire in house serve for these activities?
If the organisation take these decision in the effective and efficient way, this will enhance
the cost effectiveness and will efficiency in the process of the business (Peeters, 2016). Outsource
help the firm to introduce new and innovative ideas in the business which may be related to
policies, procedures, process, operations and activities. This activity also helps the organisation to
focus on implementing the innovation in the related work. If the Starbucks make wrong decision
then they will not able to gain competitive advantage and their rivals will grab their market share. If
they will hand over their firm's part in the wrong hands, then the quality products will not produce
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and customer standard will not achieve. This will lead to reduce the brand image of the company
and clients will not prefer their products (Pudiyapura and Suresh, 2017).
Operations manager of the giant company, Starbucks need to apply detailed logic map
which is depended on the outsourcing decision logic. This will help the company to find them
which products, process, operations, department and service should be outsourced and which
should be kept in house.
Outsource decision matrix is classified on the basis of two factors:
 Strategic improvement
 Contribution to operational performance.
Illustration 1: Outsource decision matrix
(Source: Outsource decision matrix, 2016)
Form strategic alliances: Operation which are involved in this quadrant are having high strategic
performance but they contribute very less for the operational performance. Organisation need to
have control over those activities so that they can able to ensure that the work is done according to
they want. They need to make sure that the quality of products and services are according to their
standard. They have large importance over the cost and smooth running that these activities and
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find out that whether these factor work in outsource or in house (Goldberg and Kuppermann, 2016).
Starbucks should outsourced its advertisement department so that they can able to spread their
message to whole target market as well as it will not affect the other department and daily
performance of the company.
Retain: The activities which are considered in this quadrant have large strategic improvement and
have good impact on the operational performance of the organisation. As the impact is very high,
these operations are to be kept in house so that Starbucks have large control over them. These
activities have large impact over the daily performance of the organisation Starbucks should keep
its production and packing in house. So that they can ensure the quality of products which they are
manufacturing, as their brand is famous for the quality (Wu and Yuan, 2016).
Outsource: Operation that are included in this quadrant are very significant for the operational
performance of the organisation but are not important for the strategically. The activities should be
outsourced but need high safety and should be controlled. They are not worth for making them in-
house. Starbucks may outsource its logistics to the other specialised organisation which is
particularly in the logistics field. How the products are delivery are not the part of competitive
advantage as it does not include customer experience but have large impact on the operation
performance so it should be controlled by the firm (Dixon and Knauft, 2016).
Eliminate: The task which is included in this quadrant are not significant for the company's overall
strategic performance as well as are not important in the contribution of operational performance.
Firm can not remove these activities completely but to analyse what is going wrong. Starbucks need
to reduce those material that are not necessary in the packing (Dixon and Knauft, 2016).
LO2: 5 Performance objectives that influence your decision to outsource or to remain in-house
Logic map of the Starbucks
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Store Design
Production and packaging
Menu
Logistics
In-House
Outsource Ensure effectiveness
And cost

Strategic alliances
According to Roberts, the idea is being generated in the business in the year 1960's. The
model includes the five performance based objective which is used to find that factors that influence
the decision whether to outsource of keep the operation in house, that factors are as follows:
Cost:
The costs of a performance got vary as according to the changes in the volume and variety
of the production of a product and the manufacturer. The higher the product's variety, than the
lower the quantity or volume of the production and vies-versa. Starbucks has the prices of each
product varies and which affect the product price, manufacturing costing and the product profiles. It
should be convincing to the customers or the organisations with kept in consideration of not losing
the luxuries experience in any product (Peeters, 2016). The cost on purchasing the raw material,
manufacturing the product and the prices set on the products need to be well managed. The efforts,
time, money paid to the suppliers are should be considered and there should be modification. There
should be a proper record and accounting in the organisation to measure the revenue and expenses.
There are two types of cost that are inured while producing goods and services that are fixed
cost and variable cost. Fixed are those which is made one time and it does not vary as the
production changes that include land, building, furniture etc. whereas variable cost are those
which change as the production changes such as capital, labour etc.
Quality:
Starbucks has the quality in their products as it imports the best quality coffee beans which
has the perfect aroma and taste which is attractive for the customers. The quality should be
maintained and t should be durable for life long. If the quality meets to the customer satisfaction it
will reciprocally increase the goodwill and reputation of this organisation and eventually helps in
generating pounds. This company is known for the luxurious coffee products so to maintain this
reputation for life long basis there should be no compromise with the quality of the products. There
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Retain competences

should be surveys on the various competitors so to analyse the area where we are lacking whether in
the producing the product or supplying it to the customers (Pudiyapura and Suresh, 2017).
Customers are price conscious so for there convenience the quality of a product affects that will be
unfavourable. The organisation produces quality goods and they rae famous for quality
products. Organisation should produce their goods in in-house so that they can able to
monitor their quality and serve better experience to the customer.
Speed:
Speed objective refers to how rapidly Starbucks generates its demand in the market and then
produces in accordance to the customer satisfaction, and delivers or serves the product at the
convincing time duration of the customer. The time on manufacturing a product should be cut short
without losing the quality of the product (Goldberg and Kuppermann, 2016). There should be
promptness in the services mainly serving the products to the customers, it includes the customer
satisfaction the goodwill of the organisation. To not lack in speed issue the organisation should
appoint the various skilled or experienced employees who could help in various operations like
purchasing or raw material, manufacturing, production and serving or delivery to the customers.
They have adopted different technologies which help them to reduce the production speed
and serve products on time to the consumer.
Dependability: This is the factor which help the organisation to serve different products and
services to the consumer to that they can able to stand according to the expectation of their target
market. Starbucks have made their dependability on the customer by expanding their product line
and serve different range of products to their clients (Wu and Yuan, 2016).
Flexibility: It is the important factor for the organisation performance hence this factor influence
the decision of that the service to be outsource or not. Starbucks have make large emphasis on the
flexibility on continuous basis so they are expanding their business as a globe.
By making these analyses, it will be easy for the organisation to make strategic decision
related to outsource and in house services and products.
LO3: Risks involved in the process of decision making and strategies to remove them.
Risk involved process of decision making :
Financial risk :
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This risk identifies the potential monetary misfortunes that can come about because of the
distribution of assets, shits in move towards duty, expands or diminish the cost of raw material. The
risk caused by the changes in commodities, foreign current exchange rate, interest rate. The
performance of Starbucks could cause a drop in market price of the organisation (Dixon and
Knauft, 2016).
Strategic risk :
These type of risk often involves the competition and risks like microeconomic dangers.
These risk identifies, and manages the uncertainties which are caused by the internal and external
activities in the organisation.
Operational risk :
These risk helps in finding the loss or inadequate procedures, systems or policies in an
organisation. Any activity which disrupts the business process.
Legal risk :
This risk is related to the laws and regulations which is related to make commitments to the
consumers, workers, suppliers for any insecurity . The legal risk for Starbucks is the social media
area which are tricky as the risk cross both statutory and common law limitations.
Additional types of risks :
The organisation faces many risks with the failure in power or the ability of the
organisation. This can include a sudden change in climate, war and different dangers face by the
organisation.
Recommendation to mitigate risk strategies :
The most common situation which mangers usually face is of risk. It can be managed by the
managers on basis of their experience or secondary data. In case the Starbucks have to keep its
decisions flexible to meet the risk factors, they can take the decision of launching new brands and
products of similar nature, or they can invest in a similar venture as previously launched to expand
the business in country. To mitigate the risk Starbucks should identify the recent trends that can
interrupt it's supply chain for its ability to service its customers. The key risk factors of Starbucks
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are supply interruptions, financial volatility and the geographical events that could hamper its
market value. To overcome the emerging threats the Starbucks can make strategies to mitigate the
risk. Starbucks should emphasis on its production and shipping which can result the product in
stock outs when goods are not delivered according to the supply plan (Wu and Yuan, 2016).
Multiple source procurement, Pooled procurement based on projected demand, Flexible
specifications for the presentations of appearance of packing quantities as per package and to
facilitate common product used across the countries are some strategies Starbucks should adapt to
mitigate the risk. The Starbucks emphasis on the demand risk by the clients, program, at country
level which impacts on time, cost and effective processing of the systems. Producing accurate
demands will help in fulfilling the challenges, which can result in orders that may not reflect the
country's actual need .
CONCLUSION
Decision-making is the intellectual process that determine the different courses of task
among varieties, there are lots of risk that are arises in each process. It is very important for every
organisation to outsource it's some activities and operation so that it reduce the cost of company
over the investment. Outsource decision matrix helps the company to identify those activities
provide more or less strategic performance and operational performance. That model helps the firm
to take decision regarding the activities that need to be outsourced and in build in organisation.
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