Strategic Management: Stakeholder Approach in Starbucks' Success

This report delves into the realm of strategic management, emphasizing the critical role it plays in organizational success, both domestically and internationally. It scrutinizes the stakeholder approach, assessing its viability, benefits, implementation challenges, and limitations, with a specific focus on its application to Starbucks. The report examines how Starbucks has leveraged the stakeholder approach to achieve its success, analyzing its strategies for engaging with employees, shareholders, and customers. It explores how Starbucks fosters strong relationships with its stakeholders to gain competitive advantages, enhance innovation, and build a strong brand. Furthermore, the report provides a comprehensive overview of the strategic management principles, stakeholder theory, and the implications of stakeholder management in a real-world business environment. This report also provides information on the benefits of competitive advantage, innovation to create value, and the issues and limitations of implementation. It aims to reveal the effectiveness of the stakeholder approach in forming strategies for Starbucks, providing an in-depth analysis of its impact on the company's operations.

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Executive summary
The report discusses the importance of strategic management approaches in various
organizations. It is vital for the accomplishment of the organizations in both the domestic as
well as international markets. The report has analysed various aspects of the importance of
strategic management to the organizational success. It tries to study and capture the viabilities
of stakeholder approach for successful formulation and implementation of the business
strategy. The purpose of this report is to reveal and identify the effectiveness of stakeholder
approach in forming strategies for the eminent organization namely Starbucks. The report
discusses benefits, implementation issues and limitations of this particular approach and how
it has affected the strategies of Starbucks.

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Table of Contents
1.Introduction:............................................................................................................................1
2.Stakeholder approach:.............................................................................................................1
2.1. Viability:.........................................................................................................................1
2.2. Benefits:..........................................................................................................................1
2.3. Implementation issues:....................................................................................................1
2.4. Limitations:.....................................................................................................................1
3. Starbucks’ success:.................................................................................................................1
4. Conclusion:............................................................................................................................1
5. References:.............................................................................................................................1

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1.Introduction:
Strategic management helps the organizations to design methods according to their
organizational needs and mange resources in appropriate ways. In order to set goals as well as
objectives to guide the companies properly, the managers usually plan strategies that reduces
time consumption and complete tasks in an efficient way (Daspit et al. 2017). Strategic
management includes objective setting properly, analysing the internal structure of the
organization, evaluating the effectiveness of the strategies and guarantee that the authority of
the organization properly implements them in the organizations.
For the recent competitive business world, strategic management has become vital for
every organization to survive. Every department of an organization focus on planning their
own strategies to achieve their goals. Sales managers strategize marketing strategies and the
operational managers explore strategies starting from research, development, raw material
sourcing to distributors connects. The chief priority is given to these strategies as they assist
to identify the methods which are essential for the companies to stack up more than their
competitors in the same market. Strategic management involves the proper recognition of the
opportunities along with threats which put the companies at risk (Simsek et al. 2015). These
can be come from the internal culture of the organization as well as from the competitors.
In an organization, there are different levels of management among which strategic
one is most important because this cater all the departments of a firm. It assists the
management of the corporations to maintain the overall direction by specifying their
objectives and develop business models so that the companies can build core competencies.
The chief aim of the strategies to develop the strength of the companies so they can have
more competitive advantage and maintain unique position. Strategies also help to solve the

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emerging issues that may be the cause of the company’s deterioration of the business. The
stakeholder approach defines the importance of the stakeholders in the company’s
management strategies. It assures only by satisfying the demands of the stakeholders, the
company will be getting proper competitive advantages.
2.Stakeholder approach:
In management, thi paproach defines that the managers of an organisation must
formulate as well as implement such strategies that satisfy all the needs of the stakeholders of
the company and ensure the reputation and long term success of the organization. To follow
the most successful paths and increase degree of participation of different groups in the
competitive market, the company will be gaining advantage of the market imperfections so
that it can create all valuable opportunities (Tarakci, Ates and Wooldridge 2015). The
stakeholders approach of strategic management emphasises the dynamic management of the
business ambience, improved relationship as well as promotion of the shared interests. This
approach is purely based on the theory of stakeholders that arises as the counterpart to the
most dominant way of considering and realisation of the business as well as market. Based on
these research, the management are to focus on the stakeholders’ satisfaction. Proper
implementation of this approach can strengthen the value of the corporations as well as create
competitive advantages in the market. However, some of the researchers have criticised this
approach of strategic management stating that it puts overvaluation to the customers and
stake holders therefore fail to reach the consensus (Short et al. 2016).
2.1. Viability:
The obligations of the stakeholders have been with the companies since the origin of
the concept of corporate firms. The development of stakeholder theory not only cares for
securing the interest of the stakeholders as the owners or investors but also for them who are

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responsible for providing the company all required materials to produce their goods or
services. The ownership perspective in one hand is rooted in the property law and creates the
base for the natural basis of primary stakeholders’ rights, it also claims for the fiduciary
obligations of the corporate managers where the perspective to view the corporation as the
bundle of contract permits (Xi et al. 2015). The stakeholder framework assists the
manfhemnet to maximise the single objective function as one of the most useful ways to
strategic management. It is a continuous process of balancing as well as integrating multiple
relationships and diverse objectives. In an organization, the directors often face the situations
where protecting the interest of any one of the stakeholders make others interests vulnerable
and the companies feel impossible to avoid such situations (Pearson, Bergiel and Barnett
2014). In such cases, the theories of the stakeholder approach successfully guide to solve
these problems. This approach creates room for the rights of the stakeholders of a company
by allowing the shareholders, creditors as well as other constituencies in the management
concerns of the company. This enhance the competitive advantage and creates numerous
benefits including market penetration.
2.2. Benefits:
Competitive advantage: stakeholder approach to strategic management is able to
create more competitive advantage compare to the other strategic approaches. It creates link
between the stakeholders and the company where the stakeholders perceive the clear
application of the institutional values first and then relate those values with their own
interests (O’Neill 2016). Through this theory the companies get the appropriate information
about their values stakeholders based on which they treat them accordingly as well as develop
essential initiatives. This is the process through which the companies create stronger brad
recognition in the market. It also helps to gain reputation along with loyalty or trust from the
customers and the other stakeholders (Moura-Leite, Padgett and Galán 2014). Thus gain huge

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competitive advantage in the market. The elements of loyalty and reputation earned by a
particular company largely affect the competitors as they create barriers for others who want
to know about the stakeholder utility programs. The companies who fool stakeholder
approach to form its management strategies are the first to have facilities like getting
information about the market trends and stakeholders’ requirements. Based on these issues,
the companies are able to satisfy the market in one hand and develop unique expertise
(Marvel, Davis and Sproul 2016). These acquired skills can be practised transmitted,
supported as well as reinforced in the organizations’ operations to create core competencies.
According to the researchers, this approach has become indispensable for every
organizational culture to gain competitive advantage in the market.
Innovation to create value: the stakeholders of some corporate firm include their employees.
These firms who follow the stakeholder approach, become efficient to attract more eligible
and high quality workforce. The job satisfaction among the employees also has impact on the
capability of the companies as the employees are responsible to foster innovation. The
employees of a firm think about long term engagement with their firm as well as generate
valuable ad potential ideas for development of the companies (Mahto and Khanin 2015).
These firms can access to the information from their stakeholders which they employ in
innovating new products or customise existing products for more profit. Reciprocity is one of
the key aspects in stakeholder’s approach where the satisfied customer sand employees
provide assistance and reveal more information about the utility functions as they stand in
benefit. This create opportunity for the firm owners and the managers to meet the consumer
requirements through proper knowledge of their suppliers and customers as well as other
stakeholders. They utilise the information more flexibly and strategically.

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2.3. Implementation issues:
Implementing the stakeholder approach in the strategies of an organization faces
problems both interminably as well as externally. As mentioned above, the management
needs to cater for all the stakeholders without any discrimination but they come across
numerous issues while implementing as all of them have different interests. Beside this, the
researchers reveal that the stakeholders of a company practically do not have any power to
initiate the corporation actions (Kramar 2014). Moreover, they are more vulnerable to the
management misconduct than any non-shareholder constituencies
2.4. Limitations:
Overvaluing stakeholders: according to the researchers, the companies gather information
from their stakeholders in utility functions to gain more competence but it proves to increase
cost that exceed benefits. This is how, the mangers’ intention to generate value with the help
of the stakeholders, ends up in allotting too many resources that increase cost.
Divergent interests: the implication any policy in the company aiming to satisfy the
stakeholders may produce different perspectives and make it difficult to reach consensus
because different stakeholders play for different internets (Hill, Jones and Schilling 2014).
Moreover, the it is also necessary to notice that not every stakeholder have equal power. The
more powerful actors get much benefits from the firms’ profitability. Therefore, with
distribution of value, the stakeholders cannot assume for maximization of returns.
3. Starbucks’ success:
Starbucks is one of the leading beverage company that has been offering ready-made
coffee in its outlets across the world. Therefore, it can be stated that they have their
stakeholders in all over the world whose interests are to be catered by the company efficiently
(Starbucks.com, 2018).

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Employees are the chief stakeholders of the company as they are the main driving
forces of the company’s growth in international markets. The company terms their
employees as their partners and try to build an open a direct relationship with them. It
has more than 200,000 employees working in various outlets in various continents.
The employees are providing with health care facilities which is the chief reason of
their satisfaction. Mangers of every outlets act as the coaches, entrepreneurs,
community ambassadors finally boss to the employees. They have scope for working
part-time for which they get proper salaries. Starbucks also have allowed the labour
union to speak for the interest of the employees and negotiate with the company
policies in any matter. The employees are allowing to have active participation in the
decision making procedure as well as reformation of the company. Starbucks presses
most in the trading procedure of the managers as they handle the front line workers.
They also play crucial role in maintaining the employee relation. Through them the
company directly mountains good relation with its most important stakeholder.
Shareholders: Starbucks polishes the list of their shareholders annually since its
establishment in 1992. They maintain best relationship with their shareholders that no
other companies in similar sector have done before. Starbucks have more than 25,000
shareholders in all over the world. The company provides necessary information and
quart ion and answer for their investors and communicate with them through mailing
documents if the shareholders choose to receive the information through electronic
medium. They arrange annual meetings with shareholders and biennial investor
conference. The company has proved itself to be a public trade firm and properly
utilise the digital media to communicate with their stakeholders. Moreover, the
company has sections that assist the investors with all the information’s of the
company in detail. These sections are efficient to clarify the roars about the company.

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Starbucks use emails and other digital modes to keep updating their activities o that
the shareholders have proper information at proper time.
Customers: according to the company updates it has a huge group of loyal customers
in all over the world. It claims that they have successfully established the unique
coffee culture which have led the company to have great customer satisfaction as well
as brand recognition. The aim of the company is to gather knowledge’s from the
social and economic trend of a market and introduce their product in right time. As
the theory discloses that stakeholder approach helps the companies to innovate new
products that generate more returns. This great relationship with the customers have
created scope for learning new things from the market and cater services accordingly.
The company is engaged in communication with their customers mainly through
below the line promotional activities rather than above the line advertisements. The
customers do not get information from any newspapers, posters or from traditional
media but they have the largest chain of loyal customers by creating a successful
brand in these decades. It also does not comply with the method of advertising
through direct communication with the customers.
In the retail stores, the company has adopted the method of experiential advertising by
creating an unmatchable customer experience. They also use the concept of sense marketing
through their exceptional coffee aroma or designing interior iOS that adds to the atmosphere
of the stores an aesthetic value therefore, the customers feel attracted to and the employees
also feel satisfied while working (Ghezzi, Cortimiglia and Frank 2015). The company utilizes
the internet most in connecting with their customers as most of their customers belong to a
socially higher class and have preference on the social media updates. In the websites of the
company they ate allowed to provide feedbacks so that the company get idea of the trends as

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well as the needs of the market (Hammond, Pearson and Holt 2016). This help a lot in
gaining competitive advantage.
Franchises: as the company claims, more than 49% of the Starbucks are licences
stores. These are completely operated by the franchisees. Through these franchisees,
the company penetrate the foreign markets. These franchisees pay Starbucks as they
use Starbucks logos, recipes and all other benefits from the corporate marketing
campaigns. The company has both types of franchisees: domestic and international
(Georgakakis and Ruigrok 2017). The company’s domestic franchisees work in the
airports, colleges, universities, resorts and hospitals and the places where the company
has some restrictions in operating. These franchisees enjoy autonomy as Starbucks
does not interfere in their operations. The licensed Starbucks stores operating in
forcing markets have full sovereignty in management and operations as this is the
method how the company enters the foreign markets (Bergmann and Stephan 2013).
They are offered support from the company and operate liberally as they have the best
knowledge of the country’s regulations as well as markets. These franchisees operate
freely abiding by the laws and demands of the countries but do not twist the chief
principles of an ideal Starbucks store. They promote the brand and perform
successfully. The company arranges proper monitoring of their franchisee stores in
the fright locations as well as maintain good relation with them thus gain huge support
from the stakeholders and competitive advantage.
4. Conclusion:
Therefore, it can be concluded that this paper discusses the importance of strategic
management in the growth of the business of the organizations. There are different
approaches that are used by the authorities of any corporations mainly to achieve their goals

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as well as gaining more competitive advantages. The paper indicates that the strategic tactics
have been employed by the eminent organizations to develop approaches which enhance their
accuracy in focussing their objects, increase scopes, complexities and the market penetration.
The importance of stakeholder approaches is discussed in detail with its viabilities,
advantages and limitations. There are various implementation problems that the organization
face while apply them in strengthening the organizations as different stakeholders have
different interests. The paper discusses how costly the process of information gathering can
be and how it affects the company’s benefits. The stakeholder approaches greatly supported
the business of Starbucks that gain huge popularity as they compactly rely and depend o their
stakeholders. They maintain a good relationship thus gain the scopes for innovation and
competitive advantage.