1352463181FIN 370 Starbucks Strategic Initiative Paper.doc

Head Running: - Starbucks Strategic Initiative

Learning Team Assignment: Strategic Initiative Paper

Resource: Ethics and Compliance Paper

Prepare a 1,050- to 1,400-word paper in which you describe the relationship between strategic and financial planning.

Describe:

This has to be for Starbucks

A strategic planning initiative for your organization and identify an initiative discussed in the organization’s annual report.

How the initiative affects the organization’s financial planning.

How will the initiative affect costs?

How will the initiative affect sales?

Describe risks associated with the initiative and financial effects they may have.

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Starbucks Strategic Initiative

Your Name Here

University Name

FIN/370

Date

Instructor Name Here

Starbucks Strategic Initiative

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In this paper, Team C will describe the relationship between strategic planning

and financial planning for Starbucks Corporation. The first topic covers Starbucks

strategic planning initiative and identifies a strategic initiative discussed in the

organization’s annual report; from this report Team C will describe how this initiative

affects Starbucks financial planning. Team C will break down and address how Starbucks

initiative directly affects costs and the sales of the company’s financial plan. The final

section will describe the risks associated with the initiative and the financial impact that

these risks have on Starbucks.

Strategic Planning Initiative

Strategic initiatives are strategies outlined by an organization to achieve the goals

and objectives outlined in the strategic plan. The Starbucks Corporation is one

organization striving to improve the commitment of upholding and achieving

organizational missions and goals. Starbucks is “committed to ethically sourcing and

roasting the highest quality Arabica coffee in the world” (Starbucks Corporation, 2012,

para.1). Starbucks’ mission is “to inspire and nurture the human spirit – one person, on

cup, and one neighborhood at a time” ) Starbucks Corporation, 2012, para. 1). Guiding

principles within the strategic plan of Starbucks ensure high quality products, ethical

treatment of partners and customers, and inviting and positive neighborhood and store

environment that will reward the organization with continued success and happy

shareholders.

Successful organizations use strategic initiative and plans created by decision

about people, strategy, execution, and cash to build revenues and profits, while

maximizing time savings. Starbucks outlines organization initiatives for achieving the

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status of a responsible company by earning trust and respect through ethical sourcing,

environmental stewardship, and community involvement in their company profile. Under

ethical sourcing, the company outlines the goal that by 2015 the organization will use

coffee that is only produced and obtained through the use of ethical trading and

responsible growing (Starbucks Company Profile, 2011). In concerning environmental

stewardships, Starbucks is striving to attain the goal of having each of the cups used to

serve customers as reusable or recyclable by 2015 to reduce the carbon footprint the

organization has on the environment (Starbucks Company Profile, 2011). Starbucks

community involvement goal is that by 2015 the organization will provide neighborly

assistance to the community of the stores and growing areas by contribution of a

minimum of one million volunteer hours yearly to inspire change and make a difference

in the lives of all people (Starbucks Company Profile, 2011).

Initiative Discussed in Starbucks Annual Report

Starbucks is around every corner and considered a giant in the coffee world.

Starbucks has set a goal to make 100 percent of their cups recyclable or reusable by 2015.

This is a large goal, but they have proven that this is an attainable goal. Starbucks

discovered that recycling plants often reject coffee cups for recycling because they are

made of a thin plastic lining. This plastic lining makes them waterproof. When a

consumer tosses their cup in a recycling bin it will be thrown away by the recycling

center because of the waterproof lining. Starbucks recently shipped 6,000 pounds of

Starbucks paper cups to the Mississippi River Pulp Mill. The pulp mill has the

capabilities or recycling coffee cups with waterproof linings. The Mississippi Pulp Mill

successfully recycled all 6,000 pounds of coffee cups in to Starbucks cups. “Cups to cups

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sounds like a nice closed system to us” (Inhabitat. 2012). Jim Hanna, from Starbucks

environmental impact stated “the pilot went a long way to proving to the industry that

they can take these cups” (Inhabitat. 2012). The cost effectiveness has not been

determined, however it is a constant reminder to Starbucks that they can always do more

when it comes to being greener.

Initiative Affecting Costs and Sales

It is predicted that the initiative will have different effects on both costs and sales

of the organization. The costs will be a little higher to obtain completely recyclable cups

by 2015 and an anticipated higher labor cost associated with providing volunteer work

throughout the communities that Starbucks franchises are established (Starbucks

Corporation, 2012). These costs will be an initial investment that will have anticipated

longer term effects of increased sales and support throughout the community. When

businesses provide community involvement and support efforts, such as recycling, a

positive marketing strategy is sustained incorporating long term support from the

individual communities that franchises are established. Visibility with community

involvement is another positive impact that will help with increased sales spreading

awareness of the existence of the facilities and product offered. The implementation of

these strategies will create a view of Starbucks as a responsible company ultimately

supporting ethical sourcing, positive environmental efforts, and community involvement.

The organization’s team approach and involvement of communities, employees, and

management will determine the successful implementation of all strategies.

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Risks Associated With Initiative

The implementation of the reusable or recyclable cups does have its risks. The

company will need to create a company design and make the cup to environmental

standards fitting the reusable and recyclable materials. Another risk is manufacturing

flaws in the production of the cups. Designing a cup that distinguishes Starbucks products

and promotes environmental protection may take time and have a high cost to produce

the new cups, which may strain the company’s financial flow in the beginning. The

higher production costs may also cause an increase in the price of the products to

partners, consumers, and stakeholders.

The economy is another factor that can lead to financial risks based on the

fluctuation and the demand driven by the competition (Titman, Keown, & Martin, 2011).

Consumers may start drinking coffee at home during low economic times to save money.

A price increase may cause a decrease in sales, in turn causing Starbucks to lose expected

revenues. Loss of expected profits and revenue may lead to Starbucks struggling with the

break-even point. Careful consideration and planning for all possible risks in making the

change to more environmentally safe packaging is needed for Starbucks to meet the

initiatives outlined in the organizational strategic plan.

Financial Effect of Risks Associated with Initiative

In Starbucks attempt to be a responsible organization, there is great risk involved

financially. Placing limits on whom and where coffee will be ordered from may increase

the cost to obtain product and reduce profit margin. Limiting where the product is

ordered from may also impact the cost of a cup of coffee consumers, partners, and

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stakeholders. Starbucks is also working toward changing the packaging of their products

which may potentially increase cost.

Using recyclable materials for the construction of cups will decrease the

organization’s carbon footprint in attainment of strategic initiatives but may lead to price

increases. If Starbucks can offer incentives for stakeholders to purchase a reusable cup,

an increase in profit is possible because reusable cups would decrease the number of

recyclable products. While these changes do help Starbucks brand and image, there is

risk involved. A business making changes that will increase the cost of product increases

the expense of consumers, partners, and stakeholders. These types of changes open the

door for competitors to sell similar products for less and potentially grab part of the

market.

Summary

Cultivating relationships with customers is one of the keys to the success of

Starbucks. Starbucks understood the realization that in order to become a competitive

organization in their market there had to be a change in how they did business, the way

they managed their business improved the overall training and knowledge of

organizational objectives. In order to accomplish their goals Starbucks had to develop a

strategic and financial plan. These plans were to enforce the objectives of the company

and ensure forecasted projections were met.

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References

Inhabitat. (2012). inhabitat design will save the world. Retrieved from

http://inhabitat.com/all-starbucks-cups-will-be-recyclable-or-reusable-by-2015.com

Starbucks Corporation. (2011). Starbucks Coffee Company. Retrieved from

http://www.starbucks.com

Starbucks Coffee Company. (2011). Starbucks Company Profile. Retrieved from

http://assets.starbucks.com/assets/aboutuscompanyprofileq4201112141final.pdf

Titman, S., Keown, A., & Martin, J.D. (2011). Financial management: Principles and

applications (11th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.

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Documents

1352463181FIN 370 Starbucks Strategic Initiative Paper.doc