Strategic Plan 2

Strategic Plan

Trisha Eisele

August 18, 2014

Alfonso Rodriguez

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Table of Contents Executive Summary 3 Bright Horizon 3 Environmental Scan 4 Remote Environment 4 Industry Environment 5 Operating Environment 5 Internal Strengths & Weaknesses 6 Strategies 7 Innovation 7 Horizontal Integration 8 Product Differentiation 8 Implementation Plan 9 References 16

Executive Summary

Bright Horizons is a company that brings quality early childhood education to children. As Bright Horizons has grown, they have created their own curriculum. It involves math, science, technology, social studies, the arts, cooking, and physical education. They also provide different types of services. They have client-based centers, community centers, elementary schools, after school care programs, and summer camps.

Bright Horizons (2014), states that they “strive to nurture each child’s unique qualities and potential.” As a way to extended this mission statement, I propose to offer tutoring as a part of the after school care program. This way the company can extend its mission statement to older students or past students. It is a way for Bright Horizons to extend their services to past students. Strong partnerships are a key value of Bright Horizons. I recommend that the parents get to choose their child’s tutor through a database of tutors in their area. To match another of Bright Horizons values is the collaboration with employers to build family-friendly workplaces, I recommended that the tutors going to customer’s house. Bright Horizons already has its own University to help aid in the growth of its employees. I recommend that they had more classes to aid in the knowledge of the tutors on staff.

The environmental scan involves many different categories. Through remote environment, Bright Horizons can look at the economics, social, political, technologic, and ecological factors involved in their company. Through this analysis Bright Horizons can continue to be the competitive company that they are within the child-care industry. They are consistently working to bring quality child-care to their cliental. Adding in tutoring services would just expand their strong brand and international connections.

In looking at the implementation plan, it is vital to complete for any and all short-term and long-term successes. The tasks and task ownership are there to help keep everyone accountable to their portion of the plan. This is where directors, assistant directors, and current teachers can aid in the expansion of the service. Milestones are there to have a goal to strive for within the company. Having a beta center gives the company a unique perspective. In aligning resources with the strategic plan, it allows Bright Horizons to fulfill its mission statement in a new and innovated way.

Bright Horizon

My strategic plan will be to offer tutoring through the Bright Horizon Company. To ensure the organization’s vision, mission, and people strategies and value statements are aligned, I will refer to what Bright Horizon’s strives to do for each child. They strive to “nurture each child’s unique qualities and potential” (“Bright Horizon”, 2014). Therefore, in the tutor services, I propose to develop a curriculum that will be based of each child’s learning style. Other items Bright Horizons strives to do are to support families through strong partnerships, collaborate with employers to build family-friendly workplaces, create work environment that encourages professionalism, growth, and diversity, and grow a financial strong organization” (“Bright Horizon”, 2014). Helping the company grow is another alignment of values because tutoring is a $4 billion dollar industry (“Franchise Help”, 2014). Strong partnership is a key value of Bright Horizons. I will be recommending that the parents get to choose their child’s tutor through a database of tutors in their area. To match another of Bright Horizons values is the collaboration with employers to build family-friendly workplaces, by recommending that the tutors going to customer’s house. Bright Horizons already has its own University to help aid in the growth of its employees. I will recommend that they had more classes to aid in the knowledge of the tutors on staff.

Environmental Scan

Remote Environment

The remote environment includes factors that are a part of the company’s operating situation. There are five factors: (1) economic, (2) social, (3) political, (4) technological, and (5) ecological factors (Pearce & Robinson, 2013). A part of Bright Horizons is client-based centers. For example, Bright Horizons goes to a company and lets them know that they can provide quality child-care to their employees. Not sure you should start a sentence out with it. This allows the employees to drop their children off to onsite daycare. According to Bloomsburg Businessweek (2014), “Child care benefits the employers who sponsor it by improving employee morale, reducing turnover and absenteeism, and increasing productivity.”

Social factors are key within the daycare business, especially when dealing with an international company. Bright Horizons embraces diversity. A number of the centers are a part of accreditations like NAEYC (National Association for the Education of Young Children). Also, the company has some of the highest paid workers due to the client-based centers. They offer benefit packages even to part-time workers. Politically, Bright Horizons always has to deal with new laws and regulations. The company is an international company therefore; they have to maintain other countries’ laws and regulations.

Technological factors are faced every day with the day-care centers. From personal experience, the center I work at has just finished going completely paperless for our children’s portfolios. Prior to this, the company did some technological forecasting, as they wanted to protect and improve the communication between teachers and parents. Thusly, increasing the company’s probability by attracting more customers.

Industry Environment

According to Pearce & Robinson (2013), industry environment is “the general conditions for competition that influence all businesses that provide similar products and services.” Bright Horizons has many competitors including in home daycares. According to Lamiman (2007), “One relatively new entrant is Knowledge Learning Corporation, which acquired KinderCare Learning Centers, Inc., in January 2005. Knowledge Learning reports its network now includes more than 120 employer-partnerships centers. Another company in the field is La Petite Academy, with 29 corporate-sponsored early learning centers.” Therefore, there are a number of competitors throughout the industry. Bright Horizons strives to offer multiple services throughout the year to include back up care, summer camps, and vacation support (school age).

Operating Environment

An operating environment deals with the factors in the immediate competitive situation such as looking at factors that deal with a company’s success in acquiring needed resources. According to Pearce & Robinson (2013), “Among the most important of these factors are the firm’s competitive position, the composition of its customers, its reputation among suppliers and creditors, and its ability to attract capable employees.” Bright Horizons maintains many different types of centers around the world. They are consistent with training and attracting new customers by sharing their success stories with other companies. They are a part of many accreditations and follow a number of states and countries regulations and laws. They also maintain learning and professional growth opportunities for their employees. Their competitive position is high in the daycare industry. According to Lamiman (2007), “A company spokesman reports that most of Bright Horizons' competition comes from the small owner operated childcare businesses that represent most of the industry. However, in the most recent years, there has been a slight increase in the competition at the corporate end of the industry. (Bright Horizons appears to be the only publicly traded company.)” Thusly showing how their position within the child-care industry is competitive. Their structure is what they call a management (cost-plus) model. In other words the client (a major corporation) provides the space, pays start-up costs, buys capital equipment, handles facility maintenance and retains more control over operations (Lamiman, 2007). Bright Horizons has about 40 percent of their centers under this model. Others are modeled after community centers, where there is a director, managers, and teachers creating the organizational structure.

Internal Strengths & Weaknesses

Companies should complete analysis of its company’s strengths and weaknesses. SWOT is one that is most commonly used and stands for for strengths, weaknesses, opportunities, and threats. Bright Horizons strengths include a strong customer base, specialized services, and a strong brand. To expand on one of these strengths, a strong brand is a main portion of Bright Horizons. They have their own curriculum. They included state standards but they hold their day care centers to a company standard. Their daily letters, newsletters, and class documentation all reflect these standards, which are all under the Bright Horizon brand. Weaknesses of Bright Horizons include stringent regulations and reliance on future corporate acceptance. Through personal experience, I have seen the problem with reliance on future corporate acceptance. Our contract with our company is reviewed yearly, Bright Horizons and the company negotiation on a yearly bases to keep the two centers that we have onsite. Through utilization of a SWOT Analysis, Bright Horizons can work at improving their weakness and growing their strengths.

Strategies

Innovation

According to Pearce & Robinson (2013), “Innovation is a grand strategy that seeks to reap the premium margins associated with creation and customer acceptance of a new product or service.” Bright Horizon Family Solutions is a leader in innovation among early childhood education. It needs be consistent in its innovation. “Corporations that embrace innovation and, as importantly, manage innovation well, are able to remain buoyant even in the choppy waters of today's uncertain global economics” (“Innovation”, 2012). This can be done through the improvement of their existing services. Bright Horizon would need to development and testing of the new services. It would be recommended that they have customer surveys after they have introduced new or improved services. This would allow them to respond accordingly to the wants and needs of their customers. Therefore, it is recommended that they spend time in the improvement of existing services or the development of new services.

Horizontal Integration

According to Pearce & Robinson (2013), “Among the most important of these factors are the firm’s competitive position, the composition of its customers, its reputation among suppliers and creditors, and its ability to attract capable employees.” Therefore the merging of services or organizations that operate on a similar level could help with the financial growth of the company. According to Horizontal Integration (2009), “Horizontal integration involves the union of companies producing the same kinds of goods or operating at the same stage of the supply chain. It may also describe the merging of departments within an organization that perform similar tasks.” Bright Horizon Family Solutions has already done this with the acquisition of different items and companies to aid in their growth. Bright Horizon (2014) stated, “Bright Horizons Family Solutions is a trusted leader in child care and early education. We have completed a wide variety of acquisitions, and our custom-tailored approach ensures that the transition of ownership is successful for children, families and teachers.” This is strategy that as worked well in the past and can continue to work in the future.

Product Differentiation

Although, Bright Horizon Family Solution has used the product differentiation strategy, they should continue to use it within their company. This will guarantee their mission of “providing quality childcare” (Bright Horizons, 2014). According “Product Differentiation” (2006), it is “the means by which suppliers attempt to distinguish their own products from those offered by competitors.” This would be through the promotion of the World Curriculum, which offers a variety of subjects like Art Smart (art classes), Movement Matters Zone (P.E. program), Math Counts (learning math through play), and Cooking Club (cooking lessons). They need to create and sustain a demand for their brand loyalty. This would then give them a competitive advantage over rival centers. This strategy may even serve to act as a barrier to entry to other childcare centers that may want to open within the area.

Implementation Plan

Bright Horizon Family Solutions is a company that is dealing with constant threats. These threats are in the economy, business, and competition. An implementation plan will be able to show them how to diversify their company and the services it provides. It will show that innovation is still alive within the company. This will help maintain brand loyalty and employee satisfaction. According to Business Dictionary (2014), Implementation plan is defined as a “detailed listing of activitiescosts, expected difficulties, and schedules that are required to achieve the objectives of the strategic plans.” The following points will explain the implementation plan.

Objectives

· To expand services to previous customers to bring them back

· To expand employee growth through online classes

· To become a leader in the tutoring market

Functional Tactics

Functional tactics according to Pearce & Robinson (2013) are “detailed statements of the means or activities that will be used by a company to achieve short-term objectives and establish competitive advantage.” In bringing tutoring into the umbrella of Bright Horizon Family Solutions, the management team in each center would need to be involved in implementing this new service. Therefore, the functional areas of marketing, finance, human resources, and staff all need to be included within the change. The marketing team will be crucial to contacting customers that know the Bright Horizons Family Solution brand and capitalizing on this. The staff at the centers will be crucial in building a cliental in bringing their school age children back to the early education centers for tutoring. The operations team will need to grow the Bright Horizons University (the company’s online school for staff) to included multiple subject review for tutors to access at anytime. The finance and accounting departments are going to work together to make sure the company stays within its projected costs.

Action Items

Action items for creating a service of tutoring within the Bright Horizon Family Solutions Company are key to the success of the company. Increasing the growth and profit of the company by diversifying the product over the next 3 years. One of the goals was to expand services to previous customers to bring them back and to become a leader in the tutoring market. The operational, marketing and center staffs are responsible for aiding the company in achieving growth in the tutoring market. In adding this new services, there needs to be solid market research to make sure that the service will be viable in the different company’s locations. These items need to be completed before the rollout of this service.

Milestones and a deadline

Milestones are key to the completion of an implementation plan. According to Gaines (2014), “Milestones are the events that occur on the way toward achieving the desired end results of business goals. They can be short- or long-term goals and can be easily achievable or challenging” (How to Develop Milestones for Your Business). The first milestones are introducing and development of the service. The introduction of the services will take about 3 to 6 months. This service will be introduced through a beta center. This will help get the bugs out of the system. The development of the service should be obtained within the first year of the services being introduced to a center. The second phase of the milestones will be to develop curriculum based on the World Curriculum that Bright Horizon has already implemented in the centers. This would need to be completed within the first 3 years of the service being introduced to the company.

Tasks and Task Ownership

The task of this implementation plan will encompass many parts of the company. It will start with the operations team. They will need to start the process by rolling out the service to the center. There will be a beta center to try out the service. The center administration and staff will need to be in constant communication with corporate to ensure the completion of these tasks. The marketing team will have to take ownership of the websites and pitch speeches for showing customers why they should come back or start with Bright Horizon’s for their children. It is critical for the marketing company to showcase their promotion ideas to attract more and old customers.

Resource Allocation

It is to be determined the company resources should be allocated on an as-needed basis to ensure the rollout of the services is complete. Employees cannot complete their jobs with the tools necessary are not available due to resources being withheld. All the departments will have contact to materials, information, technology, and staff within the set budget. This budget will be determined by the finance and accounting departments on how best to use the resources. There will need to be strategic controls that will allow the company to analyze any and all success and failures. This will allow the company to make adjustments for any unpredicted circumstances that may arise.

Required Organization Changed

In looking at Bright Horizon Family Solution’s company mission, they state “We strive to: Nurture each child’s unique qualities and potential, Support families through strong partnerships, Collaborate with employers to build family-friendly workplaces, Create a work environment that encourages professionalism, growth, and diversity, Grow a financially strong organization” (Bright Horizons, 2014). It was stated before the operational excellence and customer intimacy are Bright Horizon’s best value strategies. With these strategies, Bright Horizon will need to continue using them. They will help the company gain a competitive advantage. If the company has operational excellence in every department, it will help make the new service a success for the company. If there is operational excellence in every department, everyone is on the same page and they can move forward as a company not has individual units. They also provide training for their staff to reduce brining in other companies to teach certain extras like art or physical education. For customer intimacy, they have open door policies. This will be key during the implementation of the tutoring services in the beta center. Parents need to feel comfortable coming to the center and talking with the staff and administrators about the success of their child. Communication with the teachers will need to be the biggest change. When dealing with children, teachers and parents are in the trenches and know what is best. Administrators and other departments need to listen and gather information from them.

Key Success

Key success factors are a major part of the Bright Horizon’s success. These factors are brand loyalty, education, and accreditations. Bright Horizon’s has created a brand within the competitive market of early childhood education. The customers are parents that want to know the center they are leaving their child in is bring education into everything and has professionally trained employees. This will show in their accreditations that the center is apart of with in their state or country. Unfortunately, due to all of this the parents are paying immensely for the quality childcare. This can cause hard times for centers.

Financial forecasting is crucial for predicting how Bright Horizon will perform in the future. This is where Appendix A and B come into play. The budget shows where Bright Horizon is placing their resources. The break-even analysis shows at what point the revenue coming in equals the costs. It calculates the margin of safety. This is the amount that revenues exceed the break-even point. According to Krantz (2012),“It's critical for investors to understand how much debt companies have and how that debt compares with a company's ability to pay. This requires examining a company's balance sheet and income statement.” This is completely true hence why Bright Horizon needs to know where their money is and where it is going. This will help them know what to do with the resources allocated to them for the new service.

Risk Management Plan

Risk management is an ongoing process. Pearce & Robinsons (2013) state, “Risk Management is the process during which an organization identifies and prioritizes risks and subsequently employs measures to lessen the probability of harmful events and maximize opportunities.” Bright Horizon needs to provide continuous improvement for their staff and other departments. This will help alleviate undesirable influence of the new service. Some risks that Bright Horizon’s may come across is are as followed:

1. Customer Hesitation-This could result in a slow start or complete destruction of the new service.

2. No communication with departments-Due to the level of interactions and conversations between customers, teachers, administrations, and departments, there could arise miscommunication issues.

Bright Horizon’s would need to work with the marketing department to target past customers to draw them back to parts they loved at the center. Show them how the new service is an extension of the mission of the center. The second risk shows that communication among the entire company needs to be there from the start and maintained throughout the entire rollout process.

References

Bright Horizons (2014). Retrieved from http://www.brighthorizons.com/about-us

Business Dictionary. (2014). Retrieved from http://www.businessdictionary.com/definition/implementation-plan.html

Franchise Help. (2014). Retrieved from https://www.franchisehelp.com/industry-reports/educational-franchise-industry-report/

Gaines, M. (2014). Chron. Retrieved from http://smallbusiness.chron.com/develop-milestones-business-25635.html

Hahn, C. (2014). Businessweek. Retrieved from http://www.businessweek.com/debateroom/archives/2007/04/day_care_an_office_affair.html

Horizontal integration. (2009). In BUSINESS: The ultimate resource. Retrieved from

http://search.credoreference.com.ezproxy.apollolibrary.com/content/entry/ultimat

ebusiness/horizontal_integration/0

Innovation. (2012). Strategic Direction, 28(2), 9-11.

doi:http://dx.doi.org/10.1108/02580541211198373

Krantz, M. (2012, January 12). What should investors focus on in financial statements? USA TODAY. Retrieved from http://usatoday30.usatoday.com/money/perfi/columnist/krantz/story/2012-01-12/reading-companies-annual-reports/52520858/1

Lamiman, K. (2007, January). Bright Horizons Family Solutions Inc.. Better Investing, 56(5), 30-32. Retrieved from http://search.proquest.com.ezproxy.apollolibrary.com/docview/233340341/abstract?accountid=458

Pearce, J. A. & Robinson, R. B. (2013). Strategic Management: Planning for Domestic

and Global Competition (13th ed). New York, NY: McGraw Hill.

Product differentiation. (2006). In Christopher Pass (Ed.), Collins dictionary of business. Retrieved from http://search.credoreference.com.ezproxy.apollolibrary.com/content/entry/collinsbus/product_differentiation/0

Additional Information • Skills: Diploma - United States Army Military Police school. Ft Leonard Wood, MO August 2004,

Clearence - Secret. Ft Leonard Wood, MO August 2004, Training - Defensive Driving Course. Ft Hood, TX September 2004, License - Emergency Vehicle License. Ft Hood, TX September 2004Certification - Basic Instructor Development Course. Baghdad Police College, IraqMarch 2005.Certification - Oleoresin Capsicum Defensive Spray. Ft Hood, TX May 2010.Certification - Combat Lifesaver Course Ft Hood, TX June 2006.Certification - Military Police Orientation Course. Ft hood, TX June 2006, Certification - Emergency Medical Dispatch National Certification. Lampasas, TX April2009, Certification - Basic Telecomunicator Certification 1012. Lampasas, TX April 2009, Certification - Basic County Corrections Course. Bell County, Tx May 2009, License - TCLEOSE Jailer License. Bell County. Austin, Tx May 2009, Certification - TCLEOSE Telecommunications Operator Course. Lampasas, TX May 2009, COA - Emergency Management

Summary of Qualifications

• Ability to work professionally and calmly in a fast paced environment while managing multiple tasks • Over Ten years of law enforcement and public service experience working within the Military and

County Sheriffs Offices • Familiarity with departmental protocol, policies, and operational guidelines • Ability to work both independently and within a diverse team

Professional Experience Emergency Service Dispatcher Present Makes frequent critical decisions under highly stressful, time sensitive and emergency conditions. Recurring work is often performed without direct supervision or instruction. Work is reviewed for adequacy, soundness of judgment and appropriate response to specific calls on an "after the fact" basis. Serves as a Emergency Services Dispatcher, provides emergency medical services to the public by answering emergency 911 calls and responding with appropriate personnel and equipment. Maintains an accurate status of all Ambulances and personnel to assure prompt and accurate response. Provides Basic Emergency Medical Dispatch Life Support care through pre-arrival instructions to callers. *Receives and evaluates 911 emergency calls. Responsible for caller interrogation to determine the problem and the nature of the call. Prioritizes all incoming emergency and non-emergency calls. Identifies the determinant and level of response and provides this and any additional information to the responding units. Performs crisis intervention with distraught emergency callers during high-risk situations until appropriate emergency field units arrive on scene. Independently determines appropriate jurisdiction and services to be rendered. Transfers caller to proper agency as determined or dispatches a variety of emergency equipment to include police, fire, ambulance, Med-Evac, rescue or hazardous materials units. Must monitor status and availability of police, fire and medical field units to ensure an appropriate response is made. Updates information for medical, police and fire personnel enroute to emergency responses. Dispatches a variety of emergency response units. Notifies police, fire and EMS staff other agencies concerning emergency incidents when needed. Provides initial Incident Command support until appropriate response agencies arrive on a scene. Provides emergency medical dispatching (EMD) assistance to callers with medical emergencies using the local authority's emergency medical dispatch system. The EMD will verify the location, call back number for the incident and then determine the patient's chief complaint, age, and status of consciousness and breathing. Caller information may indicate that the patient is unconscious and not breathing. Employee initiates an immediate, appropriate, emergency response and provides the caller with basic life support information. The caller may be instructed, over the phone, on how to perform Cardiopulmonary Resuscitation (CPR), emergency childbirth, clearing obstruction of and opening an airway or controlling bleeding. Maintains continuous telephone contact with caller (when appropriate) during emergency situations and gives instructions regarding what to do, and what not to do, prior to the arrival of pre-hospital care providers. Refers non-emergent callers to appropriate civilian and governmental agencies. Operates communications equipment (TDD) for the hearing impaired, conveying messages, taking and making calls. Handles notification requests for various response agencies. Operates the mass notification

system for the installation when required. Operate Computer Aided Dispatching (CAD) system, NCIC, two-way radios and station alerting systems.

Armed Security Guard May 2010 – Present Serves as armed security guard for Carl R. Darnall Army Medical Center (CRDAMC), patrols the interior, roof tops, parking lots, detached hospital structures & the surrounding grounds around the facility, maintains continued surveillance over areas within the facility, investigates abnormal conditions & incidents possibly detrimental to hospital property, patients & staff. Operates a government 2 or 4 wheel drive motor vehicle, with up to one ton load capacity on mobile patrol & as transportation for patients or staff as needed. Employs measures to mitigate trespass, theft, fire, personal injuries, criminal incidents, & accidental or willful damage & destruction. Prevents unauthorized personnel from entering restricted areas. Performs foot, motor & bicycle patrol. Investigates hospital perimeters to detect faulty doors, fence lines, checks locks, alarms, fences, gates, or other barriers to assure they are *closed or locked etc. Prepares written reports for incidents & investigations.

February 2009 – May 2010 Detention Officer/ Communication Officer Guards prisoners in precinct station house or municipal jail, assuming responsibility for all needs of prisoners during detention: Locks prisoner in cell after searching for weapons, valuables, or drugs. Serves meals to prisoner and provides or obtains medical aid if needed. May prepare arrest records identifying prisoner and charge assigned. May question prisoner to elicit information helpful in solving crime. May prepare meals for self and prisoner. May distribute commissary items purchased by inmates, such as candy, snacks, cigarettes, and toilet articles, and record payment on voucher. Uses a computer-aided dispatch system, receive emergency calls from the public requesting police, fire, medical or other emergency services. Determine the nature and location of the emergency; determine priorities, and dispatch police, fire ambulance or other emergency units as necessary and in accordance with established procedures. Receive and process 911 emergency calls, maintain contact with all units on assignment, maintain status and location of police and fire units. Monitor direct emergency alarms, answer non-emergency calls for assistance. Enter, update and retrieve information from a variety of computer systems. Receive requests for information regarding vehicle registration, driving records and warrants, and provides pertinent data. Monitor several complex public safety radio frequencies. Operate a variety of communications equipment, including radio consoles, telephones and computer systems. respond to 9-1-1 and other emergency calls by dispatching the appropriate medical or rescue personnel (police, fire, ambulance, etc.) to the scene. Manage all incoming calls and carefully question the caller in order to determine the type of emergency that exists, the geographical location of the incident, and the extent of any injuries suffered. Stay in contact with EMTs in the ambulance so that they can better coordinate with the medical staff at area hospitals. Work well under pressure and is able to solve problems quickly, give a caller instructions over the phone until emergency service professionals arrive, Keep victim calm, giving CPR, delivering a baby, or stopping life-threatening bleeding, Maintain detailed records of information that is received and any services that are needed, be comfortable with sophisticated computer *and telecommunications equipment. Have exceptional communication skills.

US Army April 2004 – December 2008 Military Police Officer assigned to the Patrol Division to perform law enforcement duties. Daily duties to include but are not limited to the following. Enforcement of federal and state laws, enforcement of military rules, regulations, and UCMJ (Universal Code of Military Justice), enforces traffic regulations, conduct traffic control and investigate traffic accidents, secures, collects processes, and maintains evidence. Performs follow up on site task such as photographing scene, measurements or making diagrams. Plans and conducts investigations of felony and misdemeanor offenses. Develops leads, identifies, collects and preserves evidence, examines crime scene and writes reports. Conducts interviews and takes statements form witness, suspects, victims of criminal activity. Performs a broad range of force protection functions and law enforcement duties. Transports suspects to holding areas. Conducts vehicle or foot patrol of exclusive military property via emergency vehicle for the preservation of life and property. Conducts initial investigations, identifies, collects, preserves and safeguards evidence at crime scenes. Exercises arrest authority and follows established procedures to assist or perform search of persons to seize weapons, contraband, drugs, ETC. Maintains police records and file records. Apprehends, searches and transports prisoners. Conducts searches and inspections of personal property, facilities, vehicles, and equipment. Independently writes and presents oral reports of criminal complaints or incidents, testifies in court if necessary. Qualify with assigned firearms (M9 Pistol, Rifle, and

Shotgun). Have been trained in the use of standardized police equipment (PR-24, Baton, Pepper Spray, Police Radio, and Handcuffs. Operates a police vehicle under non-stressful, Non- emergency of stressful emergency situations. Working Knowledge in the use of computers (IBM, Windows XP, Windows 2000, Excel, E-Mail Internet automated, MDT Force Mobile Computers, 3975 *Power Point, (COPS) Central Operations Personnel Suits.

Education Kenwood High School

Week Six Assignment: Strategic Plan

Week Six Assignment: Strategic Plan

Week Six Assignment: Strategic Plan

Matthew Olinger

STR/581

August 26thth, 2014

Alfonso Rodriguez

Table of Contents

Executive Summary 3

Costco Background, Organizational Mission, Vision, and Value Statements 4

Costco Vision 4

Costco Mission 4

Costco Values 4

Environmental Scan 5

External Environment 7

Internal Environment 8

Strategic Approaches and Recommendation for the Best Strategy 12

Implementation Plan Including Contingency Plans for Identified Risks 13

References 16

Executive Summary

Costco Wholesale Corporation started as Costco Companies Inc. in 1976 in Washington State and began as a corporation in 1983. Costco has 555 warehouses around the world with about 142,000 full and part-time employees. The company has about 54.5 million cardholders worldwide. Costco offers their members competitive low prices on a limited selection of products that include a wide range of national and private label brands. Costco’s operating efficiencies are accomplished with volume purchasing, warehouses, and distribution of products to these warehouses. Volume purchasing allows Costco to purchase their products at a lower price, which in turn they can pass off to their members. Efficient distribution of their products to these warehouses allows Costco to properly distribute their products where customers are more drawn to them. Costco’s fast turnover ratio and operating efficiencies give them a lower gross margin compared to their competitors. In order for Costco to be even more successful or survive unexpected economical events, they must come up with strategy to strive for in the future. In the past Costco’s organizational company has pushed them above their competitors and to be known as a household name. For Costco to understand what to change in their organizational strategy in the future, they must understand the industry they’re in and how their internal environment is operating. Costco must analyze how their industry is doing and in which direction it is moving so they can tailor a strategy to fit the external elements. Costco must also analyze their internal environment operations so they understand if they are operating to their fullest potential, and if they aren’t they can tailor their strategy to fit their internal operation goals. When understanding both the external and internal environments the company can then create an organizational strategy that will help them succeed and survive unexpected economical events.

Strategic Plan and Presentation

Costco Background, Organizational Mission, Vision, and Value Statements

Access to Costco Warehouses is restricted to members who pay a small annual fee for access. Started primarily as a small business supply company, Costco’s inventory focus has grown to include high-end consumer goods including home electronics and luxury items. Costco has succeeded by focusing on the demands a specific customer group while continues to provide for other profitable customers.

Costco Vision

The vision of Costco founder, Jim Sinegal, is to give the customer the best value that they can. Costco strives to be a company that’s on a first-name basis with everyone. The company is committed to treating people with respect.

Costco Mission

Costco’s mission: "To continually provide our members with quality goods and services at the lowest possible prices." Costco doesn't have a vision statement, but it runs on a Code of Ethics: "Costco runs its business according to its Code of Ethics: to obey the law; take care of its members; take care of its employees; respect its suppliers; and reward its shareholders."

Costco Values

The values at Costco have helped to create a culture of fairness, transparency and respect for the consumer that shapes not just how Costco does business, but how its work force sees itself, and how customers experience the brand. One of the best-known is ‘the 14 percent rule,’ which states that no Costco product will be marked up more than 14 per cent over wholesale – regardless of how it’s selling or what competitors are doing.

Environmental Scan

We will compare Costco’s values versus Sam’s Club values. The Kirkland brand has the Costco expectation to be equivalent or better than national brands. A continual product improvement is the exact objective for the maximum competing goal. Product quality and price comparison is continuously revisited by the internal Costco research team. Sam’s club is a division from the Wal-Mart Corporation. Although Sam’s and Costco have a close race, there is an outstanding difference when considering the research that goes into product expectations and supplier preference. Costco is very similar to Sam’s, but in resent comparison Costco has beat out many companies in the same bulk market. Costco and Sam’s have excellent programs for their employees and team effort climate has both companies at an outstanding stance to overall organizational performance.

Costco is known as the anti-Wal-Mart. As of 2005 research demonstrates that Wal-Mart was unstoppable and created strife for small local businesses and destroyed many small businesses. Wal-Mart is an unstoppable force and revenues of $247 billion with a growth of 15% a year. Costco’s is approximately 30% the size of Wal-Mart and Costco competes against Sam’s approach to bulk sales. During the past 20 years Sam’s has had more than 5 CEO’s and has incorporated many strategies in order to try to gain control of the top position. All these ploys have been smothered by Costco’s array of visual space and prestigious options. Consider some figures. Sam's Club has 71% more U.S. stores than Costco (532 to 312), yet for the year ended Aug. 31, Costco had 5% more sales ($34.4 billion vs. an estimated $32.9 billion). The average Costco store generates nearly double the revenue of a Sam's Club ($112 million vs. $63 million), (Helyar, 2003).

When considering the Political, Economic, Social, and Technological aspects to Costco and Sam’s Clubs; there are applications and dues that apply to both organizations. If there is any violation to a customer’s legal liberties, the Better Business Bureau can step in and provide help for paying back any dues or compensations. Services must also fall under the ethical and humane way of treating anything or anyone with rights. Recalls are available through many options into a righteous resolution of matters. The Food and Drug Administration will step in to apply righteous and ethical behavior to products, such as food and all types of medications. Regulations in place are always to be followed by both companies. In some instances, companies such as Costco and Sam’s club may be vulnerable to contaminated foods, such as vegetables, fruits, and processed meats. Over the years, Costco has held a responsible advantage over Sam’s when choosing their provider of such items. As with all businesses offering consumable goods; Costco and Sam’s have to comply with the health inspection section of individual states. Because of their stature in business proceedings, both organizations have avoided problems in matters of this nature. James D. Senegal CEO for Costco remains adamant that mistakes will happen but then to recuperate a team effort to improve must be made. This is what has set the progressive result and rising for Costco’s future. According to Senegal (2003), “We think when you take care of your customer and your employees, your shareholders are going to be rewarded in the long run. And I'm one of them [the shareholders]; I care about the stock price. But we're not going to do something for the sake of one quarter that's going to destroy the fabric of our company and what we stand for."

Some Costco practices are often criticized; Costco has proven to survive through customer research and meeting their needs and wants. Moreover, even while Costco was critiqued on certain decisions Senegal decided to meet the challenge by analyzing, improving the product and advertisement of services. Small decisions and strategies of this nature proved to elevate Costco over Sam’s. Rather than the recommended wage reduction, a decision toward improving the stakeholder, shareholder, and employee treatment was placed in motion. Therefore, visible, and internal improvements to every Costco aspect are evident by proof of costumer surveyed satisfaction.

External Environment

The core assets/activities of this industry are primarily the facilities (geographic location included), the contracts with suppliers, buyer power, and the barriers to entry.

The factor affecting rivalry among existing competitors is a significant concentration within the industry that has left five or six main competitors capturing major market share. Competing on price at high volumes is the winning strategy within this industry. The firms competing in this industry are very sensitive to costs and capacity utilization. The majority of the facilities in this industry are often around 140,000 square feet, and they are sparsely located based of consumer population within that area. There is a high industry price elasticity of demand. Overall, rivalry is determined by the price and cost structure of the firms operating within the industry, thus rivalry is low or high relative to the price per product.

The factor affecting the threat of entry is brand loyalty. Brand loyalty has been created by some firms impacting the purchase decision. Entrant’s access to distribution channels is not easy. Entrant’s access to raw materials and technology/know-how is easy due to the advancements over the years (especially in operations management). There is an experience-based advantage to the current firms. Overall, threat to entry is relatively low given these circumstances.

The factor affecting or reflecting pressure from substitute products and support from compliments is close substitutes that are readily available. Overall, substitute products are not competitive based on the pricing strategy.

The factor affecting or reflecting power of suppliers is concentration of the suppliers to this industry is minimal at best. Firms in the industry do not purchase relatively small volumes and as such they are able to negotiate volume discounts and strip the power of the supplier. Many suppliers can guarantee sales levels by negotiating contracts with these firms. Overall, supplier power is minimal.

The factor affecting or reflecting power of buyers is buyers’ industry is not more concentrated than the industry it purchases from because buyer’s can go anywhere. Typical buyers purchase large volumes, and they purchase individual items in bulk. There is some negotiation of prices in this industry between buyers and sellers on each individual transaction, but most transactions are a “take-it-or-leave-it” price application. Overall buyer power is high given buyer options.

This industry has limited rivalry, a few enormous barriers to entry, very little supplier power, strong buyer power, and little threat from substitutes.

Internal Environment

Costco’s mission statement in the membership warehouse business reads, “To continually provide our members with quality goods and services at the lowest possible prices.” The companies basic business model is too generate high sales volumes and rapid inventory turnover by offering members low prices on a limited selection of branded and private label products in a wide range of merchandise categories. Costco has a simple but differentiated business strategy that works. Their strategy is low prices, bulk buying, limited selection, and a treasure-hunt shopping environment. Costco is known for selling top-quality national and regional branded products consistently below traditional wholesale or retail outlets. Costco also abides by a strict pricing rule to cap its markup on brand-name merchandise at 14 percent compared to competitors at 20 to 50 percent markups. Yet another price strategy is Costco’s Kirkland Signature products which are a private label designed to be of equal or better quality than national brands, but priced some 20 percent below competing brands. Product selection is another main aspect of Costco’s business model. Companies such as Wal-Mart and Target may stock some 150,000 different items to give shoppers a wide selection to choose from. However Costco’s strategy is to provide members with a selection of only about 4,000 different items.

Finally, the part everyone likes, treasure-hunt shopping. Costco’s product line may only consist of approximately 4,000 items, however, about 25 percent of those are constantly changing. Also, since approximately 1,000 items are constantly changing members know they had better buy now, because the product may not be their next time. When looking at the cross-sectional financial analysis between Costco and Wal-Mart between 2005 and 2008, Wal-Mart has had a larger profit margin compared to Costco’s over those years. Costco’s profit margin has ranged from 13.38% to 13.17%, while Wal-Mart’s profit margin has gradually increased from 24.43% to 25.29%. Costco’s average profit margin from 2005 to 2008 was 13.27% compared to Wal-Mart’s 24.80%. This shows that Wal-Mart has better control over their cost. In order for Costco to improve their profit margin, they must control their cost as well as Wal-Mart. In the cross sectional analysis, Costco’s total asset turnover has been higher than Wal-Mart’s. Wal-Mart’s total asset turnover has ranged from 2.43 to 2.60, while Costco’s total asset turnover has ranged from 3.18 to 3.50. Wal-Mart’s average total asset turn over from 2005 to 2008 was 2.29 compared to Costco’s 3.35. This shows that Costco is doing a better job at turning their assets into revenue than Wal-Mart is. When comparing each company’s equity multiplier, Wal-Mart tended to have the higher equity multiplier from 2005 to 2008 compared to Costco’s. Costco’s equity multiplier ranged from 1.88 to 2.27, while Wal-Mart’s ranged from 2.43 to 2.60. Costco’s average equity multiplier from 2005 to 2008 was 2.08 compared to Wal-Mart’s average of 2.51. This shows that Wal-Mart is relying more on stockholder’s equity or debt to finance its assets. In order for Costco to increase their equity multiplier they must use more debt to finance their assets. Costco’s return on equity from 2005 to 2008 is lower compared to Wal-Mart’s. Costco’s return on equity ranged from .80 to 1.05, while Wal-Mart’s ranged from 1.41 to 1.46. The average return on equity was .92 compared to Wal-Mart’s 1.43. In order for Costco to increase their return on equity to Wal-Mart’s they must increase their profit margin and equity multiplier. Costco must control cost and use more debt to finance their assets to increase their return on equity. The average sales for Costco between 2005 and 2008 were $62 billion, while Wal-Mart had average sales of $328 billion. Costco’s average sales growth of 11.07% between 2005 and 2008 is higher than Wal-Mart’s 9.52%. Even though Costco’s sales are not as large as Wal-Mart’s, their sales growth has been growing. The average income for Costco between 2005 and 2008 was 1.13 billion, while Wal-Mart had average income of 11.37 billion. Costco’s average income growth of 6.80% between 2005 and 2008 is lower than Wal-Mart’s 7.56%. Both companies took a hit to their income in 2007, but Costco had a negative growth compared to Wal-Mart’s. Costco’s return on assets from 2005 to 2008 is lower than Wal-Mart’s. Costco’s return on assets ranged from 5.52% to 6.38% in this time frame, while Wal-Mart had a range from 7.44% to 8.54%. The average return on assets for Costco was 6.10% compared to Wal-Mart’s 7.98%. This tells us that Wal-Mart is doing a better job at taking their assets and generating earnings. When competing with Wal-Mart, Costco should look into more efficient ways of using their assets so that more earnings can be generated. When doing a longitudinal financial analysis on Costco, Costco’s profit margin has been slightly increasing between 1999 and 2008. It had a profit margin of 12.79% in 1999 to 13.29% in 2008. This gives the company an average profit margin of 13.16% compared to the industry average of 20.40%. This shows that even though Costco has been gradually increasing its profit margin, it is still below the industry average. The company needs to control costs in order to increase their profit margin. Costco’s total asset turnover has stayed relatively the same from 1999 to 2008. The average total asset turnover in that time period was 3.40 compared to the industry average of 2.85. Compared to the industry Costco has a moderately high total asset turn over. This means that Costco is doing a very efficient job in using its assets in creating sales. Costco’s equity multiplier has ranged from 1.88 to 2.27 from 1999 to 2008. The average equity multiplier in this time period was 2.06 compared to the industry average of2.34. Costco is slightly lower than the industry average. To increase their financial performance the company should increase their financial leverage and rely on more debt to finance their assets. The average return on equity for Costco between 1999 and 2008 was .92 compared to the industry average of 1.19. Costco’s below average return on equity is mainly because of its profit margin. In order for Costco to improve on their financial performance, the company needs to handle their cost associated with their operations. Costco has had gradually increasing sales from 1999 to 2008. The sales growth shows an average growth of 11.43% for Costco compared to the industry average of 10.48%. This shows that Costco is above average in the industry with its sales growth. The average sales for Costco between 1999 and 2008 were 47.38 billion compared to the industry average of 88.53 billion. Costco’s averages sales puts the company in third place for the largest sales right behind Wal-Mart and BJ’s. Costco also has had a gradually increasing net income from 1999 to 2008. The net income growth shows an average of 15.2% for Costco compared to the industry average of 13.68%. This shows that Costco is above average in the industry with its net income growth. The average net income for Costco between 1999 and 2008 were 846 million compared to the industry average of 2.8 billion. Even though Costco’s net income is below the industry average, it is slightly growing every year. Costco has been generating below average profit margins compared to the industry average. At the same time Costco isn’t controlling their cost which is hurting their profit margins. The company gives generous pay to their employees higher than the average believing that this will result in lower turnover and saving cost on new hires and training. Another cost for Costco is their inventory and markup on products. They make less per sale but make more with higher number of sales. If this is the case then Costco is generating more cost with their inventory decreasing profit margins. The key elements of Costco’s strategy and drivers of performance are low prices, bulk buying, limited selection, and a treasure-hunt shopping environment. Another reason Costco has been generating below average profit margins is because they are doing it on purpose. Sinegal was quoted saying the following about Wall Street, “Those people are in the business of making money between now and next Tuesday. We’re trying to build an organization that’s going to be here 50 years from now.” Sinegal is saying that by keeping prices low they are driving out competitors. If Costco was to raise prices a new competitor may be able to enter the market and beat them.

Strategic Recommendations

When looking towards the next 2 to 5 years, Costco must make sure that it understands where the industry is heading. Based on the external environment and industry analysis conducted above, Costco must make sure that it can cut costs as much as possible. As mentioned above in the Key Success Factors, the most successful company within the discount, variety stores industry is a company that is able to keep prices low. Customers have very low switching costs; therefore, Costco needs to constantly remain on its toes in order to compete and sustain its position in the industry. Because Costco needs to maintain very low prices, a lot of pressure is put on the profit margin of the company. In the past, Costco has kept relatively low profit margin levels versus other competitors within the industry. Table 3 below compares Costco’s average profit margin to that of its competitors over the past ten years. Table 3

Costco Profit Margin

Walmart Profit Margin

Target Profit Margin

BJ Profit Margin

13.16%

23.79%

32.73%

11.94%

Costco’s profit margin above is significantly less than Walmart’s and Target’s. This shows that either Costco is trying to compete with the other competitors too severely and jeopardizing profits or they have large costs. In order to increase its profit margin and remain a viable player in this industry, it is strongly recommended that Costco finds a way to decrease costs while maintaining low prices.

Implementation Plan Including Contingency Plans for Identified Risks

One way for Costco to cut their cost would be in their wages. "From the perspective of investors, Costco's benefits are overly generous," says Bill Dreher, retailing analyst with Deutsche Bank Securities Inc. "Public companies need to care for shareholders first. Costco runs its business like it is a private company. (Zimmerman)" Costco’s generous wages and benefits to their employees are one of the reasons for their below industry average profit margins. One of our recommendations would be for Costco to reduce the amount of employees’ health-insurance premiums they pay by at least 6%. Costco in 2004 paid about 92% of their employees’ health-insurance premiums compared to the top U.S. companies paying on average 80% (Zimmerman). By cutting the amount Costco pays for their employees’ insurance premiums by at least 6%, Costco will still be above average compared to the top U.S. companies and still be semi-generous to employees while at the same time increasing their profits margin. One thing that has been hurting Costco and many other retailers has been the inflation cost on food. There has been a rise in cost for many of the products that Costco carries, and the company has been having a hard time passing those cost increases to their customers. This is because the costs of their products are rising to fast not giving them enough time to pass the increase to consumers. “Consumers have felt the pinch of rising prices, but Costco and other retailers have often resisted passing along all their cost increases to avoid losing sales to rivals (McWilliams )”. Costco is stuck in a corner with the rising cost of their products, because if they choose to raise prices they face the threat of losing customers and if they decide to keep prices the same they are losing profits and increasing cost. Our recommendation would be for Costco to raise prices slightly below their competitors. This is an economic condition that many retailers are facing and in order for them to survive they must increase prices as well. With the belief that many retailers are going to raise their prices as well, Costco should do the same. The price increases should be proportionate to how much the cost is rising for the product but to also try to keep the price within the 14% markup that Costco has compared to their competitors. This in turn will keep cost for Costco under control while keeping customers and still being a price competitor. With the current economic times and massive Government spending any company needs to financially and strategically place themselves for success in the future. Simple economics tells us that with huge amounts of spending and Government debt comes inflation. This is a viable outlook for the economy and to place oneself to benefit during inflationary times one needs to increase debt. Costco should do as the Government does and issued debt, take out loans, or do whatever it takes to increase the amount of debt on their balance sheet. Then during the inflationary times Costco will be able to repay that debt with a cheaper dollar instead of having their asset purchasing power devalued.

References

Costco Investor Realtions, (2014). Retrieved via the world wide web: http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-irhome&cm_re=1_en-_-Bottom_Nav-_-Bottom_investor&lang=en-US.

Helyar, J. (2003). The Only Company Wal-Mart Fears Nobody runs warehouse clubs better than Costco, where shoppers can't resist luxury products at bargain prices. Retrieved from

http://money.cnn.com/magazines/fortune/fortune_archive/2003/11/24/353755/index.htm McWilliams , Gary. "Costco's Profit Is Squeezed by Jump in Costs ." Wall Street Journal. 28 July 2008. 22 Apr 2009 http://online.wsj.com/article/SB121680042088976807.html.

Zimmerman , Ann. "Costco's Dilemma: Is Treating Employees Well Unacceptable for a Publicly-Traded Corporation?." ReclaimDemocracy. 26 March 2004. 21 Apr 2009 <http://www.reclaimdemocracy.org/articles_2004/costco_employee_benefits_walmart.html>.

STRATEGIC PLAN AND PRESENTATION 2

STRATEGIC PLAN AND PRESENTATION 10

Strategic Plan and Presentation

Shelia Collins

University of Phoenix

Strategic Planning and Implementation

STR/581

Alfonso Rodriguez

August 23, 2014

Running head: STRATEGIC PLAN AND PRESENTATION 1

Table of Contents

Executive Summary 2

Xerox Background, Organizational Mission, Vision, and Value Statements 4

Xerox Vision 5

Xerox Mission 5

Xerox Values 5

Environmental Scan 5

External Environment 6

Internal Environment 7

Strengths 7

Weaknesses 8

Strategic Approaches and Recommendation for the Best Strategy 9

Recommendations for the Best Strategy 10

Implementation Plan Including Contingency Plans for Identified Risks 11

Conclusion 12

References 13

Executive Summary

Xerox Inc. is a multinational company that focuses on the management of information and hard copy documents by manufacturing an assortment of products such as printers, photocopiers, other printing equipment and a range of digital information and production machines. Through the assembling and production of such equipment Xerox, Inc. has, therefore, solidified its strategic position in the information management through the use of hard copy media storage. This paper will focus on highlighting various essential items in the strategic plan of the Xerox Company. The essential items under consideration have been in use at the different management level within this organization. This report will also focus on the primary driving factors. Xerox, Inc. has a long history rich and dotted with numerous changes in the organizational and cultural change since its establishment. The changes have driven the firm from the simple manufacturers of printers many years ago to the modern that is diversified in information management. Xerox has a unique culture of focusing on the needs of customers and delivering innovative products that will satisfy these needs. In the long term, Xerox has been focusing on being one of the industry leaders; delivering innovative products, growing internally, externally in terms of profitability, customer base, capitalization and sustainability.

By overcoming the technological challenges through establishment of special research and development centers, the firm has gained an edge over its competitors in the information management through the application of technology in delivering satisfactory results. This report will also focus on the company values, internal and external environment analysis. Xerox has been grounded on a rich tradition of maintaining success in various sectors by fostering relationships through the satisfied customers, delivery and innovative products, market leadership, value addition and empowerment of its employees as well.

The environmental scan will highlight the internal and external factors that are either driving or slowing down the growth of Xerox. The environmental scan will focus on assessing the factors that will have an impact on the financial and non-financial performance of Xerox. The external environment (opportunities and threats) scan will highlight the effects of the micro and macro-economic factors on the overall performance of the organization; the effects of political, economic, social-cultural, technological, legal and political factors. On the other hand, the internal environment scan will address the strengths and the weakness of this firm.

This paper will assess how the firm has adopted to these changes in becoming a market leader in information management. Xerox is also thriving as a result of combining the grand and generic business strategies and objectives in the long term scope. The focus will be on the marketing, promotion, financial and the non-financial strategies that the organization has put in place in bettering its performance over the years and as a result establish its strategic position in the delivery of innovative and technological products. With the assessment of the grand and generic strategies and how they are likely to affect the performance of the company in future, the complete strategic plan for Xerox, Inc. goes on to assess the best strategies that should be taken into consideration for further growth in performance and managing competition. The recommendations part of the complete strategic plan for Xerox, Inc. assesses and recommends the best approaches to enable a continuous growth in terms of innovation, customer satisfaction, capitalization and profitability. Implementation of the recommended strategies and approaches highlights how Xerox can shift from its current state and face the future with reduced uncertainties. The paper lays bare all the risk contingencies plans that will help Xerox mitigate all the risks attributable to the future and the uncertainties due to implementation of the strategies under consideration.

Strategic Plan and Presentation

Xerox Background, Organizational Mission, Vision, and Value Statements

Xerox is a global American firm in the document management sector that manufactures and sells a wide variety of products such as printers, photocopiers, digital production, and printing devices. Additionally, the company offers a variety of consultation services on its products and those in the same field (Adrian & Richard, 2003).

Xerox Vision

Xerox's rich legacy bases much on consumer focus and employee core values that aid in delivering growth, sustainability, and profitability.

Xerox Mission

Xerox’s mission focuses on becoming the change agents and innovators. This is achieved by utilizing Xerox Lean Six Sigma that continually searches for an enhanced means to meet the difficulties and make business procedure outsourcing, new advances, IT results, items, and administrations for brilliant government and business customers that empower better comes about.

Xerox Values

Since Xerox’s initiation, it has functioned under the leadership of six core values:

· Corporate success through customers satisfaction.

· Delivery of excellence and quality in all our operations.

· Requirement of the assets' premium return.

· Technology usage to build market leadership.

· Employees value and empowerment.

· Corporate citizens responsible behavior.

Environmental Scan

In general, when analyzing the various factors that may affect the growth and subsequent sustainability of a company, looking into the current environmental issues is substantial. This aspect helps understand the areas that need consideration prior to making any decisions. The environment refers to the various factors that have some influence on something, an individual, or a group. Environments differ in the degree of influence they have on the aforementioned. In the business world, an environment earns the name business environment. By definition, business environment refers to the summation of all internal and external forces that have some influence in the general operations of the business body (Adrian & Richard, 2003). Depending on the business structure, the business’ internal and external factors may work in harmony or work separately each having its share of influence on the total business performance. In order to determine the degree of impact and the direction the impacts offers, either positive or negative, there is a great need to conduct an analysis and monitor the various factors. The above factors are possible through environmental scanning, which is an important element of global environmental analysis.

External Environment

As explained earlier external factors influence the business from outside, including the social factors, microeconomic factors, macroeconomic factors, and technological factors (Xerox Corp., 2013). Each of these factors has varied the impact on the various operational elements of a company. To begin with, the most significant external environmental factor in Xerox’s remote environment will be identified and analyzed. A remote environment refers to the forces that influence the decision making process of a business entity. In the case of Xerox, the most significant remote external environmental force is the technological factor. Xerox has heavily invested in the latest technology with the aim of ensuring it meets the latest technological standards. In this line, the use of great technology has enabled the firm to set its standards upon which the decision of quality production lays.

In the same direction, technological advancements have great influence at the industrial level hence affecting the company’s industrial environment. As previously mentioned, the company has set specific standards that guide the production of their products. The standards ensure the latest technologies are used in the production of Xerox’s products and services. To finalize, technological advancements the company exhibits have great influence on the corporation’s operations. Through the technology the firm uses, it has made its distribution chain easy. The external factors have enabled the firm to handle competition effectively making it part of the pool of market leaders in the document management sector.

Internal Environment

Strengths

For a company to enjoy success and market dominance, it is important for it to conduct a strength analysis to determine the strengths of the firm. Once it identifies its strength, it is at a position to use it in its advantage in the race to acquire business success and market dominance. In Xerox's case, the most significant strengths include the company’s ethics, managements of finances, and human resource management strategies. Xerox has concrete ethical standards that define the company’s code of conduct. In any business, setting ethics plays a great role in guiding the various stakeholders on how to conduct themselves while associating with a business entity. The aforementioned has been of great benefit since it has ensured that the business observes high level of ethics in their daily operations. In addition, its high levels of ethics have served as grounds for practicing high levels of integrity in the business’s operations factors (Xerox Corp., 2013). Adoption of an ethical profile has helped in the creation of a good relationship between the business entity and the various relevant stakeholders.

The other strength is the ability of the firm to manage its financial resources. The firm was able to leverage success from its short-term finances and current asset. In addition, the company has well utilized it working capital, which has resulted to great financial prosperity. Finally, the company has a well elaborate human resource management scheme that has seen the firm create an excellent workforce. The financial resources have led directly to an excellent performance. Xerox has invested heavily in ensuring that diversity is observed in the selection of its workforce. Recently, FORTUNE magazine and Forbes magazine recognized Xerox as part of the top 50 firms that embrace diversity factors (Xerox Corp., 2013).

Weaknesses

Every business must have various elements that act as downing force towards its success. Just like any other business, Xerox is not an exception of the previously said. Among the most crucial weakness that have immense influence on the firms operations are high technological prices, stakeholders’ adoption problem to technological changes, and a retiring poll of resources. A greater portion of success in Xerox is from its incorporation of high levels of up-to-date technologies (Zook, 2004). Despite the fact that it brings along some benefits, it also comes at a price. Currently, the firm heavily invests to ensure that it runs with the latest levels of technology. For the achievement of success, it has to channel a lot of its funds into technological advancements, which could have been put into use for other purposes.

The other weakness is the period the stakeholders may take to adapt to technological advancements. Some stakeholders may not understand the need of a given technology and it may take them some time to comprehend its importance. As a result, this may create an opposing force that may lead to the slow implementation of new technologies. Due to the constant change in the face of technology, the firm finds itself with many retired resources that have little economic value to the company. In turn, the company finds itself in a situation where it has to abandon some resources in order to a accommodate others. These resources may include an old workforce, old equipment, and old production techniques among many others factors (Xerox Corp., 2013).

Strategic Approaches and Recommendation for the Best Strategy

Xerox is an organization endeavoring to movement the legacy view of its brand while amidst conversion. Xerox Corporation Ltd. is an American international record management organization that creates and offers scanners, advanced creation printing presses, a scope of printers both color and black-and-white, multifunction frameworks, and related consulting services and products. Xerox Inc. produce, outlines, supplies, services document equipment, solutions, software, and services to a large community (Xerox Corp, 2013).

Xerox has a generic strategy that has come a long way over the years. Xerox once used product sponsorship primarily as a customer entertainment platform. The document organization has overhauled its market approach in supporting its evolving product and service offering and drive new business. The plan includes three primary components of gaining business from sponsored properties, validating brand story through product/service showcase and using intellectual property and other assets in 360-degree promotion plans and campaigns. In supporting the new strategy, Xerox has expanded its sports-heavy sponsorship portfolio into the world of art as well as diversified entertainment and added global assets that provide international reach and local touch points (Xerox Corp, 2013).

The grand strategy of Xerox is vigorously working to distinguish and fortify its project managed print services (MPS) contributions through both extended services and enhanced go-to-market. An important differentiator for Xerox is its span of service assistance that includes the entire range of printing services; from the office to the print room. Its next production MPS platform is assembled on three pillars, which includes assessing and safe, optimize and incorporate, and simplify and computerize. These fundamentals are maintained by a series of technology, products, and services that help venture activities around benefits, practicality, and expense decrease (Louella, 2014).

Xerox's strategy is to perform a reasonable, reachable, and testing objective which concentrates on expanding the organization esteem and long-term investors’ returns. Xerox's experimentations yield new items and administrations that outpace aggressive dangers since a society that examinations deliver better long-term value. Xerox's technique is to enhance continuously. This serves to ensure against competitive dangers and expands shareholder returns (Louella, 2014).

Recommendations for the Best Strategy

Strengthen the execution foundation by putting resources into 'safe wagers' is the suggestion. Despite which development technique is picked, a company's foundation must be dependent upon a standard so as to support thriving execution. An on-set duty to making such a framework is a 'safe wager' which involve wiping out departmental or territorial storehouse, using leading pointers and execution drivers that adjust to the methodology and developing leaders of all ranks, which includes managerial and non-managerial (Zook, 2004).

Launch a procedure to distinguish techniques with a high likelihood for achievement could be an alternate critical viewpoint. It is suggested that upper management start the procedure by taking into consideration the development probable inside the current center of the business and/or the prospects and development potential connected by making inventive quality suggestions for underserved client groups. While higher authority group travels throughout this development, it will appear obvious if and when adjoining development alternatives ought to be considered.

Implementation Plan Including Contingency Plans for Identified Risks

Adopting an agreement of artificial goods separation, low-cost management, and item for expenditure extension strategies will help to capitalize on potency, counteracts intimidation as these strategies continue their mission, and organize in a line with their objectives. The company will provide their customers with better substitution. The populace are escalating and growing speedily. In 2009, people aged 65 years and above were in excess in the United States. Forecasts indicate that in 2030, there will be 72.1 million Americans. Xerox has beforehand imitation a procession of products modified to the aging process, heaviness aware, and will extend to produce and get well upon these products. Xerox creates leading boundary products, civilizing based on the over-riding ahead of them when required, and use their superseding market split to carry on low expenses.

To put into practice a tactical map productively, Xerox must recognize temporary objectives, landmark, and deadline; kick off precise practical strategy; converse strategy that authorize populace in the association, while satisfying them efficiently; allocate job possession to precise everyday jobs; and assign possessions. Xerox temporary necessities comes in with the developed project in flanked by 5 to 6 percent as well as compose larger both innovative products and recuperate available goods. “Short-term objectives are experimental result probable or predictable to be attaining in one day or fewer. This plan is based on a set of goals that is also obtained by conflicts to be better understood for the important problems to meet and comment development with the necessities to be acknowledged for quantity (Ross, 1996).

All these strategies will be processed for its temporary goals in the environment with tactics so powerful for the complete period in to its responsibility. Practical approaches are the behavior that must be finished to appreciate the temporary objective. The company is however performing well because it has been capable of transforming positive cash flows from its operating activities and the company is further operating at high profit margins despite the heavy competition it faces at the market. However, Xerox remains a valuable company that one can invest in because it has a commanding lead in the field of office technology, and it has exhibited an effective marketing strategy through provision of groundbreaking items through a continuous expansion of the customer base.

The company’s stock is making returns quickly and frequently for its investment on the company’s shareholders. Through dedicated leadership and strategic management, the company has been able to restructure its priorities by placing employee culture and customer service before and everything else. Xerox as a company, also appreciates the importance of its workers as being a valuable line of communication for customer satisfaction and the general public image. Xerox has apart from investing highly in the development and research also created a strong public image so as to create innovative new products that suit the customers. It is through these information technology based products that Xerox has been able to streamline its business operations and therefore to help the company to save substantial amounts of money.

Conclusion

The company is performing well because it has been capable of transforming positive cash flows from its operating activities and the company is further operating at high profit margins despite of the heavy competition it faces at the market. However, Xerox remains a valuable company that one can invest in because it has a commanding lead in the field of office technology and it has exhibited an effective marketing strategy through provision of ground breaking items through a continuous expansion of the customer base. The company’s stock is quickly and frequently making returns for its investment for the company’s shareholders. Through dedicated leadership and strategic management, the company has been able to restructure its priorities by placing employee culture and customer service before and everything else. Xerox as a company, also appreciates the importance of its workers as being a valuable line of communication for customer satisfaction and the general public image. Xerox has apart from investing highly in development and research also created a strong public image in order to create innovative new products that suit the customers. It is through these information technology based products that Xerox has been able to streamline its business operations and therefore helping the company to save substantial amounts of money.

References

Adrian. S., & Richard. W., (2003). Six principles for making new growth initiatives work, Ivey Business Journal, (4), pp. 15-25

George S., Philip E., & Lawrence S., (1992). The new rules of corporate strategy. Harvard Business Review.(23)45-63.

Louella. F., (2014). Xerox Progresses Next Generation MPS Strategy. Retrieved from http://industryanalysts.com/xerox-progresses-next-generation-mps-strategy-louella-fernandes/

Ross, J. R., (1996). Benchmarking: Improving Performance Through Standards of Comparison, Stores, 78, (11), pp. 53–54.

Xerox Corp., (2013). Inside Xerox’s Evolving Sponsorship Strategy. Strategy. Retrieved from http://www.sponsorship.com/iegsr/2013/10/07/Inside-Xerox-s-Evolving-Sponsorship-Strategy.aspx

Zook. C., (2004). In Beyond the Core. Harvard Business School Press.

Strategic Plan and Presentation 2

Strategic Plan and Presentation

STR/581

Professor Alfonso Rodriguez

August 23, 2014

Sheila Medina

TABLE OF CONTENTS

Executive Summary 3

Company Background 3

Organizational Mission, Vision, and Value Statements 4

Environmental Scan 6

Organization Structure Examination 10

Recommended Best Strategic Choice and Evaluation 13

Implementation, Strategic Controls, and Contingency Plans 14

Financial Forecasting and Budget 16

Conclusions 17

References 18

Executive Summary and Company Background

Americans have a love for coffee that revolves back to an era even before our nations birthday. Starbucks has become the “coffee” that consumers love. There was a period of time when coffee was merely a morning routine for those coffee lovers. However, this changed after Starbucks created their own culture and was made known to the world in 1971. Starbucks opened up its first coffee shop near Seattle Washington at a place known as Pikes Place and since then, research has shown Starbucks Corporation to be “leading retailer, roaster and brand of specialty coffee in the world, with more than 17,000 retail locations world wide” (www.investor.starbucks.com).

Starbucks was founded by their President, and previous Chief Executive Officer (CEO), known as Howard Shultz who made every attempt to differentiate themselves from the surrounding coffee companies. In 1971, Howard was so enthralled by his first cup of coffee he consumed that he decided to purchase the company in 1987. Howard then named the corporation Starbucks, which was named after a character in the classic story of Moby Dick. Howard Shultz believed in Starbucks and all of their products and worked hard to ensure that Starbucks would continue be the world’s leader in retail, roasting, and branding of specialty coffees for consumers worldwide. Starbucks is known primarily for selling coffee, however, also sells other hot and cold specialty drinks, beverages, pastries, sandwiches, and other snacks.

Starbucks strives to carry on the reputation of being the consumer’s favorite coffee shop however, this will require Starbucks to be committed to their customer satisfaction and company advancement in order to achieve this. Consumers know that Starbucks has and continues to be known for their customer service, relaxing atmosphere and their excellent coffee. Starbucks offers something for everyone regardless of whether or not they drink coffee. They offer a place to those who are looking for a place to study or do homework, network, socialize, or to even relax and read a book.

There are many great aspects of Starbucks that makes them a successful company known throughout the world. However, companies are only as successful as their workers. Besides all of the great products offered, Starbucks is also known for the way that they treat their employees. They respect their employees and have a reputation for treating their employees well. They provide their employees with health care coverage and offer other incentives to their workers (www.starbucks.com). With this being said, Starbucks has a huge opportunity to attain a large market share over its competitors if Starbucks can continue winning the hearts and minds of the consumers. Starbucks needs to maintain the competitive advantage, which can be done by continuing with their expansion of businesses and continuously introducing products. The following paper will address the strategic plan outlining the steps required for Starbuck to succeed and grow to include: Company background, strategic plan proposal, external scan, organizational structure, strategic choice and evaluation, implementation, strategic controls, and contingency plans. Finally, we will discuss the budget and financial forecasting needed to implement the changes desired.

Mission/Vision/Value

Starbucks aims to be the consumer’s favorite coffee shop and to achieve this the company focused on customer satisfaction as well as company advancement. Therefore, it is important to act based on what is written in Starbucks mission, value and vision statement, “To inspire and nurture the human spirit-one person, one cup, and one neighborhood at a time” (www.starbucks.com). This mission statement was changed by Howard Shultz, CEO in order to accelerate global growth. Howard strives to move Starbucks in a direction that ensures all consumers receive the best customer experience. Starbucks coffee has always been and continues to be about quality as they are committed to maintaining loyalty, integrity, and great taste of coffee through the course of its growth, and coupled with commitment is the high value placed on employees (partners) worldwide.

Starbucks vision is to be “the most recognized and respected brand in the world.” (www.starbucks.com) The vision statement coincides directly with the mission statement on reflecting on the most important issues faced today. Starbucks cares not only about its consumers, but about their employees, diversity, community, customer satisfaction while simultaneously making a profit. Vision statements are essential as they provide a means for new product strategies and revision of new visions set forth by the company.

The value statements of Starbucks focuses on employee and customers dedication/priority (as they aim to inspire their employees and maintain relationships with their customers), cleanliness, and maintaining high standards. These standards provide boundaries on the success to be attained by Starbucks. Starbucks strives to change their focus yearly with their 2013 aim to improve their image in the area of market saturation (www.starbucks.com).

Strategic Plan

Starbucks needs a strategic plan as a foundation to assist them in determining the direction of their company’s future. There are several different sources that could also be utilized to conduct this analysis. One of the most significant sources would derive from a corporation known as “Marketing Research Trends”, LLC. This source will help us to detect any future trends we may encounter pertaining to the demands and preferences of the consumer. This marketing company will also provide updates on the different activities and plans from the different competitors (such as: Burger King, McDonalds, and Dunkin Donuts). Another source is the Business Monitor International services to receive first-hand government related activities such as, political stability, nation’s policy, and new or altered regulations, which directly impact the business (Schultz, 2013). Utilization of the different sources will also be needed to conduct an internal environmental analysis of Starbucks. These sources will be comprised of: The company’s personnel policies, SOPs, company code of conduct, product portfolio, audit results, and historical financial reports will also be used.

After the conduction of the analysis is over, the development of the strategies, vision, and mission will need to take place and must also be aligned with the strategic plan. This would involve the key stakeholders (from several representative branches) being involved in the construction/set-up process in order for it to be successful. This would also ensure the best interest of the company was at hand while representing a wide scope of the company. With the involvement of these stakeholders, all parties would be knowledgeable and aware (mutual/shared understanding) of the strategic plans (detailed), terms involved, planning, agreements, and even the outcomes of the planning process to allow for the plans to be carried out efficiently. Finally, the results and even the strategies should be translated into detailed action plans/schedules to achieve meaningful results and to ensure strategic alignment to the vision, mission, strategies, and values of the company.

Environmental Scan

The environmental scan is a critical stage for Starbucks to make decisions on the operational side. An internal analysis will help Starbucks to know their strengths and weaknesses, which will help them to improve on their weaknesses and make the required improvement needed (Pearson and Robinson, 2013). The internal environment of Starbucks is a representation of the general conditions, which affect aptitude in executing a successful strategy. The internal elements are their growth strategy, brand management, and human resources. The external environment of Starbucks is focused on competition, which are within the same business as them, legal, and political changes, opportunities such as environmental concerns, and the demographic social issues such as income per household. Thus, resulting in an environmental scan of Starbucks will increase Starbucks chances and distribute resources in the expectation of the constant changes within the environment.

The SWOT analysis serves to give us a starting point for a discussion on what Starbucks can do to reduce its weaknesses. Due to its large size, Starbucks trends for the industry that can be backed up by the volume of their delivery. Exactly how long Starbucks can dominate the market depends on Starbucks itself. Starbucks has a large number of stores for coffee outlets, all of which are owned outright by the corporation and no franchises. Minimal revenue requirements have been placed on each store, and those that fall short are closed. Starbucks closed down approximately 600 stores that fell short of its revenue requirements (Fiscal 2008 Annual Report). The large number of stores is a huge asset or liability depending on how one assesses the situation.

Strengths

Starbucks has built a strong brand image although it hardly initiated any large marketing campaign. Not depending on any marketing campaign by focusing their superior product quality, customers became strongly attached to the company and its products. Due to this, Starbucks was able to rely on solely word-of-mouth promotion from its customers. Starbucks possesses several main strengths including their high visibility given that their locations are located in high traffic areas, quality of service and products and their established brand loyalty. Starbucks remains an established leader being the number one known coffee house in the world with almost 17,000 stores in over 55 countries. Starbucks possesses a competent workforce, providing quality service, and continuing financial soundness. Starbucks is known for their strong ethical values, commitment to the environment and their community. They are also known for their strong internal and external relationships with their suppliers. Starbucks has many years of experience in its business and because of this experience customers develop trust towards Starbucks, leading to a strong customer loyalty.

Weakness

The consume rate of coffee is declining over the last few years and trends show that in the future, coffee will be consumed less and less. The rapid expansion of Starbucks might lead to an oversaturated market and the company can end up with too many stores when coffee consumption declines tremendously. Although this can be considered as a threat, one can consider rapid expansion as a weakness based on the market expectations as a weakness of the Starbucks coffee company. Producing coffee does not involve highly sophisticated technology and opening a coffee bar is relatively easy, therefore, it can be indicated that Starbucks concept is rather easy to copy since investment costs are not extremely high. It is often said that consumers feel overwhelmed by the tremendous varieties offered by Starbucks. This can be indicated as a weakness since customers get confused and some are afraid of entering a Starbucks store since ordering a plain cup of coffee becomes impossible. Weaknesses that Starbucks must address include: Product affordability and pricing, coffee beans price is the major influence over the firms profits, maintaining the positive public opinion of their products, avoiding any negative publicity, and remaining connected to their customers. Starbucks is known for innovation and the development of new products, however, they are also vulnerable to the possibility that their innovation may falter over time and product acceptance will eventually cease/come to a halt. Starbucks must also consider the fact they need to continuously expand even though they have already expanded domestically and internationally. They have already saturated the markets and expansion is needed in order to reduce business risk. Finally, Starbucks is a non-smoking facility alienating some customers from purchasing coffee or other products from their store.

Opportunities

Opportunities include the ability to enter into different and new markets,

partnership opportunities, growing acceptance and customer satisfaction, and increase

different product offerings and online services. Starbucks has the potential to co-brand with other manufacturers of food and drink services as well as brand franchising with other manufacturers. Starbucks needs to open more stores in other departments and they could open more drive-thru windows is a possibility for them if they can increase their management capabilities. Finally, Starbucks must strive to continue expanding their products and food service to remain competitive and reach other consumers.

Threats

Starbucks success has lead to the market entry of many competitors and copycat brands that could pose potential threats. Starbucks must choose carefully how they will combat these threats as this will determine their future. Other threats result from direct and indirect competition. Is other coffee shops choose to expand geographically or extend their product lines to include offering products that Starbucks currently offer, this expansion could have a negative impact on Starbuck’s bottom line. Another threat could be traditional stores, shopping malls, and even grocery stores, as they tend to expand their offers to include organic products and some gourmet items. Traditional super markets such as Super Walmart, Carrs, or Safeway usually have higher bargaining power, which allows them to offer low prices, and they have the advantage of covering a wide range of needs in a same location. Other threats that Starbucks might encounter include strong competition (expansion of product offerings by other coffee shops), vulnerability to economic change resulting in a increase in coffee prices and a decrease in the consumers’ willingness to pay these prices, disruptions in supply, saturated markets in the developed economies, the trend of consumers changing to a healthier lifestyle, rising process of coffee beans and dairy products, as well as the new products innovation from their competitors. Starbucks is a large company with a competitive advantage that is shrinking because of its huge success. This is due to Starbucks model being copied by its competitors and this poses a serious threat to Starbucks. Thus, making it imperative for Starbucks to maintain its differentiation strategy.

Industry

The demand for premium coffee continues to rise and coffee beans are the main driver of of the market costs and the profits to be made. Coffee prices have increased over the years due to an increase in demand, resulting in supply shortages. A review of Starbucks financial reports has identified an increase in revenue (but does not account for the increase in profits) over the past few years. The change in profit increase could be attributed to external factors such as demand, competition from other coffee shops. However, the growth is rising compared to the economic crises that occurred in 2009 resulting in a significant decrease in revenue. The industry in now forecasted to grow at an annualized rate of 3.9% over the next five years due to economy improving, consumer satisfaction, and the expansion of menu options (Schultz, 2013).

Organization Structure Examination

The organizational structure of Starbucks should be examined as this has a profound impact on how well Starbucks performs. The organizational structure of Starbucks was rearranged to better accommodate customer satisfaction. Howard Schultz has four different organizational functions he is able to pick from when considering the organization structure for Starbucks. These functions are referred to as: functional, divisional, network, and matrix organizations. After thoroughly evaluating his options, Howard chose to utilize the matric structure to focus on helping to better serve their consumers as well as providing an open gateway to communication. The matrix structure is composed of cross-functional teams and enables employees to communicate side to side, up and down. These teams are afforded the opportunity and encouraged to communicate with the “heads” of their organization as well as their supervisors. To be honest, this structure has been known as one of the main reasons behind the success of Starbucks today despite the challenging workplace. The matric structure allows for open/clear communication as well as creates team commoradity while providing a sense of belonging and empowerment of those team members. The team cohesiveness between the employees allows for them to develop their interpersonal skills and if Mr. Schultz would have used a strictly functional/divisional organization, he would not have had as much success with communication as the lines of communication would have been stifled.

Starbucks has successfully enacted the matrix operational functions which is made visible throughout its structure, service, marketing, and departmentalization. This structure (matrix) is flexible and has enabled Starbucks to achieve their goals (including: communication, transparency, and uniqueness) making them a market leader. Starbucks will continue to grow exponentially through the matrix system without finding themselves stifled by the constraints of other operational structures.

Strategic Choice and Evaluation

In order for Starbucks to even understand growth, they will need to identify their weaknesses as well as implement different strategies to address the weaknesses that were identified. Starbucks needs to consider a value discipline, generic strategy, and grand strategy to remain competitive in today’s economy.

Differentiation, focusing, and low-cost leadership are three generic strategies that were identified by Michael Porter. According to Pearce and Robinson (2013), differentiation requires that the business have sustainable advantages that allow it to provide buyers with something uniquely valuable to them. In the case of Starbucks, the consumer feels that the cost to purchase the coffee/food item is well below what the coffee/food item is worth compared to their competitors such as McDonalds and Dunkin Donuts.

A generic strategy that is used as an alternative approach is known as value discipline, which consists of three important concepts needed as a basic foundation for the success of any organization. Starbucks will focus on a mixture of customer service and operational excellence as the best value disciplines to be utilized. Operational excellence for Starbucks will involve cutting down their costs while still providing quality and reliable services to their customers. Customer intimacy is another important aspect of that should be utilized. In order for Starbucks to retain customer loyalty they will need to ensure that cultivate a strong relationship with their customers.

Grand Strategy

According to Pearce and Robinson (2013), Grand strategies are a means by which objectives can be achieved. Grand strategies can be utilized in Starbucks as a concentration on increasing their sales of the current coffee and products as well as the services they offer with the current distribution channels that they have in place for their business. Due to the economy being at risk and unstable, this would increase the risks for Starbucks. Unfortunately for Starbucks, they are faced with several different competitors that use the grand strategy (such as McDonalds, and Burger King) to market. These food chains use advertising and different promotions as they market their products and services that they are currently offering. McDonalds and other coffee shops send out discount coupons, or a percentage off coupon, to include buy one get one free coupons to their customers. This alone entices the consumer to purchase their products. Many customers buy based on budget and as a consumer I know that I may buy a coffee from McDonalds if I can get two for the price of one. This is why it is imperative that Starbucks really listens to their customers’ needs, wants, and desires in order to remain successful and competitive in today’s economy.

Recommended Strategies

Although, Starbucks has adopted the differentiation strategy they should continue to further expand on it to ensure that the coffee and products are different then their competitors. This could include offering different products and services at different locations. For example, Starbucks could open more coffee shops offering organic lattes, frappuccino’s and organic food products at major retail stores such as Walmart, Sears and Kohl’s Department stores. Starbucks could also acquire more companies and form more alliances to generate more money and increase their amount of sales. With the current economical conditions, Starbucks needs to differentiate their products, which may in turn, help change the minds of consumers who are less willing to spend $4.00 on a cup of coffee. They could also create new products at a cheaper price to attract more customers.

Starbucks needs to incorporate the value chain and continue to involve their suppliers and make them feel as if they are the stakeholders to their company. Starbucks has and should continue to use the horizontal integration to help control its competition and be able to reach out to new markets. They would need to continue to derive new contracts (long term) with other branded coffee companies to develop and even penetrate other product lines. Continued market penetration expanding the types of delivery systems is another option. Starbucks needs to increase the market share of the products that are currently being offered. This could be done by opening up coffee shops inside Walmart and other retail shops as well as providing more drive-through services. Another option is to expand their services to include online ordering. Starbucks should open up a drive-thru window accommodating only those customers who ordered on-line, they would be able to attract more customers and expand their stores.

Implementation, Strategic Controls and Contingency Plans

Starbucks main objective is to establish its company to be recognized and respected as a brand throughout the world. In order for Starbucks to maintain its success it must have an implementation plan that is effective. Throughout the years Starbucks has been successful in their marketing strategies and providing its consumers with quality service. Starbucks has been able to create a company where its consumers can enjoy great products but also be able to unplug from their busy lives and relax. This in turn has enabled Starbucks to be a very profitable company. In order for a successful plan to be implemented, short term objectives need to be incorporated. It is impossible to see how successful the company will be in the future so therefore goals that can be easily achieved are better in the long run. “Since 1985 we’ve rewarded our customers with a discount when they bring in personal tumblers, and we have a goal to serve 5% of the beverages made in our stores in tumblers and mugs brought in by our customers” (Schultz, 2013). This implementation was made as part of the company’s goal to reduce waste with cups that are reusable. This goal has seen some progress since the percentage of beverages being served in personal tumblers increased from “1.5% in 2012 to1.8% in 2013” (Schultz, 2013). Starbucks goal is to provide the finest quality of coffee among other products to its consumers. In order for Starbucks to remain competitive and stay ahead of the competition, they need to develop and expand their products.

Over 80 percent of Americans over the age of 25 drink an average of about 3.5 cups of coffee a day. In order to succeed, Starbucks must maintain its high quality standards even when so many other companies like McDonald’s and Dunkin Doughnuts have a very low price approach to coffee, which in turn creates some very heavy competition.

Starbucks should also increase the number of stores and to prioritize the user experience since consumers do not have a lot of patience living in a fast past society. They could also increase their advertising funds by increasing the amount of money they allocate for local newspapers. Starbucks also needs to diversify its offering either by partnering with local stores, shops, or by acquiring new coffee beans from other parts of the world. They need to offer new product lines for non-coffee drinkers such as organic drinks and organic teas ; Starbucks could also change the stores atmosphere/theme during holiday seasons ; more global presence; increase number of online services and drive-thru service.

In order for Starbucks to keep on tract and move forward, they need milestones and deadlines. For Starbucks, we will reflect on the milestones in a yearly or quarterly review to help with the decisions as to whether or not the projects are still beneficial to our overall goal of improving profit margins and increasing customer satisfaction.

Financial Forecasting and Budget

Financial forecasting is imperative for predicting how Starbucks will perform financially in the future. There are three steps useful when determining this. The first step is to estimate Starbucks Coffee expenses and revenues relative to the current planning period, which can be accomplished via the use of forecast of sales (percent-of-sales method of forecasting financial variables). Starbucks sales are expected to grow in the next several years due to their innovation and customer service (www.starbucks.com). Starbucks anticipates their sales in 2015 to grow atleast 4.5% as they anticipate the economic crises coming to a halt. Thus, expecting more people to have more jobs,which equates to more money to allow for them to have extra money to spend on their products and not settling for cheaper products or lower quality coffee. The second step consists of estimating how much Starbucks will need to invest in the fixed and current assets, which are needed to strengthen the projected sales. This can be done via estimation of a sustainable growth rate. We also need to consider the expenses Starbucks faces with operating their stores. Starbucks has long-term debt, advertising expenses, research and development expenses as well as many other expenses (www.starbucks.com). Starbucks anticipates seeing a increase in their expenses around the Holiday season as families are out shopping, thus increasing the amount of store traffic and people buying gift cards as presents. Starbucks anticipates seeing a influx of people after the Holiday seasons as those people with gift cards will need to use the cards they have and they typically are accompanied with another individual, thus causing them to spend more then what is on their card. Third, and finally, we need to be able to identify Starbucks finance needs relative to the planning period which can be done via a cash budget as this lays out a detailed plan of cash reimbursements, receipts, new financing need, and net changes in a cash over a period.

While taking a look at the break-even point for Starbucks we need to realize that Starbucks has an average revenue forecast of 12 billion over the next three years. We care able to take that 12 billion and divide it by $4.00, which is the average price of a drink at Starbucks. If we have 12 billion in sales divided by an average price of $4.00 for a drink we come out with 3 billion cups of coffee that have been sold yearly over the 3 year forecast. If we take an average variable cost of 2.5 million and divide that by the number of cups of coffee sold per year, which is the 12 billion, we would get $0.20 cents per cup of coffee sold. Starbucks would have to take the average price of a drink which is the $4.00-0.20 and you would get $3.80 of profit per drink sold giving us the cost of a average price of a cup of coffee. Now we need to determine the fixed costs of 15 million and divide it by the profit of a drink which was the $3.80 thus giving us the number of cups of coffee that have to be sold to break even which is 3.95 million cups of coffee needing to be sold at a price of $4.00. The break-even point would then be calculated using the following equation: 3.95cups X $4.00 = 15.8. So Starbucks will be able to be successful if they keep reducing their costs while continuing to improve their customer service, new innovations, and by serving high quality coffee.

Conclusion

Starbucks’ strives on being known for selling the finest quality of coffee and other products. However, this could change with the rapidly growing competition, the economy, and the consumers’ preference. In order for Starbucks to remain competitive and stay ahead and separate themselves from their competition that is in the market. They must develop and expand their products to include: Offering a variety of organic products, enhancing their customer service and investing in quicker service via use of online ordering and interactivity.

References

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development studies research agenda. Progress in Development Studies 14(1), 77-90.

Pearce, J.A. & Robinson, R.B. (2013). Strategic Management: Planning for Domestic and

Global Competition (13th ed). New York, NY: McGraw Hill.

Schultz, M. (2013). Starbucks Global Responsibility Report: Goals and Progress. Retrieved from www.starbucks.com

Unknown (2014) Starbucks Investor Relations. Retrieved from www.investor.starbucks.com).

Zhang, X. (2011). Communicating Coffee Culture through the Big Screen: Starbucks in

American Movies. Comparative American Studies, 9(1), 68-84.

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