Starbucks Case

Starbucks Case

Starbucks’ customer satisfaction scores have declined because customers have come to expect the speed of service of within three minutes regardless of the time of the day. The speed of service is one of the “Basic Service” criteria of Service, Cleanliness, Product quality and Speed of Service. The company goal of three minute service from back of the line to drink in hand is expected to be achieved if 20 hours of labor is added per week per store (costing $40 million per year). The measuring service has its own issues because the company had not been using market data in driving decision making. However, the reality was that service had declined. Read about

The ideal customer is one that Starbucks can reach where they work, travel, shop and dine, who would drink coffee every day and would visit a store at least 18 times a month. In order to have satisfied customers Starbucks will need to:

have friendlier, have more attentive staff
deliver faster, more efficient service
offer better prices/incentive programs
offer better quality/variety of products (Exhibit 11, top 5 requirements).

A highly satisfied customer is valuable to Starbucks because there is a link between satisfaction and customer loyalty. Satisfied customers are loyal customers.

Starbucks should make the $40 million dollar investment so it can meet the three minute service target which will result in satisfied, loyal customers. It is possible for a mega-brand like Starbucks to deliver customer intimacy through service. Service is used interchangeably at Starbucks with ‘service’. If the customer has an uplifting experience every time they walk through the door, then Starbucks has achieved customer intimacy.

Four Seasons Case

Four Seasons Hotels and Resorts, a leader in the hospitality sector, is a leading operator of luxury hotels. The company is in the business of operating mid-sized luxury hotels and resorts. It does not own them.  The Canadian company is committed to providing consistently exceptional service so that guests can maximize the value of their time.

The company’s success is due to a key strength of promoting diversity and singularity. While the company’s basic processes remain the same, they have been made adaptable to suit the essence of the local culture where the property resides.

The company’s corporate culture has also contributed to the organization’s success. These are listed in the seven “service culture standards” which all staff all over the word have to display at all times.

They are:

Smile

Make Eye contact

Create a sense of Recognition

Speak in a clear Voice

Be well Informed

Maintain a Clean appearance

Everyone, everywhere must show care for the guest

These together form the word SERVICE.

(Exhibit 4)

The company is also very particular in its choice of general managers because they should embody the hotel’s culture. The general manager sets the example for the other employees and is well paid. Top managers had to be comfortable in different international settings. One of the rules was ‘no bragging, no excuses’ because modesty, compassion and discipline are an important part of the culture. The top managers also had strong allegiance to the firm.

Another key reason for Four Seasons success is their approach to Human Resources. The company has a “Golden Rule” strategy for human resources and this is to treat others and you would like to be treated. The employees are treated with dignity and respect. The company did not just say it, it practiced it. This has led to being named fifth year in a row as Fortune magazine’s top 100 best companies to work for in North America.  It also has much lower turnover (half) than the industry average.

Four Seasons entry to the French market was a challenge and was done with a lot of planning and understanding of the local market. It also has to make a lot of sacrifices. The company entered the French market by providing management for the Four Seasons Hotel George V Paris (the F.S. George V). This was a landmark building purchased in 1996 by H.R.H. Prince Al Waheed Bin Taleel Bin Abdulaziz Saud for $170 million. It was one of the six Parisian hotels that are classified as “Palaces”.

The good points

The fact that this was a Canadian company helped the adaptation process. This is because France has a labor-oriented government policy and since Canada has many attributes of a welfare state, it made it easier to understand the French context. The company made sure it was well informed about French labor laws and got close to the labor unions. Some of the laws were a bit restrictive like the rule on firing.

The company invested in training employees, looked for people persons and introduced annual evaluations so that there would be a system of meritocracy. It was able to sell the evaluation system to the Anglo Saxon sense of pride the French have in having their work speak for itself.

The bad points

This required a huge amount of cultural adjustment to things like the French temper, the need to hire more people if the company was to stick to the 35-hour work week as well as maintain the number of holidays. This resulted to the highest employee-to-room ration in the company of 2.5 (Exhibit 9).

Another bad point was the fact that the company had to inherit employees if it was not closed for at least 18 months. The F.S.George V could only close for 12 months so it was left with the less high performing employees. It was eventually able to overcome this issue by the concept of creating a critical mass of employees with the right culture who would positively affect the others. The individuals with the right attitude and culture were promoted as a reward.

Istituto Clinico Humanitas

Istituto Clinico Humanitas was built by the early 1990s as an experiment in applying innovative management models to healthcare. Istituto Clinico Humanitas is performing very well. By August 2002, it was the largest hospital in Milan with an occupancy rate of 80%. It also had the First Day Surgery in Italy.

Istituto Clinico Humanitas realized this level of performance by introducing innovative management ideas like multi specialty for nurses and a new way of compensating doctors (with their pay being part fixed-pay and part variable-pay based on performance). The variable pay of doctors helped to make them more responsive to the objectives of the unit and the hospital.

It is difficult for others to copy the Istituto Clinico Humanitas’ model and practices because they are more expensive and are geared more towards the more experienced doctors. Some things that make them more expensive are the expense of operating rooms and the cost of patient beds which include facility cost, nursing staff salaries and cost of support service.

They should go ahead with the idea of affiliating with the University of Milan because, according to Dioguardi, the hospital needed to become a research and teaching organization in order for it to be credible. Also, if it developed a teaching relationship with the university, it would have available to it additional revenue sources that are made available to academic institutions in Italy.

Exel PLC

Exel’s performance to date has been very impressive. In 2000, MSAS, a freight management company and Exel Logistics, a contract logistics company, merged to form Exel plc. In 2003, Exel became the world’s largest provider of freight management and contract logistics services. In the same year, with 675 locations in 112 countries, sales were roughly ?5.1 billion.

The strategy of combining freight management with contract logistics was a successful one because it created end-to-end solutions for customers and helped Exel cross-sell contract logistics to freight management customers and vice-versa.

The company has developed strategies for matching supply and demand by forecasting demand for products, optimizing inventory levels and creating production plans. It has developed an extremely effective process for creating, selling and implementing new services. The company has done this with a four-team approach.

The teams are: business development, solution design, implementation and operations.

 Value has been added for Haus Mart through better planning by introducing a system of joint planning between HM and Exel so that competencies from both companies can be combined. Better coordination and execution has resulted in combining Exel’s operational expertise with HM’s planning function. Rationalization, restructuring, and improvement of the structure of a firms supply chain resulted in the removal of inefficient behaviour like ordering additional inventory “just in case”.

Exel should move into joint planning with Haus Mart because it can help HM with cost savings in the areas of transportation economics and shipping logistics. Exel will also make profit from the deal.

Tecnovate

Tecnovate is an Indian business process outsourcing subsidiary to its parent firm, Cendant (the world’s leading provider of travel and real estate services).

Tecnovate was originally owned by ebookers PLC, Europe’s second largest agency. In 2004, Cendant bought over ebookers plc.

Tecnovate’s growth strategy was to move from a captive (such that it provided services only to its parent company) to providing BPO services to third parties as well as offering certified courses to those in the BPO industry.

It succeeded in this before being bought over by Cendant from ebookers. Tecnovate incorporated in 2001 and operated as captive of ebookers until 2003. Tecnovate grew up ebookers value chain by providing more services. It also started offering certified courses to others in the BPO industry. In addition it started a travel BPO education centre called Travelguru. Travelguru offered IATA (Montreal) and UGC (India) certified courses.

Transition management’s plan for successful outsourcing should include the following steps:

Scoping: this involves defining the high level objectives of the deal.
Feasibility: this involves the building on the initial scope and constraints to define the next level of detail.
Preparation: this is the step where the process moves from defining the service so that it can be laid out in a contract and assumptions and assets can be confirmed through due diligence.

Transition: This is the same as process migration. This is the step that hands over the process from the client to the supplier. This us regarded the most difficult and challenging step.

Tecnovate’s business development head defines Tecnovate’s fusion philosophy “fusion BPO” as a “unique example of ‘globalisation’ where different cultures and processes ‘fuse’ to release energy in terms of worker enthusiasm and higher revenues”.

It offers seamless integration of the contact centre, IT and BPO services in the travel domain, under the operation of multicultural staff.

The fusion BPO model that Tecnovate has is one that is multi-lingual and services voice and non-voice processes. The staff of over 1000 are multicultural and about 10% of them are Europeans. Expatriate staff was from 11 countries in Europe.

Since being acquired by Cendant, Tecnovate is once again an captive but is looking forward to taking on additional functions at Cendant and hopefully to offer services to third parties. It has started making the necessary steps towards moving out of the captive status.

By 2005, Tecnovate was already doing well as a subsidiary of Cendant. The company had been having a lot more travel related processes being assigned to it from its parent company.

The new processes being introduced by Cendant and the new recruitments taking place were making new opportunities available to Tecnovate.

McDonalds

As CEO of McDonalds, I would prioritize sustainability relative to other supply chain goals such as food safety and cost management by taking into consideration consumer concerns. As CEO Jim Skinner confirms, customers will let the company know if there are issues with product or services, or whether they get the impression that McDonalds is socially responsible or otherwise.

The goals are compatible because they reinforce trust in the McDonald’s brand. And trust is the most valuable asset of the company. However the goals could conflict. An example is where the company stood in support of organized efforts against overfishing, in the short term, to ensure sustainability of fish supply for the Fish-o-Fillet product in the long run.

An example of a negative effect of sustainability failures not due to McDonald’s direct actions was the case where Greenpeace research discovered that the European suppliers of McNuggets to McDonalds fed its chickens soya from deforested Amazon land in Brazil (leading to the “McAmazon” assault). McDonalds became a front runner against deforestation and this is the approach they should continue to take.

The sustainability vision aligns with the business strategy because it must profitably yield high quality, safe products without supply interruption while creating a net benefit for employees, their communities, biodiversity and the environment.

McDonalds

1.      If you were the CEO of McDonalds, how would you prioritize sustainability relative to other supply chain goals such as food safety and cost management?

2.      In what ways are these goals compatible and in what ways do they conflict?

3.      How can McDonalds plan for and mitigate the negative effects of sustainability failures that are not due to its direct actions?

4.      How well is McDonald’s supply chain sustainability vision aligned with their business strategy?