Questions and Answers on the Growth and Success of Starbucks

Questions and Answers on the Growth and Success of Starbucks Evaluate the role played by Howard Schultz in the growth and success of Starbucks. Is the company in danger of relying too heavily on Mr. Schultz? Howard Schultzs vision was for Starbucks to become a national company with values and guiding principles that employees could be proud of. Schultz wanted to recreate the authentic Italian coffee bar culture in the United States (Thompson, Peteraf et al, 2012). He believed that building a company that valued and respected its people, that inspired them, and that shared the fruits of success with those who contributed to the companys long term value was essential, not just as an intriguing option. His aspiration was for Starbucks to become the most respected brand name in coffee and for the company to be admired for its corporate responsibility (Thompson, Peteraf et al, 2012). Schultz strategized a plan to lead the Starbucks Coffee Company by speculating to open 125 stores in the next five years of the companys operation. To symbolize the merging of Starbucks and II Giornale, Schultz instituted new changes by creating a new logo and equipping espresso machines in all the coffee resta urants. In 1987, Schultz was able to regain the mood of the employees and also ventured in new markets such as Vancouver, Chicago, Portland, Los Angeles and San Francisco. Starbucks store expansion targets proved easier to meet than Schultz had originally anticipated and he upped the numbers to keep challenging the organization and so there was 161 stores, which was above Schultzs original target of 125 stores in 1992 (Thompson, Peteraf et al, 2012). Howard Schultz argued that patience was needed as the company invested in the infrastructure to support continued growth. He contended that hiring experienced executives ahead of the growth curve, building facilities far beyond current needs, and installing support systems laid a strong foundation for rapid, profitable growth down the road. Even though Schultz was the founder of the Starbucks Corporation and managed it for long time, I dont think the company would be in danger if he leaves the position he holds today. Some basic reasons to these are, since Starbucks heavily depends on Schultz, I believe he most likely has a careful succession plan for the betterment of the company. I also firmly believe that Schultz has already developed a sound contingency plans for his position. That is he might already have set the plan of who should take over the reins on a short notice. If these strategies are in place, then Starbucks future would not be uncertain. Discuss the business engineering processes used by Starbucks to stay competitive. How does the company track performance and use its control systems? Starbucks created its own house team of architects and designers to ensure that each store would convey the right image and character. Stores had been custom -designed because the company didnt buy real estate or build its own freestanding structures, rather, each space was leased in an existing structure, making each store differ in size and shape. The company had emphasized the four stages of coffee making: growing, roasting, brewing, and aroma. With increase in its stores, greater store diversity and layout quickly became necessary. The company had some special seating areas to help make it a desirable gathering place. The company also came with the drive through windows in locations where speed and convenience were important. Just as recent as June 2009, the company announced a new global store design strategy (Thompson, Peteraf et al, 2012). This meant that each new store was to be a reflection of the environment in which it operated and was to be environmentally friendly. To better control average store opening costs, the company centralized buying, developed standard contracts and fixed fees for certain items, and consolidated work under those contractors who displayed good cost-control practices (Thompson, Peteraf et al, 2012). The retail operations group outlined exactly the minimum amount of equipment each core store needed so that standard items could be ordered in volume from vendors at 20 to 30 percent discounts, then delivered just in time to the store site either from the company warehouses or the vendor. Modular designs for display cases were developed. The layouts for new and remodeled stores were developed on a computer, with software that allowed the costs to be estimated as the design evolved. All this cut store opening and remodeling costs significantly and shortened the process to about 18 weeks (Thompson, Peteraf et al, 2012). What is the compensation strategy that the company has used to motivate its employees to focus on the companys strategy and its execution? Howard Schultz deeply believed that Starbucks success was heavily dependent on customers having a very positive experience in its stores. This meant having store employees who were knowledgeable about the companys products, who paid attention to detail in preparing the companys espresso drinks, who eagerly communicated the companys passion for coffee, and who possessed the skills and personality to deliver consistent, pleasing customer service (Thompson, Peteraf et al, 2012). Some of the compensation strategy that Starbucks used to motivate its employees included instituting health care coverage for all employees whether full time or part time. From 1988, part timers working 20 or more hours were offered the same health coverage as full-time employees. Starbucks paid 75 percent of an employees health insurance premium; while the employee paid only 25 percent. The health insurance coverage was also offered for unmarried partners in a committed relationship (Thompson, A.A. et al., 201 2). The company also had presented a stock option plan for all employees .This was aimed at turning all employees into partners, giving them a chance to share in the success of the company, and make clear the connection between their contributions and the companys market value. The company also implemented an employee stock purchase plan that gave partners who had been employed for at least 90 days an opportunity to purchase company stock through regular payroll deductions. This had really motivated many employees and since the inception of this plan, some 23.5 million shares had been purchased by partners; and one third of these partners participated in stock purchase plan during the 2000-2009 period (Thompson, A.A. et al., 2012). Starbucks workplace environment was good for its employees. The management believed that the companys competitive pay scales and comprehensive benefits for both full time and part time partners allowed it to attract motivated people with above average ski lls and good work habits. How would you describe Starbucks corporate culture? What is the relevance of corporate culture for Starbucks future growth and success? The cornerstone value to build a company with soul was that Starbucks would never stop pursuing the perfect cup of coffee by buying the best beans and roasting them to perfection. Schultz and other senior executives were adamant about controlling the quality of Starbucks product and building a culture common to all stores. Schultz was rigidly opposed to selling artificially flavored coffee beans. The management was also emphatic about the importance of employees paying attention to what pleased customers (Thompson, A.A. et al., 2012). At the very base of the companys culture was its roots within the community. Howard Schultzs goal was to build a company with soul, which included corporate responsibility. In 1997 the Starbucks Foundation was established. The foundation was one of the largest contributors to C.A.R.E. which provided health and education programs to third world countries most of which Starbucks purchased its coffee beans. Starbucks is also committedÂÂ  to the enviro nment.ÂÂ  It has organizedÂÂ  a Green Team of store managers from all regions that assist the community in environmental efforts to reduce, reuse and recycle waste. The team has introduced innovative ways to reuse some of the paper, plastic and cardboard the store uses. They have reused packing materials and have donated these materials to local schools for art projects. These corporate cultures that Starbucks developed over the years had been very useful and would emphasize the companys growth into the future (Starbucks 2006).

Hill Country snack food Co. Case Essay

Hill Country’s operating strategy and its impact on business risk & financial strategy The operating strategy is to produce high quality products through efficient, low-cost and aggressive operation as well as singular management. In detail, the company provides several kinds of snacks to satisfy different type’s customers. The company expands its presence into sporting events, movie theaters and other leisure events to attract customers. An efficient and low-cost operation is achieved by strong control of budgets and costs. Customers are satisfied by companies’ quick react to their requirements or preferences and reinvent and expand its products, showing the efficient management for the customer requirement. Also, all decisions are made in order to build shareholders’ value, indicating singular management. For the business risk, the snack foods industry was very competitive, facing off against competitors like PepsiCo and Snyder’s-Lance very day. In this high rivalry industry, company could not succeed by price increase. And unfavourable cost due to both internal and external factors is not easy to control. In order to control the business risk, the company is actively involved in the budget approval process, and the operating strategy has very important part to keep the costs under control. For the financial risk, the more debt financed the higher financial risk it is. The company’s risk avoidance strategy is manifested in its financing decision. The company is managed in preference for equity finance and against debt finance, investments are funded internally. The optimal capital structure for Hill Country The optimal capital structure is the capital structure at which the market value is maximised and the cost of capital is minimised. There are 3 alternative capital structures from pro forma 2011 financial information. If Hill take 60% debt to capital ratio, the company repurchases the most of the shares comparing with 20% and 40% debt to capital ratio structure, the debt would be B rated with highest interest rate of 7.7%, reflecting the higher risk. The net income would drop to $76M, however, the tax would reduce by around $12M, but the interest expense increases to $33.5M, there is big gap between them. In terms of the 20% debt to capital ratio one, the debt is  rated at AAA with 2.85% interest rate, the tax and interest both decreases and increases slightly, the EPS and dividend per share in 20% and 60% are less than which in 40% scenario. Regarding to the 40% debt to capital structure, the debt is rated at BBB with 4.4% interest rate. Also, the interest coverage ratio is strong(11.8). The very important part is that even the net income reduces by 8.5%, the EPS and dividend per share, are both the highest compared with 20% and 60% scenarios, thus adding value to the shareholders. In addition, it allows the firm not to be over leveraged, which is in favor of the firm that it does not want to have too much debts. The financial risk is the highest in the 60% scenario since the shareholders have the highest financial leverage(facing bankruptcy). According to the calculation(appendix), the highest value of the firm is $2482M under 40% debt scenario compared with 20% and 60% debt scenarios, thus maximizing the firm value. Therefore 40% debt to capital structure is recommended. Benefits of debt financing Debt financing allows control of business. Owner can made decision and does not need consider shareholders or investors. * Debt is tax-deductible. This means that it shields part of business income from taxes and lowers the tax liability. * The lender do not share the profits. Business only need to make repayment. * Debt is less expensive than equity due to its contractual nature and priority claim How large the benefits are depending on the magnitude of the tax benefit numbers, the benefits that reallocated to investors and whether the costs of debt that are less than the benefits from debts. Changes the capital structure? It is recommended that Hill Country to change the capital structure. The capital structure is too conservative, having negative impact on financial performance measures. Hill Country has excessive liquidity, and the interest rate is quite low, it is good opportunity to involve debts. The impacts of the change would be the increase in debt and decrease in equity. The company can get advantage of debts as mentioned before, it is aggressive growth strategy. And the financial ratios such as ROE, ROA, EPS, dividend per share as well as the value of firm would improve. Also, the repurchase of the shares will result in the increase in the share price. However, most lenders  provide severe penalties for late or missed payments, which may include charging late fees, taking possession of collateral, or calling the loan due early. Failure to make payments on a loan, even temporarily, can adversely affect a small business’s credit rating and its ability to obtain future financing. Debt financing is also borrowing against future earnings. This means that instead of using all future profits to grow the business or to pay owners, the firm has to allocate a portion to debt payments. Also, debt can limit future cash flow and growth, decreasing in equity could lead to higher debt-to-equity ratio. Alternatives to increase debt/decrease equity Instead of issuing debt, the firm can borrow debt from banks to increase debt. In order to reduce equity, another method is to rewards its investors by distributing a portion of its profits in the form of cash dividends. Since the cumulative earnings of a company are reported within the balance sheet equity account â€Å"retained earnings,† cash dividends are shown on the company’s financial statements as a direct reduction of the account. In addition, Increase expenses can bring the same effect. Depreciation is an operating expense that allows a business to allocate or spread the costs of its assets over the length of their useful life. The use of an accelerated depreciation method results in a higher depreciation expense during the asset’s earlier years of service, resulting in a lower net income and equity balance during this time. Conclusion and Recommendation Due to the strong cash balance and high liquidity of the firm, it is recommended that Hill Country to take 40% debt to capital finance with respect to the several benefits with the debt financing to increase the firm value. Also, the firm can consider the alternative ways to change the capital structure. Appendix NOPAT=EBIT(1-tax) tax rate=35.5% Hamada equation: Beta L=Beta U[1+(1-T)(D/E) Risk free rate(Rf)=1.8% Market interest rate(Rm)=3.8% cost of equity=Rf+ Beta L*(Rm-Rf)

Hairy Ape Character Analysis Essay

Style â€Å"The Hairy Ape† was done in the expressionist style of theater. Expressionism is the theatrical technique which will use the staging and setting to show the characters inner emotion or the keep the theme constantly within the audience’s sight. In Expressionism, characters do not act or talk the way they really would, everything is extreme to prove a point. In Expressionism plausibility is deliberately altered by the author to make the theme clear. Characters Yank Yank represents the lower class. He depicts the manner in which it is the force at the bottom of society that allows society to run. Yank also represents how people can be trained and persuaded to be comfortable in a situation that may not be best for their personal development and become unable to fit in elsewhere. Yank is depicted in the play as â€Å"Neanderthal† and â€Å"ape-like†, not only in his speech, but also in his physical description. Yank and his shipmates are initially described as â€Å"?hairy-chested, with long arms of tremendous power, and low, receding brows?† The ship’s crew is kept in constant hunched over position due to his quarters on the ship Yank, at the outset of the play is even proud of his position. Yank is so comfortable in his position that he lives in false security that he controls his surroundings. He feels that it is he who is better. He repeatedly states how it is he who makes the ship run. Not even real izing that he has mentally dehumanized himself; he states that he is the ship. Yank seemingly has no issue with his position, has never given it any thought and criticizes other shipmates who do, until he is observed by Mildred Douglas, who proclaims upon seeing him â€Å"Oh, the filthy beast†. It is at this point that Yank realizes he not simply a part giving the ship motion, he is more than an animal or creature, he is a man. He is infuriated by Mildred’s comment and seeks to prove his worth. Yank’s desire to prove himself throws him into conflict; he is no longer able to fit in as he did in his prior position on the ship and finds he does not belong in society outside the ship either. During Yank’s moments of thought, of attempting to find himself and his position in life O’Neill depicts him in the same position as Rodin’s sculpture â€Å"The Thinker†. This particular sculpture was Rodin’s depiction of what he saw as a brutish, almost Neanderthal type man, contemplating his existence and place in the world, which describes Yank’s position quite well. Mildred Douglas Mildred Douglas is the upper class of society. She claims sociological interest when she requests a tour of the stokehole, but does not truly perform any kind of social work in the play. She claims herself a by-product of her wealthy society. Mildred served as a tool to bring about Yank’s personal dilemma. Paddy Paddy is a nostalgic character. He speaks of when he was a sailor as a young man and being at one with the sea. Paddy represents when man and nature were one. Paddy is resigned to the position he is in now, but longs for his good old days. Yank is unable to relate to this perspective, as he views himself as part of the ships’ mechanics. Long Long is a glimpse to the future; towards social change. Unlike Yank, Long is aware of the inhumane treatment of the ship’s stokers. He speaks of the separation of the classes and its unfairness. Long speaks of ideas such as the men on the ship being â€Å"voters and citizens† and how the ships crew are more than merely slaves. Yank is unable to understand Long’s point of view or his class-consciousness, instead, Yank considers him a preacher and a wimp.

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