December 10, 2012
Control Mechanisms of Starbucks
Starbucks Coffee Company™ first opened in 1971 in Seattle’s historic pike place market neighborhood (Starbucks Coffee Company, 2012, p1). Their mission is “to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time” (Starbucks Coffee Company, 2012, p1). Identifying four control mechanisms, comparing the effectiveness of them, the reaction to the use of these controls, and how they affect the functions of management at a company like Starbucks, it is easy to see why they are so successful. Identify Four Types of Control Mechanisms
Four types of control mechanisms Starbucks uses are bureaucratic, market, financial, and clan control by empowering role of their culture. Bureaucratic controls instill the use of rules and authority to guide employee’s performance (Bateman & Snell, 2009, p575). Financial controls used are in the way to motivate employees by pay. Market control “involves the use of economic forces-and the pricing mechanisms that accompany them-to regulate performance” (Bateman & Snell, 2009, p599). Market controls at the corporate level in large companies like Starbucks are used to regulate independent business units (Bateman & Snell, 2009, p600). The control mechanism at the business unit level uses the method of transfer pricing to reflect market forces for internal business transactions (Bateman & Snell, 2009, p600). At the individual level the market control would be how much employees are to be paid (Bateman & Snell, 2009, p600). Clan control mechanism of empowerment is empowering an organization’s employees to meet performance standards (Bateman & Snell, 2009, p602).
Compare & Contrast Control Mechanisms
Bureaucratic control mechanisms are about rules, regulations, and authority where clan control mechanisms are about shared goals, values, and trust (Bateman & Snell, 2009, p575). Starbucks chooses to use more clan control mechanisms as it is in line with their mission statement about the human spirit. Financial controls are what Starbucks uses to analyze how their employees should be paid, while market controls are what they use to control the quality of the product in the market place. Effectiveness of Control Mechanisms
An example of effectiveness using bureaucratic control, Starbucks firmly believes that there “is an inherent link between quality and price” (Starbucks Coffee Company, 2007, p19). Like any business, coffee farming has to be profitable in order to be sustainable. Starbucks has made a commitment to the farmers to pay top prices for top quality coffee, both of which have proven successful. Thus, farmers are eager to continue to not only grow top quality coffee, but to increase the productions as well. Starbucks provides stakeholders with an annual fiscal report that includes the budgetary information, statistical reports, in addition to performance appraisals.
One of the most important determining factors in the pricing of coffee is quality. In addition, production costs have to be figured in, along with the “prevailing market conditions which vary from country to country and region to region” (Starbucks Coffee Company, 2007, p19). This is where Starbucks uses the market control mechanism. Starbucks continues to work with countries that struggle with economic hardships to produce quality coffees and teas for the company. This partnership has assisted such areas with funding to help rebuild the communities. This is proving to be a win-win situation for both the suppliers and Starbucks.
Something Starbucks feel very strongly about and is an example of how they use the clan control mechanism is how they treat every employee with respect and dignity. The company also believes the employees “are entitled to a fair, safe and humane work environment” (Starbucks Coffee Company, 2007). This is for the employees as well as the...