Starbucks Corporation (Starbucks Coffee Company) uses its organizational structure to facilitate business development and leadership in the global coffee industry. As the largest coffeehouse chain in the world, the company maintains its industry leadership partly through the appropriateness of its corporate structure. A company’s organizational or corporate structure influences all areas of the business, including management and leadership, communication, change strategies and management, and other variables critical to business success. Starbucks evolves to ensure that its organizational structure matches current business needs. For example, the company adjusted its corporate structure upon expanding its business through the acquisition of other firms, such as Ethos Water and Seattle’s Best Coffee. Such adjustment makes Starbucks Corporation’s organizational structure specific to the needs of the business. This structure fits within conventional typologies of organizational structures. Similar to the case of other multinational organizations, the coffeehouse company employs its structural characteristics in streamlining and managing its operations.
Starbucks Coffee Company supports its competitive advantages through the characteristics of its corporate structure. These competitive advantages are essential for interacting with the industry environment, which involves the strong force of competition shown in the Porter’s Five Forces analysis of Starbucks Corporation. The company competes against large and small coffeehouse businesses, as well as food service firms like McDonald’s, Dunkin’, Wendy’s, and Burger King. Through the effective design and development of its organizational structure, Starbucks Corporation keeps growing despite competitive pressure from these firms in the international market.
Starbucks Corporation’s Organizational Structure Type and Characteristics
Starbucks has a matrix organizational structure, which is a hybrid mixture of different features from the basic types of organizational structure. In this case, the structural design involves intersections among various components of the coffeehouse chain business. For example, the company’s product-based divisions intersect with functional groups and geographic divisions, which in turn intersect with other parts of the organization. The following are the main features of Starbucks’s corporate structure:
- Functional hierarchy (business function)
- Geographic divisions (areas or regions of operations)
- Product-based divisions (product type, such as food and merchandise)
- Work teams (groups for tasks and objectives throughout the business organization)
Functional Hierarchy. The functional hierarchy feature of Starbucks’s organizational structure refers to grouping based on business function. For example, the coffee company has an HR department, a finance department, and a marketing department. These departments are most pronounced at the top levels of Starbucks’s corporate structure, such as at the corporate headquarters. This characteristic is hierarchical. The corporate HR department implements policies applicable to all of the company’s cafés. The functional hierarchy of the corporate structure facilitates top-down monitoring and control, with the CEO at the top. Functional groups are responsible for the organization-wide development and implementation of Starbucks Corporation’s generic competitive strategy and intensive growth strategies.
Geographic Divisions. Starbucks’s corporate structure involves geographic divisions, which are based on physical location of market operations. The coffee company has three regional divisions for the global market: (1) Americas, (2) China and Asia-Pacific, (3) Europe, Middle East, and Africa. Also, in the U.S. market, Starbucks Coffee’s organizational structure involves further geographic divisions: (a) Western, (b) Northwest, (c) Southeast, and (d) Northeast. Each geographic division has a senior executive. In this way, each local manager reports to at least two superiors: the geographic head (e.g., President of Europe, Middle East, and Africa Operations) and the functional head (e.g., Starbucks Corporate HR Manager). This feature of the corporate structure enables closer managerial support for Starbucks’s geography-based business needs. Each division head is given flexibility in adjusting strategies and policies to suit specific coffee market conditions.
Product-based Divisions. Starbucks has product-based divisions in its organizational structure. These divisions address product lines. For example, the company has a division for coffee and related products, another division for baked goods, and another division for merchandise, such as mugs. This feature of the corporate structure enables Starbucks to focus on product development. In this way, the company develops and innovates its coffee and related products with support from its organizational structure. Such development provides competitiveness that the business needs, especially in dealing with the threats identified in the SWOT analysis of Starbucks Corporation.
Teams. Teams are used in different parts of Starbucks Coffee’s organizational structure. However, teams are most visible at the lowest organizational levels, particularly at the coffeehouses. For example, each café has teams organized to provide goods and service to customers. This feature of the corporate structure enables the coffee business to deliver effective and efficient service to consumers. Team effectiveness is a determinant of the financial performance of licensed locations and company-owned coffeehouses. Starbucks’s corporate culture influences how such team effectiveness is achieved. The coffee company’s development depends on team-based factors and associated human resource management strategies.
The characteristics of Starbucks Corporation’s organizational structure shape strategic management decisions in the business. Also, different levels of the business organization are responsible for maintaining the integrity of the corporate structure. The identified structural characteristics present a framework that influences corporate strategy and executive direction involving Starbucks’s headquarters.
Development of Starbucks Coffee’s Corporate Structure
Starbucks Corporation reforms its organizational structure over time. In 2007, the company was expanding rapidly, such that it shifted focus away from customers and toward the strategic global expansion of the coffeehouse chain. However, the business experienced significant decline in sales in that year. This decline worsened because of the lack of focus on customer experience. When Howard Schultz resumed the CEO position in 2008, he changed Starbucks Coffee’s corporate structure to bring focus back onto customer experience. New regional divisions were created and teams at the company’s cafés were given better training.
The current corporate structure of Starbucks is a result of reforms to improve customer experience and business financial performance. The company recognizes the importance of strategic alignment involving various facets of the coffee business. In this case, for example, aligning the corporate structure with trends in the coffeehouse industry stabilizes Starbucks’s market presence and market share. It is expected that the company’s future organizational structure will involve additional product-based divisions, such as divisions for new services complementing food and beverage, to account for further diversification. Its development history suggests that Starbucks will continue acquiring more firms in the future to support its growth strategies, including diversification.
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