A) INTRODUCTION A cup of coffee is a miracle. Its what can be.

Tell me something that can simultaneously by warm and comforting and stimulating and invigorating. Those were the words of Dave Olsen, Starbuckss Senior Vice President. Ask any coffee lover, and certainly, it would be a unanimous agreement among them that Starbucks is indeed the epitome of good coffee. So much so, its not a surprise that that from a company which begun its journey in 1971 grew to become the largest coffeehouse company in the world with 16,635 stores in 49 countries. Thus, the million dollar question thats always asked time and again is the reason behind this huge yet still growing success. In response, Scott Bedbury, a former Starbucks Executive claimed that To win, brands must be relevant, responsible, honest, definable and a welcome part of the contemporary culture. By that, what he meant was profit alone should not be the companys main aim. Customer satisfaction too should be given the appropriate attention in order to reap success. With that in mind, Starbucks has built its empire by incorporating a number of performance management systems that are in line with their vision as well as mission. B) PERFORMANCE MANAGEMENT SYSTEMS USED The first performance management system employed in Starbucks is the Total Quality Management System which is defined as a situation where all business functions are involved in a process of continuous quality improvement. The main aim of this system is to provide customer satisfaction as well as ensure theres a continuous effort to maintain the quality of the corporation. Therefore, it comes as no surprise that one of the top goals in their mission statement is to satisfy customers and promote good corporate citizenship. Like Scott Bedbury, a former Starbucks executive said Brands need to communicate that they are along for the ride. They are made of flesh and emotion. That they are made possible by people. Therefore, Starbucks has taken many steps to achieve this goal. Among them are, efficient order taking and processing. An example to substantiate this statement would be the standard procedure of coffee brewing that Starbucks has imposed on all its outlets. In order to ensure that the quality of the coffee is of top notch and fits the Starbucks criterion, the company has produced a coffee manual that is available at all of its 16000 plus outlets, guiding them on how to brew the coffee

and make it in the special Starbucks Way. By standardizing the quality of the coffee, it shows the importance Starbucks places on the quality of its products as well as customers satisfaction. Providing a Third Home Environment is also another effort of Starbucks that portrays Total Quality Management. Starbucks was first introduced as the third place of Americans, implying that it would be the next most frequented place besides home and work. In order to live up to this expectation, Starbucks went the extra mile by not only producing delicious coffee, but also ensuring that its outlets were equipped with amenities like WiFi service as well as other facilities that would enable customers to relax after a tired day. While maintaining the quality may look peripheral compared to other management systems, in reality, it requires a lot of time, money and effort. According to Dave Olsen, it is the operational tier of the management that has the most contact with customers thus it is important to motivate them to provide excellent customer service. Hence, the phenomena of awarding the Employer of the Month award where employees who have performed exceptionally well is recognized and rewarded has become a norm in almost all the Starbucks outlet. The second performance management system thats applied by Starbucks is the Just in Time System which is defined as a system that produces the required items at the required quality and in the required quantities at the precise time they are required. This is arguably one of the most difficult systems to implement since both controllable and uncontrollable factors have to be taken into account. Coming to Starbucks, this system is practiced especially when it comes to serving coffee. Theres a stack of order form thats placed in the beginning of the line. Customers who prefer to customize their coffee by adding extra condiments such as sugar, creamer and flavors can tick their preferences on the form and submit it to the counter with their name on it. In less than 10 minutes, the desired cup of coffee would be served to the respective customer. To ensure that theres a smooth flow of customers, there are three stations. Customers can place their order or submit the order form at the first station and move on to the third station to pay the bill. In the second station, the orders processed and sent to the third station where by there will be a server as well as a cashier. While the cashier handles the bills, the server calls out the orders and delivers it to the customers. The Value Chain System is yet another performance management system thats being practiced by Starbucks. From the purchasing of coffee beans right up to processing it and

delivering the hot cup of coffee to customers, the entire process is incorporated into a value chain system. The value chain starts from the plantation workers in the estate that produce and export the coffee beans to Starbucks. Though, in their earlier days, Starbucks used to purchase coffee beans from a manufacturer, owing to the increase in demand and the aim to maintain quality of the drink, they decided to process their own coffee beans. In addition, Starbucks in the United States have their own coffee plantation. The coffee that comes from that plantation is processed and exported to the various Starbucks companies and retail outlets around the world using a roaster distributor. In these outlets, the beans are then brewed into coffee and served to customers. As for the other condiments, each retail outlets have their own suppliers. C) ISSUES, CHALLENGES AND ADVANTAGES OF THE PERFORMANCE MANAGEMENT SYSTEM There are many advantages that Starbucks enjoy by implementing the said management systems. Firstly, a good totally quality management system gives Starbucks the competitive edge over its competitors. By satisfying customers and giving them value added services such as providing a Third Home Environment, Starbucks not only attracts more customers, but also enhances its reputation and rake in profits. As for the idea behind the plan is to motivate employees, especially those in the operational tier to go that extra mile in serving customers and performing beyond what is expected in their job. By doing so, its a win-win situation for both the corporation as well as the employees since the employees would be more inspired to perform and at the same time, Starbucks would be able to make their vision of providing top quality service a reality. Nevertheless, the challenge here is on how to ensure that the desired quality is maintained in all its outlets. Despite ensuring that all the outlets adhere to its procedures and recipe, maintaining the level of quality desired in every outlet is a Herculean task. The most common challenge that Starbucks face are in the form of employees. According to the Starbucks forum, there are almost 50 to 100 complains weekly regarding the services provided in selected outlets. Complaints about poor service and rude employees top the list. Therefore, its crystal clear that despite its continuous effort, Starbucks has yet to master and practice this system in all of its

outlets and this just substantiates the point that this system takes time to be implemented and for the benefits to be truly reaped. As for the Just in Time System, it too offers many advantages. It is undeniable that a carefully planned implementation of JIT increase teamwork and employee involvement, as the organization works together to find areas of waste to target and work out ways to reduce waste in that area . As a result, the inventory management system as well as business processes involved in inventory management will progress tremendously. For an example, in this case, by practicing the Just in Time system, Starbucks devote less space to food storage, and reduce its waste due to spoiled food or food that is not ordered by its patrons, without running out of food and losing the opportunity for a sale. Hence, it is unusual to see a Starbucks outlet that is more than a medium size one. However, there are also some challenges involved in the use of JIT in Starbucks. A fundamental issue is that the corporation deals with a large number of suppliers, particularly suppliers for finer products and these suppliers often do not have the ability to assure supply under the requirements of the JIT system as they may lack the computer systems required to federate supply with the restaurant. Thus, it may be difficult for Starbucks to implement a full JIT process, although it is likely that suppliers of staple and prepared products can accommodate the demands. In addition, JIT also requires considerable business process re-engineering, and the Starbucks processes may need to be significantly redesigned in order to fit with JIT practices. This would prove to be challenging in outlets that are outside the United States since the practices there, especially in Asian countries differ significantly with the ones in the US. Examples of processes that differ are inventory management practices, food production, waste management, and quality control practices, all of which plays an important role to improve the firm's performance. Thus, it is not guaranteed that Starbucks can achieve the benefits of JIT adoption especially in the said outlets. The next system is the Value Chain System which again, aids Starbucks tremendously in achieving its goals. The most prominent gain is that it helps to improve coordination and enhance cost control. By manufacturing its own coffee beans and processing it, not only have they eliminated the supplier issue but also, cost would be cut significantly since there are no middle men to deal with here.

In addition, the value chain system helps to rectify errors and defects quicker thus enabling the company to rectify them faster than Despite all the systems aiding Starbucks to achieve its vision, it is undeniable that the direction of future growth of Starbucks is still a question mark. This is because, expanding the number of outlets especially to countries outside the United States might affect the uniqueness of Starbucks coffee in a negative way as well as the culture the company has built over these years, since the possibility of compromising the quality of its goods are higher when it comes to these countries. Thus it is important that Starbucks develop an expansion strategy that comprises all these management systems that not only deliver the desired results but also protect the integrity of the brand in a long term run. D) SUGGESTION OF PERFORMANCE MANAGEMENT SYSTEM As we can see, despite its encouraging income and soaring growth, theres still room for improvement in Starbucks Corporation. The first glaring issue is that owing to its vast expansion, keeping tab of all the outlets and having a widespread view has become onerous for Starbucks. Nevertheless, having an aerial view of the companys performance plays a vital role in determining the steps needed for development and growth. Hence, the proposed performance measurement system for Starbucks would be the Balanced Scorecard System. Balanced Scorecard System is defined as a theory that measures a company's activities in terms of its vision and strategies and plays a crucial to give managers a comprehensive view of the performance of a business. This system is suggested simply because, apart from the managements view of the business, it also incorporates the financial, customer, internal control and the growth perspective of the organization thus providing the management with a 360 degrees view of the companys performance. Therefore, by integrating this system, the management will have a clearer idea on what direction Starbucks should take for development. Despite the fact that the financial perspective is seen as the most important tool in the balanced scorecard, it clashes with Starbucks vision. Therefore, Starbucks can concentrate more on the second perspective which is the customers perspective where by questions like How to attract and retain customers? comes into play. Based on this perspective, the best move that Starbucks can make in order to retain its customer base is by employing differentiation. By differentiation, it means Starbucks have to

continue to strive to create and market unique coffee based products to varied customer groups through differentiation. Based on the study conducted by the Research and Development Department of Starbucks Corporation, the company currently exhibits and utilizes both differentiation strategy as well as the focus strategy. However, this is only limited to a certain outlets, mainly in the United States. As for countries like China and India, local shops are still preferred over Starbucks simply because the price that Starbucks charge for a cup of coffee is considered to be exorbitant. However, if Starbucks can integrate differentiation, then they can start providing other consumer goods such as donuts and pastries on a larger scale and at a lower place as these will attract customers, especially in Asia. Again, this is where the balanced scorecard comes to action as it can be used to compare the effect of this system based on the financial, customer as well as growth perspective, enabling management to understand if they have taken the right step implementing differentiation. Thus, it wont be far fetched to say that in order to have a better control over the implementation of the three systems practiced by Starbucks, balance scorecard is needed to tie them up together and to enhance the positive effect of those systems. E) CONCLUSION In a nut shell, Starbucks has indeed carved a niche for itself in the industry of food and beverages, so much so, it has become a household name in many countries. Despite its soaring success, its undeniable that theres still ground to make up. Nevertheless, the most important factor is the mindset of the management and the willingness to analyze their situation, generate alternatives and implement them for the betterment of the company and at the same time, maintaining the culture of the corporation. After all, like Diedra Wager, a former Starbucks employee said Starbucks is always managing tension between opposites. On the one hand, Id say we are comfortable and predictable. Yet on the other hand, were constantly suprising and delighting. With this attitude, Starbucks is sure to make the most out of its performance management systems.