[SOLVED] What comes to mind when you think

What comes to mind when you think of IKEA? You might have memories of following your parents through an IKEA maze-like store with the promise of Swedish meatballs at the end of the trip. The Swedish-based company is known for its flat-packed furniture, minimalist style, and affordability. IKEA’s purpose, to “create a better everyday life” for people through build-it-yourself furniture, has been a successful strategy. Founded over seventy years ago, IKEA has 190,000 employees working in over 400 stores in 49 countries. Its yearly revenue is approximately $41 billion— that’s a lot of furniture! All this sounds like life for IKEA should continuously be a smooth ride. But, it wasn’t when several children were seriously hurt by one of its dresser designs that tipped over. After one child fatality, IKEA was responsible for the largest furniture recall in the world ever. They recalled 29 million furniture items in a recall that was three times bigger than the next largest furniture recall in history. IKEA also rolled out a massive communication campaign about the recall and offered wall mountings for dressers for customers who did not want to return their furniture. Then, there was another child fatality by a dresser that was not wall mounted. Pretend you’re part of the management team. Using what you’ve learned in this part on monitoring and controlling, what five things would you suggest the team focus on? Think carefully about your suggestions to the team. This is a story about the global economy. It’s about markets, politics, and public opinion. And as US jobs—especially white-collar and professional jobs—continue to be outsourced and offshored, the story hits closer and closer to home. Although the terms offshoring and outsourcing are often used interchangeably, they do mean different things. Offshoring is relocating business processes (production and services) from one country to another. Outsourcing is moving noncore activities from being done internally to being done externally by an entity that specializes in that activity. One of the realities of a global economy is that to be competitive, strategic decision makers must look for the best places to do business. If a car can be made more cheaply in Mexico, maybe it should be. If a telephone inquiry can be processed more cheaply in India or the Philippines, maybe it should be. And if programming code can be written more cheaply in China or Russia, maybe it should be. Almost any professional job that can be done outside the organization is up for grabs. There’s nothing political or philosophical about the reason for shipping jobs elsewhere. The bottomline is that it can save companies money. But there’s a price to be paid in terms of angry and anxious employees. So are offshoring and outsourcing bad? Critics say “yes.” It’s affecting jobs once considered “safe” across a wider range of professional work activities. And the offshoring and outsourcing have taken place at a breathtaking pace. What this means is that the careers many college students are preparing for may not sustain them in the long run. This structural change in the US economy also means that the workforce is likely to face frequent career changes and downward pressures on wages. Proponents say “no.” Their argument is based on viewing economic development as a ladder with every country trying to climb to the next rung. And it’s foolish to think that the United States has reached the top of the ladder with nowhere else to go. Although people fear that educated US workers will face the same fate as blue-collar workers, whose jobs shifted to lower-cost countries, the truth is that the United States currently still has a competitive advantage in innovation; although that may be in jeopardy. The US may have a trade deficit when it comes to goods (and a shortage of skilled labor that is needed in today’s manufacturing processes). But the US still has a trade surplus when it comes to services. Trends overall seem to have steered away from US firms deciding to bring their manufacturing operations back to the US (what it is called “reshoring”). Tariffs have not had a clear effect on the offshoring and outsourcing numbers yet either. It’s safe to say that offshoring and outsourcing is a reality that is not disappearing any time soon. This means that offshoring and outsourcing is another example of why decision makers need to be aware of the context within which their organizations are doing business.
Discuss the following questions:
• How are offshoring and outsourcing similar? How are they different?
• What arguments do critics use to say offshoring and outsourcing are bad?
• What arguments do proponents use to say offshoring and outsourcing are not bad?
• How does the decision to offshore and outsource affect monitoring and controlling activities
• Is it just manufacturers that deal with these decisions/ issues? Discuss.1Managers must monitor work activities to make sure they’re being done as planned and correct any significant deviations. At Starbucks, managers control various functions, activities, processes, and procedures to ensure that desired performance standards are achieved at all organizational levels.
Controlling the Coffee Experience
Why has Starbucks been so successful? Although many factors have contributed to its success, one significant factor is its ability to provide customers with a unique product of the highest quality delivered with exceptional service. And managers need controls to help monitor and evaluate what’s being done and how it’s being done. Starbucks’s managers use different types of controls to ensure that the company meets its goals. These controls include transaction controls, security controls, employee controls, and organizational performance controls. Every week, an average of 85 million customers make purchases at a Starbucks store somewhere in the world. These transactions between partners and customers—the exchange of products for money—are the major source of sales revenue for Starbucks. Measuring and evaluating the efficiency and effectiveness of these transactions for both walk-in customers and customers at drive-through windows is important. Starbucks has been doing drive-through transactions for a number of years, but there is a push to add much more. Customers aren’t looking to Starbucks as a place to sit and work as much as they used to due to an increase in shared workspace options and greater ease in finding free Wi-Fi. Instead, many customers want speed and convenience. So, 80 percent of new stores are including a drive-through window. In stores with drive-through windows, 70 percent of sales come from drive-through customers. The focus of these transactions is on both speed and quality—a different metric than for walk-in transactions. When a customer walks into a store and orders, he can step aside while the order is being prepared; that’s not possible in a drive-through line. Besides, Starbucks takes longer to deliver orders to its customers relative to competitors. McDonald’s, Dunkin Donuts, and even Panera Bread (with its lengthier food menu) have shorter drive-through delivery times than Starbucks. Recognizing these limitations, the company is taking steps to improve its drive-through service, such as using screens that allow customers to see their order and make corrections before driving up to the window, showing baristas’ faces on video screens to maintain a human connection, and making improvements to their mobile app to speed up ordering. Starbucks has new challenges as they expand their delivery services. Customers who order by delivery want their coffee at the right temperature, looking and tasting the same as if they ordered it in a Starbucks store. Starbucks’ delivery service in the US has been expanding through a partnership with Uber Eats. It’s important to Starbucks that this partnership results in coffee that is delivered at the same level of quality as coffee consumed in a Starbucks café. Concerns include: What if an Uber Eats delivery vehicle has to stop suddenly or gets stuck in traffic? Rather thanworking alone, Starbucks will need to work in cooperation with Uber Eats to ensure that delivery is fast and provides the same quality standards as in-store offerings. Starbucks also ensures control over customers’ experiences through social media. In fact, Starbucks responds to customer feedback with an average of 155 tweets per day (99 percent of those tweets are replies to customer tweets). For example, customers vented their frustration on Twitter when Starbucks’ mobile app “crashed” one morning. Starbucks didn’t just respond by fixing the technical glitch. A company spokesperson also got the word out to customers via Twitter quickly that they were working on the problem and thanked customers for their patience. Security is also an important issue for Starbucks. Keeping company assets (such as people, equipment, proucts, financial information, and so forth) safe and secure requires security controls. All partners share the responsibility to follow all safety rules and practices; to cooperate with officials who enforce those rules and practices; to take necessary steps to protect themselves and other partners; to attend required safety training; and to report immediately all accidents, injuries, and unsafe practices or conditions. When hired, each partner is provided with a manual that covers safety, security, and health standards and is trained on the requirements outlined in the manual. In addition, managers receive ongoing training about these issues and are expected to keep employees up-to-date on any changes. And at any time, any partner can contact the Partner & Asset Protection Department for information and advice. One security area that has been particularly important to Starbucks has been cybersecurity. Starbucks is known for being an early adopter of a bug bounty program that provides incentives to security experts when they identify cybersecurity problems that affect the company. Soon after Starbucks began offering bug bounty incentives, a security expert identified bugs in Starbucks’s website. The problems identified included that hackers could get customers’ credit card information, hijack customer accounts, and change customers’ passwords. By continuing their bug bounty program, Starbucks is able to identify and resolve cybersecurity problems quickly. Although Starbucks’s control methods are well thought out, some thefts occur and are not detected right away. For instance, a Starbucks store manager in Wisconsin admitted to stealing store deposits that totaled over $37,000 over three months of time in order to pay off student loans and credit card debt. Theft problems can come from customers too. Two customers in northern California were suspected of stealing other customers’ laptops in at least three Starbucks stores over a three-month period. Since trust is so important to customers’ perceptions and to Starbucks’ reputation, putting a stop quickly to any form of theft is an important task for Starbucks to take. Exemplary customer service is a top priority at Starbucks. Partners are encouraged to strive to make every customer’s experience pleasant and fulfilling and to treatcustomers with respect and dignity. What kinds of employee controls does Starbucks use to ensure that this happens? Partners are trained in and are required to follow all proper procedures relating to the storage, handling, preparation, and service of Starbucks’s products. In addition, partners are told to notify their managers immediately if they see anything that suggests a product may pose a danger to the health or safety of themselves or of customers. Partners also are taught the warning signs associated with possible workplace violence and how to reduce their vulnerability if faced with a potentially violent situation. In either circumstance where product or partner safety and security are threatened, store managers have been trained in the appropriate steps to take if such situations occur. The final types of control that are important to Starbucks’s managers are performance and financial controls. Starbucks uses the typical financial control measures (such as revenue growth and operating income), but also looks at same-store sales growth as a performance standard. Starbucks directed their attention toward improving same-store growth in late 2018 and was able to realize a 4 percent increase by early 2019. They did this by shifting cleaning duties to after stores close, automating processes that used to take time away from customers, and increasing their digital sales. One continual challenge is trying to control store operating costs. There’s a fine balance between keeping costs low and keeping quality high. Some costs are beyond the company’s control (such as the rising cost of rent and coffee beans). Other costs—like employee benefits and digital advancements—are part of Starbucks’s mission and strategy, so they are thought to be necessary. To offset costs, Starbucks recently increased the price of its regular drip coffee by 10 to 20 cents per cup, or about a 10 percent increase. The challenge is how to keep costs as low as possible so as not to force price increases. In addition to the typical financial measures, corporate governance procedures and guidelines are an important part of Starbucks’s financial controls, as they are at any public corporation. The company has identified guidelines for its board of directors with respect to responsibilities, processes, procedures, and expectations.
Starbucks’s Value Chain: From Bean to Cup
The steaming cup of coffee placed in a customer’s hand at any Starbucks starts as coffee beans (berries) plucked from fields of coffee plants. From harvest to storage to roasting to retail to cup, Starbucks is dependent on each participant in its value chain. Starbucks offers a selection of coffees from around the world, and its coffee buyers personally travel to the coffeegrowing regions of Latin America, Africa/Arabia, and Asia/Pacific to select and purchase the highest-quality arabica beans. Once the beans arrive at any one of the company’s five roasting facilities in the United States (and one inAmsterdam), Starbucks’ master professional roasters take over. These individuals know coffee and do their “magic” in balancing flavors and creating the company’s rich signature roast coffee. There are many potential challenges to “transforming” the raw material into the product and experience that customers have come to expect. Weather, shipping and logistics, technology, and political instability are examples of factors with potential impact. One issue Starbucks gives high priority to is environmental protection. For instance, Starbucks has accelerated its efforts towards developing a greener cup for its beverages by 2022. Their plan to phase out plastic straws by 2020 will result in eliminating more than one billion straws worldwide. They also have set the goal of increasing their number of environmentally certified retail stores by 2025. And they already have been investing in solar farms, like one in North Carolina that supplies solar power to 600 Starbucks stores across more than six states. To minimize Starbucks’s environmental footprint throughout its supply chain, suppliers are asked to sign a code of conduct that deals with certain expectations in business standards and practices.2

Discussion Questions:
P6-1. What might need to be different in Starbucks’s control process as a result of their shift to including more drive-through windows in their stores? What specific measures of performance might be needed with drive-through service that are not as relevant to inside-store sales? What are control issues that Starbucks may need to address related to its out of store delivery offerings? P6-2. How could Starbucks use social media to practice effective levels of feedforward control, concurrent control, and feedback control?
P6-3. What companies might make good benchmarks for Starbucks? Why? What companies might want to benchmark Starbucks? Why?
P6-4. What “red flags” might indicate significant deviations from standard for (a) an hourly partner, (b) a store manager, (c) a district manager, (d) the executive vice president of finance, and (e) the CEO? Are there any similarities? Why or why not?
P6-5. Using the company’s most current financial statments, calculate the following financial ratios: current, debt to assets, inventory turnover, total asset turnover, profit margin on sales, and return on investment. What do these ratios tell managers?
P6-6. Can Starbucks manage the uncertainties in its value chain? If so, how? If not, why not?

Question: What comes to mind when you think

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