Course Code: ISM003

Course Title: Information System Management

Section: 1

Group No.: 4

Project Title: Starbucks Company (International)

Date: 17th

April, 2011

Prepared by

Full name in English Student ID

Chin Pui Kee, Nessa 8047975

Kwan Yee Ki (Kiki) 8086098

1

Content

1. Executive Summary

--------------------------------------------------------------------------------------- P. 2 - 3

2. Introduction

---------------------------------------------------------------------------------------- P. 4

3. Background Information

3.1 History

--------------------------------------------------------------------------------------- P. 5 - 6

3.2 Business Strategy

---------------------------------------------------------------------------------------- P. 7

3.3 Business Flow

---------------------------------------------------------------------------------------- P. 8

4. Information Resource

4.1 Hardware

---------------------------------------------------------------------------------------- P. 9

4.2 Software

---------------------------------------------------------------------------------------- P. 10 - 11

4.3 Database

---------------------------------------------------------------------------------------- P. 12

4.4 Cost of the system

---------------------------------------------------------------------------------------- P. 12

5. Information Participants

----------------------------------------------------------------------------------- P. 13 - 15

6. Analysis

------------------------------------------------------------------------------------ P. 16 - 17

7. Recommendation

----------------------------------------------------------------------------------------- P. 18

8. Conclusion

----------------------------------------------------------------------------------------- P. 18

9. References

----------------------------------------------------------------------------------------- P. 19

2

Executive Summary

This report discovers how information system can

help Starbucks Corporation becomes the largest

coffeehouse company in the world by describing

hardware, software and database used to obtain,

store and analyze data.

Starbucks has used four main types of hardware in

their stores: two types of modem, computer, wireless

internet and printer.

Starbucks has used four main software systems: Point of Sale System, Manager Work

Station, Automated Labor Scheduling, Intelligent Restaurant Information System and

Starbucks Card Mobile App.

The database Starbucks has used is Starbucks Enterprise Data Warehouse (EDW), the

largest fact tables consist of billions of rows, are range partitioned, and hold 39 months

of data for reporting purposes.

According to the annual report of Starbucks in 2010, capital expenditures in fiscal 2010

totaled $441 million, primarily for remodeling and renovating existing

company-operated retail stores, opening new retail stores, and investment in information

technology systems.

Results of information analyzed show that different information participants can access

different perspectives to get the information and participate in the operation with diverse

security level.

3

Analysis

Starbucks takes advantages by using software developed by a stuffing management

technology system:

• Operational excellence

• New products, services and business model

• Improved decision making

• Competitive advantage

• Survival

For the Recommendation, we recommend Starbucks make a faster and more efficient

system as Information System have to be updated. For the up-to-date reason, we also

suggest Starbucks Invest in new technologies like new monitors, wireless system and

Printers.

Limitation of Information System is they have to Updated regularly. Moreover, as the

System cannot run by themselves, they need to train their staff how to cope with those

new technologies. There is also risk on using Information System like Virus and Hacker

attack. Sometimes the Computers would out of serve.

4

Introduction

Since I was small, I like to drink coffee and my dream is to open a coffee shop in the

future. In order to fulfill my ideal, I am going to do a research on a successful Coffee

Company – Starbucks Coffee Company.

I choose this company because it has a lot of stores throughout the world, such as United

States, United Kingdom, Japan, Hong Kong, France. In addition, it has received many

rewards and recognition. For instances, “No. 1 Best Coffee,” Fast Food and Quick

Refreshment categories and“No. 1 Most Popular Quick Refreshment Chain” from

Zagat’s Survey of National Chain Restaurants in 2009‐2010, one of the “World’s Most

Ethical Companies” from Ethisphere in 2007‐2010, one of the “100 Best Corporate

Citizens” from Corporate Responsibility Officer/Business Ethics in 2000‐2010, one of

“The 100 Best Companies to Work For” from FORTUNE in between 1998 to 2000 and

2002 to 2010.

From the above rewards and recognition, it shows the popularity Starbucks has in this

industry. By analyzing this international company from its system, business strategy,

structure, business ethics, and so forth, I can understand Starbucks more and point out the

pros and cons of it. Therefore, I can learn and intimate its way to success and open my

own coffee shop.

In this project, first introduce the background of the Starbucks (history, business strategy

and business flow), followed by the information system of it, then how the participant is

going to use it, and last is how this company can achieve by using these information

systems.

5

Background Information

History

Starbucks Coffee opens its first store in

Seattle’s Pike Place Market,

Washington in 1971. By the time, it was

a roaster and retailer of whole bean and

ground coffee, tea and spices.

In 1984, Howard Schultz convinces the

original founders of Starbucks to test

the coffee bar concept in downtown

Seattle, where the first Starbucks ®

(Starbucks’ first store) Caffè Latte is served. This successful

experiment is the genesis for a company that Schultz founds in 1985.

In 1988, Starbucks comes out with their first mail-order catalog, enabling mail-ordering

of their coffee in all 50 states.

In 1991, it becomes the first U.S. privately owned company in history to offer a stock

option program to all its employees.

In 1992, it completes initial public offering

(IPO) with common stock being traded on

the NASDAQ National Market under the

trading symbol SBUX.

In 1996, it forms a partnership and

expanded to Japan (first store outside of

North America) and Singapore.

(Howard Schultz)

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In 1997, it establishes The Starbucks Foundation, benefiting local literacy programs.

In 2001, it introduces ethical coffee‐sourcing guidelines developed in partnership with

Conservation International.

In 2002, Starbucks enters into licensing agreements with national Fair Trade

organizations to sell Fair Trade certified coffee in the countries where Starbucks does

business.

In 2010, it expands digital offerings for customers with free unlimited Wi‐Fi, Starbucks

Digital Network in U.S. stores and coffee

offerings with ultra ‐ premium Starbucks

Reserve™ line and Starbucks® Natural Fusions,

the first nationally ‐ branded naturally ‐ flavored

packaged coffee. Moreover, Seattle’s Best Coffee

reinvents business strategy to extend brand’s

reach.

Now, Starbucks Corporation is an international

coffee and coffeehouse chain. It is the largest

coffeehouse company which welcomes millions

of customers every day, in more than 17,000 locations in over countries. There are

17,009 stores thought out the world (till January 2, 2011) – 8,870 stores are

company-owned and 8,139 stores are licensed stores.

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Business Strategy

Starbucks obtained three main strategies. They are rapid store expansion strategy,

strategy on product line and coffee purchasing strategy. This enabled the initially West

Coast yuppie fad to become a global phenomenon.

In the rapid store expansion strategy, Starbucks has saturated the market by domestic

store expansion and international store expansion. For domestic store expansion,

Starbucks has introduced a three-year expansion strategy and “Starbucks everywhere”

approach. While the international store expansion, it launched company-owned and

company-operated stores or licensing, create a new subsidiary (Starbucks International)

and expanded its consumer products channel in South Pacific region. Moreover,

employees have training and recognition. There are systems to recruit, hire and train

baristas and store managers. In addition screening, training programs, awards for partners.

In real estate, store design, planning and construction. There are a broad range of store

formats, a “stores of the future” project team, high-traffic, high-visibility store locations,

controls of average store opening costs and Wi-Fi availability at stores. In store ambience,

it has the concept of “everything matters” and assessment of standards.

The Starbucks strategy has always involved thinking outside the box. In addition to

clustering its outlets, the Starbucks strategy involves engaging in smart strategy on

product line. It provides a wide range of products choices, rolling out fresh, new

initiatives, including a new product line of hot sandwiches and breakfast food and new

drinks such as coffee liqueurs and special product promotion, selling music CDs,

acquisitions hear music and ethos water, joint ventures with the right companies, such as

their successful alliance with Pepsi-Cola Co, Dreyer’s Grand Ice Cream and Jim Beam

Brands. The Starbucks strategy is now also expanding online, allowing customers to

pre-order and prepay for products via the Internet.

Last but not least is the coffee purchasing strategy. Starbucks built relationship with

growers and exporters, checks on agricultural conditions and crop yields, and searches

out varieties and sources that would meet Starbucks’ standards. By using fixed-price

purchase commitment and purchasing coffee future contracts, it contributes to the

sustainability of coffee growers which helps environment conservation. Furthermore, it

has purchased and marketed Fair Trade Certified coffee. It also promotes coffee

cultivation methods that protected biodiversity and maintained a healthy environment.

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Business flow

Coffee beans begin at the farm on coffee trees. After trees are planted, it takes between

one and three years for the trees to bear coffee “cherries,” which typically contain two

beans. Each tree produces 2,000 to 4,000 beans a year – approximately one pound of

roasted coffee. There are between 50 and 70% of the global coffee supply came from

small-scale farms by 2001.

The coffee export process varied greatly depending on origin country and buyer. In some

countries, beans were exported through government coffee boards while other countries

used private exporters only. After they were shipped to import country, coffee beans were

visually inspected and test-tasted for quality through a process called “cupping”. After

passing inspection, coffee was stored in warehouses until it was shipped to roasters.

Large roasters also stockpiled green coffee at the import warehouses to help decrease

their exposure to market conditions.

After buying green coffee, the beans are shipped to roasting facilities where the beans are

roasted until they receive their characteristic color and aroma and then cooled. Once the

beans are cooled, roaster blend beans from different countries to balance the flavors and

strengths. This process is essential because it allows for a consistent flavor even if

supplies vary due to prices and availability. Roasters then package, market, and distribute

coffee through a variety of methods. The largest roasters grind and vacuum-pack coffee

in packed bricks or cans and distribute their product through wholesale channels. These

roasters supply coffee for restaurants, airlines, and hotels in addition to selling directly to

consumers through supermarket channels. Specialty coffee, in contrast, is roasted and

packaged in a manner to guarantee quality and freshness. It is sold in both whole bean

and ground forms through wholesale and retail channels.

According to Starbucks executives, their chief concern with fair trade coffee was finding

top quality beans from cooperatives that have not demonstrated an ability to produce

quality beans to Starbucks standards. From earlier cupping analyses, Starbucks had little

evidence that fair trade met its quality standards. Starbucks was beginning to move

toward purchasing more of their coffee through direct relationships with exporters or

farmers and negotiated a price based on quality. The company was willing to pay higher

prices for great quality beans and had developed long-term contracts with many of its

suppliers. Starbucks then sell these beans on their stores.

9

Information Resources

Hardware

There are two types of modem:

The speed touch cable modem and the ISDN (integrated services digital network) modem

The speed touch cable modem and the ISDN connect the store computer system to the

Starbucks retail network. The Retail Network is the communication access between the

store and the internet. This allows the management work station to send and receive large

quantities of data and information.

There is a wireless internet provided by T-mobile, which allows customers to connect to

the wireless network.

There are two pieces of equipment:

the Cisco Router and the Cisco Wireless access point

Connected to the Point-of-Sale computer system there is a Printer used to print reports of

any nature, and a cash scale which counts Cash in a faster way and more accurately, mainly

it is used to count the tills and at the end of this process all data are send to the system. At

the Point of sale, there are two small printers where all receipts come out, and two (chip

and pin) credit and debit card machines.

To protect retailers, a new security system has been designed for cards which will use a

smart chip. When customers pay using one of these cards, rather than signing a

confidential security number (PIN) is entered.

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Software

Starbucks has used five main software systems: Point of Sale

System, Manager Work Station, Automated Labor Scheduling,

Intelligent Restaurant Information System and Starbucks Card

Mobile App.

1. Point of Sale System

The Point of sale consists in two touch screen tills used by

deployed partners that need to insert their username and specific

password before to start. From the Point of sale, managers can

access different manager’s functions menu, such as paid in and

Paid Out, and Refund to customers.

These manager functions are security measures for cash management and inventory

control in the store.

By ringing items through the tills, data such as time, customer transaction, quantity of food

and drinks sold, quantity of wasted items, are transferred to the Manager Work Station

where data are stored, analyzed and produced in form of reports, graphic, charts or

diagrams.

2. Manager Work Station

The Manager Work Station can be accessed

in the office where there is a computer

connected to the intranet, a private

communication channel for employees to

access the organization network that

resembles the internet. To access the system

it is required to sign in with a password and

the partners ID. The system recognizes

security level and allows accessing the function assigned to the security level. The normal

partners can just access the time punching option, which is that function that record staff

punches in and out for breaks and shift.

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3. Automated Labor Scheduling

Planning and building labor schedules that

maximize productivity as well as manage

payroll functions.

By using scenario-based instruction that is

realistic to Starbucks workforce

requirements.

4. Intelligent Restaurant Information System

Starbucks Coffee Company limited uses a Management information system called IRIS

which stands for Intelligent Restaurant Information System.

The IRIS is made up of two components:

4.1 The Point of Sale System (POS) in addition to regular register functions offers some

functions to be accessed only by Store Manager(SM), Assistant Manager(ASM) and Shift

Supervisor(SS), with the correct security level.

4.2 The Manager Work Station (MWS) compiles and reports all store information to

effectively manage all aspects of store business.

It displays all the different functions available on the IRIS, some of which are only

accessible by partners with the correct security which consists in typing the correct

username and password.

5. Starbucks Card Mobile App

In addition to the mobile payment capability, the app

allows customers to manage their Starbucks Card account,

check their card balance, reload their card with any major

credit card (iPhone users can also use the PayPal feature),

check their My Starbucks Rewards status and find a

nearby Starbucks store with the store locator feature.

Customers can pay with their smartphone by holding their

mobile device in front of a scanner on the countertop and scan the Starbucks Card Mobile

App’s on-screen barcode to make a purchase.

12

Database

In the case of the Starbucks Enterprise Data Warehouse (EDW),

the largest fact tables consist of billions of rows, are range

partitioned, and hold 39 months of data for reporting purposes.

The use of a sliding window partitioning scheme was employed

as a means for managing this large volume of fact data. In this

case, a sliding window scheme implies partitions and tablespaces

are added and dropped as time passes. Therefore, a PL/SQL

package that automatically adds and drops partitions as well as

adds/drops tablespaces is used to maintain the table DDL in the

warehouse. Figure 8 shows an example of the Sliding Window Scheme.

As a result of the data being split at the month level over 39 separate tablespaces, the data

volumes in each tablespace will average 180-200 GB in size. In the next few years, new

periods (i.e. months) of data are expected to average 250-300 GB and this is believed to be

a relatively manageable size from a backup and recovery standpoint.

The implementation of the sliding window partitioning scheme also called for setting

tablespaces containing fact data to read-only after 2 months. RMAN can automatically

skip read-only tablespaces and thus optimize backup and recovery operations.

Cost of the systems

According to the annual report of Starbucks in 2010,

capital expenditures in fiscal 2010 totaled $441

million, primarily for remodeling and renovating

existing company-operated retail stores, opening new

retail stores, and investment in information

technology systems.

13

Information Participants

1. Users

Starbucks Card Mobile App

Starbucks Card Mobile App

allows customers to manage

their Starbucks Card account,

check their card balance,

reload their card with any

major credit card (iPhone users

can also use the PayPal

feature), check their My Starbucks Rewards status and find a nearby Starbucks store with

the store locator feature. It is a basic business system that serves the organizations

operational level. Therefore, it is a Sale and Marketing System and Transaction

Processing System.

2. Workers

Point of Sale System

Workers like Cashiers, they will use Point of Sale

System which Perform and record daily routine

transactions necessary to conduct business like Sales

order entry. Paid in and paid out occurs when money

is taken from the till to buy items necessary for the store operations and any kind of

emergency. Other functions such as Cash Skim, Void transactions or refunds occur when

money is given back due to complaints or customers are returning faulty merchandise. It

also serves the organization’s operational level. Therefore, it is also Sale and marketing

system and Transaction Processing System

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3. Administrator

Point of Sale System

Point of sales System serves predefined, structured goals and Decision making which is

Transaction Processing System and Finance and accounting system. The Point of sale

consists in two touch screen tills used by deployed partners that need to insert their

username and specific password before to start. From the Point of sale, managers can

access different manager’s functions menu, such as paid in and Paid Out, and Refund to

customers.

Manager Work Station

Manager Work Station serves predefined, structured goals and Decision making. So it is

Transaction Processing System and Finance and accounting system. Manager Work

Station decided for Store Managers to identify

business requirements and customer needs, to

identify peak time in the store, to increase or amend

product ordering, to control wastage and track stock

and decide whether is necessary to cut labor.

Managers can access staff information and personal

details in the work station, they can insert new

partners, terminate partners, maintain employee

records, track employee‘s training and process

payroll.

15

Automated Labor Scheduling

Automated Labor Scheduling decided for Store Managers to

plan and build labor schedules that maximize productivity as

well as manage payroll functions which is a human

resources system and Management Information System..

Intelligent Restaurant Information System

Intelligent Restaurant Information System

provides a number of reports that can be used

to help to manage store profitability and

accessed to check and monitor inventory

which is a function of Inventory management

system. These reports can be viewed on the

computer monitor or can be printed for review

or archive. Store Managers can use this

Management information System to prepare

short term budget to plan long term profit and

prepare proper forecasts.

16

Analysis

What Starbucks have achieved after using these information systems?

Starbucks takes advantages by using software developed by a stuffing management

technology system.

1. Operational excellence

Starbucks from using the above information

system, it can improve efficiency and attain

higher profitability. Furthermore, information

system can increase productivity and revenue

2. New products, services, and business models

Starbucks has introduced a new

service called Starbucks Mobile

Apps which can create wealth.

3. Improved decision making

Management Information System can help Manager

making decision for Just-in-time production of goods

and services, the suitable allocation of resources and

faster response time. For online ordering, like buying

Starbucks Cards and Coffee machine, it can Reduce

cost and gain more customers

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4. Competitive Advantage on Information System

a. Starbucks Company and small coffee shop

When you walk in a Small Coffee Shop, you

can see the only Information system they

have used is Point of Sales System or a

cashier machine. Unlike Starbucks which is

an International Company. They have to

organize huge amount of Data by using

complex information system.

b. Starbucks Company and Pacific Coffee Company

Starbucks and Pacific Coffee Company (PCC) are

quite similar in information systems, because both of

them are using complex information system. Yet,

Starbucks Company has more stores and globalized

than Pacific Coffee Company. Thus Starbucks

information systems are more complexes than PCC.

Furthermore, Starbucks has a new service called

Starbucks Mobile App which PCC does not have yet.

5. Survival

Nowadays, Information Technology is a

necessity. Actually Starbucks Company has

done a lot of it, such as Starbucks official

website, gift card, Starbucks Mobile App,

etc.

(Starbucks’ official website)

18

Recommendation

On the above evidences we can see the advantages on the information systems, yet

everything has pros and cons.

We have found some limitations of it, like they have to Updated regularly. Moreover, as

the System cannot run by itself, they need to train their staff how to cope with those new

technologies. There are hidden risk on using Information System like Virus and Hacker

attack. In addition, sometimes the computers would out of serve.

Counter with the limitations above, we have some advises for Starbucks.

First, we recommend Starbucks make a faster and more efficient system as Information

System have to be updated.

Second, for the up-to-date reason, we also suggest Starbucks Invest in new technologies

like new monitors, wireless system and Printers.

Conclusion

After doing this research on Starbucks Company, I have a deep understanding on the

information systems (IS) of it. If I would like to open a successful coffee shop, I am not

only focusing on the quality of the coffee and food, but also need to put a lot of effort on

the information systems of my company. As a good information system can achieve on

operative excellent, improved decision making, comparative advantage, etc which can

increase productivity and revenue.

19

Reference

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(Accessed on 10April 2011)

Chien, T and Greg, G, “Very Large Database Backup & Recovery Best Practices.” Oracle

Corporation. Available:

http://www.oracle.com/technetwork/database/features/availability/vldb-br-128948.pdf

(Accessed on 1 April 2011)

James, M, “At last! A faster way to get espresso -- the Starbucks iPhone mobile payment

way.” Traveler 2.0. Available:

http://traveler2.typepad.com/blog/2011/01/starbucks-iphone-mobile-payments.html

(Accessed on 10 April 2011)

Joseph L., “Starbucks Training.” Docstoc 2010. Available: http://www.docstoc.com/docs/8390743/Starbucks-Training (Accessed on 10April 2011) Starbucks Corporation, “Executive Biographies.” Starbucks Corporation. Available: http://news.starbucks.com/executive+biographies/?start_row=11 (Accessed on 10April 2011)

Centurion System Inc. 2009, Starbucks Point of Sales, Centurion System Inc., America, viewed 10 April 2011, <http://www.centurionsys.com/Graphics/CSIPORTJPEG/starbucks_pos.jpg>. Gizmoe 2011, Starbucks iPhone Apps, MacApper, America, viewed 10 April 2011, <http://macapper.com/wp-content/uploads/2011/01/115004-starbucks_qr_code.jpg>.