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CASE: I
Starbucks
In 2003, Starbucks accomplished something that few companies ever do: It became a Fortune 500
company—a phenomenal achievement for a company that went public only 12 years earlier. The company
had over 6,000 stores worldwide—all company owned, as Starbucks does not franchise its outlets—and
planned to expand rapidly to over 10,000 stores.
Starbucks created not only a successful business but a thriving industry. When the company started
its massive expansion in the early 1990s, the United States had about 200 coffeehouses. In 2003 there were
over 14000 coffeehouses, the majority of them not Starbucks but mom-and –pops that bloomed after the
dawn of the $3 cup of coffee. According to a Starbucks executive, “We changed the way people live their
lives, what they do when they get up in the morning, how they reward themselves, and where they meet.
That’s more important to me than just building a company.”
More than 10 million coffee lovers spend an average of $3.60 at Starbucks weekly, and 10 percent of
them come in twice a day. Starbucks has 7 percent of the U.S. coffee-drinking market and less than 1
percent abroad, suggesting ample room for growth. The coffee market is huge; coffee is the second
most consumed drink in the world (water is first).
Starbucks’ iced beverages, which offer larger profit margins than regular drip coffee, are big sellers
in the South and Southwest. After making some adjustments, such as adding outdoor seating and couches
to stores to better serve the needs of its customers, Atlanta locations have shown double-digit sales growth.
Atlanta boasts 33 successful Starbucks, and plans for expansion are in the works. Plans for further
expansion in cities with even more Starbucks stores, such as New York City and San Francisco, are also on
the drawing board. Although 70 stores operate in New York City alone, it is estimated that growth there will
continue until 200 stores are operating in the city! As for fears of market saturation, Starbucks has none. In
fact, the java giant has two highly profitable outlets that face each other on Robson Street in Vancouver,
British Columbia. Each store has more than $1 million in annual sales. International expansion is also taking
place. In fact, the number one Starbucks in the world is located in Tokyo, and a total of 500 stores are
slated to be operational in Asia in the next three years.
What is the secret of Starbucks’ phenomenal success? According to Howard Schultz, chairman and
CEO of Starbucks Corporation, the company’s success is due to the experience created within the stores
as well as the unsurpassed quality of the coffee. A steaming café au lait must be perfectly replicated,
whether the store is in Seattle or New York City. In a world filled with people leading busy, stressful lives,
Schultz believes he has created a “third place” between home and work where people can go to get their
own personal time out or to relax with friends.
Schultz also attributes his company’s success to the 40,000 employees working worldwide.
Starbucks’ employee training program churns out “baristas” by educating 300 to 400 new hires per month in
classes such as “Brewing the Perfect Cup at Home” and “Coffee Knowledge.” Here they are taught to remind
customers to purchase new beans weekly and that tap water might not be sufficient when brewing the
perfect cup of coffee. They are also encouraged to share their feelings about coffee, selling, and working for
Starbucks. Employees are also given guidelines to maintain and enhance self-esteem, to learn how to listen
and acknowledge, and to know when to ask for help. E-mail, suggestion cards, and regular forms allow
unsatisfied workers to communicate with headquarters. If the annual barista turnover of 60 percent,
compared with 140 percent for hourly workers in the fast-food industry, is any indication of quality of its
training programs, Starbucks seems to have a handle on how to gain and maintain employee loyalty. What
about the demographic makeup of the work force? About 80 percent of the employees are white, 85 percent
have some education beyond high school, and the average is 26.
The Starbucks success story is continuing into the 21st century as the company is quickly expanding
into Europe and Asia. However, one question remains regarding the success of the company in countries
already known for their coffee-making expertise: Will such Romans and Parisians care for Starbucks?
Continued expansion and visibility has been created domestically as Starbucks has formed partnerships with
companies such as United Airlines and Barnes & Noble Booksellers, both of which draw form the same type
of knowledgeable customer.
More recently, Starbucks has opened several full-service dining establishments (Café Starbucks) in
response to customers who want more at lunch and dinner. The menu offers full meals, breads, pastries,
alcohol, and of course coffee. The company has also launched an Internet site that sells not only expensive
coffee but also pricy kitchenware, home furnishings, and gourmet food. After some skepticism by analysts
and a subsequent drop in share price, Schultz emphasized that “Every company must stick to its knitting,
The Indian Institute of Business Management & Studies
SUBJECT: Consumer Behavior Marks: 100
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understand its core competency, know what the value proposition is for the customer, and do everything
possible to get close to the customer. So you won’t see us getting far afield from what we do now” As for the
present, Starbucks is not likely to fall victim to a fad-driven society any time soon. The company seems to
be doing fine.
You can learn more about Starbucks at http://www.starbucks.com.
Question:
1. Based on the case information and your personal experiences, list at least five things you know
about Starbucks. This list offers you some idea about your cognitions concerning the coffee shop
chain.
2. List at least things you like or dislike about Starbucks. This list gives you some idea of your affect for
the coffee shops.
3. List at least five behaviors involved in buying a gourmet coffee drink from Starbucks. This list gives
you an idea of the behaviors involved in a coffee purchase.
CASE 1: Spirituality in the workplace
Traditionally, the workplace and spirituality did not mix in America. But things are changing. Andre
Delbecq, a Professor in Santa Clara University, a Jesuit institution, said: “There were two things I
thought I’d never see in my life, the fall of the Russian empire and God being spoken about in a
business school.” Now management books and conferences (including the annual meeting of the
Academy of Management) deal with the various aspects of how God can be brought into the
organizational environment. To be sure, people who want to integrate spiritual dimensions into the
workplace are still considered rebels. But ServiceMaster, a Fortune 500 company with some 75,000
employees, created a spiritual organization culture many years ago. Indeed, Peter Drucker, one of the
most prolific writers on management, had high regards for the company that is known for its products
such as Terminix (pest control), TruGreen, Merry Maids, and others.
When people in the US were asked if they believe in God, some 95 per cent said yes. It is in a
spiritual context that business people under the daily pressure can discuss their inner feelings. As the
baby boomers, now in their 50s, are reaching the top in the organizational life, they begin to wonder
what life is all about. They lived through the youth culture of the 1960s and the 1980s that was
dominated by greed. They are now questioning the real meaning of life and the ethical dimension of
work. Jose Zeilstra, an executive at Price WaterhouseCoopers worked around the world, practicing her
Christian principles in different cultures. During her assignment in China, she strongly argued against
the practice of giving “very expensive gifts.” As a result the business transaction did not work out. Yet,
in the long run, while integrating her personal beliefs with her work, resulted in a very successful
career. Academic institutions such a the University of St. Thomas, the University of Denver, and the
Harvard Divinity School are following and studying the movement of spirituality. Other schools such
as Antioch University in Los Angeles, the University of New Haven in Connecticut, the University of
Scranton in Pennsylvania, Santa Clara University in California as well as institutions abroad such as
the University of Bath in England and the Indian Centre for Encouraging Excellence in Bombay, India,
are conducting research, conferences, or lecture on spirituality.
The cover story of Business week (November 1, 1999) discussed how company outlets such as
Taco Bell, Pizza Hut, and McDonald’s as well as the Xerox Corporation pay attention to spiritual
needs of their employees. Some companies claim an increase in productivity, decrease in turnover, and
a reduction in fear. A research study by the consulting firm McKinsey & Co. in Australia showed that
firms with spiritual programmes showed reduced turnover and improved productivity. Professor Ian I
The Indian Institute of Business Management & Studies
SUBJECT: General Management Marks:100
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Mitroff at the University of Southern California even stated, “Spirituality could be the ultimate
competitive advantage.” But there is also the concern that cult members and groups with a radical
perspective could use the workplace for their own aims. Still, employees in companies that integrate
spirituality in their work place count on the potential benefits of greater respect for individuals, a more
humane treatment of their fellow workers, and an environment that permeates their organization with
greater trust.
Question:
1. What is spirituality?
2. Is this topic appropriate for businesses?
3. What are the arguments for and against its inclusion in business?
EMPLOYEE MOTIVATION IN A GOVERNMENT ORGANIZATION"
Bhumika Services Ltd., one of the largest public sector companies of India, was serving
more than 31 million customers. Along with its vast customer base, BSNL's financial and asset
bases too were vast and strong. Changing regulations, converging markets, competition and ever
demanding customers had generated challenges for BSNL. The Indore division of BSNL was the
first in the country, which faced competition in basic telecom services from 1998. In spite of being
a government department, Indore telephones had to face the competition, and relentless efforts
were put in to improve the services and provide worldclass telecom services to its customers.
Among the various services offered by Indore Telecom, 197 and 183 were two special services.
197 provided non-metered enquiry services to obtain telephone numbers by simply giving the
name of person/name of organization/ name and designation of person, or by giving address. 183
on the other hand, was a nonmetered enquiry service that provided similar services for distant
stations. There were a large number of complaints related to these services. Complaints were
either directly forwarded to the district office by customers or raised during Telephone Adalats or
pointed out by correspondents during press conferences, which were conducted quarterly.
Complaints ranged from non-response, long waiting time to rude responses.
S. Baheti took charge as Area Manager (North) on July 25, 2001 In the Indore Division.
Immediately after taking charge, he realized that special services like 197 and 183 required
urgent attention as they were directly affecting the image of the organization amongst customers.
Since most of the complaints during Telephone Adalats and press conferences were related to
these services, Baheti wanted to reach the root cause of the problem, to solve it forever. In this
process, he looked at the background of the employees involved in the special services and found
that most of the employees were office bearers of various unions that were active in the
organization. The problem was more complicated than it seemed to during interactions, the
employees indicated that they were not to be blamed for poor services since they were facing a
number of problems in providing services and senior officials were not paying enough attention to
alleviate their problems. Defective handsets, non-operating telephone lines, disturbance in lines,
jacks not making proper connections, fans and air conditioners not working properly and non
availability of typewriter/computer terminals were some of the problems brought to the notice of
Baheti by operators.
THE INDIAN INSTITUTE OF BUSINESS MANAGEMENT AND STUDIES
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Further investigation revealed that in addition to these technical problems, there were
some Human Resource Management problems as well, such as frequent short leave, extended
breaks, uninformed leave and indifferent attitude of employees towards customers. Baheti
identified that despite technical problems, some operators were sincere towards their viork and
tried their best to provide better services. To improve these services, Baheti decided to use
multipronged strategies. Most of the technical problems were solved immediately, other problems
that could not be solved at his level were forwarded to higher authorities and pursued rigorously.
As the technical problems were taken care of, efficiency of sincere employees went up. Moreover,
Baheti also began regular interaction with the operators, appreciating their good work, listening to
their problems and explaining them the;-i. importance of their jobs. The employees were made
aware of the facts that B5NL did not enjoy a sole monopolistic position any more and had to
compete with private players. So the laidback attitude towards customer complaints was not only
detrimental to the image of the organization, but also could lead to a reduced market share.
After gaining the confidence of operators, the next step was to motivate them. Towards
this end, Baheti started announcing the best operator of the month and recognition was given to
the operator by displaying his name on the board of honor. The criteria for award were minimum
200 calls attended per day and 20 days' attendance. In addition, based on last six months
performance, three best performers were identified. Appreciation letters from Area Manager and
General Manager were conferred upon these operators in a public function and prizes of their own
choice were given to them. These efforts had a desired result and the performance of all the
operators showed a marked improvement. The number of calls attended by some operators
increased from 200 to 700 calls per day. Further, quick and polite response had reduced customer
complaints. While reviewing the situation, Baheti was quite contended to see a remarkable
change in the behavior of operators just four months. He wondered whether this change was a
permanent phenomenon or he would have to strategize further.
QUESTIONS
1. Discuss the long-term relevance of motivational techniques used by Baheti in the
light of prevailing environment in the organization.
2. Had you been Baheti, what other techniques you would have used to improve the
special services provided by the organization?
Note: Solve any 4 Cases
CASE: I Diana’s Disappointment: The Promotion Stumbling Block
Diana Gillen had an uneasy feeling of apprehension as she arrived at the Cobb Street
Grille corporate offices. Today she was meeting with her supervisor, Julie Spencer, and
regional director, Tom Miner, to learn the outcome of her promotion interview for the
district manager position. Diana had been employed by this casual dining restaurant chain
for 12 years and had worked her way up from waitress to general manager. Based on her
track record, she was the obvious choice for the promotion; and her friends assured her
that her interview process was merely a formality. Diana was still anxious, though, and
feared that the news might not be positive. She knew she was more than qualified for the
job, but that didn’t guarantee anything these days.
Nine months ago, when Diana interviewed for the last district manager opening, she
thought her selection for the job was inevitable. She was shocked when that didn’t
happen. Diana was so upset about not getting promoted then that she initially decided not
to apply for the current opening. She eventually changed her mind—afterall, the company
had just named her “restaurant manager of the year” and trusted her with managing their
flagship location. Diana thought her chances had to be really good this time.
A multi-unit management position was desirable move up for any general manager
and was a goal to which Diana had aspired since she began working in the industry.
When she had not been promoted the last time, Julie, her supervisor, explained that her
people skills needed to improve. But Diana knew that explanation had little to do with
why she hadn’t gotten the job—the real reason was corporate politics. She heard that the
person they hired was some superstar from the outside—a district manager from another
restaurant company who supposedly had strong multi-unit management experience and a
proven track record of developing restaurant managers. Despite what she was told, she
was convinced that Tom, her regional manager, had been unduly pressured to hire this
person, who had been referred by the CEO.
The decision to hire the outsider may have impressed the CEO, but it enraged Diana.
With her successful track record as a store manager for the Cobb Street Grille, she was
much more capable, in her opinion, of overseeing multiple units than someone who was
new to the operation. Besides, district managers had always been promoted internally
from among the store managers, and she was unofficially designated as the next one to
move up to a district position. Tom had hired the outside candidate as a political
maneuver to put himself in a good light with management, even though it meant
overlooking a loyal employee lime her in the process. Diana had no patience with people
who made business decisions for the wrong reasons. She worked very hard to avoid
politics and it especially irritated her when the political actions of others negatively
impacted her.
Diana was ready to be a district manager nine months ago, and she thought she was
even more qualified today—provided the decision was based on performance. She ran a
tight ship, managing her restaurant completely by the book. She meticulously controlled
expenses. Her sales were growing, in spite of new competition in the market, and she
The Indian Institute of Business Management & Studies
SUBJECT: Organizational Behavior Marks: 100
received relatively few customer complaints. The only number that was a little out of line
was the higher turnover among her staff.
Diana was not too concerned about the increasing number of terminations, however;
there was a perfectly logical explanation for this. It was because she had high standards
for both herself and her employees. Any
Who delivered less than 110 percent at all times would be better off finding a job
somewhere else. Diana didn’t think she should bend the rules for anyone, for whatever
reason. A few months ago, for example, she had to fire three otherwise good employees
who decided to try a new customer service tactic-a so-called innovation they dreamed uprather
than complying with the established process. As the general manager, it was her
responsibility to make sure that the restaurant was managed strictly in accordance with
the operations manual, and she could not allow deviations. This by-the-book approach to
managing had served her well for many years. It got her promoted in the past, and she
was not about to jinx that now. Losing a few employees now and then—particularly those
who had difficulty following the rules—was simply the cost of doing business.
During a recent store visit Julie suggested that Diana might try creating a friendlier
work environment because she seemed aloof and interacted with employees somewhat
mechanically. Julie even told her that she overheard employees refer to Diana as the “ice
maiden” behind her back. Diana was surprised that Julie brought this up because her boss
rarely criticized her. They had an unspoken agreement: Because Diana was so technically
competent and always met her financial targets, Julie didn’t need to give her much input.
Diana was happy to be left alone to run her restaurant without needless advice.
At any rate, Diana rarely paid attention to what employees said about her. She wasn’t
about to let something as childish as a silly name cause her to modify a successful
management strategy. What’s more, even though she had recently lost more than the
average number of employees due to “personality differences” or “miscommunications”
over her directives, her superiors did not seem to mind when she consistently delivered
strong bottom-line results every month.
As she waited in the conference room for the others, Diana worried that she was not
going to get this promotion. Julie had sounded different in the voicemail message she left
to inform her about this meeting, but Diana couldn’t put her finger on exactly what it
was. She would be very angry if she was passed over again and wondered what excuse
they would have this time. Then her mind wandered to how her employees would
respond to her if she did not get the promotion. They all knew how much she wanted the
job, and she cringed at how embarrassed she would be if she didn’t get it. Her eyes began
to mist over at the sheer thought of having to face them if she was not promoted today.
Julie and Tom entered the room then, and the meeting started. They told Diana, as
kindly as they could, that she would not be promoted at this time; one of her colleagues
would become the new district manager. She was incredulous. The individual who got
promoted had been with the company only three years—and Diana had trained her! She
tried to comprehend how this happened, but it did not make sense. Before any further
explanation could be offered, she burst into tears and left the room. As she tried in vain to
regain her composure, Diana was overcome with crushing disappointment.
The Indian Institute of Business Management & Studies
SUBJECT: Organizational Behavior Marks: 100
Question:
1. Within the framework of the emotional intelligence domains of self-awareness, selfmanagement,
social awareness, and relationship management, discuss the various
factors that might have to led to Diana’s failure to be promoted.
2. What competencies does Diana need to develop to be promotable in the future?
What can the company do to support her developmental efforts?
Case I
THE STRATEGIC ASPIRATIONS OF THE RESERVE BANK OF INDIA
The Reserve Bank of India (RBI) is India's central bank or 'the bank of the bankers'. It was
established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
The Central Office of the RBI, initially set up at Kolkata, is at Mumbai. The RBI is fully owned by the
Government of India.
The history of the RBI is closely aligned with the economic and financial history of India. Most
central banks around the world were established around the beginning of the twentieth century. The
Bank was established on the basis of the Hilton Young Commission. It began its operations by taking
over from the Government the functions so far being performed by the Controller of Currency and from
the Imperial Bank of India, the management of Government accounts and public debt. After independence,
RBI gradually strengthened its institution-building capabilities and evolved in terms of
functions from central banking to that of development. There have been several attempts at reorganisation,
restructuring and creation of specialised institutions to cater to emerging needs.
The Preamble of the RBI describes its basic functions like this: '...to regulate the issue of Bank
Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate
the currency and credit system of the country to its advantage.' The vision states that the RBI
'...aims to be a leading central bank with credible, transparent, proactive and contemporaneous policies
and seeks to be a catalyst for the emergence of a globally competitive financial system that helps deliver
a high quality of life to the people in the country.' The mission states that 'RBI seeks to develop a sound
and efficient financial system with monetary stability conducive to balanced and sustained growth of the
Indian economy'. The corporate values underlining the mission statement include public interest,
integrity, excellence, independence of views and responsiveness and dynamism.
The three areas in which objectives of the RBI can be stated are as below.
1. Monetary policy objectives such as containing inflation and promoting economic growth,
management of foreign exchange reserves and making currency available.
2. Objectives set for managing financial sector developments such as supervision of systems and
information access and assisting banking and financial institutions to become competitive
globally.
3. Organisational development objectives such as development of economic research facilities,
creating information system for supporting economic decision-making, financial management and
human resource management.
Strategic actions taken to realise the objectives fall under four categories:
1. The thrust area of monetary policy formulation and managing financial sector;
2. Evolving the legal framework to support the thrust area;
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2. Customer services for providing support and creation of positive relationship; and
3. Organisational support such as structure, systems, human resource development and
adoption of modern technology.
The major functions performed by the RBI are:
• Acting as the monetary authority
• Acting as the regulator and supervisor of the financial system
• Discharging responsibilities as the manager of foreign exchange
• Issue currency
• Play a developmental role
• Related functions such as acting as the banker to the government and scheduled banks
The management of the RBI is the responsibility of the central board of directors headed by the governor
and consisting of deputy governors and other directors, all of whom are appointed by the government.
There are four local boards based at Chennai, Kolkata, Mumbai and New Delhi. The day-to-day
management of RBI is in the hands of the executive directors, managers at various levels and the
support staff. There are about 22000 employees at RBI, working in 25 departments and training
colleges.
The RBI identified its strengths and weaknesses as under.
• Strengths A large body of competent offers and staff; access to key data on the economy; wide
organisational network with 22 regional offices; established infrastructure; ability to attract
talent; and financial self sufficiency.
• Weaknesses Structural rigidity, lack of accountability and slow decision-making; eroded specialist
know-how; strong employee unions with rigid industrial relations stance; surplus staff; and
weak market intelligence.
Over the years, the RBI has evolved in terms of structure and functions, in response to the role as signed
to it. There have been sweeping changes in the economic, social and political environment. The RBI has
had to respond to it even in the absence of a systematic strategic plan. In 1992, the RBI, with the
assistance of a private consultancy firm, embarked on a massive strategic planning exercise. The
objective was to establish a roadmap to redefine RBI's role and to review internal organisational and
managerial efficacy, address the changing expectations from external stakeholders and reposition the
bank in the global context. The strategic planning exercise was buttressed by departmental position
papers and documents on various subjects such as technology, human resources and environmental
trends. The strategic plan of the RBI emerged with four sections dealing with the statement of mission,
objectives and policy, a review of RBI's strengths and weaknesses and strategic actions required with an
implementation plan. The strategic plan reiterates anticipation of evolving external environment in the
medium-term; revisiting strengths and weaknesses (evaluation of capabilities); and doing away with the
outdated mandates for enhancing efficiency in operations in furtherance of best public interests. The
results of these efforts are likely to manifest in attaining a visible focus, reinforced proficiency, realisation
of shared sense of purpose, optimising resource use and build-up of momentum to achieve goals.
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Historically, the RBI adopted the time-tested technique of responding to external environment in
a pragmatic manner and making piecemeal changes. The dilemma in adoption of a comprehensive
strategic plan was the risk of trading off the flexibility of the pragmatic approach to creating rigidity
imposed by a set model of planning.
Questions
1. Consider the vision and mission statements of the Reserve Bank of India. Comment
on the quality of both these statements.
2. Should the RBI go for a systematic and comprehensive strategic plan in place of its
earlier pragmatic approach of responding to environmental events as and when they
occur? Why?
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