Burkettu 4.edited.docx - Running Head STARBUCKS 1 Starbucks Operational Improvement Plan Jonathan Max Burkett Capella University May 6 2019 STARBUCKS 2

Burkettu 4.edited.docx - Running Head STARBUCKS 1 Starbucks...

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Running Head: STARBUCKS 1 Starbucks Operational Improvement Plan Jonathan Max Burkett Capella University May 6, 2019
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STARBUCKS 2 Section A Materials Machinery People Methods High product (Coffee) prices Increased wages and salaries Low productivity Scarcity of skilled workers Trade Union interventions Increase in the cost of machinery Increase in charge of installing new technology Increased costs of maintenance and repair Increased prices of raw materials Low supply (shortage) Increased internal activities Legal compliance costs Increased participation in community development projects
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STARBUCKS 3 The problem identified at Starbucks was increased product prices for the customers. Starbucks has been relying on customer loyalty as well as the high inelasticity among the customers to continually raise the prices of its coffee products. The popular coffee chain has raised its prices by about ten to twenty cents (Purkayastha at al., 2019). This is recorded as the third increase in three years. Notably, a 12-ounce "tall" brewed coffee is now costing between $ 1.95 and $2.15 depending on the location. This is not the first time Starbucks has raised coffee prices. In 2016, the company also slipped in price increase forty-eight hours after presidential elections. Consequently, it bumped the prices of select cold brews, cold drinks and baked goods by almost 30 cents (this followed other increases during the year) (Team, 2016). From the cause and effect diagram, various factors contribute to the Starbucks pricing problem. The elements emanate from the four factors of production including labor, land, capital, and entrepreneurship. Notably, the factors causing an increase in the prices of the products are increased the cost of capital. The cost of installation, repair, and maintenance of coffee machinery has increased resulting in a high cost of production. Besides, technology, which
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