Starbucks follows a matrix organizational structure with a combination of vertical and horizontal structures. It is characterized by multiple, overlapping chains of command and divisions.
Department
Type
Details
Advantages
Drawbacks
Retail Stores
Divisional
– Separate divisions for company-operated stores and licensed stores.
– Specialization in retail operations for different types of stores. – Efficient management of company-operated and licensed stores.
– Potential variations in customer experience between company-operated and licensed stores. – Challenges in standardizing operations across divisions.
Coffee Sourcing and Quality
Divisional
– Division dedicated to sourcing high-quality coffee beans and ensuring quality control.
– Expertise in coffee sourcing and quality assurance. – Ensures consistent coffee quality across locations.
– Potential difficulties in coordinating sourcing and quality efforts with retail operations. – Risk of supply chain disruptions affecting quality.
Marketing and Product Innovation
Functional
– Functional teams responsible for marketing, product development, and innovation. Functional managers oversee these activities.
– Specialization in marketing strategies and product innovation. – Efficient product development and marketing processes.
– Potential misalignment between marketing/product innovation and retail operations. – Challenges in translating innovation into successful products.
Human Resources
Functional
– Functional department responsible for HR-related activities across the organization. Functional HR managers.
– Efficient management of HR functions and workforce planning. – Expertise in HR matters and compliance.
– Limited integration between HR and other operational departments. – Potential challenges in addressing unique HR needs in different divisions.
Finance and Accounting
Functional
– Functional department responsible for financial management and accounting. Functional finance managers.
– Efficient financial management, budgeting, and accounting processes. – Expertise in financial matters.
– Limited integration between finance and operational departments. – Potential misalignment with budgeting and financial needs at different levels.
IT and Technology
Matrix
– Cross-functional teams with members reporting to both product leaders and functional IT managers.
– Enhanced collaboration between IT, technology, and product development. – Efficient utilization of IT resources.
– Potential conflicts and complexity due to dual reporting structures. – Challenges in resource allocation and decision-making.
The company is one of several large multi-national corporations to successfully implement a matrix structure. In general terms, a matrix structure consists of functional and product-based divisions with multiple chains of command. It is also well suited to organizations that have a diverse range of products or services.
Starbucks is controlled by a board of directors who operate in the company headquarters of Seattle, Washington. In the United States, the company is split into regional jurisdictions run by district managers who oversee a group of stores. Each store is run by a store manager and shift supervisor who oversees a group of staff.
Importantly, Starbucks promotes an inclusive culture among its staff. The company seeks to recognize exemplary employee performance and encourages them to develop hard and soft skills – regardless of title or pay bracket. With these skills, Starbucks gives employees the autonomy to serve customers in a way they deem best. Given that authority and empowerment are given to low-level employees, the company can also be said to incorporate aspects of a flat organization structure.
The four elements of Starbucks organizational structure
Functional hierarchy refers to the grouping of departments according to business functions. Examples include the human resource and marketing departments.
It should be noted that functional hierarchy is the most traditional aspect of the matrix structure. Much of the decision-making in each Starbucks department is centralized and only occurs at company headquarters. For instance, the corporate human-resource department makes policy changes applicable to every Starbucks café.
With the CEO at the helm, functional groups exercise top-down control to develop and then execute competitive growth strategies.
Product-based divisions
Starbucks also has several product-based divisions. These encompass divisions for coffee, merchandise, and baked goods to name a few.
They also include divisions for the numerous brands operating under the Starbucks banner, including Evolution Fresh juices and Teavana bottled teas.
Geographic divisions
With a presence in 70 countries, optimizing the structure of geographic divisions is vital for Starbucks.
In 2011, the company ditched the Starbucks U.S and Starbucks Coffee International (SCI) divisions to create three new regions:
Americas – further divided into the Western, Northwest, Southeast, and Northeast United States.
China and Asia-Pacific, and
Europe, Middle East, Russia, and Africa.
Each division has a senior executive who is given flexibility in adapting strategies to the particular geographic region. The senior executive reports to both the geographic head and the functional head.
Teams
Teams are invariably found in Starbucks in every Starbucks café. The company understands that team performance and good customer service drive the financial success of every location.
As noted earlier, teams are motivated and empowered to perform in such a way that they further personal goals and enhance Starbucks’ corporate culture.
Comparison with Top Related Companies
Dunkin’ Donuts: Dunkin’ operates under a predominantly franchise-focused model with a functional organizational structure at the corporate level. Unlike Starbucks’ matrix structure, Dunkin’ tends to have less overlap between functional and divisional commands, with clear delineation between corporate functions and franchise operations. This approach can lead to faster decision-making within individual franchises but may result in less consistency across the brand compared to Starbucks.
McCafé (McDonald’s): McCafé, as part of McDonald’s, benefits from the broader organizational structure of McDonald’s, which is highly hierarchical and functionally oriented. McDonald’s uses its structure to maintain strict control over branding and operations, which ensures a consistent customer experience globally. In contrast, Starbucks’ matrix structure allows for more flexibility and adaptability in product development and local market strategies.
Costa Coffee: Costa Coffee uses a traditional hierarchical structure with a strong focus on geographic divisions, especially following its acquisition by Coca-Cola. Costa’s structure is designed to optimize operations across different regions, focusing on scalability and market penetration. Starbucks’ matrix structure, by contrast, provides more integration between functional and divisional management, facilitating innovation and comprehensive quality control across regions.
Similarities and Differences
Similarities: All these companies utilize some form of divisional structure to manage geographical diversity and operational requirements effectively. Each company focuses on aligning their organizational structure with strategic business needs, such as market expansion and product development.
Differences: Starbucks’ matrix structure allows for greater flexibility and cross-functional integration compared to Dunkin’s franchise model and McCafé’s functional hierarchy within McDonald’s. Costa Coffee’s focus on geographic divisions contrasts with Starbucks’ emphasis on both product and geographic divisions, allowing Starbucks more nuanced control over both product innovation and regional adaptation.
Implications
Innovation and Responsiveness: Starbucks’ matrix structure supports innovation and responsiveness to changing market conditions by facilitating effective communication and cooperation between different divisions and functions. This structure helps Starbucks maintain its leadership in product innovation within the coffee industry.
Operational Complexity: While the matrix structure provides numerous benefits, it can also lead to increased complexity in decision-making and conflict resolution due to overlapping authorities and responsibilities. This can affect the speed of response in some scenarios compared to more straightforward organizational structures like Dunkin’s.
Local Adaptation vs. Brand Consistency: Starbucks strikes a balance between local market adaptation and global brand consistency through its dual focus on geographic and product-based divisions. In contrast, McCafé and Costa Coffee might prioritize global consistency over local adaptation due to their more hierarchical structures.
Key takeaways
Like many successful multi-national corporations, Starbucks employs a matrix organizational structure. The matrix structure is characterized by multiple chains of command and combines aspects of product and function-based structure.
With a focus on low-level employee empowerment and autonomy, Starbucks also embodies some aspects of a flat organizational structure. However, the company retains a strong preference for hierarchical corporate governance.
Starbucks also has product-based divisions to help structure the various product categories and brands for sale in each café. It also utilizes geographic divisions to simplify the management of its global presence.
Matrix Organizational Structure: Starbucks employs a matrix organizational structure, which combines both vertical and horizontal structures. This structure is characterized by multiple overlapping chains of command and divisions.
Global Presence: Starbucks operates in over 70 countries and has a large number of stores worldwide.
Board of Directors and Headquarters: The company is overseen by a board of directors based in its headquarters in Seattle, Washington.
Regional Jurisdictions: In the United States, Starbucks is divided into regional jurisdictions led by district managers who supervise groups of stores.
Inclusive Culture and Employee Empowerment: Starbucks promotes an inclusive culture and empowers its employees, encouraging skill development regardless of title or pay. This empowerment extends to low-level employees and reflects aspects of a flat organizational structure.
Functional Hierarchy: The functional hierarchy organizes departments based on business functions, and decision-making often occurs centrally at the company headquarters.
Product-Based Divisions: Starbucks has divisions for various products, including coffee, merchandise, baked goods, and brands like Evolution Fresh and Teavana.
Geographic Divisions: The company optimized its geographic divisions by reorganizing into three regions: Americas, China and Asia-Pacific, and Europe, Middle East, Russia, and Africa. Each division has a senior executive with flexibility in adapting strategies to their region.
Team Emphasis: Teams play a crucial role in every Starbucks café, emphasizing the importance of team performance and customer service for the company’s success.
Hybrid Structure: While Starbucks embraces aspects of a flat organizational structure through employee empowerment, it retains a hierarchical corporate governance preference.
Management of Product Categories and Brands: Product-based divisions help structure the various product categories and brands sold in Starbucks cafés.
Global Management Simplification: Geographic divisions simplify the management of Starbucks’ global presence by assigning senior executives to specific regions.
Starbucks’ main individual shareholder is Howard Schultz, the founder of Starbucks. Major institutional shareholders comprise BlackRock, with 7.18%, and The Vanguard Group, with 8.6% ownership. Starbucks follows a heavy-chained business model, where the company-operated stores play a critical role in the company’s long-term strategy, compared to McDonald’s heavy-franchised business model, where the long-term plan is to have over 95% of the stores as franchising.
Starbucks is a retail company that sells beverages (primarily consisting of coffee-related drinks) and food. In 2023, Starbucks had 44% of company-operated stores vs. 56% of licensed stores which might make you think Starbucks is a franchise business, when in reality most of its revenue (nearly 82% in 2023) came from company-operated stores, thus making Starbucks a chain business model.
Starbucks follows a chain business model strategy, where most of its revenue comes from its owned stores. For instance, in 2023, with nearly $36 billion in revenue, most of the revenue came from owned stores ($29.46 billion) compared to franchised stores ($4.51 billion) and other revenue sources ($2 billion). Yet owned stores have higher operational costs compared to franchised stores.
Starbucks follows a chain business model, building its brand through its owned stores. And its owned stores are also where most of the revenue is generated. In addition, the owned stores are a great asset to keep experimenting with new products while maintaining tight control over the customer experience.
In 2023, Starbucks operated 19,592vs. 18,253 licensed stores. Starbucks leverages primarily company-operated stores to keep tight control over product development, branding, distribution, and customer experience. It also leverages licensed stores for better amplification of brand, revenue, and profits.
Starbucks made 60% of its revenue, in 2023, from beverages, followed by other revenue, which accounted for 22% of the total revenue (that comprises packaged and single-serve coffees and teas, plus royalty and licensing revenues, beverage-related ingredients, serve ware, and ready-to-drink beverages, among other items.) and food, which accounted for 18% of the total sales in 2023.
Starbucks’s mission is “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” And its vision is to “treat people like family, and they will be loyal and give their all.”
Starbucks is a multinational coffee chain headquartered in Seattle, Washington. It was founded by Jerry Baldwin, Zev Siegl, and Gordon Bowker in 1971. From a single and very humble bean roasting store in Pike Place Market, the company is now a global giant operating over 37,711 stores around the world. This large global footprint obviously increases the competition for Starbucks in many different markets. The coffee industry itself is also highly competitive, with established players including McDonald’s and Dunkin’ Donuts.
Starbucks follows a matrix organizational structure with a combination of vertical and horizontal structures. It is characterized by multiple overlapping chains of command and divisions.
McDonald’s and Starbucks sit in the opposite spectrum of retail business models. Indeed, whereas McDonald’s follows a heavily franchised business model, Starbucks follows a heavy-chained one.
Starbucks highlights its mission as “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” And its vision is to “treat people like family, and they will be loyal and give their all.”
Starbucks is a global consumer brand with direct distribution, recognized brands, and products that make it a viable business. Its reliance on the Americas as a primary operating segment makes it a weakness. At the same time, Starbucks faces risks related to coffee beans price volatility. Yet the company still has global expansion opportunities.
In a functional organizational structure, groups and teams are organized based on function. Therefore, this organization follows a top-down structure, where most decision flows from top management to bottom. Thus, the bottom of the organization mostly follows the strategy detailed by the top of the organization.
In a flat organizational structure, there is little to no middle management between employees and executives. Therefore it reduces the space between employees and executives to enable an effective communication flow within the organization, thus being faster and leaner.
Project portfolio management (PPM) is a systematic approach to selecting and managing a collection of projects aligned with organizational objectives. That is a business process of managing multiple projects which can be identified, prioritized, and managed within the organization. PPM helps organizations optimize their investments by allocating resources efficiently across all initiatives.
Harvard Business School professor Dr. John Kotter has been a thought-leader on organizational change, and he developed Kotter’s 8-step change model, which helps business managers deal with organizational change. Kotter created the 8-step model to drive organizational transformation.
The Nadler-Tushman Congruence Model was created by David Nadler and Michael Tushman at Columbia University. The Nadler-Tushman Congruence Model is a diagnostic tool that identifies problem areas within a company. In the context of business, congruence occurs when the goals of different people or interest groups coincide.
McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.
Mintzberg’s 5Ps of Strategy is a strategy development model that examines five different perspectives (plan, ploy, pattern, position, perspective) to develop a successful business strategy. A sixth perspective has been developed over the years, called Practice, which was created to help businesses execute their strategies.
The COSO framework is a means of designing, implementing, and evaluating control within an organization. The COSO framework’s five components are control environment, risk assessment, control activities, information and communication, and monitoring activities. As a fraud risk management tool, businesses can design, implement, and evaluate internal control procedures.
The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.
Lewin’s change management model helps businesses manage the uncertainty and resistance associated with change. Kurt Lewin, one of the first academics to focus his research on group dynamics, developed a three-stage model. He proposed that the behavior of individuals happened as a function of group behavior.
OpenAI is an artificial intelligence research laboratory that transitioned into a for-profit organization in 2019. The corporate structure is organized around two entities: OpenAI, Inc., which is a single-member Delaware LLC controlled by OpenAI non-profit, And OpenAI LP, which is a capped, for-profit organization. The OpenAI LP is governed by the board of OpenAI, Inc (the foundation), which acts as a General Partner. At the same time, Limited Partners comprise employees of the LP, some of the board members, and other investors like Reid Hoffman’s charitable foundation, Khosla Ventures, and Microsoft, the leading investor in the LP.
Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.
The Amazon organizational structure is predominantly hierarchical with elements of function-based structure and geographic divisions. While Amazon started as a lean, flat organization in its early years, it transitioned into a hierarchical organization with its jobs and functions clearly defined as it scaled.
The Coca-Cola Company has a somewhat complex matrix organizational structure with geographic divisions, product divisions, business-type units, and functional groups.
Costco has a matrix organizational structure, which can simply be defined as any structure that combines two or more different types. In this case, a predominant functional structure exists with a more secondary divisional structure.
Costco’s geographic divisions reflect its strong presence in the United States combined with its expanding global presence. There are six divisions in the country alone to reflect its standing as the source of most company revenue.
Compared to competitor Walmart, for example, Costco takes more a decentralized approach to management, decision-making, and autonomy. This allows the company’s stores and divisions to more flexibly respond to local market conditions.
Dell has a functional organizational structure with some degree of decentralization. This means functional departments share information, contribute ideas to the success of the organization and have some degree of decision-making power.
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams are based on the main corporate functions (like HR, product management, investor relations, and so on).
Goldman Sachs has a hierarchical structure with a clear chain of command and defined career advancement process. The structure is also underpinned by business-type divisions and function-based groups.
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.
IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.
McKinsey & Company has a decentralized organizational structure with mostly self-managing offices, committees, and employees. There are also functional groups and geographic divisions with proprietary names.
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.
Nestlé has a geographical divisional structure with operations segmented into five key regions. For many years, Swiss multinational food and drink company Nestlé had a complex and decentralized matrix organizational structure where its numerous brands and subsidiaries were free to operate autonomously.
Nike has a matrix organizational structure incorporating geographic divisions. Nike’s matrix structure is also present at the regional and sub-regional levels. Managerial responsibility is segmented according to business unit (apparel, footwear, and equipment) and function (human resources, finance, marketing, sales, and operations).
Patagonia has a particular organizational structure, where its founder, Chouinard, disposed of the company’s ownership in the hands of two non-profits. The Patagonia Purpose Trust, holding 100% of the voting stocks, is in charge of defining the company’s strategic direction. And the Holdfast Collective, a non-profit, holds 100% of non-voting stocks, aiming to re-invest the brand’s dividends into environmental causes.
Samsung has a product-type divisional organizational structure where products determine how resources and business operations are categorized. The main resources around which Samsung’s corporate structure is organized are consumer electronics, IT, and device solutions. In addition, Samsung leadership functions are organized around a few career levels grades, based on experience (assistant, professional, senior professional, and principal professional).
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.
Starbucks follows a matrix organizational structure with a combination of vertical and horizontal structures. It is characterized by multiple, overlapping chains of command and divisions.
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.
Toyota has a divisional organizational structure where business operations are centered around the market, product, and geographic groups. Therefore, Toyota organizes its corporate structure around global hierarchies (most strategic decisions come from Japan’s headquarter), product-based divisions (where the organization is broken down, based on each product line), and geographical divisions (according to the geographical areas under management).
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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