Starbucks Corporation Case Analysis

Starbucks Corporation Case Analysis

Corporate Management in the Global Environment

Park University

History

        Gerald Baldwin and Gordon Bowker originally started Starbucks after being inspired by Pete’s coffee and tea houses in Berkley, CA. The original location opened in 1971 in Seattle, Washington and specialized in high quality coffee and brewing products. Within only nine years Starbucks was the largest coffee bean roaster in Washington. In 1981, Howard Schultz was hired as the head of Marketing.  However, after failing to convince the founders that Starbucks should serve coffee rather than just supply coffee beans, Howard left Starbucks in order to pursue his own interests.  In 1987, Howard Schultz returned to and acquired Starbucks as a result of his success with Il Giornale.  As the new owner and CEO of Starbucks, Schultz revolutionized the way Americans drink and enjoy coffee. His vision turned a small coffee bean and supply company into a Fortune 500 company with global brand recognition.

Starbucks’ Strategy

Howard Shultz’s strategy for turning Starbucks into a global powerhouse is clearly defined in its mission statement “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” (Grant, 2013, p. 447). Shultz’s goal was to create an experience for consumers and provide them with a “third place” “somewhere other than home and work where people could engage socially while enjoying the shared experience of drinking coffee” (Grant, 2013, p. 447-448). Starbuck’s achieved this experience by focusing on details such as high-quality coffee, location and design strategies, employee involvement, etc. As a result of their increased popularity Starbucks began expanding its product line in an effort to meet customer demand. This included creating new products, adding new distribution channels, rewards programs for customers and various sources of entertainment such as live music, national and local news, and social media.

Reformulating the Strategy

In 2006, after 20 years of continuous expansion Starbucks faced a major setback after their share prices declined 75% over the span of two years. As a result of this set-back, Schultz was asked to return to the company as CEO after having stepped down in 2000. Schultz agreed and returned to Starbucks as CEO in early 2008. Upon his return, Schultz immediately began taking steps to get the company back on track.  His first actions were to cut back on new US store openings and improve cost efficiencies.  Additionally, “In the summer of 2008, Schultz announced the closure of 600 US stores and the majority of its stores in Australia” (Grant, 2013, p. 450).  He also cut 700 corporate positions, decreased his salary, and sold two company jets. The second part of Schultz’s strategy was to reconnect with Starbucks customer base. Schultz wanted to revitalize the “Starbucks Experience” by showing the organizations commitment to the community and the environment.  To do this, employees participated in various community activities and disaster cleanup initiatives.  Schultz also made changes to the way coffee was brewed in an effort to speed up the process, and revised menus so they were more in line with Starbucks image. By the end of 2009, Starbucks had started turning everything around. The changes made by the Schultz had restored customer confidence and increased operational efficiency. Starbucks was back in the game and ready to expand, but this time they would take a much more controlled approach. Introducing products to grocery stores and international markets would provide Starbucks the growth they wanted while being able to maintain their core value and business principles.