Starbucks Case

1.    What was Howard Schultz’s original strategic vision for Starbucks? How many times has his strategic vision changed or evolved into something different? Is his strategic vision for Starbucks in 2011-2012 likely to undergo further evolution?

Howard Schultz’s original vision for Starbucks was to become a national company with strong value and principles that employees would be proud of working with Starbucks. In early 1990s, senior executives team came up with a clear mission statement that has never changed.

The strategic vision has never changed but expands few more objective missions. After Schultz return as Starbucks CEO, he took several actions that push Starbucks to the new level of differentiation and innovation. Schultz had three main themes: strengthen the core, elevate the experience, and invest and grow. He also had an effort on cost and efficiency campaign that worked well from Q1 2009 to Q2 2012. Schultz had plan to open “thousands of new store” in China over time. Although the Japan is its biggest foreign market, Starbucks believes that China and other Asia countries have the most significant growth opportunity for the company.

2.    Has Starbuck’s strategy evolved as the strategic vision has evolved?

Yes. Howard Schultz has his strategic vision evolved since II Giornale acquired Starbucks in 1987. Schultz told the group his vision and executed his strategy plans to achieve the goal.

3.    Which one of the five generic competitive strategies discussed in Chapter 5 most closely approximates the competitive approach that Starbucks is employing?

Starbucks employed the focused differentiation strategy which emphasis on high-quality products and services experience in all expansion stores. The strategy attracts customers who want the finely brewed coffee and friendly barista services.

4.    What are the key policies, practices, business principles, and procedures that underlie how Howard Schultz and Starbucks’ management have implemented and executed the company’s evolving strategy?

Schultz’s vision was focused on expansion with full control strategy during 1987 through 1995. Then, Starbucks utilized both company-owned-and-operated and license store agreement nationwide and international. By partnered with PepsiCo and Dreyer’s Grand Ice Cream in 1994~1995, Starbucks expanded their product lines to cans or bottles coffee beverages and ice cream. In 1998, Starbucks licensed Kraft Food to market and distribute Starbucks Coffee bean and ground Coffee to the grocery stores. The expansion strategy gave Starbucks a glory two digits growth till 2008.

5.    What “values” does Starbucks have? How well do they connect to the present strategy and to the manner in which the company conducts its business?

Starbucks senior executives brought in some key value and guiding principles into Starbucks culture in the early years. The key value “to build a company with soul” was that the company would always purchase best green beans and roasting them to perfection. Starbucks promises their customer that Starbucks would never use artificial flavor chemicals in their beverages. “Just say yes” was the key principle of training program for employees to satisfy every customer. All these values connected together while offering a cup of finely brewed coffee with happiness ambience that growth to employees and shareholders.

6.    What is your evaluation of Starbucks social responsibility strategy? Is it sincere or just something the company does and talks about to create a good public image?

Starbucks’ corporate social responsibility has four elements: ethically sourcing all of its products, community involvement and corporate citizenship, environmental stewardship, and charitable contributions. Howard Schultz implemented social responsibilities strategy varied over years since he became CEO in 1987. Starbucks had 12th named to Corporate Responsibility Magazine’s list of 100 Best Corporate Citizens for 2010.

7.    What is your assessment of Starbucks’ financial performance during fiscal years 2007-2011?

Due to the economic recession in 2008 -2009, the growth rate was decreased to “-5.86%” in 2009, and the operating profit margin drained to 3-4% in 2008-2009. Both growth rate and operating profit margin grow to 8%-10% in 2010-2011. The Starbucks stopped short-term borrowing for new opening stores after 2009 and froze long-term debt level since 2007.  The overall financial performance are getting better after revenue decreased in 2009.

8.    Has Howard Schultz done a good job since his return as Starbucks’ CEO? Why or why not? What evidence can you cite in support of your position?

Howard Schultz has done a great job. Schultz always focuses on best coffee experience that company can provide to customers. His three strategic vision themes include, strengthen the core, elevate the experience, and invest and grow. Those strategic visions saved the Starbucks’ stock drifted from $8 in 2007 and got it back to $55 in 2012. The transaction rate was from average 9.8 transactions per labor hour in 2008 to 11.3 transactions per labor hour. The total net revenue were 13.7% growth in 2012.

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9.    What issues confront the company as of mid-2012? What should Starbuck’s management be worried about?

As of uncertain economic condition goes, management should worry about the possibility of an economic downturn and lower demand power. Lower customer traffic and lower average price per transaction could impact company revenue and profit performance. The low price competitors’ advertisement campaign that Starbucks management should more careful of it.

10. What recommendations would you make to Howard Schultz to sustain the company’s growth and support continued strong financial performance in the years ahead?

·      Continuing open new stores in Asia market by open company-owned store and licensing store.

·      Communicate with both domestic and international delivery channels and retailers to distribute its products.

·      Keep improving customer traffic and average purchasing price per transaction.