Chapter 2 – Leading Strategically

Case Study – Questions are Brewing at Starbucks

1) How long would Shultz remain with the company? Could Schulz’s eventual successor maintain
Schultz’s entrepreneurial approach as well as keep Starbucks focused its mission?

Ans-:

Starbucks is an American Coffee company and coffee house chain. It was founded in Seattle,
Washington in 1971. Starbucks is known as the most famous coffee in around the world. It is a
successful company in selling coffee and it has been attractive many people.

A) History and Evolution of Starbucks-:

Starbucks coffee opens is first store in the Pike Place Market in Seattle, Washington. The company
operates over 30,000 locations worldwide. Starbucks is considered the main representative of “second
wave Coffee”. Howard Schultz is the CEO of Starbucks Coffeehouse. Starbucks sells drip brewed coffee,
espresso-based drinks, other hot drinks and cold drinks, and items such as mugs and coffee beans.

B) Mission, Vision & Objectives of Starbucks-:

a) Mission Statement-

i) Starbucks Coffee inspires and nurtures the human spirit starting with its employees.

ii) At Starbucks, employees’ and customers’ first names are used.

iii) “One person, one cup and one neighborhood at a time” this is the mission statement of shows that
the firm ensures meaningful impact on every employees and customer.

b) Vision-

i) Being a premier purveyor means that Starbucks coffee wants to achieve leadership in providing
its products, especially coffee of the best quality.
ii) Analysts and critics point out that coffee from McDonald’s or Dunkin Donuts may be better than
Starbucks coffee in some aspects.
iii) These principles include ethical conduct and warm culture.

c) Goals & Objectives of Starbucks-

i) Building a company with soul.

ii) Opposing Franchising because of Quality control and culture.

Iii ) Only selling coffee beans without artificial flavors.

iv) Satisfy customers by all means.

iv) Employees contribution and involvement in making Starbucks a better company.

C) Principles of Starbucks-
a) Provide a great work environment and treat each other with respect and dignity.
 b) Embrace diversity as an essential component in the way we do business.
c) Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of
coffee.
d) Develop enthusiastically satisfied customers all of the time.
e) Contribute positively to our communities and our environment.
f) Recognize that profitability is essential to their future success.

D) International Competitors-:
a) Dunkin Donuts- Dunkin Donuts sells beans both online & at physical outlets, Fresh brew coffee.
They provide similar services and products as Starbucks.
b) McDonald’s- McDonald’s offers number of specialty coffees and huge penetration. It is
established fast food retailer.

E) SWOT Analysis-:
a) Strengths-

i) Starbucks is the market leader in the coffee market.

ii) Customers are satisfied with the quality and taste of coffee.

iii) High brand equity.

iv) Operating in 40 countries worldwide.

v) Huge number of employees approx. 13 thousand.

b) Weaknesses-

i)Pricing are higher as compared to the competitors.

ii) High operating cost.

iii) The business profits are highly dependent on coffee product

c)Opportunities-

i)Entry into Asian market like Pakistan, India and Bangladesh.

ii) market Penetration in international countries.

iii) Co-branding with other food manufacturers.

iv) Whole bean sales in supermarkets like.

d)Threats-

i)Number of competitors are increasing like Barista, Café coffee day, Gloria Jeans Coffee

ii) Variation in coffee prices in developing countries.

iii) People started to become more health conscious.

iv) Labour Union issues In US and international countries.

v)Starbucks facing huge resistance in international countries over cultural and political issues.

F) Howard Schultz leadership style revolves around inspiration from other countries and places that he
can implement in his business. He finds places of convenience where his products are suitable and can
be enjoyed. These are the following factors makes Howard Schultz so successful.

a) Core Values- His core ideology was on very strong grounds. This includes the core values and purpose
of his business. He always emphasized on their capability – coffee, There was always quality, quality and
quality. No matter how many ups and downs were there, he ensured that the quality of the coffee was
maintained and the customers were always happy. He had a very deep sense of belongingness towards
his store. He was very attached to it and that’s why everyone feels the same about the Starbucks now.
He agreed that customer is the king of the market. He always placed customers and their preferences on
the top. He made sure that the customers connect with the stores, have a good time and uplift the
mood of the customers so that they come back again and again. He made sure that such an
environment was built in all of the Starbucks maintaining integrity. Not only the customers, but the
other stakeholders also felt that they were a part of Starbucks. The reward of Starbucks success was
passed on to the stakeholders too so that they felt are involved in every step.

b) Core purpose-

His core purpose of setting up Starbucks sums everything up- “to inspire and nurture the human spirit-
one person, one cup and one neighborhood at a time”.

c)Envisioning the future- He was not only content with the present wellbeing of the company but also
looked forward towards expansion of the company that could make a difference in the world. His vision
for future was, “To become a giant global coffee company which leads on innovation”

i) “Make it your own”- Customize the experience the way you want it to be.

ii) “Everything matters”- Focus on what you are doing. Never lose focus on your customer’s experience
and their point of view.

iii)”Surprise and delight”-Do the unexpected so that the customer feels special buying the cup of coffee.

iv) “Embrace resistance”- Learn from your mistakes and don’t have any scope of repeating them again.

v)”Leave your mark”- Do your job in such a way that the next time they come, they would want to be
served coffee by you. Do such work that they remember you!

G) Following are the Leadership Principles of Howard Schultz that makes great success of Starbucks-

a) Right People- He hired right people in his team. His goal was to challenge and inspire them, they came
back more energized than ever.
b) Consistent in delivering products & services- 22,000 stores globally that offer different coffee blends
and foods. No matter what branch you go to, will get the same quality product. Starbucks has goal of
giving best customer care service, including consistency of products.

c) Take good care of employees- He gives employees more than just perks. Gives comprehensive health
insurance, Option to own stocks, even part-time, Tuition benefits, shifting schedules, Listens to his
employees.

d) Respect culture & encourage diversity- He believes every place has its own preference and practice,
and designs every store accordingly. It contributes economic development.

e) Has a mission and vision- He has a Passion is building a company focused on treating people with
respect and dignity, this is the vision of Starbucks. Mission aims to give customers a place where to meet
up with friends, hold meetings, do work and relax. He wants it to be more than just a place to get a
coffee.

f) Importance of Partnerships- Company has partnered with organizations to reach out to its markets.
He believes in finding right team to partner with so it will be easier to build brand awareness and aceive
goals. Barnes & Noble have many stores inside. Customers can enjoy their book over coffee. Apple, can
download Starbucks playlist on iTunes.

These are the Schultz’s principles of leadership and his way of running starbucks presents him as a
transformational leader. He accepts the challenges, encourage followers to be creative, explore new
ways and new opportunities shows that definitely I must say that Howard Schultz could eventual
successor maintain Schultz’s entrepreneurial approach as well as keep Starbucks focused on its mission.

G) Conclusion-:

a) Howard Schultz’s vision has led Starbucks as the leading global player in the young, growing market
for specialty coffee.

b) Starbucks has altered the rules of the game in the US Coffee industry from strictly commodity to a
“third place experience”.

c) Its continued success depends critically on their consistent ability to interest, understand and
empathize with consumers around the world.

H) Recommendation-:

a)Starbucks must retain their inventiveness in order to stay relevant.

b) Maintain their philosophy to “Get big but stay small”

c) To stay competitive, they need:

Expand geographically, by adding new cafes in underserved areas- China

d)Expand its reach beyond coffee- Tazo, Teavana

e) Expand its consumer packaged good business, leveraging its global brand awareness.