Coffeehouse and Starbucks
1. Original Strategic Vision for Starbucks Howard Schultz’s original strategic vision was to transform Starbucks into a national company with an emphasis on placing great value on its employees. He believed that the key to success was for Starbucks to capitalize on its people; he wanted a somewhat decentralized organizational structure which emphasized the importance of including employees in the decision-making process. Schultz wanted to place an image of Starbucks as an employer that cared for the general well-being of its employees and one that employees could be take pride in being a part of.
A key strategic objective espoused by Schultz in his original strategic vision was to transform Starbucks into “the most respected brand name in coffee and for the company to be admired for its corporateresponsibility. ” Also worth noting is the fact that after visiting Milan, Italy Schultz also made it part of his strategic vision to transform Starbucks as a remake of the Italian coffee barculture. He wanted customers to perceive a visit to a Starbuckscoffee shopas a social gathering where customers could grab a fresh-brewed beverage, meet their friends and visit.
He believed that creating this emphasis on customer “experience” could distinguish Starbucks from its competitors. Schultz’s 2010 strategic vision for Starbucks is an extension of his original vision from the 1980s which has been expanded to include more innovative and cost cutting practices. It can also be argued that some of his new strategic objectives are more prudent instead of being fully aggressive. For example, while Schultz still believed that the company should continue to pursue international expansion, he makes it evident that this should be pursued at a slower, more methodical pace.
In addition, with regards to the volume of stores in the US, he acknowledges the fact that expansion efforts were not properly coordinated with regards to the close proximities of many Starbucks shops. Therefore he closed 900 underperforming shops, three quarters of which were located three miles away from a nearby shop. The 2010 strategic vision also continued to emphasize the customer experience. He believed that employees have lost their “soul of the past” in their passion to educate customers about their products and provide customers with a quality experience .
As a result in 2008, Schultz ordered 7,100 US stores to be temporarily shut down for three business hours to provide special training for store employees. The purpose of this was to give their baristas hands-on training to aid in improving the quality of the beverages they served. It was also an effort to renew and reignite Starbucks’ culture of a customer-centric focus to help employees understand the importance of a satisfying customer experience. Lastly, much innovation and cost-cutting practices were incorporated into the 2010 strategic vision.
For example as part of a serious cost-cutting strategy, the company undertook a 1000-person cut in staffing to cut down on administrative costs from the company’s organizational support infrastructure. With regards to innovation, the company also implemented ideas such as internet-based software for scheduling work hours for store employees and new resources such as laptops for store employees. Innovation was also implemented in the products the company offers.
An example of this is the launch of VIA instant coffees and menu items designed to offer healthy breakfast choices for people with busy lifestyles such as fruit cups and healthier bakery selections. 2. Has Starbuck’s strategy evolved as the strategic vision has evolved? 3 . The Broad Differentiation strategy most closely approximates the competitive approach used by Starbucks. This is supported by the fact that the company’s target segment is not limited to a specific niche market.
As reinforced by the company’s resurging commitment to expand to global markets, it is committed to serving the needs of a broad market with widely diverse preferences. Supporting Starbuck’s use of a Broad Differentiation strategy is the fact that Starbucks tries to distinguish itself from competitors by offering a service devoted to going the extra mile to deliver a satisfying customer experience. This is congruent with the company’s theme of “just say yes” to customer requests.
Another key aspect of the Broad Differentiation strategy that Starbucks practices is the offer of a wide selection of products which emphasize differentiating attributes. An example of this would be Starbuck’s introduction of VIA Ready Brew Coffee. These were packets of coffee that could be prepared instantly by simply adding them to a cup of water. VIA coffee had the superior attribute of easy preparation while replicating the same rich full-bodied taste of fresh-brewed coffee delivered by Starbucks from its coffeehouses.
Another unique product introduced by Starbucks with a differentiating feature is the introduction of Vivanno “better-for-you” smoothies. These smoothies offered thosehealth-conscious customers with little to think about with only 250 calories, one serving of fruit, 16 grams of proten and 5 grams of fiber. 4 The key policies, practices, principles and procedures that underlie how Howard Schultz and Starbucks management have implemented and executed the company’s strategy are as follows: Emphasis on providing employees with a caring, desirable workenvironmentin which they can contribute to the success and development of the company.
It is clear that Shultz believes in taking care of his employees to win their commitment to enhancing the well-being of the company. As evidence, Schultz instilled a comprehensive benefits package which unlike the norm for other businesses, were offered not only to full-time employees but part-time employees as well. In order to emphasize the connection between employee contributions and the company’s market value, Schultz also implemented Bean Stock- Starbuck’s stock option plan.
The purpose of this was to allow each employee to become a partner and share in the success of the company to promote a positive long-term effect on the company’s operations. Applying ethical and high standards of excellence to the purchasing, roasting and fresh delivery of coffee. Evidence for Starbuck’s commitment to ethical sourcing of its coffee can be supported by its partnership with Conservation International Center to develop Coffee and Farmer Equity (C. A. F. E. ) Practices. Such practices were designed to help farmers grow coffee in ways that prevented harm to the planet.
These practices were designed to cover safe and humane working conditions (ensuring congruence withminimum wagerequirements as well as child labor provisions), and making sure that the prices Starbucks paid were sufficient to allow farmers to cover their production costs and provide for their families. In addition, the company’s resoluteness to provide excellent standards in the roasting and serving of coffee is supported by Starbuck’s rigorous training program for all its partners/baristas.
The program includes a minimum of 24 hours of training in the first two to four weeks of training and involves classes in coffee history, drink preparation, coffee knowledge and customer service. The enthusiastic development of satisfied customers all of the time. It is clear that Schultz is adamant about ensuring that customers are provided with the best experience every time they visit a Starbucks coffee shop. This meant paying careful attention to what pleases their customers.
The company employs a customer-centric culture where they are trained to take extra measures to ensure that the customer was fully satisfied, and to employ a “just say yes” theme to customer requests. Make a positive contribution to the communities in which we operate our business. In order to give back to the communities in which their numerous shops reside, the company participates in many philanthropic events which are coordinated by the Starbucks Foundation. Some of their activities include participation in local charitable projects as well as community development activities.
Recognition of profitability as essential to our success. Starbucks is aware that in being able to deliver in all of the aforementioned areas, that it will be able to enjoy the success that its shareholders desire. As a result, the company believes that it is fully accountable to performing well in each of these areas so that Starbucks and its various stakeholders can continue to “endure and thrive. ” 5. What values does Starbucks have? How well do they connect to the strategy and the way the company conducts its business? 6. Social Responsibility: * C. A. F.
E : Coffee and Farmer Equity- Partnership in which Starbucks sought to develop practices to help farmers grow high-quality coffees in ways that were good for the planet. This covered practices such as safe and humane working conditions including compliance with minimum wage requirements and child labor provisions) and environmental responsibility P359 * Definition for social responsibility- Wikipedia: Starbucks’ corporate culture involves the moral binding of partners to run the company’s operations with consideration of the well-being of others around them.
Ie: the company purchases a growing percentage of coffees that Starbucks purchases are grown organically without the use of chemical fertiliziers, pesticides and herbicides. This supports the company’s devotion to socially responsible practices. Such efforts helps in maintaining the cleanliness of groundwater and prevents degradation of environmental ecosystems nearby. embrace As indicated by its countless efforts to manage business in a way that promotes social and environmental concern, Starbucks has very strong dedication to its corporate social responsibility.
Not only has this effort to “build a company with soul” has also been ingrained in the company’s mission statement, Starbuck’s has also received wide recognition for its efforts in this area. In fact in 2010, the company was named to Corporate Responsibility’s list of “The 100 Best Corporate Citizens” for the 10th time. In addition the company has received over 25 awards for its efforts in the areas of philanthropic,community serviceand environmental activities.
As one of its most noteworthy efforts, in 1997 the company established The Starbucks Foundation to organize the company’s philanthropic undertakings. Under the Foundation, many of its coffee shops participated in regular charity events and community improvement initiatives. Starbuck’s social responsibility is also reflected in its generosity towards worthy causes. For example, in 2005 the company made a $5 million, five year commitment to aid in the relief and recovery of victims of Hurricanes Katrina and Rita.
More recently in 2010, the company also donated funding worth $1 million to support the American Red Cross’ efforts to provide relief for those who survived the earthquake in Haiti. In view of such devout efforts to these environment and humanitarian concerns, it can definitely be argued that Starbuck’s social responsibility strategy is genuine. The company’s past and continued devotion to such undertakings support this conjecture, making it evident that Starbucks is true to its cause and is not only publicizing its social responsibility strategy to instil a positive image in its takeholders. 7. Assessment of Starbuck’s financial performance during 2005-2009? 8. Assessment of Schultz’s Transformation Agenda for Starbucks during 2008-2010? (C-363-C-363) Has he done a good job since his return as Starbucks’ CEO? Why or why not? While Howard Schultz has managed to instil a very strong corporate culture based on delivering the best customer experience possible during his tenure at Starbucks, it seems that the guidance of the company under Jim Donald as CEO starting in 2006 has brought on cultural change.
The introduction of Donald as the new CEO has brought on two factors of cultural change as indicated in Figure 1 below: shifting internal conditions (brought on by Donald’s assumption of role as Starbucks CEO) and rapid growth of the firm through his introduction of an aggressive corporate culture that pursued rapid store expansion at the expense of the long-established commitment to customer service.
This new focus on aggressive growth with less emphasis on maintaining customer relationships spurred uneasiness amongst member of Starbuck’s board and eroded customer traffic in US stores starting in 2007. Investors became distressed about the company’s steadily declining stock price. As a result, in January of 2008, Starbucks asked Howard Schultz to overtake his original position as CEO. Thus he proposed to fix the inefficiencies that impaired Starbuck’s original customer-centric culture.
This initiative was set out in a very well-developed set of directives which came to be known as Schultz’s 2008-2010 transformation agenda. By analyzing the various steps necessary in trying to implement change in a problem culture (shown in Figure 2 below), one can see that Schultz’s actions and numerous objectives as set out in his agenda are congruent with those outlined in these steps.
Step1: Identify facets of the present culture that are conducive to good strategy execution and those that are not In his letter to All Starbucks Partners written in February 2008, Schultz makes it clear what he believes is necessary to return Starbuck’s at its original competitive position. Of the utmost importance is Howard Schultz’s address of the waning of Starbuck’s emphasis on providing a distinct quality customer experience. He indicates has concern by saying “We are in the people business and always have been…It means you make the difference.
We succeed in the marketplace…[by] embracing the values, guiding principles and culture of our company and bringing it to life one customer at a time. ” As a result, in his letter Schultz affirms his goal to reintroduce a renewed clarity of purpose devoted to a “laser-focused” customer experience. Another of these beliefs is his continued persistence to include all employees as partners in the effort to move the company to success. Schultz continues to encourage employees to voice their opinions on how to improve the company’s operations.
This makes evident Schultz ‘s belief in holding serious esteem of the opinions of employees. Such a practice is conductive to good strategy execution as he states: “thank you for your ideas and suggestions…keep them coming. No one knows our business and our customers better than you. ” Step 2: Specify what new actions, behaviors and work practices should be prominent in the “new” culture With regards to revitalizing the company’s original customer-centric focus, Schultz clearly states “we are not going to embrace the status quo.
Instead we will be curious, bold and innovative in our actions and, in doing so, we will exceed the expectation of our customers. ” In addition Schultz outlines several new objectives in his transformation agenda which establishes the new culture. By analyzing some of these, it becomes evident that much prudence was taken in developing these objectives to correct some of Schultz’s own past inefficiencies.
For example, instead of continuing an aggressive expansion policy, the agenda sets out to “slow the pace of new store openings in the US,” as well as “closing 900 underperforming company-operated stores in the US,” which were in close proximity of an existing Starbucks store and cannibalizing on its customer base. Step 3: Talk openly about the problems of the present culture and how new behaviors will improve company performance 9. Issues that confront the company as of mid 2010? What should management be worried about? 10. Recommendations to Schultz to sustain the company’s growth and support continued strong financial performance?