Magister Manajemen Universitas Indonesia

Strategic Management

Howard Schultz & Starbucks Coffee Company

Group 3 F121 ADIT | BIMA | ESTIE ETGAR | FRISCA | HANIF

Our Menu

Who is Howard Schultz? History of Starbucks Key Issues Conclusion & Recommendation

Howard Schultz?
Born in Brooklyn, NY, on July 19, 1953 Worked as appliance salesman for Hammarplast, which sold European coffeemakers in the US Director of Retail Operations and Marketing for the Starbucks Coffee Company in 1982 Founded a coffee company, Il Giornale Purchased Starbucks in 1987 and became Chairman and CEO IPO in 1992 In 2000, Schultz announced resignation as Starbucks's CEO Returned as CEO in 2008 amidst global downturn, managed to bring back the companys profitability

Who is

History of Starbucks
1971 1982 1983
Starbucks opens first store in Seattles Pike Place Market.
Howard Schultz joins Starbucks as Director of Retail Operations and Marketing Howard travels to Italy, inspired by popularity of espresso bars in Milan. Il Giornale acquires Starbucks assets and changes name to Starbucks Corporation. Opens in Chicago and Vancouver, Canada. Total stores: 17 Completes IPO, traded on the Nasdaq using SBUX. Total stores: 165

1996 1998 2000

Opens first stores outside of North America in Japan and Singapore. Total stores: 1,015 Acquires Tazo, a tea company based in Oregon. Launches Starbucks.com. Total stores: 1,886 Schultz transitions from chairman and CEO to chairman and chief global strategist. Schultz returns as CEO. Focus on customer experience and innovation. Total stores: 16,680. Starbucks has >17,600 stores and is valued at $35.6 billion.

1987 1992

2008 2012

Case Synopsis
Human Resources
Better benefits build competitive advantage lower turnover Open forums between management and employee Training programs for baristas and managers Standard to maintain quality of coffee products Increase sales, expand brand awareness and preempt potential competitors

Quality Control
-

Continued Growth
-

Leveraging the Brand

theories & analysis

Key Issues

What are the Key Issues?

1| Entrepreneurial Perspective and Opportunity
What makes Schultz so successful?

of Starbucks Success 2| Drivers - What were the most important factors behind Starbucks success?
- How did the company create and sustain the associations? - Why did Starbucks grow so quickly? - How did Starbucks manage the challenges of rapid expansion?

Competitive Advantage 3| Starbucks - What is Starbucks most important source of competitive

advantage? - Is this advantage sustainable?

1| Entrepreneurial Perspective
and Opportunity
Q: What makes Schultz so successful?
THEORY: How to Build a Companys Vision 1) Core Ideology Core Values + Purpose a) Starbucks Core Values:
Coffee: Quality, quality, and quality. Partner: Its not just about work, its passion. Store: Sense of belonging Customer: Connect with, laugh with, and uplift the lives of our customers - Neighbourhood: Every store is part of a community - Shareholders: Our success rewards the shareholders

b) Starbucks Core Purpose:

to inspire and nurture the human spirit one person, one cup and one neighborhood at a time.

1| Entrepreneurial Perspective
and Opportunity
Q: What makes Schultz so successful?
THEORY: How to Build a Companys Vision 2) Envisioned Future (B-HAGs)

To become a giant global coffee company which leads on innovation.

*Since 1987 125 stores in 5 years with annual revenues of $60M

1| Entrepreneurial Perspective
and Opportunity
Q: What makes Schultz so successful?
THE STARBUCKS EXPERIENCE: 1) Make it your own Customize the experience. 2) Everything matters Focus on every aspect of the job. Never ever lose your focus on your customers experience and point of view. 3) Surprise and delight Do the unexpected to make buying a cup of coffee enjoyable. 4) Embrace resistance Learn from your mistakes. 5) Leave your mark Do your job so that your customers remember you.
(Michelli, 2006)

2| Drivers of Starbucks Success

Q1: What were the most important factors behind Starbucks success?
Right person in the right place
Tolerance of diversity of Tolerance of culture diversity of - Partners - Employee - Communities - Suppliers

Employee satisfaction

Respect for local culture Training program Use of IT

Innovations
- Cards - iPhone apps

culture

Employee Quality - Adaptability - Dependability - Ability to work Kualitas employee in a team

Visionary leader

Built on great global partnership

- Wifi & websites - New Variants

2| Drivers of Starbucks Success

Q2: How did the company create and sustain the associations?

Superior darkroast cofee Customized espresso drink

Offer high quality products Control value chain

Innovative environment Customer as co-producer (idea generation)

Responsive customer service

Appealing store experience

Great working environment Employee training system to recruit and training

Provide attractive social atmosphere and convenience Store design, planning, construction high visibility store and location

2| Drivers of Starbucks Success

Q3: Why did Starbucks grow so quickly?

Customer needs Affordable Luxuries BO

Enabler
Demographic (baby boomer) Lifestyle

The leader in specialty coffee

Visionary leader Organizational infrastructure

*BO = Business Opportunity

Resource

2| Drivers of Starbucks Success

Q4: How did Starbucks manage the challenges of rapid expansion?

1)
2) 3) 4) 5) 6) 7)

Ambitious growth strategy in their early business plan to quickly grasp the enormous specialty coffee market and become market leader. Saturate the market! Blanket an area completely with their stores to gain foothold. Consistently offers a combination of quality, authority, and relative value. Price setting strategy: high value at moderate cost. Mail order catalogue to tap into undefined markets, with distribution through restaurants and hotels. Wholesale distribution to enhance consumer awareness. Invest heavily in recruiting leadership the people.

3| Starbucks Competitive Advantage

Q: What is Starbucks most important source of competitive advantage?

BOARD

Cost Leadership

Differentiation

Cost Focus

Differentiation Focus (niche market)

Differentiation focus: Serve niche buyer than rivals Has unique capabilities to serve needs of target buyers segment Be profitable and offer good growth potential Resources and capabilities to serve an attractive niche

NARROW

COST

DIFFERENTIATION

Conclusion & Recommendation

Conclusion
Howard Schultzs vision has led Starbucks as the leading global player in the young, growing market for specialty coffee. Starbucks has altered the rules of the game in the US coffee industry from strictly commodity to a thirdplace experience. Its continued success depends critically on their consistent ability to interest, understand, and empathize with consumers around the world.

Recommendation
Starbucks must retain their inventiveness in order to stay relevant. Maintain their philosophy to Get big but stay small. e.g. coffee education through cupping events. To stay competitive, they need: Expand geographically, by adding new cafes in underserved areas China Expand its reach beyond coffee Tazo, Teavana Expand its consumer packaged goods business, leveraging its global brand awareness

Thank You!