Starbucks founded in 1987 as a modest nine-store operation in Seattle, Washington and quickly became the premier roaster and retailer of specialty coffees in the world with over 17,400 store locations in more than 55 countries (Thompson, Peteraf, Gamble, & Strickland, 2014). The company first got its start in 1971 when three academics all decided upon opening a coffee store in touristy Pikes Place Market in Seattle. The three academics; Jerry Baldwin an English teacher, Zev Siegel a History teacher and Gordon Bowker a writer were all coffee aficionados (Thompson, Peteraf, Gamble, & Strickland, 2014). They all enjoyed, love and shared a passion for fine coffees and exotic teas as they believed they could build a clientele in Seattle that would appreciate the best coffees and teas.
The case tells us that the store was an immediate success, with sales exceeding expectations. The company ordered its coffee bean supplies from a specialty coffee retailer in Berkeley, California but towards the end of the year the partners purchased a used roaster from Holland, set up roasting operations in a nearby ramshackle building, and came up with their own blends and flavors (Thompson, Peteraf, Gamble, & Strickland, 2014). The case tells us that by 1980s the company had four Starbucks stores in the Seattle area and had been profitable every year since opening its doors. A few decades on, April 2012, annual sales were expected to exceed $13 billion in that fiscal year (Thompson, Peteraf, Gamble, & Strickland, 2014).
Howard Schultz who was vice president and general manager of U.S operations for a Swedish marker of stylish kitchen equipment and coffeemakers, decided to pay Starbucks a visit (Thompson, Peteraf, Gamble, & Strickland, 2014). The case tells us that he was awed by the violinist playing at the door, the powerful and pleasing aroma of coffees, and the wall displaying coffee beans. After just three sips of the brew, Schultz was hooked and he began talking to the owner and was intrigued by the business philosophy of the partners. After tough negotiations, Schultz was finally hired as head of marketing and oversing retail stores. Schultz was overflowed with ideas for the company and how to move the company forward (Thompson, Peteraf, Gamble, & Strickland, 2014).
A trip to Milan Italy allowed him to explore coffee bars and learned an immense deal about the Italian passion for coffee. The trip showed him the potential of Starbucks as he then approached the owners hopefully of improving the company. The owners reject Schultz ideas as they felt it would put the core values of the companies in shadows however they did allow him to test an espresso bar which became a huge success. At the time the owners did not share similar view with Schultz so he decided to leave to start his own coffee and espresso bar named II Giornale Coffee Company. This venture became a huge success and expansion across the United State happened immediately.
After much success Schultz went back and acquired Starbucks and had numerous improvement plans for the coffee company. The first of the improvement strategy was going public, followed by making Starbucks a third place where customers could enjoy coffee, surf the internet, read, or catch up with friends (Thompson, Peteraf, Gamble, & Strickland, 2014). Another Strategy was to make Starbucks a great place to work. This strategy in my opinion was one of the key strategies in the turnaround of the company. After years of success, Schultz relinquished his role as CEO and retained his position as chairmen of the company’s board of directors and assumed the role of chief strategic officer.
The sharp economic downturn in late 2008 and early 2009 that affected much of the world’s economy hit the coffee company hard. The company began experiencing slow customer traffic and a decline in stock prices, Schultz was asked to return to his role as CEO and lead a radical restricting and revitalization initiative. This case study focuses on Starbucks, with respect to human capital and resources in the pursuit of strategy implementation. There will be an analysis of how effectively the company implemented its turnaround strategy and how effectively Starbucks utilized human capital to implement its strategy. In conclusion of this paper, there will be recommendations for effectiveness in future implementations at Starbucks. Implementation of Starbuck’s Turnaround Strategy
The return of Schultz saw him focus on three different themes; strengthen the core, elevate the experience and lastly, invest and grow. The implementation included various strategies which involved; slowing the pace of opening new stores, closing underperforming stores, restructuring the company’s store operations in Australia, creating new designs for future Starbucks stores globally, enhancing the customer experience, providing additional resources and tools for employees, undertaking a rigorous cost-containment program, and renewing attention to employee training and reigniting enthusiasm on the part of employees to customer. The case tells us that 800 underperforming stores in the United States and 100 additional stores in other countries were closed. The company even trimmed its workforce by about 6,700 employees.
From further analysis it was clear to see that Schultz’s investment in growth played a huge part in the turnaround. The company implemented this strategy by choosing to open new stores in Asia with Japan and China being the primary destinations (Starbucks Corporation, 2012). Japan became the biggest foreign market while China was seen as the most significant growth opportunity (Starbucks Corporation, 2012). With the implementation process in action, the company was on the path to profitability once again and long term growth. In 2010 Sales at Starbucks operated stores worldwide improved in the most recent five quarters, customer traffic increased by 3% in United States, net revenues increased by 8.6% and net income increased from $25 million in 2009 to $217.3 million in 2010 (Thompson, Peteraf, Gamble, & Strickland, 2014). Utilizing Human Capital at Starbucks
In any business the concept of human capital can be interpreted in many ways. One of them could be looking at the person or employees as an asset; as a resource that belongs to the company and from which they can demand all its capacity and commitment (Marimuthu & Arokiasamy, 2009). In this case it is without a doubt clearly evident that Starbucks’ greatest asset was Howard Schultz and through him the employees. Schultz was able to make the company profitable on a few different occasions which the case explains thoroughly. Schultz understood the concept of what coffee means to coffee drinkers. A trip to Italy where he saw how passionate Italians were when it came to coffee shops made him understand that the success of any coffee shop depended heavily on customer’s experience. With this in mind, he made sure that part of the company’s values was to ensure every employee is well educated and knowledgeable about the company’s products.
They employees paid close attention to detail when preparing espresso drinks, eagerly communicated the company’s passion for coffee, possessed the skills and personality to deliver consistent and outstanding customer service. The employees within the company all received at least 24 hours training on topics like coffee history, drink preparation, coffee knowledge, customer service, retail skills, and Brewing the perfect cup workshop to better prepare them for their day to day task. He was able to utilize the employees further by rewarding employees in a manner that would make them want to work for the company and generate a level of enthusiastic commitment and high levels of customer service which he felt was key to the turnaround strategy.
He created a highly motivated workforce and emphasized the fact that employees can put their trust on the management team. The case gives many examples of why winning employee loyalty and commitment to the company’s mission would retain employees. In one situation, he heard an employee requested to extend health insurance benefits to part-time employees which were turned down by pervious management team. He personally proposed to the board that a reduction in turnover would reduce the cost of hiring and training, the plan was then approved and part-time employees were offered health insurance.
Schultz’s next plan was to pursue a stock option plan for employees as he believed that it would have a positive, long-term effect on the success of Starbucks (Starbucks, 2012). The idea behind this was turning employees into partners invested in company’s performance. The employees were offered stock options awards based on the success and profitability of the financial year, and the size of the employee’s base for the purchase of stock through regular payroll deductions (Starbucks, 2012). He ultimately had a clear understanding that happy employees provide exceptional customer service to customers which in turn gains customer loyalty and brings in revenue.
Based on the brief analysis which was carried out on this case study it was somewhat easy to come up with recommendations which Starbucks may wish to consider for future implementation effectiveness. The company’s growth strategy and objects have proven to be a huge success. I am a big believer in if it is not broken do not fix it. However with that said no matter how good a strategy may be it can always be improved upon. The company should continue to focus on customer satisfaction and ensuring customers have a positive store experience. This is what has given the company so much success over the years so a suggestion will be to build on this strategy. The company could survey customers to gain a better understanding of how they can improve customer experience within the various stores (Marks, 2014).
Starbucks could even go deeper with their products by having a customer data base that allows consumers to quickly get their daily coffee once in a Starbucks. This data base can be something whereby once a customer gives their phone number a list of previous coffee which they have bought would appear to the employee (Marks, 2014). I believe this will speed up the process for some customers who would like a Starbucks but do not want to wait for it. Another recommendation will be for Starbucks to create a mega store in some big cities (Koehn, n.d).
This mega store can geared towards strictly customer experience and educating customers where their coffee is from, showing how it is made and even amusement centers where customers and children can interact. This recommendation may seem unrealistic however I feel in order to maintain a competitive advantage a company must continue to think outside the box and beyond what their competitors are doing.
Koehn. N (n.d) What’s next for Starbucks. Retrieved from http://www.businessweek.com/videos/2013-04-25/what-s-next-for-starbucks Marimuthu, M. & Arokiasamy, L (2009). Human capital development and its impact on firm performance. Retrieve from