CASE STUDY

ON

STARBUCKS

CASE STUDY CONTENTS

1- INTRODUCTION

2- STARBUCKS STORY

3- CLOSING OF STORES AND JOB CUTS

4- REASON BEHIND STARBUCK DOWNFALL

5- RETURN OF HOWARD.D.SCHULTZ

6- MEASURS TAKEN TO GAIN INVESTORS CONFIDENCE

7- EFFECTS OF EXPANDING STORES

8- REBIRTH OF STARBUCK

9- SOCIAL MEDIA CAMPAIGNS

10-TRANSFORMING THE INSTORE EXPERIENCE

11-EMPLOYEES AND BARISTAS

12-ROLES OF DIFFERENT MANAGEMENT FUNCTIONS IN A CASE

13-CONCLUSION

14-QUESTIONS TO DEBATE

THE WORLDS LARGEST COFFEE

RETAILER STARBUKS PULLED

ITSELF OUT OF THE FINANCIAL

MELTDOWN OF 2008 BY

ALIGINING ITS OPERATIONS WITH

CUSTOMER DEMAND THROUGH

SOCIAL MEDIA.

INTRODUCTION

STARBUKS founded in 1971 in SEATTLE, It

has there outlet in 43 countries around the

world. It is one of the most respected brand,

winning award such as-

BEST BUSINESS

MOST ADMIRED COMPANY

100 BEST CORPORATE CITIZENS

There was a time when WALL STREET

portrayed STARBUKS as the “THIRD PLACE”

after HOME and WORK.

JOB CUTS While its quality is unquestionable, its price has always been

higher than those offered by the domestic coffee houses in

various countries.

This was one of the reasons why the company took a hit

during the economic slowdown of 2008 as customers opted

for cheaper options for their everyday coffee. STARBUKS

forced to shut 600 shops that were not making profit.

By MARCH 30, 2008 its profit had fallen 28%compared to

the same period in 2007.

In 2009, it closed another 300 stores and laid of 6700

employees.

The closer will account for 8% of all company operated US

stores and will leave the company with 6600 US outlets.

They have to eliminate as many as 12000 full and part time

positions as a result.

RETURN OF HOWARD.D.SCHULTZ

On January 8, 2008 HOWARD.D.SCHULTZ returned as a

CEO of STARBUKS after a gap of 8 years replacing JIM

DONALD.

Experience of SCHULTZ- He nurtured the

company since 1982, when it had only 4 outlets. He

had served as a CEO from 1987 to 2000.

TWO MAJOR REASONS BEHIND

COMPANY’S DOWN FALL AND

CLOSING ITS STORES

1- Economic crises in US and world economy.

2- STARBUCKS rapid expansion strategy.

These two factors distracted it from making its cafes

an inviting place with new products. It also faced

competition from Mc Donald’s which had in 2008,

started setting up coffee bars that sold espresso.

WHAT ARE THE EFFECTS AFTER

EXPANDING ITS STORES AND

CHASING GROWTH TARGETS-

1- The regular customers who valued the club like

atmosphere of relaxing over quality cup of coffee

found themselves in minority. They didn’t believe

in the speed of order rather than prefer

recognition by and conversation with baristas. As

a result many STARBUCKS veterans have now

switched to PEETS, CARIBU and other more

exclusive brand.

2- STARBUCKS introduced many new products to

broaden its appeal for EX- sandwiches.

3- Opening of new stores and launching a blizzard of

new products create only superficial growth.

WHAT DIFFERENT STARBUCKS

DID TO REGAIN THE CONFIDENCE

OF INVESTORS AND

STAKEHOLDERS

Every time when this kind of situation arises top leadership

blamed the economy and the higher cost of products. However

SCHULTZ adopted a entirely different kind of approach. He told

his employees-

“The company shouldn’t just blame the economy;

STARBUCKS heavy spending to accommodate its

expansion has created a bureaucracy that masked it

problems.”

SCHULTZ recognised the problem that STARBUKS growth

strategy is root cause behind its downfall. “Stores no longer

have the soul of the past and reflect a chain of stores Vs

the warm feeling of neighbourhood store.”

They tried to add value through innovation, offering, Wi Fi

services, creating and selling its own music and in the end they

put their focus back on the COFFEE, revitalizing the quality of

its STANDARD.

REBIRTH OF

STARBUCKS

In a departure from conventional strategies

STARBUKS soon embraced on a technology

oriented strategy. Where employees could

think freely about the organisation and

contribute in term of strategies and ideas was

forecasted. As a result a community

involvement concept was developed.

MY STARBUKS IDEA In March 2008 “MY STARBUCK IDEA” was rolled

out for customers to exchange ideas with each

other and directly with the company. As a part of it

customers were able to give opinions on everything

such as products, services, layouts, advertising

corporate social responsibility, instore music and so

on. More than 93000, ideas were shared by about 1.3

million users on social media and page view per

month rose to 5.5 million.

STARBUKS implemented over 100 ideas. Through

this initiative, the coffee retailer builds a robust fan

base. By giving customers a platform to voice their

ideas and views on the brand by responding to it, It

was able to reignite the brand trust.

MY STARBUCKS SIGNATURE

The company embraced mobile apps much

before its competitors they uses it to reach

to their customers and helped their

costumers to personalize their companies

offering to customize the company’s

offerings. The initiative “MY

STARBUCKD SIGNATURE” helps

consumers to develop their own signature

drinks (hot or cold coffee) name the drink

and share the new flavor with community.

EMPLOYEES AND BARISTAS

They are awakes an integral part of STARBUCK ONLINE and SOCIAL MEDIA COMMUNITY. It has a separate page for its employees who used to generate and debate ideas.

“THE CRISIS AT STARBUCKS WAS AS MUCH AS THE RESULT OF THE ECONOMIC RECESSION AS DUE TO EXPANSION OF THE STORE NETWORK IN THE PREVIOUS YEARS. SO TO RECONNECT WITH ITS COSTUMERS STARBUCKS USED SOCIAL MEDIA TOENGAGE INDIVIDUAL COSTUMERS WITH ITS PRODUCT AND BRANDS”

Roles of different management function

We can observe that how much important role

these management functions play in the case study.

Planning As we all know planning is the conscious determination

of future course of action.in this case we can see that in

the lack of proper planning improper situation analysis

and inappropriate decision making is the biggest reason

for the downfall of the STARBUCKS. Initially they

failed on the forecasting part and did not consider the

economic condition which resulted in decline of

revenue and their brand value.

After a considerable planning effort by a reappointed

CEO Mr. Howard Schultz STARBUCKS regained the

market share and the brand value. .

Organizing Organizing functions can be viewed as a bridge

connecting the conceptual ideas developed in

planning two specific means for accomplishing

these ideas. STARBUCKS has always followed a

strategy to blanket a region with its new stores.

This means that by opening multiple stores in the

same street or close by location it could, reduce

the customers rush in one store, and also increase

it revenue through new stores, but this strategy

seriously backfired because of lack in

implementation on the ground level and they

failed in the organizing efforts which affected its

brand image.

When Schultz returned as a CEO he brings back

the old charm of the STARBUCKS with the proper

organizing efforts and team work.

STAFFING

Staffing involves manning the organization structure through proper and effective selection, appraisal and development of the personals to fill the roles assigned to the employers/workforce. STARBUCKS wants to make every employee a part

of a worldwide family and in order to do so to make them aware of challenges of the company.

Every partner/barista hired for a retail job in a STARBUCKS and they have to master a STAR SKILL.

STARBUCKS has a very rich culture and their employee customer relationship is very strong they believe that –

`Customers can replicate the products STARBUCKS serves, but competitors can’t replicate the STARBUCKS people serving their products to customers.

\

DIRECTING When people are available in organization, they must know what they are expected to do in organization.

Directing is said to be a process in which the managers instruct, guide and oversee the

performance of the workers to achieve predetermined goals. Directing is said to be the

heart of management process. In the case of STARBUCKS

HOWARD.D.SCHULTJ is a beautiful example, how he leaded from front. He nurtured the

company since 1982, when it had only 4 outlets. He had served as a CEO from 1987 to 2000.

CONTROLING

Controlling involves identification of actual result, comparison of actual result with expected result

as set by planning process, identification of deviation between the two, if any and taking of

corrective actions so that actual result match with expected result.

This case study is a perfect application of controlling function. We can observe that

for any company expansion is a good thing but that was not in the case of

Starbucks, due to inappropriate execution of different management functions, they

failed on achieving there goals. With the proper controlling and team

efforts of all the employees and top level management they regained their MARKET

SHARE and BRAND IMAGE.

Conclusion

To conclude we can say that STARBUKS is a great

example of brand turning around its business by

returning to its roots and reconnecting directly with

its customers. While many companies are struggling

to get back to pre-2007 financial figures,

STARBUKS has shown that people are willing to

spend $5 or 3 pound every day on their LATTE and

TWEETS about it.

STARBUCKS is a company to watch out for as it

continuous to innovate, a story where every customer

is a stakeholder and vested in the company.

REFRENCE

ANJA LAMBRECHT

Assistant Professor of Marketing, LBS

John Quelch

Professor at Harvard Business School

Tripti Lochan

Chief Executive officier,VML Qais