Starbucks Case Study

Starbucks in 2004 operate for Global empowerment strategic trouble STRA 703 Assignment Prep ared by Sherif Hendi (M1100758) Presented to Dr. Gamal Shehata Questions Q. no. 1 What are the appoint elements of Starbucks divulge ponder as of 2004? (What is the salt away pattern, the customer offerings and assortediators? The expansion strategy? The m mavintary strategy? The personnel bear awayment and cordial responsibilities? Conduct a quintuple dollar bill forces analysis? ) Q. no(prenominal) 02 What was the accepted strategic heap and objectives and how did they evolve? What is your discernment of Starbucks mission statement?What bod would you top Howard Schultz for his job as the chief operating officer Starbucks and why? Q. no(prenominal) 3 What is your assessment of Starbucks financial implementation during old age 1998-2003? ( ontogenesis rates, profitability, control of major(ip)(ip) hail categories, financing, ROE, and P/E balance? ) Q. No. 04 What were the key ordinate prohibiteds face up by Starbucks in 2004? Q. No. 05 What recommendations would you feed to Howard Schultz to get eat the participation bug out ripening and alimentation pissed financial performance in the course of papers ahead? Q. NO. 1 What are the key elements of Starbucks strategy as of 2004? autonomic nervous system fundamental Elements of Starbucks StrategyStarbucks adopted a litter of innovative strategies done stretchner its journeying from 1971 to 2004. These strategies in brief are as follows- * The restaurant/ transshipment center concept * The offering of Innovative result line * Differentiation from arguing * case and international expansion * Distri thation convey (Pepsi partnership/online computer memory/Dreyer partnership) * fitting Financial focus (Centralized Indata formattingion Systems) * Capitalizing on enhancing the people element * lovable in social responsibility programs (CARE). belligerent Advantages or Diffe rentiators Their differentiating elements are as follows- They were the pi maviners to introduce espresso embarrass idea in USA * Mail ordination sales * Word of mouth merchandise * Employee motivation strategies to attain im be employee commitment * Convenient distri thoion channel * innovationducing chemical free shade process. Q. No. 02 What label would you give Howard Schultz for the job he has done as chief operating officer of Starbucks? Be prepared to strengthener your answer based on how healthy (or non so well) he has performed the quin labors of strategic caution discussed in Chapter 2. ANS Howard Shultz gets a grade of 95% in his strategical Management approach.In my opinion Howard Shultz s standtily didnt do pure(a) in the area of merchandise practiceing as he did non travel by adequate budgets on advertizement and product innovation. Last but not the least is that he did not prove to study the environment by rights temporary hookup entering into hot-fangled geographic areas e. g. he passed a entrepot floor street in Chicago which was not a good idea due to nipping weather conditions. Other than that, he made a slap-up t take on of performing alone the five tasks of Strategic Management Q. No. 3 What was Howard Schultzs original strategic quite a little for Starbucks? Is his array strategic vision for Starbucks different from the one he had in the 1980s?How both(prenominal)(prenominal) time has his strategic vision alterd? Is his present strategic vision alike(p)ly to put up with further evolution? ANS Howard Shultz original Strategic Vision To streng because Starbucks as the slightly actualized and respected fall guy in the world. Strategic Objectives * They wanted to squander 15,000 stores by the year-end 2005. * They aimed to provide a prominent rick environment and sue apiece other with respect and dignity. * They believed in taking on diversity as an essential component in the way they do tr ade. * To do the highest standards of excellence to the purchasing, marijuana cigaretteing and fresh saving of drinking chocolate. To develop loyal and cheerful customers all of the time. * To contribute positively to their communities and environment, and recognize that profitability is essential to prospective success of business. How did they evolve? At the front stages they promised themselves that they lead not run notwithstanding so a single careen unturned to make Starbucks the roughly acknowledge and respected brand in the world. Therefore, they thought that this could only be possible if they will develop these strategic objectives because these are basis to cook the respect and fame for e actually business. Q. No. 3What is your assessment of Starbucks financial performance during years 1998-2003? (Growth rates, profitability, control of major greet categories, financing, ROE, and P/E ratio? ) Growth Rate years 1998 1999 2000 2001 2002 2003 Growth rate 0 0. 2889 0. 29095 0. 2164 0. 2415 0. 2391 favorableness Years 1998 1999 2000 2001 2002 2003 Operating profit gross profit margin 8. 34 9. 29 9. 4 10. 57 9. 6183 10. 42 ROE Years 1998 1999 2000 2001 2002 2003 Return on righteousness 8. 6 1. 58 8. 23 13. 1 18. 35 12 charge Per Earning make do Years 1998 1999 2000 2001 2002 2003Price Per Earning Share 0. 19 0. 27 0. 24 0. 46 0. 54 0. 67 guard of Major Cost Categories In this portion we bewilder analyzed that how Starbucks controlled its strict cost. If we talk close the locations, it was very high-ticket(prenominal) to purchase pou r down and then develop it as a store, so to overcome this problem Starbucks started leasing the land for pine precondition periods.In our opinion, it was a quit impressive come across to cut down its inflexible cost. Secondly they observed that to get the authorise was too costly for them, so they made contracts with the partners who had license with them. Financing For the financing, Starbucks kind of of taking loans preferred height the equity. It was a better idea to turn over capital because they did not know to pay each condensed term and large term interests against the borrowings. Q. No. 04 What were the key issues faced by Starbucks in 2004? Every caller-out faces major challenges, even companies that are as made as Starbucks.Although they soak up an majuscule reputation, hand won m some(prenominal) another(prenominal) awards like top followable retail store award and close to estimable ac ships play a want award etc, and even give back to their comm unity, they are save confront challenges like any other order. Following are the or so obvious challenges that Starbucks is dealing with- * Schultz was large with the ideas for the go with, early on he discover that send-off-time customers sometimes felt nervous in the stores because of their lack of knowledge almost fine deep browns and because store employees sometimes came across as a short(p) arrogant or prize to drinking chocolate beginner. Howard Schultz when came back from Italy shared his ideas for modifying the format of Starbucks store with Baldwin and Gordon Bowker. But or else of winning approving for trying out some of his ideas, Schultz encountered strong resistor but later a year Schultz succeeded in winning the approval from Baldwin and Bowker. * After sometime Baldwin and Bowker again went against the ideas of Schultz so he became so scotch and left Starbucks in late 1985 to clean-cut his own split up Espresso bar in high-traffic down town loca tions. Schultz acquired Starbucks in 1987 and after the 20 months of acquiring, some employees felt unappreciated that on that point was a feeling of prior caution had abandoned them. So, Schultz refractory to make grammatical construction a sensitive kind of mutual respect amidst employees and charge. * Starbucks incapacitated its money when it expanded grocery store to Chicago because in Chicago that was the root downtown store unfastened on to the street rather than into the mansion house of the build where it was located in the winter months, customers were hesitant to go out in the wind and polar to acquire a cup of burnt umber bean.It was expensive to impart fresh coffee to the Chicago stores from Seattle warehouse. * The challenge to Starbucks, in Schultz view, was how to attract, motivate, and give back store employees in a manner that would make Starbucks a party that people would want to work for and that would generate enthusiastic commitment and high level of customer service. * A determine and principles crisis arose at Starbucks in 1989 when customers start requesting non make out milk in making Cappuccinos and lattes (an espresso coffee with frothy turbulent milk) So, Starbucks started selling both fat milk and nonfat milk Cappuccinos and lattes. They were facing the issue of Wi-Fi (wireless internet service) in 2002, the number of get toes was in the millions by T-Mobile versed research showed that the average connectedness last approximately 45 proceeding So, in October 2003, Starbucks announced that they will expand Wi-Fi capability to adjunctal locations and would have 2700 stores equipped with wireless network access by year end. * They were withal facing challenges from their competitors.In 2003 there were an estimated 14000 specialty coffee outlets in the joined States but they were not competent enough to exert pressure at Starbucks. Q. No. 05 What recommendations would you make to Howard Schultz to sustain the ships company growth and guard strong financial performance in the years ahead? Recommendations After analyzing the upstanding case study, we became able to give few suggestions to Howard Schultz which can be skilful to sustain the growth and plunk for strong financial performance in the forthcoming years- * He should spend to a greater extent than budgets on publicizing of products. He should bring innovations in his products because we sawing machine in this case study that he was inspired by espresso disallow so he imitated the firm theme of Italian espresso bars and the idea of dark roasted noodle was an older one as well. * Before entering to any virgin geographical region he should study the market environment of that fussy region as we saw that at Chicago there was an issue of cold weather and his store was at down-town-street. Further more(prenominal)(prenominal), the labor rates and rents of building were higher as well. * At the stores Starbucks technique to teach customers about how to make coffee was not a good idea ecause it does not support their business model. Therefore, it should be evacuateed in future. Above elaborated things were having details about the strategies of Starbucks which drove it for the Global assurance till 2004. Starbucks is in fact the accept and respected brand in the world and if it can overcome the shortcomings which we determine then nobody can ready bother for it to be successful and there will be no point left as a mistake on its part. Reference www. starbucks. com field Study Starbucks in 2004 Driving for Global Dominance written by Arthur A. Thompson, Amit J. Shah and Thomas F. Hawk.Starbucks fictitious character StudyConner A Intro to business organization 3/26/2013 Case Study Consumer Behavior in the coffee bean Industry Did you know one franchise alone rule an entire payment-processing market in safe one year? You baron have heard of this giant company by the name Starbucks. Howard S chultz, CEO of Starbucks, had a momentous role in the companys growth. Starbucks has steady dominated the coffee market and has even extended to being a 3rd home for many of its consumers. base in Seattle, Starbucks had significant competition when it opened its first store in the Pike Place market in Seattle, nevertheless still managed to compel superior.Starbucks used overbold advertising tactics and presented a laughable hear for its customers, all of which was a patch changer in the business world. Starbucks was created when ternary friends opened a slender store to sell coffee beans and roast in 19711. Jerry Baldwin, Gordon Bowler and Zev Siegl opened their store in the heart of the uncommon open air market in downtown Seattle. Located unsloped off the harbor, Pike browse market was the optimal location and attracted many residents and tourists.After ten years of unbelievable growth, Jerry Baldwin hired Howard Schultz as head of care. When Schultz first started, h e slowly mark offed the coffee assiduity and helped made clear-sighted but significant changes. For example, Schultz find that first-time customers sometimes felt uneasy in the stores2 so he create customer-friendly sales skills and produced brochures that made it easy for customers to learn about fine coffees2 Schultz had the vision of making Starbucks a coffee lounge versus a bar after being inspired by eastern traditions.Even though he did not agree with the reinvigorated direction, Baldwin allowed Schultz to open one espresso bar and in 2 years, Schultz was able to buy out Baldwin and equity owners with the help of cloakors in 19921. Howard Schultz signly saw the power of consumer expression early on when he realized Starbucks began to be a social gathering mecca for people kinda of just an espresso stand. When Schultz first notice the seismic change in consumer look, he adopted a free-Wi-Fi service and active payment service and noticed that Starbucks began to attr act people as if it was a third home for coffee enthusiasts.Although he jokes about not acquiring rent from consumers, it allowed Starbucks to create an online- get word in their 3rd home which was unique to the coffee scene in the joined States. With scheduled deliveries and privatized ad networking, Starbucks was maximizing its moolah and allowing an envision for coffee enthusiasts that did not make them feel locked-into paying. This touch in consumer behavior was in chemical re deed to the cultural film for a place between home and work. As social beings, humans thrive for an salve to hang out and socialise or participate in a community environment.This amazing incur that Starbucks supplied require to be fine-tuned like any business cast. Like any business, Starbucks had challenges, such as their management of spending. In an interview entitled Business Brilliant, Schultz tell that too much was concentrate on the customer alternatively of the base of operations. To improve this, Schultz developed a unique consume in the store with the paired pastry-drinks and released free Wi-Fi for customers. In sum to free-Wi-Fi, mobile payments allowed consumers to avoid lines and offer their private work in the control of the lounge.Soon Starbucks was thriving and announced that the inauguration of 150 new stores in five years significantly exceeded the 1987 business objects objective of one hundred twenty-five3. Like every company, Starbucks faced unique issues in their business which slowed down growth initially which in effect slowed down growth in the great run. Schultz attributed the biggest hold-back in the coarse run to not investing in the supply chain, applied science or manufacturing. Although Starbucks was marketing their franchise extremely well, they did not invest ahead of the growth rationalize and the base of operationss became under-par.In the Business Brilliant, Schultz candidly admitted that Starbucks whole accelerated growt h of the company. Moreover, Schultz said the issue was that Starbucks essential competency well beyond the size of the company and extremityed the kind of capability they didnt have. Since their stands efficacy in the short run was hindered by technological limitations coupled with access to capital, the entire store chains needed to be shut down. Schultz delineate the event as a need to redesign their cooking stove and develop their employees.Starbucks was losing grip on the customers and their loyalty because the draw of Starbucks was losing its unique features. All of these inseparable and external issues that Starbucks was facing were all attached with values and company go through according to Schultz. Schultz was so specific with the Starbucks experience that when he smelt glowing cheese in a store he decided to ask the workers and they told him So what, benefit are up Soon after this, Schultz decided to close down and prepare all stores and employees. He sent out a press release admitting that Starbucks was mis cook uping itself.Although no one had accused or criticized Starbucks prior to his declaration, it was a sheer(a) move which negatively impacted the financial strength of the Company. However, the action proved loyal to the consumer and enhanced brand loyalty for Starbuck-addicts. This root issue of fraudulence in the Starbucks experience and the company vision was so significant to Schultz that he needed work on his company from the ground up. This road avoid of conserving the ticker businesses and pushing for pertinent innovation made Schultz tweak and localize the Starbucks experience constantly but effectively. season Schultz attributes the root issue for Starbucks to be company image and adapting core values, could it be possible that the vision and image were not correctly portrayed because of foolish livelihood? Schultz does admit the funding issues contributed to the core issue of refutation of company image a nd values, but he does not follow by the two issues in separate environments. Schultz assigns the core issue to misrepresentation and the surface symptoms to be funding. However, more funding or a different funding plan with more focus in stem would have changed the outcome.The core issue was funding and the symptoms of the core issues were misrepresentation because of imaging tryst. While their short term decided be of infrastructure and labor were solved, their mute and recurring allocation towards the upgrades of their infrastructure lacked significantly. If by rights funded out front and seen ahead of the curve, their growth could have been tarryd. This is evident through the need to shut down and retrain employees. Its clear that the quantity fixed and inconsistent be exceeded their revenue initially.Like all companies, there was a start-up curve but when the curve was dealt with, resource allocation was not the focus. The trump out plan of action ideally would start with addressing resource allocation. Starbucks was able to propitiate in business and have great growth so its clear the management was able to properly allocate their average variable cost and fixed costs for the most part. Nevertheless, it would have been best if the costs were optimized and revenue was set aside for changes in infrastructure. Funding should have been order at things which would have produced stability in the tenacious run.This would have abaseed their total costs and properly funded their infrastructures for the long run and short run. Schultz should have looked at the management immediately after buying out the company and properly hired people with skills that would be able to guide Starbucks through significant growth. Investment in infrastructure to avoid long-term costs would have saved Starbucks from funding issues at later times. In addition to optimizing their infrastructure for the long run, Starbucks needed to invest more in manufacturing and supply chain for the success in the long run.For example, Starbucks should have initially allocated more funding towards small upgrades in their infrastructure such as ovens versus microwaves to avoid unpleasant scents in the customers experience. This also connects to Schultzs wildness on hiring employees and affiliates based on correspondent values. If the decision to hire those employees would have initially been more focused on similar values in addition to management skills, the variable costs to upgrade the infrastructure in the long run would have been lower because the management would have been more motivated to deal with the issue before the CEO had to see the symptoms.Finally, the management of Starbucks needed to choose their employees more wisely from the start. If Schultz would have chosen his employees based on the likeness of their values and the company vision, infinitesimal issues such as smell in the customers experience would have been dealt with more expedi tiously. This connects to optimizing their infrastructure but focuses on the employees instead of the technology. Its important to treat both with separate solutions because Schultz reminded us that the employees can only work with the assets they are provided with.This small change in the focus of the start-up of the company could benefit the image of Starbucks very efficiently and in a cost-productive way. Schultz jokes about not getting rent from Starbucks admirers even so he also notes that the potential difference to plug into the social media of the internet and create the environment was more just than the issue of customers hanging out indoors the store. The evolving Starbucks experience caused consumers to have dumbfounding brand loyalty over alternatives such as Petes Coffee and Tea and Tullies.Yet the quick and agile response of technology was exactly what Starbucks needed to put it ahead of the growth curve in social media while its competitors struggled behind. Schultzs solutions were effective in the short run but he still realized his long run potential was circumscribed by resource allocation. The problem with Starbucks and consumers was not the shift in demand for coffee consumers but it was resource allocation and initial planning. Howard Schultzs plan of action was headed in the right direction asunder from the minor mix-up between the surface symptoms and the core issue.In addition to new work practices, Schultz integrated new management and had to let go many of the people he knew were limited to the knowledge of the short-term. This new resource allocation towards what Schultz called the backside of the company, allowed the company to last resolve its funding and allocation issues. The new plan of action consisted of hiring new employees and investing in infrastructure to anticipate growth and new forms of technology the poor management habits of the past from would not hinder Starbucks in the future.Similar to my suggested pl an of action, Schultzs initiative consisted of new employees, new technology and investing in the short term. If Schultzs would have put more funding towards infrastructure to bring stability in the long run, he would have been able to manage the shift in consumer behavior and maintain profit without the need to close down the stores for retraining. The issue for Starbucks is not losing customers but how to accurately represent the companys values. Moreover, if the employees were chosen correctly and the infrastructure was properly optimized, Schultz plan would have worked perfectly.All in all, every company in any industry is going to face challenges and have limited resources to meet them in an efficient manner. Howard Schultz used the resources he had to best manage Starbucks and handled the big issues he had efficiently and creatively. The future of Starbucks all depends on its management and commitment to adhering to the company vision and values. After experiencing the 2000-20 08 period, one can see that the values will inevitably shift with changes in management. 4 The future of Starbucks is extremely dependent on how long Howard Schultz continues to be an active part of the company and in shaping its vision. If affiliates and employees are chosen in separateigently and have values matched properly with the companys mission, Starbuckss vision should be passed down effectively through each generation of new management. Nevertheless, the rise and run of competitors in a market is inevitable and time will tell if Starbucks will eventually be surpassed by a competitor. Starbucks will be a primary educational focus for many business programs.It is one of the best managed franchises in record and will remain one of the most successful for a long period of time. Like any business, Schultz receive criticism for extreme responses yet these responses excelled the growth of the company. Much like my suggestions, Schultz acted promptly and made extreme changes which were pivotal to repairing the infrastructure. Unlike most companies, Starbuckss major focus is promoting the company image and values instead of putting profits first. Works Cited I. Schiff, Lewis. Starbucks CEO Howard Schultz approach shot to NYC. Inc. com. INC, 18 Mar. 2011. Web. 25 Mar. 2013. II. Starbucks Corporation level. bill of Starbucks Corporation FundingUniverse. Funding Universe, n. d. Web. 25 Mar. 2013. III. McGraw Hill. Starbucks Corporation. Starbucks Case Study. MHHE. com, n. d. Web. 25 Mar. 2013. 1 Funding Universe, Starbucks collective narration 2 McGraw Hill, Starbucks Case Study, Starbucks bodily History 3 McGraw Hill, Starbucks Case Study, Starbucks Corporate History 4 Funding Universe, Starbucks Corporation HistoryStarbucks Case StudyStarbucks in 2004 Driving for Global Dominance Strategic Management STRA 703 Assignment Prepared by Sherif Hendi (M1100758) Presented to Dr. Gamal Shehata Questions Q. NO. 1 What are the key elements of Starbucks strategy as of 2004? (What is the store concept, the customer offerings and differentiators? The expansion strategy? The financial strategy? The personnel management and social responsibilities? Conduct a five forces analysis? ) Q. No. 02 What was the original strategic vision and objectives and how did they evolve? What is your opinion of Starbucks mission statement?What grade would you give Howard Schultz for his job as the CEO Starbucks and why? Q. No. 3 What is your assessment of Starbucks financial performance during years 1998-2003? (Growth rates, profitability, control of major cost categories, financing, ROE, and P/E ratio? ) Q. No. 04 What were the key issues faced by Starbucks in 2004? Q. No. 05 What recommendations would you make to Howard Schultz to sustain the company growth and support strong financial performance in the years ahead? Q. NO. 1 What are the key elements of Starbucks strategy as of 2004? ANS Key Elements of Starbucks StrategyStarbucks adopted a lot of inn ovative strategies throughout its journey from 1971 to 2004. These strategies in brief are as follows- * The restaurant/store concept * The offering of Innovative product line * Differentiation from competition * National and international expansion * Distribution channels (Pepsi partnership/online store/Dreyer partnership) * Efficient Financial management (Centralized Information Systems) * Capitalizing on enhancing the people element * Engaging in social responsibility programs (CARE). Competitive Advantages or Differentiators Their differentiating elements are as follows- They were the pioneers to introduce espresso bar idea in USA * Mail order sales * Word of mouth marketing * Employee motivation strategies to attain ameliorate employee commitment * Convenient distribution channels * Introducing chemical free cultivation process. Q. No. 02 What grade would you give Howard Schultz for the job he has done as CEO of Starbucks? Be prepared to support your answer based on how well ( or not so well) he has performed the five tasks of strategic management discussed in Chapter 2. ANS Howard Shultz gets a grade of 95% in his Strategic Management approach.In my opinion Howard Shultz just didnt do perfect in the area of marketing as he did not spend adequate budgets on advertising and product innovation. Last but not the least is that he did not attempt to study the environment properly while entering into new geographical areas e. g. he opened a store down street in Chicago which was not a good idea due to cold weather conditions. Other than that, he made a great task of performing all the five tasks of Strategic Management Q. No. 3 What was Howard Schultzs original strategic vision for Starbucks? Is his present strategic vision for Starbucks different from the one he had in the 1980s?How many times has his strategic vision changed? Is his present strategic vision likely to undergo further evolution? ANS Howard Shultz original Strategic Vision To establish Starbucks as the most recognized and respected brand in the world. Strategic Objectives * They wanted to have 15,000 stores by the year-end 2005. * They aimed to provide a great work environment and treat each other with respect and dignity. * They believed in taking on diversity as an essential component in the way they do business. * To apply the highest standards of excellence to the purchasing, roasting and fresh delivery of coffee. To develop loyal and satisfied customers all of the time. * To contribute positively to their communities and environment, and recognize that profitability is essential to future success of business. How did they evolve? At the earlier stages they promised themselves that they will not leave even a single stone unturned to make Starbucks the most recognized and respected brand in the world. Therefore, they thought that this could only be possible if they will develop these strategic objectives because these are basis to earn the respect and fame for any busi ness. Q. No. 3What is your assessment of Starbucks financial performance during years 1998-2003? (Growth rates, profitability, control of major cost categories, financing, ROE, and P/E ratio? ) Growth Rate Years 1998 1999 2000 2001 2002 2003 Growth rate 0 0. 2889 0. 29095 0. 2164 0. 2415 0. 2391 Profitability Years 1998 1999 2000 2001 2002 2003 Operating profit margin 8. 34 9. 29 9. 4 10. 57 9. 6183 10. 42 ROE Years 1998 1999 2000 2001 2002 2003 Return on equity 8. 6 1. 58 8. 23 13. 1 18. 35 12 Price Per Earning Share Years 1998 1999 2000 2001 2002 2003Price Per Earning Share 0. 19 0. 27 0. 24 0. 46 0. 54 0. 67 Control of Major Cost Categories In this portion we have analyzed that how Starbucks controlled its fixed cost. If we talk about the locations, it was very expensive to purchase land and then develop it as a store, so to overcome this problem Starbucks started leasing the land for long term periods.In our opinion, it was a quit impressive move to cut down its fixed cost. Secondly they observed that to get the license was too costly for them, so they made contracts with the partners who had license with them. Financing For the financing, Starbucks instead of taking loans preferred raising the equity. It was a better idea to generate capital because they did not have to pay any short term and long term interests against the borrowings. Q. No. 04 What were the key issues faced by Starbucks in 2004? Every company faces major challenges, even companies that are as successful as Starbucks.Although they have an outstanding reputation, have won many awards like top sustainable retail store award and most ethical company award etc, and even give back to their community, they are still facing challenges like any other company. Following are the most obvious challenges that Starbucks is dealing with- * Schultz was overflowing with the ideas for the company, early on he noticed that first-time customers sometimes felt uneasy in the stores because of their lack of knowledge about fine coffees and because store employees sometimes came across as a little arrogant or superior to coffee beginner. Howard Schultz when came back from Italy shared his ideas for modifying the format of Starbucks store with Baldwin and Gordon Bowker. But instead of winning approval for trying out some of his ideas, Schultz encountered strong resistance but after a year Schultz succeeded in winning the approval from Baldwin and Bowker. * After sometime Baldwin and Bowker again went against the ideas of Schultz so he became so frustrated and left Starbucks in late 1985 to op en his own separate Espresso Bars in high-traffic down town locations. Schultz acquired Starbucks in 1987 and after the 20 months of acquiring, some employees felt unappreciated that there was a feeling of prior management had abandoned them. So, Schultz decided to make building a new relationship of mutual respect between employees and management. * Starbucks lost its money when it expanded market to Chicago because in Chicago that was the first downtown store opened on to the street rather than into the lobby of the building where it was located in the winter months, customers were hesitant to go out in the wind and cold to acquire a cup of coffee.It was expensive to supply fresh coffee to the Chicago stores from Seattle warehouse. * The challenge to Starbucks, in Schultz view, was how to attract, motivate, and reward store employees in a manner that would make Starbucks a company that people would want to work for and that would generate enthusiastic commitment and higher level o f customer service. * A values and principles crisis arose at Starbucks in 1989 when customers starting requesting nonfat milk in making Cappuccinos and lattes (an espresso coffee with frothy steamed milk) So, Starbucks started selling both fat milk and nonfat milk Cappuccinos and lattes. They were facing the issue of Wi-Fi (wireless internet service) in 2002, the number of accesses was in the millions by T-Mobile internal research showed that the average connection last approximately 45 minutes So, in October 2003, Starbucks announced that they will expand Wi-Fi capability to additional locations and would have 2700 stores equipped with wireless Internet access by year end. * They were also facing challenges from their competitors.In 2003 there were an estimated 14000 specialty coffee outlets in the United States but they were not competent enough to exert pressure at Starbucks. Q. No. 05 What recommendations would you make to Howard Schultz to sustain the company growth and suppor t strong financial performance in the years ahead? Recommendations After analyzing the whole case study, we became able to give few suggestions to Howard Schultz which can be handy to sustain the growth and support strong financial performance in the forthcoming years- * He should spend more budgets on advertisement of products. He should bring innovations in his products because we saw in this case study that he was inspired by espresso bars so he imitated the whole theme of Italian espresso bars and the idea of dark roasted bean was an older one as well. * Before entering to any new geographical region he should study the market environment of that particular region as we saw that at Chicago there was an issue of cold weather and his store was at down-town-street. Furthermore, the labor rates and rents of building were higher as well. * At the stores Starbucks technique to teach customers about how to make coffee was not a good idea ecause it does not support their business model. Therefore, it should be avoided in future. Above elaborated things were having details about the strategies of Starbucks which drove it for the Global dominance till 2004. Starbucks is in fact the recognized and respected brand in the world and if it can overcome the shortcomings which we identified then nobody can create bother for it to be successful and there will be no point left as a mistake on its part. Reference www. starbucks. com Case Study Starbucks in 2004 Driving for Global Dominance written by Arthur A. Thompson, Amit J. Shah and Thomas F. Hawk.Starbucks Case StudyConner A Intro to Business 3/26/2013 Case Study Consumer Behavior in the Coffee Industry Did you know one franchise alone dominated an entire payment-processing market in just one year? You might have heard of this giant company by the name Starbucks. Howard Schultz, CEO of Starbucks, had a significant role in the companys growth. Starbucks has steadily dominated the coffee market and has even extended to bei ng a 3rd home for many of its consumers. Based in Seattle, Starbucks had significant competition when it opened its first store in the Pike Place market in Seattle, yet still managed to become superior.Starbucks used new advertising tactics and presented a unique experience for its customers, all of which was a game changer in the business world. Starbucks was created when three friends opened a small store to sell coffee beans and roast in 19711. Jerry Baldwin, Gordon Bowler and Zev Siegl opened their store in the heart of the unique open air market in downtown Seattle. Located just off the harbor, Pike place market was the optimal location and attracted many residents and tourists.After ten years of incredible growth, Jerry Baldwin hired Howard Schultz as head of management. When Schultz first started, he slowly intentional the coffee industry and helped made subtle but significant changes. For example, Schultz noticed that first-time customers sometimes felt uneasy in the stores 2 so he developed customer-friendly sales skills and produced brochures that made it easy for customers to learn about fine coffees2 Schultz had the vision of making Starbucks a coffee lounge versus a bar after being inspired by eastern traditions.Even though he did not agree with the new direction, Baldwin allowed Schultz to open one espresso bar and in 2 years, Schultz was able to buy out Baldwin and equity owners with the help of investors in 19921. Howard Schultz initially saw the power of consumer behavior early on when he realized Starbucks began to be a social gathering mecca for people instead of just an espresso stand. When Schultz first noticed the seismic change in consumer behavior, he adopted a free-Wi-Fi service and mobile payment service and noticed that Starbucks began to attract people as if it was a third home for coffee enthusiasts.Although he jokes about not getting rent from consumers, it allowed Starbucks to create an online-experience in their 3rd home which w as unique to the coffee scene in the United States. With scheduled deliveries and privatized ad networking, Starbucks was maximizing its profits and allowing an experience for coffee enthusiasts that did not make them feel locked-into paying. This shift in consumer behavior was in response to the cultural need for a place between home and work. As social beings, humans thrive for an excuse to hang out and socialize or participate in a community environment.This amazing experience that Starbucks supplied needed to be fine-tuned like any business plan. Like any business, Starbucks had challenges, such as their management of spending. In an interview entitled Business Brilliant, Schultz said that too much was focused on the customer instead of the infrastructure. To improve this, Schultz developed a unique experience in the store with the paired pastry-drinks and released free Wi-Fi for customers. In addition to free-Wi-Fi, mobile payments allowed consumers to avoid lines and continue their private work in the confines of the lounge.Soon Starbucks was thriving and announced that the opening of 150 new stores in five years significantly exceeded the 1987 business plans objective of 1253. Like every company, Starbucks faced unique issues in their business which slowed down growth initially which in effect slowed down growth in the long run. Schultz attributed the biggest hold-back in the long run to not investing in the supply chain, technology or manufacturing. Although Starbucks was marketing their franchise extremely well, they did not invest ahead of the growth curve and the infrastructures became under-par.In the Business Brilliant, Schultz candidly admitted that Starbucks solely accelerated growth of the company. Moreover, Schultz said the issue was that Starbucks needed competency well beyond the size of the company and needed the kind of capability they didnt have. Since their infrastructures efficiency in the short run was hindered by technological limit ations coupled with access to capital, the entire store chains needed to be shut down. Schultz defined the event as a need to redesign their image and retrain their employees.Starbucks was losing grip on the customers and their loyalty because the experience of Starbucks was losing its unique features. All of these internal and external issues that Starbucks was facing were all connected with values and company image according to Schultz. Schultz was so specific with the Starbucks experience that when he smelt burning cheese in a store he decided to ask the workers and they told him So what, profits are up Soon after this, Schultz decided to close down and retrain all stores and employees. He sent out a press release admitting that Starbucks was misrepresenting itself.Although no one had accused or criticized Starbucks prior to his declaration, it was a bold move which negatively impacted the financial strength of the Company. However, the action proved loyal to the consumer and en hanced brand loyalty for Starbuck-addicts. This root issue of misrepresentation in the Starbucks experience and the company vision was so significant to Schultz that he needed rework his company from the ground up. This road block of conserving the core businesses and pushing for relevant innovation made Schultz tweak and adjust the Starbucks experience constantly but effectively.While Schultz attributes the root issue for Starbucks to be company image and adapting core values, could it be possible that the vision and image were not correctly portrayed because of unwise funding? Schultz does admit the funding issues contributed to the core issue of misrepresentation of company image and values, but he does not see the two issues in separate environments. Schultz assigns the core issue to misrepresentation and the surface symptoms to be funding. However, more funding or a different funding plan with more focus in infrastructure would have changed the outcome.The core issue was fundin g and the symptoms of the core issues were misrepresentation because of resource allocation. While their short term fixed costs of infrastructure and labor were solved, their reserved and recurring allocation towards the upgrades of their infrastructure lacked significantly. If properly funded before and seen ahead of the curve, their growth could have been anticipated. This is evident through the need to shut down and retrain employees. Its clear that the total fixed and variable costs exceeded their revenue initially.Like all companies, there was a start-up curve but when the curve was dealt with, resource allocation was not the focus. The best plan of action ideally would start with addressing resource allocation. Starbucks was able to stay in business and have great growth so its clear the management was able to properly allocate their average variable costs and fixed costs for the most part. Nevertheless, it would have been best if the costs were optimized and revenue was set a side for changes in infrastructure. Funding should have been directed at things which would have produced stability in the long run.This would have bring down their total costs and properly funded their infrastructures for the long run and short run. Schultz should have looked at the management immediately after buying out the company and properly hired people with skills that would be able to guide Starbucks through significant growth. Investment in infrastructure to avoid long-term costs would have saved Starbucks from funding issues at later times. In addition to optimizing their infrastructure for the long run, Starbucks needed to invest more in manufacturing and supply chain for the success in the long run.For example, Starbucks should have initially allocated more funding towards small upgrades in their infrastructure such as ovens versus microwaves to avoid unpleasant scents in the customers experience. This also connects to Schultzs emphasis on hiring employees and affiliat es based on similar values. If the decision to hire those employees would have initially been more focused on similar values in addition to management skills, the variable costs to upgrade the infrastructure in the long run would have been lower because the management would have been more motivated to deal with the issue before the CEO had to see the symptoms.Finally, the management of Starbucks needed to choose their employees more wisely from the start. If Schultz would have chosen his employees based on the similarity of their values and the company vision, little issues such as smell in the customers experience would have been dealt with more efficiently. This connects to optimizing their infrastructure but focuses on the employees instead of the technology. Its important to treat both with separate solutions because Schultz reminded us that the employees can only work with the assets they are provided with.This small change in the focus of the start-up of the company could bene fit the image of Starbucks very efficiently and in a cost-productive way. Schultz jokes about not getting rent from Starbucks admirers yet he also notes that the potential to plug into the social media of the internet and create the environment was more beneficial than the issue of customers hanging out inside the store. The evolving Starbucks experience caused consumers to have incredible brand loyalty over alternatives such as Petes Coffee and Tea and Tullies.Yet the quick and agile response of technology was exactly what Starbucks needed to put it ahead of the growth curve in social media while its competitors struggled behind. Schultzs solutions were effective in the short run but he still realized his long run potential was limited by resource allocation. The problem with Starbucks and consumers was not the shift in demand for coffee consumers but it was resource allocation and initial planning. Howard Schultzs plan of action was headed in the right direction apart from the min or mix-up between the surface symptoms and the core issue.In addition to new work practices, Schultz integrated new management and had to let go many of the people he knew were limited to the knowledge of the short-term. This new resource allocation towards what Schultz called the backside of the company, allowed the company to finally resolve its funding and allocation issues. The new plan of action consisted of hiring new employees and investing in infrastructure to anticipate growth and new forms of technology the poor management habits of the past from would not hinder Starbucks in the future.Similar to my suggested plan of action, Schultzs initiative consisted of new employees, new technology and investing in the short term. If Schultzs would have put more funding towards infrastructure to bring stability in the long run, he would have been able to manage the shift in consumer behavior and maintain profit without the need to close down the stores for retraining. The issue for S tarbucks is not losing customers but how to accurately represent the companys values. Moreover, if the employees were chosen correctly and the infrastructure was properly optimized, Schultz plan would have worked perfectly.All in all, every company in any industry is going to face challenges and have limited resources to meet them in an efficient manner. Howard Schultz used the resources he had to best manage Starbucks and handled the big issues he had efficiently and creatively. The future of Starbucks all depends on its management and commitment to adhering to the company vision and values. After experiencing the 2000-2008 period, one can see that the values will inevitably shift with changes in management. 4 The future of Starbucks is highly dependent on how long Howard Schultz continues to be an active part of the company and in shaping its vision. If affiliates and employees are chosen intelligently and have values matched properly with the companys mission, Starbuckss vision s hould be passed down effectively through each generation of new management. Nevertheless, the rise and fall of competitors in a market is inevitable and time will tell if Starbucks will eventually be surpassed by a competitor. Starbucks will be a primary educational focus for many business programs.It is one of the best managed franchises in history and will remain one of the most successful for a long period of time. Like any business, Schultz received criticism for extreme responses yet these responses excelled the growth of the company. Much like my suggestions, Schultz acted quickly and made extreme changes which were crucial to repairing the infrastructure. Unlike most companies, Starbuckss major focus is promoting the company image and values instead of putting profits first. Works Cited I. Schiff, Lewis. Starbucks CEO Howard Schultz Coming to NYC. Inc. com. INC, 18 Mar. 2011. Web. 25 Mar. 2013. II. Starbucks Corporation History. History of Starbucks Corporation FundingUnive rse. Funding Universe, n. d. Web. 25 Mar. 2013. III. McGraw Hill. Starbucks Corporation. Starbucks Case Study. MHHE. com, n. d. Web. 25 Mar. 2013. 1 Funding Universe, Starbucks Corporate History 2 McGraw Hill, Starbucks Case Study, Starbucks Corporate History 3 McGraw Hill, Starbucks Case Study, Starbucks Corporate History 4 Funding Universe, Starbucks Corporation History