Howard Schultz and Starbucks

ADIT | BIMA | ESTIEETGAR | FRISCA | HANIF

Group 3 F121

Howard Schultz &Starbucks

Coffee Company

Magister Manajemen Universitas Indonesia

Strategic Management

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 company’s profitabilityMagister Manajemen Universitas Indonesia

Who is

Starbucks opens first store in Seattle’s Pike Place Market.1971Howard Schultz joins Starbucks as Director of Retail Operations and Marketing

1982

1983Howard travels to Italy, inspired by popularity of espresso bars in Milan.

1987Il Giornale acquires Starbucks assets and changes name to Starbucks Corporation. Opens in Chicago and Vancouver, Canada. Total stores: 17

1992Completes IPO, traded on the Nasdaq using “SBUX”. Total stores: 165

1996Opens first stores outside of North America in Japan and Singapore. Total stores: 1,015

1998Acquires Tazo, a tea company based in Oregon. Launches Starbucks.com. Total stores: 1,886

2000Schultz transitions from chairman and CEO to chairman and chief global strategist.

2008Schultz returns as CEO. Focus on customer experience and innovation. Total stores: 16,680.

2012 Starbucks has >17,600 stores and is valued at $35.6 billion.

History of Starbucks


Case Synopsis


• Human Resources- Better benefits build competitive

advantage lower turnover- Open forums between management

and employee- Training programs for baristas and

managers• Quality Control

- Standard to maintain quality of coffee products

• Continued Growth- Increase sales, expand brand awareness

and preempt potential competitors• Leveraging the Brand


Key Issuestheories & analysis

What are the Key Issues?Entrepreneurial Perspective and Opportunity

Drivers of Starbucks’ Success

Starbucks’ Competitive Advantage

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What makes Schultz so successful?

- 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?

- What is Starbucks’ most important source of competitive advantage?

- Is this advantage sustainable?


Entrepreneurial Perspective and Opportunity

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Q: What makes Schultz so successful?


THEORY: How to Build a Company’s Vision

1) Core Ideology Core Values + Purposea) Starbucks’ Core Values:

- Coffee: Quality, quality, and quality.- Partner: It’s not just about work, it’s 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.”


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THEORY: How to Build a Company’s 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


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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 customer’s 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.

THE STARBUCKS EXPERIENCE:

(Michelli, 2006)

Drivers of Starbucks’ Success2|Q1: What were the most important factors behind Starbucks’ success?

Right person in the right place

Tolerance of diversity of

culture

Visionary leader

Employee satisfaction

Kualitas employee

Built on great global

partnership

Respect for local culture

Training program

Use of IT

Tolerance of diversity of culture

- Partners- Employee- Communities- Suppliers

Employee Quality- Adaptability- Dependability- Ability to work

in a teamInnovations- Cards

- iPhone apps- Wifi & websites- New Variants


Drivers of Starbucks’ Success2|Q2: How did the company create and sustain the associations?


• Offer high quality products• Control value chain

Superior dark-roast cofee

• Innovative environment• Customer as co-producer (idea generation)

Customized espresso drink

• Great working environment• Employee training – system to recruit and training

Responsive customer service

Appealing store experience

• Provide attractive social atmosphere and convenience• Store design, planning, construction – high visibility

store and location

Drivers of Starbucks’ Success2|Q3: Why did Starbucks grow so quickly?


BO

The leader in specialty coffee

Enabler

Resource

*BO = Business Opportunity

Affordable Luxuries

• Demographic (baby boomer)• Lifestyle

• Visionary leader• Organizational

infrastructure

Customer needs

Drivers of Starbucks’ Success2|Q4: How did Starbucks manage the challenges of rapid expansion?


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.

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Starbucks’ Competitive Advantage3|Q: What is Starbucks’ most important source of competitive advantage?


Cost Leadership

Differentiation

Cost FocusDifferentiation

Focus (niche market)

BOAR

DN

ARRO

W

DIFFERENTIATIONCOST

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


Conclusion & Recommendation

Conclusion


• Howard Schultz’s 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 “third-place 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!

Howard Schultz and Starbucks

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