howard schultz and starbucks
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ADIT | BIMA | ESTIE | ETGARFRISCA | HANIF | IRREZA
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• In 2000, Schultz announced
resignation as Starbucks's CEO• Returned as CEO in 2008 amidst global
downturn, managed to bring back the company’s profitability
Who is
Starbucks opens first store in Seattle’s Pike Place Market.1971
Howard Schultz joins Starbucks as Director of Retail Operations and Marketing
1982
1983Howard travels to Italy, inspired by popularity of espresso bars in Milan.
1987
Il 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
1|
Q: What makes Schultz so successful?
THEORY: How to Build a Company’s Vision
1) Core Ideology Core Values + Purpose
a) 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.”
Entrepreneurial Perspective
and Opportunity
1|
Q: What makes Schultz so successful?THEORY: How to Build a Company’s Vision
2) Envisioned Future (B-HAGS)
“To become a giant global coffee
company which leads on innovation.”
Entrepreneurial Perspective
and Opportunity
1|
Q: What makes Schultz so successful?
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 greatglobal 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 team Innovations
- 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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2)
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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)
BO
AR
DN
AR
RO
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”.• To stay competitive, they need:
Expand geographically, by adding new cafes in underserved areasChina
Expand its reach beyond coffee Tazo, Teavana
Expand its consumer packaged goods business, leveraging its global brand awareness
Thank You!