Problem Statement
Starbucks as an organization since its launch in 1987 has become the world’s premier roaster and retailer of coffee. The issue discussed in the case study with regards to Starbucks Evolving into a Dynamic Global Organization in 2012, is based on the challenges the company faced due to the economic downturn in late 2008 and all of 2009.
The impact on Starbucks was significant and thus due to declining sales, approximately 800 stores in US and 100 overseas were closed. New stores plans were shelved with a cost effective operation initiated.
Analysis
Great organizations when facing issues in terms of operations, it is then that their investment in creating a culture based on empowerment, teamwork and motivation which lead them through a difficult time in an effective manner.
Starbucks is a moving illustration of an organization based on a great culture, which separates them from the rest of the pack and has made them an icon in the industry.
With regards to the problem statement of the case study, it is evident that besides a great culture with empowered employees and all the energy, it is the leadership who are responsible to foster the culture.
At Starbucks the CEO Howard Schultz, founder and chairman, is the one leading the company to great heights by fostering a great culture, and as elaborated by Eric and Yvonne (2011) it is the culture at Starbucks that has been recognized as the primary reason for the company’s great success and not its coffee.
In view of the problem statement i.e. the retrenchment moves at Starbucks, the biggest issue that Howard Shultz was affronted with, was how to elevate the customer experience at Starbucks.
As stated above at Starbucks, the key innovation is its company culture the big idea of Howard Schultz was to connect networking over a cup of coffee and the vision was to create a space flanked by home and work in a serene yet exciting store environment.
The steps taken by Howard Schultz were in view of the strategic initiative to get out of the rut due to the economic breakdown effects on Starbucks operations, the following steps were taken:
- Al the Starbucks stores worldwide were closed for three hours for a special retraining program in view of reconnecting the emotive connect of the employees with the customers.
- The Hands-On training experience in essence detailed the employees on delivering superior customer service and pleasing customers the Starbucks way.
- Best Practices shared to global stores.
- Stimulating the menu with refreshing offerings at the stores.
- Environmental friendly designs for future Starbucks stores.
- More resources at the store’s disposal, which includes, laptops, and internet based software’s for work hours for store employees.
- New point-of-sale system for all stores in the US, Canada and the UK.
- Product innovation and differentiation
- Vision of adding more stores both in US and worldwide.
The above mentioned strategic initiatives helped Starbucks combat the gloomy economic environment of 2008 and 09 and make a forceful recovery in fiscal year 2010 and 2011, which in essence as stated by Howard Schultz in describing Starbuck’s performance for the second quarter of fiscal 2012, demonstrated the strength of Starbuck’s business.
The strategic initiatives adopted in a true sense helped the company in evolving into a dynamic global organization in view of the fact that the company once again delivered sustained growth in terms of profits and revenues in 2012.
It is important to dwell in a bit of history in relation to the strategic initiatives taken by Howard Schultz to rectify the problem that Starbuck faced; when the company was launched the four pillars on which Starbucks were based were in essence the guiding principles in the form of the mission (Richard Goldstein, 2013).
The four pointers are as follows:
- Focusing on every cup and customer in view of making the customers visit an experience.
- No compromise on the quality of the coffee.
- And most importantly, an environment of work to foster teamwork and respect which in essence helped in creating the culture that breeds success.
As a consequence, the management’s role, as indicated above has been of great significance in creating a way forward in sustaining the exceptional brand that Starbuck have developed into.
Alternative Course of Action
In view of an alternative course of action for the problem statement the following are some suggestions by the author to counter the problem statement from a different perspective.
As one of the leading retailer committed to adding value in the lives the consumers they serve on a constant basis, the course of action should be such that they are infused in all the operations and processes.
The actions should take into account all the major partners of Starbucks that is the customers, communities, partners, and shareholders who have a significant impact on the strategic direction of the company.
One course of action that could have been implemented is ‘Diversification’, the main business function which helped Starbucks gain massive ground in US and internationally is the coffee business; still they have productively and effectively diversified into other businesses in a seamless manner.
Ice-cream, Music and Cd’s, Tea, loyalty cards etc, have in essence transformed Starbucks into a commercial international retailer of great repute as stated in the case study.
The recession created a massive vacuum in the pockets and minds of the consumers in terms of the shopping philosophy and is the primary factor which contributed to the loss of sales for Starbucks.
Another course of action taken was to focus on the Online Retail aspect with tactical strategy (e.g. buy one get one free) implemented to increase step in the stores.
The online and digital space has helped create new segments with the advent of technology, and online retail has been blossoming even during times of strife i.e. recession.
Starbucks could have focused on the online segment to connect with the consumers on a constant basis, with the new age consumer’s tech savvy it is imperative to work out a marketing strategy which revolves profoundly around the medium.
Another course of action could have been the utilization of on ground Brand Activations in targeted avenues for Starbucks consumers.
The intent is to activate the product in the minds of the consumers through sampling and creative execution to create a feel good factor in bad times for the consumers.
Colleges, Universities, Malls, Parks to be targeted in this course of action to keep and create a connect with the consumers and lure them in the stores.
Recommendation
The most important piece of the puzzle to be a success in the coffee business is the ‘customer’.
The alternative course of action which the author feels could have been implemented to shake the effects of retrenchment could have been the ‘Online Retail Campaign’ translating into a 360° marketing campaign to promote Starbucks with a feel good factor.
The focus of the campaign will have ensured that all the consumers of different demographics, psychographics, needs and wants are targeted with regards to their shopping habits, and connect is created through the campaign to subside the effects of the economy.
The primary focus of the campaign is to recreate the Starbucks ‘experience’ in the minds of the consumers in terms of campaign novelty and to create a competitive need and want and reinforce the perception of Starbucks as a brand that helped in terms of converting a $.80 product into a $6 experience.
The online strategy is recommended in view of the fact that due to the issues facing Starbucks it is of paramount importance to manage the costs and reach out to the consumers in a manner that does not requires extravagant costs and still the message gets through to the target market.
This campaign will be supported with Brand Activation to create buzz amongst the consumers.
Implementation
The implementation will take into account the aspects of online digital reach of. Even though Starbucks have a digital network in their stores that have Wi-Fi as stated in the website Starbucks Coffeehouse (2014), the stores also provide mobile applications for android and iPhone and other innovative ideas.
At that time the launch of Wi-Fi could have been path breaking since back then it was there but not utilized by organizations extensively.
Besides working on their website, Starbucks could have created and turned its business around with a bang and look at more opportunities for online involvement of the consumers in a creative manner.
The primary aspect is the store ambience, convenience and a great rendezvous place for everyone as stated by Rachel Hennessey (2012), in her article in Forbes Starbucks it is discussed that consumers are willing to pay more for the environment, Wi-Fi and a coffee. Pre-launch Programs will include events in the form of Starbucks employees at Malls, Gym and Parks to promote the online strategy.
- Online Presence will focus on the social media forums i.e. My space, Face book etc to pass on the message to the consumers.
- The Promotion will start with Bring a friend to Starbucks store and get 50 % on coffee and other associated tactics for consumer’s benefits.
- Launch Programs will focus on sending emails to consumers with coupons to be redeemed at the stores, all consumers need to do is to visit the store.
- Starbucks will launch ‘Wish you the very best campaign’, with big white boards erected at stores, malls and other locations for people to write messages, which will in essence focus on engagement.
- Will launch a new initiative known as the ‘Starbucks Entrepreneur’, submit a business idea at any store by buying a coffee cup and have a chance to have your own business supported by Starbucks
- All business ideas to be in line with the coffee industry
- There won’t be any Advertising campaign rather all the communication will be done through the online space with on ground activities as part of the campaign.
- Giveaways such as Caps, Coffee mugs, Coffee Maker, Starbucks branded shirts and caps will be given to consumers on coffee cups purchased in stores.
The long term sustainability is based on the commitment showed by Starbucks at the launch and the strategies success will dependent upon the participation of the employees in view of the fact that it was understood from the very start that a cheerful employee and ambience as stated in Starbucks Retail Careers (2014), will rally round the company to not only grow but also create an atmosphere of competitiveness in times of hopelessness and gloom.
References
Eric, F. and Yvonne, R. (2011). Corporate Culture: The Ultimate Strategic Asset. Stanford University Press
Richard, G. (2013). At Starbucks, the key innovation was its company culture. Retrieved from http://richgoldstein.com/2013/05/09/at-starbucks-the-key-innovation-was-its-company-culture/
Rachel Hennessey (2012). Reasons Why Starbucks Still Shines, Despite Market Shortcomings. The Forbes. Retrieved from http://www.forbes.com/sites/rachelhennessey/2012/08/06/3-reasons-why-starbucks-still-shines-despite-market-shortcomings/
Starbucks (2014). Coffeehouse. Retrieved from http://www.starbucks.com/coffeehouse
Starbucks (2014). Retail Careers. Retrieved from http://www.starbucks.com/careers/retail-careers
