Howard Schultz And Starbucks
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Leadership and Management — Will Howard Schultz succeed in revitalizing the culture of coffee giant Starbucks?
In this research paper I will do an analytical background on the coffee industry Starbucks and how Howard Schultz hopes to inspire the employees as well as customers. His primary vision and goal as a CEO of the biggest chain of coffee industries is to make people realise that buying a cup of coffee in Starbucks is a lifestyle experience, unlike any other cafД©. This research paper will look at how Schultz will go about bringing back Starbucks from a decline and pay special attention to restructuring the coffee market, employee and customer satisfaction and the Starbucks culture. Along with this there will be important leadership contingency theories that apply to organisational settings and will explain how and why Howard Schultz will be able to achieve corporate objectives more effectively through them.
The Starbucks Corporation goes way back to 1971 when coffee was first introduced by three individuals intent on selling coffee beans and equipment. Entrepreneur Howard Schultz joined the company in 1982 and steered it into becoming an international brand on a worldwide scale. He ventured worldwide and placed Starbucks in almost every location now worldwide. It took over two decades to become established as a beverage business that then determined lifestyle behaviour. Since then there have emerged ample competition that have created a decline in sales in Starbucks, resulting in lowered company share value in Wall Street. Coffee now has become a common commodity that is available everywhere. There are so many Starbucks outlets that it has become more of a convenience than a trend to get a cup of coffee from there. According to an article from the online Office Connection website there are over two hundred and fifty Starbucks outlets in London alone and over 500 branches in the UK, and this figure is continuing to rise over the coming years (Office Connection [Online] Available: www.office-connection.com/advice/opening-an-overseas-branch-in-the-uk/ [3 Mar 2008]. By 2005 London had more outlets than Manhattan (Wikipedia. [Online] Available: www.en.wikipedia.org/wiki/Starbucks [4 Mar 2008]). Starbucks was becoming unstoppable. In 2000, H. Schultz left the company to pursue other interests and his position was taken over by Jim Donald and under Donald the company was expanding attempting to reach a goal of forty thousand retail outlets on a global scale. However, this expansion created a serious problem as it was diverted from the initial intention of being just a small company selling coffee products. Starbucks had started to lose focus on core competencies and the importance of creating service experience, and adding to that there was of course growth of competitors. The company sales were starting to suffer as a result as many people started to find the outlet everywhere and it become somewhat of “just another coffee place”.
Howard Schultz returned as the CEO of the company to “re-ignite” the emotional attachment that connected consumers to the coffee. His goal was to battle the dropping sales of the U.S. coffee shop chain and bring Starbucks to a fresh level. He intended to provide clear direction through leadership and take a contingency approach in organizational behaviour. To Schultz, Starbucks is not just a coffee business; it is a way of life. It exudes with culture that seems to be fading out in the last couple of years. There are a few reasons for this:
oCompetition within the fast growing coffee industries. Starbucks has cannibalised its own business through rampant expansion.
oIts mergence with McDonalds is discouraging consumers from spending more.
oThere is an inevitable drop in the stock markets.
oA rise in the prices of dairy products and a general slowing of the U.S. sales growth.
His primary objective was to restructure the current market by halting the rate of outlets being constructed and paying special attention to employee and consumer needs. He also felt that the “extra stuff” that was being sold in the store such as sandwiches and sweets (trademark of Starbucks) were a distraction to the selling of coffee products. In order to turn around what Starbucks has now become, Howard Schultz will be taking the company back to basics, to what made it so unique in a society that was consumed within the culture industry. Starbucks like any other coffee industry thrives on the three p’s, product, passion and people. Often with many big companies the need for growth is inevitable, however transforming with the growth is essential. Starbucks was a company that opened six new outlets each day and with that figure rising the quality of staff and experience was vaporising. Richard Whittington (2002) marked five key contingencies:
OTechnology
OEnvironment
OSize
ODiversification
OInternationalization
Each of the above should be used and is effectively being used by the work Schultz is carrying out. There is a wireless LAN that is available in most Starbucks outlets as an example of technology and keeping up to a highly evolving technological market. The environment of the market has been changing and may continue to change, for example the US growth decline is discouraging consumers from spending more (New York Times [Online] Available: www.nytimes.com/2008/03/03/business/worldbusiness/03cnd-stox.html [4 Mar 2008]), so Schultz may make more of an effort to appeal to the consumers to buy the Starbucks products. Size; the volume of sales and the number of employed staff at Starbucks is being considered. Quality of staff has improved because of the training in the U.S. and this training could possibly be carried on overseas as a further improvement on global sales. Its mergence with McDonalds and other such companies has increased diversification potential of an already global brand. Starbucks is known for its Internationalization however there are still a few countries that do not have Starbucks outlets. In Beijing, China, there have been cultural clashes as people ther have yet to become accustomed to the type of brand (Beijing Review, [Online] Accessed:
Starbucks is termed as “The Third Place”, a home away from home. It was labelled with this marketing technique because