starbucks case study
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Starbucks case study for Business Policy project_Starbucks in 2012: Evolving into a Dynamic Global OrganizationTRANSCRIPT
Starbucks CaseMatthew Seibert
Fay SaechaoJehrica Marini
Mission Statement Background Starbucks’ original vision in 1987 The evolution of Starbucks from
1991-2008 Worldwide expansion from 2000-
2001 Transformation of Starbucks with
return of Schultz 2008-2012 Financial Statements Evolution of Strategic Vision Broad Differentiation Teavana Video: Howard Schultz on
Teavana
Employee Training Starbucks Culture Community Service Ethical Sourcing Purchasing Coffee Beans Quality Control Lean 2012 Issues Facing Management Conclusion
Agenda
To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time
Mission Statement
Background• First coffee shop in 1971 in Seattle• Schultz hired in 1982• Schultz idea of a coffee house came about when he
was sent to Milan by Baldwin in 1983• Schultz leaves Starbucks and opened his own coffee
shop, Il Giornale in 1985
Starbucks’ original visioin in 1987 when Howard Schultz became CEO Vision for Starbucks “become a national
company with values and guiding principles that employees could be proud of”
Schultz wanted Starbucks to be a respected coffee house and to be admired for their corporate responsibility
Schultz planned on having 125 new stores open in the next five years – increments of five stores, starting with 15 stores for the first year
Merged Starbucks and Il Giornale and made a new logo, look for Starbucks and added espresso machines
The evolution of the vision from 1991 to 2008
Entered California: Los Angeles, then S.F.
Exceeded opening 125 stores, opened 161 by year 1992
Part-Time employee (20hours+) receive health benefits
Employees became partners Starbucks initial public offering in first
year was most successful of IPO of the year
Product line grew, joint ventures happened, licensed stores in areas from airlines, hotels, airports, etc.
Worldwide expansion from 2000-2012 Earlier expansion
consisted of 12 managers, today is 180 mangers with three other regional offices
Licensing agreement with Trans Fair
Tokyo- fist non-North American store
New locations in Asia, Europe, Australia, and South America
Transformation of Starbucks with Return of Schultz 2008-2012 Implemented innovative and
consumer focused concepts with mission statement “To inspire and nurture the human spirit-one person, one cup and one neighborhood at a time”
Consumer community to help innovate Starbucks experience such as: paper cups vs reusable tumbler, ideas on mystarbucksidea.com, rewards program, and the like
Lost sales due to the economic recession
Lost sight of their original mission to provide customers with the “Starbucks experience”
"I think, at the end of the day, we were never in the coffee business serving people; we were in the people business serving coffee," -Howard Schultz
After stepping down in 2000, Howard Shultz returns as CEO
Starbucks in 2008
As returning CEO, Schultz closed 1,600 stores in 2008
Shut down all Starbucks store for 3 hours to retrain all employees◦ Emphasized their need to renew their emotional
attachment to customers
CEO Howard Schultz
Shared best practices among stores nationwide
Revamped menu offerings
New and improved environmentally friendly programs
Provided more resources for employees
CEO Howard Schutlz Cont.
Cost of Sales
2007 2008 2009 2010 201140.00%40.50%41.00%41.50%42.00%42.50%43.00%43.50%44.00%44.50%45.00%
Series 1
• Supply Chain Efficiencies• Food Costs• Beverage and Packaging Costs• Sales Leverages
Operating Expenses
2007 2008 2009 2010 201131.00%
32.00%
33.00%
34.00%
35.00%
36.00%
37.00%
Series 1
• Sales Leverage• Direct Distribution Model• Impairment
General and Administrative Expenses
2007 2008 2009 2010 20114.20%
4.40%
4.60%
4.80%
5.00%
5.20%
5.40%
5.60%
Series 1
Operating Income
2007 2008 2009 2010 20114.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Series 1
Net Income
2007 2008 2009 2010 20110.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
Series 1
Return on Equity
2007 2008 2009 2010 201110.00%
15.00%
20.00%
25.00%
30.00%
35.00%
Series 1
Changes of marketing techniques using social media platforms
◦Facebook◦Twitter
Evolution of Strategic Vision
Broad Differentiation Differentiating features
that cause buyers to prefer product/service over brand rivals such as Peet’s Coffee
Quality beans that can be served at premium price
Product line Products in retail stores Amazing customer
service with happy customers
Specialty tea store owned by Starbucks 300 Teavana locations throughout the US,
Canada and Mexico Goal: To provide fresh, high quality teas and
the products to serve them. And to create a unique tea experience in each store by encouraging a positive, healthy outlook for all who enter
Teavana
Video: Howard Schultz on Teavana
Starbucks vice president for human resources is on a mission for “passionate people who love coffee”
Starbucks employees are thoroughly equipped and trained to maintain the core values
Management trainees are required to attend classes that last for an eight to twelve week period to ensure they understand the Starbucks mission centered on community
Employee Training
Each partner or barista is provided with at least twenty-four hours of training in the first two to four weeks of their hiring
The classes that they receive include: coffee history, drink preparation, coffee knowledge, customer service and retail skills
They also participate in a workshop titled, “Brewing the Perfect Cup”
Employee Training Cont.
Core value◦ “To build a company with soul”
Human connection
Focus on diversity
Encouraging atmosphere
Employees are called “partners”
Starbucks Culture
Goal of 1 million community service hours by 2015
Starbucks foundation- 1997 by funding literacy programs in the United States and Canada
The Starbucks Foundation supports their employees engagement in their local community through Partner Match and Community Service Grants
Community Service
To ensure ethical sourcing of their coffee beans, Starbucks put a program into action called Coffee and Farmer Equity (C.A.F.E.)◦ A comprehensive coffee-buying program which
guarantees coffee quality and the promoting of social, economic and environmental standards
Starbucks goal regarding the purchase of coffee is to ensure that one hundred percent is ethically sourced by the year 2015
Ethical Sourcing
Purchasing Coffee Beans
Starbucks invented FlavorLock technology
Beans are sealed FlavorLock bags within two hours of roasting
Baristas now grind the beans every time a new pot was brewed
Set timers to signal once it was time to brew a new pot
Quality Control
Starbucks decided to use lean to improve their daily operations
Led by Scott Heydon, the Vice President of Lean Thinking
Reduce waste and free up time for its baristas.
Allow baristas to interact with more customers and make more beverages in the same amount of time while needing fewer workers
Lean Operating Strategy
2012 Issues Facing Management Strong results for fiscal year 2011
Increased commodity costs
Strong competitors
Rollouts of new point-of-sale and inventory management system
International market expansion
Reorganization of leadership structure
Strengthen the “Starbucks experience”
Continue its quest to ethically source all of their coffee by 2015
Continue to take strategic action regarding the tea industry
Further differentiate themselves from their competition
Conclusion
Thank You