I. CASE OVERVIEW
Since 1987 Howard Schultz has owned and operated Starbucks, which originated
in Seattle, Washington, for $3.8 million. His first order of business within the company
was to repair the corporate culture as there was an ever building distrust with the
employees and managers. Not surprisingly employees were apprehensive of Schultz new
ideas but he was determined to build relationships with employees and management.
Fast forward twenty years, under Schultz command Starbuck’s experienced
unprecedented growth under Starbuck’s command. There are currently 15,756 stores in
operation, spanning over 44 countries, and six continents.
Starbuck’s operation proved to be lucrative since Schultz has been CEO;
however, in 2007 many stores where unable to meet their sales goals due to economic
conditions and competition. Due to the downturn of revenue Starbucks was forced to
close 600 stores in the United States. This came as a surprise to investors, as Starbucks
has planned to open 900 more stores that year. It has become evident that Starbucks had
exhausted the customer market and had fallen subject to unrecoverable overexpansion.
Since Schultz
Since the company’s downfall, Schultz and Starbuck’s have been forced to reevaluate their status as the world’s largest coffee tycoon. The coffee market has
drastically changes over the past two decades. Starbucks was also the place to go to get a
great cup of Joe. Due to the slumping economy, Starbuck’s is struggling to provide
customers with the per dollar value its competitors are offering. So, should Howard
Schultz continue to expand his coffee-esque empire, or should he attempt to strengthen
the original core competency that once made him successful.
II. TEACHING OBJECTIVES
Based on a wide variety of topics discussed within this case, this material would
be suitable for high school and undergraduate studies. Instructors may choose to use this
material in a variety of class subject such as entrepreneurship, business management,
marketing, and economics. Due to its relatively short length, this case would be
appropriate to discuss within class, used on tests, or assigned for detailed written analysis.
The teaching objectives of this study are:
1. To emphasize the impact that corporate culture has on the success or failure of
business.
2. To illustrate the everyday dilemmas faced by the CEO of a large corporation
3. Demonstrate the mix of personal and business goals used in the decision making
process
4. To illustrate the effect the economy has on everyday business.
5. To demonstrate the severity of the competitive market between large corporate
entities.
III. QUESTIONS
1. What decisions have Starbucks made in the past that are affecting them today?
-Too many store openings
-Lack of focus on core competency
-Moved to quickly, allowed no time to test the waters
2.
What ideas has and ethical beliefs had Schultz instilled into Starbucks, as it
pertains to corporate culture?
-Schults wanted Starbucks to be a place where workers and supervisors work with
one another in a trusting environment. He also wanted employees to feel a sense
of ownership within the company. He wanted employees to provide input and
insight to what they were doing and how they thought things could be improved.
3. How has the recent downfall of the worldwide economy affected the way
Starbucks is making management decisions?
-Starbucks has completely reevaluated the needs of their company and have began
to restructure the company slowly. Schultz wants to focus on the things that
originally made Starbucks successful and wants to get rid of things that have
clouded Starbucks image for the worse.
4. How has McDonald’s, Caribou, Dunkin Donuts, Panera Bread, and other
competition made Starbucks reevaluate the customer market?
-Intense competition has forces Starbucks to be innovative again. They are no
longer the only coffe outlet with wi-fi. They have realized the company is no
longer sitting at the top alone. There are other places to go and customers go
where the best value is.
5. How has Starbuck’s recent struggle affected motivation within the company at
both the executive and worker levels?
-Executives at Starbucks are more motivated now than ever and they should be.
Their company’s livelihood is at stake and they are hell-bent on keeping it alive
and successful. Employee, on the other hand, may feel both positively and
negatively about the matter. When the 600 stores closed, over 11,000 employees
were out of jobs with nothing to show. They may feel Starbucks doesn’t care.
However, some are enthusiastic and are buying into Schultz’ emphasis on
corporate culture.