Starbucks Suffers Schultz Returns Case Solution

2. Facts

• Starbucks began as a small coffee shop in 1971 started by three partners who happened to be coffee enthusiasts.

• Howard Schultz, Starbucks long-time CEO, saw the potential and took over the coffee shop.

• Schultz, after acquiring Starbucks in 1987, envisioned it to function like authentic Italian coffee shops. This made Starbucks a cross between a coffee bar and a retail coffee bean store.

• The company went public in 1992 when it had 165 stores throughout the country.

• Starbucks dabbled in selling music CDs, having joint ventures with the likes of PepsiCo. Dreyer’s Grand Ice cream in the 90s.

• In the 2000s the company continued on the growth path and opened over 10,000 shops in the country, many of which had wireless internet facility. It also helped produce music albums as well as a book and a movie. 

• Company felt the strain of competition from rivals and a rise in coffee bean prices. Compounding the issue was the company’s own deviation from the values and beliefs that were Starbucks’ hallmark.

• By 2007 the company’s store sales had fallen from 7% the previous year to 5%. This prompted a decline of 50% in the company’s share price.

• The company had over 15,000 stores and presence in 43 countries by 2007 when it was decided to bring back Schutlz as the CEO.

• Schultz promised to restore Starbucks original values and make it the company he had envisioned back in 1987.

3. Possible solutions

To deal with the issue, Starbucks has a few different options. It could halt expansion efforts and go back to its roots of serving a premium coffee experience. 

Another route the coffee company could take is to embrace the streamlined look and faster delivery and reduce the prices of its drinks to cater to a mass market.

4. Analysis of alternative solutions

Starbucks can slow down on the expansion efforts and improve the customer experience of its current coffee shops. Howard Schultz originally envisioned the company as a coffee place where people could enjoy their coffee in an atmosphere of comfort and warmth. The shop was meant to serve quality coffee drinks which were unique to Starbucks. This, coupled with the staff greeting customers and playing the music that customers would like, made Starbucks much more than a coffee shop. The company can work towards going back to that image as a means of improving its brand. This alternative has its pros and cons, which are as follows:

Pros:

• Improved quality

• Consolidation of its competitive advantage

• Premium service enables Starbucks to charge premium prices