Harvard Case - Starbucks: Battling the Racism Allegations
"Starbucks: Battling the Racism Allegations" Harvard business case study is written by Parul Gupta, Shikha Bhardwaj. It deals with the challenges in the field of Strategy. The case study is 10 page(s) long and it was first published on : Oct 25, 2019
At Fern Fort University, we recommend Starbucks adopt a comprehensive and multi-faceted approach to address the racism allegations, rebuild trust with its customers, and reinforce its commitment to diversity and inclusion. This strategy should focus on transparency, accountability, employee training, community engagement, and long-term systemic change.
2. Background
The case study focuses on Starbucks' response to a series of high-profile incidents in 2018, where customers of color were unjustly arrested or treated unfairly in Starbucks stores. These incidents sparked widespread public outrage, damaging Starbucks' brand image and reputation for inclusivity. The case highlights the company's initial missteps in addressing the situation, including its lack of transparency and its failure to adequately address the underlying issues of racial bias and discrimination.
The main protagonists are Howard Schultz, Starbucks' CEO at the time, and the company's leadership team who were tasked with navigating this crisis.
3. Analysis of the Case Study
SWOT Analysis:
- Strengths: Strong brand recognition, loyal customer base, global reach, innovative product offerings, robust supply chain, and commitment to ethical sourcing.
- Weaknesses: Lack of diversity in leadership, inadequate training on racial bias, inconsistent customer service experiences, and a history of racial profiling incidents.
- Opportunities: Enhance diversity and inclusion initiatives, build stronger relationships with communities of color, leverage technology to improve customer service, and expand into new markets.
- Threats: Continued negative publicity, boycotts, lawsuits, and increased competition from other coffee chains.
Porter's Five Forces:
- Threat of new entrants: Moderate, as the coffee industry is relatively mature, but new entrants with innovative business models or strong local presence could pose a threat.
- Bargaining power of buyers: Moderate, as consumers have a wide range of coffee options, but Starbucks' strong brand loyalty and premium positioning provide some protection.
- Bargaining power of suppliers: Low, as Starbucks has a diversified supply chain and strong relationships with its suppliers.
- Threat of substitutes: High, as consumers have many alternatives to coffee, including tea, energy drinks, and other beverages.
- Competitive rivalry: High, as the coffee industry is highly competitive, with numerous established players and emerging brands vying for market share.
Value Chain Analysis:
Starbucks' value chain is characterized by its vertically integrated model, which allows for greater control over quality and consistency. However, the case highlights weaknesses in the customer service and training aspects of the value chain, which contributed to the racial bias incidents.
Business Model Innovation:
Starbucks has a successful business model based on premium pricing, a strong brand, and a loyal customer base. However, the case suggests a need for innovation in its approach to diversity and inclusion, customer service, and employee training.
Corporate Governance:
The case study raises questions about Starbucks' corporate governance, specifically its ability to effectively address issues of racial bias and discrimination within its organization. This highlights the importance of strong governance structures and practices to ensure ethical and responsible business operations.
4. Recommendations
Transparency and Accountability: Starbucks should publicly acknowledge the racism allegations, apologize for the harm caused, and commit to taking concrete steps to address the issue. This includes releasing a detailed report on the findings of its internal investigation, identifying the root causes of the incidents, and outlining specific actions to prevent future occurrences.
Employee Training and Education: Starbucks should implement mandatory training for all employees on racial bias, unconscious bias, and cultural sensitivity. This training should be ongoing and include role-playing scenarios, case studies, and opportunities for dialogue and reflection.
Community Engagement: Starbucks should actively engage with communities of color, building partnerships with local organizations and leaders to address issues of racial injustice and inequality. This could include investing in community programs, supporting minority-owned businesses, and creating opportunities for dialogue and collaboration.
Diversity and Inclusion Initiatives: Starbucks should prioritize diversity and inclusion at all levels of the organization, from leadership to hiring practices. This includes setting clear targets for diversity representation, implementing mentorship programs, and creating a culture of inclusion and respect.
Technology and Analytics: Starbucks should leverage technology and analytics to improve customer service and identify potential instances of bias. This could include using AI-powered tools to analyze customer interactions, identifying patterns of discrimination, and providing real-time feedback to employees.
Long-Term Systemic Change: Starbucks should commit to long-term systemic change within its organization, addressing the underlying issues of racial bias and discrimination. This includes reviewing and revising policies and procedures, creating a culture of accountability, and promoting a more diverse and inclusive workplace.
5. Basis of Recommendations
These recommendations are based on the following considerations:
Core competencies and consistency with mission: Starbucks' core competencies include its brand, customer service, and innovation. These recommendations align with its mission by promoting a more inclusive and equitable environment for customers and employees.
External customers and internal clients: The recommendations address the concerns of Starbucks' customers and employees, fostering trust and building a stronger relationship with all stakeholders.
Competitors: Starbucks' competitors are also facing pressure to address issues of diversity and inclusion. By taking a proactive approach, Starbucks can differentiate itself and gain a competitive advantage.
Attractiveness ' quantitative measures if applicable: While it's difficult to quantify the impact of these recommendations, they are likely to improve customer satisfaction, employee morale, and brand reputation, ultimately contributing to financial success.
Assumptions: These recommendations assume that Starbucks is committed to addressing the racism allegations and creating a more inclusive and equitable organization. They also assume that Starbucks has the resources and willingness to implement these changes effectively.
6. Conclusion
By adopting a comprehensive and multi-faceted approach, Starbucks can address the racism allegations, rebuild trust with its customers, and reinforce its commitment to diversity and inclusion. This will require a sustained effort, a willingness to learn and adapt, and a genuine commitment to creating a more equitable and just organization.
7. Discussion
Other alternatives not selected include:
- Ignoring the allegations: This would likely lead to further damage to Starbucks' brand and reputation, resulting in boycotts, lawsuits, and declining sales.
- Issuing a superficial apology: This would be seen as insincere and would not address the underlying issues.
- Focusing solely on employee training: While important, this alone is not sufficient to address the systemic issues of racism and discrimination.
Risks and key assumptions:
- Implementation challenges: Implementing these recommendations effectively will require significant resources, time, and commitment from Starbucks' leadership team.
- Resistance from employees: Some employees may resist the changes, particularly those who are resistant to addressing issues of racial bias.
- Lack of sustained commitment: If Starbucks does not sustain its commitment to these changes, the effort will be ineffective and could even backfire.
8. Next Steps
- Immediate action: Starbucks should immediately release a public statement acknowledging the racism allegations, apologizing for the harm caused, and committing to taking concrete steps to address the issue.
- Internal investigation: Starbucks should conduct a thorough internal investigation to identify the root causes of the incidents and develop a plan for addressing them.
- Employee training: Starbucks should implement mandatory training for all employees on racial bias, unconscious bias, and cultural sensitivity.
- Community engagement: Starbucks should engage with communities of color, building partnerships with local organizations and leaders to address issues of racial injustice and inequality.
- Diversity and inclusion initiatives: Starbucks should prioritize diversity and inclusion at all levels of the organization, from leadership to hiring practices.
- Technology and analytics: Starbucks should leverage technology and analytics to improve customer service and identify potential instances of bias.
- Long-term systemic change: Starbucks should commit to long-term systemic change within its organization, addressing the underlying issues of racial bias and discrimination.
By taking these steps, Starbucks can begin to rebuild trust with its customers, employees, and communities, and create a more inclusive and equitable organization.
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Case Description
On April 12, 2018, the manager of a Philadelphia Starbucks Corporation (Starbucks) store called the police and two customers were arrested. The two men, who were black, were sitting at a table in the store without having placed an order. The incident sparked an online wave of protest over racial bias at Starbucks, a company that had long touted its social agenda of racial equity and diversity. The chief executive officer of Starbucks, quickly acknowledged the incident with a general public apology and a more specific follow-up statement later the same day. Amid outrage over the Philadelphia arrests and backlash online, the company also announced a half-day mass anti-racism training program for its employees. Experts were skeptical about the success of the training, claiming that a half-day training session could not eliminate racial bias. Was the company doing enough to train its front-line employees in providing not only the best service but also equal service to its customers? Did Starbucks truly represent the values it promoted? Would a half-day anti-racism training session effectively address the issue of racial bias, especially for front-line workers?
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