Harvard Case - Starbucks, Howard Schultz, and the Trump Effect
"Starbucks, Howard Schultz, and the Trump Effect" Harvard business case study is written by W. Glenn Rowe, Ken Mark. It deals with the challenges in the field of Strategy. The case study is 12 page(s) long and it was first published on : Sep 18, 2019
At Fern Fort University, we recommend that Starbucks adopt a multi-pronged strategy to navigate the challenges posed by the Trump Effect and maintain its competitive advantage. This strategy involves a combination of strategic planning, digital transformation, brand management, and corporate social responsibility initiatives to address evolving customer preferences, political pressures, and societal expectations.
2. Background
This case study explores the challenges faced by Starbucks under CEO Howard Schultz during the Trump presidency. The company experienced a backlash from customers and employees due to its perceived political stance, leading to a decline in sales and a tarnished brand image. The case highlights the complex interplay between business, politics, and social responsibility in a polarized environment.
The main protagonists are:
- Howard Schultz: Former CEO of Starbucks, known for his progressive values and commitment to social responsibility.
- Starbucks: A global coffee giant with a strong brand identity and a loyal customer base.
- Donald Trump: The 45th President of the United States, whose policies and rhetoric contributed to a divisive political climate.
3. Analysis of the Case Study
Porter's Five Forces Analysis:
- Threat of New Entrants: High, due to the low barriers to entry in the coffee industry.
- Bargaining Power of Buyers: Moderate, as consumers have many choices, but Starbucks' brand loyalty provides some protection.
- Bargaining Power of Suppliers: Low, as Starbucks has significant purchasing power over its suppliers.
- Threat of Substitutes: Moderate, with various alternatives like tea, energy drinks, and other coffee chains.
- Competitive Rivalry: High, with intense competition from other coffee giants like Dunkin' Donuts, McDonald's, and local coffee shops.
SWOT Analysis:
Strengths:
- Strong brand recognition and loyalty
- Extensive global reach
- Innovative product offerings
- Focus on customer experience
- Commitment to social responsibility
Weaknesses:
- High prices compared to competitors
- Dependence on a single product category
- Vulnerability to political and social backlash
- Potential for brand dilution through expansion
Opportunities:
- Growing demand for premium coffee
- Expanding into emerging markets
- Leveraging technology for personalization and convenience
- Strengthening its social impact initiatives
Threats:
- Economic downturns
- Increased competition
- Negative media coverage
- Political and social unrest
Value Chain Analysis:
Starbucks' value chain includes:
- Inbound Logistics: Sourcing high-quality coffee beans and other ingredients.
- Operations: Roasting, blending, and brewing coffee, as well as store operations.
- Outbound Logistics: Distributing coffee and other products to stores and customers.
- Marketing and Sales: Building brand awareness and driving customer traffic.
- Service: Providing a positive customer experience in stores and online.
Business Model Innovation:
Starbucks has successfully innovated its business model through:
- Diversification: Expanding into new product categories like tea, pastries, and food.
- Vertical Integration: Controlling more of its supply chain, from sourcing to roasting.
- Digital Transformation: Utilizing technology for online ordering, mobile payments, and personalized offers.
Corporate Governance:
Starbucks has a strong corporate governance structure with a focus on ethical business practices and social responsibility. However, the case study highlights the challenges of navigating a polarized political environment and maintaining a consistent brand image.
4. Recommendations
1. Strategic Planning:
- Market Segmentation: Identify and target specific customer segments with tailored product offerings and marketing campaigns.
- Blue Ocean Strategy: Explore new market spaces and create uncontested value propositions to differentiate from competitors.
- Scenario Planning: Develop contingency plans to address potential political and economic uncertainties.
- Strategic Alliances: Partner with other companies to expand reach and leverage complementary resources.
2. Digital Transformation:
- AI and Machine Learning: Utilize data analytics to personalize customer experiences and optimize operations.
- Digital Marketing: Invest in targeted online advertising and social media campaigns.
- Mobile Ordering and Payment: Enhance mobile app functionality and streamline the customer journey.
- Online Delivery: Expand delivery services to cater to changing consumer preferences.
3. Brand Management:
- Brand Positioning: Redefine Starbucks' brand image to emphasize its core values of quality, community, and inclusivity.
- Brand Storytelling: Develop compelling narratives that resonate with customers and showcase Starbucks' commitment to social responsibility.
- Crisis Management: Establish clear protocols for responding to negative media coverage and public criticism.
- Employee Engagement: Foster a culture of inclusivity and empower employees to represent the brand authentically.
4. Corporate Social Responsibility:
- Environmental Sustainability: Invest in sustainable sourcing practices and reduce environmental impact.
- Community Engagement: Support local communities through charitable initiatives and employee volunteer programs.
- Diversity and Inclusion: Promote diversity and inclusion within the company and its supply chain.
- Transparency and Accountability: Be transparent about its business practices and hold itself accountable for its social impact.
5. Basis of Recommendations
These recommendations are based on:
- Core competencies: Leveraging Starbucks' existing strengths in brand management, innovation, and customer experience.
- External customers and internal clients: Addressing the evolving needs and preferences of diverse customer segments and fostering employee engagement.
- Competitors: Differentiating Starbucks from competitors through innovation, value creation, and social responsibility.
- Attractiveness: Improving financial performance, brand reputation, and social impact through strategic initiatives.
6. Conclusion
Starbucks can navigate the challenges posed by the Trump Effect and maintain its competitive advantage by embracing a multi-pronged strategy that prioritizes strategic planning, digital transformation, brand management, and corporate social responsibility. By adapting to changing market dynamics, fostering a culture of inclusivity, and demonstrating a commitment to ethical business practices, Starbucks can emerge stronger and more resilient in the face of future challenges.
7. Discussion
Alternatives:
- Political Neutrality: Starbucks could choose to remain politically neutral and avoid taking public stances on controversial issues. However, this might alienate some customers and employees who value the company's social responsibility.
- Aggressive Political Advocacy: Starbucks could actively engage in political activism and lobby for specific policies. This might further polarize the customer base and create reputational risks.
Risks and Key Assumptions:
- Changing Consumer Preferences: The evolving political and social landscape could lead to unpredictable shifts in consumer behavior.
- Economic Volatility: Economic downturns could impact consumer spending and affect Starbucks' profitability.
- Competition: The competitive landscape could intensify, requiring Starbucks to continuously innovate and adapt.
8. Next Steps
Timeline:
- Year 1: Implement digital transformation initiatives, enhance brand positioning, and strengthen social impact programs.
- Year 2: Expand into new markets and product categories, refine market segmentation strategies, and monitor customer feedback.
- Year 3: Continuously assess and adjust the strategy based on evolving market conditions and customer preferences.
Key Milestones:
- Launch new mobile app features and online ordering options.
- Develop a comprehensive social responsibility report.
- Partner with non-profit organizations to support community initiatives.
- Conduct market research to identify emerging trends and consumer needs.
By implementing these recommendations and monitoring progress closely, Starbucks can navigate the complexities of the current environment and emerge as a more resilient and sustainable business.
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Case Description
After the former chief executive officer (CEO) of U.S.-based Starbucks started to voice his political opinions in September 2016, both Starbucks and the CEO faced backlash. As the CEO and former chairman of a large company, he may have felt entitled to voice his opinion as an individual voter. However, public backlash-from both sides of the U.S. political spectrum-suggested that commentators, looking to respond to him, were actually targeting Starbucks. In 2019, the challenge for Starbucks' new CEO was to find a way to tactfully extricate Starbucks from political conversations.
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