Harvard Case - Starbucks: Schultz Back in the Brew
"Starbucks: Schultz Back in the Brew" Harvard business case study is written by Scott Snell, Amy Lemley. It deals with the challenges in the field of Strategy. The case study is 19 page(s) long and it was first published on : Apr 21, 2009
At Fern Fort University, we recommend that Starbucks implement a multi-pronged strategy focused on digital transformation, innovation, and global expansion, while maintaining its commitment to environmental sustainability and social responsibility. This strategy will leverage Starbucks' core competencies in brand management, customer experience, and operational excellence to achieve sustainable growth and competitive advantage in the evolving coffee industry.
2. Background
The case study focuses on Howard Schultz's return to Starbucks in 2008, following a period of declining sales and customer satisfaction. Schultz recognized the need for a strategic shift to address the changing consumer landscape and the rise of new competitors. He aimed to revitalize the Starbucks brand, enhance customer experience, and drive growth through a combination of innovation, technology, and global expansion.
The main protagonists are Howard Schultz, the CEO of Starbucks, and the company's executive team, who are tasked with developing and implementing a strategic plan to address the challenges facing the company.
3. Analysis of the Case Study
This case study can be analyzed through the lens of several strategic frameworks:
Porter's Five Forces:
- Threat of New Entrants: High, due to the low barriers to entry in the coffee industry.
- Bargaining Power of Suppliers: Moderate, as Starbucks has a strong relationship with its suppliers but can be impacted by commodity price fluctuations.
- Bargaining Power of Buyers: High, as consumers have many choices in the coffee market.
- Threat of Substitutes: High, as consumers can choose from a wide range of beverages and alternative coffee options.
- Competitive Rivalry: Intense, with numerous established players and emerging competitors vying for market share.
SWOT Analysis:
Strengths:
- Strong brand recognition and loyalty
- Extensive global footprint
- Experienced management team
- Strong focus on customer experience
- Commitment to sustainability and social responsibility
Weaknesses:
- High operating costs
- Dependence on commodity prices
- Potential for brand dilution through expansion
- Competition from smaller, more agile competitors
Opportunities:
- Growing global demand for coffee
- Increasing consumer interest in premium coffee experiences
- Advancements in technology and digital platforms
- Expansion into emerging markets
Threats:
- Economic downturns
- Fluctuating commodity prices
- Competition from other beverage categories
- Changing consumer preferences
Value Chain Analysis:
Starbucks' value chain is characterized by a strong focus on customer experience, brand management, and operational efficiency. The company leverages its core competencies in procurement, manufacturing, distribution, marketing, and customer service to create a unique and valuable experience for its customers.
Business Model Innovation:
Schultz's return signaled a shift towards business model innovation, focusing on:
- Digital Transformation: Utilizing technology to enhance customer experience, including mobile ordering, loyalty programs, and personalized recommendations.
- Product Diversification: Expanding beyond coffee to offer a wider range of beverages, food items, and merchandise.
- Global Expansion: Targeting new markets with a focus on local adaptation and cultural sensitivity.
4. Recommendations
Based on the analysis, Starbucks should implement the following recommendations:
Digital Transformation:
- Enhance mobile ordering and payment capabilities: Streamline the ordering process and provide personalized recommendations through AI and machine learning.
- Develop a robust online ordering platform: Offer a seamless online ordering experience with delivery and pick-up options.
- Leverage data analytics to optimize customer experience: Utilize customer data to personalize offers, improve store operations, and anticipate customer needs.
Innovation:
- Invest in product development: Introduce new and innovative coffee blends, beverage options, and food items to cater to evolving consumer preferences.
- Explore alternative brewing methods: Offer a wider range of coffee brewing options, including cold brew, nitro cold brew, and pour-over coffee.
- Partner with start-ups and technology companies: Collaborate with innovative companies to develop new technologies and products that enhance the customer experience.
Global Expansion:
- Focus on emerging markets: Target high-growth markets with a strong coffee culture and a growing middle class.
- Adapt products and services to local preferences: Tailor offerings to meet the specific needs and preferences of local consumers.
- Develop strategic partnerships with local businesses: Collaborate with local businesses to establish a strong presence and build brand loyalty.
Environmental Sustainability and Social Responsibility:
- Continue to invest in sustainable sourcing practices: Ensure that coffee beans are sourced ethically and sustainably, supporting farmers and protecting the environment.
- Reduce environmental impact: Implement initiatives to reduce waste, conserve energy, and minimize the company's carbon footprint.
- Support local communities: Engage in community outreach programs and initiatives that benefit local communities.
5. Basis of Recommendations
These recommendations are based on:
- Core competencies: Leveraging Starbucks' strengths in brand management, customer experience, and operational excellence.
- External customers: Addressing the evolving needs and preferences of customers, particularly the growing demand for convenience, personalization, and sustainability.
- Competitors: Staying ahead of the competition by embracing innovation, digital transformation, and global expansion.
- Attractiveness: Measuring the potential impact of these recommendations through key performance indicators such as revenue growth, customer satisfaction, and market share.
6. Conclusion
By implementing these recommendations, Starbucks can position itself for sustainable growth and competitive advantage in the evolving coffee industry. The company's commitment to digital transformation, innovation, global expansion, and environmental sustainability will enable it to meet the needs of a diverse and demanding customer base while remaining a responsible and ethical corporate citizen.
7. Discussion
Other alternatives not selected include:
- Mergers and acquisitions: Acquiring smaller, more agile competitors to gain access to new technologies and market segments.
- Vertical integration: Controlling the entire coffee supply chain, from bean sourcing to retail distribution.
These alternatives were not selected due to the potential risks associated with them, such as increased complexity, integration challenges, and potential brand dilution.
Key assumptions underlying these recommendations include:
- Continued growth in global coffee consumption
- Consumer demand for premium coffee experiences
- Technological advancements enabling further digital transformation
- Positive regulatory environment for business expansion
8. Next Steps
To implement these recommendations, Starbucks should:
- Develop a comprehensive strategic plan: Outline specific goals, timelines, and resource allocation for each initiative.
- Establish a dedicated team: Assemble a cross-functional team responsible for overseeing the implementation of the strategic plan.
- Monitor progress and adjust as needed: Track key performance indicators and make adjustments to the strategy based on changing market conditions and customer feedback.
By taking these steps, Starbucks can ensure that its strategic initiatives are effectively implemented and contribute to the company's long-term success.
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Case Description
Can the return of its founding CEO turn a lagging Starbucks around? Howard Shultz must map a strategy that addresses the company's decreasing sales and perhaps too rapid growth. Had the previous CEO's efforts to streamline operations compromised the Starbucks experience or was a changing economy to blame? Schultz considers whether to close existing stores, slow U.S. growth while expanding overseas, and improve the customer experience, which he believed had eroded the company's value proposition.
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