starbucks case study

Starbucks CaseMatthew Seibert

Fay SaechaoJehrica Marini

Mission Statement Background Starbucks’ original vision in 1987 The evolution of Starbucks from

1991-2008 Worldwide expansion from 2000-

2001 Transformation of Starbucks with

return of Schultz 2008-2012 Financial Statements Evolution of Strategic Vision Broad Differentiation Teavana Video: Howard Schultz on

Teavana

Employee Training Starbucks Culture Community Service Ethical Sourcing Purchasing Coffee Beans Quality Control Lean 2012 Issues Facing Management Conclusion

Agenda

To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time

Mission Statement

Background• First coffee shop in 1971 in Seattle• Schultz hired in 1982• Schultz idea of a coffee house came about when he

was sent to Milan by Baldwin in 1983• Schultz leaves Starbucks and opened his own coffee

shop, Il Giornale in 1985

Starbucks’ original visioin in 1987 when Howard Schultz became CEO Vision for Starbucks “become a national

company with values and guiding principles that employees could be proud of”

Schultz wanted Starbucks to be a respected coffee house and to be admired for their corporate responsibility

Schultz planned on having 125 new stores open in the next five years – increments of five stores, starting with 15 stores for the first year

Merged Starbucks and Il Giornale and made a new logo, look for Starbucks and added espresso machines

The evolution of the vision from 1991 to 2008

Entered California: Los Angeles, then S.F.

Exceeded opening 125 stores, opened 161 by year 1992

Part-Time employee (20hours+) receive health benefits

Employees became partners Starbucks initial public offering in first

year was most successful of IPO of the year

Product line grew, joint ventures happened, licensed stores in areas from airlines, hotels, airports, etc.

Worldwide expansion from 2000-2012 Earlier expansion

consisted of 12 managers, today is 180 mangers with three other regional offices

Licensing agreement with Trans Fair

Tokyo- fist non-North American store

New locations in Asia, Europe, Australia, and South America

Transformation of Starbucks with Return of Schultz 2008-2012 Implemented innovative and

consumer focused concepts with mission statement “To inspire and nurture the human spirit-one person, one cup and one neighborhood at a time”

Consumer community to help innovate Starbucks experience such as: paper cups vs reusable tumbler, ideas on mystarbucksidea.com, rewards program, and the like

Lost sales due to the economic recession

Lost sight of their original mission to provide customers with the “Starbucks experience”

"I think, at the end of the day, we were never in the coffee business serving people; we were in the people business serving coffee," -Howard Schultz

After stepping down in 2000, Howard Shultz returns as CEO

Starbucks in 2008

As returning CEO, Schultz closed 1,600 stores in 2008

Shut down all Starbucks store for 3 hours to retrain all employees◦ Emphasized their need to renew their emotional

attachment to customers

CEO Howard Schultz

Shared best practices among stores nationwide

Revamped menu offerings

New and improved environmentally friendly programs

Provided more resources for employees

CEO Howard Schutlz Cont.

Cost of Sales

2007 2008 2009 2010 201140.00%40.50%41.00%41.50%42.00%42.50%43.00%43.50%44.00%44.50%45.00%

Series 1

• Supply Chain Efficiencies• Food Costs• Beverage and Packaging Costs• Sales Leverages

Operating Expenses

2007 2008 2009 2010 201131.00%

32.00%

33.00%

34.00%

35.00%

36.00%

37.00%

Series 1

• Sales Leverage• Direct Distribution Model• Impairment

General and Administrative Expenses

2007 2008 2009 2010 20114.20%

4.40%

4.60%

4.80%

5.00%

5.20%

5.40%

5.60%

Series 1

Operating Income

2007 2008 2009 2010 20114.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

Series 1

Net Income

2007 2008 2009 2010 20110.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Series 1

Return on Equity

2007 2008 2009 2010 201110.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Series 1

Changes of marketing techniques using social media platforms

◦Facebook◦Twitter

Evolution of Strategic Vision

Broad Differentiation Differentiating features

that cause buyers to prefer product/service over brand rivals such as Peet’s Coffee

Quality beans that can be served at premium price

Product line Products in retail stores Amazing customer

service with happy customers

Specialty tea store owned by Starbucks 300 Teavana locations throughout the US,

Canada and Mexico Goal: To provide fresh, high quality teas and

the products to serve them. And to create a unique tea experience in each store by encouraging a positive, healthy outlook for all who enter

Teavana

Video: Howard Schultz on Teavana

Starbucks vice president for human resources is on a mission for “passionate people who love coffee”

Starbucks employees are thoroughly equipped and trained to maintain the core values

Management trainees are required to attend classes that last for an eight to twelve week period to ensure they understand the Starbucks mission centered on community

Employee Training

Each partner or barista is provided with at least twenty-four hours of training in the first two to four weeks of their hiring

The classes that they receive include: coffee history, drink preparation, coffee knowledge, customer service and retail skills

They also participate in a workshop titled, “Brewing the Perfect Cup”

Employee Training Cont.

Core value◦ “To build a company with soul”

Human connection

Focus on diversity

Encouraging atmosphere

Employees are called “partners”

Starbucks Culture

Goal of 1 million community service hours by 2015

Starbucks foundation- 1997 by funding literacy programs in the United States and Canada

The Starbucks Foundation supports their employees engagement in their local community through Partner Match and Community Service Grants

Community Service

To ensure ethical sourcing of their coffee beans, Starbucks put a program into action called Coffee and Farmer Equity (C.A.F.E.)◦ A comprehensive coffee-buying program which

guarantees coffee quality and the promoting of social, economic and environmental standards

Starbucks goal regarding the purchase of coffee is to ensure that one hundred percent is ethically sourced by the year 2015

Ethical Sourcing

Purchasing Coffee Beans

Starbucks invented FlavorLock technology

Beans are sealed FlavorLock bags within two hours of roasting

Baristas now grind the beans every time a new pot was brewed

Set timers to signal once it was time to brew a new pot

Quality Control

Starbucks decided to use lean to improve their daily operations

Led by Scott Heydon, the Vice President of Lean Thinking

Reduce waste and free up time for its baristas.

Allow baristas to interact with more customers and make more beverages in the same amount of time while needing fewer workers

Lean Operating Strategy

2012 Issues Facing Management Strong results for fiscal year 2011

Increased commodity costs

Strong competitors

Rollouts of new point-of-sale and inventory management system

International market expansion

Reorganization of leadership structure

Strengthen the “Starbucks experience”

Continue its quest to ethically source all of their coffee by 2015

Continue to take strategic action regarding the tea industry

Further differentiate themselves from their competition

Conclusion

Thank You