Executive Summary of Starbucks

Building Starbucks Community

Indeed, his father combined 3 different jobs to support his family. His mother was a homemaker who transmits her values to her children. She was a strong-willed person who wants a good future for her children with the respect of these values. Her dearest wish was that all go to college. Howard, who believes in the American dream, felt that he had to plan his own future because he didn’t want to stay in Brooklyn.

Indeed, he met many different people who came from different backgrounds. He said that “Diversity isn’t something I had to learn. I lived it”. It’s a point which influenced his future behavior. During his teenage, Howard and his father clashed often. He will realize later that sometimes you learn lessons, but you don’t realize them in the moment. But at the time he thought that his father could have accomplished so much more if only he had tried. This natural leadership ability stood out in the schoolyard. The Sport’s domain was the example.

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Creating Starbucks

Indeed, it allows him to have a scholarship until University in Northern Michigan. After graduating, Schultz made a sales trainee in New-York in Xerox. Despite a good income, he didn’t like this job for several reasons: This Company was too bureaucratic, strict and rigid and he didn’t have a voice. Finally, he didn’t find a link between this company and his values. Creating Starbucks Howard had already works in the field of coffee. So one day, he was encountered Starbucks Coffee and was very sensitive to the product and the business.

He said that he felt he had discovered a whole new continent. After that, he joined Starbucks as a director of operations and marketing. He saw the enormous growth potential of this Company especially in the gourmet and food markets. He realized that during a trip to Italy. Indeed, he noticed the unique community experience that Milanese espresso bars played in their customers’ daily lives. He will be based on this model to launch his own business: Il Giornale. This business was a chain of espresso cafes from Starbucks in downtown Seattle. It had three locations but had not yet turned a profit.

So for answer to this problem, Schultz planned to consolidate the new company with the name of Starbucks Corporation. Indeed, this name was so known by customers. But the development of this business wasn’t so simple. The first in which Schultz has faced was the following: One of these original investors proposed to purchase Starbucks instead, on terms that would have dramatically diluted his stake and that of his other investors. Furthermore, investors put pressure on Schultz’s head. They said “If you don’t take this deal, you’ll never work in this town again. You’ll never raise another dollar.

Starbucks Corporation

You’ll be dog meat”. As a leader, Howard Schultz didn’t renounced. He prepared an alternative plan cancelled the dilution and he managed. * Growing Starbucks The father’s death of Howard Schultz has completely changed his state of mind. He realized that his father’s life wasn’t the same as hers. In those days there was no health insurance and no workmen’s compensation. So, he decided to make Starbucks the first American company to provide access to health coverage for qualified employees. Indeed, this event is directly linked to the culture and the values of Starbucks.

He wanted to build the king of company that his father never had a chance to work for, where you would be valued and respected no matter where you came from, the color of your skin, or your lever of education. He wanted to build a company that linked shareholder value to the cultural values that he created with the other employees of the company. The original business plan of Starbucks provided 125 new stores in five year. In the first year, the company had already open 15 stores in Northwest cities with a strong coffee culture. The growth was running.

And for continue at this pace, Schultz recruited Howard Behar, an executive 10 years his senior who had 25 years of retail experience. His assignment was to innovate in response to customer requests and develop the customer experience. In an other hand, Starbucks focused its attention into values and culture of the stores, reasoning that satisfied and happy baristas made for satisfied customers. For continuing in this way, Schultz was aware that growth is intoxicating and seductive but also that it covers up a tremendous amount of mistakes.

Schultz & Behar

To solve this problem, he shared power with others. Indeed, Schultz & Behar wanted to stay in the way of their values so they decided to codify the values in the company mission and values statement. It’s important for the two leaders to sharing the culture of the company in each Starbucks stores. This is what distinguishes this company from others and allows it to continuing growth. For reach this goal, there were two key: The first was to hire people with like-minded values and the second was to reinforce the values and culture of the company.

The expansion of Starbucks making this own language into a common usage (like “latte”, “half-caf”…). Schultz was also proud of making difficult choices to pass up certain growth opportunities and to stay focused. The new way adopted by Starbucks was to explore marketing carefully selected. For example, they were experimenting to combined music and coffee stores and other entertainment ventures. It was a success.  Staying Grounded As an entrepreneur, Schultz should be irreproachable. For being that, he should learn several things like to manage vulnerability and doubt.

Whither Starbucks… and Schultz?

But for understand him; there weren’t a lot of people. So he decided to talk with Warren Bennis, a widely respected leadership and with a rabbi, during a trip in Israel, where he had learned about the power of humility. These lessons helped Howard to understand that success is best when it’s shared and be better in his business. Whither Starbucks… and Schultz? The hope of Howard Schultz is that Starbucks can be a model for building a company the right way. Especially he wants that the size of the company can’t erase the integrity.

It’s an illustration of the state of mind of Schultz. He took advantage of every opportunity for delivering his message like in leadership conferences for his store managers in which he focus on people and the human connection, not on numbers. He also focused on the consumer especially on customer experience. The brand wants to have a big place in customer’s life because it pretends that it wants to be the “third place in customers’ lives between the home and the office. For that, Starbuck offers a global range from coffee to CD’s with the music that you can find in Starbucks stores.

To combine these two ambitions, Starbucks responds to customer demand which is: Hungry for humanity and authenticity. * The Schultz E-mail After the big success of Starbucks, Howard Schultz was worried about one important thing for him: With the growth, Starbucks could lose the personal feeling of the neighborhood coffeehouse which Howard Schultz wanted to create. Indeed, at his arrival, his goal was to develop Starbucks as a model company including financial performance and mainly the respect of the human relationship. But this ambition wasn’t simple to apply in the reality.

McDonalds and Dunkin Donuts

Indeed, Starbucks had become the fastest growing chain in the history of retailing: The brand began with three stores in Seattle for reach, twenty years ago, 40,000 outlets worldwide. This phenomenal expansion allows Starbucks to engage in competition with the big company like McDonalds and Dunkin Donuts. Despite this success in financially field, a question for Schultz was essential: Had Starbucks lost its soul in the process of becoming a global brand? For having an answer, Schultz decided to send an E-mail to Jim Donald, Starbucks new CEO, with copies to members of the executive team.

In his mail, Schultz explained his point of view about the situation of Starbucks at this moment. He said that the growth had not a good effect in the customer experience. He described Starbucks with the sterility and the uniformity of store decor. The turnover is the first priority than the small coffee heritage of the brand and compromised the “passion for coffee”. He send this mail and waited the response of the senior team. Schultz ’memo was published on “Starbucks Gossip”, a web site about Starbucks, the experiences and opinions of the customers and employees. So, we could find some rumors in this about the company.

But when the memo was public, the corporate communication had tried to manage the crisis and the solution was to post a confirmation that the memo was authentic. For keeping a good image, Starbucks decided to position this memo as a new way of the company. Indeed, it explained that Starbucks “reinventing itself, saying it reflected the company’s philosophy that ongoing success was not automatically a given”. It created a buzz on Internet and in Press. The Wall Street Journal dedicated an article about Schultz’s memo with 1,500 words and some blogs like “BusinessWeek. om”, “Bloomberg. com”… Joe Nocera’s Challenge The buzz continued two weeks later when the business journalist for New York Times, Joe Nocera, wrote an article about Howard Schultz in his column “Talking Business”. He focused his attention on the two personalities of Schultz. So the name of article was “Two Howard Schultz”. First, he described Schultz as a sensitive man who is attached on human’s values in his company with health assurance for employees, and coffee experience for customers. The article speaks about the huge social responsibility program established by Schultz.

But in a second time, he described a face completely different of Howard Schultz. For him, Schultz was a businessman who thinks about profit, benefit and growth so an aggressive competitor. For Nocera, Schultz’s aim was to grow as soon as possible by making the best financial result. For illustrating this, he collected some testimonials of Schultz’s colleagues who said: “Mr. Schultz is an enormously competitive businessman” for example. An other colleague told an anecdote: “Howard said that they would never serve food. He thought it would dilute the experience. …) For Starbucks, there was always going to be a limit to how much coffee it could sell in any one location, so to goose same-store sales, it began selling food”. All these testimonies supported the thesis that Howard Schultz was a man who wanted a quickly growth with a big profit. His first face was just a disguise to hide his true nature as Nocera. After having made an opposition between the two faced of Schultz, the journalist concluded that there was in reality only one Howard Schultz and the two things he wanted were “incompatible”.

Conclusion

Finally, after this event, Schultz analyzed the situation and some questions arrived: Was it possible to have it both ways, or were growth and authenticity incompatible? Starbucks pursue such aggressive global growth and remain the unique local coffeehouse that attracted customers in the first place? We can see that these issues were in link with the first ambition of Howard Schultz… So we can ask us if this ambition was really feasible or if Schultz has failed to achieve his goal. One thing was certain: The issue wasn’t going to go away

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