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Starbucks Case

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As a result, Cataracts consistently appears on “Best Places to Work” lists, and Schultz continues to be recognized for leadership by organizations such as the Deciphers Institute, Fortune, and Glissando (“Cataracts and Howard,” 2014). Schultz also appears on Fortunes first list Of the Android’s 50 Greatest Leaders” as number 29 (Cataracts News). Although critics may believe that Schultz success is a result of mere luck and situational factors, several leadership theories explain why Schultz and Cataracts continue to be successful.

The most important of these theories include trait theory and transformational leadership theory, which Schultz illustrates with many of his leadership traits, skills, and beliefs. Situational factors contributed to the initial success of Cataracts, but Schultz leadership abilities, ethics, and passion are what make Cataracts a driving force in the food and beverage industry today. Schultz exemplifies dynamic leadership skills by his ability to push Cataracts forward without losing integrity.

Although Schultz led Cataracts to be the successful company that it is today, he stepped down from his position in 2000.

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However, the company experienced several problems in 2008 because of an unstable economy and a series of poor management decisions. Schultz then felt compelled to return to the company. When Schultz returned, he found that “things were worse than [he’d] thought” (Igniting, 2010). The Cataracts leadership team admitted to failing the company’s employees and heir families, and Schultz had to make several difficult decisions to restore the company.

In addition to the crises in management, the financial crisis of the economy added stress on the Cataracts leadership team. Customers began to rethink spending four dollars on a latte, and eventually competition set in as other businesses saw Cataracts turning a profit from selling coffee. The overwhelming amount of problems challenged Schultz goal of preserving and improving the integrity of the company and its “values, culture, guiding principles, and the reservoir of trust with Cataracts people” Igniting, 2010).

Howard Schultz got Cataracts back on track by using his existing knowledge of the company, an asset other Coos did not have. He tried to do ‘the right thing” by shutting down the stores for three and a half hours for retraining. He said, ‘”We are retraining our people because we have forgotten what we stand for, and that is the pursuit of an unequivocal, absolute commitment to quality” (Igniting, 2010). Schultz motivation and thirst for success allowed Cataracts to regain its strength.

In the years 2006 to 201 3, the company underwent several leadership arrangements because Schultz carefully chose certain people for leadership positions that would optimize the growth of the company. In 2011, Cataracts adopted a new corporate structure to accelerate its growth strategy. Schultz said, “Our company performance over the past two years has positioned Cataracts for significant international opportunities ahead” (“Cataracts Announces New Leadership,” 2011 He decided to execute a multi-brand, multinational strategy that would optimize the company’s speed and focus going forward.

Schultz implemented a three-region organization Structure including China and Asia Pacific, the Americas, and MEME (Europe, LLC. K. Middle East, Russia, and Africa). He selected John Culver, Cliff Burrows, and Michelle Gas to serve as president of each region, and the presidents’ responsibilities included working with licensed and joint-venture business partners and reporting to Schultz. Cataracts also created a “multi-brand, multi-channel future by building a portfolio of branded business united beyond the Cataracts retail brand” (“Cataracts Announces New Leadership,” 201 1).

Cattle’s Best Coffee and Taco Tea both continued to be important growth opportunities as they generated revenue for the company. Building on the new corporate structure and company success, Schultz decided to strengthen the Cataracts Senior Leadership team in 2014 because he wanted to position the company ‘to leverage its assets and operations, and gain maximum benefit from the retail, consumer, mobile, and digital shifts currently underway in the global marketplace” (“Cataracts Strengthens Senior Leadership Team”, 2014).

Schultz said, “These organizational moves map our internal talent to the rapidly evolving retail environment and significant strategic and market opportunities ahead of us. With the new leadership structure, Schultz wanted to bring “greater financial and operational discipline” and to focus on the Cataracts mission and its growth (“Cataracts Strengthens Senior Leadership Team”, 2014). Senior leadership changes include Troy Lasted to Chief Operating Officer, Scott Maw to Executive Vice President and Chief Financial Officer, and Craig Russell to Executive Vice President.

With these changes, Schultz intended to focus on “generation retailing and payments initiatives in the areas of digital, mobile, card, loyalty, and e-commerce” and to prepare for “its next wave of global growth” “Cataracts Strengthens Senior Leadership Team”, 2014). The senior leadership changes took effect on February 3, 2014, and Cataracts continues to thrive under the leadership of Howard Schultz. Although Schultz is only one of many leaders who has appeared throughout history, he continues to help redefine what leadership is and how to use one’s leadership skills to run a successful company.

In general, leadership is defined as the process of providing general direction and influencing individuals or groups to achieve goals, but leaders convey leadership in many different ways (Collar, 201 1). One theory that explains why Schultz is an exceptional leader is the trait theory of leadership. Atone time, “it was thought that some people were born with certain traits that made them effective leaders, whereas others were born without leadership traits” (Collar, 201 1).

However, research has shown that leaders can learn or develop many of the traits or characteristics that they posses. Still, researchers agree that most successful leaders tend to share common leadership traits, regardless if they learn or inherit them. Some of these important leadership traits include drive, motivation, integrity, self- inference, cognitive ability, knowledge of domain, openness to new experiences, and extroversion, all of which Howard Schultz and other successful leaders exhibit. For example, Schultz displayed both drive and motivation when starting his company.

Despite financial stress and emotional struggles with his father’s death, Schultz “channeled his drive to build a company where his father would be proud to work” (George, 2007). Schultz used his past struggles to drive him forward and motivate him to create a working environment that his employees loved and were satisfied with. Rather than displaying a personalized power motive, Schultz displayed a socialized power motive to achieve goals that were in the best interest of the organization and its followers.

Schultz also exhibits integrity, since he is honest and maintains consistency between what he says and what he does. As a result, his employees trust him and are happy to work for a company that is ethically sound and fair. The Deciphers Institute named Cataracts as one of the “World’s Most Ethical Companies” for the eighth year in a row because of its honest and trustworthy leaders and employees (“Cataracts and Howard”, 2014). Furthermore, Schultz also uses his cognitive ability and knowledge of gourmet coffee and customer service to positively influence and teach his employees and partners.

Schultz even traveled to Italy to gain insight on the unique community experience that many Italian espresso bars play in customers’ lives so that he could apply many of these concepts that he learned in Italy to his own coffee shops. As a result, Schultz has used traits like his knowledge, drive, motivation, and integrity to make Cataracts into the successful organization that he had always dreamed of as a young child (George, 2007). In addition to trait theory, Schultz leadership skills also support the transformational leadership theory.

Transformational leadership theory involves motivating followers to do more than expected, to continuously develop and grow, to increase their level of self-confidence, and to place the interest of the organization before their own. As a result, transformational leaders, like Schultz, are charismatic as well as intellectually stimulating and show individual consideration of followers. Schultz is the perfect example of a transformational leader because he created a company based on his vision f excellence and innovation for the modern coffee shop.

His goal was to create a “third place” for customers in addition to their home and office by focusing on customer service and satisfaction. Therefore, he focused on empowering and instilling pride even in bottom line employees, so that they could be happy at work and create the positive environment that Schultz wanted Cataracts to have. In order to motivate employees, Schultz “instituted a training program designed to groom knowledgeable employees who would enjoy working behind a counter,” since he believed that friendly, efficient employees would boost sales (“Howard Schultz,” 2008).

By providing high quality products for customers that employees were knowledgeable about, Schultz was able to give employees a job that they could feel proud of and happy to be at. According to John R. Scarsdale, “Schultz believes the only competitive advantage Cataracts has as a national retail company is its workforce” (Scarsdale, 2013). Therefore, Schultz values his employees’ performance and happiness over everything else that Cataracts offers. As a result, Schultz leadership style “is based on his compassion for, and commitment to, customers and staff alike” (“Howard Schultz,” n. D. ).

Schultz knows that the key to any company’s success begins with its workforce, because the employees interact with the customer everyday and deliver the actual product. Schultz notes, m{U can’t expect your employees to exceed the expectations of your customers if you don’t exceed the employees’ expectations of management. That’s the contract” (“More Excellent Customer Service Quotes”, n. D. ). Although Schultz leadership traits and transformational leadership style are both crucial reasons for Cataracts huge success over the past 40 years, some situational factors are also responsible for part of Cataracts’ success.

Some Of these situational factors include higher demand for quality, increase in fast food businesses, and convenient store locations. Today more and more individuals are focusing on the quality of the food and beverages that they put into their bodies, which has resulted in a higher demand for quality. Rather than just simply buying the cheapest product, consumers want a product that offers the most value for a reasonable price. For example, today more consumers prefer a cup of coffee that is fresh and made to order rather than a cup of coffee that is pre-made from synthetic ingredients.

Therefore, any customers are willing to pay a dollar or two more for a higher quality coffee product rather than a lower quality coffee product. However, customers still expect the price for high quality coffee to be fairly reasonable, since the focus on quality in food products is becoming so important. Therefore, consumers now expect high quality products at a lower price. As a result, Cataracts has been able to capitalize on this new demand for high quality products at a reasonable price with its wide array of quality coffee and beverages.

In addition to demand for quality, fast food businesses seem to be lose by no matter where one goes because the demand for food and beverages to go has skyrocketed over the past few decades. Many individuals these days are always on the move and looking for a food or coffee establishment that can satisfy their needs in a short and efficient amount of time. Although it seems as though fast food and beverage options are never out of reach these days, this was not always the case for many coffee shops.

For example, Schultz encountered the original Cataracts Coffee in the 1 sass during a sales call in Seattle, when the company only sold roasted whole bean coffees and did not brew coffee to sell. However, now Cataracts offers a huge variety of beverages, snacks, and much more that take only under a few minutes to make for customers. Additionally, Cataracts’ convenient locations are another situational factor that helped add to its fast success, since the locations are typically very accessible and easy to find. In addition, the demand for drive thru windows has also given Cataracts a boost for customers in a hurry.

Rather than having to physically go into a Cataracts store to order coffee, customers can order from their car if they are in a hurry. As a result, Cataracts has benefited tremendously from its convenient actions and fast service. Situational factors, such as demand for quality, increase in fast food chains, convenient locations, and many others, are all extremely important contributions to Cataracts’ huge success. However, Howard Schultz leadership traits and skills that he instilled within his employees were also critical to keep Cataracts the number one coffee chain in the world.

For example, Cataracts could be a completely different type of coffee company without Schultz guidance, and both his employees and Cataracts customers would not be as happy without his focus on employee satisfaction and quality service. Although Cataracts would likely still be somewhat successful without Schultz leadership, the company would likely have trouble differentiating itself from other coffee chains. Furthermore, the company also would not have as many loyal customers without their focus on quality customer service, since the employees would not be required to go through intense training.

In addition, employees would not be as happy, since many of the employee benefits such as health care may not exist without Schultz. Consequently, unhappy employees could turn away potential and existing customers and only allow Cataracts to have short-term success. As a result, without Schultz focus on employee and customer satisfaction, the situational factors would not have mattered in the long run. Therefore, Schultz leadership skills were essential in establishing Cataracts as a dominant force in the coffee industry.

Although Schultz allegiance clearly lies with Cataracts, he could apply many of his leadership skills and abilities to another organization if needed. For example, if Howard Schultz was the CEO of Wall-Mart, he could use his knowledge and experience from Cataracts to lead Wall-Mart in a more positive direction by improving the quality of employees’ jobs. Currently, several issues exist that may hold the company back from reaching its full potential. Hidden beneath operational problems, diminished sales, and low customer service ratings, employees are complaining about low salaries, erratic scheduling, and understanding (Heal, 2008).

Currently, as many as 825,000 of Wall-Mart workers have an annual income of less than $25,000 (“Five Ways:’ 2014). Wall-Mart is one of the most successful companies in the country and can certainly afford to raise these salaries so that hard working employees are able to support a family. Also, Wall-Mart employs a large annuity of employees in part-time positions, allowing the company to skimp on costs, when most of these employees desire more hours (“Five Ways,” 2014). Workers are becoming frustrated with executives avoiding this crucial issue.

Protests occurred at roughly 1,500 Wall-Mart stores on this past Black Friday alone. The protesters, a mix of workers and supporters, held signs calling for higher pay and better working conditions. To make matters worse, massive cuts of worker hours are taking a toll on consumer ratings of the company. A recent Consumer Reports Survey placed Wall-Mart at the bottom of the list of grocers. Shoppers mentioned the understanding, a clear cause of, “long lines and an overall poor customer service” (“Walter Ranks,” 2014).

According to Geoffrey Heal (2008), accusations against Wall-Mart include “gender discrimination, low wages, excessive use of part-time labor, and harsh working conditions. ” Based off these accusations, if Schultz were the CEO of Wall-Mart, its position would be much different. Many of these weak areas are exactly where Cataracts has excelled over the past few decades. Schultz recon sized an approach that would build success for a Company with such a large number of employees. First, Cataracts pays its employees wages far above the service branch average and offers low-cost health benefit opportunities.

Cataracts realized early on that properly training employees and acting generously towards them would lead to a very low employee turnover rate, which would reward the company in the future (Heal, 2008). Perhaps Wall-Mart’s biggest challenge is that, unlike Cataracts, many of the employees are not proud to work there. Schultz prides Cataracts on being an employer that people trust. Workers share genuine hope for the company’s future, and they want to be a part of it. Wall-Mart, on the other hand, is facing new lawsuits continuously -? and its own employees file a lot of them.

Within the past year, the National Labor Relations Board filed a complaint against Wall-Mart for illegally firing and punishing about 60 workers who vocalizes a desire for change (“Five Ways,” 2014). In comparison, Howard Schultz has always treated his employees with respect and valued their individual opinions. Cataracts often holds open forums and encourages employees to speak their minds, even it they have negative comments. The combination of these criticisms along with praise in table areas has been important in contributing to shape the future of Cataracts and its culture.

Schultz realized the value of personal connection when building Cataracts, and this is the major area that Wall-Mart needs improvement in. According to the case study, Schultz notes that remaining a humble and grounded entrepreneur is crucial. Schultz would bring this attitude to the executives at Wall-Mart, who currently do not cherish their employees as assets of the company. The case study reinforces Cataracts as a company that listens to and understands each employee by noting the many has “implemented generous employee benefits, training programs, and employee stock ownership programs. For this reason, the transformation of Cataracts serves as a great model for the hypothetical situation of Schultz as CEO of Wall-Mart. Schultz would excel as the CEO of Wall-Mart, providing a fresh perspective to the executives and managers, and instilling values from the immense growth at Cataracts during his time there. No longer would bullying workers be acceptable, and “changing this culture of intimidation would go a long way to improving labor relations” (“Five Ways,” 2014). The basic change off higher minimum wage would reduce the number of protests and cause employees to feel a more prideful connection to the company.

With Schultz as CEO, Wall-Mart executives would begin to recognize the importance of listening to employees across all levels and this simple act would go a long way to make the company a stronger unit. Despite Howard Schultz eight-year hiatus in 2000, he has been one of Cataracts’ greatest assets by building its fundamental ideals and values and staying involved to communicate his vision. For these reasons, Schultz is known around the world as one of the greatest leaders in the business world cause of his ethical values, passion, and communication skills.

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