Good Case Study On Starbucks Success Story: Edging Out Competition
Recently, many social networking sites have been abuzz because of tweets, posts, and hashtags regarding news that some people opted to take their vows in Starbucks. While enjoying the aroma of freshly brewed coffee, the bride and groom exchange vows in the presence of their friends and loved ones. Dating as early as 2012, the hashtag has been in existence since that time and has captured the imagination and interest of those who want to join in the fun. Likewise, to further get attention, Starbucks baristas reveal that they try to make things even more exciting for customers by consistently spelling customer names incorrectly, instead of just using the correct spelling. Yes, the intentional way of incorrectly spelling one’s name is one of Starbucks’ ways of “marketing” their products for free. Considering that almost anything and everything gets their 15-second fame on Facebook, Twitter, and most of all, Instagram, the company says they enjoy free product marketing services every time an incorrectly spelled name in a Starbucks cup is shared from one social networking site to another – a brilliant idea indeed!
Starbucks dates back in 1971, when three owners Jerry Baldwin, Gordon Bowker, and Zev Siegl opened their first café in Seattle, Washington. Within 10 years of operation, Starbucks was able to open three more specialty cafes in Washington and caught the curiosity and interest of Howard Schultz, a brilliant marketing man who would later on become the CEO and owner of Starbucks. He found an opportunity to work directly with Baldwin and after one of his trips to Italy, Schultz proposed that Starbucks offer espresso by the cup to its customers, which was an instant success. With the help of Baldwin’s group, Schultz was able to open his own café called Il Giornale, a business venture with Dave Olsen, who handled the operations side of the business, while Schultz developed outside marketing. When Baldwin’s group decided to sell six of the Starbucks cafes, Schultz bought the cafes together with other investors. Since then, Starbucks has grown from a small-time coffee shop to a multi-billion company that it is today.
Starbucks operates in the “retail coffee and snacks store industry” (Geereddy, n.d., p. 2) and is considered a success in the industry. At some point, especially during the economic crisis, Starbucks was among the companies affected by the economic slump considering that people opted to buy cheaper alternatives to leisure activities and luxuries such as dining out. However, as the economy steadily grew stronger and with better products in the offing, the company began regaining its foothold on the market as their market share increased to 36.7% of the total in the industry, making them the premiere company in the retail coffee and snacks stores business. Starbucks is followed by Dunkin Brands in second place with 24.6% of the total market share, and others in the industry, including McDonald’s and Tim Horton’s (Geereddy, n.d., p. 2).
Starbucks’ Mission and Organizational Culture
Starbucks lives and breathes their mission and vision everyday and in all decisions they make. According to Starbucks’ website, the company’s mission is, “ to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time.” (Starbucks Mission Statement, 2015). By living certain principles daily in the conduct of their tasks, Starbucks management believe that they will be able to form a relationship with their customers, as they create a “sense of belonging through its stores (havens), being part of a neighborhood through development of a sense of community, and delivering rewards to all its stakeholders” (Brizek, n.d., p. 2). Starbucks understands the importance of becoming a socially responsible company considering their worldwide success, thus, they put up a foundation that helps in improving the plight of coffee-producing nations. Included in their projects are health and sanitation efforts to provide clean water systems to coffee-producing nations, improvement in healthcare, and provision of literacy programs and opportunities for children. The company also has a separate environmental mission statement that they adhere to. As a result, Starbucks follow environmentally responsible practices in the hopes of helping preserve the environment.
Starbucks also places a high value on its organizational culture as it believes culture is what will drive the company to success and the customers coming back for more of Starbucks’ products. It includes norms, values, assumptions, and symbols that define what a Starbucks experience is like. It involves the physical, emotional, mental, and behavioral make up of employees when conducting their day-to-day tasks, which in turn, transcends to the customers as they adapt to the image of Starbucks. At Starbucks, the culture is that of respecting and valuing diversity and inclusion, especially since they operate on a global scale. This includes building a strong and competent diverse workforce worldwide, raising awareness when it comes to cultural competencies, developing a culture of acceptance, and tapping diverse kinds of suppliers. Cliff Burrows, Starbucks current president, says they also expect that all those connected with the company, from senior leadership teams to the stakeholders to the workforce, to embrace diversity and inclusion and demonstrate this acceptance through their everyday decisions, behaviors, and conduct at work. Burrows says Starbucks’ thrust is to leverage on the varied talents, viewpoints, and capabilities of leaders where a Starbucks café is located, that despite the geographical distance, Starbucks will function as a team without limits. Therefore, regardless of business or function, organization or market, and culture and community, Starbucks will strive to act as one (“Diversity and Inclusion”).
The Starbucks Strategy
Howard Schultz claims there really is no secret. Everybody can do it. Schultz says the goal is to become the main supplier of the best coffee in the world while staying true to the company’s principles and missions (Kotha & Glassman, 2003, p. 3). The company also aims to become the most recognized and respected brand in the world. Now, enjoying a cup of Starbucks coffee leaves a feeling of contentment whether coffee is enjoyed in the café or as a takeaway.
According to Fortune comments (as cited in Kotha & Glassman, 2003), the Starbucks strategy is simple: Open several Starbucks café in an area even if each store eats up one another. This method of ensuring a Starbucks –everywhere approach helps in market recall, which works well for the company and its customers. For the company, marketing costs are lessened considering that a store is located just about everywhere, thus, regular customers and even those who do not intend to purchase coffee are drawn to the café. In addition, the company saves on delivery costs as they can easily direct customer orders to the nearest Starbucks café where the customer is located. Based on Starbucks’ revenues, clustering the stores near each other seems not to have a negative impact on the company itself considering that while some stores may have lower sales than others, the size of Starbucks as a company is able to absorb the losses and opening up new branches also helps level the field. On the part of the customer, the proximity of each Starbucks store to one another shortens waiting time in stores, thus, the lesser the inconvenience, the more likely they are to come back and enjoy a real Starbucks coffee experience (p. 3).
Leadership Style in Starbucks
Another of Starbucks leading battle cries is “people first and profits last” (Stanley, 2002, p.4). With this belief, leadership competencies that make Starbucks effective and successful include how it demonstrates ethical leadership and transformative leadership. An ethical leader leads fairly and ensures he or she is a good ethical example to everyone in the company. He or she ensures that everyone in the company behaves in a moral manner (Mayer, Aquino, Greenbaum, & Kuenzi, 2012, p. 151). An ethical leader understands that the long-lasting effect of being this kind of leader is a loyal and trustworthy workforce. In the same light, Starbucks leadership is defined by leaders who follow the transformative leadership style. This approach ensures that leaders are thoroughly committed to the promotion of the interests and well-being of the people they work with (Caldwell, Dixon, Floyd, Chaudoin, Post, & Cheokas, 2012, p. 175). Transformative leaders are guided by their morals when making decisions. They remove barriers that hinder the development of people, products, and processes. Transformative leaders rethink assumptions and always find solutions to problems. They force other people to think instead of simply going back to old ways of solving new problems (Caldwell et al., 2012, p. 176). As a transformative leader, Schultz was able to define his goals and foresights clearly to Starbucks management, put them in practice and in action, and sustain the goals and the connection with people, thus, earning his the support and trust of people he manages. As a whole, this type of leader acts as a moral compass for the company and therefore also requires a personal transformation in order to encourage to follow his or her lead and change another person’s points of view (Caldwell et al., 2012, p. 176). Leaders such as Schultz are guaranteed to have a greater follower support, commitment, and trust in the company’s initiatives and leadership.
Differentiating Starbucks from Others in the Same Industry
Schultz has always had put the people first before thinking about revenue in the belief that a happy and contented workforce makes all the difference in the day-to-day management of Starbucks cafes. Back in 1987, when he bought Starbucks from Baldwin, Bowker, and Siegl, Schultz’s first plan of action was to come up with an employee benefits program, both in the hopes of attracting key individuals to the company and as reward for employees’ hard work. His idea was to create a family-like environment to ensure that employees feel safe, comfortable, and loyal to Starbucks and consequently, consistently produce high-quality results. During that time, Starbucks was also known to offer better salary packages than those businesses in the same industry. As a result, Starbucks often attracted young, driven, and highly-educated individuals in their workforce.
Starbucks enjoys a strong market presence all over the world. Because of recall and its reputation of serving the best coffee beans for brewing, it has extended its operations to more than 60 countries worldwide and has captured 36.7% market share in America alone (Geereddy, n.d., p. 4). In 2013, it was also recognized as the 91st in the best global brands in 2013. It has also enjoyed tremendous success in business considering that apart from coffee, the company also sells merchandise such as cups, mugs, coffee grains, and CDs, among others. This strong market presence has given leverage to Starbucks especially in its expansions in other countries, including “significant economies of scale with superior distribution channels and supplier relationships” (Geereddy, n.d., p. 4).
Starbucks focuses on high quality products. All over the world, the price of a Starbucks coffee is generally a little higher than in other coffee shops. However, because of the company’s reputation of serving only the best products, people still patronize Starbucks for the quality of service and products.
Starbucks offers a unique experience to all customers. Schultz reiterates that it is not only coffee that they sell, but an experience so unique for all customers that they would want to come back always. The stores feature a very relaxing ambiance where customers can unwind with friends in comfortable chairs, calming sights, and soft Jazz music (Kotha & Glassman, 2003, p. 4). Typically located in major, high-traffic areas, Starbucks stores are highly visible to the public, thus, it is able to capture prime markets and customer-base. Offering cool factor to the ambiance, all stores are visually appealing and offer free WiFi to guests, warm service, and an environment of community among customers. As such, Starbucks has added another goal to its list, that is, that each store be a “third place besides home and work” (Geereddy, n.d., p. 4).
Had it not been for Schultz determination to become part of Starbucks management when it was still owned by Baldwin and company, including his foresight that Starbucks is one company that is yet to bloom, boom, and reach its full potential, Starbucks will not be enjoying the rewards, revenues, and success that it has now. As a leader, Schultz was a risk-taker who was ready to do whatever it takes to bring the company the next level. His determination to innovate and his progressive mind drove Starbucks to success. Understanding that businesses are not only about the money, Schultz and Starbucks will continue to drive changes in the coffee industry, enjoy the rewards of having a high-quality and satisfied workforce, while at the same time, having the ability to give back to others through its social responsibility programs.
Brizek, M.G. (n.d.). Coffee wars: The big three: Starbucks, McDonald’s and Dunkin’ Donuts. Journal of Case Research in Business and Economics. Retrieved from http://www.aabri.com/manuscripts/131646.pdf
Caldwell, C., Dixon, R., Floyd, L., Chaudoin, J., Post, J., & Cheokas, G. (2012). Transformative leadership: Achieving unparalleled excellence. Journal of Business Ethics 109: 175-187. PDF.
“Diversity and Inclusion.” (n.d.). Starbucks Corporation. Retrieved from http://www.starbucks.com/responsibility/community/diversity-and-inclusion
Geereddy, N. (n.d.). Strategic Analysis of Starbucks Corporation. Retrieved from http://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf
Kotha, S., & Glassman, D. (2003). Starbucks corporation: Competing in a global market. UW Business School. Retrieved from http://www.foster.washington.edu/centers/gbc/globalbusinesscasecompetition/Documents/Cases/2003Case.pdf
Mayer, D., Aquino, K., Greenbaum, R., & Kuenzi, M. (2012). Who displays ethical leadership, and why does it matter? An examination of antecedents and consequences of ethical leadership. Academy of Management Journal 55(1): 151-171. PDF.
Stanley, A. (2002). Starbucks coffee company. Tuck School of Business – Dartmouth. Retrieved from http://mba.tuck.dartmouth.edu/pdf/2002-1-0023.pdf
Starbucks Mission Statement. (n.d.). Starbucks Corporation. Retrieved from http://www.starbucks.com/about-us/company-information/mission-statement