Starbucks’ Strategies

Starbucks’ core strategy is “to inspire and nurture the human spirit—one
person, one cup and one neighborhood at a time” (Grant 447). Shultz felt a need to
build a strong customer relationship and thought it was instrumental6 to engage
customers on an emotional level, as well as serve high quality coffee. Shultz
combined several elements in order to achieve the Starbucks’ Experience -
somewhere where people can socially enjoy the experience of drinking coffee while
away from home and work.
One element needed in order to fully achieve the Starbucks Experience was
the requirement of the use of coffee beans of a high, consistent quality and the
careful management of activities, transforming them into the best possible espresso
coffee.
Another key element needed for the Starbucks Experience surrounds
employment involvement. Shultz knew early on that “if Starbucks was to engage
customers in an experience which extended beyond the provision of good coffee,
then it was going to have to employ the right store employees who would be the
critical providers of this experience” (Grant 448). Starbucks thus looked for
employees who were committed and enthusiastic communicators of Starbucks core
principles and values. Starbucks tailored its human resource practices for
recruitment to attract people whose attitudes and personalities were consistent
with the culture of the company and to foster trust, loyalty and a sense of belonging.
Shultz required its new employees to be trained particularly on the education about
coffee. By implementing a strong employee involvement with proper employee
recruitment, Starbucks was able to build a strong employee relationship.
Shultz also strengthens the employee relationship by treating them as
business partners and providing health insurance for almost all regular employees,
including part-time employees, which built created unbelievable trust in its people.
The next key element in implementing the Starbucks’ Experience was its
community relations and social purpose. “[Shultz] wanted to build the kind of
company [his] father never had the chance to work for, where you could be values
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and respected wherever you came from, whatever the color of your skin, whatever
the level of education” (Grant 448). Also, Shultz felt a need to do good in the world,
so he started at the local level by establishing that every store is part of the
community in which they take a responsibility to be good neighbors. By doing so,
Shultz brought forth positive action that helped bring together Starbucks’ partners,
customers, and community to contribute in the world every day. Shultz brought this
aspect to the global level by continuing to help the community.
The last two elements of the Starbucks’ Experience was its location strategy
and its layout and design. Shultz’s location strategy was a clustering of 20 or more
stores in each urban area, eventually adding drive through windows and building
new stores adjacent to major highways to expand the sales of coffee-to-go. The
layout and design of Starbucks is a key element in the Starbucks experience because
“the design of the store is intended to provide both unhurried sociability and
efficiency on-the-run, and appreciation for the natural goodness of coffee and the
artistry that grabs you even before aroma” (Grant 449).
Shultz has a store design group that is responsible for the design of furniture,
fittings, and its layout. Shultz hoped that unifying the following elements would help
further his success and bring a Starbucks’ Experience to all its customers. Starbucks
had to adapt to help bring the Starbucks’ Experience by broadening its product
range by responding to customer demands. Starbucks diversified and began adding
food, music, books, and videos to its stores. Starbucks also began to diversify its
business model and other ownership formats, additional products, and differ ent
channels of distribution. Starbucks had the desire to reach customers in a variety of
locations, which caused Starbucks to abandon its policy of selling only through
company-owned outlets, opening up licensed coffee shops in kiosks. Starbucks
starting distributing packs of Starbucks coffee through supermarkets and other
retail food stores. The company diversified itself even more with its involvement in
financial services by beginning with its Starbucks prepaid store card, later combined
with a Visa credit card. The diversification of distribution and ownership helped
meet customer demands (Grant 447-49).
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After 20 years of continuous growth and expansion and rising profits,
Starbucks was hit with and unexpected, rapid downturn. In the beginning of 2008,
Howard Shultz returned as CEO of Starbucks hoping to return Starbucks to its
pristine company it once was and to renew its compromised core values that had
resulted from the company’s growth spurt (Grant 450).
In order to get Starbucks back on track, Shultz based his turnaround strategy
on two thrusts: retrenchment and reaffirmation of Starbucks’ values and business
principles. After his reappointment, Shultz issued a cutback in planned US new store
openings and revised operational practices to improve cost efficiency. Also, in the
summer of his reappointment as CEO, Shultz issued a closure of 600 US stores, as
well as the majority of its stores in Australia.
The second thrust of Shultz’s turnaround strategy resulted in a company -
wide reconsideration of Starbucks’ missions statement and its commitment to
corporate social responsibility. In order to improve their community responsibility,
10,000 Starbucks employees helped in community project cleanups in New Orleans
after Hurricane Katrina. Also, Starbucks launched Starbucks’ Shared Planet: and
environmental sustainability and community service program. The improvement of
community responsibility helped revamp their image and brand.
Shultz also made changed to the operating practices by returning to handmade
coffee and by replacing its La Marzocco espresso machines with automatic
Verismo machines, sped up the coffee making process. Shultz also saw a need in
adjusting the food menu; a key change being the withdrawal of toasted breakfast
sandwiches because the sandwiches’ aroma masked that of the coffee, ultimately
taking away from the Starbucks’ Experience. “By re-emphasizing Starbucks’ core
values, reversing store expansion, eliminating non-core products, and returning to
the quality of the coffee and customer service, Shultz viewed his role as putting
Starbucks on the right road” (Grant 451).
After implementing Shultz’s turnaround strategy, Starbucks slowly shifted its
emphasis back to disciplined growth opportunities, specifically in the grocery trade
and international markets. Starbucks wanted to grow its brand and product
positioning within the grocery sector. With the introduction of Via, a new type of
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instant coffee, in 2009, Starbucks was allowed to replicate the taste of their coffee,
and in less than two years, Via’s sales reached $200 million. Starbucks also
produced new product such as serving K-Cups for the use of Keurig coffee makers
and its own Verismo coffee pod espresso system. The increased strategic focus on
grocery trade led to the decision to withdrawal from its agreement with Kraft Foods
for the distribution of its packaged coffees. In 2011, Starbucks acquired premium
juice maker Evolution Fresh Inc. with the hope to expand retail distribution of fruit
juices and open its own stores. Starbucks also felt a need to push for International
Expansion, specifically in China and soon India (Grant 451-52).