An Interview with Howard Schultz, former CEO of Starbucks

Overseeing more than 16,000 stores worldwide, creating a new coffee lingo, Schultz indicates
that there are over 70,000 different ways to order a Starbucks coffee which makes up the
Starbucks experience. Now seen as a symbol of grand indulgence, Starbucks is struggling. The
company announced the closing of 600 underperforming stores in the U.S. and the need to cut
more than 1,000 jobs. Schultz admits that Starbucks may have grown too big too fast given
today’s economy and a business plan was not in place for the severity of the economic
downturn. Schultz recognizes that such a recession has created more discretionary coffee
decision making purchases. Dunkin Donuts, with its expansion, is providing some strong
competition by offering an upgraded coffee experience at a lesser consumer cost.
When asked if he would bring the Starbucks prices down, Schultz maintains that Starbucks will
not cut corners but will reduce waste to save the company more than $400 million and continue
to sell more than a cup of coffee. He says, post 911, that Starbucks traffic increased because of
the need for a sense of community and that they don’t want to do anything to fracture the
community experience. He also plans to continue to provide health insurance to all employees
including part-time. When asked if Starbucks can keep its mission statement in this economy,
he says he is optimistic and realistic and offers would be entrepreneurs this advice:
Opportunities can be and have been created during tough economic times. Starbucks was
created by believing in big dreams so dream big and dream bigger.
Questions:
1. How would you describe the market segment(s) that Starbucks serves and describe the
business level strategy the company is using. (5 points)
2. Is the strategy they are using appropriate for Starbucks? Yes or No. Explain your
answer. (5 points)
3. If you are Kevin Johnson, the present CEO of Starbucks, how should Starbucks plan to
position the company in the midst of the COVID-19 pandemic? Discuss your answer. (10
points)