Abstract

Starbucks is a major specialty coffee retailer, with presence in over 40 countries around the world. The financial crisis in the United States and the consequent global economic problems, together with rapid expansion in the number of its outlets created serious problems for the giant coffee retailer. With the economy showing signs of a recession, more and more customers started to cut down on consumption of expensive coffee. In addition, the rapid growth in the 2000s had diluted the 'Starbucks Experience' and the company's customers were complaining of falling service quality levels. Moreover, cannibalization of sales as new stores were opened too close to existing outlets also became a serious issue for the company. The case discusses the possible reasons for the significant drop in traffic and profits at Starbucks in 2008 and the transformational initiatives that Howard Schultz, the founder CEO of the company, implemented to revive the Starbucks brand and bring back customers to its stores.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the efforts needed to transform a commodity like coffee into an 'experience.'
• Recognize the role of leadership in turnaround management.
• Analyze the strategies undertaken to bring about a transformation in an organization.
• Recognize the need for retention of customers in the face of economic recession.
• Understand the perils of rapid expansion.

Keywords

Globalization, Entry and expansion strategies, Competition, Turnaround Strategy, Cannibalization, Gourmet coffee industry, The Starbucks experience, Transformational Agenda, Retail Management, Strategic Management, Managing in hard times, Luxury brands and recessions