Starbucks Strategy and Internal Initiatives
Schultz Original Vision. From the beginning, Howard Schultz, the founder of Starbucks had a special vision for this company. The analysis of this company reveals that the founder built it on a solid ground, and this is the reason why it still holds the largest share in this line of business. Since early stages, Howard Schultz maintained an intrinsic formula towards opening more outlets in different parts of the country as part of his strategic measures (Fellner 29). Howard Schultz also believed in establishing a culture for success, which to him, was addictive and turned it into a strategic measure. This paper aims at analyzing Starbucks case study and provides some intuitive responses to the questions given.
1987 and 2010 Vision Difference. In 1987, Howard Schultz had a strategic vision, which revolved around having more than the initial 100 employees and 11 stores. When he returned to the helm in 2008, however, it is seeable that he had different visions for the company given that in 2010, he embarked on a discipline strategy. Reviewed the growth and performance of all the stores that the company had established while he was away, Schultz claimed that he was astonished by the idea that the company had to close down some of its stores that it had opened only less than 18 months ago (Pham-Gia 42). When writing off the amount of money invested and the profit during that period, Schultz saw the necessity of implying the discipline strategy in order to shift its vision from growth or expansion to managing its investments with discipline.
Graph 1: Starbucks Revenue and Free Cash Flow (Wit and Ron, 132).
Change of Vision. A closer outlook into Starbucks vision shows that Schultz has changed its strategic vision several times. During its foundation period, Schultz had zeal and passion for growth and eventually he made expanded his strategic vision for the company (Wit and Ron 61). However, as time went by, he realized that the company was concentrating more on opening up of new stores and failed to manage their investments properly. Therefore, he changed the companys strategy into considering discipline for investment, management, and sustainability since he believed the company needed to reduce the amount of wastes that the company had frequently faced with. (Fellner 50). According to some reliable sources, Schultz current strategy will soon undergo further evolution as he is currently working on venturing into developing markets. This is simply further evolution of his strategies given that further expansion has to incorporate both discipline for investments and growth.
Strategy Evolution. As the strategic vision developed, the companys strategy also evolved in a number of ways. Starbucks is no longer establish the outlets on the West coast towards the other parts of the country, which was the initial vision for Starbucks, but rather looking into exploiting consistent managerial platforms. Since Starbucks was spearheading for the total expansion, it is clear that it was driving for global dominance. As a result, the most suitable generic competitive strategies discussed in Chapter 5 that can closely relate with the competitive approach applied by Starbucks is the crafting and execution strategy that attributes to the concepts and cases employed by this company during its rise to its current phenomenal growth (Bussing-Burks 47). Additionally, the concept of the quest for competitive advantage also discussed in Chapter 5 still relates closely with the Starbucks consequential growth.
Graph 2: Starbucks Net Income/Loss (Fellner 134).
Competition. Starbucks deals with fast foods, coffee, and fresh drinks as well as fast food eateries. In this service industry, competition is rather stiff, as there are so many other companies offering the same services at the same price and quality. In fact, the entry and growth of other competitive companies such as the McDonalds and Peets have come to torment the growth, profits, and presence of Starbucks. In other words, competition in this industry is stronger than in other sectors of industry. (Pham-Gia 59). In order to differentiate the state of competition between the Starbucks and other companies in operating one has to consider the threat of entry of other competitors. As of today, many companies serving fast foods and fresh drinks have emerged and are posing significant challenges to the well-being of the old ones.
Social Responsibility. Starbucks social responsibility is sincere due to numerous things that it has done in the quest for a responsible position in the community. Starbucks engages in community development projects where it donates a number of products to individuals and groups in need. These donations come in the form of financial assistance, sponsorship, and/or investments. With reference to the available analytical evaluation, Starbucks social responsibility strategy is indeed congruent as it provides sponsorship for needy students and extends its support for community projects that aim to sustain the lives of those living in that community (Wit and Ron 70). It also has a social responsibility strategy that involves employing the locals nurturing skills.
Sincerity. The Starbucks social responsibility strategy is sincere. Due to its actions and projects the company tries to improve the level of life within the communities. If Starbucks desire was only to create a good public image by incepting a social responsibility strategy, it would just implement the positive replies. (Fellner 64). However, the company has a social responsibility strategy, which revolves around giving back to the society via engaging in various support activities.
Recommendations. In order to sustain a reasonable financial performance, it is recommendable for Howard Schultz to review his intentions about closing down some of the underperforming stores. Generally, all the underperforming stores only accumulate the financial woes that the company suffers. Therefore, closing them would be a move forward. (Pham-Gia 70). In conclusion, it is recommendable for Schultz to put a pause on his strategy of expanding worldwide through opening up of new stores. Without a doubt, venturing into new markets requires huge sums of money and when the set-up outlet fails to return the capital used, it becomes a challenge for the company to sustain a continued strong financial performance. Moreover, Schultz can experience the great financial growth and expansion by introducing its services into vibrant yet new markets whose potential is incredible with substantial market base.
Graph 3: Starbucks Profit Margin (Bussing-Burks 98).