Case Study Description of Starbucks Coffee Company: Transformation and Renewal
Starbucks Coffee Company: Transformation and Renewal analyzes the turnaround and reconstruction of Starbucks Coffee Company from 2008 to 2014 as led by CEO and co-founder Howard Schultz. The case offers executives and students an opportunity to examine in depth how Schultz and his team saved Starbucks from near-collapse, by both executing a deep, comprehensive return to its core values and, at the same time, investing in a range of new products, customer experiences and organizational capabilities designed to make the company fit for enduring success in a turbulent global economy. Set against the backdrop of the Great Recession, the case also considers the impact of unprecedented important shifts in consumer spending and confidence as well as new competitive forces on Starbucks' transformation. The case concludes by examining Schultz's own leadership journey, the lessons he learned personally during Starbucks transformation, and how he is using these lessons-within Starbucks and on the national stage-to redefine the roles and responsibilities of a public corporation in the 21st century. Based on extensive interviews conducted with Schultz and other Starbucks executives conducted from 2011 to 2014, the case offers a range of vital lessons on leadership, organizational transformation, restructuring, strategy, innovation, entrepreneurial vision, and customer service.
Authors :: Nancy F. Koehn, Kelly McNamara, Nora N. Khan, Elizabeth Legris
Swot Analysis of "Starbucks Coffee Company: Transformation and Renewal" written by Nancy F. Koehn, Kelly McNamara, Nora N. Khan, Elizabeth Legris includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Starbucks Schultz facing as an external strategic factors. Some of the topics covered in Starbucks Coffee Company: Transformation and Renewal case study are - Strategic Management Strategies, Decision making, Entrepreneurship, Leadership, Leadership development, Managing uncertainty, Organizational culture, Product development, Risk management and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Starbucks Coffee Company: Transformation and Renewal casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, increasing commodity prices, wage bills are increasing,
cloud computing is disrupting traditional business models, geopolitical disruptions, etc
Introduction to SWOT Analysis of Starbucks Coffee Company: Transformation and Renewal
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Starbucks Coffee Company: Transformation and Renewal case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Starbucks Schultz, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Starbucks Schultz operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Starbucks Coffee Company: Transformation and Renewal can be done for the following purposes –
1. Strategic planning using facts provided in Starbucks Coffee Company: Transformation and Renewal case study
2. Improving business portfolio management of Starbucks Schultz
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Starbucks Schultz
Strengths Starbucks Coffee Company: Transformation and Renewal | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Starbucks Schultz in Starbucks Coffee Company: Transformation and Renewal Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Starbucks Coffee Company: Transformation and Renewal Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High brand equity
– Starbucks Schultz has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Starbucks Schultz to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Starbucks Schultz has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Starbucks Coffee Company: Transformation and Renewal HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Starbucks Schultz is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Nancy F. Koehn, Kelly McNamara, Nora N. Khan, Elizabeth Legris can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Learning organization
- Starbucks Schultz is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Starbucks Schultz is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Starbucks Coffee Company: Transformation and Renewal Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Starbucks Schultz digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Starbucks Schultz has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Strong track record of project management
– Starbucks Schultz is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Starbucks Schultz has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to lead change in Leadership & Managing People field
– Starbucks Schultz is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Starbucks Schultz in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Starbucks Schultz
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Starbucks Schultz does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Starbucks Schultz are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Low bargaining power of suppliers
– Suppliers of Starbucks Schultz in the sector have low bargaining power. Starbucks Coffee Company: Transformation and Renewal has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Starbucks Schultz to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Starbucks Coffee Company: Transformation and Renewal | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Starbucks Coffee Company: Transformation and Renewal are -
Aligning sales with marketing
– It come across in the case study Starbucks Coffee Company: Transformation and Renewal that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Starbucks Coffee Company: Transformation and Renewal can leverage the sales team experience to cultivate customer relationships as Starbucks Schultz is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Starbucks Schultz has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Starbucks Schultz even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
No frontier risks strategy
– After analyzing the HBR case study Starbucks Coffee Company: Transformation and Renewal, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Lack of clear differentiation of Starbucks Schultz products
– To increase the profitability and margins on the products, Starbucks Schultz needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Nancy F. Koehn, Kelly McNamara, Nora N. Khan, Elizabeth Legris suggests that, Starbucks Schultz is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Slow to strategic competitive environment developments
– As Starbucks Coffee Company: Transformation and Renewal HBR case study mentions - Starbucks Schultz takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Starbucks Coffee Company: Transformation and Renewal HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Starbucks Schultz has relatively successful track record of launching new products.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Starbucks Coffee Company: Transformation and Renewal, it seems that the employees of Starbucks Schultz don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Starbucks Schultz supply chain. Even after few cautionary changes mentioned in the HBR case study - Starbucks Coffee Company: Transformation and Renewal, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Starbucks Schultz vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Starbucks Schultz is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Starbucks Schultz needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Starbucks Schultz to focus more on services rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Starbucks Coffee Company: Transformation and Renewal, is just above the industry average. Starbucks Schultz needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Opportunities Starbucks Coffee Company: Transformation and Renewal | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Starbucks Coffee Company: Transformation and Renewal are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Starbucks Schultz can use these opportunities to build new business models that can help the communities that Starbucks Schultz operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Using analytics as competitive advantage
– Starbucks Schultz has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Starbucks Coffee Company: Transformation and Renewal - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Starbucks Schultz to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Starbucks Schultz can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Starbucks Schultz can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Starbucks Schultz in the consumer business. Now Starbucks Schultz can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Starbucks Schultz has opened avenues for new revenue streams for the organization in the industry. This can help Starbucks Schultz to build a more holistic ecosystem as suggested in the Starbucks Coffee Company: Transformation and Renewal case study. Starbucks Schultz can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Starbucks Schultz can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Starbucks Schultz can develop new processes and procedures in Leadership & Managing People industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Manufacturing automation
– Starbucks Schultz can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Starbucks Schultz to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Starbucks Schultz can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Starbucks Schultz can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Leadership & Managing People segment.
Learning at scale
– Online learning technologies has now opened space for Starbucks Schultz to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Threats Starbucks Coffee Company: Transformation and Renewal External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Starbucks Coffee Company: Transformation and Renewal are -
Consumer confidence and its impact on Starbucks Schultz demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
High dependence on third party suppliers
– Starbucks Schultz high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Shortening product life cycle
– it is one of the major threat that Starbucks Schultz is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Starbucks Schultz
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Starbucks Schultz.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Starbucks Schultz business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Starbucks Schultz in the Leadership & Managing People industry. The Leadership & Managing People industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Starbucks Schultz will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Starbucks Schultz can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Starbucks Coffee Company: Transformation and Renewal .
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Starbucks Schultz in the Leadership & Managing People sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Starbucks Coffee Company: Transformation and Renewal, Starbucks Schultz may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Starbucks Schultz with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Starbucks Schultz has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Starbucks Schultz needs to keep up with the evolution of technology in the Leadership & Managing People sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Weighted SWOT Analysis of Starbucks Coffee Company: Transformation and Renewal Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Starbucks Coffee Company: Transformation and Renewal needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Starbucks Coffee Company: Transformation and Renewal is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Starbucks Coffee Company: Transformation and Renewal is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Starbucks Coffee Company: Transformation and Renewal is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Starbucks Schultz needs to make to build a sustainable competitive advantage.