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 - – there is backlash against globalization, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels,
increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, 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 -
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.
Diverse revenue streams
– Starbucks Schultz is present in almost all the verticals within the industry. This has provided firm in Starbucks Coffee Company: Transformation and Renewal case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Ability to recruit top talent
– Starbucks Schultz is one of the leading recruiters in the industry. Managers in the Starbucks Coffee Company: Transformation and Renewal are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Sustainable margins compare to other players in Leadership & Managing People industry
– Starbucks Coffee Company: Transformation and Renewal firm has clearly differentiated products in the market place. This has enabled Starbucks Schultz to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Starbucks Schultz to invest into research and development (R&D) and innovation.
Innovation driven organization
– Starbucks Schultz is one of the most innovative firm in sector. Manager in Starbucks Coffee Company: Transformation and Renewal Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Starbucks Schultz has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Starbucks Schultz has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
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.
Training and development
– Starbucks Schultz has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Starbucks Coffee Company: Transformation and Renewal Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Superior customer experience
– The customer experience strategy of Starbucks Schultz in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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 -
High cash cycle compare to competitors
Starbucks Schultz has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
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.
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.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Starbucks Coffee Company: Transformation and Renewal has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Starbucks Schultz 's lucrative customers.
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.
Skills based hiring
– The stress on hiring functional specialists at Starbucks Schultz has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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.
Capital Spending Reduction
– Even during the low interest decade, Starbucks Schultz has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
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.
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 -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Starbucks Schultz in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
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.
Better consumer reach
– The expansion of the 5G network will help Starbucks Schultz to increase its market reach. Starbucks Schultz will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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.
Loyalty marketing
– Starbucks Schultz has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Starbucks Schultz can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Starbucks Schultz can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Starbucks Coffee Company: Transformation and Renewal, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
Buying journey improvements
– Starbucks Schultz can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Starbucks Coffee Company: Transformation and Renewal suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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.
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.
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 -
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Starbucks Schultz can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Starbucks Schultz.
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.
Regulatory challenges
– Starbucks Schultz needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Leadership & Managing People industry regulations.
Environmental challenges
– Starbucks Schultz needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Starbucks Schultz can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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 .
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.
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.
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 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.
Stagnating economy with rate increase
– Starbucks Schultz can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
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.