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 - – increasing commodity prices, increasing transportation and logistics costs, increasing energy prices, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic ,
talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
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.
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.
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.
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.
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.
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.
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 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.
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.
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.
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.
Low market penetration in new markets
– Outside its home market of Starbucks Schultz, firm in the HBR case study Starbucks Coffee Company: Transformation and Renewal needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
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.
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.
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 harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Starbucks Schultz is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Starbucks Coffee Company: Transformation and Renewal can help to provide better information regarding products and services. It can also build an online community to further reach out to potential 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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Starbucks Schultz needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
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 -
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.
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.
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.
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.
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.
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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Starbucks Schultz can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Starbucks Schultz can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Starbucks Schultz is facing challenges because of the dominance of functional experts in the organization. Starbucks Coffee Company: Transformation and Renewal case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
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 -
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.
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.
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.
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.
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.
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.
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 .
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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
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.
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.
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.
