Question

Starbucks in 2009: The Coffee Goes Cold: 1. How do you assess the performance situation at the firm Starbucks?

Answer 1

Established in Seattle in 1971, Starbucks is present in fifty states in the United States & 43 nations. Its one of the most reputed brand names, winning awards like ‘Most Admired Company’ etc. Whilst its quality is indubitable, its pricing has always been greater than that of various domestic coffee houses in different nations.

This was a reason why the firm took a hit during the economic slump of 2008 as consumers opted for cheaper alternatives for their everyday consumption. Starbucks was compelled to shut 600 outlets that weren’t making profits. By 30^th March, 2008, its profit had dropped 28% compared to 2007. In 2009, it shut down another 300 outlets & dismissed 6,700 employees.

On 8^th January, 2008, Howard Schultz came back as CEO of Starbucks after a gap of 8 years.

The former leadership had held the economy responsible & the augmented cost of dairy products for the drop in business. They had also given this as a reason to increase the prices. However, Schultz took a completely different view of the circumstance. He told the personnel, ‘The firm should not simply blame the economy; Starbucks's heavy expenditures to accommodate its expansion plans had created a bureaucracy which veiled its problems.’

Starbucks then embarked upon a technology-oriented plan. An environment where personnel could freely think about the corporation & contribute in terms of ideas was encouraged. As an outcome, a community participation notion was developed. After the 2008 crisis, Starbucks had to reconstruct its customer relations & demonstrate to the world that it cared for consistency & quality. Starbucks soon recognized that it had to project its “cool” facet thru social media-oriented marketing.