Starbucks: Schultz Back in the Brew

18 Pages Posted: 18 Jun 2009

See all articles by Amy Lemley

Amy Lemley

University of Virginia - Darden School of Business

Scott A. Snell

University of Virginia - Darden School of Business; Cornell University - School of Industrial and Labor Relations

Abstract

Can the return of its founding CEO turn a lagging Starbucks around? Howard Shultz must map a strategy that addresses the company's decreasing sales and perhaps too rapid growth. Had the previous CEO's efforts to streamline operations compromised the Starbucks experience or was a changing economy to blame? Schultz considers whether to close existing stores, slow U.S. growth while expanding overseas, and improve the customer experience, which he believed had eroded the company's value proposition.

Excerpt

UVA-OB-0970

April 21, 2009

STARBUCKS: SCHULTZ BACK IN THE BREW

It was a startling announcement: Starbucks CEO Jim Donald had been fired, and founder Howard Schultz was coming back to his former position as CEO. The news came on January 7, 2008, eight years after Schultz had handed over operational control of the company. During that time, Starbucks had become the most successful coffee retailer in the world, with more than 15,000 stores in 19 regions of the globe, arguably having transformed the industry in the process. Starbucks' customer service had reset the benchmark for the fast-food industry, its approach to managing people had raised the bar for best practice, and until recently its shareholders had seen triple-digit returns.

Yet for all it had done right, had it done something wrong? Starbucks' stock price had dropped 50% since 2006, from around $ 32 in January of that year to only $ 18 on the day of Schultz's return the next year. In a memo released that same day, Schultz offered an explanation. “If we take an honest look at Starbucks today,” Schultz wrote, “then we know that we are emerging from a period in which we invested in infrastructure ahead of the growth curve. Although necessary, it led to bureaucracy.” To prevent a more serious financial crisis and rescue the faltering U.S.-retail business, Schultz had to quickly implement a turnaround plan (Exhibit 1 shows stock prices).

Creating the Third Place

. . .

Keywords: strategy map, brand turnaround, competition, changing economy, value creation, leadership

Suggested Citation

Lemley, Amy and Snell, Scott A., Starbucks: Schultz Back in the Brew. Darden Case No. UVA-OB-0970. Available at SSRN: https://ssrn.com/abstract=1421632

Amy Lemley

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Scott A. Snell (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://www.darden.virginia.edu/html/direc_detail.aspx?styleid=2&id=10766

Cornell University - School of Industrial and Labor Relations ( email )

393 Ives Hall
Ithaca, NY 14853-3901
United States

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