Starbucks Coffee Company: Transformation And Renewal Case Study Examples
STARBUCKS COFFEE COMPANY: TRANSFORMATION AND RENEWAL
Starbucks is a well-renowned company and known for its high-quality coffee. The company has differentiated itself from its competitors by offering lowered cost high quality diversified products.
The aim of this paper is to take the “Starbucks coffee company: transformation and renewal” case into consideration and encounter the learning that have been presented in the case.
Increasing competition is presenting enormous options in front of customers and customers move quickly towards alternative if they do not find value. Even the most beloved brand can and have lost their lusters such as pizza brand of Dominos. More companies who lost the shine due to not paying attention on transforming their companies according to the industrial changes include Dell, Amazon, Blackberry, American apparel, and best buy (McIntyre, Hess, and Weigley, 2013). When successful brands take the transformation for granted and stops focusing on their core values, then the predictable share value and profit gets started to plummet. People, technology, and business process are the crucial factors in every organization and transformation aligned these factors more closely. The aim of transformation is to make the company different from the competitors. According to MicroAgility, “only those organizations can survive in the modern business world that can reinvent themselves every five years.” Transforming and reinventing business is important and mandatory to the successful survival of the companies in such a highly competitive business arena (MicroAgility, n.d.).
As it has been exposed that even most flourishing brands can lose their leadership with lack of transformation; same happened with Starbucks. Company started focusing on its gross margins rather focus on the core values of the company and its atmosphere and rather to make innovation in products and to reinvent the organization. Starbucks prefers to extend the lines of products; the company was still making profits and growing as well. However, the rate of growth was far lower as compare to prior years (Starbucks Corporation, 2007). This was the sign of danger because constant reduction in growth rate could turn the company into reduced profit situation. Therefore, by analyzing this alarming situation and understanding the need of transformation, Howard Schultz (a CEO) who had resigned from the position of CEO. He took the position back at the beginning of 2008. He realized that if they want the organization remains at flourishing position then they have to come under the process of reinvention. Howard Schultz took some serious steps for taking the company back on the track and preferred that company must stick with its core value. Howard Schultz put the organization into endless transformation process through making initiatives to offer new and innovating products to customers and by forcing the employees to stick with company’s core values (Kaplan, 2014).
Howard Schultz for transforming the company considered the potential commoditization of the brand and rapid expansion of the organization. Howard Schultz gathered the key executives and asked them to go in more detail to realize the operational activities of the brand in order to make product innovation and excellent service delivery. Employees were trained, and their morale was boosted to motivate them to provide alike, consistent, and unique brand experience. Howard Schultz utilized social media techniques and set bars to utilized modern technologies. He implemented innovative consumer focused approaches. He also closed more than 7000 stores, in order to retain the employees shut down the store for 3 hours. Other important measures were to overhaul menu offerings, started investing in environmentally friendly programs, best practices shared among stores on the national level.
In short, Howard Schultz deployed the disruptive reinvention. He reinvigorated the staff, shrewder operations, introduced innovative and creative products, and modernized technology.
Strategies and leadership have always been the core of businesses; strategic leadership is not an easy task and does not come in organizations easily. A good leader must have understanding of the complex relationship that exist between the organization and its environment. Leader must know how to align the actions with strategy, and must clear the strategic direction to all over the organization (Beatty, 2010). There is a wider range of leadership styles that can be deployed, and the effectiveness of leadership styles depends upon the conditions in which these are being utilized. Howard Schultz had been recognized for his transformational and democratic leadership style and same he did at Starbucks when chose to transform and reinvest Starbucks. His leadership style at Starbucks revealed enormous secrets that are essential for the sustainability of the organization. Organizations’ employees are the capital of the organization and play a crucial role in the overall success of the organization. For example, if organization wants to reduce the cost and enhance the profit, it has to run the operations in a way through which lead time, waste, and inefficiencies can be reduced. For this purpose, organization requires human capital and to take advantage of them it is essential that effective and efficient leadership style be deployed that can engage them and motivate them to run the operations in cost-effective and high-quality manners. From the leadership of Howard Schultz, it has been learnt that for the successful organizations, especially when they are in transformational process it is essential that input of employees and free opinion of them is exercised. The reason is that this practice just not motivates employees to get the organizational goals but also server leaders with innovative ideas. It has been encountered that competitive business arena will not let the organization lead if they are not involved in the reinvention process. Therefore, it is pivotal that leadership is build upon the higher motivation and moral. Leadership does not mean to dictate people; for the success of the organization it is essential that followers and leaders have strong bond and employees have clear understanding of organizational value and trained accordingly.
It has been observed that many organizations formulate strategies, but they fail because their strategies are not aligned with their vision and mission; moreover they are not clear to organizational employees. It has been realized that organizations must formulate strategies that are aligned with companies’ core values. This means strategy formulation is just not about the new ideas and innovations, but it is about tightening the nut and bolts. It is essential that all employees be aware of organizational strategy and have conviction about core values. Making strategies is not an easy task and require some internal changes (Arrusy, 2005) and courage. As Howard Schultz did when brought transformation into place; he redefined the duties, engaged the employees, allowed them to learn new practices, redesigned the stores for the deployment of modern technology and shrewd operations. It has been realized that despite the all these facts - for the successful strategy - it is also pivotal that organizations have a complete understanding of competitive and external environment. Moreover, the organization should know about the internal environment that allows the organization in formulation effective strategy and implementing it efficiently (Drejer, 2002).
Core values are not “adopted values these are the values that are in use of the organization and let people aware that what is important to that organization. Core values are neither designed nor determined these are described and discovered through the inquiry process (Cummings and Worley, 2014). The reason due to which core values of the organization are essential to be clear is that these guide employees in getting the goal of the organization.
At Starbucks, people are committed to the core values that meant they hold each other accountable; the core values of Starbucks for which Howard Schultz had strives include:
Diversity: To make diversification is in core values of the organization.
Quality: Maintain the quality whatever Starbucks provide is the priority of the organization
Sense of belonging: Stores are designed in a way that can communicate the sense of belonging.
Customers: Uplifting the lives of customers, laughing with them and connecting with them.
Partners: Employees are treated with dignity and respect and considered as partners.
When Howard Schultz took the chargeback as CEO of Starbucks, he realized that Starbucks is behind its core value. He considered that it was important to take the workers back on the track of serving customers with Starbucks core values. The Howard Schultz offered the health coverage and in the form of options gave them equity that delivered the sense to employees that they are partners, and if the organization will be successful then they will be too. He declared pouring espresso as an art and trained the employees for this that resulted in high-quality beverage, which ultimately serves the core value of Starbucks to serve customers with quality beverages or coffee.
Howard Schultz introduced new and innovative products that satisfied the core value of the organization called diversification; through making diversification, Howard Schultz enhanced the sale of the organization. Through the expansion of stores and taking place in crowded areas, organization attained the objective of connected with the community as it is in the core values of the organization to live, laugh, and connect with customers. In order to engage and inspire partners and improve the service quality, Howard Schultz deployed the modern technology and trained employees. Through restructuring the supply operations and manufacturing Starbucks improved its sense of belonging. Despite the fact that the company was not making enough profits, Howard Schultz sent 10000 partners to Orleans accounted for $30 million; this step encouraged partners. Moreover, taking part in social activities company communicated the sense of belonging to its customers that had a positive impact on company’s image.
It has been realized that for the success of the organization, it is pivotal to make transformation and companies that indulge in reinventing, and transformation process will succeed in current business arena. It has been realized that strategies must be aligned with the organizations’ core values, and employees must have a clear idea of organizational strategy so they can better deliver to gain the objectives of the organization. For the success of the organization, it is essential that followers and leader have good and close relation.
Arrusy, L. (2005). Passionate and Profitable: Why Customer Strategies Fail and Ten Steps to Do Them Right!. John Wiley & Sons, USA.
Beatty, K. (2010). The Three Strengths Of A True Strategic Leader. Forbes, Available from: http://www.forbes.com/2010/10/27/three-strengths-strategy-leadership-managing-ccl.html [Accessed 14th February, 2015]
Cummings, G., and Worley, G. (2014). Organization Development and Change. Cengage Learning, USA.
Drejer, A. (2002). Strategic Management and Core Competencies: Theory and Application. Greenwood Publishing Group, USA.
Kaplan A. (2014). Starbucks: The Art of Endless Transformation. Inc Magazine, Available from: http://www.inc.com/magazine/201406/david-kaplan/howard-schultz-reinvents-Starbucks-constantly.html [Accessed 14th February, 2015]
McIntyre, D., Hess, A., and Weigley, S. (2013). Eight founders who ruined their companies. USA Today, Available from http://www.usatoday.com/story/money/business/2013/02/09/founders-ruin-companies/1905921/ [Accessed 14th February, 2015]
MicroAgility. (n.d.). Business Transformation: Reinvent to Succeed. Available from http://www.microagility.com/wp-content/themes/microagility/insight_pdfs/Business_Transformation_%20Reinvent_to_Succeed.pdf [Accessed 14th February, 2015]
Starbucks Corporation. (2007). Annual Report. Available from: http://media.corporate-ir.net/media_files/irol/99/99518/200710K.pdf [Accessed 14th February, 2015]
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