Group 2__________________

Advanced accounting 59A

Dinh Thi Khanh Linh Nguyen Duc Thanh

Pham Bao Huyen Trinh Nguyet Hoa

Dang le Phuong Trang Tran Phuong Thao

Le Thu Hien Le Thanh Ha Phuong

Nguyen Le My Linh
 Executive summary 4

Table Company background 5

of content______
Analysis 7

Question 1 6

Question 2 6

Question 3 11

Question 4 13

Question 5 15

Question 6 18

Question 7 21

Question 8 23

Conclusion 26
Executive summary

In 1971, Starbuck was just a small coffee shop operated by three academics Gerald

Baldwin, Gordon Bowker, and Ziev Siegl. In 1981, Schultz visited Starbucks and was impressed

with the company's knowledge of coffee and kept in contact over the next year, then expressed

interest in working with them. A year later, he joined Starbucks as the Director of Marketing. In

1983, Howard traveled to Italy and was drawn into Italian coffee bars and the romance of the

coffee experience. He desired to bring the Italian coffeehouse tradition back to the United States.

After a successful pilot of the cafe concept, the owners refused to roll it out company-wide,

saying they did not want to get into the restaurant business. He left Starbucks for a short period

of time to start his own Il Giornale coffeehouses and returned in August 1987 to purchase

Starbucks with the help of local investors. With Howard Schultz’s leadership skills, he had

turned a small coffee shop into the number one specialty coffee retailer in the premium coffee

market.

In the case “Starbucks in 2018: Striving for Operational Excellence and Innovation

Agility”, the company has focused on reshaping its business model in ways that do more social

goods. This includes a partnership with Feeding America to donate 100% of all daily leftovers to

nearby community groups - an effort that is expected to decrease the company’s food waste and

provide 50 million meals annually by the time it scales in 2020. In 2017, Starbucks committed to

hire 10,000 refugees at stores in areas where they’ve resettled, while continuing to open cafes in

with the purpose of providing jobs and boosting development in economically depressed cities

around the United States. Current spots, including Ferguson, Missouri; Baltimore; and Chicago’s

Englewood neighborhood, among others, are already up and running.

Company background

Starbucks is a global coffeehouse chain and coffee company which is headquartered in

Seattle. The company started as a coffee retailer and roaster and then added coffeehouses to its

services. The company began in 1971 and incorporated in 1985 (Pride & Ferrell, 2013). The

Starbucks Corporation then achieved true success in the U.S. marketplace in the 1970s and

1980s. After working for 5 years in the operation sector at Starbucks Corporation, Howard

Schultz truly brought the company to a whole new reign.

The number of coffee shops increased dramatically from just 17 to 4,000 in simply 13

years. Until the year 2000, Schultz undertook the responsibility as CEO, chairman, and chief

global strategist. Immediately when Schultz took over the control of the Starbucks Corporation,

the business was propelled into a new direction that would revolutionize the coffee market.

Schultz repositioned Starbucks into a new superior business era not just locally but globally.

Starbucks is considered as the largest coffeehouse company in the world, with over 30,000 ]

locations in 62 countries. In order to continue its dominance in the coffee industry, Schultz

empower the workforce through clearly stated missions, and vision

Mission statement

More than just coffee, the mission statement of Starbuck, the leading company in the

coffee industry is about: “to inspire and nurture the human spirit – one person, one cup and one

neighborhood at a time”.  It reflects the special focus of Starbucks on the customer. Businesses

are created for human society and Starbucks believes in remaining focused on that. It is why its
focus is on ethical sourcing, maintaining ethics and compliance in every part of its business and

on investing in environment and empowerment.

Vision statement

Starbucks Coffee’s corporate vision is “to establish Starbucks as the premier purveyor of

the finest coffee in the world while maintaining our uncompromising principles while we grow.”

It is clearly stated that Starbucks is ambitious to become the leader in making the finest coffee in

the world. However, rapid growth has to go along with company standard appropriately.
Analysis

Question 1 :
What was Howard Schultz’s original strategic vision for Starbucks? How many times has his

strategic vision changed or evolved into something different? Is Kevin Johnson likely to continue

with Shultz’s latest strategic vision for Starbucks for several more years or is the vision likely to

undergo change before year-end 2018?

1.1 Howard Schultz’s original strategic vision for Starbucks 

Howard Schultz saw Starbucks as more than just coffee, but instead more for the dark –

roasted flavor profiles that Schultz’s and the founders were so passionate about. Top quality,

fresh – roasted, whole – bean coffee was the company’s differentiating and bedrock value.

Shultz’s original plan in 1982 was to expand product development and modify the format of the

Starbucks store with space within the stores to serve as an espresso bar. His biggest inspiration

and vision for future came during the spring in 1983 when the company sent him to Milan, Italy

and Schultz explored many different espresso bars where he was greeted by many “baristas”.

This trip produced a revolution, he believed there was so much more than just selling coffee, he

wanted Starbucks to sell fresh brewed coffee, espressos, and cappuccinos in his store and create

an American version of Italian coffee bar culture. Schultz became frustrated with Starbucks and

left the company and started his own venture called II Giornale. Within six months of operation,

his store was receiving more than 1,000 customers a day and then he was able to open another

store. After the successes of his stores, Jerry Baldwin and Gordon Bowker decided to sell the

whole Starbucks operation to Schultz. Schultz was able to evolve Starbucks’s strategic vision by
acquiring other companies expanding geographically, partnering in joint ventures and further

developing his products and markets.

1.2. How many times has his strategic vision changed or evolved into something different?

His plan has changed on several different occasions, from a retail company to a service

provider. Evolved in many ways to expand into new markets to inspire and nurture the human

spirit – one person, one cup, and one neighborhood at a time.

 From coffee equipment to branded giant 

 Local shop to international locations and grocery stores 

 Just coffee to accessories, drinkware and more 

 Continued focus on offering high-quality products 

 Continue to provide customer service skills training 

 Expanded products to include tea and non-coffee drinks 

 Follow trends to include healthier options. 

3. Is Kevin Johnson likely to continue with Shultz’s latest strategic vision for Starbucks for

several more years or is the vision likely to undergo change before year-end 2018? 

“It would be reserved for more discerning types, those who were prepared to spend $10

for a coffee whose beans had been trodden on by the pedicured feet of peasants who live in the

clouds and never talk to strangers” That was the vision presented just a couple of years ago by

former CEO Howard Schultz. Seem like this vision will likely to undergo change before year-

end 2018. On March 21, 2018, in Starbucks Corporation hosted its 26th Annual Meeting of

Shareholders, with more than 3,500 shareholders, partners (employees), invited guests and board

members in attendance, Kevin Johnson began the meeting by highlighting the trajectory of the

business over the past five years and the foundation that has been laid to accelerate the
company’s next wave of growth. In his remarks, he offered tribute to the heritage of the founder-

inspired company and highlighted both the power of the iconic brand and the strategic vision set

to fuel the company’s future.  

“No retailer is better positioned to meet the changing needs of today’s consumer, as

expectations of convenience and community redefine what it takes to be a successful and

relevant brand,” said Kevin Johnson.  “The story of our growth over the past five years is

grounded in key innovation investments we have been making for our future, and this continued

focus will ensure we build upon on our leadership position in this rapidly changing retail

environment.”

Question 2:
Which one of the five generic competitive strategies discussed on Chapter 5 most

closely approximates the competitive approach that Starbucks is employing ?

Starbucks adapts numerous elements of five generic competitive strategies in order to bring the

success to the company. They have conducted a lot of research and analyzed them with the aim

of choosing the most corresponding strategy. And the closest one to describe option is broad

differentiation strategy. Starbuck emphasizes on being differentiated in terms of products. It has

been very successful in the continuous company base’ s expansion and even when we compare

Starbucks with its rivals locally and globally. It created various products to attract massive

customers. There are many clues to demonstrate the strategy that Starbucks focuses on is broad

differentiation strategy and below are the clearest indications our team come up with.

2.1 Strategic target

 The reason why Starbucks puts an emphasis on product differentiation is because its

target customer is very broad. Starbucks keep release new features so as to appeal more

and more buyers. In fall 2019, it introduced VIA Ready Brew with the addition of rich,

full-bodied taste to please the on-the-go and at-home coffee drinkers. Furthermore, with

the approach to non- coffee drinkers, Starbucks also altered their menu to meet the

demand of customers which consisted of fruit cups, yogurt parfaits, skinny lattes and so

on. It sold products through grocery stores, warehouse clubs to serve at home consumers

and international ones through the abroad expansion.

2.2 Competitive strategy

Sales are not the only important aspect that Starbucks pays attention to. In order

to adapt and fit well with the geographic location, Starbucks modifies not only the design

but also the atmosphere of each stores. It is a good competitive advantage as other

companies usually uses the same setting and background which might give the customers

boring feelings. At the beginning period- 1996, there were four store templates with

different color, internal materials. After that, to serve the change of demand, several

stores had a special seating area for the customers to relax or chat with their fellows. In

contrast, in high- traffic destinations, the stores were designed for buyers to pass by and

quickly pick up their coffee. Through this way, Starbuck creates places to explore and fit

with the need of customers.

2.3 Product line

Starbucks offers various number of products to compete with competitors. The

wide range of goods is not limited with only many kinds of specialty coffee. It also

comprises coffee- flavored ice- cream which ranked the number one selling, food
 products, merchandise and distributes tea worldwide. The product line of Starbucks is

very diverse. The managers pay a lot of attention to the expansion and evolvement of

product line since it is a vital part to succeed.

2.4 Product emphasis

In general, if a company produces immense range of goods, it frequently tends to

forget to pay attention to the quality of individual product. Nevertheless, Starbucks

always promises about the hygiene despite the wide variety of available products. In fact,

one of the factors that brought the CEO of Starbucks to this industry is because of both

the notion of two first founders and the unique taste of special coffee. As a result, from

the beginning, Starbucks claimed about the guarantee of the products’ high quality,

especially coffee. This is differentiated principle that can help to appeal customers.

2.5 Marketing emphasis

To discuss about the next differentiation of Starbucks, it will be a lack if we do

not mention about the atmosphere that Starbucks brings to the customers. In each

location, the service is very well- trained by the experienced staffs. The employees need

to ensure that their customers can receive the best service in order to feel delightful. The

staffs are usually intensely observed and trained to provide the standard of service. This

fact seems to create a professional workplace atmosphere and enhance Starbucks’ image

about high quality of not only products but also the employees here.

2.6 Keys to maintaining strategies

Starbucks always tries its best to create an excellent innovation with the aim of

providing the interesting feeling to the customers. At the same time, Starbucks focuses on

both store location and improved products. Because it knows that the two key factors that
 can bring the success and reputation. Besides, Starbucks has coordinated with numerous

partnerships and tried to explore new market segment. For instance, the company chose

PepsiCo to work with in a new product which was beverage in bottles or cans. With the

wisdom of Schultz, he led two companies to the profound happy result.

Question 3:
What are the key policies, practices, business principles, and procedures that underline how Howard

Schultz and Starbuck’ management implemented and executed the company’s evolving strategy?

Howard Schultz and Starbucks’ management had used many different policies, practices,

business principles as well as procedures to support the evolving stage of the company. All of

them had specific roles which had been considered and discussed thoroughly among managers of

Starbucks before they decided to do so. Thanks to the important business principles, Howard

Schultz had created Starbucks as a great place for both partners (employees) and customers.

Since 1988, Howard Schultz had shown his clear thoughts about how Starbucks should

work. He believed that knowledgeable, skillful and passionate employees were the key element

for the positive experiences of customers. He had given many policies in order to attract together

with motivate and give awards to the employees. He persuaded Board members to institute

health care coverage for every employee consisting of full-timers and part-timers who went to

work for more than 20 hours. He also pursued a stock option plan to make employees become

partners of Starbucks after working for the company more than half a year with over 500

working hours. Moreover, he executed that all partners who had gone along with Starbucks for at

least 12 weeks could have a chance to get company stocks by regular payroll deductions at a

discount of 5 percent in the closing price on the last day of each quarter. Working at Starbucks

had never become so attractive that not only were partners offered with best policies but they
also received among the best salaries on the market. Starbucks has worked as the rationale of

Schultz: “If you treat your employee well, that is how they will treat customers”. Other than that,

he trained new employees with rules and specialized lessons and understanding about coffee. It

is no doubt that the list of “100 Best Companies to Work for” by Fortune has mentioned the

name of Starbucks 14 times over the 30-year period, between 1988 and 2018.

Satisfying customers also played an undeniable part of Starbucks that the main idea for

the business principles of the company was about the quality created for customers. Starbucks

does everything with a passion to create a place where customers can relax and be themselves.

The company also declined that they wanted to build a company with soul where people can

connect with each other and find themselves belong to. By using fixed and price-to-be-fixed

price coffee and other products from local sources, Starbucks was able to retain the suppliers and

manufacturers all over the world. Understanding that people were paying more attention to

health, Howard Schultz had developed a certain guideline called C.A.F.E practices (standing for

Coffee and Farmer Equity) to make sure of the product quality, the prices for manufacturers, safe

conditions for working and environmental cultivation. Starbucks had started with the promise for

making the best beverage to create connections between people and people and they did it. They

always focused on pleasant of customers. Therefore their main theme on every store was “just

say yes” to requests from any customer.

It is true to say that based on the key policies, practices, and business principles of

Howard Schultz, Starbucks had succeeded in existing and developing to become one of the best

company in the world.

 Question 4:
What are the key policies, practices, business principles, and procedures that underline how Howard

Schultz and Starbuck’ management implemented and executed the company’s evolving strategy?

4.1 Values

Starbucks strictly pursues values with the hope to enhance the quality of products and

maintain friendly environment. The cornerstone vale is “to build a company with soul”. In

general, the company makes a promise to never stop chasing perfection of coffee. 

The theme of Starbucks is “just say yes” to customer request. As a consequence,

managers high light that customers’ satisfaction is priority. Employees were trained to go out

of their way, also heroic measures is vital in several situations. 

Retribution is not a concern in Starbucks since employees are encouraged to raise

their voice. They want employees to be involved in by pointing out what is right or wrong.

Furthermore, workers are highly allowed to contribute to the process of making Starbucks a

better company by vocalizing about what modification is suitable.

All of the following actions lead to the list of stated values which are well adapted by

Starbucks:

- Creating a culture of warmth and belonging where everyone is welcome

- Acting with courage, challenging the status quo and finding new ways to grow our

company and each other.

- Being present, connecting with transparency, dignity, and respect

- Delivering our best in all we do, holding ourselves accountable for results

- We are performance driven, through the lens of humanity

 Moreover, Conforming the highest standards of ethical conduct and taking all the

legal and ethical responsibility seriously are necessity.

4.2 How well do they connect to the present strategy and to the manner in which company

conducts its business?

Our coffee - In order to meet the highest standard of coffee, Starbucks choose the best

beans and perfectly roasting them. Starbucks so strongly disapprove artificially flavoured coffee

that they are passionate about sourcing the qualified beans. Furthermore, the living standard of

farmers who grow the beans is a concern of the company. They pay deeply care about all of

these. 

Our partner - Starbucks refers doing business as passion. They respect the diversity and

put effort in building a place where everyone can be themselves. The importance of employees

within the company is mentioned frequently by offering incentives, benefits and awards. 

Our customers - Due to the extensive training process, employees are believed to

professionally perform customers’ care. Starbucks is a place for human connection. 

Our stores - Starbucks strategy is to prepare the decoration based on the geographical

culture of each location. The action is to create the senses of home and peace when visiting

Starbucks.

Our neighborhood - Starbucks acknowledge that each store is a part of a specific

community. Contribution is their mission to positively effect to their surrounding communities.

In detail, they are friendly neighbors, and also engaging in many different community service

projects such as the Starbucks Youth Action Grant, which is given to young people within

specific communities monetary aid in

community service. 
 Our shareholders - Starbucks refer success as their duty to shareholders. Starbucks

commits to do whatever possible to endure and thrive the company and related people. They

have done this so far by becoming the global powerhouse that Starbucks is today.

 Question 5:
What is your evaluation of Starbucks social responsibility strategy? How much does it helps to

create their public image?

From what we can see, social responsibility has been of concern for mankind for many years.

Over the last two decades, however, corporate social responsibility has come up as a significant

subject matter in the business community and progressively become a mainstream activity.

Striving to make a profit or building value for one constituent is obviously unsustainable. Being

aware of the vital role in business plan to achieve sustainable success, Howard Schultz and

Starbucks has done their utmost to “build a company with soul” which was built on a foundation

of humanities. The core belief stated that “the way to build a great enduring company is to strike

between profitability and social conscience”. In order to attribute positively to the community,

Starbucks enter a commitment to take ecological and social responsibility of the community in

which they are located in.

5.1      Ethically resourcing all of its product

Starbucks’ success is directly linked to the work of farmers and suppliers who

grow and produce products. Starbucks committed to buy green coffee beans that are

grown in accordance with environmentally sustainable agriculture practices. Moreover,

the major partners of Starbucks were poor farmers who lack money to promote farming

stuffs or cover all the necessary expenses. Acknowledging these difficulties, Starbucks
 was always ready to provide funding for loans and technical assistance to aid small coffee

growers in meeting the basic needs, improving the living standard and promoting best

practices in coffee production.

Besides, Starbucks made every effort to purchase well-qualified goods from

suppliers by attaching themselves to strict food safety, product quality standard and

Starbuck-specified operating practices. They also had to comply with the company’s

global Supplier Code of Product.

Therefore, since 1998, the prior goal of top executives in Starbuck had stated that

all of their purchased coffee beans are C.A.F.E which cover four areas: product quality,

the price received by the farmers, safe and humane working conditions and

environmentally responsible cultivation practices. From time to time Starbuck has

temporarily or permanently stopped working with suppliers who failed to execute these

compliances.

5.2   Community involvement and corporate citizenship

Starbucks strongly believes that successful business has to involve and support

the communities as well. They exert themselves to be good corporate citizen and friendly

neighborhood by engaging in social projects regularly which help the community thrive.

These activities resulted in a meaningful impact in which they resided in.   

For instance, since 2011, Starbucks has held a Global of Month Service annually

which attracted more than 60,000 employees to volunteer for over 150,000 services hour

and complete 1,400 community-service projects. Another improvement program was

“food share” which consisted of  donating food and providing meals for needy families or
 homeless people. A group of experts estimated that when the project is fully operational,

there will be 50,000 million meals providing per year.

5.3      Environmental stewardship

Globalization has led to cross-border transactions which caused a burden over the

environment.  The whole world is concerned over the growing environmental issues. As

one of the top businesses, Starbucks has been pursuing various strategies to address these

serious challenges. They attempt to increase recycling, reduce waste, be more energy

efficient, use renewable energy sources, preserve water resources and make all company

facilities as green as possible by using environmentally-friendly building material or

energy-efficient design. All of these activities make a great contribution in reducing the

rate of pollution.

Over the last few decades, Starbucks has recorded a lot of great achievements in

attempting to steward the environment. In 2015, Starbucks built more than 1,200 LEED-

certified stores on 20 countries. In 2017, they decreased 22% in the amount of water used

successfully. Starbucks was also the number one purchaser of renewable electricity in its

sector on the EPA’s Green Power Partnership National Top 100 list.  

5.4      Creating opportunities to help people achieve their dreams

As Starbucks was built on humanity, they always create paths for poor people and

give them a chance to work and reach their own dream. By 2020, Starbucks aims to hire

100,000 youngsters aged 16-24 who was disconnected from work and school. At least

25,000 veterans and military spouses as well as 10,000 refugees across 75 countries will

be Starbucks’ employees in 2025. They will also sponsor great scholarships for deserved

students.
5.5       Charitable contribution

The Starbucks Foundation was set up in 1997 with a hope to contribute to

philanthropic activities. Their huge funding comes from Starbucks Coffee Company or

private donations. Until now, Starbucks has made about 200 grants to nonprofit

organizations such as the American Red Cross, Save the Children, Global Fund and

products. Their core mission is to help poor people who experienced serious damage

from natural disaster, famine, wars and so on to better off the community.

In short, Starbucks is an enterprise that takes its CSR very serious to develop and

maintain a healthy relationship with their customers, suppliers, investors and

shareholders. All of these activities has exerted positive impact on Starbucks’s public

image. This brand was listed on the Corporate Responsibility Magazine’s“100 Best

Corporate Citizens”. This honor can attract more and more customers who are socially

responsible and willing to pay for Starbucks’ products. This also can be determined to be

as a driving force to corporate social responsibility accurately.

Question 6:
What is your assessment of Starbucks’ financial performance during fiscal year 2015-2017?

 America 

  2017 2016 2015

Revenues $3,949.0 $3,968. $3,383.8

Growth rate  -0.48% 17.30%  

Operating $903.7 $1,096. $840.6

 Income 9

Operating Margin 22.9% 27.6% 24.8%

 International 

  2017 2016 2015

Revenues  $1,165. $1,109. $960.5

8 4

Growth rate  5.10% 15.5%  

Operating Income  $236.5 $238.2  $182.9

Operating Margin  20.3% 21.5% 19.1%

   

It is clear that the US market is more potential and profitable when looking at Starbucks'

financial data sheet in both the US and international markets.. Firstly, when looking at yearly

revenue, the revenue in the United States market in 2017 alone was around four times higher

than the International market revenue. The United States had revenue of $3,949.0 million while

the International revenue was only $1,165.80 million. Besides, profitability that came from

international investment rose gradually each year. This means in the future, International

Starbucks might cover loss and bring more money back. However, the revenue in USA tended to

decline slightly. Revenue from company-operated stores accounted for 79% of total net revenues

during fiscal 2017, while revenues from our licensed stores accounted for 11% of total net
revenues in fiscal 2017. This represents the level of customer credibility in company-operated

stores because customers were offered better service when they visited these stores. 

Next, to compare the revenue growth rate percentage, America had a negative growth

rate in 2017, while the Starbucks International growth rate was a positive one, which about 5.6%

higher than that of the United States. However, from 2016 to 2017, the world economy suffered

a recession, so it was not surprising that Starbucks's development had fallen into a negative state.

Even since 2015, the economic development of Starbucks in the US market had the tendency to

slow down, but growth figures were still positive and much higher than International Starbucks.

Due to the ambition of expanding the area and entering the international market in recent years,

Starbucks had made itself fall into precarious economic fluctuations from 2015 but they

remained quite high at 15.5% growth in 2016. The big difference between Starbucks' operating

revenues and international Starbucks once again confirms the size, profitability and position of

Starbucks in the US, when the operating revenue in the US market is much higher. The operating

income of $903.7 million in Q4 FY17 declined 18% versus $1,096.9 million in Q4 FY16. 

 Looking at the operating income to revenue percentage the United States dominates. As

it gets closer to the present, however, for example in 2017 the operating income to revenue ratio

is much closer. Within the area of the United States, it was 22.9% and for the International

market, it was 20.3%. This proves that the recession had flattened every similar economy in that

period of time.

Overall, Starbuck is  a healthy and profitable company on average. The only years that

they saw a decrease in sales were during the recession which was quite common in most

companies. However, Howard Schultz had a plan for this decline in sales in which he cut stores,

and made sure to refocus the company on sustaining grow. The number of commissions for each
share increased to $0.3, proving that Howard's method was effective, marked the flourish in the

growth background of Starbucks

Question 7:
What issues confront the company as of mid-2018? What should Kevin Johnson and other

Starbucks senior executives be worried about?

7.1  What issues confront the company as of mid-2018?

        As of the mid-2018, a change in leadership was the biggest issue confronting Starbucks.

Howard Schultz, Starbucks’ Executive Chairman retired on June 26, leaving Kevin Johnson

as CEO and Myron “Mike” Ullman as Starbucks Chairman. This was something having been

planned for over a year as Schultz explained in an MSNBC interview. Schultz new title was

the Chairman Emeritus. 

        Another issue confronts Starbucks was that in the last three months of  2018, Starbucks’

stock was down 11.38%, while the overall market was up 4.10%. As of June 5, the market

closed with Starbucks shares down 2.44% at about $55.68 USD. This could be explained in 3

main reasons. The first cause which led to the failure of Starbucks was the result of having too

many locations. Starbucks has added stores at an aggressive rate in these recent years. Since

2013, according to Technomic data, the chain has grown unit count by nearly 22%. The

company has spread itself too thin in too many markets. That has hurt traffic in the afternoons

when its customers were less loyal. Moreover, having too much competition also created

some problems. It is clear that Starbucks was not alone in the field. Rival Dunkin’ Donuts had

some similar challenges but said it is in revitalization mode. The fact that having higher costs

made the biggest problem for Starbucks. When the price increased, the number of loyal

customers decreased significantly

7.2 What should Kevin Johnson and other Starbucks senior executives be worried about?

Johnson took over as CEO for the legendary Howard Schultz in April 2018. And

Starbucks stock has barely budged since then. (A flat white may be a good thing for

Starbucks. A flat stock price isn't.) 

Many investors clearly seemed nervous about the trouble that Starbucks was having in

its home market. More than 8,000 stores shut down operations so about 175,000 employees

could “go through a training program designed to address implicit bias, promote conscious

inclusion, prevent discrimination and ensure everyone inside a Starbucks’ store to feel safe

and welcome,” as noted in the company statement. The temporary closure resulted in $16.7

million in cost for the Seattle-based company, as estimated by Bloomberg. The publicly

traded company went on to state that this type of training would become a part of the

onboarding process for all new employees, or “partners” as Starbucks calls them.

Starbucks did not seem to be attracting new customers. All its same-store sales growth

in the United States came from customers spending more. However, the number of actual

transactions was flat. The slow death of shopping malls was hurting Starbucks, too. Only 6%

of Starbucks stores were in a mall, but sales at those stores fell during the quarter. So

investors had reason to be concerned.

Donald Trump’s policy also affected Starbucks directly, as you know the trade war

broke out between the two countries - America. In Starbucks's chain of stores, there are 3300

stores across 141 cities in China. American trade war can affect the number of customers and

sales of Starbucks. This also changed some starbucks's business strategies in China -

something that they had succeeded in this country before.

Question 8:
What recommendations would you make to Kevin Johnson to sustain the company’s growth and

improve the company’s financial performance in the years ahead?

Kevin Johnson assumed the role of President and CEO of Starbucks in April 2017, when Howard

Schultz announced he was stepping down from his role as Executive Chairman of Starbucks last

month. All eyes have been moving over to the new CEO and there are a lot of ideas that he can

apply to maintain the sustainability of the growth rate in Starbucks and improve company’s

financial performance in the years ahead.

8.1 International market

First of all, international growth is a key component that Starbucks needs to focus

on. Although Starbucks had over 28,200 store locations in 76 countries as of April 2018,

its expansion in the Asia market has been quite slow. Asian countries are totally

significant difference when it comes to culture, value, religion, taste, etc, especially tea

culture in some countries such as China, Japan, Korea, and Vietnam. To meet the local

taste, Starbucks needs to act locally by introducing alcoholic or tealike beverage. In

March 2019, Kevin Johnson accelerated Starbucks expansion across Asia amid

intensifying competition. Recently, Japan is now the home of the largest Starbucks store

on the planet. Furthermore, besides the United States, Japanese citizens consume the

highest amount of goods produced by Starbucks. In addition, no one can deny the

remarkable rise of Starbucks in China. It can be a tremendous idea for Starbucks to

spread out and open new location in both China and Japan. However, Starbucks also

needs to set up different strategies and approaches for some markets such as Vietnam.

Vietnam is a country that shares several commons in tea culture with China and Japan.

Therefore, after conducting adequate analysis, if Starbucks can have a suitable strategy
 and take full advantage of it, the company can reduce both the money and intellectual

intelligence to invest in Vietnam.

8.2 Price strategy

Another thing that Kevin Johnson should take into consideration is lowering

price. A lot of consumers shy away from Starbucks because of their high coffee prices.

Due to that, slightly lowering price is a good option that Starbucks may want to think

about and give it a chance. By this way, Starbucks can reach more consumers who don’t

feel comfortable with the current high price. Alternatively, if the managers do not feel

satisfied doing this, they can choose to offer new deals such as a buy one get one free

during obscure hours for example, from 3-6pm on weekdays. This would help increase

the flow into Starbucks during the non-“rush hours”. This would also attract more

consumers who perhaps have never tried Starbucks but are interested in the deal. When

they taste the high quality of the brew, they may be more willing to splurge on a good

cup of coffee.

8.3 Continuous innovation

Last but not least, with the aim of sustaining Starbucks’s growth, aggressively

innovating can be taken seriously, especially in the aspect of product development.

Innovation can make the company’s products more difficult to imitate. Adding new

features to products is a method to enhance the value that a company brings to its

customers. As a result, this way is able to not only create a profound reputation but also

increase the profitability for Starbucks. Furthermore, creative marketing and branding

strategies should be paid attention to, which tend to build the Starbucks image as a
contributor to community development. That image can help reduce socio-cultural

opposition against the company. 

Howard converted Starbucks into a $84 billion consumer brand and he handed at

the brass key to Kevin Johnson in April 2017. Kevin Johnson needs to have a clear view

and come up with good strategy based on his own experience and also his talented

employees. There are a lot of opportunities to be utilized and challenges that have to be

dealt with in order to ensure the company’s growth and improve the company’s financial

performance in the future.  

Conclusion

It is no doubt that Starbucks is one of the most successful global company in the world.” They

used a simple strategy, "connecting links between treating employees with dignity and respect

and producing a good product and services." That was the major factor that differentiate

Starbucks from others and bring success to the company. “The future of Starbucks, which is in a

fast-growth phase, is apparently to be successful and promising. However, those keys to success

may not be applicable to tomorrow's environment and in the global market. Defending and

growing a competitive position requires firmly built strategies basing on its unique, valuable and

leading capabilities and resources, rather than the products and services themselves, proactively

responding to ever-changing the internal and external environment to keep fending off its

competitors. Although currently there are no formidable competitors for Starbucks leadership in

both international and domestic markets, it should not take it for granted for good. Tomorrow's

destiny of Starbucks will depend on its strategic capability to preserve and sustain its strengths,

offset weaknesses, avoid threats and capitalize on opportunities. If Starbucks would correctly

identify and deal with the issues under current and near future circumstances, it could remain

excitement about further growth and continues to be prosperous.”