.Case: Starbucks - The Leadership of Howard Schultz

Starbucks was started in 1971 by three academicians in Seattle. Ten years later, Howard Schultz joined the company. During his trip to Italy he realized that the coffee house can be much more that simple a place where you drink coffee. However, his ideas were not accepted by the owners of the company. Being frustrated, Howard Schultz looked for investors and eventually bought the company. From 1987 until 1992, Starbucks remained a privately held company. When the company ventured outside the Pacific Northwest, the company first experienced disappointments which were followed by mixed to moderate successes.

Howard's dream was to not only provide a friendly environment for its customers, but also for its employees providing friendly service. This meant taking good care of its employees by providing healthcare benefits not only for its full-time employees, but also for those working 20 hours or more. Moreover, employees could also purchase stocks in the company. In all, company pay and benefits attracted motivated employees with good skills.

Starbucks' aim was "to build a company with soul." This meant that employees had to listen carefully to what customers want and meet their expectations. The customer-oriented philosophy was expressed in the mission statement which also emphasized that employees treating each other with dignity, enjoying diversity in the workplace, reflecting the local community, having high standards for coffee, being a good member of the community, and being, of course, profitable.

The mission statement resulted in strategies that lead not only to domestic, but also international expansion. In 2006, the Starbucks Web site showed 16 international countries plus Beijing, Shanghai, and Hong Kong. The longer-range goal was to have some 25,000 stores in various locations. To achieve this long-range aim, Starbucks designed stores with a pleasant ambience which customers, surrounded by coffee aroma, really enjoy. Also, since 2002, the company worked with T-Mobile USA by providing Internet access in the coffee shops. Besides offering caffeinated and decaffeinated beverages, a great variety of specialty coffees as well as teas are offered. Customers can also get juices, pastries, coffee mugs, coffee- making equipment, and even CDs. Moreover, Starbucks partnered with PepsiCo and Dreyer's Grand Ice Cream and engaged in licensing agreements with Kraft Foods. Coffee is also offered at warehouse clubs, Marriott Host International, United Airlines, and even at Wells Fargo Bank. Catalog sales were tried but did not succeed and consequently were discontinued. Starbucks also invested unsuccessfully in a number of dot.com companies.

The sense of social responsibilities guided the company's actions. Not only did the firm participate in local charities to "give back" to the community in which it operates, but also applied this sense of responsibility to its purchasing practices. Most of its retail stores and hotels with which the company had licensing agreements, used Fair Trade Certified coffee.

Clearly, the company has been successful despite competition from coffee makers such as Proctor & Gamble, Nestle, and Kraft General Foods. How, then, will Starbucks meet those and other challenges in the future?

Questions:

1. Why was Starbucks so successful?

2. How does Starbucks differ from other coffee houses?

3. How could the company attract non-coffee drinkers?

4. What other challenges may Starbucks encounter in the future?

5. What were key leadership traits of Howard Schultz and his quality insights, which played an important role in success of the company?

(2x5= 10 marks)