lished in the intensely competitive U.S. market, Starbucks is growing much more quickly in Asian markets. This is STARBUCKS COFFEE requiring the firm to place more emphasis on how it tar- gets Asian consumers. The company has 3,000 cafes in 135 cities in China, where consumers drink, on average, just three cups of coffee every year. By opening more lo- cations and encouraging consumers to bring their friends for coffee and conversation, Starbucks aims to increase demand and boost sales throughout China. Long-term growth in China is one of the company's top priorities. In Source: TY Lim/Shutterstock Japan, where Starbucks now has more than 1,300 cafes, consumers have long enjoyed the tradition of meeting in neighborhood coffee shops. After more than 30 years as CEO, co-founder Howard Schultz stepped down from the helm in 2017, replaced by former COO Kevin Johnson. Often when the founder steps Starbucks experiences significant organizational change. down-especially one as popular as Howard Schultz-the company must face. Starbucks also experiences internal move creates internal turmoil within the company. One organizational change, such as changes in management way Starbucks is overcoming resistance to this change is and employees. This requires Starbucks to understand by replacing Schultz with a seasoned executive who has competition and changing market conditions, as well as worked with Schultz during key changes at the firm. It changes resulting from employee turnover and corporate also helps that Schultz is not leaving the company entirely. culture. Of particular importance is how these changes Not only will he remain executive chairman, but he is also impact the customer experience. When the financial cri- planning to focus his energy on expanding the company's sis occurred in 2008-2009, the change in income levels premium coffee segment. and employment led to a drop in sales. A combination of The company considers restaurant industry studies, overexpansion and declining revenues required Starbucks credit card data, and same-store sales trackers to set fi- to make organizational changes quickly, including hiring nancial forecasts. Starbucks aims to open 12,000 addi- back its founder Howard Schultz as CEO. Under Schul- tional stores, refocus on its coffee beverages, and expand tz's leadership, Starbucks closed some of its stores and its focus on technology and its rewards program to lead focused on enhancing the customer experience to create the organizational change and exceed growth targets. more value for customers. This emphasis on the customer . The company announced plans to sell its Tazo tea brand helped Starbucks rebound, but it continues to face chal- to Unilever, close all 379 Teavana locations, and end its lenges as it adapts to internal and external organizational e-commerce platform. Sometimes a key part of change in- forces. Because the consumer is the most important fo- volves eliminating less profitable segments that take away cus at Starbucks, managing the quality of the coffee ex- from the company's core focus. perience that Starbucks provides is essential for Starbucks With company food sales reaching 21 percent of total management. sales in the United States, Starbucks aims to elevate its Starbucks continues to refine the retail environment to food offerings. The company invested in high-end Italian increase customer value. It has researched and refined ev- bakery Princi and opened a bakery inside the company's ery aspect of the customer experience, from the size of flagship Reserve Roastery and Tasting Room in Seattle. its coffees ("tall" is actually "small") to the number of This bakery features more than 100 menu items, including minutes that customers spend waiting in line. To speed up croissants, sandwiches, salads, and more. The company's purchases, it offers the options of paying by cell phone and roasteries are designed to be larger than its traditional cafe ordering ahead. To pay with the Starbucks app, consum- concept and will incorporate Princi bakeries, including ers with iPhone, Android, or Windows cell phones sim- those slated for Shanghai, Milan, New York, Tokyo, and ply download the app and let cashiers scan the Starbucks Chicago. Part of Schultz's job now that he is no longer code on the screen during checkout. The app links to the CEO will be to focus on these roasteries, which sell pre- customer's Starbucks Card, which combines the rewards mium coffee products that Starbucks believes will become of a loyalty program with the convenience of a prepaid a lucrative industry in the coming years. card, for making purchases. The Starbucks mobile wallet Taking note of consumer interest in energy drinks, is a big hit: nearly a third of its sales volume now comes which has blossomed into a $27.5 billion market, Star- through its mobile wallet. bucks launched Starbucks Refreshers to take advantage One major change Starbucks has encountered in recent of this growing trend. Starbucks Refreshers is a line of years is its saturation in the United States. Well estab- carbonated drinks with more than half the caffeine con- 320 Part 4 Organizing Ianossiango 01 0age10tent of an espresso shot. Available in supermarkets and in Starbucks cafes, these all-natural drinks combine green, which organizations react spontaneously to external and unroasted coffee with fruit juices for a fruity, non-coffee internal forces but do little to modify their behavior. The flavor. To gain significant market share, Starbucks must company's many successful initiatives, as well as its not- battle against Red Bull, Rockstar, and other well-known so-successful ones, demonstrate that the firm is ready and willing to make changes to maintain its competitive ad- marketers of energy drinks. In undertaking this endeavor, vantage and gain market share.48 Starbucks must deliberately structure its operations and strategies to anticipate environmental forces, including the 1. Describe how Starbucks introduced technological changing behavior of consumers and competitors. changes to speed up purchases. tril When it comes to innovation, Starbucks clearly engages 2. What external and internal forces are causing Star- bucks to refocus on its coffee beverages? in planned change. It is proactively embracing innovative 3. Describe the organizational changes Starbucks has changes it believes will help it to become a more suc- had to undertake to continue its success. cessful firm. This is the opposite of reactive change, in winido bas dis Notes 1. Conversation with Marshall Powell Ledbetter III; VIP ment and Disagreement," Psychological Reports 66 (June nado- Moving & Storage website, http://www.vipmovingandstorage 1990): 1235-1241. com/ (accessed July 14, 2015); Better Business Bureau, "VIP 12. Peter Senge, The Fifth Discipline: The Art and Practice of Moving & Storage Inc.," https://www.bbb.org/losangeless the Learning Organization (New York: Doubleday, 1990). iliconvalley/business-reviews/moving-and-storage-company/ 13. Phyllis Korkki, "Invasion of the Annual Reviews," The vip-moving-and-storage-in-pacoima-ca-1023815 (accessed New York Times, November 23, 2013, http://www.nytimes logevery da this may seem like contributing to the entire operation of the restaurant. Too the resistance look like? o you anticipate? What will much congestion in the lobby is creating too much noise pollution for the diners, and people are constantly bump- resistant? 5. What can you do to proactively manage those who are ing into each other in the lobby. Just last week a fire mar- shall came in for a meal, and, after seeing the conditions, 6. What specific behaviors do you need from the em- warned the manager of safety violations. Additionally, the ployees to address the resistance? restaurant cannot keep up with the demand. In fact, the 7. What type of personal support or assistance will you need to implement the change? Case 10: Organizational Change at Starbucks Starbucks-the Seattle-based company that popularized tween home and work. Today, there are more than 24,000 the "coffee culture"-is brewing up higher sales through Starbucks stores in 70 countries. new beverages and new cafes in global markets. A stop As with all firms, Starbucks must undergo change to at Starbucks has become part of many consumers' daily be successful. Consumer preferences change rapidly, and outines. Some are attracted by the variety of high-quality, Starbucks must adapt if it wants to avoid being left behind. brewed-to-order coffee and tea, whereas others look for- Changes in consumer preferences, as well as changes in ward to relaxing and socializing in the "third place" be- technology and the economy, are external forces the If ded nordl scom ilve adarib barsnodiss dites Chapter 10 Organizational Change and Innovation 319