Starbucks: Back to Basics?
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Case Code: BSTR307 Case Length: 18 Pages Period: 2007-2008 Pub Date: 2009 Teaching Note: Available |
Price: Rs.500 Organization: Starbucks Industry: Food and Beverage Countries: USA, Global Themes: Growth Strategy, Globalization |
Abstract Case Intro 1 Case Intro 2 Excerpts
Introduction
On July 30, 2008, Starbucks Corporation (Starbucks) announced a net loss of US$ 6.7 million, for the quarter ended June 2008. This translated to a loss of one cent per share, as opposed to a profit of 21 cents per share (with a net profit of US$ 158 million) recorded for the corresponding period in 2007. This happened despite the fact that the company's net revenue grew 9 percent in the quarter to US$ 2.57 billion.
Earlier, Starbucks had announced that it would close down around 600 of its under-performing stores in the US and nearly all of its stores in Australia, in addition to cutting about 1,000 non-store jobs. Analysts attributed Starbucks' falling fortunes as much to its rapid expansion that apparently eroded its competitiveness, as to the worsening US economy, with falling home prices, rising unemployment, and cash-strapped customers.
The history of Starbucks goes back to 1971 when the first store was opened. Initially, the stores sold coffee "by the pound". After Howard Schultz acquired the company in 1987, Starbucks started setting up cafés, where customers could sit and sip their favorite espressos and lattes. Schultz was instrumental in the rapid expansion that the company saw in the 1990s and 2000s. From being a small-sized company with around 165 stores in the US in 1992, Starbucks became a global behemoth with around 15,000 stores in more than 40 countries by early 2008. However, this rapid expansion brought with it some problems. While earlier Starbucks cafés were known for their high level of service, with friendly baristas, by the mid-2000s, they were criticized for their impersonal service...
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