transformation of starbucks

8/7/2019 transformation of starbucks

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Prerna Malhotra

IVth sem.

MHROD

StarbucksPresented by:


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Introduction

In early yearsFounded by JerryBaldwin, Gordon Bowker, & Zev Siegelin 1971, in Seattle

Sold only whole-bean coffee and coffeebrewing machine

In 1980s

Howard Schultz became CEO andrenamed it as Starbucks

Re-image from only selling beans tobe a coffeehouse


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Introduction

Largest coffeehouse company in the world,

with over 17,800 stores

in 49 countries,

Over 11,000 in the United States, almost 800 in theUK, and nearly 1000 in Canada.

Business expansion into food, ice-cream, tea, RTD

business, credit cards, music and film.


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Growth Rate till yr 2008


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Transformation Agenda

Declared in Jan08 by Howard Schultz

Following strategic initiatives declared:

1. Improving current state of US business

2. Reigniting emotional attachment with customers: focusing on the

Starbucks Experience

3. Building for the long term

4. Expanding presence around the world


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Steps to transformation

1. Restructuring Starbucks Leadership Team

2. Assigning accountabilities to leadership team and their

direct reports3. Restructuring the company

4. Slowing the pace of US store openings and accelerate

internationally

5.

Reinvention of partner training6. Reinstate regularly scheduled open forums

7. Developing clarity of focus and a laser-focus on

customer experience


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Restructuring of the company

Howard Schultz announced following two modifications in

organizational structure:

1. US field operations:

Transition from 2 divisions to 4 Namely: western/pacific, northwest/ Mountains, southeast/Plains,

northeast/Atlantic

Each div to be led by a senior VP reporting directly to US

president

Teams are being centralized to create an infrastructure with globalspan, capability and effectiveness

This will allow the co. to

Align leaders with customers

Ensure stronger level of partner development, coaching and

accountability in the field.


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2. Centralization/Consolidation of Support functions:

Following support functions have been reorganized to

consolidate functional activities into teams that have a shared

view and goals to support the business:

US store development US licensed store

US finance

Partner resources

Marketing

In store experience

Global supply chain

Global communication

Partner and asset protection


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Other initiatives

In-store education and training of all partners

Holding a leadership conference

Free Wi-Fi for all partners and customers

Closure of about 600 underperforming stores in the US and 61stores in Australia

Lowering Prices at some places

Launching schemes and frequent purchasing cards

unprecedented level of advertising aimed at coffee consumers

new coffee shops in Seattle that will carry the name of their

neighbourhoods rather than the Starbucks brand, which will

include alcohol sales and live music aimed at attracting

customers in the evening.


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Effect of transformation on

business According to Reports, In Q3, 2009:

Revenues fell from $2.6bn to $2.4bn.

Net income for its fiscal third quarter was $151.5m, against a

$6.7m loss a year ago.

Restructuring changes impacted operating income and operating

margin by $51.6m and 210 basis points respectively , compared to

operating loss of $21.6m and negative 0.8% in Q3 2008

Q1 2011 shows a record $3.0 billion of revenue


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transformation of starbucks

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