Howard Schultz : An American Entrepreneur

Since Starbucks entered the coffee retail business, the company has made many trade-off business decisions. The first major trade-off was made when Howard Schultz wanted to acquire present day Starbucks from three entrepreneurs Baldwin, Siegel and Bowker. Therefore, Schultz prior to the acquisition made the trade-off to open his own coffee bar in 1986 instead of staying at Starbucks as the manager of retail sales and marketing. A bold feat, Schultz was able to replicate success and was offered to buy Starbucks for $4 million. At the time of the acquisition, many investors, including the former Starbucks owners, would not expect that the American consumer would pay a premium for coffee products. Schultz, after calculating the opportunity cost, was convinced that Starbucks would become a large coffee chain not only in the United States but internationally too. Reflecting this approach, Schultz’s trade-off worked. Starbucks, according to our book has revenue exceeding $13 billion and nearly 200,000 employees. The company has also expanded to 40 countries with 17,000 stores (Hill et al., 2015).

Howard Schultz took a small three-store coffee shop and grew it into the largest specialty coffee retailer in the world. With twenty-five thousand locations, 105 million customers a week, and 191 thousand employees. Let’s start with the beginning.

Howard Schultz is the man who grew up in a New York City Housing projects to eventually own Starbucks and gain a personal worth of $2.3 billion. The operating profit of Starbucks was US$3,081.1 million in FY2014, compared to an operating loss of US$325.4 million in FY2013. (Publication, 2015)

The extraordinary success Starbucks experienced during the early 1990s resulted from Howard Schultz’s passion and vision to create a coffee culture in the United States similar to the coffee culture he experienced while traveling to Italy. Schultz’s vision of the Starbucks brand evolved around providing a quality product while delivering exceptional customer service in an inviting atmosphere. Starbucks’ success can be attributable to the following factors:

When Howard Schultz launched Starbucks, its main targets were the competitors and the customers. Schultz’s brand aimed at gaining dominance in the coffee industry in addition creating a Italian coffee shop feel in the United States (Buchanan & Simmons, 2009). The strategy of Starbucks was based on new products, listening to customers wants and ensure future expansion (Buchanan & Simmons, 2009). In creating convenience for customers, Starbucks created stores almost on top of eachother. They hinged on the idea that, they did not want to lose out on a sale if a line was too long. This action, of placing stores in heavy populated areas, basing need on projected growth of an area caused some decline in sales during economic trouble with the economy. The 2007 recession, failure of subprime mortgages, increased competition from McDonald 's McCafe brand, and Dunkin Doughnuts all led to a decline in sales for Starbucks in the fourth quarter of 2007 (Buchanan & Simmons, 2009). To attempt to regain market share and recover after the

Howard Schultz, the CEO of Starbucks Corporation, is a great business leader because he has a clear vision that no one had before, a solid strategy to achieve that vision, and a great influence on people around the world.

In 1971, Starbucks started as a small coffee shop which targeted a specialized market of coffee purists. Howard Schultz, who later owned the company and initiated the high growth period, joined Starbucks’ marketing team in 1982. Main concept of Schultz marketing strategy was too make Starbucks “America’s third place” considering home and work the two other places where Americans spend most of their time. In 1992, Schultz acquired Starbucks and made an initial public offering. Despite Wall Street’s doubts about the IPO, $25 million was raised by Starbucks.

“We are not in the coffee business, serving people. We are in the people business, serving coffee”, Howard Schultz’s philosophy has shaped and continues shape Starbucks, the world’s number one specialty coffee retailer with over 21,000 outlets in more than 65 countries nowadays (Starbucks, 2011). Starbucks was founded in 1971 and Howard Schultz joined Starbucks in 1982. In 1987, Howard acquired Starbucks and changed the name to Starbucks Corporation.

For a short period, Howard left Starbucks to start up his own II Giornale coffeehouse. In 1987, he eventually returned to Starbucks with help from local investors to purchase Starbucks, he then became chief executive officer. Howard’s leadership skills led Starbucks to be the finest coffee in the world, providing coffee to consumers in 23,000 stores and 68 countries. Part of what makes Howard a good leader is that from the beginning; he set out to build a different kind of company, one that demonstrated respect and dignity. Through Starbucks, Howard created two programs that embraced the culture that he always wanted. The first program offers health coverage for eligible part-time and full-time employees, which is not something many retailers do. The second program known as the Bean Stock empowers partners (employees) to know that they can invest in a profitable business as well as share its success. These two programs are incentives for motivation as well as benefits for employees.

Howard Schultz didn’t just build a company, he built an empire. Starbucks’ Coffee is a benchmark in the coffee trade, for coffee drinkers and, even non-coffee drinkers. He nursed a small company in the big city of Seattle, to a global

1. In the early 1980’s, how did Howard Schultz view the possibilities for the fledgling specialty coffee market? What were the most important factors in shaping his perspective and its success?

Starbucks first opened its doors in Seattle’s Pike Place Market with the name being coined from that of Moby Dick’s first mate (Schultz & Yang 1999). It has spread its shops across North America, all over Europe, the Middle East, Latin America as well as the Pacific Rim with an estimated 35 million customer weekly (Michelli, 2008). With tremendous growth from a small time coffee shop, the company has matured to an international icon that today it is one of the world’s leading retailer, roaster and brand specialty coffee (Story, 1971). The company offers whole bean coffees, espresso beverages, and confectionery and bakery items.

The CEO (Chief Executive Officer), Howard Schultz pointed that the main reason from the decline of “Starbucks Experience” was that the number of Starbucks shops increased sharply from only 1,000 to 13,000 within ten years. Other people considered their brand has been commercialized, and the customers hadn’t had enough enthusiasms to appreciate every moment of their coffee any longer. He suggested that Starbucks should re-find its origin. Nevertheless, his advice apparently was opposite to the

This case assignment discusses the history of Starbuck’s accomplishments as they entered the American coffee culture heritage. In 1983, The chairman and CEO Howard Schultz traveled to Italy and had a dream to carry the Italy coffeehouse ritual back to the United States. Schultz was focused on creating an environment meeting company that makes good coffee but also be a social experiment. Starbucks today opened more than 19,000 stores functioning in 62 countries. Starbucks has numerous rewards that globalization has offered and they have significantly benefited from it, while in the coffee industry. Starbucks has a wide-range in marketing strategies to benefit the customers. During the different obstacles that Starbucks has encountered, they must stay reliable in quality and uphold to adjust to different customer values.

In 1981, Howard Schultz, the chairman, president and chief executive officer of Starbucks, walked into a Starbucks store for the first time. Highly impressed of the great coffee and the company’s concept, he joined Starbucks a year later. In 1983 he traveled to Italy, where he became fascinated with the coffee culture in