How did Starbucks create its uniqueness in the first place? Why was the uniqueness so successful? To
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- How did Starbucks create its uniqueness in the first place? Why was the uniqueness so successful?
- To be a source of competitive advantage over time, core competencies need to be continuously honed and upgraded. Why and how did Starbucks lose its uniqueness and struggle in the mid-2000s? What strategic initiatives did Howard Schultz, following his return as a CEO in 2008, put in place to re-create Starbucks' uniqueness?
- Howard Schultz, as the creator of the Starbucks brand that we know today, is a larger-than-life figure in the company and business community.
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MiniCase 2 Starbucks CEO Kevin Johnson: "I'm not Howard Schultz" STARBUCKS HAS MORE Ihan 30.000 stores knd $26h Mon in annual revenues, making it the largest cofflee house chain in the world. Starbucks has also enperienced a sustained competitive advantage. Exhihit MC21 shows that since its IPO in 1992. Starbucks has putperformed the wider stock market by a huge mar- gin-23,500 percentage points!-with an especially pro pounced performance increase since 2008, when Girmer CEO Howard Schultz eame out of retirement coffee. The consumer experience that Starbucks cre ated is a valuab, rare, and oowtly to imitate intangble resource. This allowed Startucks to gain a competitive advantage Since 2000, Starbucks' revenues have grown 134old, from less than $2 billion to nearly $2h billion in 2019. While core competencies are ofhen bailt thrmugh learning from experience. they can atrophy through foceetting. This is whut happened to Starbucks between 2004 and 2008, when it rapidly expanded operations by doubling its stores from 3.500 to almost 17,000 (see Exhibit MC2.2). Ii also branched out into ice cream. desseris, sandwiches, bouks, music, and other retail How did all this start, especially since the United States is not known for its coflee culture? Inspired by halian coffee bars, Schultz set out to provide a com- pletely new consumer experience. The trademark of ny Starbucks location is its ambience-the music and comfortable chairs and sofas draw customers in to sit and visit with friends while enjoying their beverages (and in some locations wine). food (a more recent addition), and complimentary WiFi. The menu boasts an array of oflerinp: Caffe Misto, Caramel Macchiato, Cinnamon Dolce Latte, Espresso Con Panna, and Mint Mocha Chip Frappuccino, as well as nearly 30 different coffee blends, Impressed customers then pay up to $4.50 for a Venti-sized drink. Starbucks has been so successful at creating its Starbucks experience that customers keep going back for more. erchandise, straying from its oore business. In trying to keep up with its expknive growth in both sres and diverse product offerings. Starbucks began to forget its core compesency. It kest the appeal that made it special and its unique culture became diluled. For example, it used sa be that baristas woold grind coffee beans each time a new pot of coffee needed to be brewed (which was at leist every eight minutes, so hasi cally throughout the day). The wund of coffee beans grinding and the fresh aroma of cuffee filling the air were ubiquitous across all Starbucks Mores. But to accommodate the hrand's rapid growth, many baristas began to take shorteuts: They would grind all the coffee beans in the morming and then store the ground beans for use throughout the day. The new espresso machines that were great for efliciency were not so great for cus tomer service: they were so tall, they blocked interac tion between baristas and customers. Although these and other operational changes allowed Starbucks to reduce costs and improve efficiency, they undercut Star- bucks' primary reasan for successgoing to Starbucks not simply for the quick cup of coffee, but for the whole Starbucks collee experience. Losing a bltind taste-test to fast food giant McDonald's further underscored the negative impact of cost reduction measures. As one ol among six coffees tested, Starbucks came in last. Even run-ofthe-mill supermarket brands rated higher. Customers that were Starbucks' Core Competency Starbucks' core competency is to create a unique con- sumer experience the world over. When buying out the original owners of Starbucks (a coffee bean roaster ini tially) in 1987, Schultz's strategic intent was to create a *third place," between home and work, where people Would want to visit, ideally daily., and enjoy a sophisti- cated cup of coffee. Customers would pay for the unique experience and ambience, not just for the h T.Rahanml aud t MiniCee fron pabtic ores This Mni Lek deskped fr the purpese f clasi discon. Itis not intended nd far f enderement uerce of data, ulepition of efire otest matagen Al opinions epreaed, all crors and nly the aurk Renntand undatod Aune , 209 Fank T ahal 475 MiniCase 2 Starbucks CEO Kevin Johnson: "I'm not Howard Schultz" STARBUCKS HAS MORE Ihan 30.000 stores knd $26h Mon in annual revenues, making it the largest cofflee house chain in the world. Starbucks has also enperienced a sustained competitive advantage. Exhihit MC21 shows that since its IPO in 1992. Starbucks has putperformed the wider stock market by a huge mar- gin-23,500 percentage points!-with an especially pro pounced performance increase since 2008, when Girmer CEO Howard Schultz eame out of retirement coffee. The consumer experience that Starbucks cre ated is a valuab, rare, and oowtly to imitate intangble resource. This allowed Startucks to gain a competitive advantage Since 2000, Starbucks' revenues have grown 134old, from less than $2 billion to nearly $2h billion in 2019. While core competencies are ofhen bailt thrmugh learning from experience. they can atrophy through foceetting. This is whut happened to Starbucks between 2004 and 2008, when it rapidly expanded operations by doubling its stores from 3.500 to almost 17,000 (see Exhibit MC2.2). Ii also branched out into ice cream. desseris, sandwiches, bouks, music, and other retail How did all this start, especially since the United States is not known for its coflee culture? Inspired by halian coffee bars, Schultz set out to provide a com- pletely new consumer experience. The trademark of ny Starbucks location is its ambience-the music and comfortable chairs and sofas draw customers in to sit and visit with friends while enjoying their beverages (and in some locations wine). food (a more recent addition), and complimentary WiFi. The menu boasts an array of oflerinp: Caffe Misto, Caramel Macchiato, Cinnamon Dolce Latte, Espresso Con Panna, and Mint Mocha Chip Frappuccino, as well as nearly 30 different coffee blends, Impressed customers then pay up to $4.50 for a Venti-sized drink. Starbucks has been so successful at creating its Starbucks experience that customers keep going back for more. erchandise, straying from its oore business. In trying to keep up with its expknive growth in both sres and diverse product offerings. Starbucks began to forget its core compesency. It kest the appeal that made it special and its unique culture became diluled. For example, it used sa be that baristas woold grind coffee beans each time a new pot of coffee needed to be brewed (which was at leist every eight minutes, so hasi cally throughout the day). The wund of coffee beans grinding and the fresh aroma of cuffee filling the air were ubiquitous across all Starbucks Mores. But to accommodate the hrand's rapid growth, many baristas began to take shorteuts: They would grind all the coffee beans in the morming and then store the ground beans for use throughout the day. The new espresso machines that were great for efliciency were not so great for cus tomer service: they were so tall, they blocked interac tion between baristas and customers. Although these and other operational changes allowed Starbucks to reduce costs and improve efficiency, they undercut Star- bucks' primary reasan for successgoing to Starbucks not simply for the quick cup of coffee, but for the whole Starbucks collee experience. Losing a bltind taste-test to fast food giant McDonald's further underscored the negative impact of cost reduction measures. As one ol among six coffees tested, Starbucks came in last. Even run-ofthe-mill supermarket brands rated higher. Customers that were Starbucks' Core Competency Starbucks' core competency is to create a unique con- sumer experience the world over. When buying out the original owners of Starbucks (a coffee bean roaster ini tially) in 1987, Schultz's strategic intent was to create a *third place," between home and work, where people Would want to visit, ideally daily., and enjoy a sophisti- cated cup of coffee. Customers would pay for the unique experience and ambience, not just for the h T.Rahanml aud t MiniCee fron pabtic ores This Mni Lek deskped fr the purpese f clasi discon. Itis not intended nd far f enderement uerce of data, ulepition of efire otest matagen Al opinions epreaed, all crors and nly the aurk Renntand undatod Aune , 209 Fank T ahal 475 MiniCase 2 Starbucks CEO Kevin Johnson: "I'm not Howard Schultz" STARBUCKS HAS MORE Ihan 30.000 stores knd $26h Mon in annual revenues, making it the largest cofflee house chain in the world. Starbucks has also enperienced a sustained competitive advantage. Exhihit MC21 shows that since its IPO in 1992. Starbucks has putperformed the wider stock market by a huge mar- gin-23,500 percentage points!-with an especially pro pounced performance increase since 2008, when Girmer CEO Howard Schultz eame out of retirement coffee. The consumer experience that Starbucks cre ated is a valuab, rare, and oowtly to imitate intangble resource. This allowed Startucks to gain a competitive advantage Since 2000, Starbucks' revenues have grown 134old, from less than $2 billion to nearly $2h billion in 2019. While core competencies are ofhen bailt thrmugh learning from experience. they can atrophy through foceetting. This is whut happened to Starbucks between 2004 and 2008, when it rapidly expanded operations by doubling its stores from 3.500 to almost 17,000 (see Exhibit MC2.2). Ii also branched out into ice cream. desseris, sandwiches, bouks, music, and other retail How did all this start, especially since the United States is not known for its coflee culture? Inspired by halian coffee bars, Schultz set out to provide a com- pletely new consumer experience. The trademark of ny Starbucks location is its ambience-the music and comfortable chairs and sofas draw customers in to sit and visit with friends while enjoying their beverages (and in some locations wine). food (a more recent addition), and complimentary WiFi. The menu boasts an array of oflerinp: Caffe Misto, Caramel Macchiato, Cinnamon Dolce Latte, Espresso Con Panna, and Mint Mocha Chip Frappuccino, as well as nearly 30 different coffee blends, Impressed customers then pay up to $4.50 for a Venti-sized drink. Starbucks has been so successful at creating its Starbucks experience that customers keep going back for more. erchandise, straying from its oore business. In trying to keep up with its expknive growth in both sres and diverse product offerings. Starbucks began to forget its core compesency. It kest the appeal that made it special and its unique culture became diluled. For example, it used sa be that baristas woold grind coffee beans each time a new pot of coffee needed to be brewed (which was at leist every eight minutes, so hasi cally throughout the day). The wund of coffee beans grinding and the fresh aroma of cuffee filling the air were ubiquitous across all Starbucks Mores. But to accommodate the hrand's rapid growth, many baristas began to take shorteuts: They would grind all the coffee beans in the morming and then store the ground beans for use throughout the day. The new espresso machines that were great for efliciency were not so great for cus tomer service: they were so tall, they blocked interac tion between baristas and customers. Although these and other operational changes allowed Starbucks to reduce costs and improve efficiency, they undercut Star- bucks' primary reasan for successgoing to Starbucks not simply for the quick cup of coffee, but for the whole Starbucks collee experience. Losing a bltind taste-test to fast food giant McDonald's further underscored the negative impact of cost reduction measures. As one ol among six coffees tested, Starbucks came in last. Even run-ofthe-mill supermarket brands rated higher. Customers that were Starbucks' Core Competency Starbucks' core competency is to create a unique con- sumer experience the world over. When buying out the original owners of Starbucks (a coffee bean roaster ini tially) in 1987, Schultz's strategic intent was to create a *third place," between home and work, where people Would want to visit, ideally daily., and enjoy a sophisti- cated cup of coffee. Customers would pay for the unique experience and ambience, not just for the h T.Rahanml aud t MiniCee fron pabtic ores This Mni Lek deskped fr the purpese f clasi discon. Itis not intended nd far f enderement uerce of data, ulepition of efire otest matagen Al opinions epreaed, all crors and nly the aurk Renntand undatod Aune , 209 Fank T ahal 475 MiniCase 2 Starbucks CEO Kevin Johnson: "I'm not Howard Schultz" STARBUCKS HAS MORE Ihan 30.000 stores knd $26h Mon in annual revenues, making it the largest cofflee house chain in the world. Starbucks has also enperienced a sustained competitive advantage. Exhihit MC21 shows that since its IPO in 1992. Starbucks has putperformed the wider stock market by a huge mar- gin-23,500 percentage points!-with an especially pro pounced performance increase since 2008, when Girmer CEO Howard Schultz eame out of retirement coffee. The consumer experience that Starbucks cre ated is a valuab, rare, and oowtly to imitate intangble resource. This allowed Startucks to gain a competitive advantage Since 2000, Starbucks' revenues have grown 134old, from less than $2 billion to nearly $2h billion in 2019. While core competencies are ofhen bailt thrmugh learning from experience. they can atrophy through foceetting. This is whut happened to Starbucks between 2004 and 2008, when it rapidly expanded operations by doubling its stores from 3.500 to almost 17,000 (see Exhibit MC2.2). Ii also branched out into ice cream. desseris, sandwiches, bouks, music, and other retail How did all this start, especially since the United States is not known for its coflee culture? Inspired by halian coffee bars, Schultz set out to provide a com- pletely new consumer experience. The trademark of ny Starbucks location is its ambience-the music and comfortable chairs and sofas draw customers in to sit and visit with friends while enjoying their beverages (and in some locations wine). food (a more recent addition), and complimentary WiFi. The menu boasts an array of oflerinp: Caffe Misto, Caramel Macchiato, Cinnamon Dolce Latte, Espresso Con Panna, and Mint Mocha Chip Frappuccino, as well as nearly 30 different coffee blends, Impressed customers then pay up to $4.50 for a Venti-sized drink. Starbucks has been so successful at creating its Starbucks experience that customers keep going back for more. erchandise, straying from its oore business. In trying to keep up with its expknive growth in both sres and diverse product offerings. Starbucks began to forget its core compesency. It kest the appeal that made it special and its unique culture became diluled. For example, it used sa be that baristas woold grind coffee beans each time a new pot of coffee needed to be brewed (which was at leist every eight minutes, so hasi cally throughout the day). The wund of coffee beans grinding and the fresh aroma of cuffee filling the air were ubiquitous across all Starbucks Mores. But to accommodate the hrand's rapid growth, many baristas began to take shorteuts: They would grind all the coffee beans in the morming and then store the ground beans for use throughout the day. The new espresso machines that were great for efliciency were not so great for cus tomer service: they were so tall, they blocked interac tion between baristas and customers. Although these and other operational changes allowed Starbucks to reduce costs and improve efficiency, they undercut Star- bucks' primary reasan for successgoing to Starbucks not simply for the quick cup of coffee, but for the whole Starbucks collee experience. Losing a bltind taste-test to fast food giant McDonald's further underscored the negative impact of cost reduction measures. As one ol among six coffees tested, Starbucks came in last. Even run-ofthe-mill supermarket brands rated higher. Customers that were Starbucks' Core Competency Starbucks' core competency is to create a unique con- sumer experience the world over. When buying out the original owners of Starbucks (a coffee bean roaster ini tially) in 1987, Schultz's strategic intent was to create a *third place," between home and work, where people Would want to visit, ideally daily., and enjoy a sophisti- cated cup of coffee. Customers would pay for the unique experience and ambience, not just for the h T.Rahanml aud t MiniCee fron pabtic ores This Mni Lek deskped fr the purpese f clasi discon. Itis not intended nd far f enderement uerce of data, ulepition of efire otest matagen Al opinions epreaed, all crors and nly the aurk Renntand undatod Aune , 209 Fank T ahal 475 MiniCase 2 Starbucks CEO Kevin Johnson: "I'm not Howard Schultz" STARBUCKS HAS MORE Ihan 30.000 stores knd $26h Mon in annual revenues, making it the largest cofflee house chain in the world. Starbucks has also enperienced a sustained competitive advantage. Exhihit MC21 shows that since its IPO in 1992. Starbucks has putperformed the wider stock market by a huge mar- gin-23,500 percentage points!-with an especially pro pounced performance increase since 2008, when Girmer CEO Howard Schultz eame out of retirement coffee. The consumer experience that Starbucks cre ated is a valuab, rare, and oowtly to imitate intangble resource. This allowed Startucks to gain a competitive advantage Since 2000, Starbucks' revenues have grown 134old, from less than $2 billion to nearly $2h billion in 2019. While core competencies are ofhen bailt thrmugh learning from experience. they can atrophy through foceetting. This is whut happened to Starbucks between 2004 and 2008, when it rapidly expanded operations by doubling its stores from 3.500 to almost 17,000 (see Exhibit MC2.2). Ii also branched out into ice cream. desseris, sandwiches, bouks, music, and other retail How did all this start, especially since the United States is not known for its coflee culture? Inspired by halian coffee bars, Schultz set out to provide a com- pletely new consumer experience. The trademark of ny Starbucks location is its ambience-the music and comfortable chairs and sofas draw customers in to sit and visit with friends while enjoying their beverages (and in some locations wine). food (a more recent addition), and complimentary WiFi. The menu boasts an array of oflerinp: Caffe Misto, Caramel Macchiato, Cinnamon Dolce Latte, Espresso Con Panna, and Mint Mocha Chip Frappuccino, as well as nearly 30 different coffee blends, Impressed customers then pay up to $4.50 for a Venti-sized drink. Starbucks has been so successful at creating its Starbucks experience that customers keep going back for more. erchandise, straying from its oore business. In trying to keep up with its expknive growth in both sres and diverse product offerings. Starbucks began to forget its core compesency. It kest the appeal that made it special and its unique culture became diluled. For example, it used sa be that baristas woold grind coffee beans each time a new pot of coffee needed to be brewed (which was at leist every eight minutes, so hasi cally throughout the day). The wund of coffee beans grinding and the fresh aroma of cuffee filling the air were ubiquitous across all Starbucks Mores. But to accommodate the hrand's rapid growth, many baristas began to take shorteuts: They would grind all the coffee beans in the morming and then store the ground beans for use throughout the day. The new espresso machines that were great for efliciency were not so great for cus tomer service: they were so tall, they blocked interac tion between baristas and customers. Although these and other operational changes allowed Starbucks to reduce costs and improve efficiency, they undercut Star- bucks' primary reasan for successgoing to Starbucks not simply for the quick cup of coffee, but for the whole Starbucks collee experience. Losing a bltind taste-test to fast food giant McDonald's further underscored the negative impact of cost reduction measures. As one ol among six coffees tested, Starbucks came in last. Even run-ofthe-mill supermarket brands rated higher. Customers that were Starbucks' Core Competency Starbucks' core competency is to create a unique con- sumer experience the world over. When buying out the original owners of Starbucks (a coffee bean roaster ini tially) in 1987, Schultz's strategic intent was to create a *third place," between home and work, where people Would want to visit, ideally daily., and enjoy a sophisti- cated cup of coffee. Customers would pay for the unique experience and ambience, not just for the h T.Rahanml aud t MiniCee fron pabtic ores This Mni Lek deskped fr the purpese f clasi discon. Itis not intended nd far f enderement uerce of data, ulepition of efire otest matagen Al opinions epreaed, all crors and nly the aurk Renntand undatod Aune , 209 Fank T ahal 475 MiniCase 2 Starbucks CEO Kevin Johnson: "I'm not Howard Schultz" STARBUCKS HAS MORE Ihan 30.000 stores knd $26h Mon in annual revenues, making it the largest cofflee house chain in the world. Starbucks has also enperienced a sustained competitive advantage. Exhihit MC21 shows that since its IPO in 1992. Starbucks has putperformed the wider stock market by a huge mar- gin-23,500 percentage points!-with an especially pro pounced performance increase since 2008, when Girmer CEO Howard Schultz eame out of retirement coffee. The consumer experience that Starbucks cre ated is a valuab, rare, and oowtly to imitate intangble resource. This allowed Startucks to gain a competitive advantage Since 2000, Starbucks' revenues have grown 134old, from less than $2 billion to nearly $2h billion in 2019. While core competencies are ofhen bailt thrmugh learning from experience. they can atrophy through foceetting. This is whut happened to Starbucks between 2004 and 2008, when it rapidly expanded operations by doubling its stores from 3.500 to almost 17,000 (see Exhibit MC2.2). Ii also branched out into ice cream. desseris, sandwiches, bouks, music, and other retail How did all this start, especially since the United States is not known for its coflee culture? Inspired by halian coffee bars, Schultz set out to provide a com- pletely new consumer experience. The trademark of ny Starbucks location is its ambience-the music and comfortable chairs and sofas draw customers in to sit and visit with friends while enjoying their beverages (and in some locations wine). food (a more recent addition), and complimentary WiFi. The menu boasts an array of oflerinp: Caffe Misto, Caramel Macchiato, Cinnamon Dolce Latte, Espresso Con Panna, and Mint Mocha Chip Frappuccino, as well as nearly 30 different coffee blends, Impressed customers then pay up to $4.50 for a Venti-sized drink. Starbucks has been so successful at creating its Starbucks experience that customers keep going back for more. erchandise, straying from its oore business. In trying to keep up with its expknive growth in both sres and diverse product offerings. Starbucks began to forget its core compesency. It kest the appeal that made it special and its unique culture became diluled. For example, it used sa be that baristas woold grind coffee beans each time a new pot of coffee needed to be brewed (which was at leist every eight minutes, so hasi cally throughout the day). The wund of coffee beans grinding and the fresh aroma of cuffee filling the air were ubiquitous across all Starbucks Mores. But to accommodate the hrand's rapid growth, many baristas began to take shorteuts: They would grind all the coffee beans in the morming and then store the ground beans for use throughout the day. The new espresso machines that were great for efliciency were not so great for cus tomer service: they were so tall, they blocked interac tion between baristas and customers. Although these and other operational changes allowed Starbucks to reduce costs and improve efficiency, they undercut Star- bucks' primary reasan for successgoing to Starbucks not simply for the quick cup of coffee, but for the whole Starbucks collee experience. Losing a bltind taste-test to fast food giant McDonald's further underscored the negative impact of cost reduction measures. As one ol among six coffees tested, Starbucks came in last. Even run-ofthe-mill supermarket brands rated higher. Customers that were Starbucks' Core Competency Starbucks' core competency is to create a unique con- sumer experience the world over. When buying out the original owners of Starbucks (a coffee bean roaster ini tially) in 1987, Schultz's strategic intent was to create a *third place," between home and work, where people Would want to visit, ideally daily., and enjoy a sophisti- cated cup of coffee. Customers would pay for the unique experience and ambience, not just for the h T.Rahanml aud t MiniCee fron pabtic ores This Mni Lek deskped fr the purpese f clasi discon. Itis not intended nd far f enderement uerce of data, ulepition of efire otest matagen Al opinions epreaed, all crors and nly the aurk Renntand undatod Aune , 209 Fank T ahal 475
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MiniCase 2 Starbucks CEO Kevin Johnson Im not Howard Schultz STARBUCKS HAS over 30000 stores and 5363 Mon in annual revenues making it the biggest coffice house chain within the world Starbucks has al... View the full answer
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