Instructions: Read the mentioned chapters from your book, Chapter 1: Managers in the Workplace and Chapter 2: Making decisions. You have to answer the questions followed by the case at the end. Make sure that your answer does not exceed 200 words each. You can also explain it with the help of an example where necessary.

Starbucks Introduction

Community. Connection. Caring. Committed. Coffee. Five Cs that describe the essence of Starbucks Corporation what it stands for and what it wants to be as a business. With more than 19,000 stores in 62 countries, Starbucks is the worlds number one specialty coffee retailer. The company also owns Seattles Best Coffee, Teavana, Tazo, Starbucks VIA, Starbucks Refreshers, Evolution Fresh, La Boulange, and Verismo brands. Its a company that truly epitomizes the challenges facing managers in todays globally competitive environment. To help you better understand these challenges, were going to take an in-depth look at Starbucks through these continuing cases, which youll find at the end of every part in the textbook. Each of these six part-ending continuing cases will look at Starbucks from the perspective of the material presented in that part. Although each case stands alone, youll be able to see the progression of the management process as you work through each one.

The Beginning

We arent in the coffee business, serving people. Were in the people business, serving coffee. Thats the philosophy of Howard Schultz, chairman and chief global strategist of Starbucks. Its a philosophy that has shapedand continues to shapethe company. The first Starbucks, which opened in Seattles famous Pike Place Market in 1971, was founded by Gordon Bowker, Jerry Baldwin, and Zev Siegl. The company was named for the coffee-loving first mate in the book Moby Dick, which also influenced the design of Starbucks distinctive two-tailed siren logo. Schultz, a successful New York City businessperson, first walked into Starbucks in 1981 as a sales representative for a Swedish kitchenware manufacturer. He was hooked immediately. He knew that he wanted to work for this company, but it took almost a year before he could persuade the owners to hire him. After all, he was from New York and he hadnt grown up with the values of the company. The owners thought Schultzs style and high energy would clash with the existing culture. But Schultz was quite persuasive and was able to allay the owners fears. They asked him to join the company as director of retail operations and marketing, which he enthusiastically did. Schultzs passion for the coffee business was obvious. Although some of the companys employees resented the fact that he was an outsider, Schultz had found his niche and he had lots of ideas for the company. As he says, I wanted to make a positive impact. About a year after joining the company, while on a business trip to Milan, Schultz walked into an espresso bar and right away knew that this concept could be successful in the United States. He said, There was nothing like this in America. It was an extension of peoples front porch. It was an emotional experience. I believed intuitively we could do it. I felt it in my bones. Schultz recognized that although Starbucks treated coffee as produce, something to be bagged and sent home with the groceries, the Italian coffee bars were more like an experiencea warm, community experience. Thats what Schultz wanted to recreate in the United States. However, Starbucks owners werent really interested in making Starbucks big and didnt really want to

give the idea a try. So Schultz left the company in 1985 to start his own small chain of espresso bars in Seattle and Vancouver called Il Giornale. Two years later when Starbucks owners finally wanted to sell, Schultz raised $3.8 million from local investors to buy them out. That small investment has made him a very wealthy person indeed!

Company Facts

Starbucks main product is coffeemore than 30 blends and single-origin coffees. In addition to fresh-brewed coffee, heres a sampling of other products the company also offers:

Handcrafted beverages: Hot and iced espresso beverages, coffee and non-coffee blended beverages, Tazo teas, and smoothies

Merchandise: Home espresso machines, coffee brewers and grinders, premium chocolates, coffee mugs and coffee accessories, compact discs, and other assorted items

Fresh food: Baked pastries, sandwiches, salads, hot breakfast items, and yogurt parfaits

Global consumer products: Starbucks Frappuccino coffee drinks, Starbucks Iced Coffee

drinks, Starbucks Liqueurs, and a line of super-premium ice creams

Starbucks card and My Starbucks Rewardsprogram: A reloadable stored-value card and

a consumer rewards program

Brand portfolio: Starbucks Entertainment, EthosTM Water, Seattles Best Coffee, and

Tazo Tea

At the end of 2013, the company had more than 200,000 full- and part-time partners (employees) around the world. Howard Schultz is the chairman, president, and CEO of Starbucks. Some of the other interesting executive positions include chief operating officer; global chief marketing officer; chief creative officer; executive vice president of partner resources and chief community officer; executive vice president, global supply chain; executive vice president, global coffee; learning business partner; and international partner resource coordinator.

Decisions, Decisions

One thing you may not realize is that after running the show for 15 years at Starbucks, Howard Schultz, at age 46, stepped out of the CEO job in 2000 (he remained as chairman of the company) because he was a bit bored. By stepping down as CEOwhich he had planned to do, had prepared for, and had no intention of returning toessentially he was saying that he agreed to trust the decisions of others. At first the company thrived, but then the perils of rapid mass-market expansion began to set in and customer traffic began to fall for the first time ever. As he watched what was happening, there were times when he felt the decisions being made were not good ones. Schultz couldnt shake his gut feeling that Starbucks had lost its way. In fact, in a memo dubbed the espresso shot heard round the world, he wrote to his top managers explaining in detail how the companys unprecedented growth had led to many minor compromises that when added up led to a watering down of the Starbucks experience. Among his complaints: sterile cookie cutter store layouts, automatic espresso machines that robbed the barista theater of roasting and brewing a cup of coffee, and flavor-locked packaging that didnt allow customers to inhale and savor that distinctive coffee aroma. Starbucks had lost its cool factor, and Schultzs criticism of the state of the companys stores was blunt and bold. There was

no longer a focus on coffee but only on making the cash register ring. Within a year of the memo (and eight years after he left the CEO gig), Schultz was back in charge and working to restore the Starbucks experience. His goals were to fix the troubled stores, to reawaken the emotional attachment with customers, and to make long-term changes like reorganizing the company and revamping the supply chain. The first thing he did, however, was to apologize to the staff for the decisions that had brought the company to this point. In fact, his intention to restore quality control led him to a decision to close all (at that time) 7,100 U.S. stores for one evening to retrain 135,000 baristas on the coffee experience . . . what it meant, what it was. It was a bold decision, and one that many experts felt would be a public relations and financial disaster. But Schultz felt doing so was absolutely necessary to revive and reenergize Starbucks. Another controversial decision was to hold a leadership conference with all store managers (some 8,000 of them) and 2,000 other partnersall at one time and all in one location. Why? To energize and galvanize these employees around what Starbucks stands for and what needed to be done for the company to survive and prosper. Schultz was unsure about how Wall Street would react to the cost, which was around $30 million total (airfare, meals, hotels, etc.), but again he didnt care because he felt doing so was absolutely necessary and critical. And rather than gathering together in Seattle, where Starbucks is headquartered, Schultz chose New Orleans as the site for the conference. Here was a city still recovering from Hurricane Katrina, which had totally devastated it five years earlier in 2005. Talk about a logistical nightmare and it was. But, the decision was a symbolic choice. New Orleans was in the process of rebuilding itself and succeeding, and Starbucks was in the process of rebuilding itself and could succeed, too. While there, Starbucks partners volunteered some 50,000 hours of time, reinforcing to Schultz and to all the managers that despite all the problems, Starbucks had not lost its values. Other decisions, like closing 800 stores and laying off 4,000 partners, were more difficult. Since that transition time, Schultz has made lots of decisions. Starbucks has again come back even stronger in what it stands for, achieving in 2013 record financial results, and it is on track to continue those record results.

So were beginning to see how Starbucks epitomizes the five Cscommunity, connection, caring, committed, and coffee. In this Continuing Case in the Management Practice section at the end of Parts 26, youll discover more about Starbucks unique and successful ways of managing. As you work on these remaining continuing cases, keep in mind that there may be information included in this introduction you might want to review.

Discussion Questions

P1-1. What management skills do you think would be most important for Howard Schultz to have? Why? What skills do you think would be most important for a Starbucks store manager to have? Why?

P1-2. How might the following management theories/ approaches be useful to Starbucks: scientific management, organizational behavior, quantitative approach, systems approach?

P1-3. Choose three of the current trends and issues facing managers and explain how Starbucks might be impacted. What might be the implications for first-line managers? Middle managers? Top managers?

P1-4. Give examples of how Howard Schultz might perform the interpersonal roles, the informational roles, and the decisional roles.