Case Starbucks

ALL’S NOT WELL WITH STARBUCKS

In March 2003, Fortune came out with its annual list of “Fortune 500 companies”. For Howard Schultz (Schultz), Chairman of Starbucks Corp. (Starbucks), this list was special as Starbucks [was] featured in the list (position 465). It was a dream that come true for the Seattle-based entrepreneur. Though the U.S. economy was reeling under recession and many retail majors were reporting losses and applying for bankruptcy, Starbucks announced a 31% increase in its net earnings and a 23% increase in sales for the first quarter of 2003. Analyst felt that the success of Starbucks showed that a quality product speaks for itself and the fact that Starbucks spent less than 1% of its sales on advertising and marketing strengthened this view. In addition to be a popular brand among customers, Starbucks was also considered the best place to work due to its employee friendly policies (Starbucks was the first organization in the U.S. to offer stock options and health coverage to part-time employees also). However, analysts felt that the success of Starbucks was due to its profitable domestic operations. It was reported that most of Starbucks’ international operations were running into losses. In May 2003, Starbucks’ Japanese operations reported a loss of $3.9 million (Japan constituted the largest market for the company outside the U.S.), and the company also performed badly in Europe and the Middle East. Analysts pointed out that Starbucks international operations were not as well planned as its U.S. operations. They also observed that the volatile international business environment made it difficult for the company to effectively manage its international operations. Many analysts felt that it was important for the company to focus on its international operations. With the U.S. market getting saturated, Starbucks would be forced to look outside the U.S. for revenues and growth. The history of Starbucks dates back to 1971, when Jerry Baldwin, Zev...