Howard Schultz and the Starbucks Company

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1.0 CASE SUMMARY
Starbucks is a specialty coffee company located in Seattle, USA. The company CEO is Howard Schultz, who bought the company in 1987 for $3.8 million. Before purchasing Starbucks, Schultz was an employee there before deciding to leave the company to open his own coffee bar, Il Giornale in 1985.
After purchasing Starbucks, Schultz continued to expand the business rapidly by attracting more investors to gain financing. The company relied on positive word of mouth to attract customers to try its specialty coffee while emphasizing on the social experience of customers in its stores. This move has led to customers associating Starbucks with quality coffee and social experience in its outlets through immense public support and …show more content…

2. Bad business practices by franchisees can negatively affect the Starbucks brand and name as the company relies on positive word-of-mouth by the customers for its marketing.

4.3 Reduce Clustering by Closing Outlets
Positive
1. This strategy helps in eliminating cannibalization of the business as there are less competitions and share of market share between Starbucks outlets in a cluster.
2. This strategy can assist Starbucks in lowering operating cost as non-performing outlets will be closed thus improving net profit and margin earned by the company.
Negative
1. The closing of outlets in certain clusters will give way for competitors to enter the market which will lead to reduced market share in certain locations that are previously dominated by Starbucks.
2. The closing of outlets will lead to elimination of many outlet employees service which will demoralize employees in other clusters as they will feel that they will be out of job if their outlets are not contributing to the company in terms of revenue and sales.

5.0 CHOOSING THE BEST STRATEGY AND JUSTIFICATION
After further discussion, it is felt the best strategy to implement is to “Allow Franchising of Starbucks Outside North America” in order to solve the main problem. There are a few reasons or justifications as to why this strategy is chosen.
Firstly, the strategy will basically kill two birds with one stone. The company will be able to lower their

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