The Entrepreneurial Journey Of Howard Schultz And The Success Story Of Starbucks
How Howard Schultz changed the American culture with Starbucks
The assignment is focussed on entrepreneur Howard Schultz who is the executive chairman of Starbucks. An entrepreneur is someone who takes innovative approach to mark an identity and influence the world around it. Howard Schultz had such elements in him and has the credit to change the American culture. The American culture was initially limited just to coffee being made at home in kitchen. However, the entrepreneurial skills of Howard Schultz have drove people towards beverage stores like the Starbucks Coffee houses. People now started to go to coffee houses to have a cup of coffee. It was not less than a risk that Howard Schultz had taken by challenging the existing American culture of that time. The risk then paid off and customer gave green signal to “second wave coffee” (Tucker, 2017). The study is focused on entrepreneur Howard Schultz who with his entrepreneurial skills did lay the foundation and helped Starbucks reach to a leading position. Today, Starbucks is a global name and people know this for trusted quality of coffee.
The executive chairman of Starbucks had seen a struggling life at the start. He belonged to a very struggling family. He lost his father at his very early age. Howard Schultz started his career with a job where he needed to make cold calls in Seattle. In a very short span of time, he became the president and then the managing director of the same company. Starbucks had initially struggled and consequently, it was being sold to Howard Schultz in 1987. Howard Schultz had then helped Starbucks to expand in different parts of world (Hutt, 2016).
The challenges that Howard Schultz had faced before he became the executive chairman of Starbucks is inspirational. The journey from just being a caller to the president & then the manager of the same company is all such that adds feathers to the fact. The ability to identify the prospect in the form of “second wave coffee” and owning the Starbucks at the time when it had struggled to find any foothold in the beverage industry. To realize that “second wave coffee” is a potential option and also that Howard Schultz can do wonder with Starbucks which at once had fallen to make any remark, is nothing but an ideal entrepreneurial skill. The entrepreneurship in him can be understood from various decisions which Howard Schultz had taken on different occasions. One of such decisions is to collaborate with Conservation International (CI). The collaboration had proved quite successful for Starbucks in regards to CSR.
Challenges Faced by Howard Schultz
Starbucks is one of the very few companies that consider CSR initiatives on a serious note. This is also evident in the mission statement of Starbucks. The mission statement revolves around a belief that business can or should have a positive effect on the communities they belong to. They do it through better connectivity with the local farmers, collaborating with others and innovation (Starbucks.in, 2018). Reducing the environmental footprint is another serious concern for Starbucks (Starbucks.in, 2018). The message that the company delivers to the world is influential not to the common people only but, to the other businesses as well. Environmental footprint is a big concern for countries across the globe. The footprint can only be reduced if the global people, local & the global government, local manufactures & the suppliers, the non-profit organisation and the globally reputed firms work together for a shared mission.
The story of Conservation International is one of such examples. The way he identifies the opportunity and adopts the different strategies for different market just shows his intelligence and entrepreneurship in him. Howard Schultz was capable to identify the market and its needs. Also, he knew exactly which strategy will work. This is why Howard Schultz had taken different strategies to enter different markets. In some countries, he went with acquisition while in others he preferred strategic alliances. On the other hand, Howard Schultz also went for joint ventures in a large number of other cases of expansions. Howard Schultz acquired UK-based Seattle Coffee Company in 1998 and then re-branded the entire stores as Starbucks. The acquisition helped Starbucks to get 56-outlet in UK (Aiello & Dickinson, 2014). Howard Schultz had considered a strategic partnership with Royal Caribbean International in 2010 to open up its first Starbucks at sea (Aiello & Dickinson, 2014). In January 2012, Howard Schultz declared a joint venture with Tata Global Beverages (Berger & Blake, 2016).
Starbucks had faced several challenges like the company were being held unethical in 2008 for a branch opening of Starbucks without a prior permission from the local planning authority, Hove City Council and Brighton (Martínez-Torres, Rodriguez-Piñero & Toral, 2015). Starbucks in Beijing was being found unethical due to overcharging prices in Beijing and cheapest prices in Mumbai. There are other instances when they had faced the criticism for different reasons like supporting refugees in 2017 in the United States, Muslim boycott of Starbucks and others (Martínez-Torres, Rodriguez-Piñero & Toral, 2015).
Starbucks’ Commitment to Corporate Social Responsibility
Despite the challenges in different parts of the world, Howard Schultz had kept on moving and scripting the story of success. The entrance in China and India is not less than a remarkable story. China had the different taste and Frappuccino which is exclusive only to Starbucks could just be the taste for the country. Howard Schultz was able to identify the challenge and hence, he made necessary changes to taste while keeping the exclusivity intact. An alternative of Frappuccino was then offered to the Chinese customer.
Howard Schultz did approach the Asia’s major coffee plantation company, Tata Coffee to form a joint venture. The first store of Starbucks was being opened in Mumbai in October 2012. It is now close to 100 stores in India (Berger & Blake, 2016). Despite the criticism for ethical issues, Howard Schultz had proved their point for being ethical. He delivered it through the commitment to three pillars which is to support the communities that they serve, seeking the ethical ways of coffee plantation and promoting a sustainable business (Susanty & Kenny, 2015). The collaboration with Conservation International in Mexico just represents the very same fact. CI in Mexico is itself committed to improve the production of coffee in Mexico and reduce the deforestation. For the purpose, CI seeks for global connection and that they have got in the form of Starbucks. Howard Schultz did not only start funding the CI but, he had personal interest in working closely with farmers & suppliers (Yang et al., 2015). It was just to ensure that Starbucks get the best quality coffee. On the other hand, Howard Schultz had also tried to understand the farmers and their needs. By being ethical Howard Schultz actually helped the farmers on monetary terms.
Collaboration with Conservation International is just an example of how Howard Schultz takes up every opportunity. Howard Schultz considered collaborating with CI seeking to offer ethically sourced coffee o customers. Additionally, ethical practice was another concern with this collaboration. They had not just collaborated but had practically implemented strategies to yield positive results. Notably, the collaboration has been the reasons to happiness for more than millions of farmers across the few regions such as Indonesia and Mexico. Howard Schultz in collaboration with the Conservation International have worked harder for 15 long years and as a result of which Starbucks could deliver a 99% ethically sourced coffee (conservation.org, 2018).
Howard Schultz’s Collaboration with Conservation International
The story of Howard Schultz in regards to collaboration with CI was not just limited to this but he took this opportunity on a serious note. Consequently, he invested a huge sum of investment for ethical sourcing of coffee, helping the coffee cultivating communities, reducing the adverse impact of climate change, farm sustainability and promoting long-term crop firmness. The joint operation has formed a network of support centres around the globe in six centres like Colombia, China, Costa Rica, Tanzania, Rwanda, and Ethiopia (conservation.org, 2018). Howard Schultz did focus on farmers and had helped them by financing them the short and the long-term loans. They were being committed to receive $20 million (conservation.org, 2018). Howard Schultz had wider vision and which is why he went for purchasing a farm in Costa Rica (conservation.org, 2018).
Howard Schultz with the association of Starbucks and CI had continued to innovate by offering loans to farmers, raising awareness in communities for the carbon market and the inception of C.A.F.E. Practices. It is the vision of Howard Schultz to establish coffee as the primary sustainable agricultural product at the global level. Through the C.A.F.E. Practices, Howard Schultz is able to guide the farmers to the most feasible way of farming which is good for both people and the planet. In fact, Howard Schultz had also focussed on training the farmers on sustainable way of farming. Farmers were also being monitored to evaluate their performance, so that, shortcomings could be identified. In such way, Howard Schultz is trying every single bit to revive the image of Starbucks as an ethical company (Hossain & Islam, 2015).
Howard Schultz knew it that without having cooperation from responsible body in society it is difficult to attain the ethical practice and produce a sustainable business. Hence, the government, the local businesses and the non-profit organisations had made to realise the urgency to focus on sustainability. Urgency was being cited for promoting the ethical sourcing of coffee. The efforts paid-off and consequently, helped to receive supports from the government, the local retailers and the other significant bodies (Hutt, 2016). The entrepreneurship in Howard Schultz was identified again when he had moved to launch the concept “One Tree for Every Bag Commitment” on the National Coffee day in September 2015. As part of the concept, Starbucks contributed 70 cents for every bag of coffee sold at contributing stores to CI. In turn, CI had ensured the production of seedling nurseries that had supplied new rust-resistant coffee trees to farmers in Guatemala, El Salvador, and Mexico. Only those farms had received the trees that are C.A.F.E. Practices-verified farms. These were the farms and the farmers that had initially experienced the adverse impact of coffee rust, which is a kind of plant fungus. The fungus had damaged millions of trees at the global level (Koehn et al., 2014). The sheer trust that Howard Schultz had on his move had resulted in the production of 18-million coffee tree and created a milestone through in the form of “One Tree for Every Bag Commitment” (Koehn et al., 2014).
Establishing Coffee as the Primary Sustainable Agricultural Product
With such a global presence that Starbucks has, it is a surprise to see how Howard Schultz has managed its customers. He has indeed managed it and that with perfection. Amalgamation of cultures is one of the strategies which have benefitted Starbucks in foreign locations. Howard Schultz began to sense the urgency for a cultural shift when they entered to Europe in particular France and Austria. People living in such places have a habit to stay in coffee shops even after they have purchased and consumed it literally to have some moments spend with their friends and relatives. It means that they will need a spacious ambiance where they can feel like spending some time. Hence, the stores were in the format of large-size ambiance with luxurious seating and wifi (Akgün & Yal, 2015). Since then, Howard Schultz has always relied on cultural shift and relied on this as a strategy to penetrate the market.
Localising the products is the other strategy which Howard Schultz had successfully used in few countries like China. He has maintained the delicate quality of Starbucks while also blending this with the local culture to make it fit the clientele rather than expecting the people to adhere to their taste. The Frappuccino, a Starbucks unique, is a famous blended beverage typically containing caramel, chocolate, mocha flavours or vanilla. However, the blend was not fitting with the Chinese culture. Hence, Starbucks produced Red Bean Green Tea Frappuccino as a substitute flavour (Qian & Xing, 2016).
Howard Schultz has also learned from his failures. One of such examples is of the entrance to India. Since the opening in 2012, Starbucks could only be successful in expanding by 75 stores. It was surprising considering a fact that India is home to over one billion people and also that they like having coffee in different flavours especially from reputed brands. Despite the fact they had very limited expansion until the mentioned time span (Berger & Blake, 2016). However, Howard Schultz had capably realised the reason for failure. Local culture was being identified as the main reason. It was a mistake that Howard Schultz had made and preferred coffee as the primary option in a country that predominantly likes to have tea as their first choice. However, he stood straight from the failure and had shown the sign of an entrepreneur by introducing the recently acquired tea company, Teavana to promote the sales (Berger & Blake, 2016).
The staffing and the structure of the firm had kept on evolving with its progress. In fact, Howard Schultz had not just concentrated on the conventional mode of staffing but, focus was also being shifted towards those who would not have been anywhere else. Opportunities were being provided to working parents, students, military spouses and also the young people who were the complete freshers for any industry. Starbucks also have store managers who manage the daily operations and several other works like scheduling the job allocation. They also have a dedicated support team of partners who are there to provide support to employees. Currently, the company has an approximate around 250,000 staffs at the worldwide level (Isosävi & Lappalainen, 2015).
Entrepreneurship is, in fact, a progressive trend in Starbucks. Howard Schultz has proved this on several occasions like when Starbucks entered China and India. Keeping apart the criticisms, Howard Schultz had performed exceptionally well to keep the success coming the way. There have been several joint ventures, acquisitions, and the strategic alliances; however, a joint venture with Conservation International was the changing moment in regards to their stand for CSR. With this venture, Howard Schultz had continually deployed innovative thoughts to improve the lives of farmers, the quality of coffee and customers as well. The venture had ensured a rust free plantation with “One Tree for Every Bag Commitment” program (Hossain & Islam, 2015).
Creativity is an asset of entrepreneurs. Howard Schultz has proved that on most occasions. Howard Schultz had believed in adjusting to culture they had visited to. They had adopted the European culture when Starbucks had first entered the European market. Howard Schultz was innovative again when Starbucks had entered China and India. These are just the few examples; however, Howard Schultz has been innovative from process design to ventures (Martínez-Torres, Rodriguez-Piñero & Toral, 2015).
The entrepreneurial skills that Howard Schultz has and had displayed throughout his association with Starbucks kept on piling the stories of success. The decision to unite with CI was not less than a firm response to all such criticism that had hammered the market values of Starbucks. However, the venture had proved such thing as less important to Starbucks by making some practical application of what being committed for. It just did not help Starbucks but, also helped the farmers (Hutt, 2016).
The value was revived again when Starbucks has entered the Chinese market. Frappucino which is exclusive to Starbucks was redesigned to produce an alternative of it, so that, it get mixed with the Chinese taste for coffee. Howard Schultz had ensured customers are not being called to it but, coffee is being delivered to their needs and taste. It was the entrepreneurial move of Howard Schultz that had helped Starbucks to plan in accordance to the circumstances (Aiello & Dickinson, 2014).
It was in the year 2012 when Starbucks had entered India through strategic alliance with Tata. They had faced the challenge and could not be successful in the early period. The expansion was not that flourishing in India because, Starbucks had preferred coffee as the primary offer to customers which predominantly prefer having the tea. Howard Schultz was innovative again and had used the entrepreneurial skills to identify the needs of a repair. Consequently, Starbucks had planned to offer tea in collaboration to Teavana (Harrington, Ottenbacher & Fauser, 2017).
It was the entrepreneurial skills of Howard Schultz which had impacted the society in huge regards. The joint collaboration with CI had impacted the farmers in different parts like Indonesia and Mexico. Starbucks was also able to prove its stand for CSR. A company with high CSR reputation does produce positive impact on customers. They actually have more trust on such employers. Starbucks is a game changer as it was first to create the “second wave coffee”. The American culture had shifted from making coffee in kitchens to having coffee at the different beverage stores (Tucker, 2017).
Conclusion:
Therefore, Howard Schultz is successful in quite of ways. The entrepreneurial skills in him had produced appropriate results on correct situation. The entrepreneurial skills was required when they had come out of the comfort zone and moved to other parts of world. They had to construct the coffee shops as per the culture in European countries. They had needed to change the taste and produce an alternative of Frappuccino, exclusive only to Starbucks, when they entered the Chinese market. The entrepreneurship in Howard Schultz was revealed again when Starbucks failed to make a great impression in the Indian market. Howard Schultz had then realised the urgency and decided to include tea in their menu with the help of Teavana.
References:
Aiello, G., & Dickinson, G. (2014). Beyond authenticity: a visual-material analysis of locality in the global redesign of Starbucks stores. Visual Communication, 13(3), 303-321.
Akgün, S., & Yal, F. (2015). The Reasons of Young Consumers’ Choice on Chain Café Stores: A Research on Starbucks. International Review of Management and Marketing, 5(3), 1-14.
Berger, K. A., & Blake, L. J. (2016). Starbucks Enters India: The Indomitable Competitor or Underdog?. Journal of Case Studies, 34(2), 75-91.
conservation.org. (2018). About Us. conservation.org. Retrieved 28 March 2018, from https://www.conservation.org/about/Pages/default.aspx
conservation.org. (2018). conservation.org. Conservation International. Retrieved 28 March 2018, from https://www.conservation.org/NewsRoom/pressreleases/Pages/Starbucks%20Announces%20CI%20Partnership%20Milestone%2099%20of%20Their%20Coffee%20is%20Ethically%20Sourced.aspx
Harrington, R. J., Ottenbacher, M. C., & Fauser, S. (2017). QSR brand value: Marketing mix dimensions among McDonald’s, KFC, Burger King, Subway and Starbucks. International Journal of Contemporary Hospitality Management, 29(1), 551-570.
Hossain, M., & Islam, K. Z. (2015). Generating ideas on online platforms: A case study of “My Starbucks Idea”. Arab Economic and Business Journal, 10(2), 102-111.
Hutt, R. W. (2016). Reputation on the line: the Starbucks cases. Journal of Business Strategy, 37(1), 19-26.
Isosävi, J., & Lappalainen, H. (2015). First Names in Starbucks: A Clash of Cultures?. In Address Practice As Social Action: European Perspectives (pp. 97-118). Palgrave Pivot, London.
Koehn, N. F., McNamara, K., Khan, N. N., & Legris, E. (2014). Starbucks Coffee Company: Transformation and Renewal. President and Fellows of Harvard College.
Martínez-Torres, M. D. R., Rodriguez-Piñero, F., & Toral, S. L. (2015). Customer preferences versus managerial decision-making in open innovation communities: the case of Starbucks. Technology Analysis & Strategic Management, 27(10), 1226-1238.
Qian, Y. A. N. G., & Xing, T. U. (2016). Starbucks VS Chinese Tea—Starbucks Brand Management Strategy Analysis in China. International Business and Management, 12(1), 29-32.
starbucks.in. (2018). Responsibility | Starbucks Mission Statement. starbucks.in. Retrieved 28 March 2018, from https://www.starbucks.in/responsibility
Susanty, A., & Kenny, E. (2015). The relationship between brand equity, customer satisfaction, and brand loyalty on coffee shop: Study of Excelso and Starbucks. ASEAN Marketing Journal, 14-27.
Tucker, C. M. (2017). Coffee culture: local experiences, global connections. Taylor & Francis.
Yang, C. C., Paoching, C., Lin, S. L., Rofiq, M., & Davaanyam, O. (2015). The Brand Perception Influence on Coffee Consumption: A Case Study of the Chain Stores Starbucks and 85 C Daily Cafe in Taiwan. International Journal of Science and Engineering Investigations, 4(42), 65-68.