goodwill vs starbucks case study

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2.1 Doing Good as a Core Business Strategy: The Case of Goodwill Industries

Mike Mozart – Goodwill Store – CC BY 2.0.

Goodwill Industries International has been an advocate of diversity for over 100 years. In 1902, in Boston, Massachusetts, a young missionary set up a small operation enlisting struggling immigrants in his parish to clean and repair clothing and goods to later sell. This provided workers with the opportunity for basic education and language training. His philosophy was to provide a “hand up,” not a “hand out.” Although today you can find retail stores in over 2,300 locations worldwide, and in 2009 more than 64 million people in the United States and Canada donated to Goodwill, the organization has maintained its core mission to respect the dignity of individuals by eliminating barriers to opportunity through the power of work. Goodwill accomplishes this goal, in part, by putting 84% of its revenue back into programs to provide employment, which in 2008 amounted to $3.23 billion. As a result of these programs, every 42 seconds of every business day, someone gets a job and is one step closer to achieving economic stability.

Goodwill is a pioneer of social enterprise and has managed to build a culture of respect through its diversity programs. If you walk into a local Goodwill retail store you are likely to see employees from all walks of life, including differences in gender and race, physical ability, sexual orientation, and age. Goodwill provides employment opportunities for individuals with disabilities, lack of education, or lack of job experience. The company has created programs for individuals with criminal backgrounds who might otherwise be unable to find employment, including basic work skill development, job placement assistance, and life skills. In 2008, more than 172,000 people obtained employment, earning $2.3 billion in wages and gaining tools to be productive members of their community. Goodwill has established diversity as an organizational norm, and as a result, employees are comfortable addressing issues of stereotyping and discrimination. In an organization of individuals with such wide-ranging backgrounds, it is not surprising that there are a wide range of values and beliefs.

Management and operations are decentralized within the organization with 166 independent community-based Goodwill stores. These regional businesses are independent, not-for-profit human services organizations. Despite its decentralization, the company has managed to maintain its core values. Seattle’s Goodwill is focused on helping the city’s large immigrant population and those individuals without basic education and English language skills. And at Goodwill Industries of Kentucky, the organization recently invested in custom software to balance daily sales at stores to streamline operations so managers can spend less time on paperwork and more time managing employees.

Part of Goodwill’s success over the years can be attributed to its ability to innovate. As technology evolves and such skills became necessary for most jobs, Goodwill has developed training programs to ensure that individuals are fully equipped to be productive members of the workforce, and in 2008 Goodwill was able to provide 1.5 million people with career services. As an organization, Goodwill itself has entered into the digital age. You can now find Goodwill on Facebook, Twitter, and YouTube. Goodwill’s business practices encompass the values of the triple bottom line of people, planet, and profit. The organization is taking advantage of new green initiatives and pursuing opportunities for sustainability. For example, at the beginning of 2010, Goodwill received a $7.3 million grant from the U.S. Department of Labor, which will provide funds to prepare individuals to enter the rapidly growing green industry of their choice. Oregon’s Goodwill Industries has partnered with the Oregon Department of Environmental Quality and its Oregon E-Cycles program to prevent the improper disposal of electronics. Goodwill discovered long ago that diversity is an advantage rather than a hindrance.

Based on information from Goodwill Industries of North Central Wisconsin. (2009). A brief history of Goodwill Industries International. Retrieved March 3, 2010, from http://www.goodwillncw.org/goodwillhistory1.htm ; Walker, R. (2008, November 2). Consumed: Goodwill hunting. New York Times Magazine , p. 18; Tabafunda, J. (2008, July 26). After 85 years, Seattle Goodwill continues to improve lives. Northwest Asian Weekly . Retrieved March 1, 2010, from http://www.nwasianweekly.com/old/2008270031/goodwill20082731.htm ; Slack, E. (2009). Selling hope. Retail Merchandiser, 49 (1), 89–91; Castillo, L. (2009, February 24). Goodwill Industries offers employment programs. Clovis News Journal . Retrieved April 22, 2010, from http://www.cnjonline.com/news/industries-32474-goodwill -duttweiler.html ; Information retrieved April 22, 2010, from the Oregon E-Cycles Web site: http://www.deq.state.or.us/lq/ecycle .

Discussion Questions

What are Goodwill’s competitive advantages?
Goodwill has found success in the social services. What problems might result from hiring and training the diverse populations that Goodwill is involved with?
Have you ever experienced problems with discrimination in a work or school setting?
Why do you think that Goodwill believes it necessary to continually innovate?

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Business Meets Goodness: The Goodwill Model

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Academic Distinction in Our Core Four

Case Study: Goodwill an Outstanding Model of Distributed Social Enterprise

As an example of long-term success in a highly complex organization, Goodwill Industries International, Inc., has many lessons to offer in the field of organizational leadership, says James K. Hazy, Ed.D. He and co-author Jim Gibbons conducted a detailed case study over five years involving collection and analysis of data such as direct observations, interviews and discussions, internal historical information, and internal case studies.

Dr. Hazy is a professor of management in the Robert B. Willumstad School of Business and also served on the board of Goodwill Industries International from 2008 to 2013. Gibbons is president and CEO of Goodwill Industries International.

Their study, “Leading a Large-Scale Distributed Social Enterprise: How the Leadership Culture at Goodwill Industries Creates and Distributes Value in Communities,” was published in the journal Nonprofit Management & Leadership . The journal’s editor described the paper as an exemplary case study on conceptual development, having broad appeal for future scholars.

The paper may be of interest to social enterprises seeking to scale up to a national level, as well as to profit-based businesses that incorporate a focus on social responsibility. It offers important insights on overcoming the complex leadership challenges of creating a common mission and brand identity, providing a strong organizational infrastructure to enable robust leadership at all levels, fostering a culture of leadership, and measuring the results of the social mission.

The authors refer to Goodwill as a “distributed social enterprise” because it is both a revenue-generating venture and a social services organization that gathers and distributes all revenue locally into its community-based mission of helping people to gain job-related skills and entry-level employment. Most revenue is realized through its donated-goods retail network of more than 3,100 stores. The case study examined how the $5 billion-plus nonprofit organization has succeeded for well over a hundred years to continually balance its dual objectives and overcome the complex management and leadership challenges specific to this hybrid operating model.

While Goodwill Industries International is the overarching organization, local Goodwill businesses function independently of one another but steadfastly adhere to a common mission across the larger network: “Helping people in need reach their full potential through learning and the power of work.” Each local Goodwill business has its own autonomous CEO and board of directors from within the community it serves. Specific social services vary according to need.

“The local CEOs and boards of directors are deeply aware of community issues and problems. They’re also aware of local resources and opportunities. They know the real issues faced in their own communities,” says Dr. Hazy. “This is the solution Goodwill developed over the years. They gather resources from the community and then put them back into the community. They are doing for the people what most needs to be done, where it most needs to be done. The key is that the value is distributed where the value is generated.”

This decentralized authority structure requires fostering a culture of leadership throughout the organization. “Leadership is everywhere,” Dr. Hazy says. “Leadership is not confined to any one person or persons. Organizations need to have various kinds of leadership skills throughout all levels as part of the culture.”

Part of the culture of leadership involves institutionalizing continual change. The organizational model, at the national and local levels, evolves as necessary in response to changing conditions and opportunities, both in its business enterprise and its revenue distribution mission. This is in contrast to corporate operating models, which evolve in response to market conditions, but for which revenue distribution to shareholders does not, and for most nonprofits, in which mission strategies may change but the methods of raising funds do not.

The dual nature of Goodwill’s operating model—an integrated business enterprise and social mission—presents demanding leadership challenges. Goodwill has to attract and retain the best talent at all organizational levels to both run its multibillion-dollar business enterprise and distribute that value within thousands of communities that depend upon it every day.

For further information, please contact:

Todd Wilson Strategic Communications Director p – 516.237.8634 e – [email protected]

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Module 2: Managing Demographic and Cultural Diversity

2.6 optional case study: doing good as a core business strategy at goodwill industries, doing good as a core business strategy: the case of goodwill industries.

Case written by [citation redacted per publisher request] . Based on information from Goodwill Industries of North Central Wisconsin. (2009). A brief history of Goodwill Industries International. Retrieved March 3, 2010, from http://www.goodwillncw.org/goodwillhistory1.htm ; Walker, R. (2008, November 2). Consumed: Goodwill hunting. New York Times Magazine , p. 18; Tabafunda, J. (2008, July 26). After 85 years, Seattle Goodwill continues to improve lives. Northwest Asian Weekly . Retrieved March 1, 2010, from http://www.nwasianweekly.com/old/2008270031/goodwill20082731.htm ; Slack, E. (2009). Selling hope. Retail Merchandiser, 49 (1), 89–91; Castillo, L. (2009, February 24). Goodwill Industries offers employment programs. Clovis News Journal . Retrieved April 22, 2010, from http://www.cnjonline.com/news/industries-32474-goodwill -duttweiler.html ; Information retrieved April 22, 2010, from the Oregon E-Cycles Web site: http://www.deq.state.or.us/lq/ecycle .

Discussion Questions

What are Goodwill’s competitive advantages?
Goodwill has found success in the social services. What problems might result from hiring and training the diverse populations that Goodwill is involved with?
Have you ever experienced problems with discrimination in a work or school setting?
Why do you think that Goodwill believes it necessary to continually innovate?
An Introduction to Organizational Behavior. Authored by : Anonymous. Provided by : Anonymous. Located at : http://2012books.lardbucket.org/books/an-introduction-to-organizational-behavior-v1.1/ . License : CC BY-NC-SA: Attribution-NonCommercial-ShareAlike

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1.2 Case in Point: Doing Good as a Core Business Strategy

Timothy Brown – Browsing – CC BY 2.0.

Goodwill Industries International (a nonprofit organization) has been an advocate of diversity for over 100 years. In 1902, in Boston, Massachusetts, a young missionary set up a small operation enlisting struggling immigrants in his parish to clean and repair clothing and goods to later sell. This provided workers with the opportunity for basic education and language training. His philosophy was to provide a “hand up,” not a “hand out.” Although today you can find retail stores in over 2,300 locations worldwide, and in 2009 more than 64 million people in the United States and Canada donated to Goodwill, the organization has maintained its core mission to respect the dignity of individuals by eliminating barriers to opportunity through the power of work. Goodwill accomplishes this goal, in part, by putting 84% of its revenue back into programs to provide employment, which in 2008 amounted to $3.23 billion. As a result of these programs, every 42 seconds of every business day, someone gets a job and is one step closer to achieving economic stability.

Based on information from Goodwill Industries of North Central Wisconsin. (2009). A brief history of Goodwill Industries International. Retrieved March 3, 2010, from http://www.goodwillncw.org/goodwillhistory1.htm ; Walker, R. (2008, November 2). Consumed: Goodwill hunting. New York Times Magazine , p. 18; Tabafunda, J. (2008, July 26). After 85 years, Seattle Goodwill continues to improve lives. Northwest Asian Weekly . Retrieved March 1, 2010, from http://www.nwasianweekly.com/old/2008270031/goodwill20082731.htm ; Slack, E. (2009). Selling hope. Retail Merchandiser, 49 (1), 89–91; Castillo, L. (2009, February 24). Goodwill Industries offers employment programs. Clovis News Journal . Retrieved April 22, 2010, from http://www.cnjonline.com/news/industries-32474-goodwill-duttweiler.html ; Information retrieved April 22, 2010, from the Oregon E-Cycles Web site: http://www.deq.state.or.us/lq/ecycle .

Discussion Questions

How might the implications of the P-O-L-C framework differ for an organization like Goodwill Industries versus a firm like Starbucks?
What are Goodwill’s competitive advantages?
Goodwill has found success in the social services. What problems might result from hiring and training the diverse populations that Goodwill is involved with?
Have you ever experienced problems with discrimination in a work or school setting?
Why do you think that Goodwill believes it necessary to continually innovate?

Principles of Management for Leadership Communication Copyright © 2015 by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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Goodwill Industries International, Inc.: a Case Study

by Allie Heckel

Goodwill Industries International Research Mission: Goodwill Industries’s (Goodwill) mission is “to enhance the dignity and quality of life of individuals and families” by performing several key functions (Goodwill Industries International, 2013). These functions include “strengthening communities, eliminating barriers to opportunity and helping people in need reach their full potential through learning and the power of work” (Goodwill Industries International, 2013). Lewis (1977) states that: Goodwill could show America what ‘service’ and Christianity should be, [Helm] said; then business and labor might adopt Goodwill principles and procedures so that every citizen would attain the highest ‘mental, moral and physical growth’ of which he or she was capable. This, [Helm] asserted repeatedly, was Goodwill’s mission - to save the waste in men as well as things and to give any who were willing to work regardless of handicap or circumstance, ‘a chance, not charity’ (p. 68). Goodwill also maintains a vision statement for the future of the organization: “Every person has the opportunity to achieve his/her fullest potential and participate in and contribute to aspects of life” (Goodwill Industries International, 2013). A section highlighted on the Goodwill website is dedicated to specific “values” the company upholds. These values include: respect, stewardship, ethics, learning and innovation (Goodwill Industries International, 2013). History: Founded in 1902 (by the Rev. Edgar J. Helms, a Methodist minister and social innovator) in Boston, Massachusetts, Goodwill is the “largest, most comprehensive, privately maintained HECKEL - SITUATIONAL ANALYSIS 1

network in the world of rehabilitation centers and workshops servicing the physically, mentally and emotionally disabled” (Lewis, 1977, p. 13). From 1902-03 Boston was an area greatly affected by a financial collapse, with widespread unemployment and poverty. Helms encouraged the people of Boston to contribute old clothing and other necessities for those hit hard by the economic collapse, notably the unemployed and the handicapped (p. 63). These volunteers worked at restoring the items donated for resale, with the proceeds of their labor providing “a token income and a considerable amount of self-respect” (p. 63). The system created by Helms was successful, and the Goodwill philosophy of “a hand up, not a hand out” was therein born (Goodwill Industries International, 2013). Today, Goodwill is a $4 billion nonprofit organization. It is described as industrial program as well as a social service enterprise that provides of employment, training and rehabilitation for people of limited employability. Goodwill is also a source of temporary assistance for individuals whose resources are depleted (Goodwill Industries International, 2013). Through its 21st Century Initiative, Goodwill aims to improve the economic selfsufficiency of 20 million people and their families by 2020 (Goodwill Industries International, 2013). While this task seems daunting to management, Goodwill maintains the resources necessary to successfully fulfill this promise. Times have changed since the foundation of Goodwill, however Helms’s vision has remained constant. HECKEL - SITUATIONAL ANALYSIS 2

Products and Services: Goodwill offers job training and placement programs for people with disabilities and other disadvantages to work in the stores (Goodwill Industries International, 2013). Stores feature gently used and new items, such as adult and children’s clothing, housewares, appliances, and more at affordable prices (Goodwill Industries International, 2013). Goodwill stores add new items to their inventory daily to allow for a constant stream of diverse products (Goodwill Industries International, 2013). Since first opening in 1902, times and technology have changed. Goodwill has incorporated new technology demands by creating an online auction site, shopgoodwill.com, that features an average of 11,000 items to auction including antiques, collectibles, jewelry, and many other products (Goodwill Industries International, 2013). Structure: Goodwill globally operates as a network of 165 independent, community-based organizations (Goodwill, 2013). These organizations offer job training, employment placement and other services to people who face employment challenges. These challenges may be because of an individual’s lack of education or job experience, or they have disabilities and are unable to find work elsewhere (Goodwill, 2013). Each Goodwill retail store and donation center is owned and operated by the local Goodwill Industries within that community (Goodwill, 2013). Every Goodwill retail store has a manager responsible for the daily operations, including maintaining cleanliness, managing merchandise, and keeping inventory (Goodwill, 2013). Managers are also responsible for assuring that employees receive proper training, supervision, and reporting to regional managers (Goodwill, 2013). Because each retail store and donation center is HECKEL - SITUATIONAL ANALYSIS 3

individually operated, structure can fluctuate. How open or closed communication is may be left up to the individual store’s manager. Communication between upper management and external channels, however, is closed. This is exemplified by Goodwill CEO Jim Gibbons’s recent criticism by the National Federation of the Blind (NFB). Image: Although Goodwill’s image is normally consistent, some of its stores were in the news in August 2012 for issues regarding compensating disabled employees less than minimum wage (National Federation of the Blind, 2012). In August 2012, the NFB announced that it, along with several other organizations representing people with disabilities, would protest in front of more than 80 thrift stores operated by Goodwill Industries. This protest was in an effort to raise awareness of the nonprofit’s “practice of sub-minimum wages” to many of its workers with disabilities (National Federation of the Blind, 2012). Some reports by the NFB showed that Goodwill employees with disabilities were being paid as low as 22 cents an hour, far below minimum wage (National Federation of the Blind, 2012). In a report by the NFB, President Marc Maurer discussed how Goodwill is financially in a position to stop the exploitation of its workers with disabilities (National Federation of the Blind, 2012). Although this is a pertinent issue, it is not one the general public would know about unless they followed Goodwill regularly. However, if this issue is not addressed adequately and management continues to be reactive, Goodwill’s image could greatly suffer. HECKEL - SITUATIONAL ANALYSIS 4

Management’s View of PR: “We care about the people we serve. We care about the people we employ,” is a quote prominently displayed on Goodwill’s homepage (Goodwill Industries International, 2013). Upper management wants Goodwill’s stakeholders to feel like they are the most important part of the organization. However, when it comes to being proactive, Goodwill struggles. In general, Goodwill is more reactive than proactive. Although Goodwill has not experienced negative media coverage, its recent crisis of paying disabled employees less than minimum wage has brought some negative light. Goodwill CEO Jim Gibbons denied speaking about its exploitation of disabled employees (National Federation of the Blind, 2012). It has been two years since these accusations were brought to media attention, and Gibbons and other Goodwill managers have yet to release a statement addressing claims of employee exploitation (National Federation of the Blind, 2012). Gibbons has maintained his decision to implement Section 14(c) of the Fair Labor Standards Act, which authorizes employers to pay less than minimum wage to certain employees with disabilities (Bagenstos, 2012). Section 14(c) does not take into account these workers’ productivity levels or how long they have been employed by the organization (Bagenstos, 2012). Gibbons attempted to justify these discriminatory actions, claiming Goodwill provides people with disabilities an opportunity to learn key job skills. In his statement, he did not address paying employees wages as low as 22 cents, generating criticism among organizations that represent people with disabilities (National Federation of the Blind, 2012). HECKEL - SITUATIONAL ANALYSIS 5

If Gibbons and Goodwill management would have been more proactive in their PR decisions, criticism could have been avoided. Instead, Goodwill waited for an issue to occur, leaving management unprepared for certain consequences such as negative reports by the NFB. Internal Culture: Overall, Goodwill treat its employees with respect, offering opportunities for advancement within the organization. Goodwill states on its website that employees and their wellbeing come first (Goodwill Industries International, 2013). However, after employees with disabilities reach a certain level of employment within the organization, they hit what Goodwill calls the “barrier to opportunity” which it states eliminate in its mission statement (Danielsen, 2012). These employees, despite qualification, are denied of advancement within Goodwill Industries (Danielsen, 2012). Financial Status: While the economic downturn caused some traditional retailers’ sales to decline in 2011, Goodwill Industries experienced an increase in almost every financial category. Sales by Goodwill thrift stores increased to $2.59 billion in 2011, and have remained consistent (Colbert, 2013). Federal awards increased 3 percent from 2010 to 2011 — the highest contribution to total revenue with 56 percent (Colbert, 2013). Both monetary and physical donations, however, declined 44 percent (Colbert, 2013). In order for Goodwill to remain financially consistent, employees must find a way to generate more contributions to keep the thrift stores fully supplied. The thrift stores are its biggest money maker, so if advertised and promoted effectively Goodwill could benefit with an increase in revenue. HECKEL - SITUATIONAL ANALYSIS 6

Current Reputation: Over the 100 years that Goodwill has been existence, it has established a long-standing reputation of providing jobs and necessities to those who need it most. Overall, Goodwill has upheld its mission and positive reputation, despite its most recent accusations of exploiting employees with disabilities. PR Problem: A significant problem Goodwill Industries needs to address are the accusations by the NFB. Goodwill’s upper management has not reacted accordingly. Upper management claims that paying employees with disabilities any wage creates a job opportunity for them, therefore they should not care about the amount they are paid (Bagenstos, 2012). This situation shines poorly on Goodwill’s upper management and needs to be properly addressed. Audiences Affected: There are many audiences that could be potentially affected by this problem. Some of these stakeholders affected include: Goodwill management, employees, customers, organizations that serve those with disabilities, communities that rely on Goodwill Industries, and current and potential donors. Objectives The PR problem is that Goodwill Industries never properly addressed the accusations by the National Federation for the Blind (NFB) that claimed Goodwill pays employees with disabilities less than minimum wage. HECKEL - SITUATIONAL ANALYSIS 7

Attitudinal: To change negative attitudes among members of the NFB towards Goodwill Industries regarding employment policies for disabled. One strategy I would use to change negative attitudes would be to create and issue a statement such as “We’ve taken into consideration these organizations’ opinions and are working to fix the situation entirely.” Ideally, this statement should come from Goodwill CEO Jim Gibbons who has denied all accusations of employee exploitation in the past. Goodwill and upper management need to think about its publics and remember that employees come first, and mistreatment of these employees shines poorly on Goodwill as an organization. Therefore, changing any and all negative attitudes is critical if Goodwill wants to maintain its positive reputation. Behavioral: To encourage management to compensate employees based on performance, regardless of disabilities or other discriminatory qualities. In order for the first strategy of changing negative attitudes to be successful, all of management must be on the same page internally. Goodwill needs to develop a universal practice of paying employees, particularly those with disabilities, based off of performance. Until this is policy is implemented, Goodwill will continue to be behind on the times of equality in the workplace. HECKEL - SITUATIONAL ANALYSIS 8

Programming Restate the PR Problem: The PR problem is that Goodwill Industries never properly addressed the accusations by the National Federation for the Blind (NFB) that claimed Goodwill pays employees with disabilities less than minimum wage. HECKEL - SITUATIONAL ANALYSIS 9

Objective #1: To change negative attitudes among members of NFB towards Goodwill Industries regarding employment policies for the disabled. Objective #1: To change negative attitudes among members of NFB towards Goodwill Industries regarding employment policies for the disabled. Objective #1: To change negative attitudes among members of NFB towards Goodwill Industries regarding employment policies for the disabled. Strategy #1: Target media outlets about positive Goodwill policies through mass and social media. Key Public (s) Addressed: the NFB, media Channels: Special Event: Press conference about Goodwill policies by CEO Jim Gibbons. He should address accusations by the NFB and allow questions by the media. A good implication of the success of the press conference is to see how many news articles are written about it. If the news stories are positive, then Goodwill should just continue to reinforce these attitudes. If the news stories are negative, then Goodwill needs react accordingly and find a way to change negative attitudes through a different channel. Strategy #1: Target media outlets about positive Goodwill policies through mass and social media. Key Public (s) Addressed: the NFB, media PMT: Create a hotline number with consistent facts about policies. Monitor number of calls to hotline after press conference and news release. Strategy #1: Target media outlets about positive Goodwill policies through mass and social media. Key Public (s) Addressed: the NFB, media Mass Media: Goodwill should release a statement and news release responding to NFB accusations. Monitor the amount of news stories written containing information from the news release. Strategy #1: Target media outlets about positive Goodwill policies through mass and social media. Key Public (s) Addressed: the NFB, media Mass Media: Air a PSA about Goodwill policies to reach out to external publics like consumers and the community. Monitor the date, time and frequency of PSA airings. Also, monitor the number of calls to the hotline during the PSA effort as compared with the period before and after the PSA ran. Strategy #1: Target media outlets about positive Goodwill policies through mass and social media. Key Public (s) Addressed: the NFB, media Mass Media: Target publications for disabled individuals such as “ABILITY Magazine.” Information published should seek to change negative attitudes by informing disabled individuals of Goodwill policies. In this article should be the number for the hotline. Monitor number of calls to hotline after information is published in traditional mass media. HECKEL - SITUATIONAL ANALYSIS 10

Strategy #2: Target the NFB and discuss problems and concerns regarding treatment of Goodwill’s disabled employees. Key Public (s) Addressed: the NFB Channels: Individual: Meeting between Gibbons and the NFB CEO Marc Maurer to discuss any problems he may have. Follow up with Maurer to see if his attitude has changed. Offer another individual meeting with him if need be. Objective #2: To encourage management to compensate employees based on performance regardless of disabilities or other discriminatory qualities. Objective #2: To encourage management to compensate employees based on performance regardless of disabilities or other discriminatory qualities. Objective #2: To encourage management to compensate employees based on performance regardless of disabilities or other discriminatory qualities. Strategy #1: Target Goodwill employees about new changes in training and wages. Key Public (s) Addressed: Goodwill employees Channels: Individual/Special Event: Establish a training program for Goodwill managers and employees to ensure awareness of any changes regarding Goodwill policies and how to properly respond to accusations by the NFB. Monitor number of managers and employees that participate in training program in the first month after it’s established. Also, the Goodwill PR team should hold a focus group for randomly selected employees. This focus group will allow for insight of any discrimination is going on within individual Goodwills. Strategy #1: Target Goodwill employees about new changes in training and wages. Key Public (s) Addressed: Goodwill employees PMT: Managers should email employees to communicate message that disabled employees will have unique standards regarding wages. Keep up with number of responses to emails, and respond accordingly. Strategy #1: Target Goodwill employees about new changes in training and wages. Key Public (s) Addressed: Goodwill employees Publication: Send out an employee publication to managers and employees about changes in Goodwill policies. This will also be addressed in the focus group. Employees and managers will have the opportunity to speak up about changes in policies to upper management. HECKEL - SITUATIONAL ANALYSIS 11

Strategy #2: Develop incentive for managers to compensate employees based on performance. Key Public (s) Addressed: Goodwill management Channels: Individual/Special Event: Implement an awards program that highlights specific Goodwill stores that go above and beyond to treat employees fairly. This award will be given monthly, with a new store and management highlighted. Hold focus group of selected store’s managers and get their opinions on the awards program. Strategy #2: Develop incentive for managers to compensate employees based on performance. Key Public (s) Addressed: Goodwill management Individual: Top management at Goodwill could even go as far as to personally give the winning store each month a cash reward for their outstanding behavior and performance. Contact selected stores one month after they are highlighted to see if managers are continuing to compensate employees based on performance. Strategy #2: Develop incentive for managers to compensate employees based on performance. Key Public (s) Addressed: Goodwill management Individual/Special Event: Each winning store’s manager will have the opportunity at the end of the quarter to have a sit-down luncheon with Gibbons. This luncheon will be a time for managers to individually ask any questions they might have, or discuss the future of the company. Follow up with these managers one month after luncheon to see if policies and attitudes have remained consistent. HECKEL - SITUATIONAL ANALYSIS 12

References Goodwill industries international. (2013). Retrieved from http://www.goodwill.org/ Lewis, J. F. (1977). Goodwill: for the Love of People. The United States of America. Bagenstos, S. (2012, January 19). The case against the section 14(c) subminimum wage program. Retrieved from http://www.ct.gov/dds/lib/dds/employment/the_case_against_14c_ sub_minimum_wage_program.pdf Danielsen, C. (2012, August 24). Goodwill industries refusing to change it spots. Echevarria Travel, Retrieved from http://echevarriatravel.wordpress.com/2012/08/24/goodwillindustries-refusing-to-change-it-spots/ National Federation of the Blind. (2012, August 20). Americans with disabilities to protest goodwill's subminimum wages. PR Newswire. Retrieved from http:// www.prnewswire.com/news-releases/americans-with-disabilities-to-protest-goodwillssubminimum-wages-166783886.html Colbert, C. (2013). Goodwill industries international, inc. In C. Colbert (Ed.), Hoover's. Retrieved from http://subscriber.hoovers.com/H/company360/overview.html? companyId=40179000000000 HECKEL - SITUATIONAL ANALYSIS 13

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How Starbucks Became Everyone's Cup Of Coffee

Table of contents.

Starbucks Coffee Company boasts impressive stats:

Owns 40% share of US Coffee Market
Earns $24,72 billion worldwide
Has 29,324 stores worldwide in 72 countries
Over 14,000 of total stores in the United States / over 27,000 worldwide
Conducts over 90 million transactions per week
So popular in China, a new store opens every 15 hours
Following McDonald's as the most valuable fast food brand worldwide (valued at $44.5 billion)

It will be very hard to achieve something Starbucks did since 1971 when the company started. There’s a lot of firsts when it comes to the company. First to introduce the new coffee culture, the first privately owned company which offered all their employees health insurance AND the share of the company.

The CEO, Howard Schultz, who might even run for president at some point , achieved something that is almost impossible — appeal to shareholders, employees, and customers at the same time. This is my giant case study on how to achieve world domination in case you want to bring an old product to the new market.

The Starbucks Idea

The coffee culture in the United States before the 80s was nonexistent.

Americans were used to huge cans of ground coffee and they couldn’t care less about the flavor. Even if you’d go outside your household to a dinner you would be met with a generic drip coffee or styrofoam cups of foul-tasting joe at the workplace. No one even thought about the flavor, the origin, or anything more sophisticated tied to the drink.

The 70s coffee culture didn’t exist at all.

In 1970 three college friends: Gordon Bowker, Jerry Baldwin, Zev Siegl went into the coffee business together. They set up a shop and sold roasted beans. They received the knowledge from a man named Alfred Peet (if that rings a bell, yes he is the owner of Peet’s Coffee). Alfred was one of the most knowledgeable people in the country about coffee. He knew where to source it, how to roast it. He was the first to introduce dark roasted and french roasted beans.

In 1971, the three friends opened the roastery and bean shop in Pike’s Place, Seattle’s famous tourist destination known for the Pike’s Public Market Center. Peet helped the young entrepreneurs by providing them with beans and connecting them with reliable bean providers.

The name Starbucks stuck because it’s easy to say, impossible to misspell, and has a vaguely British overtone to it. Really, we picked it because our lawyer called and told us we had to submit papers and needed a name. We didn’t know at the time, but Starbuck is the name of the first mate on the Pequod in Moby Dick. That might explain the siren logo. Some might even say it comes from Mount Rainier's Mining company Starbo . According to Gordon Bowker, they were initially going for the name Cargo House Coffee .

The business was successful enough for the trio so they opened 4 more shops in Seattle. However, no coffee drinks were being served. This was still a roasted bean retail shop intended for home use.

At that time Starbucks was competing against instant coffee cans. The quality was stark and thus the business went well. Things were about to change when the founders hired the head of marketing and sales, Howard Schultz in 1982.

The Inclination for Grit and Determination Fix Social Injustice

Howard Schultz was a child raised in poverty. After seeing his father injuring himself doing grueling manual labor, he decided he wanted to get rid of the injustice of the working class. An idea of creating and striving for an environment where employees are fairly compensated and taken care of has been set in.

In Masters of Scale interview with Reid Hoffman, Schultz described seeing his father stretched out on the sofa after suffering an injury. Howard Schultz swore to himself to make a company his father had never worked for.

“I saw my father losing his sense of dignity and self-respect. I am sure that this was caused mostly by the fact that he has been treated as an ordinary working man.” – Howard Schultz, AstrumPeople article

Schultz started working at the age of 12 selling newspapers. Since he was being athletic, Howard earned an athletic scholarship at Northern Michigan University where he received his Bachelor’s degree in Communications in 1975.

After his graduation, Howard Schultz spent three years as a sales manager at Xerox, and then he started working at a Swedish company Hammarplast , where he was selling home appliances, including coffee grinders to businesses like Starbucks.

The Starbucks founder trio took him amidst to grow the company.

In 1983, Howard Schultz gets an epiphany. He travels to Milan, Italy for some sort of conference and what he sees there changes his perception of coffee forever. In certain European countries, especially Italy, coffee was one of the more important things in life. It served as a social lubricant and the third place of dwelling between home and work. Schultz discovered what it means to have a high-quality espresso served in a proper way in a relaxed environment.

He was determined to bring this piece of coffee culture back to the United States. The founders gave in after continuous pressure from Schultz to open an espresso bar. Eventually, they gave him an opportunity to open up a coffee bar inside a store. It was incredibly popular. But the owners didn’t want to turn the coffee retail business into a cafe.

“After Milan I flew back to the United States, excited to share what I experienced. But my bosses, the first founders of Starbucks, for whom I had tremendous respect, did not share my dream of re-creating the coffee bar experience in Seattle. I was crushed, but my belief was so powerful that, in April 1986, I left Starbucks and raised money from local investors to found my own retail coffee company. I named it Il Giornale after Milan’s daily newspaper.

In 1985 Howard Schultz opened his own cafe chain - Il Giornale . He wanted to pursue the dream and went back to Starbucks owners and offered to buy all 6 stores that were operational at that time. With the help of raised venture capital he succeeded and became the CEO after the successful acquisition with $3.6M.

The hyper-growth began.

Key takeaway #1 — change is good

The determination and unrelenting belief to change the current situation is not just a helpful attribute but a prerequisite for cultural change. Staying true to the “one thing” without flinching will be the cause and the driver of change.

“An Old Product in the New Market”

Whenever something works out on an incredible scale in one market, there’s a potential of seeing it succeed in a new one. This is called introducing an old product to a new market.

For example, Uber and Lyft built an incredible business about ride-sharing. Because they have to contain the growth before they are spread too thin, that gives the opportunity to copy-cats in different markets. In the United Arab Emirates, you have Careem ( just recently acquired by Uber ), in Croatia you’ve got have Cammeo and in India, you’ve got sRide .

After something experiences great success, there is only a matter of time before someone else sees the potential and brings it back to the new market, and starts eating out the market share

Coffee was a big opportunity in the United States at that time. Howard Schultz saw with his own eyes how effective and important it is in Italy and he knew he could do something similar in the United States. To perform a similar innovative (for the new market) service you would need to take the entire concept and localize it to the new market.

Even the trends from 2004 to this day shows an upward trend in coffee:

This go-to-market product strategy was first introduced In 1957 by Russian American mathematician and business manager Igor Ansoff. The Ansoff Matrix was published in Harvard Business Review in the article “Strategies for Diversification”. In his opinion, there are only two ways to develop a growth strategy — varying what is sold (product growth) and to whom it is sold (market growth).

Market development — new market, existing product

The Starbucks go-to strategy was to bring the already established product in different cultural and geographical spaces into the new market — the coffee-culture deprived United States.

Howard Schultz’s task was to closely observe how Italians treat the product and figure out a way to bring it home with minor changes. It was impossible to expect that the new market is going to slurp macchiatos from tiny espresso cups but everyone could understand comfort and better quality. That was going to be Starbucks’s trump card.

Market penetration — old market, old product

The most obvious strategy is to sell the existing product to the existing market. With this concept there’s a little risk since the companies don’t have to educate the market with the new product, however, the growth is inhibited by competition or decreasing trends.

Diversification - new market, new product

By far the riskiest approach is introducing a new product in new markets. Not only the product needs to provide clear values, but it also has to educate its use in the new market.

Imagine bringing augmented reality technology to a country where there’s no practical use for it yet. Since there’s a great risk, it can also result in amazing success where you’re the only provider in the blue ocean market.

Most of the startups are banking on this strategy.

Product development - old market, new product

This strategy is most often used by established brands that are already known as leaders in their field. If a washing machine company introduces a new technology that also folds your clothes after washing and drying, that would be much easier to understand and adapt to their existing users.

Key takeaway #2 — do market research

When developing the new market, learn as much as possible about the product itself in the location where it’s mostly used and established. Identify all the major benefits and think of the most significant values that would succeed in the new market

Eco-Conscious, Friendly People, and Profitable — Starbucks’ Triple balancing act

Howard Schultz had an idea to build something that is almost impossible to imagine and can exist only in Utopia. From the start, he wanted to serve with equal importance towards customers and employees.

This is almost impossible to achieve since on one end the business investors want to see money coming in, which in most cases means lean running staff with lower wages and higher-priced products. The staff, or “ partners ” as Howard Schultz calls its employees, are not only compensated a fair wage ( between $10 to $15/hour according to Glassdoor ) but also have healthcare insurance and discounted stock options for company shares.

Howard went even further, offering full tuition coverage through Arizona State University's online degree program .

This idea was most likely outrageous to shareholders. Everyone will get a piece of the company’s pie?

In a Tim Ferriss interview with Jim Collins, the author of Built to Last and Good to Great mentioned the final lesson of his mentor and all-around management superhero Peter Drucker:

“The management isn’t about being more efficient all the time, but it’s also being more humane at the same time.

Striving for workplace quality for the employees was thus one of the main values the CEO implemented in the company.

The interesting analogy is Jordan Peterson’s theory of order and chaos (yin and yang) where one side represents the profit that company must achieve by ruthlessly cutting back the cost in the workforce and the other side where the conscience of doing the right thing for your people brings satisfaction and peace to the workplace which is a proven necessity for customer-facing businesses.

Key takeaway #3 — happy employees make happy clients

Treat your people well. When you’re in the service industry the customer satisfaction and treatment are at times more important than the actual product. And happy employees make happy clients.

The Product

Better coffee.

To coffee drinkers, there are not a lot of things more important than a good coffee in the morning or during the day. By today’s standards, Starbucks drinks aren’t at the level of barista artisans and coffee aficionados. But when the shops started opening in the early 70s, 80s, and 90s, the espressos and lattes were vastly different from all the other stuff people were drinking.

Coffee is generally roasted in three ways: light, medium, or dark, depending on the time dedicated to the coffee beans’ roasting.

In a light roast, you would notice a fruity and acidic taste. Coffee beans are actually considered fruit and are sometimes called cherries. That is the reason you taste light roast as acidic with fruit notes.

In Medium roast, the coffee tastes the sweetest. The glucose levels reach the point where the glucose starts to break. Coffee roasters would say the medium roast is the most balanced since it’s not bitter nor acidic but something in between.

In dark roast, you can taste the bitterness due to burned beans.

Coffee quality comparison

Starbucks predominantly use dark roast coffee which also represents the majority of the coffee that is being consumed in North America. As mentioned, the coffee quality was much better than instant abominations in the early 80s; however, it definitely cannot measure up to artisan roasters.

There are two main reasons:

1— Dark roast is cheaper and can be produced in mass quantities. Similarly to green tea, the light roast-worthy beans are grown in shady, high-altitudes where it produces the most sweetness. High-quality matcha (powdered green tea leaves) is intentionally kept in the shade so it produces more photosynthesis and better taste. Since Starbucks has to supply tens of thousands of shops, they have to bring the mass supply to the cafes. Brian Stoffel from El Toledo roastery in Costa Rica says: “It would be financially stupid for a large chain to buy high-quality coffee beans and use them for dark roast coffee.”

This brings us to…

2— The coffee has to taste the same across the cafes to guarantee uniformity. With dark roast, the flavors of the beans are getting covered up in the same way as overseasoning a dish or overcooking a steak.

But it wasn’t just about the coffee alone. The branding kicks in and people pay for something they want to eventually become. Drinking Starbucks drinks meant they are sophisticated, culturally progressive individuals who enjoyed the premium experience of coffee-drinking culture from fashionable Milano streets.

The slim and elegant takeaway cups proudly wore the green siren logo so the passers-by noticed the person drinking that exact coffee. These cups were different from styrofoam cups in the office or fast food joints.

A similar tactic was used by Apple with the launch of iPods and white earbuds. The iPod was a cool new gadget you had to wear to be relevant in modern society. Apple made it in such a way that people noticed which users had iPods — because they plugged white earbuds into them.

This was a genius idea because the users were immediately differentiated from other less-cool mp3 gadget-using people. Secondly, this was a perfect silent word-of-mouth strategy. If local influencers were seen using white earbuds, everyone else wanted to get on that trend. This strategy is viral in concept and is used by many companies; however, it’s harder to implement it on a distinctive level.

Later on, Starbucks adapted to the marketing with something called “horizontal offer”. It wasn’t just about the dark roast and espresso shots. Young budding students wanted something sweet and mocha just hit the note between coffee and rich chocolate fudge. Why not having both in one product?

Later on, Starbucks started offering teas and snacks. Snack is bringing in a substantial amount of revenue. The shops are using the display of sweet pastry or savory egg sandwiches like any expert pastry shop in Europe. And there are not many people who can resist a croissant, cinnamon roll, or blueberry muffin with their americano or latte.

The food is bringing in more than 20% of all revenue . The pasty was the start, but the company followed up by offering breakfast sandwiches. The adaptation to the market goes even further.

With the recent diet trends in health and fitness, Starbucks has you covered with gluten-free, protein-rich snacks.

With all the addition and expansions to serve a larger audience, it’s inevitable to create resistance groups who blame Starbucks as a commodity coffee provider. And they would be right, it has become that because their system of sourcing beans has to ensure the stock supplies for thousands of shops. But by becoming the main coffee dealer to the masses all the micro-roasters and man-bun wearing, tattoo-sleeved barista artists can fall on their knees and thank the mighty green Siren for creating a market for them.

The need for coffee has increased substantially with the introduction of better coffee, so it created another pocket of niche providers of premium roasted bean roasters.

The price of a cup

Most of the coffee shops live well because they can afford hefty margins. An 80% markup is a standard in the coffee business, especially on the higher-end brews. According to the Small Business Development Center’s 2012 report, food costs take up about 15 percent of revenues on average. The average coffee shop then has a gross margin of 85 percent.

Starbucks margins must be pretty loaded then since they buy tons of coffee from a few sources. According to Coffee Makers USA, the actual coffee in a grande Starbucks cappuccino costs about 31 cents.

For a commodity product such as coffee, Starbucks drinks are quite up there on the more expensive tier ranging from $2.15 for a tall drip to $5.95 for a seasonal frappuccino concoction. But taking into consideration the physical positioning ( Chapter 5 — Coffee Locations ), paying off employees and staff the actual margin per coffee sold are 7% .

Historically, Starbucks has been raising the prices per cup over the years. Since it has poured a lot of equity into maintaining the brand image, it can afford to have a steeper price than its competitors (McDonald's and Dunkin Donuts). Instead of losing the price-sensitive customers, Starbucks differentiates itself from the before-mentioned companies and thus keeping the brand image of a premium java provider.

However, as Tucker Dawson from PriceIntelligently mentions, the prices aren’t increased across the whole product offering . The high-margin items have stayed the same.

Product differentiation

By having a strong and recognizable brand, the company can afford to put out merchandise. Starbucks holiday-themed mugs and localized artwork on them are a big part of the exposure. The merch cabinets and tables are usually near the counters or areas where there’s a longer dwelling time.

The revenue isn’t coming just from the beverages alone. Starbucks did an amazing job of offering non-caffeinated beverages including kids drinks and teas which were introduced after partnerships or acquisitions of Tazo and Teavana.

Starbucks started to diversify its products, pushed them into retail space, and also added teas.

The big drivers are also snacks, wholesale beans, before-mentioned merch, and coffee equipment.

Key takeaway #4 — diversify and expand

While the product is one of the key components of a successful business think about its potential upgrades. Keeping the core you can diversify the offering (and acquire new revenue channels) by expanding into different verticals but staying inside your core company values.

Experience is More Important Than The Product Itself

With a distinctive brand identity, Starbucks shops are easily recognizable anywhere in the World. For a global brand, this is one of the mandatory elements. Each franchise is slightly different than the other — Starbucks in the posh downtown area will have a different feel than the one on the Student campus or at an airport.

But each store follows certain guidelines which are prescribed. In tech and startups, product development follows a concept called minimal acceptance criteria . In other words, what are the lowest common denominators the dev team needs to do before it can be rolled out as a published version.

For Starbucks Cafes, even though the store managers have a certain freedom to run and maintain the facility, they have to ensure to deliver the core Starbucks qualities.

Indie playing music
Comfortable (community) tables for remote work
Reliable wireless connection
Charging Outlets

These shouldn’t just be taken for granted. People love some sense of predictability in their lives. How many times have you been on the lookout for Starbucks when visiting a new country just to take advantage of their wi-fi connection and use of restroom? From that perspective, Starbucks serves as a transactional facility offering other services which don’t have much to do with coffee.

The main idea is, coffee is not the product that is being sold at Starbucks cafes — the whole thing is a social experiment of creating a meeting place between people. It serves as some sort of oasis for meeting up with friends, having a snack and a cup of coffee in a comfy chair while listening to the latest Indie playlists . Starbucks is less in the coffee business as is in people’s business as well.

“It’s not Starbucks coffee you are getting, it’s the Starbucks experience. “

By calling your name and writing it on the cup, it doesn’t just inform the customer that their drink is ready. It allows a more personalized service since we love hearing and seeing our name.

Smells and sounds

Starbucks Sounds

Chances are when you go to Starbucks you don’t ever hear the music. But it plays an important role nevertheless. Starbucks playlists are carefully curated to help create that ambiance of a neighborhood coffee shop.

It has been a piece of the Starbucks experience for over 40 years already . The songs and tracks are carefully curated way ahead of time. These handcrafted playlists usually consist of indie, feel-good songs, pop, alt-country to season-themed or even classical playlists during holidays.

In 1999, Starbucks even acquired a Bay Area music store to launch its own branded coffeehouse and later on, even a record label. In the early 2000s, Starbucks sold CDs in the store until the format decline. In 2016, Starbucks partnered with Spotify . Through the mobile app integration, Spotify plays music as part of the app. In-store listeners can take a look inside to identify the artists and save the tracks to their playlists.

Holly Hinton and David Legry, the in-house music curators, are responsible for what gets played. What sounds like the best job in the world, actually is. Their sole work is searching for the right tracks and artists that they can see are fit to be played in the coffee shop.

In an interview with Fast Company , Holy Hinton said:

“We want our customers to walk in and have a ‘What’s that song?’ moment. We want them to hear interesting, cool music that they might not hear when they turn the radio on. It’s music that we think is cool and would sound beautiful in the coffee shop. It’s the music that we’d want to hear on Sunday morning when we’re reading the paper and drinking coffee. It’s a friend-to-friend personal. And we’re lucky to be able to be a part of that.”

To localize the experience, every region is slightly customized regarding the music, while still carrying the same vibe Starbucks customers are used to. This way, whenever a customer comes to the cafe, within the first few seconds, they feel accustomed based on the music alone.

The interior design

Every piece of furniture and interior is carefully planned to conform to the standards of the homey coffee place.

To get their store right, Starbucks interviewed hundreds of coffee drinkers to get as much information which they could use to build a perfect coffee shop. The overwhelming consensus actually had nothing to do with coffee; what consumers sought was a place of relaxation, a place of belonging.

If we go back to Howard Schultz’s deciding moment from the Milanese coffee shops, it shows he managed to do just that. Create a community space as a second home. It’s somewhere where people meet, it’s where you can take someone for a first date or even get some work done at the large community table.

In the book Starbucked, freelance journalist Taylor Clark claims, that “The round tables in a Starbucks store were strategically created in an effort to protect self-esteem for those coffee-drinkers flying solo. After all, there are no “empty” seats at a round table.”

If we looked at the interior, the counters, chairs, and wardrobes are built out of natural materials like warm woods and stone. In some stores, you would find cozy armchairs as well. With the Shared Planet initiative , they doubled down with environmental sustainability in mind and employing local craftsmen to do the job. The stores are built from reused and recycled materials wherever possible.

Most of the new stores that are being built are a part of the LEED Certification program (Leadership in Energy and Environmental Design).

Starbucks differentiates from three general looks with the addition of concept designs:

Heritage coffee houses reflect the history of the place where the store is located. At Pike Place, the coffee shop reflects the merchant trading roots with worn wood, stained concrete or tiled floors, metal stools, and factory-inspired lighting. Even more sophisticated is the New Orleans inspired coffeehouse showing the rich music history.
A “Louisian merchant in the early 1900s” inspired heritage coffeehouse with vintage trombones light fixtures. Located in French Quarter, New Orleans.
Artisan stores echo the industrial past of urban markets, taking inspiration from the Modernism of the 1930s. This motif celebrates simple materials like exposed steel beams, masonry walls, factory casement glass, and hand-polished woodwork in a creative gathering place for culture and the arts.

Regional Modern are localized stylized coffee shops. The interior is spacious. comfortable and welcoming. The bright, loft-like, light-filled spaces punctuated with regionally inspired furniture and culturally relevant fabrics create a calm and contemporary respite from the clamor of the fast-paced world.

Experimental — with growth and a plethora of locations comes more daring and innovative designs. Unique designs such as the reimagined drive-thru in Colorado , the Swiss Train contemporary mobile coffee space from Geneva Airport to St. Gallen or one of the beautiful Shinto shrine-inspired coffee shops in Japan

‍ Starbucks Reserve

To combat the upscale coffee market which ironically has to thank Starbucks for creating fertile grounds of demand for premium coffee, Starbucks started opening up so-called Starbucks Reserve stores. These are luxurious, beautiful, and magnificent stores where they roast premium, rare beans and experiment with different brewing techniques.

CNN Money described the store concept as "an open, marketplace-style" with a Princi bakery counter, a full liquor bar, and a Reserve coffee bar, with tables, lounge areas, and two fireplaces.

"Our Reserve store takes the best of coffee craft as well as artisan baking and layers in a marketplace-style customer experience creating a space that has both energy and moments of intimacy," — Liz Muller, VP of Creative, Global Design & Innovation at Starbucks

Coffee shop locations

In any high-traffic area in the city where Starbucks is located, you almost have a feeling their shops are everywhere. You would be partially right — Starbucks are strategically located in areas with high appeal. Similarly to Walgreens, Starbucks chose the concept of the convenience store, always located in an area of larger foot-traffic .

Source | A snapshot of Starbucks shops in Seattle

Arthur Rubinfeld who is responsible for Starbucks’ location selection, explained there are about 20 or so analytic experts around the world who are assessing different factors of the appropriate area for the new Starbucks shop .

Key takeaway #5 — spoil your customers

Think beyond the product and identify what else can you do for the customer to add you in their daily, weekly routine. Customer support excellence is mandatory, so think further and in the direction of the place’s ambiance including smells and sounds.

Breaking down the Brand and Messaging

Bill Macaitis, former CMO of Slack said it best - “The brand is the sum of all customer touchpoints your customers have with you at any point”. With the food and beverage category, this is even more important.

By introducing and creating a culture of coffee drinking, Starbucks had a major opportunity to create intimacy with the customer. In Italy, coffee culture is a part of every day and the same culture was slowly getting familiar to the new audience.

Because of the personal nature of coffee and frequency of visits, this relationship-bonding happened much faster than in other fast-food joints, especially since in the early years of Starbucks there was no competition.

Brand and product

The bright white cups with the green siren are the first noticeable brand. But it goes beyond that. You will notice that Starbucks never offers any sort of discounts or actions like buy-one-get-one-free. That’s sort of action dilutes the premium feel of the brand. You can get a free coffee drink for your birthday, but the underlying reason for that is for a customer to develop a positive connection with the brand and company.

The most valuable assets of the regular Starbucks coffee shop can be broken down:

☕Free reliable Wifi - besides oxygen, water, and sleep, the online connection has become a necessity in modern civilization. Whenever you’re in a new place and you need to connect, one of the first options would be a Starbucks shop.

☕Comfortable seats and community tables - whether you’re there to take a breather or putting some hours of online work or organizing an impromptu study group, there’s a Starbucks location that can provide those demands. Most of the Starbucks are generously equipped with charging outlets as well, so you can get another drink after your focus is starting to drop… and then another… And another...

☕Friendly baristas - customer service is ingrained in the retail work description yet rarely done the right way. With L.A.T.T.E. method (Chapter 8 - Disciplined Action) and general training of Starbucks partners , each interaction with the customer is there to provide a positive experience. Calling people by their name, timely service, and the patience of crafting ridiculously complex drink orders .

☕Brand colors and materials — the nature-influenced interior with dark colors and wood finishes are giving a feel of hominess. Sometimes a Starbuck visit is just a pause you take in a day to relax your eyes.

☕Music and smells — coffee and snacks just smell amazing. Let’s take that for granted. The music serves a purpose as well as bringing an ambiance that is great for having a conversation or focusing on work (or your date).

Key takeaway #6 — positive interactions

The brand is the sum of all touchpoints the customer has with the company. This goes beyond the product and customer service. Think about every single interaction customers have with you and make them positive.

Starbucks Master Example of Mobile Retention and App Rewards

Starbucks mastered the mobile game at the right time. Dabbling with mobile technology since 2007, Adam Brotman spearheaded the platform to maximize the effect. The big challenge was to align it with the brand.

“We don't look at mobile in a vacuum. We have an overall digital strategy that's all about building relationships with our customers, and that strategy runs across a number of digital touchpoints. We're looking at mobile, Web and social to think more holistically about how we engage with our customers and tell our story." — Adam Brotman, Chief Digital Officer

In the Manifest survey in 2018, 500 smartphone owners rated their satisfaction using food apps. Starbucks had the most popular and regularly used loyalty rewards app — 48% of users used it on a daily basis.

Four years later, Starbucks remains one of the most popular apps, ranking number 6 on the list of most downloaded Food & Drink apps.

The mobile switch paid dividends with time. Instead of support and enhancing physical visits to the store, the channel began bringing in 23% of all the revenue.

Ordering ahead of time and user experience

For a food mobile app to be successful, it must bring value to the user, be easy or even fun to use and it should have entertaining, dynamic content.

The design has to adhere to rules of the brand, achieve a consistent visual look and continuity across all touchpoints.

The mobile app design is no different than the rest of the materials Starbucks uses.

Digital Engagement paid tremendous dividends for the company.

Starbucks CFO Scott Maw said almost all of the company’s same-store sales growth has come from customers that have digital relationships with the company and those that are in the Starbucks Rewards program.

User-friendly design

This is the minimal and easiest thing to leverage on. With a strong brand, it should not be hard to create an appealing visual interface and create logic flow and transitions or continuation to the desired action.

Engaging loyalty program

Retention is the name of the game. If a customer trusts you well enough to download your app, you have a unique opportunity to convert him or her to be a regular user.

Starbucks has a similar strategy with the reward system. Every day there’s a slight reward, whether it’s collecting points or showing the current mouth-watering warm drink inside the app. It’s sticky and you can’t help but wish for a warm beverage.

Mobile pay and ordering

The North American market is known for heavy mobile use . By prepaying and using the device to quickly go through the ordering process, the customers feel more efficient and slightly more an advantage than the other poor souls who still buy their coffee with credit cards or cash.

Integration with other platforms and services

Partnerships are ways to get tons of new users with one big swoop. Spotify acquired one million users a few days after partnering with Facebook (Source) and Facebook had one sexy product update from it as well. For similar reasons, Starbucks used Spotify to enrich the experience of the mobile app.

Now playing highlight in Starbucks stores (Music is a big part of the brand and having perennial "Shazam" embedded brings seemingly insignificant, yet positive experience.

UX/UI — breaking down the mobile app design

Out of this world personalized experience.

The app remembers your favorite order. This is ingenious. We’ve mentioned how coffee represents a daily habit - if Starbucks manages to infiltrate itself into your habit loop, they’ve won. They have become a part of your daily routine. Stacy always stops at the same drive-through Starbucks, orders her Grande Latte with Soy Milk at 6:15 am before she checks-in at her job. When that’s her daily or even only a few time per week routine, the LTV for that kind of customer is absolutely amazing!

Every little detail counts. For instance, here’s the customized greeting each time a user opens the app’s Home tab.

Gamification

Most addictive phone games always give you something to do if you’re not using them for a while. From Candy Crush Saga to Supercell’s engineered mobile drugs like Clash of Clans and Boom Beach, the mechanics of engagement are carefully predicted for maximum time and cash spend. These games start with low difficulty. They are fun, colorful, and offer an entertaining introduction to their mechanics. But you can play all day, and after a while (on a free tier) you’re locked out of the game.

To continue playing, you can either (literally) buy your time or increase your chances of success with extra loot, power levels, or something similar.

Starbucks uses a similar principle of gamifying its mobile app. There’s a lot of value upfront (pay with a card, skip the line, earn credits for free drinks) but it serves the company’s profit. You get hooked to those stars (credits) which are stacking in your beautifully designed mobile app.

There are also challenges for extra Starbucks points (who can say no to double credit days?)

With the app, Starbucks gets you to try new products and thus increase the range of products you are consuming AND it gives the company an opportunity to increase the average order revenue per customer.

There’s a thin line between being overbearing and being just enough engaging. And at the same time, they have to be very strategic on the number of features offered. Sean Ellis , the OG Growth hacker said the product is ready to ship once all the unnecessary features are taken away (kind of the same mentality as per good design). Luckily with MILLIONS of users, Starbucks can apply some Data Science magic and figure those timings for every type of person.

Personalization goes even further - it tries to give a similar experience as to visiting the store ( source )

Starbucks Loyalty Program on triple-caffeine nitro power

The Starbucks Rewards are dead simple - the more you spend the more stars you get. Besides the stars, the rewards program offers birthday rewards, phone payments, paying ahead, free in-store refills and special offers and events for members. As expected the experience is personalized for each user.

The Rewards work like gangbusters! More than 14.2 million active members in the U.S. are invested in the loyalty program and the mobile strategy has seen an 11% growth in users in Q2 2018 . The gamification of the program and “spend more, earn more” in some cases represent 39% of the entire chain's sales .

Here’s what’s ingenious about the mobile program. Even though there are people who prefer to have the minimum number of apps on their phone and think twice before opening the doors for the elite club on their smartphone storage, the Starbucks app is a trojan horse of benefits - even if you don’t care about collecting stars, it’s tough to say no to the free birthday drink or the convenient mobile pay.

Online Ordering and easy payments flatten the friction of getting the product. Just like the Amazon 1-click purchase or Slack’s onboarding sequence , the same goes for picking up a mocha and Petite Vanilla Bean Scone. At first, Starbucks had some issues, since the mobile members had to wait in line just like the others, but Starbucks responded by adding dedicated stations for mobile order-ahead customers.

Members can skip the waiting line and enjoy the jealous looks while feeling elite of themselves.

The beauty of the app isn’t giving one big benefit of a quicker caffeine shot to the member, but it serves as an upsell marketing tool. The Starbucks app is a delivery method for presenting new items ahead of time. These generate interest and coupled with email notifications, it gives their customers something to look forward to.

To keep the retention flat, the Rewards program has “punishment” traits tied into it. If you’re not using the stars for visiting the cafes you start losing them. This psychological trick, known as The Endowment Effect , helps to nudge those people who are affected more about losing something they already have.

The Mobile part is one of the main drivers of customer retention and has proven to raise the average order size per customer. Since the frequency of orders and visits is so high, the LTV per customer contributes to that impressive double-digit growth in the first years.

Key takeaway #7 - APP A mobile app for a product that is being used on a daily basis and is in the lifestyle category is not a nice to have, but almost mandatory. If you want to stay a part of your customer's daily lives, bring the entertainment, rewards, and gamification to keep retention and customer satisfaction high. You will be rewarded with increased LTV.

The Success Flywheel of Starbucks

The easiest way to figure out and identify the success of a company is to apply the try-and-true framework. Jim Collins, the author of Good to Great, Built to Last claims all mega-successful companies have to figure out the Flywheel principle .

To become an unstoppable juggernaut in its own field, Starbucks had to align 5-6 different elements in three categories:

Disciplined People
Level 5 Leadership
First Who… Then What
Disciplined Thought
Face the Reality
Hedgehog Concept
Disciplined Action

Culture of Discipline

Leveraging the Technology

Imagine the concepts as drivers of one giant flywheel. Let’s say you’d want to move a giant stone wheel that sits on an axle. It would take a lot of effort to get it moving at first. After gaining speed it would need less and less power to keep it going. After gaining momentum, the same wheel would run on its own with little interaction. Just like the extremely simplified quote says; “If it ain’t broke, don’t fix it.”

Disciplined people - Starbucks Level 5 Leadership

Excerpt from Good to Great -> “Level 5 leaders display a powerful mixture of personal humility and indomitable will. They're incredibly ambitious, but their ambition is first and foremost for the cause, for the organization and its purpose, not themselves. While Level 5 leaders can come in many personality packages, they are often self-effacing, quiet, reserved, and even shy. Every good-to-great transition in our research began with a Level 5 leader who motivated the enterprise more with inspired standards than inspiring personality.”

There’s no doubt, Starbucks CEO Howard Schultz possesses the characteristics and personality traits of a Level 5 leader. The ambition alone to introduce a new cultural concept in a new market sounds incredibly daunting, but to play it right with the shareholders, customers and their own people sounds impossible.

But that was the initial idea, a moral standard. The mission statement of Starbucks is:

“to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”

Let’s break this down into two pieces.

Inspire and nurture the human spirit .

The people, customers, and partners (staff) are the most important assets of any company. The first part of the mission statement explains that in a split-second. The relationships within the company have to be nurtured and supported while exuding warmth and friendliness.

Howard Schultz has shown respect for the mission by developing programs for their own people, which include free education, health insurance and even a share in the Starbucks company.

“One person, one cup and one neighborhood at a time .”

The second part stresses the importance of gradual improvement. Each interaction with a customer, each cup of coffee made hold a large amount of responsibility to deliver the right experience. The neighborhood part reminds the staff and the customers that the stores pay special respect and attention to the place where they are located.

In the article Inside Starbucks’s $35 Million Mission , author Sarah Kessler describes how Starbucks runs the “ Leadership Lab ” — part leadership, part training conference for 10,000 store managers.

Disciplined thought

Face the Reality — When stuff gets hard, leaders don’t turn away from the problem or worse, get busy with mundane tasks, deceiving themselves they are working. Closing your eyes to the reality means you’re on a great way to a downward spiral.

In 2008, Howard Schultz got reinstated by the board as CEO. The sales and shares were dropping. The brand and the culture of Starbucks were deteriorating rapidly. The magical experience was a shadow of its former self.

Schultz decided on a radical idea to close all the stores and retrain in order to inflict the importance of the Starbucks vision and mission. Tied into this transition was closing numerous shops and letting go of hundreds of employees. The ordeal cost the company 6 to 7 million dollars .

In 2018, Starbucks closed the doors again in order to put the staff through racial anti-bias training. The temporary closure cost the company between $15 - $20 million dollars

But it was necessary and long needed. The company picked up from the bottom just like in Drake’s song and has been rapidly growing in the world’s map as well as on index stock charts.

The Hedgehog Concept

The term Hedgehog concept introduced by Collins is some sort of a marriage consisting of a Venn diagram and three major ideas. Jim Collins thinks that in order to have a chance to be the best in the world you have to possess all three:

The Elite Skill - You will have to be the best in your area of expertise. Constant learning, innovating and moving the boundaries are expected from the movers and shakers of the world.
Deep Passion - Someone who grows a business will eventually (and continuously) encounter major obstacles where the skill isn’t going to be enough. The grit, powered with a deep passion and a reason why is arguably even more important than the knowledge alone.
Ability to generate revenue - Understanding of what drives the economic engine is the third piece of the puzzle that completes the concept. No business can survive without sustaining itself and its people financially.

Schultz possesses all three: the Stanford education armed him to become shrewd and dangerous in the business world with a deep understanding of the economic machine while he stayed in love with the company and continued to deeply care for its people and the customers.

The second part of the hedgehog concept is the sheer simplicity of your objective. When it comes to specializing and becoming the best in the world, you need one clear statement which completely prevails over all the others.

The hedgehog is the exact opposite of the fox concept. Foxes are cunning, smart and resourceful animals who take any opportunity to get ahead using any tactic they can think off. Yet when they encounter and attack the hedgehog, the hedgehog simply rolls up into a ball and protects itself with its spiky hide.

The hedgehog companies have one major driving goal that is ingrained as the cornerstone of its business. In Starbucks, it’s not the coffee quality, but it’s the deep desire to create an experience for their customers. Everything is tied into this.

Sometimes, achieving massive rapid growth for the growth sake reveals cracks in the system if it’s not solid. In 2008, when the company was on the decline, Schulz looked at the strategy of the past few years and, in a letter penned company-wide, explained that Starbucks had “invested in infrastructure ahead of the growth curve” and it was time to “shift our emphasis back onto customer-facing initiatives.”

Imagine, the Starbucks insane growth pace required to hire 1,500 new employees a week.

Disciplined action

The success of anything in our lives is in the hands of people. It always is the #1 element in any company.

“In determining the right people, the good-to-great companies placed greater weight on character attributes than on specific educational background, practical skills, specialized knowledge, or work experience.”

When the quality of the work started slipping. Schultz had to close down hundreds of shops for a training day. It was a necessary decision to refocus, restructure and boost Starbucks employees to work and deliver on the right things and to deliver the experience as it was intended in the first place.

When faced with a difficult customer or a problem, the Starbucks partners (employees) are taught customer service by using a L.A.T.T.E. system. The acronym helps baristas deal with any situation in the store.

L isten to the customer
A cknowledge the problem/situation
T ake actions and solve the problem
T hank the customer
E xplain what you did

The simple system isn’t there just to provide clear guidelines but it also boosts motivation and willpower among employers. In the book, The Power of Habit , Charles Duhigg wrote that the LATTE system prevented the customer service meltdown , and sustained willpower throughout the day.

In the end, customer service is there to deliver and exceed the experience which is tied to the brand. Nothing is as important as delivering the service.

“[Employees] are the true ambassadors of our brand, the real merchants of romance and theater, and as such the primary catalysts for delighting customers. Give them reasons to believe in their work and that they’re part of a larger mission, the theory goes, and they’ll in turn personally elevate the experience for each customer–something you can hardly accomplish with a billboard or a 30-second spot.” — Excerpt from book Onward, Howard Schultz

Technology Accelerators

For a globally recognizable brand like Starbucks technology plays a major role in the expansion. The Starbucks app and the emails alone played a significant role in the company’s growth.

According to Collins, technology accelerators have to be carefully selected. Companies had to sift through the emerging technology, identify and select the right ones and gradually introduce them in the business model.

The Hedgehog Concept would drive the use of technology, not the other way around — Jim Collins

Companies that jumped the gun burned badly.

In fact, Jim Collins discovered that more than 80% of great companies didn't rank technology as one of the top five ranking factors for success.

“Those that stay true to these fundamentals and maintain their balance, even in times of great change and disruption, will accumulate the momentum that creates breakthrough momentum. — Jim Collins

Down to the core, Starbucks has one secret ingredient to thank for — knowing their customers. Data analytics. According to Starbucks, this function uses “ methodologies ranging from ethnography to big data analytics … that help support Starbucks pricing strategy, real estate development planning, product development, trade promotion optimization, and marketing strategy.”

Starbucks contracts with a location-analytics company called Esri to use its technology platform that helps analyze maps and retail locations. It uses data like population density, average incomes, and traffic patterns to identify target areas for a new store.

The Crawl, Walk, Run Concept

The gradual introduction of technology is a part of the hedgehog concept. Technology is a major proponent of business growth however if it doesn’t tie into the one simple concept , the company has to be disciplined enough to say no to new opportunities.

Eventually, they can adapt the technology in their concept which turns the massive flywheel forward.

In Starbucks sense, they seem like they embrace technology. They started out with gift cards and pay-ahead mobile purchases. The next step was adding the Starbucks Rewards program to cultivate upsells and raise the LTV per customer. And today with big data, AI, and predictable algorithms they maximize the relationship with the customers.

Key takeaway #8 — the flywheel concept

Successful companies that persevered and thrived with time have found and adopted the Flywheel concept. Focusing on the essentials of the business, working with the right people in the right places, and maintaining discipline is the only way for continued sustainable growth.

Starbucks Vs the World

Competitors.

Starbucks enjoyed the blue ocean marketplace as a premium coffee culture experience provider.

But as soon as competitors noticed Starbucks discovering a new opportunity they had to react quickly. McDonald's and Dunkin’ Donuts were the big ones that introduced their own versions of coffee-to-go. Better than instant coffee and convenient while on the go, the two competitors did enjoy new revenue stream of introducing coffee; however, as companies, they had to keep the focus on what they are good at — McDonald's with their fast food burgers and fries and Dunkin’ Donuts with well… donuts. DD does serve coffee but had no intention to put more emphasis on it until the late 1990s .

Starbucks kept the lead in the coffee concept because of its focus on the coffee culture and holistic concept of their brand, especially customer service. This point can be seen as soon as you look at international markets. Dunkin' Donuts’ international revenue in 2018 contributed less than 4% of total sales, while roughly 30% of Starbucks' consolidated net revenues in the same period were attributed to markets outside America.

When international expansion goes right

When you get it right and you know you have the brand, processes, and culture down, you can move outside. When Starbucks expanded its adopted “Coffee culture” to new markets it could follow its own tracks again. In many countries, especially Asian nations the idea of a coffee culture was new, fresh, and exciting.

To overcome the culture gap, Starbucks sought partnership through direct investments and joint ventures instead of direct franchising . This solved two major problems.

First, they relied on local retailers who already had experience and experience in the local markets. They married the coffee culture idea with market research of the new areas to discover regional customers’ tastes and preferences. After that, they just had to deliver the employee training, workflows, and the product itself.

Secondly, they acquired and absorbed the entire pieces of coffee markets , such as Coffee Partners in Thailand and Bonstar in Singapore. All in one big swoop.

But even today a Starbucks café is opened every 15th hour in China. It already operates more than 3,000 stores in China and plans to add 2,000 more by 2021 . Seoul has the most Starbucks cafes in any city ( 284 ).

Starbucks is present in 6 continents and in more than 72 countries and territories. But it wasn’t always smooth sailing for the old Starbuck.

And when it doesn’t go so well

While Starbucks had amazing success in Asian countries, they hit a snag in Australia.

In 2008, they closed two-thirds of all stores.

The reason?

Australia is already known as one of the hardest markets to get into in the first place and they are very proud of their coffee culture. The flat whites, coffee art in ceramic lattes have been served for dozens of years at beloved local cafes and by baristas who knew what they are doing.

What Starbucks was doing in the United States was introducing the coffee culture in the new market because it was non-existent before. But in Australia, this model didn’t fit in at all.

In 2008, Starbucks closed two-thirds of all the stores. The prices of Starbucks’ relatively common-tasting coffee (compared to established coffee shops) were pricier than the local solutions and managed by young students who didn’t have the level of appreciation of either the coffee culture and/or Starbucks as a brand.

Key takeaway #9 — establish yourself

Follow the winning formula of developing the markets first and turning into a product innovator after you have established yourself. Forcing the innovation where it’s not perceived as such, is waging a losing battle.

Starbucks on Social Media

The website is simply designed with an intention to present the latest seasonal product in the Starbucks shops in the first fold. The focus of the homepage is also on advertising the Starbucks Rewards program.

According to SimilarWeb, it attracts 18.9M visits per month, with an average of 2 minutes and 3.2 page views per session. Starbucks site is the 9th top ranked site for Food and Drink category in the world

The Youtube channel was established at the end of 2005. After 16 years it managed to acquire 335,000 subscribers, which isn't’ that much if we take the size of the company into consideration.

The most successful videos are close to 10 million views; however, they are short, 15-seconds clips of the product. The channel moderators are not participating in the comment sections.

Luckily there’s not much competition on YouTube; however, as a highly visual channel, Starbucks could advertise their mobile app and Starbucks reward program using socially-conscious values, product innovation, or sustainability programs.

On the other hand, Instagram is doing absolutely amazing. Naturally, since the best Starbucks customers are the ones who have been using their mobile devices for ordering and participating in the Starbucks Rewards program

Starbucks Instagram uses a mix of images and video clips mostly displaying their well-designed cups. The posts are mostly re-shared (“regrams”) of other Instagram users. With this tactic, Starbucks incentivizes UGC (user-generated content), since Instagram users have the chance to be regrammed and have their Starbucks shot seen by 17.8 million followers.

Pinterest is another great visual platform where images are split into different categories: from coffee recipes, coffee photography to store designs and world-recognized Starbucks cups.

Pinterest receives 10+ million monthly views and has 443,600 followers.

Even though their daily support is dropping, Facebook is still being used as one of the channels where Starbucks shows its videos and posts.

On Twitter , Starbucks shares its globally conscious ideas, news, and stories about the company and its products. Twitter also serves as a chance to (as in Instagram) retweet other users’ posts.

Starbucks likes to reshare the positive messages of happy users who had a positive experience at one of their stores

Since Starbucks' success mainly lies in their visual branding, they use social media for their brand awareness and in a Facebook sense, pushing the mobile app downloads.

Key takeaway #10 — delegate your resources

When using social media, identify which social media platform brings the best results. If your users are primarily on mobile devices, Instagram would be a smart choice. Delegate your resources to the best-performing channel.

Starbucks Corp. has become a worldwide success by sticking to its hedgehog concept. The realization of being customer-centric in the practical, not just theoretical sense laid the foundation of expansion in North American markets as well as international ones.

When all of the decisions are catered to the concept of serving their customers, including using technology as accelerators, there’s nothing to worry about in their future.

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Starbucks (HK) Case Note: The Ambiguous Limb of Goodwill and the Tort of

Victoria University of Wellington Law Review

This article looks at the United Kingdom Supreme Court's decision in the case of Starbucks (HK) Ltd v British Sky Broadcasting Group PLC (Starbucks). In this case Lord Neuberger reaffirmed that the traditional "hard-line approach" is the applicable test for the goodwill limb under the tort of passing off in the United Kingdom. This approach maintains that in order to succeed in a claim for passing off, the claimant must show that they have goodwill in the form of business and customers in the jurisdiction. A significant reputation among a sufficient section of the prospective purchasing public within the jurisdiction (the…

Case Study Of Starbucks: How Starbucks Became The Coffee King?

Supti Nandi

Updated on: April 25, 2024

Starbucks, a brand that became synonymous with coffee has created a sensation in the world with its coffeehouse culture. Have you wondered how? Well, to answer this question we will delve into the case study of Starbucks.

Stay tuned!

(A) Starbucks: A Brief Overview

Let’s buckle up for a Starbucks journey! Founded back in 1971, this coffee giant now reigns supreme as the world’s largest coffeehouse chain, with its home base in the city of Seattle, Washington.

Before diving deeper into the Starbucks case study, let’s have a look at the company’s profile-

Fast forward to November 2022, and you’ve got Starbucks waving its coffee wand in a staggering 35,711 stores across 80 countries. And when you zoom in on the U.S., you’re looking at a whopping 15,873 Starbucks hotspots.

Here’s the scoop – over 8,900 are Starbucks-run, and the rest are running under licensed partnerships.

Now, let’s talk coffee vibes. Starbucks is the unsung hero of the second wave of coffee culture, dishing out an array of coffee delights. Think hot espresso, chill Frappuccinos, and a lineup of pastries and snacks that’s strong enough to trigger your taste buds.

Oh, and did you know some Starbucks treats are exclusive to certain locations? How? You may wonder. Well, here’s a bonus – most Starbucks joints worldwide offer free Wi-Fi. Coffee and connectivity – a match made in heaven.

So there you have it – the Starbucks saga!

(B) Business Overview of Starbucks Case Study

Understanding the business perspective is one of the essential parts of the Starbucks case study. Reason? You will get to know how Starbucks is performing in the market in terms of financials and business.

Go through the table given below-

In today’s date, the coffee giant is flexing a market capitalization of a whopping $105.82 billion – that’s some serious coffee beans.

Now, rewind to 2023, and Starbucks made it rain with a revenue of $35.976 billion. But what about the nitty-gritty? Operating income in 2022 hit $4.62 billion, while net income settled at $3.28 billion. These aren’t just numbers; they’re the financial pillars of Starbucks.

That’s not all!

Hold onto your coffee cups; we’re diving into assets and equity. Total assets in 2022 clocked in at $27.98 billion – that’s like a treasure chest of coffee goodness. But here’s a twist – total equity dipped to -$8.70 billion. It’s like a plot twist in a coffee-fueled drama.

Now, let’s talk about expenses and profits. In 2023, expenses tallied up to $30.584 billion, but here’s the kicker – profits soared to $25.108 billion.

That’s like balancing a delicate espresso shot with a mountain of whipped cream.

In a nutshell, Starbucks isn’t just brewing coffee; it’s a financial powerhouse, stirring up a caffeinated storm in the business world.

(C) History of Starbucks: Timeline & Key Events

Coming to the third part of the Starbucks case study, let’s delve into the history of Starbucks-

Founded in 1971 by Jerry Baldwin, Zev Siegl, and Gordon Bowker at Seattle’s Pike Place Market, Starbucks underwent pivotal changes in ownership and leadership. In the early 1980s, Howard Schultz acquired the company and transformed it into a coffee shop, introducing espresso-based drinks after being inspired during a business trip to Milan, Italy.

Schultz served as CEO from 1986 to 2000, orchestrating an expansive franchise expansion across the West Coast.

Orin Smith succeeded Schultz, focusing on fair trade coffee and boosting sales to US$5 billion. Jim Donald took the helm from 2005 to 2008, overseeing substantial earnings expansion. Schultz returned during the 2007–08 financial crisis, steering the company towards growth, expanded offerings, and a commitment to corporate social responsibility. Kevin Johnson assumed the CEO role in 2017.

In March 2022, Starbucks announced Schultz’s return as interim CEO in April 2022, with Laxman Narasimhan appointed to succeed him in April 2023. Narasimhan assumed the position earlier, in March 2023.

Beyond beverages and food, Starbucks stores offer official merchandise and select locations to provide “Starbucks Evenings” with beer, wine, and appetizers. The company’s products, including coffee, ice cream, and bottled drinks, are available in grocery stores globally. The Starbucks Reserve program, initiated in 2010 for single-origin coffees and high-end shops, has evolved. Starbucks operates six roasteries with tasting rooms and 43 coffee bars.

The company faced controversies but maintains substantial brand loyalty, market share, and value. As of 2022, Starbucks ranks 120th on the Fortune 500 and 303rd on the Forbes Global 2000.

(D) Significance of Logo in Starbucks Case Study

Let’s delve into the details of the Starbucks logo evolution. In its inception in 1971, the original Starbucks logo featured a complex design comprising a two-tailed mermaid or siren, encompassed by a wordmark. This design was a visual nod to the brand’s early identity and origins. The mermaid, with its twin tails, was a dual representation of the sea and Seattle, the birthplace of Starbucks.

As the brand progressed, the logo underwent a significant transformation. The evolution saw a shift towards simplicity, as the wordmark surrounding the mermaid was phased out. This marked the beginning of the modern Starbucks logo we recognize today.

The current emblem showcases a simplified and stylized green siren enclosed within a matching green ring, emphasizing a cleaner and more focused visual identity.

Beyond aesthetics, the modern logo carries symbolic weight. The green mermaid within the circle has become an iconic representation of Starbucks’ commitment to delivering high-quality coffee experiences.

Additionally, it reflects the brand’s emphasis on creating a sense of community that extends beyond geographical boundaries.

In essence, the evolution of the Starbucks logo is a journey from a detailed and intricate design to a streamlined and symbolic representation. It mirrors the brand’s growth, emphasizing its roots, dedication to quality, and the broader cultural impact it seeks to make through coffee and community.

(E) Market Penetration Strategy: How Starbucks became the coffee king?

In this section, we will look into the key plans and actions that helped Starbucks gain a strong foothold in the beverage and cafe industry.

Starbucks continues to blend innovation and growth, navigating the ever-changing landscape of the coffee industry.

(F) Starbucks Entry in India: Core of Starbucks Case Study

In 2012, Starbucks initiated its venture into India through a significant 50:50 joint venture with Tata Consumer Products Ltd. The inaugural flagship store, which opened its doors on October 19th, 2012, found its home in the historic Elphinstone Building in Mumbai.

The architectural design of this store ingeniously merged Starbucks’ global coffee legacy with the vibrant local culture, creating a welcoming space for community and connection. Over time, this Mumbai location evolved into India’s first Starbucks Reserve® Store, setting the stage for an elevated coffee experience.

(F.1) The Starbucks Reserve® Store Unveiled: A Coffee Lover’s Haven

The introduction of the Starbucks Reserve® Store marked a milestone in the coffee giant’s presence in India. Spanning an impressive 5,200 square feet, this store greeted customers with the intoxicating aroma of coffee.

The entrance featured a stunning monolithic terrazzo Reserve bar, a masterpiece crafted by local artisans. Trained black apron coffee masters curated an exceptional coffee experience, showcasing rare and exquisite brews through various brewing methods.

This Reserve Store was not just a coffee shop; it was a canvas for creating unique moments of connection through the artistry of coffee.

(F.2) Expanding Horizons: Tata Starbucks’ Nationwide Presence

Tata Starbucks established a substantial footprint, operating 350+ stores spread across 36 cities in India. In a significant achievement in 2022, Starbucks executed its largest single-year expansion in India, reaching 14 new cities. The brand’s influence spanned major cities such as Mumbai, Delhi NCR, Hyderabad, Chennai, Bengaluru, Pune, and more.

(F.3) Coffee Blends Celebrating Indian Flavors and Heritage

Starbucks paid homage to India’s rich coffee heritage by introducing special blends. The India Estates Blend, sourced from estates in Coorg and Chikmagalur, the birthplace of coffee in India, made its debut in 2013. Additionally, the Diwali Blend, introduced in 2020, served as a tribute to India’s vibrant culture and longstanding coffee traditions.

(F.4) The Tata Alliance: A Successful Partnership

Starbucks in India proudly bore the branding “Starbucks Coffee – A Tata Alliance,” underscoring the synergy between Starbucks and Tata Global Beverages.

Starbucks’ journey in India was not merely about coffee; it was about brewing connections, transcending cultural boundaries, and crafting unforgettable coffee experiences that resonated with the diverse tapestry of India.

(G) Business and Marketing Strategies of Starbucks in India

Starbucks, despite entering India’s coffee scene with strong strategies, faced challenges in a market dominated by competitors like Cafe Coffee Day and Barista Lavazza. Unlike the U.S., where coffee is a staple, India is traditionally a tea-drinking country.

Starbucks aimed to create a space for relaxation, blending its global coffee legacy with local culture.

Let’s look at the business and marketing strategies of Starbucks in India-

In short, Starbucks’ journey in India reflects a careful blend of global strategies and localized approaches, aiming to create a unique and sustainable presence in a market with diverse preferences and cultural nuances. The success indicators appear promising, showcasing Starbucks’ commitment to long-term growth and meaningful community integration.

Note: Do you know Starbucks collaborated with Apple during the horizontal marketing in the US? We have covered it thoroughly here- Horizontal Marketing System . You can check it out for detailed information.

(H) Wrapping Up the Case Study of Starbucks

The Case Study of Starbucks unveils a fascinating journey that transformed Starbucks into the reigning coffee king. What started as a local coffee bean store in Seattle’s Pike Place Market in 1971 boomed into a global coffee empire. The strategic moves, like Howard Schultz’s visionary shift to espresso-based drinks, had set the stage for Starbucks’ aggressive expansion.

Throughout its evolution, Starbucks faced challenges, leadership changes, and controversies, but resilience and strategic pivots marked its trajectory. The decision to focus on corporate social responsibility under Schultz’s leadership during the financial crisis showcased Starbucks’ adaptability.

The engagement with local cultures, from the iconic two-tailed mermaid symbol to store designs reflecting regional aesthetics, contributed to Starbucks’ success. Key partnerships, like the one with TATA in India, demonstrated a keen understanding of local markets.

Starbucks’ commitment to quality, community, and sustainability resonated with consumers globally. From unique store experiences to tailored product launches, Starbucks consistently adapted its offerings to cater to diverse tastes.

In essence, the Case Study of Starbucks illuminates a narrative of coffee, community, and corporate strategy, culminating in Starbucks’ reign as the coffee king.

The journey is a testament to the power of adaptability, brand loyalty, and a steaming cup of coffee that transcends borders, making Starbucks an integral part of daily rituals worldwide!

Contact Info: Axponent Media Pvt Ltd, 706-707 , 7th Floor Tower A , Iris Tech Park, Sector 48, Sohna Road, Gurugram, India, Pin - 122018

Case Studies

Goodwill serves customers in a wide variety of industries, ranging from medical device, to CPG to automotive and more, helping them address both ongoing and peak/seasonal needs.

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COMMENTS

Goodwill Industries versus A Firm Like Starbucks Essay
operations. Goodwill is a non-profit organization that strives for c ommunity diversity. Goodwill. provides people, irrespective of race or se xual preference, with job opportunities. On the other. hand, Starbucks is a corporation that dominates the world of coffee facilities. Starbucks is a. Seattle-based international chain of c offeehouses ...
2.1 Doing Good as a Core Business Strategy: The Case of Goodwill
As technology evolves and such skills became necessary for most jobs, Goodwill has developed training programs to ensure that individuals are fully equipped to be productive members of the workforce, and in 2008 Goodwill was able to provide 1.5 million people with career services. As an organization, Goodwill itself has entered into the digital ...
Case Study 1- Goodwill Industries
Case Study how might the implications of the planning framework differ for an organization like goodwill industries versus firm like starbucks? principles of. ... Starbucks and Goodwill Industries are two extremely different companies that participate in diverse operations. The nonprofit group Goodwill strives to encourage diversity in society.
Notes on Goodwill Case Study
Goodwill Case Study. Goodwill is an intellectual capital connected with the purchase of a corporation by another. Goodwill is defined as the portion of the purchase price that is greater than the total of the net fair value of all assets acquired and liabilities taken in the transaction. The difference between the purchase price paid for an ...
Full article: Empirical Goodwill Research: Insights, Issues, and
The latter includs surveys and small-sample case studies that closely observe the actual behavior of, and the interaction between, decision-makers within firms. ... Empirical goodwill studies are often performed on restricted samples. For example, many studies of impairment antecedents (summarized in Section 4.3.3) focus on firms with a high ...
Goodwill Industries Vs Starbucks Research Paper
Starbucks (SBUX) first started in 1971 as a roaster and retailer of whole bean and ground coffee, tea and spices in a single store in Seattle's Pike Place Market. Today, they have expanded to more than 23,000 retail stores in 68 countries. Starbucks is named after the First Mate in Herman Melville's "Moby Dick.".
Starbucks (HK) Case Note: The Ambiguous Limb of Goodwill and the Tort
This paper looks at the UK Supreme Court's decision in the case of the Starbucks (HK) Limited v British Sky Broadcasting Group PLC (Starbucks). In this case Lord Neuberger re-affirmed that the traditional 'hard-line approach' is the applicable test for the goodwill limb under the tort of passing off in the UK. This approach maintains that ...
PDF Strategic Analysis Of Starbucks Corporation
Starbucks Corporation, an American company founded in 1971 in Seattle, WA, is a premier roaster, marketer and retailer of specialty coffee around world. Starbucks has about 182,000 employees across 19,767 company operated & licensed stores in 62 countries. Their product mix includes roasted and handcrafted high-
Goodwill Industries Versus A Firm Like Starbucks
The difference seems simple considering Goodwill remains a non-profit organization whereby its P-O-L-C framework is based on how the company makes revenues, which will allow it to carry on with its businesses. On the other hand, firms such as Starbucks could be considered for profit. Its P-O-L-C framework is based on product sales, which will ...
Business Meets Goodness: The Goodwill Model
Case Study: Goodwill an Outstanding Model of Distributed Social Enterprise. As an example of long-term success in a highly complex organization, Goodwill Industries International, Inc., has many lessons to offer in the field of organizational leadership, says James K. Hazy, Ed.D. He and co-author Jim Gibbons conducted a detailed case study over ...
2.6 Optional Case Study: Doing Good as a Core Business Strategy at
As technology evolves and such skills became necessary for most jobs, Goodwill has developed training programs to ensure that individuals are fully equipped to be productive members of the workforce, and in 2008 Goodwill was able to provide 1.5 million people with career services. As an organization, Goodwill itself has entered into the digital ...
1.2 Case in Point: Doing Good as a Core Business Strategy
As technology evolves and such skills became necessary for most jobs, Goodwill has developed training programs to ensure that individuals are fully equipped to be productive members of the workforce, and in 2008 Goodwill was able to provide 1.5 million people with career services. As an organization, Goodwill itself has entered into the digital ...
Collaborating with Activists: How Starbucks Works With NGOs
Argenti's (2004), Starbucks case study, shows that, for the most part people trust NGOs and distrust enterprises, although people will start to lose trust in an NGO if it forms partnerships with ...
Calaméo
Goodwill Industries International, Inc.: a Case Study. by Allie Heckel. Goodwill Industries International Research Mission: Goodwill Industries's (Goodwill) mission is "to enhance the dignity and quality of life of individuals and families" by performing several key functions (Goodwill Industries International, 2013).
Strategy Study: How Starbucks Became Everyone's Cup Of Coffee
More than 14.2 million active members in the U.S. are invested in the loyalty program and the mobile strategy has seen an 11% growth in users in Q2 2018. The gamification of the program and "spend more, earn more" in some cases represent 39% of the entire chain's sales. Here's what's ingenious about the mobile program.
(PDF) Starbucks (HK) Case Note: The Ambiguous Limb of Goodwill and the
This article looks at the United Kingdom Supreme Court's decision in the case of Starbucks (HK) Ltd v British Sky Broadcasting Group PLC (Starbucks). In this case Lord Neuberger reaffirmed that the traditional "hard-line approach" is the applicable test for the goodwill limb under the tort of passing off in the United Kingdom.
Case Study.docx
Referencing the case study, Goodwill accomplishes its goal, in part, by putting 84% of its revenue back into programs to provide employment. In 2008, more than 172,000 people obtained employment, earning $2.3 billion in wages and gaining tools to be productive members of their community.
The implications of the P-O-L-C framework
Get your custom essay on. " The implications of the P-O-L-C framework ". Goodwill has to invest lots of money in training these to first understand the needs of the corporate environment and what it means to maximize profit rather than utility since most of these are used to spending time at home. The disabled are always a discriminated lot ...
Case study goodwill
As technology evolves and such skills became necessary for most jobs, Goodwill has developed training programs to ensure that individuals are fully equipped to be productive members of the workforce, and in 2008 Goodwill was able to provide 1 million people with career services. As an organization, Goodwill itself has entered into the digital age.
Compare Working at Starbucks vs Goodwill
Employee sentiment. 50% CEO Approval. Laxman Narasimhan. 63%. 63% Recommend to a friend. Starbucks employees rated their Recommend to a friend 14% higher than Goodwill employees rated theirs. 49%. 49% Positive Business Outlook. Starbucks employees rated their Positive Business Outlook 7% higher than Goodwill employees rated theirs.
Challenges and Strategies: Goodwill Industries vs Starbucks in
A Case Study Analysis on Goodwill Industries Assignment.pdf. Midway University. BUSINESS A 390. IDS 400 5-2 Activity Reflection Self .docx ... A company like Goodwill Industries will face different challenges when applying the P- O-L-C paradigm than a chain like Starbucks. Plans at Goodwill Industries are geared at realizing the organization's ...
Case Study Of Starbucks: How Starbucks Became The Coffee King?
Profits (2023) $25.108 billion. Case Study of Starbucks: Business Perspective. In today's date, the coffee giant is flexing a market capitalization of a whopping $105.82 billion - that's some serious coffee beans. Now, rewind to 2023, and Starbucks made it rain with a revenue of $35.976 billion.
Case Studies
Case Studies. Goodwill serves customers in a wide variety of industries, ranging from medical device, to CPG to automotive and more, helping them address both ongoing and peak/seasonal needs. EHOB. An innovator of affordable products that are effective in the prevention and treatment of pressure ulcers.

2.1 Doing Good as a Core Business Strategy: The Case of Goodwill Industries

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Goodwill Industries International, Inc.: a Case Study

How Starbucks Became Everyone's Cup Of Coffee

The Starbucks Idea

The Inclination for Grit and Determination Fix Social Injustice

Key takeaway #1 — change is good

“An Old Product in the New Market”

Market development — new market, existing product

Market penetration — old market, old product

Diversification - new market, new product

Product development - old market, new product

Key takeaway #2 — do market research

Eco-Conscious, Friendly People, and Profitable — Starbucks’ Triple balancing act

Key takeaway #3 — happy employees make happy clients

The Product

Coffee quality comparison

The price of a cup

Product differentiation

Key takeaway #4 — diversify and expand

Experience is More Important Than The Product Itself

Smells and sounds

The interior design

‍ Starbucks Reserve

Coffee shop locations

Key takeaway #5 — spoil your customers

Breaking down the Brand and Messaging

Brand and product

Key takeaway #6 — positive interactions

Starbucks Master Example of Mobile Retention and App Rewards

Ordering ahead of time and user experience

User-friendly design

Engaging loyalty program

Mobile pay and ordering

Integration with other platforms and services

UX/UI — breaking down the mobile app design

Gamification

Starbucks Loyalty Program on triple-caffeine nitro power

The Success Flywheel of Starbucks

Disciplined people - Starbucks Level 5 Leadership

Disciplined thought

The Hedgehog Concept

Disciplined action

Key takeaway #8 — the flywheel concept

Starbucks Vs the World

When international expansion goes right

And when it doesn’t go so well

Key takeaway #9 — establish yourself

Starbucks on Social Media

Key takeaway #10 — delegate your resources

Starbucks (HK) Case Note: The Ambiguous Limb of Goodwill and the Tort of

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Case Study Of Starbucks: How Starbucks Became The Coffee King?

(A) Starbucks: A Brief Overview

(B) Business Overview of Starbucks Case Study

(C) History of Starbucks: Timeline & Key Events

(D) Significance of Logo in Starbucks Case Study

(E) Market Penetration Strategy: How Starbucks became the coffee king?

(F) Starbucks Entry in India: Core of Starbucks Case Study

(F.1) The Starbucks Reserve® Store Unveiled: A Coffee Lover’s Haven

(F.2) Expanding Horizons: Tata Starbucks’ Nationwide Presence

(F.3) Coffee Blends Celebrating Indian Flavors and Heritage

(F.4) The Tata Alliance: A Successful Partnership

(G) Business and Marketing Strategies of Starbucks in India

(H) Wrapping Up the Case Study of Starbucks

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