Starbucks as the established leader in coffee retail

Starbucks is the established leader of the coffee and coffee-based beverages across the entire world. The company helped create business history through the innovative ideas of Howard Schultz and it became established as an epitome of business success.

Recently however, the company had been facing increasing competition and added internal problems. As a result, it conducted an internal process of change and hoped that it would reconsolidate its position. At this level, it is useful to assess this situation through four distinctive lenses, as follows:

The need for change and the process of the change

The benefits of the change process

The risks of the structural change, and last

The financial analysis before and after the change.

The need for change and the process of the change

The change implemented by Starbucks was fueled predominantly by the realization that the firm had been losing its identity. Specifically, throughout the past recent years, the executives at Starbucks had developed and implemented a series of business oriented decisions. These revolved around the generation of operational efficiency and the generation of superior returns on investments. Some examples in this sense include the elimination of grounding machines from the stores and the choice of pre-grounded coffee, the opening of drive-throughs or the addition of sandwiches in the Starbucks menus. While these decisions had been business wise at the time they were taken, they now furthered the company from its initial feel and ambiance.

The challenges for Starbucks increased once McDonald's launched its operations into the coffee industry as well. The fast food chain integrated coffee machines in most of its stores worldwide and this posed direct competition for Starbucks. The fast food giant argued that its decision to sell coffee was not a direct attack at Starbucks, but a strategy of adapting to the changing needs of their customer base. For instance, as children come to celebrate their birthday parties at the stores or to play in the mini parks, parents can enjoy a cup of coffee.

Still, regardless of the motivation behind McDonald's decision to sell coffee and coffee-based beverages, fact remains that this posed a serious competition for Starbucks. In order to overcome this competition and restore its position within the industry and the market, Starbucks had decided upon a change process. This change processes commenced with the replacement of the Starbucks chief executive officer in 2008. The position was offered to founder and former CEO Howard Schultz, who assumed it and argued that he would strive to return the company to its initial focus. Upon accepting the job, he stated:

"We must address the challenges we face and we know what has to be done. Put simply, we are recommitting ourselves to what has made Starbucks and the Starbucks Experience so unique: ethically sourcing and roasting the highest quality coffee in the world; the relentless focus on the customer; the trust we have built with our people, and the entrepreneurial risk-taking, innovation and creativity that are the hallmarks of our success" (case).

At a more detailed level, the change agenda was focused on four distinctive directions, as follows:

Improving the state of the business in the United States by focusing on the customer experience, the store design, and employee training

Decreasing the rate at which new stores are being opened in the United States and closing down stores which are underperforming

Reigniting the relationship between Starbucks and its customers, and last

Reshaping the business model to be better focused on customer satisfaction and the managerial model to be more focused on key drivers of value (case).

2. The benefits of the change process

The changes implemented were necessary in order to restore the company to its position within the industry, through the enforcement of a superior relationship with the customers. The benefits of implementing such a decision include:

Higher levels of customer satisfaction

The improvement of the relationship between the company and its customers

The improvement in the general perception over Starbucks

The internal reshaping of the business model and the generation of internal strengths to make the company better able to deal with the emergent challenges

The restoration of the Starbucks image and perception, strengthened by the return of Schultz.

3. The risks of the structural change

When it decided to replace its chief executive officer, Starbucks assumed a multitude of risks, including:

A decrease in the company's image as a result of major changes in management

The possibility of facing perceptions of instability

The perception that the company was unable to continue without the support of its founder

The resistance of the employees to adopt the change process

The possibility for the new business model to not be financially sound and not generate the necessary financial returns

The possibility for the new business model to not lead to the desired results.

4. The financial analysis before and after the change

All in all, when it implemented the change process in 2008, Starbucks hoped to revive its position. At this stage, this ability would be tested through the lenses of the financial results. The table below reveals some financial highlights of the company in 2007, comparative to 2010.