Marketing Strategy and Management

Submitted to: Ms. Fatima

Assignment #
Mba 1.5 (Sec A)

Sr.1
3
Sr.4
7
Sr.0
4
Sr.
Sr.3
6

Submitted by:
Tahir Bashir
L1f14mbam0028
Bilal Yasir

L1f14mbam7092

Bilal Abbas Naqvi

L1f14mbam0012

Qurat-ul-Ain Malik
Arooj Zahra

L1f14mbam0067
L1f14mbam0196

Topic:Starbucks: Schultz back in the brew

QUESTION # 1
What Challenges did Schultz face in 2008?
CHALLENGES
Global Economic Crisis
One of the major challenges that Starbucks faced, was 2008 economic
crises. In 2008 the world economy faced its worst crisis since the Great
Depression of the 1930s. The crises, which began in 2007 when sky-high
home prices in the United States finally turned decisively downward,
spread quickly, affecting most financial sector and then to financial
markets overseas. The carnage was not limited to the financial sector,
however, as companies such as Starbucks that rely on credit suffered
heavily. The banks, trusting no one to pay them back, simply stopped
making the loans that most businesses need to regulate their cash flows
and without which they cannot do business. Share prices plunged
throughout the world; theDow Jones Industrial Average in the U.S. lost
33.8% of its value in 2008. Starbucks stock value dropped drastically.
High Operating Cost
Another major challenge Starbucks face in 2008 is high operating costs,
that is, in fact one of the major reasons along with others that the
Starbucks stock price decrease to some about 43% over the year.
So, the challenge for Schultzs & company to lower down the operating
costs by doing the things which are appropriate to the firm, cut down the
extra activities for a while & make the best use of resources.
Retaining Goodwill
The challenge for Schultz is to re-gain the firms goodwill, bring the
confidence back among their customers & employees which they had
before & make the corrective measures for doing so.
Making new customers is much more difficult as compared to retain them,
& one research suggests that the customers of the Starbucks are not

going anywhere else, they are just coming to them less frequently. So, as
far as the retention of the customers is concerned, that is a challenge for
Schultz to make the policies which attract the customers & again they
visit their outlets more frequently as they did before.
Too Rapid Expansion
Starbucks expand themselves far too quickly, both nationally &
worldwide, yes they were in profit, yes they were achieving their shortterm goals, but although, the expansion was far too rapid. Originally, the
Owner set a goal of expanding nationally to reach 125 stores in 5 years,
while currently they are controlling 5% U.S market share in coffee
consumption, & not even 1% worldwide, while their growth rate was
committed to 20%.
But, instead of meeting the targets in time, they over expand themselves,
& reach 165 stores nationally in a couple of years time. By May 2003,
there were 6400 Starbucks locations in more than 30 nations, but out of
23% stores overseas accounted for only 9% of sales & they were net
money loosers, these are the drawbacks of far too rapid expansion, & thus
a major challenge for Schultz to cut down their locations in order to focus
on few & give quality the most priority to get back on track.

QUESTION #2
What should Schultz do?
Suggestions:
Right Sizing of Employees and Outlets
As the Starbucks coffee outlets were expandedat undue high rate,
resulting in high company cost. Starbucks should close some of the
outlets and shed extra fat by reducing number of employees to counter
monetary stress and reduced customers. Furthermore Starbucks should
emphasize on more training of its employee to tackle the situation.
Hire Skilled People
Schutlz should hire new leadership team loaded with innovative ideas
which will help him to reduce cost and in process improvement. Starbucks
core strength is customer service and rich aroma of Italian coffee which
has been compromised by Donald polices those he made for rapid
expansion, new skilled employees help him to make compatibility
between core values of firm and changing needs of customers. This
method was adopted by EngroPakistan and has been followed by other
multinational companies.
Advertising
Starbucks should use social networking such as Facebook, tweeter etc for
its promotion to get customer feedback and suggestions to cater their
needs and readdress their complaints more effectively.
Getting Back to Customers
One thing Schultz should do must be, Get back to their customer policy
put their feets in the shoes of their customers & ask, what are they
experiencing at Starbucks?
He has an enormous opportunity to do two things:
1) Go back to their roots
2) Reaffirm their leadership position in coffee making

When you get large & very successful, you have to balance creativity &
entrepreneurship with process & strategy, they are got a little out of
balance, & they are not as creative & entrepreneurial as they were when
they smaller, & they must try to do the same kind of spirit & innovation
which they have when they were younger.
Reduce operations:
Schultz should cut expenses in order to becoming more financialy
stable.Cutting expenses would pay back lot of support to the company.
Starbucks has done too rapid expansions. Since Schultz knew that
companys downturn was not because of competition and slower
economy. So It is because of investment in more process, infrastructure
and plants.In this case Starbucks should decrease its operation by selling
out some of its idle roasting plants, stores. Starbucks should also consider
checking Donalds decisions in the downward period and try to correct it if
something was against companys value system.