Strategic Issues Analysis of a Global Company
To complete this Shared Activity:
• Read and Review the analysis below.
• Respond to this analysis by offering potential critical directing questions and specific and constructive ideas for improving this analysis. (2 paragraphs)
• Be sure to support your postings with evidence. Consult the Harvard Referencing Style Guide for proper citation and referencing information.
Strategic Analysis of a Third Place Strategy
In reading Ignatius, A., (2010), it was interesting to understand how the CEO Howard Schultz had left Starbucks in 2000, when the brand and the coffee chain was on a steady trajectory of growth, however in the space of 8 years, after he left, Starbucks was struggling and the ex-CEO was needed back in to turn the crisis of a faltering Starbucks around.
In reviewing the strategic issues of Starbucks it was clear that there were 2 main issues in regards to why the Starbucks story was faltering after the CEO had left. The issues or as some called it the crisis centered around financial and management.
It seemed for the financial problems, Starbucks based themselves purely on their brand and kept their prices high, not realizing that the world was changing and that fuel process were rising, cost of living was increasing, wages were not, yet a price of a coffee at Starbucks was as much as a gallon of fuel. It came across that Starbucks were possibly greedy and for this they received negative press from other retailers and the public. As Ignatius, A., (2010), refers McDonald's put up billboards saying that four dollars for a coffee is dumb.
In regards to the management crisis, Papadakis, V.M., Lioukas, S. & Chambers, D. (1998) refers that there are 4 factors that affects strategic decision-making; I believe in Starbucks case 2 played a role in this crisis, these are:
• Top Management Characteristics
Did the new CEO have the skills and education to succeed?
• Internal Organisational Characteristics (Internal Environment)
Performance, Corporate Control/Ownership Type?
In reviewing some of the management issues, succession planning wasn't completed adequately enough and for many being in a position can sometimes lead to areas that management and the new CEO had never been before, these were facing stiff competition from competitors and bad publicity due to high costs. Many thought that Starbucks were a company running on excess.
With the old CEO returning, he faced the crisis head on, understanding what had gone wrong and finding a solution for it. I agree with this thinking, as it is summed up when CEO Howard Schultz, states "It's like when you have a secret and get it out: The burden is off your shoulder." As once you admit to yourself, the company and the public that we have made mistakes and we are responsible for them, you can then draw a line and move on, learning from your mistakes and try to make it work.
If you now look at Starbucks throughout the world, and I can use my own experience of this, having recently worked in KSA, Hong Kong and Qatar, every Starbucks is the same, same look, same brand and same product base. It seems the CEO has learnt from the mistakes and even though the price remains high, the majority of the other coffee shops now price their own similar products around the same price and therefore Starbucks remains competitive.
I also think the CEO Howard Schultz, went back to the basics of his previous success and he immediately saw and understood the antecedents within the company as described by Bailey, B. C., &Simor, I., (2013), once he understood he knew what to change and amend and he did what he said he would do.
References
Bailey, B. C., &Simor, I (2013), ‘Boardroom Strategic Decision-Making Style: Understanding the Antecedents', Corporate Governance: An International Review
Ignatius, A., (2010), 'The HBR Interview: We Had to Own the Mistakes," Harvard Business Review
Papadakis, V.M., Lioukas, S. & Chambers, D. (1998) "Strategic decision-making processes: the role of management and context', Strategic Management Journal