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STARBUCKS: SHULTZ BACK IN THE BREW

Q1. What challenges did Shultz face in 2008?


Ans. Challenges that Shultz face in 2008 was as follow:
Espresso machines were automated:
When Shultz left the StarBucks, espresso machines were automated. This coffee
making process lacked the romance and mystery of coffee and slowed down the
service. There was no grinding of beans by hands; this lost the romance of hissing
steam sound from the stores.
Differentiate the brand form competitors:
Starbucks competitors McDonalds and Dunkin donuts started serving espresso
drinks nationwide. McDonalds spend millions of dollars on advertising of its espresso
coffee that was a big threat to StarBucks. It had to differentiate its brand in order to
grow.
Other products than coffee:
Starbucks started selling multiple products that done have coffee in them or coffee
associated with them.
Market strategy:
In order to expand and maintain dominant position in the market StarBucks started
buying out competitors leases and made clusters in several locations in small
geographical areas.
Exploitation of worlds agricultural workers:
Starbucks was charged foe exploitation of agricultural workers. Coffee farmers
receive prices for their harvest less than the costs of production forcing them into a
cycle of poverty and debt.

Q2. What should Shultz do?


Ans. The Shultz took the following steps when he returned back to StarBucks as a
CEO in 2008:
StarBucks replaced all of its Espresso machines and skilled StarBucks
employees balanced time and temperature to achieve good roasted coffee
recipe and how best to achieve flavours, the results were saved into
proprietary computer software.

To maintain high quality coffee beans StarBucks buyers personally visited


coffee growers to maintain standards for flavour, fair market pricing and
sustainability.
Shultz decided that the aroma of Italian style coffee had been eclipsed by the
smells of the breakfast sandwiches.
StarBucks closed around 600 stores to cut down the costs.
StarBucks reorganized its supply chain operations that help in getting
products to stores more efficiently and improving inventory.
The farmers who grew the beans were paid directly at fair market price.
StarBucks became the worlds largest buyer of Fair trade certificate.
Previously it was relying too much on human instinct and expertise to manage
supply. It sought ant IT solution.
CDs, entertaining music, books that overpower the stores were scaled back.
The stores were redesigned to recapture the coffee house feel with soft
colours, unique architecture, lightning and strategically placed furniture.
Starbucks decided to continue offering health insurance to their employees.