In addition to the above issues, Starbucks had over the years failed to adapt to the changing environment, both internally and externally. For example, despite its rapid expansion both within the United States and to other markets across the globe, the company failed to deploy mechanisms to adapt to these changes. For example, whereas this rapid expansion required a high number of employees with management skills to manage its branches in different location, most of the managers who were sent to different locations where the company had established its presence did not understand the core mission and vision of Starbucks (Koehn, McNamara, Khan and Legris, 2014). This undermined their ability to promote the value proposition of Starbucks. Furthermore, the company was slow in adopting new technologies and solely relied on its brick-and-mortar stores to reach out to its target consumers. This undermined its ability to improve how it served its customers.
One of the key aspects in Schultz’s analysis of Starbucks regards the way he perceives this company’s decline in 2007 and 2008. Notably, from the perspective of Schultz, the major factors that led to this company’s decline mainly occurred in or before 2007. For instance, Koehn, McNamara, Khan and Legris (2014) observe that Schultz observed that the declining value proposition of Starbucks had been an ongoing process that had occurred over the years culminating in 2007. Similarly, Schultz perceived that Starbucks had over the years failed to change and adapt both internally and externally, and by 2007, the negative impact of these changes were beginning to emerge in full measure. On the other hand, Schultz attributes to the decline of Starbucks in 2008 to the transition and transformation process that this company was going through in a bid to recover its lost glory. Note that in 2008, the company not only focused on transforming its internal culture, but also focused on transforming its leadership, with Schultz returning to the company as a CEO.
Importantly, despite the fact that Schultz’s analysis of Starbucks indicate that most of the factors that led to its decline in 2007 and 2008 were much obvious, some of them were less obvious. To begin with, from his analysis, Schultz found out that Starbucks had created a culture of pride, entitlement and complacency, particular among its management and internal stakeholders. Therefore, what mattered to these stakeholders was the making of profits while Starbucks as a brand was not of any concern to them. Similarly, due to the fact that this company experience revenue and profit growths every year, the company failed to notice that its comparable sales were declining rapidly, and that its new establishment were not generating revenue growth as far as their existing establishments.
2) What were the most important aspects of Starbucks transformation? Why did these matter to the survival and transformation of the company? How generalizable are such initiatives in the broader context of business turnarounds?
One of the most important aspects of Starbucks transformation was its ability to envision, that is, identify the why it needed a transformation, and how it could achieve it. A critical evaluation of Schultz’s analysis of Starbucks indicate that he identified the fact that this company had lost its value proposition as well as identify on the market, and inasmuch as its experience increasing revenues and profits at the end of each financial years, it faced significant threats on the market. In reference to Abdimomunova and Valerdi (2010) successful transformation of a business requires it to envision a desirable future, which can only be achieved through addressing the current shortcomings. Therefore, it is importantly to reiterate that Schultz’s ability to envision a different Starbucks was fundamental to the transformation of this company.