Is Customer really King?

Founded in 1971 in Seattle, as of 2021 Starbucks is available in all 50 states with a total count of 14,810 stores in the Unites States alone. It is one of the most respected brands, winning awards such as "Best Business", "Most Admired Company", "100 Best Corporate Citizens" and so on. While its quality is unquestionable, its price has always been higher than those offered by the domestic coffee houses in various countries. In 2008 when the financial crisis struck, Starbucks took a hit in this economic slowdown as customers chose cheaper local cafés over Starbucks for their everyday coffee. This forced them to shut close to 600 US stores that were not generating substantial profits.The Seattle based coffee giant reported a drop of 28% in profits when compared to the same time period back in 2007. Continuing this trend they closed another 300 stores and had to lay off 6,700 employees! Although The recession at the time reduced consumer spending, How did Starbucks reach this point of no return ? Many articles, business reviews, leaders blamed the heavy losses on the economy and higher costs of dairy product during the slump, they also used the same excuse to help justify the hike in their pricing.

However After a long period of 8 years, Howard D.Schultz returned as the CEO of Starbucks on January 8,2008 replacing Jim Donald. Schultz had grown and nurtured the brand since 1982 when it had only four outlets. Upon returning as CEO, he noticed that due to Starbucks rapid expansion both globally and locally, their stores had to compromise on their warm hospitality. After identifying this problem Schultz made it his objective to “reignite the emotional attachment with customers”. In the following years, Starbucks implemented a lot of social media marketing strategies and linked its objectives with technology channels like mobile apps(the origin of “my Starbucks” idea)

Most of the industry experts think that the initiative undertaken by Starbucks was a major stepping stone to building an online community that greatly influences the company’s product strategy, However the Harvard Business Review thinks that Starbucks should have remained private, developing at a controlled rate to keep up its status as a premium brand.

In conclusion this case study is an amazing example of how a business can modify its strategies to return to its roots and reconnect directly with customers during a dry business period.