Strategic Management

Jezzyl A. Deocariza BSBA- Marketing Management III

Activity 1: Assignment

1. Study the biography of Howard Schultz, CEO of Starbucks. Include his childhood, if
there is something significant, his interest, his educational attainment, professional and
career orientation, and other facts that might have contributed to the success he is
enjoying now.

Howard Schultz Biography

Howard Schultz is the infamous businessman behind the success of Starbucks, a

Howard was born on July 19, 1953 on Brooklyn, New York to Fred and Elaine Schultz
and neither of the two finished high school. He grew up in a neighborhood of low-income
families. He first had his job at the age of 12 by selling newspapers and working in local cafes.
At 16, he worked at a fur store, where he stretches leathers. Schultz excelled at sports. This was
also his escape on the hardships he experiences in life. Because of this he received athletic
scholarship to Northern Michigan University. In 1975, Schultz became the first to graduate
college in his family. He was a communications graduate of Northern Michigan University.
His first job was selling office equipment from one door to another under a Swedish
company, Hamamaplast. Every day he made up to 50 cold calls which he enjoys as he talks
to people and is making sales. Half of his pay check always goes to his parents. As he sells
appliances, he discovered the company that purchases their coffee machines way more than some
other popular stores and the coffee stores name was Starbucks. He then decided to meet the
owners of Starbucks in Seattle and after a year was hired for a position.

On 1982 he joined the Seattle-based Starbucks as the director of retail operations and
marketing. His starting salary was less than half of what he was being paid at Hamamaplast but
as he saw great potential he pursued the job. H eventually became chairman of Starbucks after 3
years. Because of the promotion he had to move to Seattle with his wife, Sheri Schultz. On
1983, Schultz was able to taste his very first espresso during a business trip to Italy. On
this Italian cafe he was captivated by the beverages, the barista who prepared it and the
ambiance of the place. At the time Starbucks stores only sold whole bean coffee. During
this time he had the vision of having a specialty coffee stores and a coffee shop combined
which the founders of Starbucks took no interest. In 1985 he founded his own coffee
specialty store I1 Giornale, which took him so long but after been rejected multiple times
investors finally believed and appeared and on 1987 aside I1 Giornale having its 3 rd branch, the
coffee shop was able to purchased Starbucks at 3.8 million dollar. He then renamed I1 Giornale
into Starbucks and started its expansion.

Howard Schultz stepped down as the CEO of Starbucks in the year 2000 but remained as
its chairman. A total of 15000 branches were located worldwide by 2007 but met its crisis. On
January 2008, he returned as its CEO. Despite the closure of 900 stores he remained strong by
implementing strategies composing of having its own bakery chain, having coffee-brewing
system, having its own instant-coffee brand as well as changing menu offerings. Starbucks went
back to track on 2012. He officially left Starbucks in 2018 but for him the three million
people who have worked for Starbucks over the years will always has a special space in
his life. In 2019 he became a candidate for president but later announced that he will no
longer do so.

Throughout his journey he has received many achievements and awards. In 1998 Schultz
was given the award entitled “Israel 50th Anniversary Tribute Award” from the Jerusalem Fund
of Aish Ha-Torah having been recognized as a key person in the promotion of alliance between
Israel and United States. In 1999, he was given the the “National Leadership Award” for
philanthropic and educational efforts to battle AIDS. In 2004, the International Distinguished
Entrepreneur Award from the University of Manitoba was awarded to him. He also received the
Rev. Theodore M. Hesburgh, C.S.C., Award for Ethics in Business at the Mendoza College of
Business at the University of Notre Dame, and delivered the Frank Cahill Lecture in Business
Ethics.
References:

https://www.britannica.com/biography/Howard-Schultz

https://www.howardschultz.com/my-story/

https://astrumpeople.com/howard-schultz-biography-success-story-of-starbucks-ceo/

2. Study the beginnings of Starbucks, the challenges it encountered through the years,
and its journey toward success.

Starbucks is a well-known American company that is considered as today’s largest

In 1971, Jerry Baldwin, Gordon Bowker, and Zev Siegl opened the very first Starbucks
store in Pike Place Market in Seattle. The three were from the same university and are fond of
coffee and tea. The name for the store was taken after the first mate of the classic novel Moby
Dick. The founders’ inspiration was Alfred Peet. A seller of Arabica coffees in Us during 1950
and the owner of Peet’s Coffee and Tea. Peet became the initial supplier of green coffee beans to
Starbucks. With his help Baldwin and Bowker were able to conduct an experiment on the
roasting techniques necessary to create different blends and flavour for Starbucks coffee. In 1980
along with the opening of three other Starbucks stores, Siegl left the management of Starbucks to
Baldwin and Bowker to pursue his personal interests.

In 1982, Schultz who saw the potential that Starbucks had was hired as the head of
marketing department. During his term he noticed that new customer’s unfamiliarity with fine
coffees made them uneasy. As a solution with his supervision, Starbucks developed customer-
friendly sales skills and provided brochures to help customers familiarize their product offers. In
1985, Schultz left Starbucks to start his own coffee chain, Il Giornale, after being rejected by the
founders with his idea to make the coffee store a café. March of 1987, Baldwin and Bowker sold
Starbucks to Schultz. Howard combined his business operations under Starbucks and made a
café concept for the business and by 1992, the company went public. In 1994, employees noticed
that customers are least during summer as they have no refreshing drinks aside from coffee.
Trying to deviate from the traditional pure coffee, the first Frappucino was introduced to 550
Starbucks stores in April 1995 which eventually gained popularity bringing them a tenth of the
total profit of Starbucks in that same year.

As Starbucks aiming to be the best place for having conversations, it made changes to its
interior when it discovered that the Italian café style didn’t fit the preference of the American
when socializing. The areas of the stores were increased by tenfold and tall bar stools were
replaced by cozy tables and chairs. With the comfortable space and arrangement, Americans then
started to choose Starbucks for their meetings. Having an opportunity to sit separately from the
other visitors, Americans started to arrange meetings at Starbucks. Aside from what was
mentioned, changes in the method of the coffee system were also made. Starbucks ’baristas has
only seven days to use its coffee grain before it loses its quality. To compromise for the loss its
making, Schultz decided to use a new method for the preparation of the store’s soluble coffee
extract. This allowed them to obtain a much higher quality of the instant coffees. A significant
part of this system was the creation of uniformity and standardized Starbucks where each store
was to have similar designs coffee taste.

In 2007, customers started complaining that Starbucks lost its spirit of romance as stores
new brewing machines were now taller that customers are unable to see the process preparation
of beverages. In addition, the coffee aroma that customers love is being deprived by the new
packaging. Howard returned to the Starbucks in 2008 right at the presence of an economic crisis.
along with this is the tighter completion as big companies like McDonald’s and Dunkin’ Donuts,
promote themselves under the slogan: “Support local businesses. 600 Starbucks stores were
closed stores in 2008 and another 300 in 2009 as part of their strict measures to improve its
services. In the March of 2008, Starbucks also opened an online project where anyone can share
their ideas to improve the store.

On the early 21st century, Starbucks is already operating over 30,000 stores all around
the globe. Food offers in its cafés started in 2003. Schultz was then replaced as CEO in 2016 by
Kevin Johnson by Myron Ullman as its chairman in 2018. In 2019, the largest Starbucks opened
in Chicago. Today the store still continues to be one of the leading coffee house in the world.

References:
https://astrumpeople.com/howard-schultz-biography-success-story-of-starbucks-ceo/
https://www.britannica.com/topic/Starbucks
3. From the management, result-driven, practical, and inspirational strategies
implemented by Schultz at Starbucks, which struck you as something worth imitating?
Explain your answer.

Through the years of devotion and service that Howard Schultz contributed to
Starbucks and to where the company is now, it is no wonder that he is now one of today’s
most successful individual in the whole world. Reaching this kind of success is equivalent to a
lot of hardships and loses. Despite everything Schultz manage to let Starbucks continue its
success.

Among the strategies used by Howard Schultz, the action that impresses me the most
was when he decided to cut down several branches to bring back Starbucks to the
competition. With the huge complaints it received about the services and essence of its store,
alongside the economic crisis, I think that he made a great choice in closing down some of
their stores. In this way, Starbucks was able to save and optimize the cost that these stores are
making with their current sales and performance. With these stores closing down, it will
surely still affect their sales, thus he decided on strict measures, focusing on the quality
instead the quantity of Starbucks. It is also noteworthy that he also decided to make changes
on a lot of things instead of just going back to their usual style. To save more money the store
decided to have its own bakery chain, its own coffee-brewing system and coffee brand. Changes
on the menu were also made. It is important to keep in mind that loses is natural in a business.
Sometimes you have to take risks. Schultz showed us how to earn twice what was lost. By
strengthening its basic and core on their coffee system alongside with the changes they
implemented, it is no wonder that they were able to get back on track. I also admire that on the
same year, he focused on the customer’s opinion on coffee. For me this was an important move.
As every individual has their own coffee preference, letting the public share their ideas shows
how the company would want to serve the best. No business will always be on top, but as long
as you always believed in your business and its potential and continue to make it better, people
will surely do the same. This is the most important insights I learned on the strategies
implemented by Howard Schultz in Starbucks.