Starbucks Facing Brand Culture Devaluation and Massive Layoffs

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Starbucks facing brand culture devaluation and massive layoffs To: Howard Schultz, Starbucks
From: Yang LU, Aspire

CC: Rui DONG
Xiaochen DONG
Vanessa BAXTER
Pushpak BERIWAL

Executive summary
The aim of this report is to find out the deep-seated reason for this depression of Starbucks and give a recommendation to the firm to deal with it. Furthermore, this report also suggests solutions to dismiss the panic of the staff and remains the excellent performance.

The key findings include:
Finding 1: The over-expansion made Starbucks’ unique culture of the “Starbucks experience” devalued and seemed no difference with other fast food restaurants. This caused employees’ less well performance and therefore it lost customers’ loyalty as well. Finding 2:The employees felt dissatisfied with the rewards and treated customers with less effort while the unacceptable massive layoffs made a panic.

The recommendations suggested by this report include:
Recommendation 1:“Decentralization”-- Remove number of outlets away from each other and slow down the pace of opening new stores in the US or concentrate on the unexploited market space in other countries. Recommendation 2:Increasing the compensation given to the members asked to leave and suggesting them do some other suitable jobs. The firm can also make a promise that these employees would be considered first when hiring candidates in the future after the most difficult times. Furthermore, keep the employees’ payment stable and hold some activities inspiring to promote people to tide Starbucks over difficulties together.

This report describes the findings after applying theories to analyse the issue which claimed the trouble that Starbucks was facing. For years, Starbucks was famous for its consistent growing and expansion. However, the both share price and sales fell even three times than before since 2008. The “Starbucks experience” (Michelle, 2007) was widely supposed to have been diluted and the customers complained that the staff seemed to be less complaisant since they found Starbucks Ubiquitous. A resource from MarketWatch: Global Round-up (2008) reported that Starbucks had been forced to close 600 US stores and axe 12,000 jobs which took almost 7% of its global workforce which had made negative effect on other employees. The aim of the report is to find out the deep-seated reason for this depression and give a recommendation to the firm to deal with it. Furthermore, this report also suggests solutions to dismiss the panic of the staff and remain the performance.

Key issues identified by Aspire
| Key issue| Champion|
1| Over-expansion caused Starbucks’ brand devaluation and massive layoffs.| Yang Lu| 2| Starbucks' two non-payment methods of motivating employees.| Rui Dong| 3| Starbucks changed people-oriented culture into profit-oriented culture.| Xiaochen Dong| 4| Kraft foods taking Starbucks to court over the planned termination of its contract to distribute Starbucks packaged coffee.| Vanessa Baxter| 5| Starbucks is a very command and control driven company which leads to very little flexibility and decision making power at certain regional stores.| Pushpak Beriwal|

Justification of key issues over-expansion caused culture devaluation and massive layoffs Fast-forward 20 years, Starbucks had more than 10,000 American outlets till 2008 from only 84 US stores in 1990 (Smale, 2008). This sharply increased number made Starbucks seem to be omnipresent like other fast food stores. As a result, this change took a negative effect that the members in this group feel less proud of their jobs in Starbucks which was famous for its unique culture and therefore had less passion to satisfy the customers. From Schein’s (2004) theory of culture components, Starbucks fell to the basic level of culture instead of the highest one it got before. Starbucks finally cut over 10,000 jobs which were most in the US in the last two years during the...
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