PRINCIPLES OF MANAGEMENT
STARBUCKS CASE STUDY
The history of Starbucks starts in Seattle in 1971. Three friends, Jerry Baldwin, Zev Siegl, and Gordon Bowker, who all had a passion for fresh coffee, opened a small shop and began selling fresh-roasted, gourmet coffee beans and brewing and roasting accessories. In 1981 Howard Schultz first walked into Starbucks as a sales representative for a Swedish kitchen manufacturer. He immediately wanted to work for the company as he got so inspired by Starbucks but it took him a year to finally persuade the owners to hire him. The owners were reluctant initially to hire Schultz because they thought his style and high energy might not blend with the existing culture of the company. However in 1982 Starbucks hired Schultz as the new head of retail operations and marketing and shortly thereafter was sent to Milan to attend an international housewares show in Italy. When he arrived, Schultz found himself infatuated with the exciting coffee culture of Italy. Schultz went to Verona and had his first caffe latte. But he observed something more important than the coffee. The cafe customers were chatting and enjoying themselves while sipping their coffees in the elegant surroundings. That’s when Schultz was struck with an inspirational idea. "Why not create community gathering places like the great coffee house of Italy in the United States?" However, Schultz's idea did not go down well with Baldwin. Baldwin was not ready to get into the restaurant business nor to have anything distract him from his original plan of selling whole beans. Schultz, however, branched out on his own and opened a coffee house named after Italy's largest newspaper, The Daily, or Il Giornale. Two months later, the new store was serving more than 700 customers a day, and it was selling 300 percent more than the Starbucks locations. In 1987 the owners of Starbucks Coffee Company decided to sell their coffee business, along with the name for $3.8 million. Schultz raised the money by convincing local investors of his vision. Now with over 11,000 outlets in more than 36 countries, Starbucks is the world’s number one specialty coffee retailer. Schultz philosophy: “We aren’t in the coffee business, serving people. We’re in the people business, serving coffee” has shaped and continues to shape the company. Q1: What management skill do you think would be most important for Howard Schultz to have? Why? What skill do you think would be most important for a Starbucks store manager to have? Why? Conceptual Skill would be the most important skill for Howard Schultz to have and as we can see Schultz already had those skills. When he went to Italy and saw espresso bar it was his conceptual skills that led him to the idea of introducing coffee bars in America. It was his conceptual skills that led him to identify the opportunity. And it is the conceptual skills that lead managers to take advantage of opportunities and oppose threats as well as make good business decisions and lead him to innovation. Human and Technical Skills would be the most important for a store manager because he is in direct contact with employees. By Human skills he is able to work well with other people individually and in a group and by technical skills he can guide people under his supervision to efficiently perform specific tasks. Q2: How might the following management theories/approaches be useful to Starbucks: Scientific Management, Organizational Behavior, Quantitative approach, System Approach? SCIENTIFIC MANAGEMENT: It is concerned with improving the performance of individual worker and finding the best way to do particular task. Starbucks coffee producing department is the place where scientific management theory can be applicable where they can divide and distribute jobs and find out the best way of performing tasks in order to improve production efficiency. ORGANIZATIONAL BEHAVIOUR: It is...
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