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Objectives Block · To effectively use the library database; · To thoroughly understand research report format and layout; · To make a set of formal recommendations in a professional setting. Task The executive team at Starbucks has hired you as a consultant to come in and sort out the problem the organization is facing. (For an example of a public relations firm that does this kind of work, see Fleishman Hillard.) You are going to carefully analyse the problem and craft a research report approximately 1400-1800 words in length (main content of the document not including Letter of Transmittal, Title Page, Exec Summary, References, and so on) which is going to tell the senior management how organization should remedy the situation. You may use content from the case study if you wish. Report should address the following central questions: 1. What is the problem facing Starbucks? Remember you should have identified the problem in the case assignment; use that. 2. What underlying factors gave rise to the problem? You should have given some thought to underlying factors in the second question in the case study worksheet. Feel free to use this content. 3. What recommendations are you going to make to your superior to ensure that problem is properly handled? While we are making three recommendations, not offering three alternatives, you can borrow from some of the alternatives you created in your case. Report will include at least one effectively titled visual. Effective headings are essential. Assignment Deliverables A. Report Report Components (These are not headings.) Report Components Report should be 1400-1800 words in length (main content in the “Report Body” of your document, not including tables and references) and should employ standalone headings. Assignment should follow problem-solution structure introduced in video lecture. Document should be: · Composed in Microsoft Word; · Uploaded to URCourses; · Checked for spelling, punctuation, and grammatical errors. Carefully follow my video instructions when you create your report. B. Visual Report should contain at least one high-quality “visual”. Visuals which contain data should be formatted by you and not simply screen-copied from other internet sources. Think of it this way: Consultants are well-paid for the information they provide their clients. Would a client be happy if her consultant took a screen shot of a bar chart found somewhere on the internet? Remember that you have to draw the reader’s attention to the visual in the text. Remember that your visual also needs a caption. Source of your visual should be included in references. If you create your own visual from material you have synthesized yourself, you need not include a reference C. References Please include at least 10 references. Remember, good references include diverse materials such as government documents, industry reports, academic articles, case studies, law cases, reputable web sites, and authoritative news content. You may use the references included in the case study if you think appropriate. 9B19M117 STARBUCKS, HOWARD SCHULTZ, AND THE TRUMP EFFECT1 Ken Mark wrote this case under the supervision of Professor W. Glenn Rowe solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e)
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[email protected]. i1v2e5y5pubs Copyright © 2019, Ivey Business School Foundation Version: 2019-09-18 “Who’s Afraid of Howard Schultz?” was the headline of the Wall Street Journal’s editorial posted on January 30, 2019.2 A few days before, Schultz, the former chief executive officer (CEO) and former executive chairman of Starbucks, had declared that he was thinking of running, as an independent candidate, to become the president of the United States in 2020. Schultz’s plan was widely criticized by Democratic observers and contenders, who believed that his candidacy—as a centrist—would have the effect of drawing votes away from a Democratic nominee, resulting in President Donald J. Trump being re-elected for another four-year term. “If Howard Schultz runs for president, Starbucks will be on the ballot, too,”3 stated an article in the Washington Post on January 28, 2019, even though Schultz had stepped down from his role as executive chairman on June 26, 2018 and had no further business dealings with the coffee chain.4 This article was not the first effort by pundits to link Schultz with Starbucks. During the 2016 presidential elections, while Schultz was still CEO of Starbucks, he had publicly endorsed Democratic candidate Hillary Clinton, Trump’s chief rival, stating: Hopefully Hillary Clinton will be elected president. I think it’s obvious that Hillary Clinton needs to be the next president. On the other side, we’ve seen such [a] vitriolic display of bigotry and hate and divisiveness, and that is not the leadership we need for the future of the country.5 Schultz, then the CEO of Starbucks, a major, publicly traded Fortune 500 firm on NASDAQ, had made his political views known in an era when most CEOs were choosing to avoid taking such a public political stance. Trump’s supporters wasted no time in denouncing Schultz, using the hashtag “#Boycott Starbucks.” Trump himself added that he was thinking of removing the Starbucks store from the Trump Tower building in New York City.6 While Schultz’s first efforts to engage in the political dialogue drew criticism from conservatives—and had potentially negatively affected the company’s sales (see Exhibit 1) and share price—his second effort, less than three years later, was attracting angry voices from liberals. Commentators suggested that Starbucks’ operations could again be negatively affected by Schultz’s moves. Mark Kalinowski of Kalinowski Equity Research stated: Starbucks’ fairly broad U.S. customer base—it is, after all, the #2 restaurant brand in the U.S. as measured by domestic system-wide sales—nevertheless skews somewhat toward the Democratic Page 2 9B19M117 side of the political spectrum. . . . If Mr. Schultz is widely seen as doing something meaningful that could help tip the U.S. presidential election toward the current Republican incumbent, the relevant question for Starbucks’ shareholders might not be if Starbucks’ business would be harmed by Mr. Schultz’s actions—only by how much.7 On January 30, 2019, it was reported in the press that Kevin Johnson, Starbucks’ CEO, had sent an email to the company’s 350,000 employees in an effort to distance the coffee company from its former leader, writing, “As a company, we don’t get involved in national political campaigns. And nothing changes for Starbucks.”8 THE SPECIALTY COFFEE CONSUMER The market for specialty coffee in the United States was $1.3 billion9 in 2016. According to research by the Specialty Coffee Association of America, consumers of specialty coffee looked for quality, convenient locations, and friendly and knowledgeable staff. Victrola, a popular independent coffee shop in Seattle, was described this way: A chrome-covered, vastly complicated, all-manual espresso machine yowled and hissed. The joint reeked of fresh roasted coffee. With spiky hair, great gobs of eye shadow and garrulous ways, two baristas ground beans for each new shot of espresso. Slowly and carefully, they created lattes in heavy china cups, each drink with its own distinctive floral pattern. Around the store, customers hunched over laptops, sponging up free Wi-Fi, slowly nursing their espresso investments. A scarred but serviceable, upright piano stood off in the corner. It is played, sometimes with virtuosity, by stragglers coming off the street. . . . “Look at the baristas!,” [said a customer], pointing to the intense women on the business side of the espresso machine. “This is a calling, what they do, like an old-school European barber. This is not pulling fries out of the vat when the thing beeps at you. With these old machines, you run the risk of variability in every cup. But sometimes you get art.”10 Relatively speaking, the price of a coffee drink was not a big concern to aficionados. In 2017, a survey found that two-thirds of Americans drink a cup of coffee each day. This rate of coffee consumption was the highest in five years.11 A National Coffee Association survey found that the majority of coffee drinkers consume coffee in the early and mid-morning periods, with relatively fewer people drinking coffee from the afternoon onward.12 COMPETITORS Starbucks’ key competitors were smaller chains such as Caribou Coffee with 440 stores, Peet’s Coffee with 190 stores, and privately owned, independent coffee shops. Quick-service chains such as Dunkin’ Donuts and McDonald’s had been adding coffee to their menus, in an attempt to capitalize on Starbucks’ efforts to develop the market for premium coffee. For major restaurant chains, coffee sales represented a way to boost revenues. STARBUCKS Starbucks had started in 1971 as a single store in Seattle and had originally been owned by two teachers and a writer inspired by Peet’s Coffee. Schultz join Starbucks in 1982 as director of retail operations and Page 3 9B19M117 marketing, left to start a coffee company called Il Giornale, and then purchased Starbucks in 1987.13 Five years later, with 165 outlets, Starbucks had its initial public offering and began to expand rapidly across the United States. Featuring premium coffee in various blends, Starbucks was responsible for popularizing specialty coffee drinks in the United States. Its early stores were known for their warm, inviting, and often distinctive décor. Coffee beans were roasted on site and served fresh. Its employees—known as “partners”—enjoyed health-care benefits and stock options,14 which were then unheard of for U.S. retail employees. In 2018, Starbucks employed 291,000 people worldwide, of whom 191,000 were in the United States. Of those employees, 183,000 employees