For many years, Starbucks has been considered an example of a highly successful brand. The company performed properly contemplating each step and decision made to achieve its goals. In particular, the corporation has an increased focus on the staff training, the product’s name, the development of its history, branding, and penetration to new markets. Starbucks is well known worldwide for its coffee. In addition, the company has created the environment with a comfortable place and relaxing atmosphere, and thus a place for everyone (Kumar, 2016). Moreover, it provides promotions and seasonal offers preserving the reputation of the brand by every consumer (Kumar, 2016). For that reason, Starbucks has become a highly prosperous company that is copied and lauded. However, similarly to other businesses, Starbucks has experienced both successes and failures. While many companies have a short lifespan before closing or merging into another business, some of them can grow and stick long enough to either fail or return. In spite of the fact that Starbucks had a difficult period, it managed to pull itself from the 2008 downfall during recession and became successful again, thus becoming a good example for other companies.

Literature Review

The purpose of the current paper is to show how overexpansion can result in failure, to study the causes and the impact of the recession on business, as well as to indicate how failing companies can be revived. To achieve this purpose, it is necessary to explore reviews and articles. The research will demonstrate how the CEO Howard D. Schultz could save Starbucks. All the resources used in the current paper are useful because from different perspectives, they demonstrate causes of Starbucks’ crisis. They also provide useful information on the steps that were conducted to save the company.

Methodology

The structure of the paper will be grounded on studies and articles conducted on Starbucks. They will demonstrate the way the company could succeed in the early 2000s. In addition, the factors of its expansion in various unnecessary spheres as well as its failure due to the financial crisis in 2008 will be examined. Moreover, the paper will investigate the steps for the company to able to overcome financial crises and improve its image. Finally, it will demonstrate the aspects other companies can learn from the history of Starbucks and how to focus on the issues that make the business successful. Qualitative research examines contextual factors and social processes. This paper follows a qualitative approach explaining why the crisis in Starbucks happened and how it managed to become successful again.

Preliminary Data

Starbucks created a highly lucrative coffee empire. Its story began in Seattle, WA, in 1971 (Kumar, 2016). The company’s global expansion was strategic and fast. It opened the first store outside the United States in Tokyo in 1996 followed by the United Kingdom in 1998 (Roll, 2017). The strategic geographic expansion, continuous updates of the menu, and impressive marketing efforts helped the company increase the revenue and become well-known in many countries (Campos, 2013). There are more than 20,000 cafes in about 60 states worldwide (Campos, 2013). A good conjunction of the aggressive revenue increase and high profitability resulted in the considerable growth in Starbucks’ cost. There are several reasons for the company’s success.

The main reason consists in its philosophy. Starbucks created a place where people can drink coffee in the pleasant atmosphere. The company strived to create the third place where people could go except of work and home. It bears responsibility for the creation of the concept of place between work and home, where it is possible to enjoy a cup of coffee and relax experiencing an attractive atmosphere (Roll, 2017). One of the major products of Starbucks was coffee, and the company transformed the drinking habits of Americans. People started noticing the difference between Arabica and Robusta. The company paid considerable attention to the quality of beverages; it constantly expanded the assortment offering new and unique drinks and ingredients. Thus, Starbucks raised the culture of coffee in the country and later across the globe.

In addition, Starbucks established a unique brand identity suggesting people an enjoyable and relaxing atmosphere. Starbucks is customer-oriented perceiving its business from the guest’s perspective. The aspects such as the choice of fixtures and furniture, the message on the cups, and the names of its drinks created an unforgettable atmosphere in the coffeehouses (Hanft, 2005). The empirical aspect of the brand was efficiently and consistently realized in all coffeehouses worldwide (Roll, 2017). Suggesting a relaxed and pleasant climate in working with customers, the company focuses its attention on pleasant memories rather than not on prices of beverages. Despite the fact that the price is considered higher than among Starbucks’ competitors, popularity and atmosphere in coffeehouses are more appreciated by people (Roll, 2017). Thus, consumers are usually ready to pay more for beverages in Starbucks for the mood the company provides. Such approaches made Starbucks a highly popular company contributing to a decision to expand.

The management of the company believed that Starbucks was more than just coffee. It launched its recording company that won eight Grammy Awards (Robertson, 2015). Later, Starbucks launched the first film and began working with William Morris to create books, music, and films (Robertson, 2015). It led to the fact that the company established an entertainment office in Los Angeles (Robertson, 2015). All the initiatives were based on the Starbucks’ philosophy regarding the third place in addition to work and home, and movies and music became part of this concept.

In relation to profit, the creation of the recording company and the entertainment office were considered a beneficial decision. However, Starbucks forgot how it all began; it forgot about coffee (Robertson, 2015). From the cultural perspective, the company neglected to make good coffee. It ceased to be customer-oriented. Starbucks lost its focus on the main attributes, namely atmosphere, quality, and service. The most devotee consumers started noticing failures in quality and services in the work of the company. By 2008, the culture of coffeehouses started gaining popularity, and people began to choose other brands that were mainly focused on making good coffee, thus leading to a real crisis in Starbucks. Consequently, sales at one store decreased by about 7%; Starbucks closed more than 900 stores and cut 18,000 jobs (Robertson, 2015). The stock price fell to $ 7.83 in comparison with $ 39.63 in 2008 (Robertson, 2015).The management of the company understood that the ego to capture other popular spheres became the major reason of the crisis. The expansion to other businesses had short success for Starbucks, and it was decided to close the entertainment office. If urgent measures were not taken, Starbucks would have expected a complete collapse.

Howard Schultz initiated urgent measures that became highly successful to bring the company out of the crisis. He occupied the position of the CEO in 2008 and in spite of the great skepticism, restored Starbucks to its previous status as a company and as a brand (Taylor, 2011). The first action of Howard Schultz was the refocus on coffee. He closed every store for one day to retrain a barista. The reason was that many regular customers started complaining about the quality of the preparation of beverages. It was an effective way to admit that the company had made a mistake spending much effort on launching new businesses (Robertson, 2015). Moreover, such a step also informed the customers that Starbucks returned to where the company started, namely from coffee. Starbucks started to introduce different innovations, but all of them were associated with a wider choice of drinks, sandwiches, and pastries (Robertson, 2015). It contributed to the fact that the company returned its previous success. By 2014, the company’s sales had grown by 58% in comparison with 2009, 5-year 10% CAGR (Robertson, 2015). Therefore, Howard Schultz chose a right direction in the company’s management and brought it out of the crisis.

Starbucks serves as a good example for other companies on how wrong decisions can ruin a well-established business, and only clever management can return the success. Innovations are essential for every business; however, refocusing can result in highly negative consequences. Still, it is necessary to implement innovations to improve the already existing business. After the company survived the crisis, numerous innovations were implemented, including a mobile application, a loyalty system for regular customers, and various campaigns (Kumar, 2016). In 2014, Starbucks launched its global brand campaign “Meet Me at Starbucks” (Roll, 2017). It memorializes a day in the life of Starbucks through a film in the mini-documentary format. It was filmed in 59 different stores situated in 28 different states worldwide (Roll, 2017). The main focus of this campaign was made on the experience of customers that is a direct connection with Starbucks’s core philosophy and values. The example of Starbucks demonstrates that each business creates a unique experience and ecosystem around the interaction with customers; and a size of the niche in which the company works is not important (Hanft, 2005). Attention to details is of great significance and sends a message that the company values its customers and does not take them for granted.

Statement of Limitation

It sometimes can be difficult to determine that the company is experiencing a downfall because all organizations have annual low sales that are considered a norm. If Howard Schultz did not become CEO of Starbucks, there would have been an end of the company since it was on the verge of bankruptcy in 2008 (Roll, 2017). When he became the CEO, increased operational efficiency and cost reduction were paramount. In 2008-2009, over 800 stores were closed in the United States. The global recession also had a highly negative impact on the company’s income because of the constant reduction in customers’ spending. Nevertheless, if there was no recession, the crisis for Starbucks would be irreversible. As aforementioned, coffeehouses started gaining popularity at that time, and there was tough competition. Since Starbucks ceased to develop as a coffee company, it lost many customers that affected its profits. If there was no recession in 2008, Starbucks would still experience difficulties, but the global recession only worsened the situation.

Conclusion

The return of Starbucks’ success can be an inspiring example for other companies as it motivates them to make attempts to prosper. After the crisis, Starbucks managed to become successful again because it focused on its original goal, namely coffee. It is obvious that innovations are highly important for every business; nevertheless, refocus is dangerous because companies neglect their original values. When Starbucks became successful enough for the expansion, it began to move in the wrong direction ignoring its primary objective. When in 2008, Howard Schultz became the CEO, he brought the company out of crisis. He could do it by returning to original philosophy of the company that is making good coffee and orientation on customers. He proved that every company should focus on its main concept because it will bring it stronger reputation and better return on effort.

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