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Starbucks Update from Howard Schultz

Jim Riley

5th April 2014

Starbucks - always one of the best BUSS4 research examples - continues to be a source of inspiration for business teachers and students. I picked up on this excellent Q&A interview between CEO Howard Schultz and Bloomberg Businessweek which is packed with useful research insights. Here is the article - well worth a read.

I highlighted the following as being particularly interesting:

The significance of mobile transactions to Starbucks.

Their stores are processing over 5 million mobile orders a week, all of which are linked to Starbucks' customer loyalty programme. In this supporting article, I discovered that Starbucks generated around $1bn in revenue from mobile transactions in 2013. Over 10 million Starbucks customers use the mobile app to place orders and earn loyalty rewards.

A corporate objective (focused on shareholders) to achieve a market capitalisation of $100bn

Market capitalisation is the value of the business based on the share price and number of shares in issue. Starbucks' current market cap (early April 2014) is around $56n, so the corporate objective is to effectively double the value of the firm for shareholders. This looks like quite a stretch objective and the challenge for Howard Schultz and his team is to exploit growth opportunities.

Schultz's response to the question of how the objective will be achieved is interesting. It is all about globalisation which he links to the "culture and values of the company".

The importance of China

Schultz is clear - Starbucks has invested in China for the long-term and that investment and patience is now starting to pay off. You can read more about how Starbucks has succeeded in China here.

Time for Tea - with Oprah and Teavana

Starbucks is investing heavily in a brand new brand and product range, with the aim of making Starbucks the biggest tea retailer in the world.

In 2012 Starbucks acquired Teavana and has set an objective of opening 1,000 Teavana stores in the US alone within 10 years to take a big slice of a $80bn market. As part of this growth strategy, Starbucks recently announced a partnership with Oprah Winfrey to launch Oprah Chai - a celebrity tea products old through Teavana!

Corporate Social Responsibility

Schultz is well-known (and heavily criticised in the US) for his left-leaning political views. He makes some significant statements about his support for US war veterans and for his support of raising the minimum wage in the US.

Jim Riley

Jim co-founded tutor2u alongside his twin brother Geoff! Jim is a well-known Business writer and presenter as well as being one of the UK's leading educational technology entrepreneurs.

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