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Everyone in the United States is impressed: Starbucks is everywhere! Do you know the history of this thriving coffee shop? In this book, CEO Howard Schultz tells what steps he has taken to make Starbucks the world's best-known cafe. If you want to know more about the growth of this organization and its values, don't miss this 12min microbook!
Early on, Starbucks grew from a single store to five in Seattle, comfortably serving a growing niche in the market, despite the economic woes at the time. The founder's passion and the sharing of coffee knowledge with customers made Starbucks popular with coffee consumers in Seattle. By educating its customers about the different types of coffees, Starbucks differentiated itself from other conventional companies. Their coffees, being roasted individually in front of the customer, turned out to be the best coffee available in the United States.
Howard Schultz had a humble background, designing houses until he built a successful career as general manager of the Swedish company Hammerplast, selling kitchen components in the United States.
Eventually, after observing for a year, Schultz joined Starbucks with a small capital to handle marketing; with the goal of making Starbucks a national company.
Drinking coffee should be part of a community's social life, and it was based on this notion that Starbucks achieved fame. The coffee shop is an extension of people's homes and should be places where you can sit down, drink coffee, and interact with others, strangers and friends alike.
After returning from a trip to Italy, Schultz presented his ideas to the founders. His vision of expanding the business like a coffee shop serving fresh coffee, and especially lattes, was not well accepted. Starbucks, for the owners, was in the business of selling roasted coffee beans, not the restaurant business. For months, Schultz persisted in presenting the same idea countless times and was rejected every time.
Conflicts, of ideas or personalities, are the forces behind changes in corporate cultures. In the end, Schultz decided to set up his own company with the idea of selling espresso coffees all over Seattle.
Baldwin, along with the rest of Starbucks' directors, supported Schultz's departure from the company and allowed him to stay for a few more months as he got set up. Baldwin even helped him with the capitalization, providing $150,000 as an investment seed.
Schultz opened his coffee shop called II Giornale while bringing a new experience inspired by Italy. Selling espresso and organizing coffee shops in the United States was a new phenomenon that Schultz thought would be a successful venture.
It took four years to get the business profitable and supported by investors. All his investors have invested in him and not in his ideas. His passion for coffee and his desire to succeed boosted him.
From inviting investors to raising their target capital of $ 1.25 million, until they chose the people who would run the business, Schultz showed how he could overcome all the challenges.
There was no secret. The key was the central belief in knowing that the business was solid and would be a success and that's where your passion comes in as a component. The belief and love for the coffee business were as important as making the business a success. When the first store finally opened, Schultz knew it would take some time before he could recover his investments.
But investors were not confident in the deal; they were confident in Schultz. Honesty and integrity are important when you are dealing with other people's money because your reputation is at stake.
David Olsen, one of the owners of Café Allegro, joined Schultz to expand the operations of II Giornale. David's contribution and passion for the coffee business have made Starbucks what it is today: a billion-dollar business. Schultz passed the values of his company to its employees, and partners.
Perhaps an important point in Schultz's life has been his ability to predict the future, and his belief in destiny and that was evident when he took the opportunity to buy Starbucks Coffee when it was on sale as an important element of entrepreneurship, looking for opportunities and having passion produces incredible results. With determination, Schultz bought the company he loved so much.
Changing the business proved difficult. Twenty months after he left Starbucks, employee morale was very low. When Schultz told his co-workers about his plans to turn the company around, he found a lot of skepticism. His first request of the day was to establish trust between managers and employees.
The principle of giving due recognition to the employees of the organization was worthwhile since the employees were motivated and driven by a company that showed that they cared for them. At Starbucks, a person is not just an employee with skills but an artist who is passionate about coffees.
The difficulties involved in organizing a company to change its direction (from selling coffee beans to serving fresh coffees) were many. Schultz had to bring in a team of managers and adapt Starbucks to the new coffee experience.
Opening stores across the United States for the next five years has become a challenge that has been overcome thanks to the redesign of Starbucks. When something new comes up and takes advantage of customers' imaginations, success is guaranteed.
The most important principle that Schultz likes to convey is that people remain the main resource of the organization. Treating employees as a family will make them loyal and encourage them to give their best.
Without people who share the same passion and beliefs, an organization fails. A company also fails when customers don't believe in the products or what the company stands for.
Schultz believes that a company needs to listen and care about people, not just to comply with what is required. When a company cares, this is passed on to customers in some way, who are happy to go back and continue doing business. Corporate social responsibility has made Starbucks become a company with a heart and passion for coffee. And this social responsibility is embodied in the Starbucks mission statement.
Starbucks had a series of losses from 1987 to 1989 with just 20 stores running at the time. Schultz presented a growth plan for his Board of Directors: build a high-level facility to roast coffee beans and a very sophisticated computerized information system to record sales from hundreds of stores.
His Council supported him with patience. The rest is history. From 1987-1989, Schultz developed a solid foundation by hiring key managers and investing in the facilities Starbucks needed. When Starbucks issued its IPO in 1992, its revenues reached 80 percent a year, and the number of stores doubled annually.
Companies fail, according to Schultz, because they don't invest in people, systems, and processes that are important.
According to Schultz, competing businesses in the same industry failed because:
Schultz also relied on mentors who have gone through the same thing before - experienced entrepreneurs who helped him and guided his steps.
Schultz hired people who were not only smarter than him but who also had the experience to help him at the beginning of the II Giornale and during the years of Starbucks expansion. He fired people who were not up to the challenge during the growing years of the company.
He has learned to accept sincerity as a valuable criticism of the philosophy of how Starbucks operates. Howard Behar, who joined Starbucks in 1989, had the view that the company was product-oriented when it should be people-oriented. He said, "we are not filling bellies, we are filling souls."
From there, Starbucks became highly customer-driven, adopting an instant program that involved surprise visits from each store to monitor customer service. Behar trained Starbucks employees to take heroic action and meet customer demands. Behar also taught Starbucks employees how to talk about their meetings every quarter.
Eventually, Behar, after a few years leading the retail and expansion operation of Starbucks, did what few executives do: he hired and trained his successor, Deidra Wager of Taco Bell, who turned out to be a skilled manager. He knew the information systems Starbucks needed to systematize its retail operations.
Without romance and vision, a business has no soul to motivate people to achieve great things.
Many businesses fail because their leaders don't know how to execute. A solid foundation of processes and systems, and discipline and efficiency are needed before creative ideas are implemented, and the entrepreneurial vision realized.
With Starbucks' decision to go public, the company had a very good start on the NASDAQ on June 26, 1992, when it opened at $ 21 per share, while its target was $ 14 to $ 16 per share. The IPO raised $ 29 million for the company, $ 5 million more than expected. At the end of the day, Starbucks' market capitalization stood at $ 273 million, five years after Schultz bought the deal for $ 4 million.
The stock price never dropped below the opening price, and three months later hit $ 33 a share, making Starbucks worth $ 420 million.
The short-term sellers who believed that Starbucks was overvalued had turned out to be wrong over time.
When coffee began selling across the country, the competition also increased. Coffee shops were adapting to the Starbucks model. Starbucks never felt threatened by small neighborhood cafes, but coffee companies were seeing the success of Starbucks and thinking of big expansion plans.
Schultz and his Starbucks team embarked on an aggressive expansion plan for the East Coast, accelerating planned execution to open more stores and stop the competition. In June 1994, the Coffee Connection in Boston with about 25 stores, agreed to exchange stock worth about $ 23 million with Starbucks and at the end of the year, Starbucks went into Texas as well.
In June 1994, Schultz decided to reinvent himself by allowing Orin Smith to handle most of his responsibilities, taking over the company's CEO and COO titles. Schultz now had time to focus on a joint venture with Pepsi; in the design of the store of the future and development of new products.
Each year the competition increases, managers change, and the needs and tastes of customers change as well. If things are going well, changing the formula is a necessity since nothing can stay the same forever in the business world. Maintaining the status quo can lead to failure.
From 1984 on, Starbucks was in the business of selling coffee and coffee shops. The second shift in their paradigms came when they invented new ways to enjoy the taste of coffee, in bottled drinks, ice cream, and other innovative products.
In 1993, Don Valencia, an immunologist who created the Sumatra coffee extract, joined Starbucks as head of Research and Development, which opened up a whole new world for Starbucks. This enabled them to capture new products, including coffee flavored beers, coffee ice creams, and ready-made and bottled coffee drinks.
Starbucks entered a joint venture with Pepsi to announce Mazagran, an iced coffee drink that would be distributed by Pepsi. It was a failure. But Schultz didn't stop that from happening. Instead, he decided to put his Frappucino in cans. Pepsi was impressed with the orders, and it was a great success.
Starbucks entered the ice cream business in 1996, together with Dreyer; again a success, beating Haagen Dazs as the # 1 premium coffee ice-cream brand in the United States.
The day a frost hit Brazil, Schultz knew he had a major crisis to solve.
His management team handled the problem with ease and protected his coffee supply despite the high prices. He passed the costs on to customers just to cover Starbucks costs.
To recover from the rising cost of coffee, Orin suggested that they become more efficient by taking advantage of economies of scale by using a "profit improvement plan. "This included renegotiating contracts with its supply chain operations, such as the renegotiation of paper cup prices. That plan took ten years, but Starbucks did it.
When coffee prices rose again in 1997, Starbucks was ready to solve the problem. Schultz claimed that Starbucks could have bought cheaper coffees of lesser quality, but he did not want to compromise quality in return for profit.
Schultz believed that strong brands create powerful personal connections. He started these connections with his employees and not with his clients. Most national brands in the United States are focused on marketing. Starbucks is focused on its products, people, and values.
Schultz said that Starbucks started educating clients about their passion for coffee. Starbucks has built brand loyalty by every customer through its in-store campaigns.
The company's success shows that million-dollar advertising programs aren't requirements for building a national brand. The Starbucks brand represents more than just coffee. It involves an experience in every way, giving the customer a passion for coffees.
Starbucks supports valuable causes in the communities in which it operates and in the countries from which it buys. Schultz has partnered with CARE to help these countries. Until 1993, Starbucks was the organization's largest corporate sponsor in the United States.
But that didn't stop protesters and activists from complaining about the low prices paid by Starbucks to their coffee suppliers.
In September 1995, Starbucks developed a Code of Conduct called "Starbucks 'Commitment to Do Our Part" that defined Starbucks' beliefs and aspirations, as well as some specific short-term commitments to help improve life quality in countries that sold coffee.
Schultz tells us that Starbucks maintains the design of each store to a high standard, same as required for coffee.
They come in a variety of different design formats, designed for numerous locations such as 130-square-meter Type A stores and B-type retail stores. The bar was designed for stores within supermarkets or office buildings, and there are also designs for spaces with only 1 square meter.
Schultz sets out to lead with the heart, passion, commitment and enthusiasm of a group of dedicated people. It's no longer about making money, but about pursuing dreams that others didn't believe possible, and figuring out a way to give something back to employees, customers, and the communities where Starbucks operates.
The victory means much more when it comes not only from one's efforts but the joint accomplishments of many. According to Schultz, success is much sweeter when it is shared.
If you don't want to start a business with a new product you have created, you will need to reinvent an old commodity. If you love this commodity and are willing to go forward, you will have a much better chance of attracting customers. They will buy your product because they will buy your commitment and so will Investors. They will invest in your passion, in the fact that the success of your business is personally important to you and essentially, they will invest in you. Passion and commitment aren't things you learn in a college of management!
If you liked this microbook, how about reading' The Everything Store,' about creating the giant Amazon? We think you'll like it, check it out!
Howard Schultz is an American businessman, a former CEO, and chairman emeritus of Starbucks, a coffeehouse chain that he helped transform into one... (Read more)
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