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July 3, 2008
In this entry: quotes, warm up questions, discussion questions, resources
VIDEO SUMMARY
This video report looks at Starbucks as it works to reboot sales by closing 600 unprofitable stores, readjust to declining economic conditions and revitalize the “coffee experience.”
With 15,000 stores worldwide, almost 50 million customers buy something from Starbucks every week. But the company’s stock has lost almost half its value in a year and customer traffic has declined for the first time ever.
In the report, CEO Howard Schultz says that the company’s rapid expansion has squeezed out some of the elements that used to make Starbucks the “third place” to go and hang out - along with home and work (or school). He outlines some steps to return the “theater” to the store, such as grinding the beans on site and making the espresso machines shorter so that customers can see their coffee being made.
But are such changes enough? Or is Starbucks a cultural phenomenon whose moment has passed? This report is a good way to get students thinking about American businesses, marketing and the economics behind their favorite commercial hangouts. SELECTED QUOTES
“We somehow evolved from a culture of entrepreneurship, creativity and innovation to a culture of, in a way, mediocrity and bureaucracy.” - Howard Schultz, CEO of Starbucks
“Perhaps for the first time in our history, the downturn in the economic cycle and the pressure that the consumer is under has affected the frequency of visits of how often people have been coming into Starbucks.” - Howard Schultz, CEO of Starbucks
“For us, it’s an art. So we use manual machines, and we teach the employees to really perfect the espresso and the coffee…It’s so hard to do on a bigger scale. Porsche doesn’t sell millions of Porsches; they sell a few.” - Jeff Babcock, Zoka Coffee Roaster and Tea
WARM UP QUESTIONS
What do you know about Starbucks, its products and its business philosophy? Would you rather go to a Starbucks or a local coffee shop? Why? What matters to you when considering a place to hang out or where to spend your money?
DISCUSSION QUESTIONS
Were you surprised by how much thought, planning and money goes into selling a cup of coffee? Do you think the head of Starbucks is correct when he says there are no “coffee wars” and that Starbucks isn’t being challenged by McDonalds and other coffee sellers? What do you think of the statement that “Porsche doesn’t sell millions of Porsches; they sell a few”? What does that statement mean? Does that apply to Starbucks? Why or why not?
Has the downturn in the economy affected your spending habits? In what ways has it affected your family or peers?
RELATED RESOURCES
Transcript of this report
NewsHour coverage of Business and Economy
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