Starbucks' Strategy and Internal Initiatives to Return to Profitable Growth

Starbucks' Strategy and Internal Initiatives to Return to Profitable Growth

Starbucks was started in 1971 by Jerry Baldwin, Zev Siegel, and Gordon Bowker.

Each owner invested $1,350 and borrowed another $5,000 from the bank to open the Pikes Place Store in Seattle. By the 1980's the company had established four more stores in Seattle and were very profitable every year. Zev Siegel left the company and a gentleman named Howard Schultz was hired to take his place. Schultz dream was to open Starbucks all over the United States. His ideas were to serve cups of coffee, espressos and cappuccinos in its stores (in addition to beans and coffee equipment). In 1984 Schultz convinced Baldwin in the grand opening of their sixth store to open an espresso bar. The idea was a profitable one but, Baldwin felt as though it was a restaurant instead of just selling the fine coffee beans and teas. Schultz left the Starbucks and went out on his own opening II Giornale Coffee Company.

In March of 1987, Baldwin and Bowker decided to sell the whole Starbucks operation in Seattle-the stores, the roasting plant, and the Starbucks name. Schultz raised $3.8 million need to buy Starbucks. The acquisition was completed in August 1987. The new name of the combined companies was Starbucks Corporation. Howard Schultz became the president and CEO.

Starbucks opened 15 new stores in fiscal 1988, 20 in 1989, 30 in 1990, 32 in 1991 and 53 in 1992-producing a total of 161 stores. Starbucks was profitable in 1990 and every year except 2000 (because of a $58.8 million in investment write-offs in four dot-com enterprises) and for fiscal year 2008 (when the global economy downturned and hit the company's bottom line hard). In 2008- 2009 Schultz realized a new strategic plan had to be reformed to save the company's future.

His plan involved slowing the pace of new store openings in the U.S. but, open 75 new stores internationally. They closed 900 underperforming company-operated stores in the United States, 75 % of them were within 3 miles of an existing Starbucks store. Closing these stores would boost sales and traffic at many nearby stores. Restructuring company's store operations in Australia to only focus on three key cities and there surrounding area-Brisbane, Melbourne, and Sydney- and to close 61 stores that were not turning a profit. Schultz plan also decided to discontinue breakfast sandwiches in North America stores (because there scent interfered with the coffee aroma). , However, they did add to their menu fruit cups, yogurt parfaits, Vivanno smoothies and healthier bakery selections. He also focused on employee training and reigniting enthusiasm on the part of store employees to please customers.

April of 2010 Schultz was pleased that the company's progress was returning back to a profitable, long