Analysis of Starbucks Mission Statement

Starbucks is the worlds largest coffee shop chain company and continues its aggressive growth through international expansion and new product development. But at the beginning of this century affected by the economic downturn Starbucks financial growth of same-store sales and margins showed a 70% decline in net income and had experienced its first ever decline in quarterly sales (Grant, Robert Contemporary Strategy Analysis 2010). This paper will look at Starbucks’ mission statement and guiding principles to assess if their strategies during this downturn were still aligned with these principles and if these principles aided in its recovery.

Starbucks Mission Statement and Principles Mission statements are always present based, talking about why a company or person exists and what they want to achieve in the here and now. (www. wisegeek. com). Starbucks mission statement from 1990 to October 2008 stated “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow. ” The six principles to help achieve their goals and governed their decision making process were:

1. Provide a great work environment and treat each other with respect and dignity.

2. Embrace diversity as an essential component in the way we do business.

3. Apply the highest standards of excellence to the purchasing.

4. Roasting and fresh delivery of our coffee.

5. Develop enthusiastically satisfied customers all of the time.

6. Contribute positively to our communities and our environment, and recognize that profitability is essential to our future success.

Application of these principles can be used as a guide for all employees from managers to workers to aim to achieve the company’s goals, while maintaining a certain type of standard.

After the economic down turn the Mission Statement became “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time and their principles of how we live that every day: Our Coffee: It has always been, and will always be, about quality. We’re passionate about ethically sourcing the finest coffee beans, roasting them with great care, and improving the lives of people who grow them. We care deeply about all of this; our work is never done. Our Partners: We’re called partners, because it’s not just a job, it’s our passion.

Together, we embrace diversity to create a place where each of us can be ourselves. We always treat each other with respect and dignity. And we hold each other to that standard. Our Customers: When we are fully engaged, we connect with, laugh with, and uplift the lives of our customers – even if just for a few moments. Sure, it starts with the promise of a perfectly made beverage, but our work goes far beyond that. It’s really about human connection. Our Stores: When our customers feel this sense of belonging, our stores become a haven, a break from the worries outside, a place where you can meet with friends.

It’s about enjoyment at the speed of life – sometimes slow and savored, sometimes faster. Always full of humanity. Our Neighborhood: Every store is part of a community, and we take our responsibility to be good neighbors seriously. We want to be invited in wherever we do business. We can be a force for positive action – bringing together our partners, customers, and the community to contribute every day. Now we see that our responsibility – and our potential for good – is even larger. The world is looking to Starbucks to set the new standard, yet again.

We will lead. Our Shareholders: We know that as we deliver in each of these areas, we enjoy the kind of success that rewards our shareholders. We are fully accountable to get each of these elements right so that Starbucks – and everyone it touches – can endure and thrive (www. starbucks. com). Why the Change The enhancement to Starbucks Mission Statement was reflection of the economic down turn and the reappointment of its founder Howard Schultz as CEO to aid in Starbucks’ refocus on the customer and the core product coffee.

Before Schultz’s appointment, he had sent a memo to the current CEO Jim Donald about his concern of ‘The Commoditization of the Starbucks Experience’ (www. starbucksgossip. com). In this memo Schultz describes how the atmosphere of the stores no longer have the soul of the past and reflect a chain of stores versus the warm feeling of a neighborhood store and that some people even call our store sterile, cookie cutter, no longer reflecting the passion our partners feel about our coffee. Starbucks vision as stated in its website is to become the most recognized and respected brand in the world, but at what cost?

The commoditization of Starbucks began when the coffee company lost its appeal to its customers “the early adopters who valued the club-like atmosphere of relaxing over a quality cup of coffee found themselves in a minority. To grow, Starbucks increasingly appealed to grab and go customers for whom service meant speed of order delivery rather than recognition by and conversation with a barista. Starbucks introduced new store formats like Express to try to cater to this second segment without undermining the first. But many Starbucks veterans have now switched to Peets, Caribou, and other more exclusive brands”.

Schultz described this concern as the change in atmosphere inside Starbucks “when we went to automatic espresso machines, we solved a major problem in terms of speed of service and efficiency…we overlooked the fact that we would remove much of the romance and theatre that was in play with the use of the La Marzocca machines…the height of the machines blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista”.

Schultz also expressed concern about the loss of aroma in Starbucks shop due to increased fresh roasted bagged coffee… the loss of the aroma – perhaps the most powerful non-verbal signal we had in our stores; the loss of our people scooping fresh coffee from the binds and grinding it fresh in from of the customer, and once again striping the store of tradition and our heritage (www. starbucksgossip. com).

Other concerns discussed included the effects of streamlining the store design to gain efficiencies of scale and to make sure the ROI on sales to investment ratios would satisfy financial side of our business but the result was a soulless experience. The introduction of many new products to appeal to different clients but turns off the coffee purists the loyal customer of Starbucks who believes the company should focus on making a great coffee.

As indicated by Schultz’s concerns enhancements and changes needed to be implemented to bring back the Starbuck’s coffeehouse experience and make Starbucks the “third place” after home and work. ( hbswk. hbs. edu/faculty/jquelch. html). Financials of Same Store Sales Starbucks net revenue from 2007 to 2008 had a 10. 4% ($1 billion dollar) increase but the area of concern was the operating income results which went from 11. 2% down to 4. 9% . The operating income is important because it is an indirect measure of efficiency.

The higher the operating income, the more profitable a company’s core business is. Several things can affect operating income, price strategy, prices for raw materials, or labor costs, but because these items directly relate to the day-to-day decisions managers make, operating income is also a measure of managerial flexibility and competency, particularly during rough economic times (www. investinganswers. com). Barons. com2008 The source of the problem is Starbucks' U.S. stores, which account for almost 80% of revenue.

In the latest reported quarter, U. S. retail revenue grew 6%, to $1. 9 billion, but operating margins shrank to 8. 6% from 13. 8% a year earlier (www. barons. com 2008). Analysis of 1990 Mission Statement & Principles and Growth The 1990 Mission Statement of -establishing Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow- was effective and in line with Starbucks deliberate and aggressive growth. But opening new stores and launching a blizzard of new products create only superficial growth.

These strategies take top management’s eye off of improving same store sales year-on-year. The stores manager’s efforts are undercut when additional stores are opened nearby and eventually saturation is reached and cannibalization of existing store sales undermines not just brand health but also manager morale. (hbswk. hbs. edu/faculty/jquelch. html). The 1990 Mission Statement was anemic in Starbucks focus of making premium coffee and sustaining customer loyalty both areas that ultimately affect long-term profitability.

Current Mission Statement & Principles Evaluation Starbucks current mission statement – to inspire the human spirit – one person, one cup and one neighborhood at a time - and the six principles to support this mission statement is being utilized to guide Starbucks’ future. At the height of the economic downtrend Starbucks closed 600 U. S based locations and 70% of the stores were within three miles of another Starbucks location and most of the stores marked for closure opened in the past two years and have yet to turn a profit .

In addition, Starbucks increased focus on marketing its brand image versus word of mouth: Starbucks is selling an easily accessible tangible product, but has evolved into a company that is doing much more than that. There is also a philosophy and an image Starbucks is attempting to promote through its products. The company is heavily involved in public relations, promoting an image of a responsible company that has the resources to make good on its promises.

Starbucks promotes ethical sourcing, environmental stewardship, and community involvement and goes as far grading itself on the company's website ("FY 2008Global Responsibility Report"). The company boasts of being ethically committed to all stakeholders in the business - from the coffee bean farmers to the issues of climate change. Starbucks maintains that being ethical is a top priority of the organization. Starbucks is also very much involved in community activities.

The company sent 2,000 volunteers to Louisiana to help locals get their lives back on track after Hurricane Katrina, and in several communities laid sod, and planted over 1000 trees ("FY 2008 Global Responsibility Report"). As one volunteer said, "Starbucks is all about the human connection" - this statement is a powerful representation of what the company represents. The focus on the greater good of the customers is what Starbucks wants to be known for. Starbucks wants its customers, and potential customers to perceive them as a company that has a positive impact on the world (Scribd. com pg 18).

In February of 2008 Starbucks boldly closed all 7,100 of its stores for three hours so that it could retrain is baristas on creating a Starbucks branded customer service experience, resulting in 426,000 man hours, 3 million plus in wages, and 21,300 hours of lost customer revenue (about. com 2009) and Starbucks began a loyalty program in May 2008 and Starbucks leadership has changed to ensure there is a division that solely focuses on the Starbucks experience.