Organizational change is said to be the complete alteration or restructuring of the work, culture

or even the structure of a company (Cameron &Green, 2015).  The chief objective of
organizational change is to resolve or eliminate organizational issues that exist in an organization
and helps the organization to be responsive to the changes that are constantly certain such as
creation of new values and development of the organization (Hornstein, 2015). Therefore, the
main purpose of this essay is to identify the change strategy that was adapted by Starbucks
during the financial crisis in 2007-2008 and how the company helped itself to overcome the
crisis and what change management strategies it used or might have used to improve experience
of consumers. Starbucks is a multinational coffee company. The company was quite capable to
engage a large number of customers even though they were selling expensive coffee. It had a
positive impact on the investors who invested in Starbucks coffee as it was a profitable
investment for them. The company became successful in gaining goodwill in the business world
due to its coffee outlets, expensive coffee and by using Italian names of coffee. The approach
that was used for attaining this reputation and brand-image was a systematic planning,
understanding of needs of consumers’ behavior, value, taste and their preferences (Starbucks,
2012).

“Understanding the crisis requires understanding the economic crisis and how the market works.
In order to measure market efficiency, a well-balanced model is required” (Brunes, 2004).
Howard Schultz, CEO of Starbucks, in 2007 mentioned that he was aware about the upcoming
crisis. Schultz advises regarding commoditization of Starbucks through a message to the
employees working at top level management at Starbucks (The Economist, 2008). In 2007,
shares of Starbucks fell down by 42% deriving in the worst performers of the stock market. The
financial crisis caused entry of competitors (Brunes, 2004). Through the phase of 2005- 2007,
numerous competitors came up such as Dunkin Donuts and McDonald's as they were aware
about advantages of selling coffee (Financial Times, 2008). Analysts were concerned regarding
fast growth of Starbucks. Howard Penney, an analyst, acknowledged that Starbucks had to think
about their rapid growth (Clark, 2008). The increase in the prices for food commodities, also
forced the company to raise the prices of its products. Customers by now were worried about oil
prices, food etc., that had also taken its toll on Starbucks. This persuaded its competitor, for
instance Dunkin Donuts; McDonald's to sell coffee at economical price leading to make
Starbucks look like a brand that targets only Affluent Middle Class Earners (The Economist,
2008). Although, by June 2006, company was aware about the consequence of the market, still
Starbucks had to face losses in the phase from October 2008 to March 2009. Although, the rapid
growth of Starbucks brought in structural issues leading in minimizing the profits, drop in
demand etc. The opening of new stores enlarged the issues as Starbucks had a frantic growth
rate, almost opening 20000+ stores in different countries in a time period of 20 years (Perera,
2012).
According to (Starbucks Annual Report, 2011), annual sales revenues of Starbucks were
recorded $2.6 billion in 2010 leading to an enormous turnover from the past 3 years throughout
the crisis. To overcome the crisis, the first step taken by Howard Schultz as a CEO was that he
admitted the responsibility of mistakes made by the management team. He believed in "owning
reality was critical to expediting change" (Harvard Business Review, 2010). Once Shultz noticed
that Starbucks was losing its brand image, he followed the autocratic style of leadership. An
autocratic leader is a type of leader who decides his team members and establishes what is
supposed to be done for the organization to continue generating revenues. Schultz recognized
that there is a need for change in the strategy of the company (Rainey, 2014). One of the main
advantages that Starbucks had was that every employee at Starbucks was involved at each level
of change to ensure success. “Building relationship with your employees in the company helps
the business prosper” (Bruce &Pepitone, 1999). This is was the same thing that was done by
Starbucks. The company spends 30million$ even in the financial crisis and took each and every
one of their managers to New Orleans for a discussion. Furthermore, prior to the conference,
each manager was requested to do a community service for about five hours to prove their
commitment towards customer service (Starbucks Newsroom, 2015). The company wanted to re-
establish their relationship with the customers and the faith that consumers had towards the
company prior to the financial crisis. Company initiated various policies like “My Starbucks
Idea”, whose objective was to make sure that company could maintain direct relationship with its
consumers (Thau, 2015). Also, company had to reduce costs, approximately about $500 million,
closing down 600 outlets and minimizing the number of employees (Prabhakar, 2013).

Hence, to relate the change approach efficiently and resist the inaccuracy which is done by many
organizations, John P. Kotter (1996) initiated an eight- step change model in an interview at
Harvard Business School, which can also be put into practice in the case of Starbucks. The first
approach is establishing a sense of urgency. During the crisis of 2007-2008, Starbucks facilitated
itself through a message by Schultz who forwarded a message to each and every one of his
employees which mentioned that “the company must go back to its core business and become
customer centric again instead of focusing on bureaucracy”. This aim was made very vibrant by
Schultz that the employees should unite by having an emotional attachment with consumers
(Businesstoday, 2014). Second approach states about creating the guiding coalition. Within
January 2008, Schultz returned and had to face the unfavorable circumstances as the CEO; the
decision that needed to be taken was incredibly complex, where Schultz mentioned that it was
like to make an acknowledgment in front of 180000 employees. However, Schultz came up with
a technology-oriented approach where employees were asked to share and put in their ideas. This
plan was to make an environment to accomplish the planned objectives (Businesstoday, 2014).
Third approach by Kotter is about developing the guiding coalition. Starbucks recognized that
people want a break from home and work, so they build a zone for comfort and relaxation,
compelling the customer with the comfortable experience. The company took concern of each
little detail such as furnishings, paint in this third place that people seem for in the hustle and
bustle, including modernization that assisted Starbucks to assess its customers by adding
technology as a primary business tool to reinvent the chain. As per the idea given by the
employees, Wi-Fi was set up in the company (Businessholic, 2011). Fourth approach i.e.
communicating the vision was also applied in the company. Schultz had made it clear to his
employees that they should not only focus on coffee business as their aim was to generate a gap
between work and home, providing customers an experience to appreciate and visit again.
Strategies of Starbucks were transformed and further persuasive conversations took place during
the change (Gallo, 2011). Starbucks moreover followed the approach of consolidating gains and
product change. The aim of Starbucks was not only to overcome of crisis however also turn into
the hub of the community service and training programs of employees to ensure additional
learning associated to needs of the consumers. This policy generally created opportunities
amongst young people (Starbucks Coffee Company, 2015). Employees were always considered
as part of the Starbucks. Employees were given a high priority and were involved in the change
process since the beginning of change management process that took place from 2008.
Employees just not only accepted new behaviors and took the transformational actions, but were
also engaged in the change process by sharing their ideas and thoughts regarding how they could
bring back the old charm in the Starbucks (Starbucks, 2013).

Starbucks followed Higgins 8S model for strategic implementation. This approach include the
change management structure in eight steps i.e., strategy, structure, system and process, style,
staff, re-sources, shared values and strategic performance. This model is a combination of
diverse interconnected change elements that helps companies to implement the change gradually
but effectively. Schultz employed this strategy by instilling the organizational perceptions using
a directional process leading in the change strategy implementation comparatively easier. Unlike
the McKinsey 7 S approach, this strategy comprises the final stage of strategy performance that
can be demonstrated in the course of the Starbuck’s performance that shows optimistic transform
from 2010 (Bhatti, 2011).

According to the Starbucks situation in the market and mainly after the crisis, it is said that
Starbucks should had implemented Lewin’s model of change.

According to Lewin, if a company is not able to do well, it is essential for a company to admit
that there is a urgent need of change, and its tie to do devise between employees to continue the
operations of an organization, everything should be unfreeze to ensure that issues could be
tackled. After identifying all the shortcomings inside an organization, it is vital to start solve
problems and should look for alternative to continue the business. This step is mainly
complicated part of the approach as change strategy is not easy to put into practice and several
employees refuse moving towards a change. The last step of this approach is to freeze everything
over again and form advanced assumptions to set new objectives for the company to do well.

1. Unfreezing at Starbucks: As Jim Donald was appointed as the new CEO, the value of
the leadership and coffee started dropping down. Schultz was extremely criticized for his
‘unawareness’ regarding opening of numerous numbers of stores in United States of
America which eventually led in declining the quality of coffee. Hence, after
brainstorming with the executives at Starbucks, Schultz came up with a result which
talked about that main reason behind the crisis at Starbucks was lack of a ‘backup plan’
concerning the leadership (Cbsnews.com, 2015).
2. Change at Starbucks: Starbucks had used a successful policy for change in business.
The company overcame the crisis with not more than one year with returning back to its
rise in the profit margin. Efforts made by Howard Schultz led the firm in making
unexpected growth. Schultz’s objective was to bring back the company back to its
successful spot, so he dispersed his emotion to his ‘employees’ in a optimistic manner.
The main action plan for Starbucks was due to the development of the perfect brand of
coffee, upgrading on customer interactions, innovation, and the client-oriented brand
marketing (Neacşu and Bărbulescu, 2015). Moreover, Starbucks recognized requirements
of its employees and ensure that they were motivated (Larimore, 2013).
3. Refreezing at Starbucks: After the implementation of the change after the crisis,
Starbucks aimed in expanding its business globally. In order to generate further profits,
the company targeted to expand in countries like Russia and China as part of the
geographical policy of the company. The company had to be fewer associated with US
and become customer-oriented (Neacşu & Bărbulescu, 2015). Further, the company had
to operate on its core values of quality products along with extraordinary customer
relations.

Howard Schultz signifies his transformational leadership approach by using multiple approaches
to develop his leadership skills and be efficient to accomplish his objectives among his
employees. According to the case study, Schultz core objective was firstly to assure that the
needs of his employees were being fulfilled during the change process. According to Maslow,
human needs are in hierarchical order of starting from basic needs, followed by safety, belonging
and love, self-esteem and finally self-actualization (Rainey, 2014). The core competitive
advantage that Starbucks had was the employees working in the company. Thus, Schultz pays his
workers fairly. Further, employees had benefits of healthcare packages, career counseling and
development and stock options leading in satisfying their basic needs (Koehn, 2014). On analysis
about the hefty paycheck, Schultz explained that employees were more concerned about the
company as the profit that is generated by the company was shared among the employees.
Starbucks follows a matrix-structure of organization, where the reporting structures emphasize a
long hierarchy with a top-down command flow. 

Therefore, the analyses of the organizational change management assisted me to realize that
organizational change is a complex situation where there is a high possibility of failure. But,
according to the case study of Starbucks it was found that the changed strategy that was applied
by Starbucks resulted in enhanced sales, larger geographical reach, improved brand image,
improve in supply chain management and quality- products. In my opinion, beyond all the
changes that was needed by Starbucks, company’s leadership style must be transformed, which
does not mean that the managers will be fired but there is a need for improvement in their
capabilities, skills and attitudes. No organizational change strategy can said to be successful if
the managers are not accessible of change. Organizational change strategies can only be applied
the accurate approaches are executed and the managers have been at the forefront of these
actions (Anderson, 2010). Leading organizational/strategic change is not always an easy work
for executives or employees of an organization. There are some efforts that fail because of
strategies that are over sighted by the managers. Thus, managers of Starbucks would have not
failed, as it is necessary that company’s managers should recognize what should be avoided
during execution of changes in the organization. (Kotter, 2007) acknowledged eight main
mistakes that are made by the organizations i.e. Not establishing a great enough sense of
urgency; Not creating a powerful enough guiding coalition; Lacking a vision; Under
communicating the vision by a factor of ten; Not removing obstacles to the new vision; Not
systematically planning for, and creating, short-term wins; Declaring victory too soon; and Not
anchoring changes in the corporation’s culture. According to (Ignatius, 2010), employees of
Starbucks should have been avoided the mistakes mentioned above. Over-performing or
underperforming the points that are mentioned above might also lead to failure. Thus, to
implement the change which is recommended, the managers must do what is exactly required,
i.e. executing the strategies as they are formulated.

Furthermore, I think that the dilemma with the existing strategy that is used by Starbucks is that
it focuses on global expansion using an organizational structure which is based on compliance.
The chain of command in Starbucks flows from top to bottom in such a way where authority is
delegated, which is simply to be expected as the normal means of doing things in a big company
and still expanding.

Moreover, Starbucks could have given chance to those employees who were fired throughout the
time of crisis to work again for the company. Also, strictness for a warm drink may have caused
stakeholders to embrace complaints for the company. For instance, feedbacks from ex-
employees or consumers might have eliminated:
 "The coffee is not always fresh. Often, employees start a new urn on top of the remains of the
cold coffee, so the new stuff mixes with the old. There may not be a freshly done urn all day." -
Kelly, an ex-employee at Starbucks.

Thus, also according to Aimee, an employee who used to work at Starbucks mentioned that
"Some of my coworkers were more demanding than others. Most were nice and welcoming. And
there were office politics. On more than one occasion I walked into the break room to see
someone crying, or talking about other coworkers. I mostly avoided this, until what would be my
last week on the job”.

Therefore, it can be concluded that an organization like Starbucks should not have faced the
financial crisis that was confronted by the company, which did not only led to the firing of
employees however led in shutting down of 600 stores which is explained in the crisis segment
above. In my opinion, currently, company’s main focus is to increase its sales in United States of
America instead of focusing on inclining to become an international brand. If Starbucks had
included a change approach or a strategy to turn out to be an international brand in their
corporate culture, then it would have become the brand of people all over the world. Besides, it
should initiate an online awareness program among employees or other stakeholders to spread its
international performance among the consumers. For example, Wikipedia has made its value and
performance known to every people. Hence, during the phase of crisis, Starbucks must have
commenced such initiatives that would help the company to get the support from the customers
(Ignatius, 2010). At last, it can be said that Starbucks still has to face some challenges and a lot
of grey areas are missing to improve its brand. Therefore, in the present time Starbucks is
adapting a strategy which mainly focuses on Change and Consensus management strategy in
their day today business which will help the company to increase their brand value and will assist
the company to resolve riddles to recognize the needs of the customers in an improved way.
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