Continuing Case – Starbucks 1

Continuing Case – Starbucks

Kimberly A. Marks

Centenary College

September 3, 2016
Continuing Case – Starbucks 2

Discussion Questions

P1-1. What management skills do you think would be most important for Howard Schultz
to have? Why? What skills do you think would be most important for a Starbucks store
manager to have? Why?

I think it would be important for Howard Schultz to have conceptual, human and technical skills.
In order to understand his customers and subordinates, Howard has to have human or
interpersonal skills. He must effectively communicate the company’s goals, standards, and
practices so that the message can be relayed throughout the hierarchy, down to the store
associates. In order to handle the abstract and complex situations revolving around being a CEO
and running a successful business, Howard must possess conceptual and technical skills. Howard
has to have knowledge regarding the coffee industry, what customers want, and how to run and
maintain a business and all of the associates. For a Starbucks store manager, it is most important
to have interpersonal skills. Store managers not only handle employees, but customers as well.
They must be able to communicate and listen. In addition, store managers need to have
conceptual skills in order to oversee a store, its employees, its customers, and any problems that
arise from them.
As chairman and chief global strategist of Starbucks Corporation, Howard Schultz needs to
have strong skills in each of the areas identified by Robert L. Katz: technical skills, human skills,
and conceptual skills. Conceptual skills are especially important for Schultz to effectively lead
his company. These skills enable him to make strategic plans that guide the global growth of
Starbucks, predict future product trends, and take advantage of opportunities in the external
environment.
To manage an individual Starbucks location successfully, each Starbucks store manager, as
well as the top manager of Starbucks Corporation, needs to possess the skills identified by
Katz. Your students should recognize that the most important skills in this level of management
would likely be related to human skills. This particular skill category equips a store manager to
effectively utilize his/her most valuable resource - the employees, or "partners" - to achieve the
goals and objectives of the individual store as well as the corporation as a whole.

P1-2. How might the following management theories/approaches be useful to Starbucks:

scientific management, organizational behavior, quantitative approach, systems approach?

Scientific management, according to the text, is the use of scientific methods to define the “one
best way” for a job to be done. Scientific management would be useful to Starbucks because it
defines clear guidelines for improving production efficiency. In a business like Starbucks,
production efficiency is important. Starbucks needs to fill positions with the best qualified
candidates for that specific job function. This would be an example of how Starbucks could use
the scientific management theory.
Organizational behavior, as defined in our textbook, is the study of the actions of people at work.
Starbucks could utilize this theory throughout all levels of the company hierarchy. The theory of
organizational behavior revolves around the relationship between management and team
members. Motivation, leadership, group behavior and development are considered to be
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behavioral approaches. All of the behavioral approaches can be utilized both on store level and
on the corporate level to create a healthy relationships company-wide.
Quantitative approach, as defined in the textbook, is the use of quantitative techniques to
improve decision making. The quantitative approach is a perfect fit for Starbucks. Quantitative
approach improves a manager’s decision making. Analyzing data better allows for the company
to make decisions and continue to improve their products, locations, and services.
The systems approach, as described in the textbook, consists of two systems: open and closed.
Open systems are systems that interact with their environment, whereas, closed systems are not
influenced by and do not interact with their environment. Starbucks already utilizes the systems
approach. Starbucks would be considered an open system as they interact with their environment
daily. The textbook states, “For example, the systems approach recognizes that, no matter how
efficient the production department, the marketing department must anticipate changes in
customer tastes and work with the product development department in creating products
customers want…” This approach most likely already exists in Starbucks. For example,
customer’s coffee preferences change with seasons. Customers may prefer pumpkin flavored
coffee in the fall as opposed to French vanilla. The company needs to be flexible and understand
these changes in taste in order to satisfy customer requests.
P1-3. Choose three of the current trends and issues facing managers and explain how
Starbucks might be impacted. What might be the implications for first-line managers?
Middle managers? Top managers?

1. Technology: Starbucks might be impacted by the ever-changing technology. As

technology continues to advance, systems throughout Starbucks may need to be
upgraded. For example, point of sale technology is always changing. This could require
Starbucks to upgrade their cash registers and the type of tenders they accept. First-line
managers may be responsible for training the store’s staff on how to properly use the
point of sale terminals. (i.e.- Apple Pay.) Middle managers may be responsible for
answering questions and directing the front-line managers as needed. For example, if the
front-line manager is having issues a certain type of tender or the point of sale terminal
they may rely on the guidance of the middle manager. Top managers might oversee the
type of tenders used or the need for upgrades. For example, if their competitor, Dunkin
Donuts, began accepting Food Stamps as a form of tender, the top managers at Starbucks
may try to coordinate a similar program in which case the information would flow back
down to the front-line manager.
2. Education: Starbucks might be impacted by the issues surrounding education. As tuition
rates increase, less and less people can afford to receive a college education. This means
that entry level positions, such as a barista at Starbucks, may be the only option
individuals have as a source of income. I do not feel that this is necessarily a negative
impact for Starbucks as they offer many educational tools for their employees. For those
interested in long-term careers with Starbucks, there are barista and coffee-making
classes available. In addition, Starbucks offers a discount on tuition for those employees
that are or wish to attend college. This means that store managers are responsible for
informing employees of the benefits the company has to offer. By doing this, Starbucks
Continuing Case – Starbucks 4

executives (middle managers included) have the ability to train and educated the potential
future leaders of the company.
3. Diversity: Another current issue or trend managers face is workforce diversity. Again,
this may not be a negative impact. As Starbucks is a globally owned company, it is
imperative that the company have some sort of workplace diversity program. This
includes race, gender, religion, languages spoken, people with disabilities, etc. By
offering equal opportunity employment, Starbucks sets the standards for the coffee
industry. This impacts all levels of management. If the first-line managers are responsible
for hiring, they should be educated on the need for diversity.

P1-4. Give examples of how Howard Schultz might perform the interpersonal roles, the
informational role, and the decisional roles.

To answer this question, I will use the same example for each, found in the textbook.

Interpersonal roles: Howard Schultz performed interpersonal roles when he wrote the memo,
“espresso shot heard round the world.” In this memo, he reached out to his top managers,
effectively communicating his concerns.

Informational role: The “espresso shot heard round the world” memo could also be used to show
how Howard Schultz performed the information role. The informational role consists of
collecting, receiving, and disseminating information. When Schultz collected and received data
showing that customer traffic had begun to fall, he disseminated that information to the top
managers.

Decisional role: Decisional roles entail making decisions/choices. Howard performed this role
when he decided to return to Starbucks as the CEO. After seeing the negative changes that
occurred when he stepped down as CEO, he found it best to return to rectify the situation.

P1-5. Look at Howard Schultz’s philosophy of Starbucks. How will this affect the way the
company is managed?

“We aren’t in the coffee business, serving people. We’re in the people business, serving coffee.”
This affects the way the company is managed greatly. The goal of the organization is not to serve
coffee and simply make a profit. It is much more than that. They are in the customer service
industry. The goal of the organization is to provide a great experience unlike any other similar
establishment. The main goal is great customer service, the second goal is great coffee!

P1-6. Go to the company’s Web site [www.Starbucks.com], and find the list of senior
officers. Pick one of those positions and describe what you think that job might involve.
Try to envision what types of planning, organizing, leading, and controlling this person
would have to do.
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Scott Maw – executive vice president, chief financial officer

As a chief financial officer, Scott is most likely responsible for all financial report, including
financial risks, financial planning, and financial status. He is most likely responsible for
forecasting the company’s finances and strategizing future financial decisions.

Planning – a chief financial officer may be responsible for the strategic planning of the
company’s finances and future financial decisions
Organizing- a chief financial officer must have organized records of past and present financial
standings

Leading- a chief financial officer may be responsible for relaying the financial information to the
CEO and the individual owners, making recommendations on how best to achieve the company’s
future goals

Controlling- a chief financial officer usually oversees an accounting department. A chief

financial officer must ensure that the department is accurately reporting all financial information.

P1-7. Look up the company’s mission and guiding principles at the company’s Web site.
What do you think of the mission and guiding principles? Describe how these would
influence how a barista at a local Starbucks store does his or her job. Describe how these
would influence how one of the company’s top executives does his or her job.

“Our Mission: To inspire and nurture the human spirit – one person, one cup and one
neighborhood at a time.”

“Our Values: With our partners, our coffee and our customers at our core, we live these values:
Creating a culture of warmth and belonging, where everyone is welcome.

Acting with courage, challenging the status quo and finding new ways to grow our company and
each other.

Being present, connecting with transparency, dignity, and respect.

Delivering our best in all we do, holding ourselves accountable for results.

We are performance driven, through the lens of humanity.”

I think that the mission statement and the company’s core values are what sets them apart from
other coffee shops. They make it clear that the customer is their number one priority. These core
values would influence a barista at a local Starbucks store to do his or her job with the customer
in mind. They must be possess the proper interpersonal skills to ensure that the customer leaves
the store happy. The mission statement and core values would influence the CEO to be aware of
what happens on all levels of the organization, keeping these values in mind. When Howard saw
that these values had slowly faded, he decided to return as CEO.
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P1-8. Starbucks has some pretty specific goals it wants to achieve (look ahead to Part 3 on
page 285 for these company goals). Given this, do you think managers would be more likely
to make rational decisions, bounded rationality decisions, or intuitive decisions? Explain.

I think that, with Starbucks specific goals in mind, managers would be more likely to make
rational decisions with a mix of intuitive decisions. Rational decisions are choices that are
logical, consistent, and maximize value. Intuitive decisions are based off of experience,
emotions, data, ethical values, and past decisions. Starbucks has outlined several specific goals it
wants to achieve. I think it is important to have managers that think rationally, keeping in mind
these specific goals in order to maximize value. On the other hand, for example, store managers
may use intuitive decisions based off of their knowledge and past experiences.

P1-9. Give examples of decisions that Starbucks managers might made under conditions of
certainty. Under conditions of risk. Under conditions of uncertainty.

Conditions of certainty: A manager realizes that the supply of pumpkin flavored coffee is
running low. This flavor is popular during this time of year. The manager decides to order more
of this product. In this situation, all possible outcomes are known.

Conditions of risk: The Starbucks establishment is located in a predominately Jewish

neighborhood. The customers have requested a line of kosher cake pops. The manager, based off
of this knowledge, is fairly certain a line of kosher products would sell in this store. He or she
decides to order three flavors of kosher cake pops.

Conditions of uncertainty: Opening a new Starbucks location in an uncertain, uncharted area may
be an example of decisions made under conditions of uncertainty. If they do not know how
economical stable the neighborhood is, whether or not the neighborhood can/would purchase
Starbucks products makes for an uncertain decision.

P1-10. What kind of decision maker does Howard Schultz appear to be? Explain your
answer.

I think that Howard Schultz has a nonlinear thinking style. Nonlinear thinking style is a decision
style characterized by a person’s preference for internal sources of information and processing
this information with internal insights, feelings and hunches. When Howard walked into the
coffee shop in Milan, he had a gut feeling that the concept would work in the United States. He
said that it brought about a certain emotion, making customers feel as if the coffee shop were an
extension of their front porch. It was then that Schultz approached the owners of Starbucks with
this great concept. When they declined, he started his own espresso bar. Shortly after, Starbucks
wanted to sell and Howard Schultz bought them. All of this occurred on a hunch that he had in
that little espresso bar in Milan.

P1-11. How might biases and errors affect the decision making done by Starbucks
executives? By Starbucks store managers? By Starbucks partners?
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Biases and errors might affect the decision making done by Starbucks executives, managers, and
partners in a negative way. For example, an overconfident executive may want to implement a
program on the store level that they feel is beneficial to the company. When they implement this
program, confident in their decision, and the program turns out to be unsuccessful, the store
managers are left to deal with the consequences of the executives actions. Moreover, the partners
of Starbucks may suffer when their profits decrease.

P1-12. How might design thinking be important to a company like Starbucks? Do you see
any indication that Starbucks uses design thinking? Explain.

Design thinking is approaching management problems as designers approach design problems.

Design thinking influences how a manager identifies a problem and evaluates the alternative.
Design thinking is crucial to a company like Starbucks. I have seen indications that Starbucks
uses design thinking. For example, a Barnes & Noble book store in my area had a small satellite
Starbucks. This location had approximately 3 small, round tables with barstool chairs. Upon
opening, this small satellite store was packed with customers drinking coffee, reading books, and
typing papers on their laptops. Unfortunately, due to the lack of seating, customers began to sit
on the floor. In addition, there were no outlets to charge their devices, so customers made their
way through the Barnes & Noble store to find a power source. Shortly after, a simple solution
was found to help alleviate this problem. Starbucks rearranged the seating, added a few more
chairs and tables, and extension cords to allow for more charging capabilities. Customers
instantly took notice and flocked to this location.
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References

Robbins, S.P., & Coutler, M. (2013). Management (13th ed.). Upper Saddle River, NJ: Pearson

Prentice Hall. ISBN-10: 0133910296 ISBN-13: 978-0133910292

Lukac, M. (n.d.). The 5 Most Prominent Management Trends of the 21st century. Retrieved

September 03, 2016, from http://www.ibtimes.com/5-most-prominent-management-trends-21st-

century-271373

Starbucks – The Best Coffee and Espresso Drinks. (n.d.). Retrieved September 03, 2016, from

http://www.starbucks.com/