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‫‪Starbucks: Crisis Management Analysis‬‬

‫‪Report 2018‬‬

‫‪Gauri Shukla‬‬

‫‪Social Media Marketing Consultant and SoulUp Peer‬‬

‫‪ ٦‬مقال متابعة‬
‫‪ ٣٠‬يوليو ‪٢٠١٩‬‬
Immersive Reader ‫فتح‬
 Photo by Adrianna Calvo from Pexels

Company Overview

Starbucks corporation, founded in Seattle, Washington in 1971 is an American coffee

company with about 28,000 operating locations worldwide. Starbucks is considered a
representative of the second wave of coffee wherein customers desired to know the roast type
and different origins of the coffee they consume. Coffee became more than just a drink and
the wave of specialty coffees kicked in. Starbucks provides a wide range of specialty coffees
.and recently introduced a line of specialty teas to adhere to the new wave of tea drinkers

Source: www.statista.com; Revenue in billion USD

The figure above represents the revenue of Starbucks from 2012 to 2018 by region (in Billion
USD). With growing operations worldwide, Starbucks derives about 30% of their income
from China/Asia Pacific and EMEA. Despite being exposed to cultural norms across the
.globe, Starbucks faced a racial discrimination issue in Pennsylvania in April 2018

Context and Background of the Crisis

In April 2018, a Starbucks employee called 911 and reported two men standing in Starbucks
without placing an order. The employee felt suspicious because the two men were dark
skinned. The two men were arrested and escorted out of the coffee house. The incident was
captured on camera and made viral causing a havoc by protests demanding a response from
.Starbucks
 Within two days, the police department and the Mayor’s office launched separate
investigations to inquire if the incident was an outcome of a racial bias. During the
investigation, it was revealed that the two men who were arrested were waiting for a real
.estate investor who was supposed to meet them for a meeting at Starbucks

Eventually, in the next two days, there were heavy protests outside Starbucks in Philadelphia
where the incident took place. It had been four days since the incident and there was no
action taken against the store manager who accused the two men of trespassing. After the
protests, the manager voluntarily quit. Subsequently, a video of a dark-skinned male who was
denied entry to use the restroom right after a light skinned male at Starbucks in California
went viral. Starbucks was now accused of two racial discrimination incidents from both
.coasts in the United States

Analysis of the Crisis Management and Communication

Initial Response: Two days after the incident, the CEO of Starbucks, Kevin Johnson,
apologized to the two men who were arrested and promised to take appropriate action to
remedy the situation. However, the initial apology did not address racial discrimination and
action against the store manager resulting in multiple protests. Starbucks provided with a
vague response and included that they are engaged in the investigation led by the police
department which indicated that Starbucks is not taking responsibilities until the investigation
.is complete

Second Response: Three days after the first response, Starbucks deeply analyzed the situation
and realized the magnitude of the issue. A sincere apology would not suffice in this situation.
Hence, Starbucks announced that they would be shutting down about 8000 locations on May
29, 2018 and conduct a training session for 175,000 employees. The agenda and contents of
the training session were to be drafted by a wide range of experts to counter racial bias.
Starbucks took a great leap and took appropriate action which party made up for the delay in
responding to the situation. By shutting down almost all the locations to conduct training for
their employees on the issue of racial discrimination, Starbucks sent a message that they are
 taking strong actions against the two racial discrimination incidents that took place in
Philadelphia and California respectively. Subsequently, Kevin Johnson, the CEO of
Starbucks, released a video statement and scheduled interviews with the media to discuss the
.situation and the action plan

Third Response: A day after the press release, in an interview with CBS, the executive
chairman of Starbucks, Howard Schultz, mentioned that he was ashamed of the
incident. More members of the executive team communicated with the media and provided
statements of regret. Starbucks stood together during this duress and functioned as a team to
convey their regrets and their action across all possible platforms including digital, mass and
social media. The CEO also met with the two men who were arrested and offered to cover
.their tuition at the Arizona State University, where they were studying

Fourth Response: On May 29, Starbucks closed over 8000 locations as promised and
conducted a four-hour training to combat racial discrimination incidents and encourage
employees to be more sensitive to the customers. Starbucks suffered a loss of $16.7 Million
in retail sales that afternoon. Starbucks was greatly applauded for the grand gesture across the
.globe

Analysis and Critique

The overall action plan developed by Starbucks managed to retain the trust of their customers
and the community by providing a grand gesture of closing over 8000 locations to train the
employees against racial discrimination. Having said that, Starbucks was not prepared for a
crisis. Three days after the incident, they provided an initial response to the situation with an
.insufficient apology further enraging the customers and the community

The initial response received massive criticism but the bold plan of action demanded
appreciation from crisis management teams in varied fields. Starbucks was witnessing a
downward spiral by the time they provided a concrete solution to the problem. Starbucks is a
huge company, they could have opted for an easier remedy of the situation; however, they
developed a strong action plan that positively contributed to the Starbucks employees,
.customers and the community

Starbucks took responsibility for their action, honestly responded to all the questions and
developed a generous action plan to make a difference in the community as a whole.
Although Starbucks could have provided a stronger initial response, they sounded honest and
genuine. The crisis management and communications team at Starbucks potentially
succeeded in maintaining the trust of the stakeholder, employees, customers as well as the
.community

Furthermore, Starbucks acted responsibly during the aftermath of the crisis situation. They
conducted training at the designated date that was promised. Once Starbucks declared an
action plan, they gained confidence and became more transparent about the situation and the
measures they are taking to remedy the situation. They incurred a substantial loss in sales
when they conducted training and additionally provided the two accused men sponsorship for
their education. Starbucks went above and beyond to take corrective action for the incident
that took place in Philadelphia. They showed the public, media and the protesters that they
care and they want to make a difference in the community. By hosting a training session
across the United States, Starbucks also addressed an ongoing social issue of discrimination
 and how they would like to be proactive by training all their employees to help the social
.cause

Advising

If I were on the advising committee for the issue, my first advice would be to address the
issue as soon as the incident happens. Starbucks took three days to provide an initial response
which was ineffective in terms of content and enraged the public rather than providing
comfort. Hence, the first response should be given within a few hours of the incident clearly
addressing the situation and comfort the media that Starbucks is in conversation with the
investigation department and will be providing a plan of action once more clarity is derived
from all the members involved in the incident. In a few days, once more clarity is derived
regarding the innocence of the two accused men, I would have advised Starbucks to provide
with a statement mentioning that they would take appropriate action against the manager who
.practiced discrimination

In addition to the press releases and two official statements from the CEO, I would encourage
the CEO to have a conversation with the accused as soon as they were cleared of all charges.
This gesture would portray that Starbucks is genuinely affected by the incident and is
proactively apologizing during the first chance they get. The protests were a result of the lack
of response from Starbucks, inefficiency in timely action and, reports that suggested that the
victims were gravely affected by the incident. The second response and the immediate meet
.with the victims would have prevented the protests that lasted for a few days

The action plan developed by Starbucks thereafter was a grand gesture towards the accused
victims and the community. Starbucks portrayed a very strong message. They highlighted the
fact that they will tolerate a significant loss of sales revenue nationwide but they will tolerate
social injustices. With one action plan, Starbucks managed to regain the confidence of the
public and address a social issue of discrimination which has resurfaced in the past few years.
For the day of the training, I would have advised the committee to utilize platforms like live
tweeting and life feed to capture the content covered by the Starbucks at the training session
to maintain further transparency. A few testimonials by the attendees of the program and
CEO would have been a good representation of the success of the event and how it has
.impacted the trainees

Summary

Starbucks was not prepared for a crisis situation, a mistake many organizations tend to make
due to the lack of necessity to develop a plan of approach. Starbucks showed that they
genuinely cared about the cause when they released an action plan developed by the
organization; however, since they were not prepared they could not attend to the situation
promptly and professionally. Hence, it is imperative for companies to develop a plan of
approach in case of a crisis. More importantly, constant communication is advised before,
during and after a crisis situation. Starbucks intended for the best; however, their lack of
.communication gave rise to distrust amongst the customers, general public as well as media

Hence, the key takeaways from this report are that planning, communication, timeliness and
.effective content are very crucial for any organization before, during and after a crisis

References
 Astley, Graham. “Structural Sources of Intraorganizational: Power: A Theoretical
Synthesis.” Academy of Management | Home, 1 Jan. 1984,
.journals.aom.org/doi/10.5465/amr.1984.4278071

Czarnecki, Sean. “Timeline of a Crisis: Starbucks' Racial Bias Training.” PR Week, July 6,
.2018 www.prweek.com/article/1486260/timeline-crisis-starbucks-racial-bias-training

Stewart, Emily. “Starbucks Says Everyone's a Customer after Philadelphia Bias

Incident.” Vox.com, Vox Media, 19 May 2018,
www.vox.com/identities/2018/5/19/17372164/starbucks-incident-bias-bathroom-policy-
.philadelphia

Black Men Arrested at Philadelphia Starbucks Feared for Their Lives.” The Guardian,“
Guardian News and Media, 19 Apr. 2018,
www.theguardian.com/business/2018/apr/19/starbucks-black-men-feared-for-lives-
.philadelphia

Starbucks: Revenue Worldwide by Region 2018 | Statistic.” Statista, Statista, 2018,“

./www.statista.com/statistics/572306/net-revenue-of-the-starbucks-by-region-worldwide

‫تقديم تقرير عن هذا‬

‫تم النشر بواسطة‬

Gauri Shukla
Social Media Marketing Consultant and SoulUp Peer
‫ أعوام‬٤ • ‫تم النشر‬
‫ مقالمتابعة‬٦
Starbucks had a bitter sweet year in terms of crisis management in 2018. They are heavily
expanding in Asia, specifically in India, in 2019. Considering inclusion of more cultures, here
is a recap of the highlights and drawbacks along with a few suggestions for improving the
.Crisis Management strategy adopted by Starbucks in 2018

: ‫المصدر‬

/https://www.linkedin.com/pulse/starbucks-crisis-management-analysis-report-2018-gauri-shukla