Starbucks As A Private Company Case Study

STARBUCKS AS A PRIVATE COMPANY
From 1987-1992

Phua Li Jean
Abu Bakar Cik

3 April 2017
Summary of the Case:
Before Starbucks became a public company in 1992, the company had faced challenges with the employees as well as the management. As a result to balance and satisfy both the employees and management , Howard Schultz, the current CEO of Starbucks tried different solutions to favour both sides. Besides that, when the management decided to expand Starbucks’ by introducing it into the markets outside the Pacific Northwest, the stock market crashed and a few other problems occurred.

Problem:
Starbucks’ primary problem in this case would be the changes in the employee’s commitment to the company when it became a private company

First of all, the part time employees at Starbucks began requesting for extended healthcare benefits as they thought the provided healthcare benefits were insufficient. This was an issue as two thirds of Starbucks’ workforce is accounted to the part-time employees. If these employees did not feel they were cared for properly by their employers, they might end up leaving the company and releasing them would also be costly. The cost of healthcare during this period was also on a constant rise so it was very important for these employees. Furthermore, Starbucks had difficulties when they tried to expand their company and introduce it to outside the Pacific Northwest such as in cities like Chicago, Illinois and Portland Oregon. When Starbucks entered the Chicago market, they had issues gaining customers in their stores. This was partially caused by the insufficiency of experienced store employees and managers. Costs also impacted the expansion of the brand. The cost of supplying coffee to the Chicago stores were also part of the issue as it was costly. The rent and wage rates were also higher in Chicago than in other states. Another problem that Starbucks had to persevere is the requests of drinks made with nonfat milk from customers. The idea of serving nonfat milk at Starbucks was not accepted by Howard Schultz as he stated that would not represent the company. Howard Schultz realised that nonfat milk

This reduces the cost of employees health-care benefits for the company because it is cheaper.

The insurance plan might only cover a range of diseases or injuries and employees will not be able to receive further coverage on any other sickness or injuries that is not covered by the insurance.

Summary
Both the management and employees would most likely accept this solution, because it favours towards both the company expenses and the employees’ satisfaction. If the employees are happy, they will have a good attitude which promotes their customer services towards customers in a lively way, this would attract more customers to the company.

3. Starbucks has business however the company is not making profit, this is because they have a high cost of production.The company can lower their cost of production regarding their durable products like the coffee cups, straws etc. As for non-durable products, the company can reduce on purchasing too expensive dairy products and coffee