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Tuesday, June 10, 2014

Has Starbucks Weened Itself Off the Growth Drug? On an Alternative Strategy of Intensification over Diversification and Expansion

At one time, Starbucks was golden. “Everything Starbucks did in the past, more or less, had worked,” Howard. Schultz, the CEO, said in an interview in January, 2011 at the company’s headquarters. “Every store we opened was successful, every city, every country.” This led--not inevitably though seemingly so--to a phenomenal intoxicating growth in the number of stores. In 1987, Schultz bought Starbucks, which at the time had just six stores. By 1995, it had 677 shops, and by 2000, when he stepped down as CEO, it had 3,501. According to Schultz, “Growth had a life of its own — and that’s O.K., when you’re hitting the cover off the ball every time, but at some point, nothing lasts forever."  The New York Times reports that after decades of "breakneck expansion . . . tight-fisted consumers abandoned" the megachain's stores during the recession. Starbucks' overreaching under Schultz was thus exposed. Ironically, it was then, in 2008, that Schultz returned to Starbucks as CEO to keep it from becoming the target of a take-over or going bankrupt. Starbucks "ultimately closed 900 locations worldwide and cut $580 million in costs." Fortuantely, by April 2009, "same-store sales, though still down from a year earlier, were finally rising. By the holidays, they had turned positive." In spite of this turnaround, lest history repeats itself, is should be asked whether Schultz had been cured of his taste for the growth drug.

From: "Starbucks"