IIPM Ranked No. 1 B-School In Global Exposre - Zee...
Expansion proved a poison pill for Starbucks. Now for some silence!
Having wallpapered the world green with its ‘two star band and a crowned siren’ logo, having sold everything – from soft toys to CDs, having produced a box-office failure Akilah and the Bee, having bought a basketball team that never made it to the NBA, Howard Schultz, the globally renowned co-founder and current CEO of Starbucks Corp. has tried everything... besides selling coffee at a premium (does he still remember how to do it?)!
So how bad is the situation? Look at the plummeting share price on the NYSE and you’d never ask this question again. Its share price tanked to $14.95 on July 8, 2008 (even below the July 8, 2003 price of $15!) and its MCap has eroded by over 50% in the past year! And if you still thought that operational problems were far from reality, July 1, 2008 saw two announcements that proved optimists wrong – closure of 600 outlets in US (5% of US total) and a reduction of its workforce by 12,000 (a cut by 7%) explaining which, Schultz justifies, “The current economic environment is the weakest in our company’s history, marked by... rising costs that are directly impacting our customers.” But then, optimists also argue – “Starbucks is global, and the US problems shouldn’t have too many negative repercussions!” To put figures as alibi, 81% of its revenues (of $9.05 billion during FY ‘07-08) come from US alone! No negative effect? Really?!
Just two years ago, the company made tall claims of its thriving success story in US by opening two stores in one building in many locations (compromising on store location standards) and selling everything under one brand (dangerously misusing ‘umbrella branding’ concept). What’s more a slap, 70% of the stores that are destined to close were opened post-2005! Really, a strategic error! Competition is another issue, with McDonald’s and others coming out with affordable beverages as compared to Starbuck’s $4 standard foam latte.
Starbucks made a mistake by expanding too fast. For now, “Too many machines, spoil the coffee!” Burning a hole in customers’ pockets would only sound logical once recession is passé. And for that, expansions would have to wait.
Priyanka Rajpal
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
Read these article :-
B-schooled in India, Placed Abroad (Print Version)
IIPM in Financial times (Print Version)
IIPM makes business education truly global (Print Version)
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IIPM Campus
ZEE BUSINESS BEST B SCHOOL SURVEY
IIPM awards four Bengali novelists
The Hindu : Education Plus : Honour for IIPM
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IIPM Ranked No1 B-School in India
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Expansion proved a poison pill for Starbucks. Now for some silence!
Having wallpapered the world green with its ‘two star band and a crowned siren’ logo, having sold everything – from soft toys to CDs, having produced a box-office failure Akilah and the Bee, having bought a basketball team that never made it to the NBA, Howard Schultz, the globally renowned co-founder and current CEO of Starbucks Corp. has tried everything... besides selling coffee at a premium (does he still remember how to do it?)!So how bad is the situation? Look at the plummeting share price on the NYSE and you’d never ask this question again. Its share price tanked to $14.95 on July 8, 2008 (even below the July 8, 2003 price of $15!) and its MCap has eroded by over 50% in the past year! And if you still thought that operational problems were far from reality, July 1, 2008 saw two announcements that proved optimists wrong – closure of 600 outlets in US (5% of US total) and a reduction of its workforce by 12,000 (a cut by 7%) explaining which, Schultz justifies, “The current economic environment is the weakest in our company’s history, marked by... rising costs that are directly impacting our customers.” But then, optimists also argue – “Starbucks is global, and the US problems shouldn’t have too many negative repercussions!” To put figures as alibi, 81% of its revenues (of $9.05 billion during FY ‘07-08) come from US alone! No negative effect? Really?!
Just two years ago, the company made tall claims of its thriving success story in US by opening two stores in one building in many locations (compromising on store location standards) and selling everything under one brand (dangerously misusing ‘umbrella branding’ concept). What’s more a slap, 70% of the stores that are destined to close were opened post-2005! Really, a strategic error! Competition is another issue, with McDonald’s and others coming out with affordable beverages as compared to Starbuck’s $4 standard foam latte.
Starbucks made a mistake by expanding too fast. For now, “Too many machines, spoil the coffee!” Burning a hole in customers’ pockets would only sound logical once recession is passé. And for that, expansions would have to wait.
Priyanka Rajpal
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
Read these article :-
B-schooled in India, Placed Abroad (Print Version)
IIPM in Financial times (Print Version)
IIPM makes business education truly global (Print Version)
The Indian Institute of Planning and Management (IIPM)
IIPM Campus
ZEE BUSINESS BEST B SCHOOL SURVEY
IIPM awards four Bengali novelists
The Hindu : Education Plus : Honour for IIPM
IIPM ranked No.1 B-School in India, Management News - By ...
IIPM Ranked No1 B-School in India
Moneycontrol >> News >> Press- News >> IIPM ranked No1 B-School in ...
IIPM ranked No. 1 B-school in India- Zee Business Survey ...
» IIPM ranked No1 B-School in India :: Education, Careers ...
The Hindu Business Line : IIPM placements hit a high of over 2000 jobs
Deccan Herald - IIPM ranked as top B-School in India
India eNews - IIPM Ranked No1 B-School in India
IIPM Delhi - Indian Institute of Planning and Management New Delhi ...
domain-b.com : IIPM ranked ahead of IIMs
IIPM makes business education truly global-Education-The Times of ...
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