Starbucks: global brand in emerging markets

Praveen Gupta, Ankita Nagpal and Diksha Malik

Praveen Gupta is based at Department of Marketing, Lal Bahadur Shastri Institute of Management, Delhi, New Delhi, India. Ankita Nagpal is based at the Department of Marketing and Operations, Lal Bahadur Shastri Institute of Management, Delhi, India and Deloitte, Gurgaon, India. Diksha Malik is based at the Department of Marketing and Operations, Lal Bahadur Shastri Institute of Management, Delhi, India and Asian Paints Limited, Delhi, India.

In March 2017, Howard Schultz attended the last shareholders meeting as Chief Executive Officer (CEO) of Starbucks Corporation. The meeting was full of patriotic fervor, and it ended with handing over the company’s reins to his successor, Kevin Johnson. The audience also saw the emotional gesture regarding Schultz handing over to Johnson the key of the company’s first store at Seattle’s Pike Place Market, which he always carried with him over the past 35 years. The leaders talked fervently about core values, principles and compassion which helped the corporation over four decades. Schultz after stepping down was destined to take the mantle of executive chairman. After April 3, 2017, he was planning to re-build Starbucks as the higher-end brand and ‘experiential destination. Schultz had resigned earlier also but ended up in stepping back in (Janet, 2017).

Post Schultz, Johnson had tough tasks ahead of him. He faced multitude challenges like cooler growth in Starbucks’ home market at the USA plus intense competition from rivals and managing massive expansion project in China (The Straits Times, 2017). During the past five years, Starbucks achieved significant growth in markets such as China but failed to replicate the same in the home market (Taylor, 2017). Since 2008, in the US market, same-store sales had been growing at its slowest pace. Investors’ expectations from Starbucks had fallen short of the mark in the last four quarters of the year 2016-2017. The revenue reached $21.3bn during the year, though 3 per cent annual growth in revenue was slowest in the previous five years (compounded annual growth rate, i.e. CAGR in the past five years was between 6 and 7 per cent). In general, most retailers faced a reduction in in-store traffic.I need to answer 7 questions