Hitt 13e Case Teaching Notes
Case 14: Driving Innovation and Growth at Starbucks:
From Howard Schultz to Kevin Johnson
Case Synopsis
Synonymous with premium coffee, Starbucks is one of the most admired companies in the
world. Over its 30+ years in business, the firm has earned top marks for quality, service,
management, innovation, and more. Starbucks was the brainchild of Howard Schultz, who
conceived of a chain of Italian-style espresso bars. He served as the firm’s CEO from 1987 to
2000 and again from 2008 to 2017 before turning the position over to Kevin Johnson.
Innovation in many forms at every level is one of the hallmarks of Starbucks’ organizational
culture. The firm is continuously devising new products and product variations, such as
seasonally themed coffee drinks, and it vigorously encourages both employees and customers
to make suggestions and share ideas. Starbucks also innovates on its in-store experience with
Learning Objectives
• Explain the importance of analyzing and understanding the firm’s external environment.
(Chapter 2)
• Define and describe the general environment and the industry environment. (Chapter 2)
strategy. (Chapter 8)
• Explore the determinants of national advantage as the basis for international business–
level strategies. (Chapter 8)
• Describe the three international corporate-level strategies. (Chapter 8)
• Discuss the value of strategic leadership in determining the firm’s strategic direction.
Strategic Issues and Suggested Discussion Questions & Answers
1. Explain how Starbucks has used factors in the demographic segment of the external
environment to create opportunities. How does it exploit these opportunities?
From the beginning, Starbucks’ CEO Howard Schultz had a clear picture of the firm’s ideal
customer base. These would include primarily younger to middle-aged people, such as students
Starbucks has exploited this opportunity by creating “destination” locations that reinforce that
sensation of affordable luxury. High traffic combined with quality products enabled the store to
grow its reputation by word of mouth in the early years. Stores are inviting and relaxing,
offering a “third place” outside the home or office where people can enjoy a good cup of coffee
2. Describe at least three of Starbucks’ resources and three of the firm’s capabilities.
Using the four criteria of core competencies, determine whether anything on your list
is a core competency.
Students’ answers to this question will vary, but they should be able to support their choices
with logical reasoning.
Brand recognition, reputation, and a powerful association with quality and consistency all top
These resources have led to strong capabilities in customer service and marketing; in
operations and human resources management; and in research, development, and production
(Table 3.3).
Analyzing each of these through the four criteria of valuable, rare, costly–to-imitate, and
nonsubstitutable, students will most likely conclude that Starbucks’ costly development of a
3. Which international corporate-level strategy is Starbucks using? Which mode of entry
is it using? Is this the best strategy for the firm? Explain your answer.
Starbucks is enjoying all of the benefits of engaging in an international strategy—dramatic
The transnational strategy is definitely the right strategy for this firm. If it were to switch to a
multidomestic strategy, with decentralized strategy and operational decision making, the
4. How would you describe Starbucks’ organizational culture, and how did Howard
Schultz implement this culture?
The case brings out several important qualities in Starbucks’ organizational culture. First and
foremost is an entrepreneurial mind-set that encourages and embraces new ideas, inventions,
5. Identify at least three different examples of innovation within Starbucks, and explain
how these innovations add value to the firm’s customers.
Innovation is one of the core values at Starbucks, and examples of innovation can be seen in
many areas so students will have many possible answers to choose from. In terms of products,
Additional Resources
Reuters’s company profile gives in–depth background on Starbucks’ current financials,
leadership, valuation, news, and more:
Store remodeling was the subject of this March 2019 CNN Business article:
Australia’s rejection of the Starbucks’ brand was featured on CNBC in July 2018: