Introduction
The beginning of the economic crisis of 2008 significantly affected all businesses throughout the country, and this event influenced the companies involved in international operations in the first place. For example, Starbucks faced challenges stemming from the emerging hardships expressed by financial losses and wrong strategic choices, deteriorating its overall position in the market (Ng, 2018). However, the managers’ external circumstances were not the most critical considerations since the existing problems in Starbucks’ activity were added to the new issues. The failure to adhere to the company’s original vision related to providing not simply a product but valuable experiences led to difficulties in overcoming the crisis (Bezek, 2018). From this perspective, the analysis of all conditions as of 2008 is required to demonstrate Starbucks’ capability to survive in the future.
The Company During the Economic Crisis of 2008
During the economic crisis of 2008, Starbucks’ managers were reported to struggle with maintaining operations while the consequently developed policies allowed eliminating the threat. Thus, coping with the alarming situation was possible with the interventions of CEO Howard Schultz, who decided to return to their rescue after leaving the company in the 2000s (Bezek, 2018). He criticized the ideas implemented in his absence as they contributed to the hardships more than the global recession caused by the crash of the banking system, which caused the mentioned problems (Ng, 2018). Apparently, housing issues as the precondition for the crisis were critical; nevertheless, the internal issues related to inappropriate strategies were determining for the business’ capability to survive.
In order to successfully deal with these circumstances, he suggested introducing a number of changes corresponding to the identified issues. First, it was intended to remain relevant to the customers by shifting focus from the necessity to maintain the operations of numerous stores to the establishment of quality standards through the training of personnel (Ng, 2018). This measure was implemented by closing 7,100 selling points in February 2008 and elaborating the programs for baristas (Ng, 2018). Second, the expansion of the business to foreign markets was stopped as a high degree of unpredictability of such strategic courses did not contribute to efficiently managing the operations (Bezek, 2018). Third, the need for simplifying the menu was urgent as this factor was vital for decreasing the popularity of coffee as the main product. It was equally addressed by Schultz suggesting to focus on the drinks instead of “meat and cheese sandwiches” (Bezek, 2018, para. 8). In this way, overcoming the obstacles to profitability took significant amounts of time but helped Starbucks to remain competitive in the long run.
Microeconomic Implications
The main indicator concerning the effects of the examined crisis on Starbucks is related to its significant financial losses during this period. According to De Silva (2020), the continuous growth since 1991 was replaced by the decrease in revenue “from $10.38 billion in 2008 to $9.77 billion in 2009” attributed to this event (para. 5). The scholar mentions the cause of this occasion which is “reduced consumer spending” in target markets, while claiming that this factor was connected to other essential conditions (De Silva, 2020). Thus, the recovery was accompanied by specific microeconomic implications, including low demand, poverty of the population, and high inflation (De Silva, 2020). These phenomena were complemented by the increase in unemployment caused by the novel policies of Starbucks when reducing the number of stores mentioned above. At the country level, it reflected the conditions which triggered the specified microeconomic issues and exacerbated the situation of Starbucks by negatively affecting its image. In addition, the impossibility of selling coffee drinks and the growing costs of already pricy products contributed to the challenges the company faced in eliminating the risks related to the economic crisis of 2008.
Starbucks’ Immunity
Another characteristic determining the capability of Starbucks to remain competitive on the market during adverse economic events is whether it is immune to them or not. As follows from the data regarding the crisis of 2008, this aspect presents a threat to the business as, according to the previous claims of Schultz (Ng, 2018). The CEO stated that “it needs to do is what every surviving brand needs to do,” meaning that the company is not exempt from the negative consequences of the described shifts in economy (Ng, 2018, para. 50). The actions of its managers discussed in the sections above show that Starbucks’ survival is conditional upon the successes of the team in timely addressing critical issues. They are mainly connected to the adherence to the core principles of the company, including the initiatives to maintain its image as a brand providing a high-quality experience instead of simply brewing coffee (Ng, 2018). Moreover, the development and practical implementation of new ideas linked to expansion to international markets and opening new stores are to be taken into account to guarantee that they do not contradict the environmental conditions.
Performance After the Crisis and Its Implications
Once the crisis ended, the performance of the company significantly improved as the measures developed by Schultz were feasible from the perspective of increasing demand by eliminating the problems previously existing in the company. At first, the financial losses were high considering the preceding period of prosperity, but plummeting of stock prices by half were compensated for by restoring brand credibility (Ng, 2018). This outcome of achieved through readjusting the overall strategic course as per the suggestions of the CEO (Bezek, 2018). In this way, the global recession of the time showed that regular operations were key to survival.
Moreover, this experience of Starbucks proved that risky moves are attributed to the primary factors preventing the business from growth in the long run. In the case of economic crises, it was reported to have detrimental consequences on Starbucks’ activity by taking unnecessary steps aimed at increasing profits as these decisions add to the difficulty of overcoming these obstacles (Bezek, 2018). Hence, the implications of the events of 2008 for the future include the requirement of carefully planning the distribution of available resources to ensure the capability to survive in the long run. In addition, Starbucks should pay more attention to customer response to innovation to timely trace the buying patterns and introduce necessary changes.
Conclusion
In conclusion, the decisions of Starbucks during the economic crisis of 2008 serve as evidence of its capability to maintain its activity regardless of external threats. They allowed the business to not only effectively readjust to the emerging conditions negatively affecting the financial aspect but also develop an appropriate strategic plan for the future. The involvement of Howard Schultz in the process confirmed the value of the experience for this purpose. Even though microeconomic circumstances were not favorable for an optimal outcome, the elaboration of suitable measures helped Starbucks to survive. The company was not immune from the hardships, but the improved performance after the described events provided a solid basis for managing similar occasions in the long run.
References
Bezek, I. (2018). 3 big reasons Starbucks Corporation stock has lost its buzz. Investor Place. Web.
De Silva, D. (2020). Starbucks: Lessons from the financial crisis. Seeking Alpha. Web.
Ng, D. (2018). How Starbuck’s growth nearly destroyed the business, until one man saved its skin. Channel New Asia. Web.