Company Overview

What do Captain Ahab and Howard Schultz have in common? Well, let’s hope nothing more than a connection to the first mate in Herman Melville’s Moby Dick, the character after which the coffee empire was named. Spoiler alert: In the final chapters of Moby Dick, the captain goes down with the whale. As America's largest coffee retailer, Starbucks is to retail coffee what Gap is to retail clothing. Both companies enjoyed enormously profitable growth for several years, before hitting the kind of giant snag that requires a strategic overhaul. Starbucks opened in 1971 in Seattle’s Pike Place Market as Starbucks Coffee, Tea and Spices, with a mission to establish itself as the go-to supplier of fine coffee in the world without compromising its values along the way. The company grew from four stores in 1987 to more than 15,000 in 2007, seemingly popping up on every other corner as it spread to all 50 states and 42 other countries.

The company went public in June 1992 at $17 per share and closed its first day at $21.50 per share. As part of its continuous growth, Starbucks diversified beyond its retail stores—selling its beans and other products to supermarkets, restaurants, businesses, airlines, and hotels through a mail-order catalog and over the Internet. It constantly experiments with new retail offerings in its stores, and even tried to produce and sell a Starbucks-branded magazine. In one of its most successful ventures, Starbucks went from selling albums by Bob Dylan, Ray Charles, and other well-known artists at the front of its stores to opening its own musical label in March 2007: Hear Now. The first musician to release an album on the chain's label? Sir Paul McCartney.

But despite the company’s wild popularity and continuous sales increase, Starbucks executives have publicly acknowledged a recent struggle to maintain the level of service customers once expected as the number of stores soared in the United States and internationally. In the process of its tremendous growth, the company went from a unique coffee shop in Seattle to one of McDonalds’ and Dunkin Donuts’ primary competitors.

In January 2008, former Starbucks CEO Howard Schultz announced his return to power in the form of CEO Jim Donald’s replacement, and launch a new strategy for growth that includes new products and design elements and new training and tools for store partners. Starbucks will also slow the pace of U.S. store openings and fold stores considered underperformers, Schulz said, as the organization re-aligns though streamlined management and a larger investment in its global business. (The company announced a week later it formed a new partnership with Naked Juice to sell the all-natural product in its stores, and opened its first store in the Czech Republic the same month.) Schultz’s move sparked a flood of reports and predictions about whether his return could save the troubled coffee and food service chain from the threat of an increasing number of McDonalds locations equipped with baristas and specialty coffee drink menu. Schultz served his first tenure as CEO from 1987 to 2000, leading the company into success as it went public and became somewhat of a cultural icon known as much for its complex drink titles as treating its employees well. But as Schultz explained in a memo to employees, the company began to lose its connection with consumers as the number of stores rocketed from four to more than 15,000. Schultz, considered the architect of the Starbucks brand, started his career with the company when it operated only four stores with a small base of employees focused on creating a unique, inviting environment for customers.

One of the areas Starbucks has remained committed to during its lifetime is that of social responsibility by contributing positively to its communities (although some independent coffee shops and their devotees might protest that company statement), and working with coffee farmers to minimize its environmental impact. The company stated that in 2006, it donated $36.1 million in cash and products, volunteered 383,000 hours through its volunteer program Make Your Mark, quadrupled its renewable energy purchase to equal 20 percent of the energy use in its company-operated stores in the United States and Canada, and introduced the first-ever paper cup made with 10-percent post-consumer recycled fiber, reducing its wood use by the equivalent of 78,000 trees. Another aspect Starbucks focuses on as part of its corporate social responsibility is the treatment of its employees, who receive benefits even as part-timers. The company ranked in the top 100 on Fortune's "Best Places to Work" list in 2007.