Organizational leaders have a pivotal role in the direction and success of their companies. They not only set goals and objectives, but also design appropriate strategies, implement them, and motivate employees to effectively execute their responsibilities, to guarantee the achievement of the goals. Additionally, they are firms’ agents of change since they manage organizational processes. They constantly review and reevaluate prevailing issues in the market such as customers’ expectations and competition and adopt policies to alter their business model accordingly. I feel Howard Schultz is an example inspirational leader since he had an instrumental role in changing Starbucks’ direction when the company was on the verge of bankruptcy during the great recession.
Challenges Faced By Starbucks and How Schultz Addressed Them
Starbucks is one of the most respected brands in the United States and across the world. The company expanded its operation in various states in the US and other countries since its inception in 1971(Valet, 2019). However, the global recession of 2007-2009 negatively impacted Starbucks like other businesses due to various reasons (Valet, 2019). While the quality of Starbucks’ products is unquestionable, the price has been always higher compared to what other domestic coffer houses offer in different nations.
For this reason, the firm was significantly affected by the economic slowdown because most customers opted for a cheaper coffee. Consequently, Starbucks closed more numerous stores in the US during the period and dismissed a significant number of workers.
The strategy adopted by previous leadership and competition also contributed to the problems faced by Starbucks. The rapid expansion policy also distracted the company from making the company’s stores more inviting with new products, apart from the worsening economic condition. Equally, McDonald’s, one of the firm’s competitors, started setting coffee bars across the US in 2008 and offered espresso to the customers (Valet, 2019). Therefore, these factors contributed to Starbucks losing customers and reducing its profits. However, Schultz’s resumption of the company’s leadership positively changed its direction and it rebounded from a financial crisis.
Unlike such conventional strategies redesigning and renovation of stores, Schultz opted for a technology-oriented approach to ensure Starbucks started making profit again and establish a strong relationship with its customers as well as employees. He developed a community involvement concept to establish an environment where workers could freely think about the company and contribute ideas and strategies. Schultz started the “My Starbucks Idea” and “MyStarbucksSignature” initiatives to directly link customers with the company and allow them to exchange ideas through social media (Husain et al., 2014).
As a result, the consumers made opinions on products, layout, services, corporate social responsibility, advertisement, and others through “My Starbucks Idea”, of which the company implemented a significant number of the ideas. Additionally, the inventiveness enables Starbucks to inform its customers about various products they offer across all stores internationally. While “My Starbucks Idea” was an instrumental strategy for understanding customers’ needs and concerns, “MyStarbucksSignature” established an interactive experience in product creation.
Schultz also developed a marketing strategy that helped the company reach more customers. The marketing team started social media promotions to increase the rate of customer visits during breakfast hours (Husain et al., 2014). The approach was effective and less expensive than installing billboards across cities on-store promotions. Additionally, Schultz’s leadership ensured that the company embraced mobile apps that appeal to the online community and enhance its relationship with social media users. Undeniably, the technological approach adopted by Schultz saved Starbucks from collapsing and helped the company regain its competitiveness in the global market.
Relationship and participative theories are the leadership concepts that Schultz applied successfully and positively change Starbucks’ direction. The relationship theory explains leaders who accentuate effective interaction with others (Iqbal et al., 2019). The technological approach adopted by Schultz not only facilitated more interaction with the customers, but also the employees from different parts of the world. This strategy created a positive work environment and enhanced workers’ and buyers’ confidence with the leadership. Additionally, it helped Schultz understand and meet the needs of the customers as well as those of his employees, whom Starbucks refers to as “partners.” Consequently, the company’s productivity and sales increased, and it started making a profit again.
Conversely, the participative theory focuses on leaders who embrace the involvement of stakeholders in decision-making. According to the theory, leaders facilitate conversation and welcome opinions, ideas, and suggestions to make the best possible decision (Hayat Bhatti et al., 2019). Schultz’s technological approach established a platform where employees and customers gave their opinions and ideas about products, layout, services, and others related to the company’s operations, helping him to make the best decision. As a result, workers and consumers felt valued, motivated, and that they owned the company since they were directly involved in Starbucks’ decisions and outcomes.
In conclusion, organizational leadership influences both company’s direction and success level. I believe leaders are firms’ agents of change because they manage processes by setting goals and objectives and adopt various strategies to achieve them. Howard Schultz, the former Starbucks CEO, is the leader whom I feel is inspirational since he helped change the enterprise’s direction when it was about to collapse due to a financial crisis. He used a technological approach to focus on customer needs, develop new products, and establish an enjoyable working environment while minimizing operational costs. Schultz’s tactic in addressing Starbucks’ problem portrayed the application of relationship and participative theories of leadership.
Hayat Bhatti, M., Ju, Y., Akram, U., Hasnat Bhatti, M., Akram, Z., & Bilal, M. (2019). Impact of participative leadership on organizational citizenship behavior: Mediating role of trust and moderating role of continuance commitment: Evidence from the Pakistan hotel industry. Sustainability, 11(4), 1-21. Web.
Husain, S., Khan, F., & Mirza, W. (2014). How Starbucks pulled itself out of the 2008 financial meltdown. Business Today. Web.
Iqbal, S., Farid, T., Khan, M., Zhang, Q., Khattak, A., & Ma, J. (2019). Bridging the gap between authentic leadership and employees communal relationships through trust. International Journal of Environmental Research and Public Health, 17(1), 1-14. Web.
Valet, V. (2019). Howard Schultz teaches you how to be a leader in a crisis. Forbes. Web.