Locus of Control

“Starbucks is now struggling with the most serious crisis in its history... Last year Starbucks' share-price fell by 42%, making it one of the worst performers on the NASDAQ exchange. In the last quarter of 2007 Starbucks recorded its first ever year-on-year decline in customer visits in America, easily its biggest market. When analysts at Bear Stearns, an investment bank, downgraded the firm's shares on January 2nd, they plunged by another 12%. This sealed the fate of Jim Donald, the chief executive since 2005. On January 7th the company said it would replace him with Mr Schultz, who stepped aside in 2000 to become chairman.

“Mr. Schultz is not trying to pass the buck. His company is in trouble, and much of it is self-inflicted. ‘I'm here to tell you that just as we created this problem, we will fix it,’ he promised. He wants to slow down the pace of expansion and improve the ‘customer experience’ in America, while accelerating expansion overseas. But he says there is no ‘silver bullet’...

“Mr. Schultz saw his firm's crisis coming. In February 2007 he warned of the ‘commoditisation’ of the brand in an internal memo to senior executives that found its way onto the internet. ‘Over the past ten years... we have had to make a series of decisions that, in retrospect, have led to the watering down of the Starbucks experience,’ he admitted. He cited the switch from hand-pulled espresso machines to the automatic variety, which helped to speed up service but diminished the spectacle of coffee-making. The result, he conceded, was that some customers found Starbucks coffee shops sterile places that no longer reflected a passion for coffee.

“Analysts and investors welcome Mr Schultz's return because it shows the company is taking action to correct its drift. The main architect of Starbucks' expansion is seen as the best person to lead a return to the firm's roots as a specialist coffee shop with a local touch.”

(“Coffee Wars.” The Economist. January 10, 2008)

SO, IN SPITE OF McDonald's, Panera Bread, Dunkin' Donuts, and in spite of soaring commodity prices, there may be hope for Starbucks if they focus clearly on their own responsibilities and actions.

When we look at the world as the source of our woes, or the source of our salvation, we consign ourselves to mediocrity and decline.