Howard Schultz's Strategy for Building Starbucks Community

Company History and Founding

This document synthesizes the case study "Howard Schultz: Building Starbucks Community" from the Harvard Business School review. Written by George and research associate Andrew McLean in April 2007 for classroom discussion, the nine-page case with two exhibits describes the development strategy of the Starbucks company. It explains how in less than twenty years, the company shifted from a small Seattle coffee bean roaster and retailer to a major multinational firm under the leadership of Howard Schultz. The case demonstrates the exceptional performance of his company and the strategy he employed to sustain growth while preserving the company's integrity and core values.

As director of operations and marketing for Starbucks, Howard Schultz visited Italy in 1983, where he experienced espresso bars staffed by baristas who maintained strong bonds with their customers. Schultz's vision was to bring traditional Italian coffee culture to the global market. When the original Starbucks owners rejected his ideas, he decided to launch a new business independently. He raised $400,000 from private investors and created the first "Il Giornale" in 1985. Three years later, he had expanded to three locations but had not yet achieved profitability.

Recognizing that the Starbucks brand image was a valuable asset, Schultz sought additional funding to acquire Starbucks and consolidate the company under the Starbucks Corporation name. After meeting with one of his original investors, who proposed purchasing Starbucks in a way that would have diluted Schultz's stake and that of other investors, Schultz felt compelled to preserve the company he had begun to shape with values. He prepared an alternative financing plan that avoided dilution and achieved the $3.8 million financing goal—the greatest and most difficult challenge he faced during this period.

Howard Schultz's Social Background and Corporate Mission

Schultz began his expansion in Northwest cities with strong coffee culture and in the Los Angeles market. With a splash entry in 1991, the brand became trendy, adopted by Hollywood taste-makers, and the company successfully increased total net revenues between 1996 and 2005.

Schultz believed that companies should value their employees. One of his main concerns was building a company with equity that provides opportunities—the kind of company his father never had a chance to work for. Schultz grew up in Brooklyn in a poor family. His father was broken by the system and worked over thirty blue-collar jobs throughout his life. A major event occurred in winter 1961 when his father, the family's only provider, was injured on the job and received no workers' compensation, leaving the family in terrific hardship. Unable to work, his father could not support the family, an experience that shaped Schultz's later business decisions.

This personal history led Schultz to introduce a series of employment practices unprecedented in retail. He made Starbucks the first American company to offer health coverage access to employees working at least twenty hours per week. This commitment reflected his conviction that companies have a responsibility to care for their workforce. Furthermore, Schultz prioritized creating a good work environment where employees could actively contribute to company direction. They were encouraged to express their views on company policies and strategy through open forums, fostering a culture of shared voice and collaborative decision-making.