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Starbucks Cuts 600 Positions

February 22, 2008; Page B6

Starbucks Corp. is eliminating 600 jobs as part of an effort to revive the struggling coffee giant.

The Seattle company said that 220 people lost their jobs as part of its restructuring. The remaining 380 jobs are open positions that won't be filled. The cuts are happening in Starbucks' so-called field operations, or offices that support Starbucks cafes, and won't result in job losses at the retail stores. Nearly all of the jobs are based in the U.S. Starbucks employs about 170,000 people.

"We have to step up to the challenge of being strategic as well as nimble as our business evolves," Chairman and Chief Executive Howard Schultz said in an email to employees. The company also increased by two the number of regional divisions it has in the U.S., for a total of four.

In returning to the chief executive position last month, Mr. Schultz said the company's rapid growth had led to bureaucracy. Starbucks shares lost almost half their value last year as price increases and a weak economy slowed traffic at its U.S. locations, and a lack of appealing new products dulled demand.

A few days after his return, Mr. Schultz announced he had shuffled a handful of top management positions. This latest round of cuts doesn't reach into the executive level.

Since his return, Mr. Schultz has said he plans to close weak stores and slow the number of store openings in the U.S. as well as refocus the chain on coffee. He says he will release more details of his plans at the company's annual meeting next month. On Tuesday, Starbucks plans to close all of its company-operated stores in the U.S. from 5:30 p.m. to 9 p.m. local time to retrain 135,000 store workers, in part to teach them how to better make espresso drinks.

Mr. Schultz has indicated that, among other things, he plans to make better use of the Starbucks payment card, emphasize the company's expertise in coffee roasting and possibly create a new segment for Starbucks that would allow customers with lower incomes to try its products.

Of those who lost their jobs, about one-third worked at Starbucks headquarters in Seattle, and about two-thirds worked at other Starbucks field operations outside headquarters


This is an interesting article that ties into our analysis of developing strategy based on the external environment. First, Schultz is removing what he feels are excess staff, feeling that there was too much bureaucracy for Starbucks' current size and future growth goals. In light of the current macro economic conditions in the US, the company is also test marketing $1 cups of coffee with free refills. I also spoke with a barista a few days after Shultz' return to the CEO post in Jan, and they noted that certain drinks that were not selling well were already pulled from the menu.