Communication Case

The mid 2000's were a prosperous time for Starbucks financially. In 2005, newly minted CEO Jim Donald began an aggressive growth campaign for the renowned coffee company. He set a long-term target of 40,000 new store openings and began executing aggressively. By 2007 Starbucks was still averaging six new stores per day. In addition to this massive capital plan, Donald also worked to streamline Starbucks and make it operate more efficiently. Unfortunately, this efficiency came at the cost of the Starbucks experience, which ultimately drove away customers. Starbucks was becoming complacent at the top and was losing sales because of it. Sensing impending difficulties in Starbucks' near future, former CEO Howard Schultz regained the top spot at the company and formed a plan to revert Starbucks back to its roots.However upon further inspection, there are additional line items during that two-year period ("Restructuring Charges") that are one-time only expenses that companies incur when they restructure and change direction. When these costs are factored out, actual financial performance fared much better - during 2009, Starbucks achieved its highest net earnings of any year in the case study ($723 billion) and its second-highest profit margin (8.84%.) Exhibit 4 shows profit margin vs. profit margin excluding the Restructuring Charges. [NOTE: Although this profit margin was historically strong for the company, there was also a breakdown of profit margins by business unit that shows the licensing and distribution business line as far more efficient than the overall U.S. and international operations, which had a 39.6% operating profit margin in 2009.]