Starbucks (SBUX): The Mess Gets Worse

Twelve thousand souls are losing their jobs at Starbucks (SBUX), mostly because Howard Schultz let incompetents run his empire while he was occupied elsewhere. It will always be open to debate whether things would have been different if he had stayed on as CEO, instead of returning recently when things at the coffee company were getting bad.

In a superb article in The New York Times, the paper analyzes what may have been the worst decision by Starbucks executives. In the surge of rapid expansion in the US, they put many of their stores in the wrong places.

According to the article, "the company was so determined to meet its growth promises to Wall Street that it relaxed its standards for selecting new store locations." How could Starbucks, which knew very well where to put stores, make such a basic error?

Hubris. Starbucks believed that its products were so good and its brand was so strong that it could expand in the US and abroad no matter what the economic conditions were. The profound miscalculation is based on the notion that the number of customers who would come to Starbucks is nearly endless. The same idea has ruined a number of companies and industries over the years. It is the trap of thinking that the concept behind a firm is flawless and that execution is not as critical as the original idea.

That way of thinking eventually costs a lot of people their jobs.

Douglas A. McIntyre