Schultz Returns as CEO of Starbucks

Breaking news this afternoon that Howard Schultz has returned to the role of CEO at Starbucks. The news comes on the heels of a front page article in the Wall Street Journal today, which focuses on how McDonald's is expanding its direct competition with Starbucks in terms of coffee sales. That article proved very interesting, because it is clear that the strategies and product offerings of Starbucks, Dunkin' Donuts, and now even McDonald's have been converging over time. Strategy convergence generally isn't a good thing in industries; it tends to enhance direct and intense rivalry among firms and diminish overall industry profitability.

Kudos to Schultz for finally recognizing that Starbucks needed to re-think its strategy. They had drifted from their core strengths in recent years, and ultimately, it began to affect financial performance. In the letter Schultz posted on the Starbucks website, he notes that the company will scale back the growth of domestic locations and even close some underperforming stores. Moreover, Schultz states that Starbucks will seek to reconnect emotionally with their customers, enhance differentiation relative to rivals, and launch new products.

Here are some issues that should definitely be on the table as Starbucks considers its strategy moving forward:

• Should the company continue to serve breakfast sandwiches? Does this really fit with the Starbucks experience? Do the sandwiches take away from the atmosphere in the store, and from the focus on coffee?
• Should the company continue to build drive-thrus? Do these fit with Schultz' initial vision of Starbucks as a "third place" where people gather and enjoy coffee together?
• Should the company take some products off of the menu? Is the product proliferation diluting both product quality and the quality/speed of the service by the baristas?
• Should the company consider offering free wireless, as competitors such as Panera Bread do, so that customers may come and spend more time in the stores?

Naturally, the list goes well beyond these questions. Schultz' return provides a tremendous opportunity for Starbucks to confront key strategy issues such as these and rekindle the magic that drew in so many customers over the past twenty years.