The CEO of Starbucks and the Practice of Ethical Leadership

Sara Tangdall

Background

One year after becoming CEO of Starbucks, Kevin Johnson faced a leadership test when two black men were arrested in a Philadelphia Starbucks. The men were waiting to meet a business associate, but they didn’t purchase anything while they were waiting. The store manager asked them to leave, and they refused, explaining that they were there to meet someone. The manager called the police because the men refused to leave, and the police arrested them.

Another patron at Starbucks recorded the arrest on her cell phone, and it quickly went viral. In an interview after the arrest, the woman who took the video mentions that she had been sitting there for a while, and she wasn’t asked to leave even though she didn’t order anything. Additionally, the video shows the business associate of the black men show up during the arrest, and he asks the manager and the police what the men had done wrong. The general public and those who witnessed the arrest labeled it as discriminatory and racist.

This happened on a Thursday and the following Monday, Johnson said that the manager no longer worked at the store. The arrests led to protests and sit ins at the Philadelphia Starbucks the days following the event.

In his apology statement and follow up video release shortly after the arrests, Johnson said, “The video shot by customers is very hard to watch and the actions in it are not representative of our Starbucks Mission and Values. Creating an environment that is both safe and welcoming for everyone is paramount for every store. Regretfully, our practices and training led to a bad outcome—the basis for the call to the Philadelphia police department was wrong.”  

Before the incident, Starbucks had no companywide policy about asking customers to leave, and the decision was left to the discretion of each store manager. Because of this flexible policy, Starbucks had become a community hub--a place where anyone could sit without being required to spend money. Johnson mentioned this community in his apology when he said Starbucks works to create an environment that is “both safe and welcoming for everyone.”

Also in his apology, Johnson outlined the investigation he and the company would undertake. The apology detailed actionable steps Starbucks leadership would follow to learn from the situation, including meeting with community stakeholders to learn what they could have done better. Johnson took full responsibility for the actions of his employees, and he acknowledged that Starbucks customers were hurt by the arrests. Johnson acknowledged that employees needed more training, including about when to call authorities, and that the company needed to conduct a thorough analysis of the practices that lead to this incident.

After issuing his apology, Johnson went to Philadelphia and met with the two men face to face to involve them in dialogue on what Starbucks needed to do differently.

The week following the arrests, Starbucks announced it would temporarily close 8,000 stores to conduct unconscious bias training, which they did on May 29, 2018. A month after the arrests, Starbucks released a new “Use of Third Place Policy,” which states that anyone can use Starbucks and its facilities without making a purchase; it also explains what managers should do if a customer becomes disruptive. Additionally, the policy says that Starbucks seeks to create “a culture of warmth and belonging where everyone is welcome. This policy is intended to help maintain the third place environment in alignment with our mission ‘to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.’”

Practice of Ethical Leadership

How is Johnson practicing ethical leadership? Additionally, we can consider what we learn about his character through his actions and his impact.

1. Did his decision to close all Starbucks stores for unconscious bias training and to create a new “Third Space Policy” align with Starbucks’ mission and goals? If so, how?

2. Explain everything Johnson did right and what positive outcomes resulted from his actions?

3. What leadership traits did Johnson exhibit?

1. Evaluate the following statement


A. “Managers should specialize by acquiring only the tools needed to operate in a particular market structure. That is, managers should specialize in managing either a perfectly competitive, monopoly, monopolistically competitive, or oligopoly firm.”



B. The CEO of a major automaker overheard one of its division managers make the following statement regarding the firm’s production plans: “In order to maximize profits, it is essential that we operate at the minimum point of our average total cost curve.” If you were the CEO of the automaker, would you praise or chastise the manager? Explain.




C. You are the manager of a small pharmaceutical company that received a patent on a new drug three years ago. Despite strong sales (GH¢125 million last year) and a low marginal cost of producing the product (GH¢0.25 per pill), your company has yet to show a profit from selling the drug. This is, in part, due to the fact that the company spent GH¢1.2 billion developing the drug and obtaining Food and Drugs Authority approval. An economist has estimated that, at the current price of GH¢1.25 per pill, the own price elasticity of demand for the drug is -2.5. Based on this information, what can you do to boost profits? Explain.



D. The opening statement on the Website of the Organization of Petroleum Exporting Countries (OPEC) says, “...OPEC’s eleven members are all developing countries whose economies are heavily reliant on oil export revenues. They therefore seek stable oil prices that are fair and reasonable for both producers and consumers of oil.” To achieve this goal, OPEC attempts to coordinate and unify petroleum policies by raising or lowering their collective oil production. However, increased production by Russia, Oman, Mexico, Norway, and other non-OPEC countries has caused the price of crude oil to fall dramatically in recent years. To achieve its goal of stable and fair oil prices, what must OPEC do to maintain the price of oil at its desired level? Do you think this will be easy for OPEC to do? Explain.

5. You ask your recent MBA hire to evaluate the attractiveness of an investment in a piece of computer equipment you've been interested in. He gives you the following report. (Assume that he at least collected all the figures correctly.) The equipment cost $150,000 and will be straight-line depreciated over 5 years. It will replace an existing system -- that would otherwise be used for the five years -- which has been fully depreciated and could be sold for $3,000. It requires the use of software, which the firm has recently purchased for $20,000. The equipment will improve efficiency, which will allow you to cut costs by $60,000/year. The maintenance of the product requires the time of 1/10th of an employee with salary $30,000 and who generates $50,000 of profits to the firm. An additional $5,000 must be reserved for operations. You know that you can sell this product after 5 years for $50,000. Your firm is taxed at 30%. Last year, your firm had a price increase of 15%. You also know that firms who are only in this no-growth business are trading at a P-E multiple of 10. You receive the following analysis with a recommendation against the investment:

                        0          1          2          3          4          5

                        ---        ---        ---        ---        ---        ---

Cost Savings               60        60        60        60        60

Maintenance               -3         -3         -3         -3         -3

Buy Eqpt      -150                                                       50

Sell Old            3

OppCost of

150K at 15%               -22       -22       -22       -22       -22

Depreciation               -20       -20       -20       -20       -20

Software      -20

                        --------------------------------------------------

EBIT          -167          15        15        15        15        65

Taxes                          4.5       4.5       4.5       4.5       19.5

                        --------------------------------------------------

Net CF        -167         11        11        11        11        46  

IRR<0<Required 15% return. Is this analysis correct? If not, where did your MBA go wrong? Redo the analysis to determine whether you should invest in the new equipment.

MBA - Managerial Economics

1. Demand of a product is usually very sensitive to economic variables, such as the prices and consumer income. This responsiveness of demand is elasticity. Compute elasticity in the below scenarios:
   1. Yesterday, the price of envelopes was $3 a box, and Jacky was willing to buy 10 boxes. Today, the price has gone up to $3.75 a box, and Jacky is now willing to buy 8 boxes. Is Jacky's demand for envelopes elastic or inelastic? What is Jacky's elasticity of demand?
   2. Katy advertises to sell cookies for $4 a dozen. She sells 50 dozen, and decides that she can charge more. She raises the price to $6 a dozen and sells 40 dozen. What is the elasticity of demand? Assuming that the elasticity of demand is constant, how many would she sell if the price were $10 a box?

Thanks

Upon successful completion of the MBA program, imagine you work in the analytics department for a consulting company. Your assignment is to analyze the following databases: Hospital

Provide a detailed, four part, statistical report with the following sections:

Part 1 - Preliminary Analysis

Part 2 - Examination of Descriptive Statistics

Part 3 - Examination of Inferential Statistics

Part 4 - Conclusion/Recommendations

Part 1 - Preliminary Analysis Generally, as a statistics consultant, you will be given a problem and data. At times, you may have to gather additional data. For this assignment, assume all the data is already gathered for you.

State the objective: What are the questions you are trying to address? Describe the population in the study clearly and in sufficient detail: What is the sample? Discuss the types of data and variables: Are the data quantitative or qualitative? What are levels of measurement for the data?

Part 2 - Descriptive Statistics Examine the given data. Present the descriptive statistics (mean, median, mode, range, standard deviation, variance, CV, and five-number summary). Identify any outliers in the data. Present any graphs or charts you think are appropriate for the data. Note: Ideally, we want to assess the conditions of normality too. However, for the purpose of this exercise, assume data is drawn from normal populations.

Part 3 - Inferential Statistics Use the Part 3: Inferential Statistics document. Create (formulate) hypotheses Run formal hypothesis tests Make decisions. Your decisions should be stated in non-technical terms. Hint: A final conclusion saying "reject the null hypothesis" by itself without explanation is basically worthless to those who hired you. Similarly, stating the conclusion is false or rejected is not sufficient.

Part 4 - Conclusion and Recommendations Include the following: What are your conclusions? What do you infer from the statistical analysis? State the interpretations in non-technical terms. What information might lead to a different conclusion? Are there any variables missing? What additional information would be valuable to help draw a more certain conclusion?

You are a hotshot MBA financial analyst for the manager of the Emmons Corporation’s Machining Department. Your manager is visibly upset after being reprimanded for his department’s poor performance over the last month, as presented in the below report:

Emmons Corporation – Machining Department

Department Performance Report

For the Month of November 2016

“I just can’t understand all these unfavorable variances,” your manager complained to you. “When the big boss called me in, I thought she was going to give me a pat on the back for the great job that we had done in November. Instead, she handed me a copy of this report, read me the riot act, and pointed out to me that every variance was unfavorable! I need your help in countering the conclusions of this report.”

Your manager gives you the above report and you go back to your office to study and prepare the response for your manager. You know that direct labor wages and supplies are variable costs; supervision and depreciation are fixed costs, and maintenance and utilities are mixed costs. The fixed component of the original budget maintenance cost is $92,000. The fixed component of the original budget utilities cost is $11,700.

Required:

1. You recall studying flexible budgets in your amazing MBA program. Using a flexible budget approach, prepare the more appropriate performance report for your manager.
2. Based on your report in “a” above, how would you evaluate your department’s performance?

In a survey of MBA students, the following data were obtained on “students’ first reason for application to the school in which they matriculated.” Reason for Application School School cost or Quality Convenience Other Totals Enrollment Status Full Time 421 393 76 890 Part Time 400 593 46 1039 Totals 821 986 122 1929 (a) Develop a joint probability table for these data. (b) Use the marginal probabilities of school quality, school cost or convenience, and other to comment on the most important reason for choosing a school. (c) If a student goes full time, what is the probability that school quality is the first reason for choosing a school? (d) If a student goes part time, what is the probability that school quality is the first reason for choosing a school? (e) Are the enrollment status and the reason for application independent? Explain using probabilities.

•Exercise 1: It is assumed that 80% of the students pass the MBA 510 course. Calculate the following for a class of 15 students:

(a) the mean number of students expected to pass;

(b) the standard deviation;

(c) P(exactly 12 of the 15 students pass);

(d) P(at least 12 of the 15 students pass).

•Exercise 2: Five customers enter a store and make independent purchase decisions. The store’s records indicate that 20% of all customers who enter the store will make a purchase.         

(a) Does a general discrete probability distribution or the binomial distribution apply?

(b) Write the probability form applicable.  

Calculate the probability that:

(c) exactly 4 customers will make a purchase;

(d) less than 3 customers will make a purchase.

Please show all the work in Excel or Word.

Assignment Problem:

Matt Profitt, an MBA student, is studying companies that are going public for the first time. He is curious about whether or not there is a significant relationship between the size of the offering (in millions of dollars) and the price per share.

Size    108     4.4      3.5      8.6      139     228     47.5    5.5      175     12        51        66

Price   12        4          5          6          13        19        8.5      5          15        6          12        12        

a. Develop the appropriate scatterplot for the two variables in the Excel spreadsheet.

b. Based upon the visual inspection of the plot, what type (directional) of relationship do you anticipate between the dependent and independent variables? Offer a brief explanation why that makes theoretical sense.

Please use the example illustrated Tables 12.2 and 12.3 for guidance on the EXCEL steps appropriate to generate the information needed to address the remaining sections.

c. Calculate SS_XX,SS_YY, and SS_XY.

d. Calculate the estimated y intercept (b₀) and the estimated slope coefficient (b₁).

e. Interpret the estimate slope coefficient.

f. Construct the ANOVA appropriate for this regression model.

g. Calculate r².

h. Interpret the coefficient of determination.

i. Calculate s sub b1.

j. Calculate the correlation coefficient.

k. Test whether or not the population correlation coefficient (rho) differs from zero. Use alpha = 0.05.

Could you please just help me with J and K? Thank you so much!