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Starbucks' New Board Members Make Strategic Sense

By Daniel B. Kline – Sep 17, 2019 at 8:16AM

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The company has made some very smart additions.

It rarely makes much news for a company to name new board members unless it's happening due to an activist investor calling for change. Starbucks (SBUX -0.62%) has, however, recently added three people to its board, and all of them speak directly to the chain's evolving business.

The company has added Domino's (DPZ -3.25%) CEO Richard E. Allison, Jr., Nike (NKE 0.24%) CFO Andrew Campion, and Isabel Ge Mahe, Apple's Managing Director of Greater China, to its board, increasing its size to 13.

"As we pursue our goal of building an enduring company, I couldn't be more excited to have Ritch, Andy, and Isabel join our world-class board of directors," said Starbucks CEO Kevin Johnson in a press release. "Their expertise across global technology, retail and customer experience at scale will accelerate our drive to innovate in a way that's relevant to our customers and inspiring to our partners."

A Starbucks in China

China has become Starbucks' second-largest market. Image source: Starbucks.

Strategic moves

While Allison has only been CEO at the pizza chain for less than a year, he previously ran the company's international division. That gives him two types of unique experience that Starbucks needs.

Johnson has long understood that Starbucks is only partly a coffee company -- it's also a technology company. Domino's is more a tech-oriented company focused on order fulfillment rather than purely a pizza company. Allison clearly understands not only how to prioritize efficient operations -- something Starbucks has been invested in -- but the differing expectations in various markets around the world.

Ge Mahe's addition makes sense because China has become Starbucks' second-largest global market, with the company adding roughly one store there a day. The chain faces competition from tech-focused Luckin, though, and Ge Mahe can bring an added understanding of the market. Ge Mahe has also worked with Apple on developing market-specific content for the iPhone and iPad. That's an expertise Starbucks can leverage for its own app and in-store experience.

Experience in China is something Campion can bring to the table as well. Nike competes in China, selling against local brands that are often offered at much lower price points. In addition, Campion's company has been expanding its sales channels and its direct relationships with consumers. Those are both things that might have value to Starbucks going forward.

Smart partnerships

Apple has been an important partner for Starbucks. Domino's and Nike have not, but it makes sense for those companies to work with Starbucks as the coffee chain attempts to sell technology to third parties. It's easy to see Domino's and Starbucks collaborating on advancing their apps, with the coffee brand leading the way by spending heavily on technology.

These additions give Starbucks added knowledge in areas that are very important to the company. They also strengthen the company's ties to Apple, which is a key relationship given the importance of the company's app in its overall strategy.

Adding people to the company's board won't pay dividends that stockholders necessarily see, but these three additions will offer guidance that steers the company. These are smart moves that show a company that understands its needs and has a CEO comfortable enough in his position to be willing to have strong board members.

Daniel B. Kline owns shares of Apple. The Motley Fool owns shares of and recommends Apple, Nike, and Starbucks. The Motley Fool owns shares of Luckin Coffee Inc and has the following options: short January 2020 $155 calls on Apple, long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, and long January 2020 $150 calls on Apple. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Starbucks Corporation Stock Quote
Starbucks Corporation
$84.28 (-0.62%) $0.53
Apple Inc. Stock Quote
Apple Inc.
$151.76 (0.66%) $0.99
NIKE, Inc. Stock Quote
NIKE, Inc.
$96.29 (0.24%) $0.23
Domino's Pizza, Inc. Stock Quote
Domino's Pizza, Inc.
$314.19 (-3.25%) $-10.55
Luckin Coffee Inc. Stock Quote
Luckin Coffee Inc.
$16.53 (3.22%) $0.52

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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