Economic Forces in Starbucks Corporation
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The importance of economic indicators to the strategic planning process in any organization is the ability to benchmark economic conditions that contribute to improve profitability, business growth and market size. Leadership sets up the mission “to establish Starbucks as the most recognized and respected brand in the world.” In doing so, they have created a set of industry-leading, comprehensive coffee-buying guidelines addressing coffee quality, financial transparency, social and environmental responsibility. Starbucks strategy is also expanding market in globally to provide high quality coffee in convenient and visibility locations. They are continuing to innovate and extend the business with imaginative new ready-to-drink beverages and expanded packaged coffee offerings (Starbucks Corporation, 2007).
Today, they have expanded lunch programs to a total of 4,150 stores and introduced the ability to warm pastries and provide hot breakfast sandwiches to stores across the nation. Starbucks retail stores are operated through a number of joint venture and licensing arrangements in South East Asia countries as well as Thailand, Singapore and China. When they do the business in foreign countries, the most important issues will have to be aware of the exchange rates. They are planning to open 2,400 stores internationally in 2007, and they have approximately set financial growth targets for total revenue 20 percent and annual earnings-per-share 20 to 25 percent for the next three to five years. In addition, they have proposed new stores count target to 40,000 worldwide (20,000 U.S. and 20,000 International) in the long-term (Starbucks Financial Release, 2007).
Starbucks have succeeded several economic factors as well as price elasticity of demand.
Price elasticity of demand can be determined by the percentage change in the quantity demanded with the percentage change in price. They should consider household income that people are willing to spend more on food and beverages when household income increases. Starbucks innovation in joint ventures has opened new markets and opportunities increasing product use among different demographics. Starbucks has proven to be highly innovative in business culture that offers prepaid cards, priced from $5 to $500. Joint ventures with Pepsi Company, Dreyer's Grand Ice Cream Inc and inspiring entertainment with the launch of “Hear Music” have developed Starbucks with great success. Starbucks has shown their values, leveraging market power, resources, and capabilities to achieve returns higher than their competition (Investment Group, 2001)
The social factors that affect Starbucks involve the beliefs, values, attitudes, opinions and lifestyles of persons in the external environment as developed from cultural, demographic, education, ethnic conditioning and customers’ needs and the size of the potential market (Pearce-Robinson, 2004). Starbuck’s approach to corporate social responsibility (CSR) includes developing “ethical sourcing practices for products such as coffee and cocoa, strengthening their involvement in education programs focused on cultural diversity globally, funding water projects in developing countries, and reducing our environmental footprint” (Starbucks Corporation, 2007). Social forces results from the efforts of individuals to satisfy their desires and needs by controlling and adapting to environmental factors.
Starbucks Company profile states that they “offer benefits package to both full-time and part-time employee included medical, dental, vision and short-term disability insurance, paid vacations and employee stock options package.” They also provide training programs to facilitate the knowledge of products and discount stock option for global partners. The benefits package promotes employee motivation, strong workforce and the implementation of this policy has been highly successful for Starbucks. These benefits packages decrease employee turnover and encourages them to be attentive in order to satisfy consumer needs. They treat employees as the most valuable asset for the company and empower to make decisions. They continue to sustain the values of personal dignity, mutual respect, shared success and diverse workforce culture in the organization. In addition, they focus on ethical sourcing that offers affordable loans for farmers, sustainable farm management practices, the prohibition of forced child labor, and economic transparency to increase their value chain (Starbucks Company Profile, 2007).
The Starbucks Foundation has begun to serve impoverished communities and support education funds for the children where it operates through social, environmental programs and projects. Starbucks has built trusting relationships with their future neighbors and to gain a deep appreciation for what each community values and many Starbucks leaders are involved with such organizations serving on boards and making personal contributions of their time and money. Starbucks and CARE International, a global humanitarian organization, have been working together to help alleviate poverty and create long-term solutions in coffee growing communities since 1992 (Starbucks CSR Report, 2007).
They have demonstrated farmers to “produce high quality coffee through Coffee and Farmer Equity (C.A.F.E.) Practices” that issue individual farmers, cooperatives, processors, exporters and importer to create a long-term supply of coffee for loyalty customers. Starbucks has been cooperated with farmers to make good relationship of the supply chain stipulation targeted to grow the finest coffee and to accelerate the interest of consumers. Starbucks has a strong partnership with Conservation International (CI), which together are working with coffee producers to promote coffee cultivation methods that improve the livelihood of coffee farmers everywhere (Starbucks CSR Report, 2007).
Starbucks is also committed to “many environmental activities and community service programs within the areas they serve.” Their involvement promotes customer satisfaction, provide with best quality coffee beans and great customer service that create retaining existing customers and increasing new customers. Starbucks has set out to understand more about the risks associated with climate change and to evaluate their contribution to global warming. They recognized that coffee farming depends on a healthy environment that the negative impacts of climate change on coffee-growing regions could affect the business significantly in the long-term. Starbucks has been coordinating with their suppliers especially coffee-growers to focus and conserve coffee-region environment. The environmental strategy has been supported and proven internationally their ecological strength and elasticity in coffee-growing areas.
Working with environment is one of their missions and they have to measure the environmental performance of the store design and operations by the amount of electricity, gas and water consumption of their areas. Starbucks brought into new creative ideas water usage in the packaging of their product and environment affairs, water crisis program reflects Starbuck’s commitment to contributing positively to the environment. Starbucks will influence at the agricultural level to protect watersheds and encourage customers to participate in environmental initiatives of the global water crisis. Waste management focus on the amount of recycling, scale of waste reduction opportunities and encourage the use reusable mugs. Today, Starbucks will begin introducing the recycle paper cups in U.S. Company-owned stores to address the environmental impact associated with their paper buying practice (Starbucks Environment Affairs, 2007).
Starbucks transformed their business operations cycle from a pedestrian commodity into up-scale high consumer acceptability with quality product. In summary, Starbucks has upgrade image to open new stores by implementing its location strategy and uses lobbying to change city regulations in order to get the best places in town and around the globe. Starbucks Corporation has established by purchasing high quality coffee beans and sells the customers along with a variety a specialty drinks and food that has met with an ever-increasing amount of success. Starbucks has been changed specialty operations as well as joint ventures, grocery channel licensing and wholesale account (Starbucks Financial Release, 2007).
Starbucks in local stores created an environment accommodation that customers can use free wireless internet usage to increase more customers. Schultz believes that “Operating with a social conscience has always been a core purpose and competency at Starbucks.” So, they involved a corporate social responsibility and contributed US $5 million in the establishment of china educational project in 2005. They built executive community leadership program to facilitate Starbucks executives’ service on non-profit boards and building community to support neighborhood organizations ((Starbucks CSR Report, 2007).
One of many Starbucks environmental efforts included Global Green's plan educate individuals, stakeholders, businesses, and governments how they can take action to address climate change. They conducted an inventory of GHG emissions as an effort to better understand and quantify their environmental footprint. They have used the “World Resources Institute Greenhouse Gas Protocol” to perform the inventory of major emissions from the company-operated retail stores, coffee roasting, administrative operations and distribution network. They have been working the risks of climate change for their business and reduce GHG emissions (Starbucks Environment Affairs, 2007).
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