Case study of Starbucks: Competitive Strategies and Corporate Social Responsibility in Africa and Asia

Starbucks Corporation (or simply Starbucks) is a global giant in coffee roasting and retailing business. Starbucks undertakes high-grade coffee roasting and retailing mainly in United States, Canada and Japan. In 1985, it is when Starbucks was founded. Since start, Starbucks has enjoyed both national and worldwide growth. Starbucks attributes its growth to its sophisticated expansion based strategies and product innovation. In addition, Starbucks exceptional growth is also attributable to desirable global market for coffee (Starbucks Corporation 2009). In 2006, Starbucks revenue was worth $5.1 billion. Starbucks has always embraced the goal of diversity as a way of advancing its standard of excellence. The nature of American market and desire for coffee are also factors that promote Starbucks sales. That is, according to Howard (2005), in average terms, Americans are projected consume at least three cups in each single day.

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Starbucks has always embraced good relationship with working class clients. It always enhances this relationship through service increment rates and provision of purchasing options to customers of its brewing equipments such as machine cleaners, espresso and even coffee filters. The success of Starbucks is also attributable to its unconventional approach on market operations, trends and projections unlike its rival firms like McDonalds who consider advertisements in televisions as a major booster of their sales (Allison 2006). Starbucks has always dedicated little budget on advertising. For instance, in 2005, Starbucks expenditure on advertising was $87.7 million, which was worth 1.4 percent of revenues of that time. This amount is too small when compared to amount spend other companies like Coca Cola and Nike who spend 1.7 billion (11 percent of revenues) and 2.5 billion (11 percent of revenues) at the same period for similar purpose – advertising.

In spite of the success noted in the last four decades, Starbucks has its own down falls. For instance, the 2009 Annual Report indicates that Starbucks owned 16,635 store across the globe (in over 50 countries) (Starbucks Corporation 2009). The revenue generated by these stores was worth $9.8 billion – that is a decline or negative growth of its total sales. The decline of its sales relates to both intrinsic and extrinsic factors such as economic, demographic, political, social, technological and environmental aspects (Allison 2006). To overcome such challenges its post 2010 operations, Starbucks needs some restricting strategies. One major goal of Chairman and CEO, Mr. Howard Shultz was to boost Starbucks’s sales up to $23 billion by the year 2012 (Helm 2007). This ambitious goal called for Starbucks management to appraise and amend their business model and strategic growth initiatives. This essay paper seeks to analyze Starbucks’s success in 2010, as well as reviewing necessary models that will improve its operations and sales in post 2010 period.

Mission, Vision, Goals and Long-term Objectives

Starbucks mission, vision, goals and long-term objectives pursue its sales volume growth and global expansion. Its mission shows that sociological forces are driving force of enhancing the current society’s milieu. Starbucks demonstrates this initiative by being at the centre center stage of taking part in social responsibility events like clean-ups (Kambell 2002). This company undertakes numerous audits in its stores. This audits aims at mitigating on energy consumption as well as improving the efficiency of its use. Starbucks imposes these sociological efforts to its entire workforce across the globe with the aim of empowering them to participate in environmental positive initiatives. This company considers demographic factors as a major booster in making its decisions that relate to population, ethical groups and general expansion. On its demographic literature, CIA world fact book indicates that, the population aged between 15 years and 64 years in American Society comprises of the number of consumers (Howard 2005). As a result, a major focus on this population will enhance Starbucks’s sales volume.

Company Competitive Strategies

One major strategy of Starbucks is its study on demographic trends – population spread and ethnicity – in American society. This initiative enables Starbucks to acquaint itself with information about public perception, trends, preferences and tastes of consumers (McRoskey 2008). The prevailing conditions of high consumer spending and low inflation in some of the countries Starbucks operates presents it with an opportunity to purchase its specialty coffee drinks at lower prices. In spite of such opportunities, Starbucks faces some eminent threats from small and giant competitors like McDonalds (Kembell, 2002). There is possibility of small and emerging firms in this industry taking some Starbucks customers. Since, Starbucks undertakes either coffee production through support it gives to farmers directly or indirectly, the enormous production of coffee in Central American states to some extend dictates its daily operations (Kembell 2002). Starbucks may also benefit from low supply of coffee that may push prices higher. The profit increment in this case may emerge because there are fewer substitutes of coffee beans (Allison 2006).

Starbucks mainly plans and focus on matter and issues that affect its customers either directly or indirectly. This firm undertakes this through creation of good relationship with customers and other third parties who share similar values and commit themselves to quality. Starbucks has initiation of products outlets in strategic locations have made it even stronger (Kembell, 2002). These strategic outlets include schools, airports, grocery stores, department stores, convenient stores, movie theaters and home deliveries. To enhance its business operation and at the same time ensure smooth run, Starbucks has made several agreements with its business strategic partners. One notable agreement is Starbucks accord with Kraft Foods. Through the agreement, Starbucks licensed Kraft Foods to undertake coffee bean distribution in entire United States grocery stores (Pretorious 2009). This agreement mandated Kraft Food to undertake product promotion through shows and media advertisement. In addition, the accord calls for Kraft Foods to distribute Starbucks products in its market. There have been price fluctuations in the international market. We attribute these price fluctuations to economic, political and weather conditions. This contact is a long-term initiative that aims at mitigating price and supply fluctuation (Howard, 2005).

The success of Starbucks is attributable to its expansion strategies. In the last two decades, Starbucks increased has increased its stores from mere 17 to notable 10,241 across the globe. One cannot attribute this success ton one strategy but many. Shah, Thompson & Hawk (2007) identify such strategies as store expansion strategy, corporate social responsibility strategy, working place strategy and coffee purchasing strategy. Starbucks implemented these strategies by aligning its executive management with adequate provision of resources. For example, Starbucks undertook great work place strategy implementation after it made forensic consultation with Starbucks executive personnel and board of directors. To ensure the success of its strategies, Starbucks made sure it provided adequate resources at the time of implementation. Shah, Thompson & Hawk (2007) attribute Starbucks success at global level to its precise and effective implementation of such strategies.

To attain quicker expansion, Starbucks Chairman and CEO realized that it was necessary to improve the expectation of customers (Shah, Thompson & Hawk 2007). On the hand, the goal of meeting customer expectation is achievable when workforce conditions are favorable. To attain customer expectations, first Howard Shultz introduced greater working strategy to raise working conditions of respective workers of the company. In this initiative, Shultz argument to the board of directors was that, this strategy is necessary particularly in affirming workforce loyalty and commitment to Starbucks. At first, greater working place was expensive, however, as Starbucks realized later, it was economical when compared to expenses associated with new recruitments. For instance, Starbucks management realized that the cost of maintain an employee in a single year was $1,500 compared to $3,000 of new recruitments (Shah, Thompson & Hawk 2007).

Starbucks success is also associated with executive management extensive involvement cooperation with its personnel in major decisions. For example, when Starbucks was undertaking reviews on its mission statement, belief and values, the executive team sough recommendation and opinion from other company workers (Shah, Thompson & Hawk 2007). Further, in Starbucks’s real estate development and maintenance, planning and construction and store design, its executive management initiated “stores for future” project team to undertake research and come up with necessary recommendations. Starbucks considers its employees as important stakeholders (Starbucks Corporation 2009). It has included them in plans such as stock purchase. The employee purchase of shares implies that, they stakeholders category does not constitute mere workforce but also as strategic partners.

The success of Starbucks is also attributable to the execution of strategy. Starbucks executive management relies on prioritization and filtration of change programs. During the execution of improving working condition strategy, Starbucks has made priorities in different programs such as giving stock priority and expanding health care programs to workers (Moore 2006). Starbucks considered such workers based priority programs like health programs instead of frequent hiring new workforce.

In expansion strategy, Starbucks has made priorities in some areas characterized by supportive infrastructure and demographic profiles. For example, Starbucks relies on metropolitan cities as hub centers for its stores (Shah, Thompson & Hawk 2007). For a long time, Starbucks has used metropolitan cities as a strategic way of minimizing both management and delivery costs. In addition, these hubs have shortened customer line within its stores.

Cooperation between Starbucks and its executive management facilitated the success of desired projects. For example, during Starbucks execution of healthcare program, the boards of directors, the CEO and other executive management team directed their focus and commitment to this program (Pretorious 2009). Because of such commitment, Starbucks revolutionized its workforce healthcare.

Starbucks is not strange to delegation. The company has used delegation as a strategy of providing its customers with quality products. Its project teams – stores for the future – Starbucks undertakes research on details of how to develop and maintain modern stores (Shah, Thompson & Hawk 2007). Starbucks has involved itself in various joint ventures. One notable joint venture is the one with Pepsi. This joint venture enabled executives from both sides to avail exceptional details of making a version of shelf-stable Frappaccino. The taste of these Frappaccino was wonderful and recommendable.

As necessity, accountability is highly recommended. Likewise, firms must make sound decisions. Both accountability and sound decision-making have facilitated Starbucks success. For instance, in 1500 stores Starbucks opened while it was undertaking expansion program, only two proved to have been bad decision (Shah, Thompson & Hawk 2007).

Starbucks Social Responsibility

Starbucks employ strong policies in its social responsibilities. This social responsibilities are dictated by the believe that it is necessary for firms to undertake positive initiative on their stakeholders (Starbucks’s 2011). Through its well-defined social responsibility policies, Starbucks continues to enjoy respect and trust from its strategic partners like customers, employees and neighbors. Starbucks pursues social responsibility through ethical sourcing, wellness, community service, diversity and environment sustainability (Campbell 2007).

Community social responsibility constitutes the creation of positive impact towards the society under question (Franklin 2008). Starbucks engrosses itself with its surrounding communities as a way of proving a positive change to their lives. For example, in early 2011, Starbucks employees engaged in voluntary works. Its volunteers impacted positively to people live through various projects such as irrigation, refurbishing schools, painting and gardening (Starbucks’s 2011). Starbucks is very close to communities. For instance, it enhances community lives by inspiring and nurturing the youth in their participation, leadership and resolving emerging challenges within the society. Campbell (2007) points out that, Starbucks undertakes these initiatives by financing strategic partners and affiliate organizations such as International Youth Foundation. In addition, Starbucks has numerous supportive initiatives in other regions such as Africa. For instance, through its Starbucks’s RED Card scheme, Starbucks helps African communities diagnosed with HIV/AIDS (Starbucks’s 2011).

Franklin (2008) defines environment social responsibility is the mitigation of natural hazards such as climatic change (Moore 2006). Starbucks is and has continued to deploy policies that aim at restraining environmental trends. At the same time, Starbucks has embarked on climate change initiatives as well as inspiring other firms to undertake the same. For instance, Starbucks undertakes recycle for its used paper cups (Starbucks’ 2011). Starbucks inspires local communities in areas it operates by mobilizing their local leaders as a way of seeking their support in its recycling opportunities. Further, Starbucks is engaged in energy consumption reduction. It undertakes using advanced technologies and sophisticated strategies. Climatic change has compelled Starbucks to help farmers directly at global level in raising their crops. Some notable regions where Starbucks helps farmers are Chiapas, Sumatra, Mexico and Indonesia (Starbucks’ 2011).

It is imperative to for firms to embrace transparent trade, legal and honesty in their ethical outsourcing (Donaldson & Dunfee 1999). Starbucks supports farmers through the sell and purchase of excellent quality they grown. This coffee must be justly exchanged – proper transaction must have taken place; otherwise, Starbucks will not buy that coffee. To ensure justice in coffee exchange, Starbucks purchases its coffee through CARE (Coffee and Farmer Equity) (Starbucks’ 2011). The group CARE ensures the coffee in the question is of proper quality and adheres to both social responsibility and economic accountability.

Starbucks is very considerate on its workers rights. It evaluates its workforce rights and safety in their working conditions. In its workforce, Starbucks does not entertain child labor, unrealistic wage and discrimination among their human rights violations (Franklin 2008). Further, Starbucks supports farmers through supportive centers located in numerous locations where it operates. Such examples of supportive center include Costa Rica and Rwanda. Here, Starbucks offer farmers expertise and resources such as financial aids (Starbucks’ 2011).

In selecting strategic suppliers, Starbucks is very choosy. It only undertakes deals with suppliers who employ similar ethical values it embraces. Starbucks undertakes social responsibility on its new and existing strategic suppliers (Donaldson & Dunfee 1999). Diversity and wellness are other social responsibilities undertaken by Starbucks. Through wellness social responsibilities, Starbucks devotes significant resources as well as effort on improving the health of its stakeholders. Further, through wellness social responsibility, Starbucks provides its customers with balanced foods and beverages. Through diversity social responsibility, Starbucks has policies that encourage people to air their diversified ideas to its management. These diversified ideas help Starbucks in creating and enhancing its opportunities in business operation (Donaldson & Dunfee, 1999).

Post 2010 Starbucks Success Strategies

CAFE (Coffee and farmer equity) program has proved to be hard task for Starbucks to undertake. In spite of obstacles associated with CAFE obstacles, Starbucks tirelessly continues to improve these programs. Starbucks encourages the farmers’ participation by expanding its operation in new areas and motivating farmers and suppliers to participate. Through CAFE programs, farmers have continued to enjoy improved conditions in terms of global market prices (Allison 2006). To continue enjoying success in post 2010 period, Starbucks should undertake the following

Training, Communication Channels and Relationship Improvement

At the times when coffee demand increases, Starbucks must embrace training of its suppliers on issues that relate to CAFE. This training is essential because, in this industry there is a complexity within the supplier network. Continued training will enable Starbucks and its strategic partners to have ease time while verifying the quality of coffee. In addition, improved relationships and communication channels will foster efficiency in Starbucks that in turn will positively respond to supplier demands (Howard, 2005). The enhanced CAFE practices as well as improved participations of its suppliers will facilitate Starbucks realization of long-term goals of creating and maintaining sustainable coffee supplies. To achieve such goals, Starbucks must rely on third parties who will undertake inspection and verification of coffee. Therefore, there is need of more trained verifiers who will keep pace with emerging and sophisticated verification requirement (Kembell 2002). Because of the number farmers willing to engage into CAFE practices, this an opportunity for Starbucks (Howard 2005).

Global expansion of business operation in Africa and Asia

As it has always improved its sales volume with ventures in new regions, Starbucks should undertaken aggressive expansion programs to Africa and Asia. These new ventures should also constitute supportive initiatives to farmers (Steverman 2009). During the pre 2010 development, Starbucks has successfully increased its sales volume through new expansions. For example, in 2004, Starbucks initiated farmer support centers in Costa Rica. This initiative enhanced Starbucks efficiency of dealing with suppliers and farmers while dealing with matters of coffee quality and supply sustainability (Steverman 2009). However, Starbucks faces difficulties in implementing and enhancing CAFE programs in Asia Pacific and African countries. In Kenya, it collaborates with AWF (African Wildlife Foundation), this one of the first Starbucks CAFE initiatives in Africa. In Asia Pacific, CAFE initiatives are affected negatively by the absence of financial transparency as well trained verifiers’ less understanding of these programs (Howard 2005).

Fair Trade Certification

Starbucks should continue embracing fair trade certification. The collaboration between Starbucks and Fair Trade Certification and Licensing Organization dates back to 2000. This accord gave Starbucks an authority to make purchase, roast and sell the fair trade certified coffee only. The main objective of this accord was to give farmers justified prices for their coffee as well as enhancing their access to international markets. Like CAFE, Fair trade system has long term focus of Starbucks and farmers relationship by supplementing the latter with funds and preferable credit terms to those who need working capital (Allison 2006).

Conclusion

In the last four decades, sales growth, revenue growth and global expansion have characterized Starbucks. These essay paper has appraised Starbucks success from inception until 2010. Further, the essay paper has put across possible strategies that could foster its growth in post 2010 era. The success of Starbucks in pre 2010 period is attributable to factors such as social responsibility initiatives and its effective strategic programs. Starbucks undertakes five forms of social responsibility among the society – wellness, ethical sourcing, environmental diversity and community. At community level, Starbucks creates positive impact to people by initiation of projects that nurture the talent of youth. At environmental level, Starbucks participates in initiatives that seek to eliminate hazards within the environment; for instance, it recycles its used paper cup. In addition, Starbucks is helpful to farmers through its participation in ethical and legal transactions.

Starbucks is major concern is the welfare of its customers. Starbucks moves towards building a good relationship with its customers and strategic partners who share its value and commitment to quality products. The success of Starbucks is also associated with its strategic locations particularly in metropolitan that serve as hubs to regional strategic stores such as schools, airports, grocery stores, department stores, convenient stores, movie theaters and home deliveries. One major factor that promoted Starbucks success is its expansion strategies. Within 20 years, Starbucks managed to initiate 10,241 stores across the globe. This initiative has not only improved Starbucks sales but also stabilized them. To continue experiencing success in future, Starbucks must put in place some strategies. For instance, it should continue its expansion programs in regions such as Africa and Asia pacific. Again, Starbucks should continue adhering to Fair Trade System accord as well as collaborating with farmers by training coffee verifiers.

Reference List

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Missouri State University

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