A Company Analysis - Starbucks

Freshman (College 1st year) ・Business ・Harvard ・13 Sources

Starbucks is a global corporation that sells more than 87,000 varieties of drinks to its customers (Starbucks Newsroom 2016). The institution grew from 1986 when its founder, Howard Schultz, bought it and changed the company's intent from merely selling ground coffee, herbs, tea and whole bean to the company's customers to serve drinks. The organization is now operating in more than seventy countries and has over twenty-four thousand discount outlets. The corporation currently has the biggest coffeehouse chain in the world. Starbucks business structure The organizational structure of Starbucks is partly responsible for its success in the market. The company is governed through divided based on geography and brands. When it comes to continental segments, the operations of the enterprise are spread out in China, Americas, Channel Developments, and Europe, Africa and Middle East and other segments it has ventured or intends to venture into (Starbucks Newsroom 2016). The brands within the organisation consist of Teavana, which serves various teas; Starbucks which is based on the provision of coffee to its clientele as well as food and other beverages that are non- alcoholic; Tazo tea which serves teas, roots, spices and herbs; and Evolution Fresh which provides foods and juices for nourishment.

Operations of the company

In 2017, the organisational structure of the company was transformed when the current Chief Executive Officer, Kevin Johnson, adopted changes that were meant to streamline the services provided to customers by making them more flexible (Starbucks Newsroom 2016). The organisation has both company operated and licensed stores. The company’s operations are enhanced through technology use as it has its own mobile applications in order to promote the sale of its products. The clientele is also able to enhance customized service through choices that are made via the apps.

Contribution to the economy

As a multinational organisation, Starbucks not only improves the economy of the United States where it was incorporated, but also other regions within which it operates. In the United Kingdom, for example, it sources milk and other produce from local suppliers (Starbucks 2017). Moreover, in the United Kingdom alone, the enterprise has employed more than fourteen thousand people in the eight hundred coffee shops it has within the region. Although the company’s profits have been affected by the impact of Brexit, it has however continued to pay corporation tax in the country thereby contributing to the economy (Press Association 2017).

Key stakeholders

The term ‘stakeholder’ refers to any person within an organisation who is pertinent for its operations, generation of revenue and growth as well as one who is affected by its operations. The key stakeholders of the business include the suppliers such as coffee farmers, investors, employees including baristas, and governments (Panmore Institute 2017). All the stakeholders play a significant role in the successful operation and growth of the organisation. The employees of the organisation, for example, directly interact with the customers thereby having the ability to attract more through their customer service or to deter future visits and purchases. The government of the countries in which the organisation operates has a duty to establish laws that are favorable for the conduct of business and attraction of investors, which includes a reduction of trade barriers. The customers of Starbucks also play a major role because they determine what is sold by the organisation based on any variations in the consumption habits they exhibit. Suppliers ensure that there are qualities goods supplied which are used to create the beverages which customers of Starbucks prefer. The stakeholders in the company therefore shape the manner in which the enterprise operates as well as its ability to generate profits (Cornellissen 2011, p 54). Consequently, stakeholder collaboration is essential and the leaders of the business ensure that there is constant communication and adherence to the messages relayed by all stakeholders which are used to improve the business.

Vision, mission and purpose of the organisation

Vision and mission

The organisation currently has no vision statement with its mission providing guidance instead on the direction in which the company aims to head in. The vision of the company is “to inspire the human spirit-one person, one cup and one neighborhood at a time.” The objective of the company emanates from the childhood and upbringing of the founder of Starbucks, Howard Schultz in the Bay-view Housing Projects (Starbucks 2017). Consequently, he wanted the Starbucks experience to be an escape from the adverse conditions in his childhood.

In order to keep in line with the objective of the founder which is committed to a social purpose, the following statement can be adapted as the vision of the company:”To unite the world through the experience of a beverage drink and transform the lives of all associated persons through the Starbucks experience”(Starbucks Newsroom, 2016). The mission statement can be: “To venture into all the societies in the world and enhance their experience of other worlds through beverages, while also exposing its drinks as an experience for global transformation.”

The value to stakeholders and the wider society

The business will be beneficial because it will enhance the income and social experience for all its stakeholders. More employees, for example will be engaged by the organisation in order to enable it to venture into all markets globally. Moreover, the company will be able to employ more members of the society. As such, it will raise the living standards of the communities it establishes branches in. Governments also have an opportunity to increase the revenue generated through corporate taxes if the organisation begins serving diverse beverages inspired by the drinks from other parts of the world, which has the possibility of attracting more people to become part of its clientele (Gouillart 2014, p. 2). The suppliers of the organisation will not only improve their profits because of the demand for more products to be used on a global scale, but will also learn from other products used to make drinks in other parts of the world; thereby enhancing their agricultural methods, for example. As a result, the entire society will be enriched through the sharing of cultural experiences via drinks and the improvement of revenue collected by each person.

Why the company should develop a wider social purpose from the outset

Incorporating social purposes from the creation of a business improves the public image of the organisation thereby enhancing the ability to develop a loyal customer base (Gamboa & Goncalves 2014, p. 710). The revenue that can be generated due to a positive perception in the public domain is more favorable. Moreover, corporate social responsibilities developed from the onset have the ability to save costs for the company, for example through government tax incentives in support of such measures as well as enhancing its ease of operations in new markets because of good relations with the government (Saeidi et al. 2015, p.344). Suppliers and employees are also more likely to provide quality goods and services if they believe they are part of a wider scheme meant to profit the entire society.

Winding up companies under United Kingdom law

The process of ‘winding up a company’ relates to the ending of the operations of a business. Since the running of a business involves complex transactions which may result in debts to suppliers or other creditors, the interests of those owed money are paramount. Creditors can ask a company to pay up its debts. In case a company is unable to pay up what it owes within twenty one days, a solicitor can be asked by the lenders to institute a winding up petition in court (Peel 2016, p.346 ). Upon review, the court can declare a company insolvent and it thereafter has seven days to pay the debt or the petition is approved by the Court and the advertisement gazette. The assets and accounts of the company are thereafter frozen and an official receiver appointed as liquidator. The assets of the company are sold off and those owed money repaid. Any surplus, if any, is thereafter given to the shareholders of the business.

Critical analysis of the market and economic environment

The five forces propounded by Porter as having the ability to impact an organisation are rivalry through competition in the market, the power of suppliers and buyers. Others include the ability of the clients to substitute the products of a company, and the possibility of the emergence of a new entry that may affect the current position of the business in the market (Dalken 2014, p. 7). In Starbuck’s case, the main competitors include McDonalds and Dunkin’ Donuts which both serve coffee to their customers. Starbucks currently prides itself as engaging in ethical sourcing of the coffee used in making its beverages (Starbucks 2017). Since the organisation has a diverse supply chain which incorporates more than 300 000 farmers in at least thirty countries, it has the ability to easily switch in case one supplier becomes unreliable. The clients of the company appreciate the unique array and quality of beverages they get from the enterprise which serves a wide range of persons thereby having a large customer base. However, there exists the possibility that another company can enter and make headway in the market thereby affecting the position of Starbucks since the market is easily penetrable. The reason behind this is that it provides a basic service which does not require complex skills.

A PESTEL analysis of the political, economic, socio-cultural, technological, environmental and legal factors can also help predict the viability of the organisation in the long run (Dockalikova & Klozikova 2014, p. 41). Although the economic and political conditions in the United Kingdom have been adversely affected by Brexit, the enterprise still has other favorable environmental elements. Such factors include a socio-cultural predisposition to drinking coffee due to rigorous work schedules; the incorporation of current technological innovations such as mobile applications and a favorable legal environment in most countries for the provision of its services; including low corporation taxes in places such as the UK.

Concept of visible and invisible hand

The invisible hand, in the context of an organisation refers to the market forces which are unobserved and help optimize the supply and demand of goods and services in a free market (Gavin 2014, p. 199). In contrast, the visible hand connotes artificial interference in the market, for example through government regulation aimed at the same objective of optimizing trade. For Starbucks, the invisible hand can positively affect the organization by enhancing its ability to compete and attract more clients through cheap prices brought about by lack of barriers such as taxes. However, there is also a negative consequence that could arise through the lack of regulation of competition which has the potential of easily derailing a business, for example through a merger of the two top competitors of the business thereby lowering the prices and acquiring the ability to venture into many more markets. Conversely, the visible hand affects Starbucks by negatively increasing the cost of doing business through the levies that have to be paid to regulators. However, the interference by the state ensures that there is a fair trading environment.

Relevant regulations that can affect Starbucks

Brexit persists as the main concern of businesses such as Starbucks that operate in the country (Cumming & Zahra 2016, p. 35). The trade barriers which are likely to arise if the negotiations between the Britain and the European Union fail will adversely affect many businesses including Starbucks. Such companies may be forced to pay higher levies to relay products across borders or even operate within the country as the government attempts to fill the deficit caused by loss of some businesses which traded within the EU.

The minimum wage also increases every year on April 1 thereby affecting businesses such as Starbucks which have many employees. Currently, adults between 21 and 24 years, for example, currently earn a minimum wage of 7.50 pounds (Smith 2017). Such wage increases adversely affect the company which has to comply with the stipulations thereby affecting its revenue allocations for the financial year.

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Cumming, D., & Zahra, S. A. (2016). Brexit can have profound implications for firms on both sides of the Atlantic. LSE Business Review , 34-47.

Dalken, F. (2014). Are porter's five competitive forces still applicable? A critical examination concerning the relevance for today's business. BS thesis. University of Twente , 143.

Dockalikova, I., & Klozikova, J. (2014). MCDM Methods in Practice: Determining the significance of PESTEL Analysis Criteria. European Conference on Management, Leadership & Governance. Academic Conferences International Limited .

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Panmore Institute. (2017). Starbucks Coffee's Stakeholdres: A CSR Analysis. Retrieved December 30, 2017, from Panmore Institute: https://panmore.com/starbucks-coffeee-stakeholdres-csr-analysis

Peel, M. J. (2016). Owner-Managed UK Corporate Start-Ups: An Exploratory Study of Financing and failure. Entreprenuership Research Journal, 6(4) , 345-367.

Press Association. (2017, April 13). Starbucks sees UK profits plunge 60pc as Brexit and slowing economy hit sales. Retrieved December 31, 2017, from The Telegraph: http://www.telegraph.co.uk/business/2017/04/13/starbucks-sees-uk-profits-plunge-60pc-brexit-slowing-economy/amp/

Saeidi, S. P., Sofian, S., Saeidi, P., Saeidi, S. P., & Saaeidi, S. A. (2015). How does corporate social responsibility contribute to firm financial performance? The mediating role of competitive advantage, reputation, and customer satisfaction. Journal of Business Research, 68(2) , 341-350.

Smith, R. (2017, January 5). British law changes in 2017: How will the new rules affect you?

Retrieved December 31, 2017, from Express.co.uk: https://www.express.co.uk/news/uk/750207/british-laws-changing-2017-new-uk-rules-affect-cigarettes-road-tax/amp

Starbucks. (2017). Ethical Sourcing. Retrieved December 31, 2017, from Starbucks: https://www.starbucks.co.uk/responsibility/sourcing

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