Analysis of the strategy and business performance of Starbucks Coffee UK.
1636972 Coursework 2
221 BSS
221 BSS Coursework
Business Management
This report will analysis the strategy and business performance in the retail food sector, the company I will be analyzing is Starbucks Coffee UK, using the PESTEL. Starbucks is a multinational coffee and coffeehouse chain based in the USA. It is the largest coffeehouse company in the world.
Starbucks was founded in 1970, with the first store opening that year in USA. In 1982 Howard Schultz joined the company, later going on to be the Chairman, CEO and President of the company. The first UK store of Starbucks opened in 1998. In 2007, there were 15,011 Starbucks outlets in 42 countries, 6,793 of these being in the US. Additionally Starbucks was voted one of the top ten UK workplaces in the Financial Times 2007. In the future Starbucks aim’s to operate over 40,000 outlets worldwide.
The PESTEL framework gives broad list of influences on the likely success or failure of particular strategies. It is important to analyse how environmental influences are effecting an organization in the present and in the future. The PESTEL analysis is used as it sufficiently can be used to understand and identify the important factors that Starbucks must consider in all areas of the business and industry. PESTEL stands for:
Political – current political influences and the influence of the Government
Economic – business cycles, world economy and inflation
Social – changes in society, lifestyle changes as well as social mobility
Technological -growth of the Internet, new emerging technology and Government spending on research
Environmental – ‘green issues’ and growth of environmental protection laws
Legal – Changing health and safety laws, growth of legislative constraints on companies.
Political
- Taxation Policy- as Starbucks purchases whole bean coffees from farmers, these farmers may face a high taxation rate, in the countries, which they produce, coffee, this suggests that Starbucks could pay a higher price for the coffee they purchase. If there are any changes in the price that they pay for the beans, this in turn has an effect on the price that Starbucks charges to its customers. Tanzania’s Minister of Finance (June 2003) matched and updated the local government tax in order to improve rural production of the coffee bean. As the tax was lowered for the rural farmers, the savings that are made will then be passed to the large companies that purchase the coffee such as Starbucks.
- Government Stability – Before Starbucks enters a new international or national market; it is essential that they investigate the political status of the country. A potential future change in the government or the way the government operates can lead to changes in tax and to her important rules. For example the current American Elections may have an effect on the American based Starbucks, as potentially the Government may bring in an increase or decrease in tax. Furthermore countries that are in political uproar (e.g. Kenya) should be approached with care, when considering new projects.
- Employment Law – The countries that produce coffee for Starbucks are affected by a change in the employment laws. A dramatic change in the permit and other costs for producing coffee beans would mean the production cost for the farmers would decrease. This potential saving that the Government makes is then passed to the consumer, in this case Starbucks.
- Deregulation – is the process by which Governments reduce restrictions they have set out on businesses. About 10 years ago the US government left the ICA (International coffee Agreement); they had set up export quotas for the coffee producing nations and kept the price of coffee at a stable price. Since these deregulations farmers have experienced a loss of earnings, therefore they have struggled to make a living and have given up.
- International Stability – both national and international economy must be considered when it has an effect on Starbucks’ sales and markets. Following both July 7th 2005 and September 11th 2001 terrorist attacks on in USA and London, there was an economic slowdown that affected both national and international economic markets.