The aim of this report is to investigate the challenges facing Starbucks. The objective of this report is
to analyse the businesses current situation, identify emerging issues, offer solutions for the
problems identified and lastly to propose recommendations using relevant marketing theory which
is in line with Starbucks overall mission.
Starbucks is an iconic global company which originated in Seattle, the company was founded by
Howard Schults who seized an open market opportunity and forever changed the coffee industry.
The company has experienced unprecedented growth by converting a pedestrian commodity into a
fashion accessory. Starbucks sells coffee and snacks in well positioned cafes for premium prices. The
company began as a tiny chain of Seattle coffee shops and has grown into a multinational
Starbucks has endured a hostile reception for future consumers, criticism for moving too slowly to
improve the situation for poverty stricken farmers as well as discontent staff and low employee
morale. This report will focus on and analyse these issues facing Starbucks.
Alternatives are generated as strategic options and analysed in regards to the extent which the
alternatives address the issue of negative public opinion, disgruntled employees and inability to
penetrate the emerging younger market.
A SWOT analysis investigates the current situation.
Strengths of Starbucks are that it has substantial financial backing and an experienced management
team. This ultimately provides Starbucks with capital base and buying power, with 3.1 billion worth
of sales in 2004. It can afford to expand into new markets and acquire
tacticalcommercialacquisitions. It also has unwavering support of investors and a well-established
growth capacity, operating as one of Business Weeks top 100 global brands in 2005.
Starbucks has also become proficient at ‘predatory real estate’ strategy, which enables the
company to keep competitors at bay. The company-owned stores also enable Starbucks to maintain
control over the image of the company. This will also enable Starbucks to implement any strategies
across the stores rapidly without losing control. Starbucks also has the competitive advantage of
having no nationwide competitor, which would contribute to its growth potential. The company is
also renowned for being a highly innovative business with record service and creative new product
In terms of weaknesses, Starbucks has encountered negative feedback from its futurecustomers,
current employees have been dissatisfied and the company has also been criticized for debauched
Generation X negatively received Starbucks, saying that the brand doesn’t welcome their age group
and they find it difficult to identify with the Starbucks image. Furthermore, the 20-30 year olds
complained about issues surrounding the affordability of the products.
Starbucks also encountered large volume dissatisfaction amongst employees over odd hours and
low pay, which ultimately affected the coffee itself.
Controversy has arisen presiding over the companies CSR practices;critics have claimed that
Starbucks is more concerned about public image than attempting to resolve widening inequalities
Regarding opportunities, the presence of the generation Y market as emerging consumers is growing
and this technologically savvy cohort responds well to wireless access and pre-ordering. In order to
gain a foothold on the younger generations, Starbucks must adapt itself to the current expectations.
The younger generations are highly responsive to corporate social responsibility initiatives.
Starbucks has experienced high demand for new stores internationally, which means the company
has the opportunity for further international expansion. An improved human resources
management inniative will help to improve employee relations and motivation.
In terms of threats, Starbucks is facing increasing competition, an increasing fight for market share
and decreasing store sales in foreign markets.Starbucks is struggling for customer retention in the
The SWOT analysis identified key problem areas in the Starbucks case:
Lack of corporate social responsibility
Disgruntled employees and inefficient employee relations
Ineffectiveapproach to penetrate the emerging youth market
“Should STARBUCKS pursue strategies to influence public opinion?”
This decision statement questions the public opinion of the current business strategy and the ability
for Starbucks to persuade a generation of consumers and employees that Starbucks is a company
that enhances society and accountable for its actions.
Identification of alternatives:
Alternative A: Pursue a corporate social responsibility strategy
Corporate social responsibility will address several issues in this case. The use of this strategy will
balance corporate power with responsibility, promote long-term profitability, improve business
value and reputation and correct social problems caused by the business(Lawrence & Weber, 2008).
The use of a mission statement that incorporates a social mission will improve staff morale and
motivation level, providing intrinsic rewards for employees and ultimately improving work and
service quality. This is catering to employee’s higher order needs (Bergman, Coulter, Robins & Stagg,
Alternative B: Segmenting Consumer Markets
Isolate individual characteristics and cater to these segments using different strategies. The newer
generation that Starbucks needs to attract has relatively homogeneous needs. Starbucks must focus
on closely aligning their image with the consumers’ideals. They must consider how the age gap
relates to customers’ needs, attitudes, lifestyle and preferences(Hodgetts & Kuratko, 2008).
The younger generation is more price sensitive and values different product benefits. Their
personality, motives and lifestyles are different to that of Starbucks initial customers. Promotional
discounting new products and odd-even pricing will help Starbucks tackle the price sensitivity of the
new younger customers. Persuading the younger generation of Starbucks social responsibility and
non-pretentious attitude will help to encourage penetration of this ‘up-and ‘coming’ market
segment (Farell & Hartline, 2011).
Alternative C:Customise products and Starbucks image to relate to new geographic locations to
prove cultural empathy and a sense of humility.
Starbucks should customise products to suit each countries wants and needs of the target market.
This will help deal with the problem of rising competition and Starbucks ‘overly powerful’ image.
This will also help hamper the socio-cultural issues faced by Starbucks in the Middle East.
For example, to enter the Chinese market in order to raise awareness Starbucks will need to
establish itself as a socially responsible company and prove that it will make a strong commitment to
the new county. The daunting economic situation will increase this pressure and in order to succeed
and compete on a global scale with the constant threat of imitators, Starbucks will need to be highly
innovative with product development and cater to the countries tastes and preferences(Farell &
Hartline, 2011). P.174
Alternative D: Development of a company-wide planning culture
The relationship between headquarters and local subsidiary staff is a likely cause of dis-satisfied
employees. It is common for Subsidiary staff to claim that, being more involved with the local
customer’s gives them a better idea of opportunities and therefore they should play a larger part in
the planning process, especially in the department of developing objectives and strategies.
In order for this situation to change, all corresponding persons should have a clear idea of their own
roles and involvement of the process and how their contributions are integrated. A greater emphasis
on staff at all levels will provide an increased level of customer service performance and a sense of
self actualisation amongst staff members. This should be a continuous process and enhance strategic
thinking across the board though a standardised planning process P.223 (Doole & Lowe, 2008).
Criteria A In order to justify any expenditure or use of organisational resources, the use of these
strategies must enhance the value proposition of Starbucks in the minds of the consumers.
Criteria BExpenditure must enablepenetration of the younger market, increased staff morale and
service capabilities, and improved public opinion of Starbucks.
Criteria CThe benefits must outweigh the costs of this operation. It must enable the Starbucks brand
to move into new segments and markets to increase profit margins. Ultimately it will enable
Starbucks to increase global market share.
Criteria D The strategy must support the long-term growth and sustainability of the company and
enhance its competitive advantage.
Criteria EThisapproach will improve customer relations and responsiveness to customer demands.
This section will discuss advantages and limitations of the alternatives
Alternative A In an assessment of the advantages of this alternative, it does cover the majority of
criteria. The creation of a corporate social responsibilitystrategy will sway public opinion, enhance
staff morale and therefore service to customers as well as increase global market share and
responsiveness to customer demands. The most poignant feature of this alternative is that it will
enhance the value proportion of Starbucks in the minds of the consumers. It will also enhance the
sustainability of the company through increased an increased customer base and customer centric
ideals. The strategy also has the added benefit of having a sustainable, long-term orientation and
will enhance its competitive position.
Alternative BSegmentation of the market will enable Starbucks to penetrate a new market and
utilise Starbucks financial backing to manage this expansion. This alternative is in line with enhancing
the value proposition of Starbucks and the accessibility of it to the new market segment. However, it
does not enhance staff morale.
Alternative CThis strategy presents many advantages. It involves an interchange between
development and knowledge of the foreign market and an increasing commitment of resources. An
apt knowledge of the new market and marketing of socially responsible efforts will increase the
value proposition of Starbucks in the minds of the consumers. It is also likely to affect the motivation
of employees and therefore enhance quality of service. These actions will increase the likelihood of
success in foreign markets and therefore abide to criteria C, having the cost outweigh the benefits. It
will also help the issue of psychic distance such as overcoming barriers like difference in language,
culture and political systems (Lawrence & Weber, 2008). This will enhance the long-term growth and
enhance Starbucks competitive advantage.
Alternative D Developing a company-wide planning culture will help the responsiveness to
customer demands and will also boost staff morale and satisfaction (Stasch, 2010). As the majority
of staff is within the generation Starbucks is hoping to target, it would also help to penetrate this
new market segment. However, it does not cover the issue or public opinion.
Based on the analysis, alternative A is the best course of action; however elements of alternative D
do warrant consideration.
To implement alternative A, the following actions are recommended:
In order to change and influence public opinion, the use of media messages must be crafted to
enlighten or educate the public regarding the changes in the businesses viewpoint and how this will
affect the public. This can be done through public service announcements. In order to attract
customers that are politically and socially informed Starbucks can offer an editorial informing the
public about philanthropy and activism. This can be offered inside the store and discuss issues that
resonate with the public. It is an informative way of showing its customers that it is paying attention
to global issues (Lawrence & Weber, 2008).
Starbucks can create a global public relations management team to deal with issues surrounding
corporate social responsibility. This team can also deal with responsiveness to environmental and
recycling issues. The global management team can analyse scientific studies and track government
actions across the world, it can also work within the company on different levels to ensure that the
staff are ‘speaking with one voice’ regarding social issues. This team can iron our any cultural
disparities, design press releases and interact with the media. The impact of the public relations
program will most likely vary between different nations given the different systems and diversity. A
public relations manager needs to be capable of speaking the native language to avoid embarrassing
or misleading communication issues. This will also help to alleviate some of the anit-American
sentiment felt globally (Lawrence & Weber, 2008).
In order to ensure that business strategies are implemented appropriately, the global public
relations program will need to be decentralized due to the vast differences between nations. This
team will also integrate some of alternative D, so that company resources are quickly utilised to
maximise customer understanding and employee satisfaction. A transparent communication system
between front of house staff and managers will impact Starbucks competitive advantage and
consumer appeal (Lawrence & Weber, 2008).
In order to announce changes in the business organisation, image advertisements will promote the
new image of a socially responsible company. These advertisements target the public’s emotions
and seek to inspire the customers and employees. This will target the younger generation and
develop an image of a company that cares about its suppliers and ‘the little guy’. This will be
communicated to the employees and customers. It is imperative that it is etched deep into the
corporate culture to ensure pride by the employees and loyalty from customers (Lawrence & Weber,
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