Evaluation of Starbucks Dilemmas - Essay Example

?Business Ethics Table of Contents Introduction 3 Overview of the Company 4 Issues or Dilemmas Facing by Starbucks 5 Evaluation of Starbucks Dilemmasand Its Application 8 Starbucks’ Ethical Practices 11 Recommendations 13 References 16 Bibliography 19 Introduction Business ethics, also at times referred as business law, may be defined as the overall study of the activities and operations in which a few rights and wrongs regarding the financial as well as overall market position of a company are stated. Business ethics enhances human interactions, which take place during the life cycle of a product or a service. It also enhances the relationships between management, stakeholders and the society. Business ethics involves decision making process which focuses on moral awareness which leads to moral judgement or moral motivation. From prior studies, it can be evidently stated that ethical considerations provided by organisations in the post-modern era not only tends to boost its industry relations, but also tends to strengthen its existence in the market. Thus, ethical concerns by organisations play a crucial role in rewarding the company with competitive advantages in its targeted market (Shaw, 2010). Hereby, this paper will intend to provide a brief description of Starbucks, a coffee company in relation to its ethical considerations. With this concern, the paper will focus on the ethical dilemmas faced by the company and its ethical practices implemented in the recent company operations. From a rational perspective, these facts will be further analysed so as to obtain a comprehensive explanation business ethics related issues faced by the company based on which recommendations will also be suggested. Overview of the Company It was in the year 1971 that Starbucks was founded in Seattle, Washington. The main reason in instigating the company was the love and desire for coffee in the then American community. As days passed on, this company grew up slowly with its branded coffee and by the year 1981, it established a well equipped coffee roasting plant. It had also built four retail stores that sold the whole bean coffee in the markets around Seattle. Starbucks continued growing rapidly into the market with continuous development of retail stores and establishment of new enterprises. Within five years, the number of Starbucks’ stores grew nearly about tenfold with various locations prevailing in different countries like U.S, Japan, and Singapore among others. In the year 1998, Starbucks partnered with Conservation International (CI), which is a non-profit organisation and it enormously helped Starbucks to promote bio-diversity especially in the coffee-growing regions in order to support the producers of shade grown coffee. The result with this partnership has also laid impact on the positive response towards the environment and also among the farmers engaged in the initial level of the company’s supply chain. From the very beginning Starbucks made some strategy of loan guarantees that helped to provide loans to the farmers and with this financial support they enabled themselves to double their income which facilitates farmers’ motivation (Stanley, 2002). Issues or Dilemmas Facing by Starbucks One of the major and most hazardous operational issues faced by Starbucks was that it had limited control over fluctuating global prices. As a consequence, increase in the commodity prices in the global market forced the company to increase its product price. Furthermore, with an increase in its product price and simultaneously in its profit earned, Starbucks should also require taking appropriate measures for community services which can be observed as an ethical issue faced by the company. For instance, the farmers play a very crucial role in the production process of coffee in the supply chain of Starbucks. But unfortunately it was these groups of people who are observed to suffer a lot of hardships that can hamper the production process to an extent which is likely to have significant influence into the business marketing of Starbucks across the country. The farmers working in the production plants were also observed to have limited opportunity for education and medical facilities which was certainly one of the liabilities of the company from an ethical perspective. Thus, this is also one of the severe ethical issues or problems that Starbucks is facing (Wright, 2011). The interests of these groups of producers or farmers are also observed to be hampered by the company’s operations, to provide them with their deserved pay. As stated by Wright (2011), the purchase price offered by the company in return of goods such as unprocessed coffee beans, does not include the true costs incurred by the farmers during the production. This has often been termed to be a significant reason for the company to serve its products at a cheaper rate than that of its competitors. In other words, the savings derived by the company from paying the farmers with inadequate compensation is further observed to reduce the production and processing cost of the company allowing it to serve its products at cheap rates (Wright, 2011). Un-favourable general economic conditions in the respective markets where the company intends to execute its business marketing strategies also play a significant role in causing ethical dilemmas for Starbucks. For instance, in global markets and different economies, various divergences can be observed in terms of culture, and customer spending power among others. Dealing with these divergences can also influence a few ethical issues that in turn are likely to obstruct the sustainable growth of the company at large. Increment of some favourable but uncontrollable factors such as fluctuating interest rates, improper income distribution, results in minimised customer satisfaction that in turn tends to hamper customer confidence at large can also be a relevant reason for the company to witness ethical dilemmas (Crane & Matten, 2007). Another challenging problem of Starbucks is the increased competition that arises while transacting the business throughout the country and at times imitating the strategies of the successful competitors also leads to the path of ethical dilemma for Starbucks. In its continuing operations, Starbucks can be observed as focused on consistent expansion scattering its business activities not only across the country but also in cross-border regions. In this relation, it was observed that Starbucks is facing significant inefficiencies to manage the rapid pace of growth of its business performances or activities with competency. This is another major ethical issue or a problem that Starbucks faces in its global operations (Pahl, 2009). In order to establish a polished business activity or to maintain smooth business operations across its market, a particular company should focus on acquiring important key personnel for efficient business performances. But the fact is that Starbucks faces enormous difficulties in acquiring vital key personnel within the organization which is considered to be a major problem or difficulty for the company. One of the reasons for the company to face this issue relates with the incompetent working culture within the organisation that is likely to create a gap between the needs of the productive human resources and the organisational requirements (Pahl, 2009). Another most significant problem or difficulty that Starbucks is facing relates with its concentration of maintaining the business operations merely with its store outlets rather than providing equal significance to other segments of organisational structure, such as supply chain and production processes. Thus, Starbucks has to remain highly dependent upon the financial performance of United States as its home country. As the financial markets of US were suffering from a crisis related to the factors of securities and mortgages which caused damaging results in terms of steep deductions in the customer spending power. This incident in relation to the strategic vision of Starbucks resulted in serious problems while operating its business across the country (Pahl, 2009). Another problem or difficulty that Starbucks faces is the political risk factors which come from the unpredictable shifts in various government policies that can drastically change business conditions of Starbucks raising ethical dilemmas. Political risk includes sudden changes in social infrastructure also which may cause the consumers to reconsider their choice of products. Anti-competitive forces that restrict trade or support economic inefficiency can also put Starbucks at a disadvantage (Glenn & Henson, n.d). Starbucks also faces difficulties in terms of cultural differences as well as in terms of industry relations and legal structures of various economies. For instance, in the Japanese market, the active anti-competitive practices and foreign relations had been observed to have an effect on Starbucks’ strategies concentrated on penetrating the market of food service industry. Notably, in Japan the food service industry is identified to be highly regulated and thus can be referred as politically sensitive. Furthermore, the control of immigration laws and economic reforms prevailing in the Japanese market also played a significant role in obstructing the organisational success of Starbucks (Glenn & Henson, n.d). Hence, Starbucks will have to resolve some substitute strategies for the employees in order to overcome these difficulties in the Japanese market as well as in other similar market structures. To be precise, these are a few major and vital ethical issues that are faced by Starbucks while executing its business operations across the global market. Evaluation of Starbucks Dilemmas and Its Application Considering these difficulties in terms of ethical dilemmas faced by Starbucks, it intends to implement various appropriate theories so as to enhance its competency in the global market. For instance, Starbucks in order to deal with these above mentioned problems or dilemmas, laid emphasis on its Strategic Diamond Approach. This particular approach helped Starbucks in its business development in order to interpret the strategic alliances that have been adapted by the company. The company also tends to emphasise on Five Elements Framework that comprises of several arenas, such as offering high quality fresh products in a pleasant atmosphere as well as offering personal services mainly to pursue the young customers who want to enjoy a kind of luxury and comfortable atmosphere. It also establishes aggressive national and international expansion strategies focusing on the areas with high consumer potential. In relation to the ethical dilemmas, Starbucks can also focus on the company operated retail stores maintaining proper and smooth licensing agreements along with partnerships prevailing in both domestic and international markets (Pahl, 2009). In order to manage these issues, Starbucks has taken an analytical approach on Corporate Social Responsibilities (CSR). Nowadays, CSR has emerged as an important part of many global organisations. It is concerned with how a company tries to be beneficial to all its stakeholder groups. CSR can also prove to be quite beneficial to improve the quality of the product helping the organisation to provide better and satisfied services to the customers. By focusing on the CSR activities, the company not only depicts to be concerned with the profit but also with the presence of its social and environmental liabilities. Hence, CSR is viewed as an umbrella concept which constitutes corporate citizenship, stakeholder management, corporate sustainability, environmental management, business ethics and corporate social performances. It is due to this reason that CSR is one of the most beneficial strategies to run bigger organisations (Elkington, 1997). In the current scenario, it is very much obvious that in every business or in every company, there is a positive influence of economic factors. In order to sustain businesses economically, companies should not only be concerned about benefits of financial aspects but also provide with due significance to its ethical responsibilities towards the community and the society at large (Elkington, 1997). In other words, ethically concerned companies are most likely to receive a lot of economic advantages by using innovative strategies to operate their businesses rewarding with the benefits such as reduced production costs, enhanced quality of products and goodwill that in turn shall build effective long run relationship with its stakeholders. Therefore, it can be stated that these shall emerge as the win-win strategies for Starbucks to revitalise its corporate presence in the global market (Harnrungchalotorn, n.d.) Another most important factor in the CSR’s triple bottom line thinking is that it can adversely affect in the field of economics along with the field of environment. Starbucks should be responsible towards communities both internally and externally, as it has a significant impact on developing markets in providing good environmental workplace, training skills, and human rights among others. As a result, Starbucks will receive good feedback from communication and all employees to corporate sustainable development. The three principles are justified for a sustainable value based service business (Harnrungchalotorn, n.d.). Strong values drive customer values as it develops to customers’ values as well as society’s values including value of organization towards the direction of business improvement. CSR, as a strategy for sustainable service business, relates to its responsibilities towards social, environment, economic conditions to support its long term benefits. Organisational leaders, implementing CSR, need to perform many skills in conducting the company’s strategies and to reach the desired goal or target. Thus, in order to cope up or to face the above mentioned dilemmas, Starbucks have to undergo the overall strategies and operations of a theory called Corporate Social Responsibilities (CSR) in order to manage the different ethical issues that has been faced by Starbucks (Harnrungchalotorn, n.d). Starbucks’ Ethical Practices Since the year 2006, Starbucks has felt the immense adverse affects of ethical dilemmas into its business markets which hampered consumer confidence, especially in the U.S. market. In the year 2008, Starbucks introduced some major initiatives or essential ethical practices in order to retain its reputation among the consumers, employees and its stakeholders by concentrating on its core businesses. For instance, Starbucks planned to replace or change its existing coffee making machines with a newer and developed one that was smaller than the current equipment. This revitalisation of the stores interiors allowed the employees to communicate with the customers easily and directly that assisted in retaining customer’s confidence (Trading Visions, 2009). Another ethical practice, on which Starbucks had worked upon, regarding its commitment towards the product quality, helps to protect customers’ health and safety. Apart from this Starbucks also pays severe attention upon the preparation, handling and storage of coffee products in such an advanced way which ensures clean sanitary and safe conditions (Standard of Business Conduct, 2009). Introduction of rewards program connected with the a prepaid card facility through which the customers could gain discounts on the purchase of any Starbucks product also played a vital role in rewarding the organisation with better customer satisfaction. This program is directly related in order to satisfy the needs of various customers and retain the customer’s lost confidence over Starbucks (Trading Visions, 2009). Focusing on the social and environmental responsibilities not only on promoting the farmers but also ensuring fair wages and suitable working conditions for them, emerged as another vital consideration in the ethical practices of Starbucks. In addition, the company also focuses on adapting preventive measures for the protection of land, water and forests that surround the most important coffee growing regions in the world (Pham-Gia, 2009). Starbucks established a new website, i.e. MyStarbucksIdea.com in order to enhance the effective relationship and to maintain proper medium of channel amid the worldwide customers. The main objective in order to introduce this new website was to provide the customers with an opportunity to convey their ideas, opinions, and valuable suggestions regarding the betterment of the company, its products, its operations, and customer experience as well. Through this website, Starbucks’ leaders and also the employees can participate in the discussions conveying their views. One of the major objectives for Starbucks in considering these strategies was to fulfil its social and environmental responsibilities (Pahl, 2009). Furthermore, related to its ethical practices, the supply chain initiative taken by Starbucks focused on promoting the acceptance of expanded responsibility regarding the decisions taken, empowering the capabilities which are necessary for these responsibilities and enabling themselves to exercise some control over the transformation (MacDonald, 2007). Starbucks has always considered fair trade campaigning as a vital aspect in its ethical practices. The main advantage of Starbucks is that the company possesses their own in-house certification by which they can demand to pay higher than market prices for their coffee product (Trading Visions, 2009). Starbucks’ interaction with the government has been committed towards adhering laws and regulations implemented by the government of the region it happens to be located in, in order to work fairly and honestly with the government officials and others present in the community. By implementing such activities focusing on a fair relationship with the government, Starbucks’ strategies are most likely to meet the legal and ethical standards quite effectively. Starbucks partners must be compulsorily truthful in dealing with the government and its commitment towards the government will ensure its stability into the market. By establishing a fair relationship with the regulatory reforms enforced by the government, the company apparently intends to gain the recognition of an ethically responsible corporate entity (Standard of Business Conduct, 2009). Recommendations While Starbucks became very much successful with its newly developed products, its coffee producing machines, its establishment of new company websites, making alliances with other companies, it has to pay a severe attention towards these quality features and should maintain with proper implementation so that in future the company can meet the various challenges in terms of ethical dilemmas. Maintaining effective quality of the product can also be a beneficial factor for Starbucks in this context. With the rapid pace of growing competition in today’s financial market, it is essential for Starbucks to ensure the company’s reputation in the coffee based products across the country (Larson, 2009). From an ethical perspective, it can also be recommended that Starbucks should ensure and retain the customer’s attention as well as customer’s confidence in favour of the brand so as to encourage effective relationship with its customers. The strategies of Starbucks do not necessarily require being based on long term objectives but should lay a solid and polished foundation for the company. In conclusion, Starbucks is still in a growing stage, though an established one. With the development of better ethical standards, the organisation can attain a better position as a market leader in the global food service industry (Larson, 2009). References Crane, A. & Matten, D. 2007. Business Ethics. Oxford University Press. Glenn, J. & Henson, N. No Date. The Assessment of Business Risks in Japan for Starbucks. Risk Analysis for Starbucks. [Online] Available at: http://info.umuc.edu/mba/public/AMBA606/GlobalStrategists/Assignments/OMBA606_sec9023_Japan_Week11.html [Accessed November 26, 2011]. Harnrungchalotorn, S., & Phayonlerd, Y., No Date. Starbucks with Corporate Social Responsibility (CSR). Starbucks: The Marketing of Ethics. [Online] Available at: http://www.tradingvisions.org/content/starbucks-marketing-ethics [Accessed November 26, 2011]. Larson, R., 2009. Marketing Strategy and Alliances Analysis of Starbucks Corporation. Faculty Publications and Presentations. MacDonald, K. 2007. Fair Trade, Starbucks and the Transformation of Supply Chain Governance. Beyond Corporate Social Responsibility? Business, Poverty and Social Justice. [Online] Available at: http://www.tandfonline.com/doi/abs/10.1080/01436590701336663 [Accessed November 26, 2011]. Matten, D. & Crane, A. 2007. Corporate Social Responsibility. Sage Publications. Pahl, N., 2009. The Idea behind the Starbucks Experience. GRIN Verlag. Pham-Gia, K. 2009. Marketing strategy of ‘Starbucks Coffee’. GRIN Verlag. Shaw, W. H., 2010. Business Ethics: A Textbook with Cases. Cengage Learning. Standard of Business Conduct, No Date. Starbucks Business Ethics and Compliance. [Online] Available at: http://assets.starbucks.com/assets/sobc-fy09-eng.pdf [Accessed November 27, 2011]. Stanley, A., 2002. Starbucks Coffee Company. Trustees of Dartmouth College. Tuck School of Business at Dartmouth. [Online] Available at: http://mba.tuck.dartmouth.edu/pdf/2002-1-0023.pdf [Accessed November 26, 2011]. Trading Visions, 2009. Starbucks: The Marketing of Ethics. [Online] Available at: http://www.tradingvisions.org/content/starbucks-marketing-ethics [Accessed November 26, 2011]. Wright, M., 2011. The Ethical Dilemma Facing Consumers. A Guide to Ethical Living. [Online] Available at: http://www.guardian.co.uk/starbucks-ethical-living/ethical-consumer-debate [Accessed November 26, 2011]. Bibliography Meyer, R. & De Wit, B., 2010. Strategy: An International Perspective. Cengage Learning, Emea. Santa Aria, B & Ni, S. 2008. Entry Mode of Starbucks. Master Thesis Course - International Business and Entrepreneurship. [Online] Available at: http://www.eki.mdh.se/uppsatser/foretagsekonomi/VT2008-FEK-D-2023.pdf [Accessed November 27, 2011]. Read More