Cultural Issues within Starbucks - Term Paper Example

An Analysis of Cultural Issues within Starbucks as a Global Organization Starbucks Coffee, Tea and Spices was the original name of the first store opened in 1971 by the three Seattle friends who started the company. The company’s namesake is actually the first mate of the whale ship Pequod in Herman Melvin’s classical novel, Moby Dick. The original logo sported a chocolate-brown mermaid/siren with its long hair and exposed chest, later on however the company gives the mermaid a make-over giving it a more modern albeit modest look. Today millions of people worldwide walk into Starbucks, with its coffee-bar environment, to purchase their daily dose of caffeine. In 2007, competition of coffee retailer suddenly jumped up the charts with coffee sales rising more than 50% (Roby, 2011). Because of the large amount of consumers for the coffee industry, competition for these consumers also saw a rise in numbers. A number of factors are pushing and transforming the coffee industry into what it is today. At the rapid pace the industry is growing across the globe, there is no doubt that the company able to conquer global frontiers will take the top spot in market leadership among competitors. Thus being the case, expansion is one major key to be successful in the coffee industry and its rapidly widening market. The coffee industry is expected to continue growing through at least the year 2015 and even longer in other emerging markets around the world (Roby, 2007). Recent studies have shown that because of Brazil’s rising economy, it is set to be the biggest coffee drinking country in the world with recent coffee consumer growth of 39% from 2000 to 2009 (Roby, 2011). Due to the expansion of the middle and upper classes, a percentage of the population has now become spending oriented as there is more money to spend on ‘specialty coffee’ and other items that were considered to be unnecessary luxuries in the past. Another similar emerging market for the coffee business is India. As the country’s economy experiences growth, individuals from the upper and middle classes are now able to spend more on items that were usually seen as pointless expenses. Clearly competition in the booming coffee industry is not just within the United States anymore, and as stated earlier if a competitor wants to emerge at the top of the market then penetration into the market of these “growing” nations is a major key. Starbucks understands the need for expansion. In 1996 the company went international, opening its first international store in Tokyo, Japan (Bussing-Burks, 2009). To date the company is now operating 17,000 stores in 55 countries. In the past three new branches open every day, wanting to realize its goal of 30,000 stores (thus having sights set on rapidly expanding markets such as mentioned earlier). Naturally the company has had much success in their trade; however with this success also comes fierce criticisms. The company has faced intense criticisms on issues such as overpriced coffee, fair-trade coffee, and charges that their non-stop expansion has forced other local coffee shops out of business. In the UK a survey carried out by the Global Marketing Insite found that even Starbucks customers find the company as ‘arrogant, intrusive and self-centered’. This can be considered an irony when the company claims to have worked hard in order to develop an ethical profile. However, the company’s rush for profit had serious consequences when management decided to overlook the interest of their Ethiopian suppliers (Mead & Andrews, 2009). Since 2005, the US government has tried to support said country’s farmers by trade-marking their coffee in the US. By doing this the government intended to protect the product and earn up to £50 million annually to the national economy (Mead & Andrews, 2009). What came as a surprise is that the major opponent was the world’s largest ‘specialty’ coffee franchise. Even more surprising is that Starbucks has a policy of helping local farming communities. It turned out that the campaign would have had the effect of raising the price of coffee to Starbucks. It is important to note however that at this time the company was already buying coffee beans from the earlier mentioned farmers in between 75¢ to $1.60 a pound and selling to consumers at around $26 a pound (Mead & Andrews, 2009). Word quickly got out and the company’s reputation was seriously damaged. It was not just within the US that the news spread; instead the news was carried across the globe. Starbucks was portrayed as a modern day colonialist, exploiting one of the world’s poorest countries. The company has learned not compromise its core brand tenet of social responsibility in order to allow local considerations (Mead & Andrews, 2009). The damage done to the company was massive, if not incalculable. Another issue Starbucks faced (or is probably still facing) when it started expanding business outside of the US is when critics dubbed its marketing operations as ‘clustering’. Critics claim that the company saturates a particular area with several branches ultimately forcing local businesses to close down. Starbucks tend to locate retail stores in high-traffic, high-visibility locations. This strategy has been so prominent for most of the 1990s and 2000s that consumers began to wonder whether they really needed one Starbucks coffee shop every corner or sometimes even directly across each other (Ferrell, Fraedrich & Ferrell, 2012). In the UK, for example, the “invasion” of Starbucks has been pointed to contribute to the decline in the sales of Tea, which happens to be the default beverage of choice. With all the bad publicity the company has managed to gain for itself while expanding across the globe, it is no wonder why it has invested significantly in its CSR activities. In the UK the company has offered grant to charities, educational foundations and training courses. It has also joined forces with Oxfam (an international charity that focuses on fighting poverty) in giving £100,000 to a rural region in Ethiopia where farmers suffer from poverty and droughts. Still, there are many who dismiss the company’s CSR activities as ‘smokescreen to create an illusion of ethics’. Many still believe that the company will remain a primary target of criticisms by being a concrete example of an American Multinational. References Bussing-Burks, M. (2009). Change on the Horizon. In Starbucks: Corporations That Changed the World. (p. 6). ABC-CLIO. Ferrell, O. C., Fraedrich, J., & Ferrell (2012). Starbucks' Mission: Social Responsibility and Brand Strength. In Business Ethics: Ethical Decision Making & Cases. (9th ed.). (pp. 319-320). Cengage Learning. Mead, R., & Andrews, T. G. (2009). Ethics and Corporate Responsibility. In International Management. (4th ed.). (pp. 428-429). John Wiley & Sons. Roby, L. (2011). An Analysis of Starbucks as a Company and an International Business, 6-14. Read More