Social Responsibility and Brand Strength of Starbucks - Case Study Example

Starbuck’s Report Student’s Name Institutional Affiliation Case Summary The report is about Starbuck a company in coffee industry whose mission is social responsibility and brand strengthening. The company deals with an array of products with coffee being one of its key products. The sale of its products is usually via retail outlets and its trademarks are licensed through various channels with some being under its partners. For example, its Frappuccino coffee drinks, VIA coffee, Starbucks Double shot espresso drinks and super premium ice creams can be bought from the company’s grocery stores via retailers such as Target and Walmart. Starbuck is considering collaborating with Courtesy products to produce a single-cup packet Starbucks packet for sale to hotel rooms. The company boosts for its powerful corporate culture and has been ranked as one of Fortune’s “100 Best Companies to Work for” for almost a decade. In the year 2010, Starbucks was voted as “Most Ethical Company” in the entire European Coffee Industry (Fraedrich, Linda & Ferrell, 2013). Ethical Issues Through its CEO Howard Schultz, the company recognizes that, although it may be cumbersome to be in the right all the times, it is important for a company to sacrifice some of its short-term commitments that to disregard its central values in the long term. Therefore, the company views its employees as its indispensable part. Employees who work at Starbuck for not less than 20 hours in a week are guaranteed of an inclusive benefit package that comprises of stock options, medical benefits, vision as well as dental benefits (Fraedrich, Linda & Ferrell, 2013). Its ethical practices also extend to other countries and the company has gained recognition and won awards for its corporate culture. Starbuck has also collaborated with other companies to contribute money towards research for HIV/AIDs. The company also collaborated with conservation international for environmental conservation, which should be the center of focus for business today in upholding of ethical standards. This was accomplished through supporting sustainable agriculture where farmers were encouraged to adopt a shade- grown coffee practice to prevent deforestation by cutting down trees to create coffee plantations. Starbuck’s Primary Stakeholders Starbuck Company was formed by three partners who included Jerry Baldwin, Ziev Siegel and Gordon Bowker) on March 30 1971 in Seattle. In 1982, Howard Schulz moved in as marketing director and retail operations. Later he became the CEO and the chairperson of Starbuck. Howard Schulz works in collaboration with a team of executives to come up with principles and strategies that the company should adapt to maintain its status in the global market. Other stakeholders includes partners such as Courtesy products and Green Mountain Coffee Roasters who collaborates with Starbuck to bring Starbucks- branded coffee as well as tea pods in the market. Its suppliers also form a part of its stakeholders and Starbuck is committed to improving corporate social responsibility with coffee growers. In addition, customers forms part of its stakeholders and the company is committed strengthening its brand and meet its customer needs, tastes and preferences (Fraedrich, Linda & Ferrell, 2013). Alternatives One of the alternatives of Starbuck is to modify its brand to meet sophisticated customer needs, tastes and preferences. This alternative need to be considered by any established company regardless of how successful it might be and it should learn to acclimatize their products as well as the image of the company to respond to the changing demands of the targeted markets. Starbuck should also follow suit and incorporate product branding as one of its alternatives. Although the company has managed to penetrate the coffee industry and remain competitive, it needs to develop its brand to meet increasing consumer demand for quality coffee as competition in specialty coffee drinks continue to augment (Fraedrich, Linda & Ferrell, 2013). Intensification of its brand and meeting the customer needs can one of the best strategies that the company should adapt to remain competitive in global market. Another alternative for the company is to apply advanced technology in coffee brewing, product diversification and enhancing their advertising campaigns. Through technology, the company will be able to produce in large scale thereby taking advantage of economies of scale. On the other hand, its products will become more affordable to budget- conscious customers. Starbuck has been anticipating venturing into music, movies as well as other ventures that would diversify its markets but it has not been able to accomplish that since it concentrated more on the quality of coffee, the condition of its coffee shops and strategies to remain competitive in coffee industry rather than product diversification (Fraedrich, Linda & Ferrell, 2013). Ethical Issues Arising From These Alternatives In an effort to adapt various alternative measures to strengthen its brand, respond to consumer needs and to move with current technological advancements ethical issues such as environmental conservation concerns may arise. Starbucks has adapted a move to manufacture cups that are more environmental friendly. One of the strategies adopted by the company is to change from using polyethylene No. 1 to more environmental friendly polypropylene No. 5. However, the company is faced with challenges in disposing these cups as they are non-biodegradable and characterize a somber waste problem for the company (Fraedrich, Linda & Ferrell, 2013). Starbuck is now considering a strategy to encourage consumers to bring back re-usables to the company with a promise for compensation to coffee consumers. However, this has not been accomplished as the number of re-used cups brought back in the company is below its expectations. They are devoted to solving the problem come to 2015b where it expects the return of re-usables to be 100%. Constraints Some of the constraints facing the company is penetration into the UK market. Realizing that the uniformity its stores could not be match the UK market, Starbuck considered restructuring its stores so that it could serve its customers better in all spheres of its operation. Starbuck is also looking forward to enhance its market in China and expand its operations. However, in the Chinese market, the company has 7000 stores and it is intending to open a hundred more stores. Nonetheless, the company is faced with constraints on how it will approach and penetrate the Chinese market by identifying strategies that would serve the needs, tastes and preference of Chinese customers. Thus, there is need for Starbuck to invest more into branding its products and enhancing its current technology in coffee brewing as it retains its corporate responsibility. Despite all these shortcomings, the company is determined to capture a larger market share in China as compared to other competing companies in the coffee industry (Fraedrich, Linda & Ferrell, 2013). Recommendations Despite the company’s effort to uphold sustainability and preserve high standards of ethics, the company has received criticisms in the recent past on issues related to fair trade and driving locally coffee shops out of the market. However, in bid react to those criticisms the CEO of the company Mr. Howard Shultz should consider providing Fair Trade Certified Coffee, that has being described as menu that will enhance its operations in all its markets (Fraedrich, Linda & Ferrell, 2013). Starbuck has current implemented Fair Trade Certified Coffee in both the UK and the Ireland although it has not been able to implement the same in the United States. The company should also seek to strength its brand, meet the over-increasing customer demands and concentrated more on creating consumer loyalty rather than opening more stores. This strategy will make Starbuck more competitive in the United States as well in the global market. The company should invest most of its resources in advertising and creating awareness of its different brands to increase its market share and remain competitive. The company should also focus on harmonizing prices of coffee and other products in order to meet the needs of budget conscious customers who may not afford to buy expensive products from their stores. Answers to the questions at the end of the case study (4a). Why do you think Starbucks has been so concerned with social responsibility in its overall corporate strategy? Starbucks is much engrossed in social responsibility since it views its workers as it indispensable part hence has to help them achieve better living standards for healthy business growth. In addition, the top management (Howard Schultz), strives to be sympathetic to eliminate dogma created by unsympathetic employer since he also grew up close to his father and his life was nearly destroyed by his father indifferent to employers. Therefore, he aims at building a company that his father never worked for, fully caring for all its employees' needs. Thus said Starbucks spends more in insurance and rates highly in provision of social responsibility services (Fraedrich, Linda & Ferrell, 2013). (4b). Is Starbucks unique in being able to provide a high level of benefits to its employees Starbucks uniqueness is portrayed in provision of better and quality social services, and the greatest spender in providing high-level benefits to its employee leading to high productivity and low employee turnover. In addition, Starbuck, just like other modern day firms, is concerned with meeting its suppliers’ needs to increase its productivity, a major revolutionary in modern business operation. Starbucks has attained amazing growth levels due to the quality services offered to its employees (Fraedrich, Linda & Ferrell, 2013). In addition, Starbucks has built its reputation on quality products, an approach adopted by other companies, ensuring stakeholders’ financial success. (4c). Do you think that Starbucks has grown rapidly because of its ethical and socially responsible activities or because it provides products and an environment that customers want? Albeit being one of the largest coffee brands in the entire world, Starbucks still maintains good relation with its employees through provision of non-remuneration packages such as medical insurance and dental care services to its employees. These business ethics has endeared the company to its employees thereby increased productivity and high employee retention rate leading to low employee turnover. This reduces the costs associated with hiring and training new workforce. Conversely, Starbucks maintains a cordial relation with small-scale farmers through socially responsible Starbucks Coffee and Farmers Equity Practices (C.A.F.E.), which ensures profitability of farmer through farmer premium prices (Fraedrich, Linda & Ferrell, 2013). These social responsibilities to farmers have made Starbucks the preferential coffee buyer in many countries thereby increased raw material provision. Lessons from the Case From the case study I’ve learnt that maintaining ethical standards for the company can lead to its success rather than concentrating just on profitability. In the recent past, Starbucks has undertaken to launch more products in the market to remain competitive. The company has set a good example with the way it relates with its employee, suppliers, customers and the community. As aforementioned, Starbucks is so much concerned with social responsibility as an overall corporate strategy. Starbucks employees work for not less than twenty hours a week and are guaranteed inclusive benefit option that includes stock options, medical benefits, and dental benefits among other social services. The company also supports sustainable Agriculture by encouraging farmers by giving fair prices for their products and encouraging them to adopt best farming practices. From the above, it is evident that Starbucks has considerably grown due to its ethical and social responsibilities, which have endeared it to both its employees and suppliers hence, Starbucks rapid growth. However, part of its success can be attributed to provision of products needed by consumers. References Fraedrich, J. Linda, F., & O.C. Ferrell (2013) .Ethical Decision Making in Business: A Managerial Approach, (9th Ed). Stamford: Cengage Learning. Read More